[GRAPHIC MISSING]

Sequoia

Fund, Inc.

 
 
 
 
 
 
 
 
 
 
 
 
 

SEMI-ANNUAL
REPORT

(Unaudited)
JUNE 30, 2014


 
 

SEQUOIA FUND, INC.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
With Income Dividends and Capital Gains
Distributions Reinvested in Shares (Unaudited)

The table below covers the period from July 15, 1970 (the date Fund shares were first offered to the public) to June 30, 2014. This period was one of widely fluctuating common stock prices. The results shown should not be considered as a representation of the dividend income or capital gain or loss which may be realized from an investment made in the Fund today.

       
PERIOD ENDED   Value of Initial
$10,000 Investment
  Value of Cumulative Reinvested
Capital Gains Distributions
  Value of Cumulative
Reinvested Dividends
  Total Value
of Shares
July 15, 1970   $ 10,000     $     $     $ 10,000  
May 31, 1971     11,750             184       11,934  
May 31, 1972     12,350       706       451       13,507  
May 31, 1973     9,540       1,118       584       11,242  
May 31, 1974     7,530       1,696       787       10,013  
May 31, 1975     9,490       2,137       1,698       13,325  
May 31, 1976     12,030       2,709       2,654       17,393  
May 31, 1977     15,400       3,468       3,958       22,826  
Dec. 31, 1977     18,420       4,617       5,020       28,057  
Dec. 31, 1978     22,270       5,872       6,629       34,771  
Dec. 31, 1979     24,300       6,481       8,180       38,961  
Dec. 31, 1980     25,040       8,848       10,006       43,894  
Dec. 31, 1981     27,170       13,140       13,019       53,329  
Dec. 31, 1982     31,960       18,450       19,510       69,920  
Dec. 31, 1983     37,110       24,919       26,986       89,015  
Dec. 31, 1984     39,260       33,627       32,594       105,481  
Dec. 31, 1985     44,010       49,611       41,354       134,975  
Dec. 31, 1986     39,290       71,954       41,783       153,027  
Dec. 31, 1987     38,430       76,911       49,020       164,361  
Dec. 31, 1988     38,810       87,760       55,946       182,516  
Dec. 31, 1989     46,860       112,979       73,614       233,453  
Dec. 31, 1990     41,940       110,013       72,633       224,586  
Dec. 31, 1991     53,310       160,835       100,281       314,426  
Dec. 31, 1992     56,660       174,775       112,428       343,863  
Dec. 31, 1993     54,840       213,397       112,682       380,919  
Dec. 31, 1994     55,590       220,943       117,100       393,633  
Dec. 31, 1995     78,130       311,266       167,129       556,525  
Dec. 31, 1996     88,440       397,099       191,967       677,506  
Dec. 31, 1997     125,630       570,917       273,653       970,200  
Dec. 31, 1998     160,700       798,314       353,183       1,312,197  
Dec. 31, 1999     127,270       680,866       286,989       1,095,125  
Dec. 31, 2000     122,090       903,255       289,505       1,314,850  
Dec. 31, 2001     130,240       1,002,955       319,980       1,453,175  
Dec. 31, 2002     126,630       976,920       311,226       1,414,776  
Dec. 31, 2003     147,610       1,146,523       362,790       1,656,923  
Dec. 31, 2004     154,270       1,200,687       379,159       1,734,116  
Dec. 31, 2005     155,450       1,331,529       382,059       1,869,038  
Dec. 31, 2006     152,750       1,496,788       375,422       2,024,960  
Dec. 31, 2007     139,120       1,713,258       342,768       2,195,146  
Dec. 31, 2008     95,270       1,265,238       241,397       1,601,905  
Dec. 31, 2009     109,900       1,459,533       278,860       1,848,293  
Dec. 31, 2010     129,290       1,745,828       333,509       2,208,627  
Dec. 31, 2011     145,500       1,979,112       375,323       2,499,935  
Dec. 31, 2012     168,310       2,289,377       434,162       2,891,849  
Dec. 31, 2013     222,920       3,093,884       575,031       3,891,835  
June 30, 2014     222,430       3,130,923       573,766       3,927,119  

The total amount of capital gains distributions reinvested in shares was $1,558,458. The total amount of dividends reinvested was $130,082, including return of capital distributions reinvested of $5,294.

