UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-01976
Sequoia Fund, Inc.
(Exact name of registrant as specified in charter)
767 Fifth Avenue, Suite 4701, New York, NY 10153-4798
(Address of principal executive offices) (Zip code)
Robert D. Goldfarb
Ruane, Cunniff & Goldfarb Inc.
767 Fifth Avenue
Suite 4701
New York, New York 10153-4798
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 832-5280
Date of fiscal year end: December 31
Date of reporting period: December 31, 2007
<Page>]
ITEM 1. REPORTS TO STOCKHOLDERS.
ANNUAL REPORT
DECEMBER 31, 2007
SEQUOIA FUND, INC.
ILLUSTRATION OF AN ASSUMED INVESTMENT OF $10,000
WITH INCOME DIVIDENDS REINVESTED AND CAPITAL GAINS
DISTRIBUTIONS ACCEPTED IN SHARES
The table below covers the period from July 15, 1970 (the date Fund shares were
first offered to the public) to December 31, 2007. 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.
<Table>
<Caption>
VALUE OF VALUE OF VALUE OF
INITIAL CUMULATIVE CUMULATIVE TOTAL
$10,000 CAPITAL GAINS REINVESTED VALUE OF
PERIOD ENDED: INVESTMENT DISTRIBUTIONS DIVIDENDS 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
</Table>
The total amount of capital gains distributions accepted in shares was
$1,306,611, the total amount of dividends reinvested was $117,636.
No adjustment has been made for any taxes payable by shareholders on capital
gain distributions and dividends reinvested in shares.
<Page>
TO THE SHAREHOLDERS OF SEQUOIA FUND, INC.
Dear Shareholder:
Sequoia Fund's results for the quarter and year ended December 31, 2007
appear below with comparable results for the leading market indexes:
<Table>
<Caption>
SEQUOIA DOW JONES STANDARD &
TO DECEMBER 31, 2007 FUND INDUSTRIALS POOR'S 500
------- ----------- ----------
Fourth Quarter 0.61% -3.91% -3.33%
1 Year 8.40% 8.88% 5.49%
5 Years (Annualized) 9.18% 12.24% 12.82%
10 Years (Annualized) 8.51% 7.43% 5.91%
</Table>
The performance shown above represents past performance and does not
guarantee future results. Current performance may be lower or higher than the
performance information shown.
Comparison of a change in value of a $10,000 Investment in Sequoia Fund
and the S&P 500 Index
[CHART]
<Table>
<Caption>
SEQUOIA S&P
---------- ----------
1/1/1998 $10,000.00 $10,000.00
12/31/1998 $13,525.26 $12,857.00
12/31/1999 $11,288.18 $15,562.11
12/31/2000 $13,552.59 $14,145.96
12/31/2001 $14,978.32 $12,464.01
12/31/2002 $14,582.90 $ 9,709.46
12/31/2003 $17,079.49 $12,494.13
12/31/2004 $17,875.39 $13,853.50
12/31/2005 $19,266.10 $14,533.70
12/31/2006 $20,872.89 $16,830.03
12/31/2007 $22,626.21 $17,754.00
</Table>
THE S&P 500 INDEX IS AN UNMANAGED, CAPITALIZATION-WEIGHTED INDEX OF THE
COMMON STOCKS OF 500 MAJOR US CORPORATIONS. THE DOW JONES INDUSTRIAL AVERAGE IS
AN UNMANAGED, PRICE-WEIGHTED INDEX OF 30 ACTIVELY TRADED BLUE CHIP STOCKS. THE
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND ASSUMES REINVESTMENT OF
DIVIDENDS. 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.
<Page>
<Table>
<Caption>
Sector Breakdown (Unaudited)
As of December 31, 2007
(as a percentage of net assets)
Diversified Companies 24.76
Retailing 20.31
Building Materials 7.58
Flooring Products 6.93
Freight Transportation 5.83
Automotive Manufacturing 5.47
Veterinary Diagnostics 5.10
Property and Casualty Insurance 5.09
Industrial & Construction Supplies 4.66
U.S. Government Obligations 3.04
Finance 2.30
Aerospace/Defense 2.20
Other 6.73
------
100.00
======
</Table>
Sincerely,
/s/ Richard T. Cunniff /s/ Robert D. Goldfarb /s/ David M. Poppe
- ---------------------- ---------------------- ------------------------
Richard T. Cunniff Robert D. Goldfarb David M. Poppe
Vice Chairman President Executive Vice President
February 21, 2008
THE RUANE, CUNNIFF & GOLDFARB INC./SEQUOIA FUND, INC. ANNUAL INVESTOR DAY
WILL BE HELD AT 10A.M., NEW YORK CITY TIME, ON FRIDAY, MAY 16, 2008 AT
THE ST. REGIS HOTEL, TWO EAST 55TH STREET, NEW YORK, NEW YORK 10022
<Page>
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (UNAUDITED)
The total return for the Sequoia Fund was 8.4% in 2007. This compares with
the 5.5% return of the S&P 500. As it has been for many years, our investment
philosophy is to make concentrated commitments of capital