No adjustment has been made for any taxes payable by shareholders on capital gain distributions and dividends reinvested in shares.


 
 

To the Shareholders of Sequoia Fund, Inc.

Dear Shareholder:

Sequoia Fund’s results for the second quarter of 2014 are shown below with comparable results for the S&P 500 Index:

   
To June 30, 2014   Sequoia Fund   S&P 500 Index*
3 Months     -0.86 %      5.23 % 
6 Months     0.92 %      7.14 % 
1 Year     18.42 %      24.61 % 
5 Years (Annualized)     19.13 %      18.83 % 
10 Years (Annualized)     8.67 %      7.78 % 

The performance shown above represents past performance and does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance may be lower or higher than the performance information shown.

* The S&P 500 Index is an unmanaged, capitalization-weighted index of the common stocks of 500 major US corporations. The performance data quoted represents past performance and assumes reinvestment of distributions.

The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Year to date performance as of the most recent month end can be obtained by calling DST Systems, Inc. at (800) 686-6884.

As of this writing, the Sequoia Fund is down 0.60% year-to-date versus up 8.62% for the S&P 500 Index.

Based on activity to the date of this letter, the capital gains distribution will be approximately $1.76 per share and would be distributed in November. We will do our best to keep you informed of any material changes due to sales activity through October 31, 2014. IRS regulations dictate that capital gain distributions are determined by transactions from November 1 of one year to October 31 of the following year.

We are providing you with a copy of the transcript of the Ruane, Cunniff & Goldfarb Inc./Sequoia Fund, Inc. “Annual Investor Day 2014” meeting that was held on May 16th.

Sincerely,

 
[GRAPHIC MISSING]   [GRAPHIC MISSING]
Robert D. Goldfarb
President
  David M. Poppe
Executive Vice President

August 20, 2014


 
 

FEES AND EXPENSES OF THE FUND
(UNAUDITED)

This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund.

Shareholder Fees (fees paid directly from your investment)

The Fund does not impose any sales charges, exchange fees or redemption fees.

Annual Fund Operating Expenses (expenses that are deducted from Fund assets)

 
Management Fees     1.00 % 
Other Expenses     0.02 % 
Total Annual Fund Operating Expenses *     1.02 % 

* Does not reflect Ruane, Cunniff & Goldfarb Inc.’s (“Ruane, Cunniff & Goldfarb”) contractual reimbursement of a portion of the Fund’s operating expenses. This reimbursement is a provision of Ruane, Cunniff & Goldfarb’s investment advisory agreement with the Fund and the reimbursement will be in effect only so long as that investment advisory agreement is in effect. For the year ended December 31, 2013, the Fund’s annual operating expenses and investment advisory fee, net of such reimbursement, were 1.00% and 0.98%, respectively.

Shareholder Expense Example

As a shareholder of the Fund, you incur ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (January 1, 2014 to June 30, 2014).

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Example for Comparison Purposes

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and

an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and will not help you determine the relative total costs of owning different funds.

     
  Beginning
Account
Value
January 1,
2014
  Ending
Account
Value June 30,
2014
  Expenses
Paid During
Period*
January 1,
2014
to
June 30,
2014
Actual   $ 1,000     $ 1,009.20     $ 4.98  
Hypothetical (5% return per year less expenses)   $ 1,000     $ 1,019.84     $ 5.01  

* Expenses are equal to the Fund’s annualized expense ratio of 1.00%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period).


 
 

SECTOR BREAKDOWN (UNAUDITED)

 
As of June 30, 2014   Percent of
Net Assets
Healthcare     18.92 % 
U.S. Government Obligations     18.21 % 
Diversified Companies     11.15 % 
Retailing     8.73 % 
Aerospace/Defense     6.79 % 
Industrial & Construction Supplies     4.26 % 
Auto Parts     4.15 % 
Veterinary Diagnostics     3.28 % 
Information Processing     2.72 % 
Internet Software & Services     2.33 % 
Transportation Services     1.99 % 
Flooring Products     1.97 % 
Miscellaneous Securities     1.57 % 
Biotechnology     1.29 % 
Dental Equipment     1.29 % 
Industrial Gases     1.13 % 
Industrial Machinery     1.11 % 
Precision Instruments     1.09 % 
IT Consulting and Other Services     1.07 % 
Other     6.95 % 
       100.00 % 

The table below shows the Fund’s major positions as of June 30, 2014:

   
Position   % of net assets
6/30/2014
  % of net assets
12/31/2013
Valeant Pharmaceuticals     17.7 %      16.5 % 
Berkshire Hathaway     11.1 %      10.5 % 
TJX Companies, Inc.     6.8 %      8.1 % 
Fastenal     4.3 %      4.1 % 
Idexx Laboratories     3.3 %      2.6 % 
O’Reilly Automotive     3.1 %      2.7 % 
Top positions     46.3 %      44.5 % 


 
 

SEQUOIA FUND, INC.
Schedule of Investments
June 30, 2014 (Unaudited)

COMMON STOCKS (81.85%)

   
Shares     Value
(Note 1)
       ADVERTISING (0.82%)           
931,348     Omnicom Group Inc.     $ 66,330,605  
       AEROSPACE/DEFENSE (6.79%)           
944,977     Precision Castparts Corp.       238,512,195  
23,101,827     Qinetiq Group plc (United Kingdom)       81,760,984  
12,344,388     Rolls-Royce Group plc (United Kingdom)       225,837,739  
             546,110,918  
       AUTO PARTS (4.15%)           
629,215     Advance Auto Parts, Inc.       84,893,688  
1,654,600     O’Reilly Automotive Inc. *       249,182,760  
             334,076,448  
       BIOTECHNOLOGY (1.29%)           
2,070,778     Novozymes A/S – B Shares (Denmark)       103,865,023  
       CONSTRUCTION & ENGINEERING (0.97%)           
1,459,643     Jacobs Engineering Group Inc. *       77,769,779  
       CONSTRUCTION EQUIPMENT (0.46%)           
1,508,945     Ritchie Bros. Auctioneers Incorporated       37,195,494  
       CRUDE OIL & GAS PRODUCTION (0.10%)           
179,048     Canadian Natural Resources Limited       8,220,094  
       DENTAL EQUIPMENT (1.29%)           
1,253,778     Sirona Dental Systems Inc. *       103,386,534  
       DIVERSIFIED COMPANIES (11.15%)           
3,093     Berkshire Hathaway Inc. - Class A *       587,362,247  
2,445,502     Berkshire Hathaway Inc. - Class B *       309,502,733  
             896,864,980  
       DIVERSIFIED MANUFACTURING (0.75%)           
763,700     Danaher Corporation       60,126,101  
       ELECTRICAL & MECHANICAL SYSTEMS (0.43%)           
773,732     EMCOR Group Inc.       34,454,286  
       ELECTRONIC MANUFACTURING SERVICES (0.58%)           
1,273,426     Trimble Navigation Limited *       47,053,091  


 
 

   
Shares     Value
(Note 1)
       FLOORING PRODUCTS (1.97%)           
1,143,736     Mohawk Industries Inc. *     $ 158,224,438  
       FREIGHT TRANSPORTATION (0.08%)           
143,113     Expeditors International Inc.       6,319,870  
       HEALTHCARE (18.92%)           
528,442     Perrigo Company plc (Ireland)       77,025,706  
11,309,482     Valeant Pharmaceuticals International Inc. *       1,426,351,870  
431,692     West Pharmaceutical Services, Inc.       18,208,769  
19,982     Zoetis Incorporated       644,819  
             1,522,231,164  
       INDUSTRIAL & CONSTRUCTION SUPPLIES (4.26%)           
6,932,949     Fastenal Company       343,111,646  
       INDUSTRIAL GASES (1.13%)           
689,896     Praxair, Inc.       91,247,265  
       INDUSTRIAL MACHINERY (1.11%)           
3,509,135     IMI plc (United Kingdom)       89,301,817  
       INFORMATION PROCESSING (2.72%)           
2,981,796     MasterCard Inc.       219,072,552  
       INSURANCE BROKERS (0.43%)           
1,121,947     Brown & Brown Inc.       34,454,992  
       INTERNET SOFTWARE & SERVICES (2.33%)           
161,856     Google Inc. – Class A *       94,632,348  
161,856     Google Inc. – Class C *       93,112,520  
             187,744,868  
       INVESTMENT BANKING & BROKERAGE (0.90%)           
433,884     The Goldman Sachs Group Incorporated       72,649,537  
       IT CONSULTING & OTHER SERVICES (1.07%)           
476,557     International Business Machines Corp.       86,385,487  
       PRECISION INSTRUMENTS (1.09%)           
839,542     Waters Corporation *       87,681,766  
       PROPERTY AND CASUALTY INSURANCE (0.77%)           
31,120     Admiral Group plc (United Kingdom)       824,974  
4,927,848     Hiscox Ltd. (United Kingdom)       59,624,667  
20,945     Verisk Analytics, Inc. – Class A *       1,257,119  
             61,706,760  


 
 

   
Shares     Value
(Note 1)
       RETAILING (8.73%)           
39,563     Costco Wholesale Corporation     $ 4,556,075  
850,813     Tiffany & Co.       85,294,003  
10,258,839     TJX Companies, Inc.       545,257,293  
892,350     Wal-Mart Stores, Inc.       66,988,715  
             702,096,086  
       SPECIALTY CHEMICALS (0.72%)           
1,530,875     Croda International plc (United Kingdom)       57,664,565  
       TRANSPORTATION SERVICES (1.99%)           
3,247,427     World Fuel Services Corp.       159,870,831  
       VETERINARY DIAGNOSTICS (3.28%)           
1,974,648     Idexx Laboratories Inc. *       263,753,733  
       Miscellaneous Securities (1.57%) (a)       125,971,068  
       TOTAL COMMON STOCKS (Cost $2,234,784,504)     $ 6,584,941,798  

U.S. GOVERNMENT OBLIGATIONS (18.21%)

   
Principal
Amount
    Value
(Note 1)
$1,465,000,000     U.S. Treasury Bills, 0.010% – 0.020% due 7/3/2014
through 8/21/2014
    $ 1,464,996,915  
       TOTAL U.S. GOVERNMENT OBLIGATIONS (Cost $1,464,996,915)       1,464,996,915  
       TOTAL INVESTMENTS (100.06%) (Cost $3,699,781,419) ††       8,049,938,713  
       LIABILITIES LESS OTHER ASSETS (0.06%)       (4,484,571 ) 
       NET ASSETS (100.00%)     $ 8,045,454,142  

†† The cost for federal income tax purposes is identical.
* Non-income producing.
(a) “Miscellaneous Securities” include holdings that have been held for not more than one year and have not previously been publicly disclosed.


 
 

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized in the three broad levels listed below:

Level 1 –  quoted prices in active markets for identical securities
Level 2 –  other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3 –  significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments)

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. During the six months ended June 30, 2014, there were no significant transfers into and out of Level 1 and 2 measurements in the fair value hierarchy. There were no level 3 securities held in the Fund during the six months ended June 30, 2014.

The following is a summary of the inputs used to value the Fund’s investments as of June 30, 2014:

     
Valuation Inputs   Common Stocks   U.S.
Government
 Obligations 
    Total  
Level 1 – Quoted Prices   $ 6,584,941,798              $ 6,584,941,798  
Level 2 – Other Significant Observable Inputs         $ 1,464,996,915       1,464,996,915  
Total   $ 6,584,941,798     $ 1,464,996,915     $ 8,049,938,713  

 

The accompanying notes are an integral part of these Financial Statements.


 
 

SEQUOIA FUND, INC.
Statement of Assets and Liabilities
June 30, 2014
(Unaudited)

 
ASSETS
 
Investments in securities, at value (cost $3,699,781,419) (Note 1)   $ 8,049,938,713  
Cash on deposit     11,599,241  
Receivable for capital stock sold     1,909,297  
Dividends receivable     3,890,121  
Other assets     38,303  
Total assets     8,067,375,675  
LIABILITIES
        
Payable for capital stock repurchased     10,098,874  
Payable for investment securities purchased     4,717,031  
Accrued investment advisory fee     6,930,972  
Accrued other expenses     174,656  
Total liabilities     21,921,533  
Net assets applicable to 36,169,965 shares of capital stock outstanding (Note 4)   $ 8,045,454,142  
Net asset value, offering price and redemption price per share   $ 222.43  
NET ASSETS CONSIST OF
        
Capital (par value and paid in surplus) $.10 par value stock,
100,000,000 shares authorized
  $ 3,638,053,616  
Accumulated net realized gains on investments (Note 5)     57,243,232  
Unrealized appreciation on investments     4,350,157,294  
Total net assets   $ 8,045,454,142  

 

The accompanying notes are an integral part of these Financial Statements.


 
 

SEQUOIA FUND, INC.
Statement of Operations
Six Months Ended June 30, 2014
(Unaudited)

 
INVESTMENT INCOME
        
Income
        
Dividends, net of $637,358 foreign tax withheld   $ 37,965,719  
Interest     142,767  
Total income     38,108,486  
Expenses
        
Investment advisory fee (Note 2)     40,560,575  
Stockholder servicing agent fees     469,510  
Directors fees and expenses (Note 6)     146,248  
Legal and auditing fees     82,471  
Custodian fees     62,501  
Other     91,653  
Total expenses     41,412,958  
Less expenses reimbursed by Investment Adviser (Note 2)     778,000  
Net expenses     40,634,958  
Net investment loss     (2,526,472 ) 
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS
        
Realized gain (loss) on
        
Investments (Note 3)     92,043,480  
Foreign currency transactions     9,979  
Net realized gain on investments and foreign currency transactions     92,053,459  
Net decrease in unrealized appreciation on investments     (17,523,010 ) 
Net realized and unrealized gain on investments and foreign currency transactions     74,530,449  
Net increase in net assets from operations   $ 72,003,977  

 

The accompanying notes are an integral part of these Financial Statements.


 
 

SEQUOIA FUND, INC.
Statements of Changes in Net Assets

   
  Six Months
Ended 6/30/14
(Unaudited)
  Year Ended
12/31/13
INCREASE (DECREASE) IN NET ASSETS
                 
From operations
                 
Net investment loss   $ (2,526,472 )    $ (25,955,496 ) 
Net realized gain on investments and foreign currency transactions     92,053,459       230,849,682  
Net increase (decrease) in unrealized appreciation on investments     (17,523,010 )      1,844,931,680  
Net increase in net assets from operations     72,003,977       2,049,825,866  
Distributions to shareholders from
                 
Net realized gains     (91,654,590 )      (120,895,246 ) 
Capital share transactions (Note 4)     25,942,429       273,608,098  
Total increase     6,291,816       2,202,538,718  
NET ASSETS
                 
Beginning of period     8,039,162,326       5,836,623,608  
End of period (including undistributed net investment income of $0 and $0, respectively)   $ 8,045,454,142     $ 8,039,162,326  

 

The accompanying notes are an integral part of these Financial Statements.


 
 

SEQUOIA FUND, INC.
Notes to Financial Statements (Unaudited)

NOTE 1—SIGNIFICANT ACCOUNTING POLICIES

Sequoia Fund, Inc. (the “Fund”) is registered under the Investment Company Act of 1940, as amended, as a non-diversified, open-end management investment company. The investment objective of the Fund is growth of capital from investments primarily in common stocks and securities convertible into or exchangeable for common stock. The following is a summary of significant accounting policies, consistently followed by the Fund in the preparation of its financial statements.

A. Valuation of investments: Investments are carried at market value or at fair value as determined under the supervision of the Fund’s Board of Directors. Securities traded on a national securities exchange are valued at the last reported sales price on the principal exchange on which the security is listed on the last business day of the period; securities traded in the over-the-counter market are valued in accordance with the NASDAQ Official Closing Price on the last business day of the period; securities traded in the over-the-counter market and listed securities for which no sale was reported on that date are valued at the mean between the last reported bid and asked prices.

Securities traded on a foreign exchange are valued at the Official Closing Price on the last business day of the period on the principal exchange on which the security is primarily traded. The value is then converted into its U.S. dollar equivalent at the foreign exchange rate in effect at the close of the New York Stock Exchange on that day.

U.S. Treasury Bills with remaining maturities of 60 days or less are valued at their amortized cost. U.S. Treasury Bills that when purchased have a remaining maturity in excess of sixty days are stated at their discounted value based upon the mean between the bid and asked discount rates until the sixtieth day prior to maturity, at which point they are valued at amortized cost.

When reliable market quotations are insufficient or not readily available at time of valuation or when the Investment Adviser determines that the prices or values available do not represent the fair value of a security, such security is valued as determined in good faith by the Investment Adviser, in conformity with guidelines adopted by and subject to review by the Board of Directors.

Foreign currencies: Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of foreign portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities are acquired or sold. Income and expenses are translated into U.S. dollars at the rates of exchange prevailing when accrued. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. Reported net realized foreign exchange gains or losses arise from the difference between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the fair values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.

B. Accounting for investments: Investment transactions are accounted for on the trade date and dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Premiums and discounts on fixed income securities are amortized over the life of the respective security. The net realized gain or loss on security transactions is determined for accounting and tax purposes on the specific identification basis.


 
 

C. Federal income taxes: The Fund complies with the requirements of the Internal Revenue Code applicable to regulated investment companies and distributes all of its taxable income to its stockholders. Therefore, no federal income tax provision is required.
D. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
E. General: Dividends and distributions are recorded by the Fund on the ex-dividend date.
F. Indemnification: The Fund’s officers, directors and agents are indemnified against certain liabilities that may arise out of performance of their duties to the Fund. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss thereunder to be remote.

NOTE 2—INVESTMENT ADVISORY CONTRACTS AND PAYMENTS TO INTERESTED PERSONS

The Fund retains Ruane, Cunniff & Goldfarb Inc. as its investment adviser. Ruane, Cunniff & Goldfarb Inc. (the “Investment Adviser”) provides the Fund with investment advice, administrative services and facilities.

Under the terms of the Advisory Agreement, the Investment Adviser receives a management fee equal to 1% per annum of the Fund’s average daily net asset values. This percentage will not increase or decrease in relation to increases or decreases in the net asset value of the Fund. Under the Advisory Agreement, the Investment Adviser is contractually obligated to reimburse the Fund for the amount, if any, by which the operating expenses of the Fund (including the investment advisory fee) in any year exceed the sum of 1 1/2% of the average daily net asset value of the Fund during such year up to a maximum of $30,000,000, plus 1% of the average daily net asset values in excess of $30,000,000. The expenses incurred by the Fund exceeded the percentage limitation during the six months ended June 30, 2014 and the Investment Adviser reimbursed the Fund $778,000. Such reimbursement is not subject to recoupment by the Investment Adviser.

For the six months ended June 30, 2014, there were no amounts accrued or paid to interested persons, including officers and directors, other than advisory fees of $40,560,575 to Ruane, Cunniff & Goldfarb Inc. and brokerage commissions of $137,855 to Ruane, Cunniff & Goldfarb LLC, the Fund’s distributor. Certain officers of the Fund are also officers of the Investment Adviser and the Fund’s distributor. Ruane, Cunniff & Goldfarb LLC received no compensation from the Fund on the sale of the Fund’s capital shares during the six months ended June 30, 2014.

NOTE 3—PORTFOLIO TRANSACTIONS

The aggregate cost of purchases and the proceeds from the sales of securities, excluding U.S. government obligations, for the six months ended June 30, 2014 were $198,334,037 and $257,149,250, respectively. Included in proceeds of sales is $42,465,645 representing the value of securities disposed of in payment of redemptions in-kind, resulting in realized gains of $34,795,171.

At June 30, 2014, the aggregate gross tax basis unrealized appreciation and depreciation of securities were $4,357,466,019 and $7,308,725, respectively.


 
 

NOTE 4—CAPITAL STOCK

At June 30, 2014 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock for the six months ended June 30, 2014 and the year ended December 31, 2013 were as follows:

       
  2014   2013
     Shares   Amount   Shares   Amount
Shares sold     1,295,456     $ 292,509,717       3,153,816     $ 611,624,071  
Shares issued to stockholders on reinvestment of net realized gains on investments     363,420       81,649,682       506,868       107,075,851  
       1,658,876       374,159,399       3,660,684       718,699,922  
Shares repurchased     1,552,202       348,216,970       2,275,012       445,091,824  
Net increase     106,674     $ 25,942,429       1,385,672     $ 273,608,098  

NOTE 5—FEDERAL INCOME TAXES

Distributions to shareholders are determined in accordance with federal tax regulations and may differ from those determined for financial statement purposes. To the extent these differences are permanent such amounts are reclassified within the capital accounts. During the six months ended June 30, 2014 permanent differences primarily due to realized gains on redemptions in kind not recognized for tax purposes, net investment loss and different book and tax treatment of net realized losses on foreign currency transactions resulted in a net decrease in net accumulated investment loss of $2,526,472 and accumulated net realized gains on investments of $34,805,150 with a corresponding increase in capital of $32,278,678. These reclassifications had no effect on net assets.

The tax character of distributions paid during the six months ended June 30, 2014 and during the year ended December 31, 2013 was as follows:

   
  2014   2013
Distributions paid from
                 
Long-term capital gains   $ 91,654,590     $ 120,895,246  

As of June 30, 2014 and December 31, 2013, the components of distributable earnings on a tax basis were as follows:

   
  2014   2013
Undistributed long-term gain   $ 57,243,232     $ 91,649,513  
Unrealized appreciation     4,350,157,294       4,367,680,304  
  $ 4,407,400,526     $ 4,459,329,817  

The Fund recognizes the tax benefits or expenses of uncertain tax positions only when the positions are “more likely than not” to be sustained assuming examination by tax authorities. Management has reviewed the Fund’s tax positions taken on federal income tax returns for all open years (tax years ended December 31, 2010 through December 31, 2013) and has concluded that no provision for unrecognized benefits or expenses is required in these financial statements.


 
 

NOTE 6—DIRECTORS FEES AND EXPENSES

Directors who are not deemed “interested persons” receive fees of $13,750 per quarter and $2,500 for each meeting attended, and are reimbursed for travel and other out-of-pocket disbursements incurred in connection with attending directors meetings. The total of such fees and expenses paid by the Fund to these directors for the six months ended June 30, 2014 was $146,248.

NOTE 7—INTERIM FINANCIAL STATEMENTS

The interim financial statements have not been examined by the Fund’s independent registered public accounting firm and accordingly they do not express an opinion thereon.

NOTE 8—SUBSEQUENT EVENTS

Accounting principles generally accepted in the United States of America require the Fund to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed as of the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has evaluated subsequent events through the issuance of these financial statements and has noted no such events.


 
 

NOTE 9—FINANCIAL HIGHLIGHTS

           
  Six Months
Ended
June 30, 2014
(Unaudited)
  Year Ended December 31,
     2013   2012   2011   2010   2009
Per Share Operating Performance (for a share outstanding throughout the period)
                                                     
Net asset value, beginning of period   $ 222.92     $ 168.31     $ 145.50     $ 129.29     $ 109.90     $ 95.27  
Income from investment operations
                                                     
Net investment income (loss)     (0.07 )      (0.72 )      (0.41 )      (0.42 )      0.00 (a)      0.00 (a) 
Net realized and unrealized gains (losses) on investments     2.12       58.73       23.22       17.45       21.35       14.65  
Total from investment operations     2.05       58.01       22.81       17.03       21.35       14.65  
Less distributions
                                                     
Dividends from net investment income                                   (0.02 ) 
Distributions from net realized gains     (2.54 )      (3.40 )            (0.82 )      (1.65 )      (0.00) (a) 
Return of capital                             (0.31 )       
Total distributions     (2.54 )      (3.40 )            (0.82 )      (1.96 )      (0.02 ) 
Net asset value, end of period   $ 222.43     $ 222.92     $ 168.31     $ 145.50     $ 129.29     $ 109.90  
Total Return     0.92 %†      34.58 %      15.68 %      13.19 %      19.50 %      15.38 % 
Ratios/Supplemental data
                                                     
Net assets, end of period
(in millions)
  $ 8,045.5     $ 8,039.2     $ 5,836.6     $ 4,914.0     $ 3,487.7     $ 2,867.8  
Ratio of expenses to average net assets
                                                     
Before expense reimbursement     1.02 %††      1.02 %      1.03 %      1.03 %      1.04 %      1.05 % 
After expense reimbursement     1.00 %††      1.00 %      1.00 %      1.00 %      1.00 %      1.01 % 
Ratio of net investment income (loss) to average net assets     (0.06 )%††      (0.37 )%      (0.26 )%      (0.34 )%      (0.00 )%      0.01 % 
Portfolio turnover rate     3 %†      2 %      5 %      3 %      23 %      15 % 

Not annualized
†† Annualized
(a) Represents less than $0.01 per share.


 
 

Other information (Unaudited)

Please consider the investment objectives, risks and charges and expenses of the Fund carefully before investing. The Fund’s prospectus contains this and other information about the Fund. You may obtain year to date performance as of the most recent month end, and a copy of the prospectus by calling 1-800-686-6884, or on the Fund’s website at http://www.sequoiafund.com. Please read the prospectus carefully before investing.

Shares of the Fund are offered through the Fund’s distributor, Ruane, Cunniff & Goldfarb LLC. Ruane, Cunniff & Goldfarb LLC is an affiliate of Ruane, Cunniff & Goldfarb Inc. and is a member of FINRA. An investment in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency.

The Fund may be offered only to persons in the United States and by way of a prospectus. This should not be considered a solicitation or offering of any product or service to investors residing outside of the United States.

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC’s web site at http://www.sec.gov. The Fund’s Form N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. For information regarding the operation of the SEC’s Public Reference Room, call 1-800-SEC-0330. For a complete list of the Fund’s portfolio holdings, view the most recent quarterly, semiannual or annual report on Sequoia Fund’s web site at http://www.sequoiafund.com/fund-reports.htm.

You may obtain a description of the Fund’s proxy voting policies and procedures, and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, without charge. Visit Sequoia Fund’s web site at www.sequoiafund.com and use the “Shareholder Information” link to obtain all proxy information. This information may also be obtained from the Securities and Exchange Commission’s web site at www.sec.gov or by calling DST Systems, Inc. at (800) 686-6884.


 
 

SEQUOIA FUND, INC.
9 West 57th Street, Suite 5000
New York, New York 10019-2701
(800) 686-6884
Website: www.sequoiafund.com

DIRECTORS

Robert D. Goldfarb
David M. Poppe
Roger Lowenstein
C. William Neuhauser
Sharon Osberg, Chairperson of the Board
Robert L. Swiggett

OFFICERS

Robert D. Goldfarb

 — 

President

David M. Poppe

 — 

Executive Vice President

Todd G. Ruoff

 — 

Executive Vice President & Secretary

Paul J. Greenberg

 — 

Treasurer

Michael Sloyer

 — 

Chief Compliance Officer

Michael Valenti

 — 

Assistant Secretary

INVESTMENT ADVISER

Ruane, Cunniff & Goldfarb Inc.
9 West 57th Street, Suite 5000
New York, New York 10019-2701

DISTRIBUTOR

Ruane, Cunniff & Goldfarb LLC
9 West 57th Street, Suite 5000
New York, New York 10019-2701

CUSTODIAN

The Bank of New York
MF Custody Administration Department
One Wall Street, 25th Floor
New York, New York 10286

REGISTRAR AND SHAREHOLDER SERVICING AGENT

DST Systems, Inc.
P.O. Box 219477
Kansas City, Missouri 64121

LEGAL COUNSEL

Seward & Kissel LLP
One Battery Park Plaza
New York, New York 10004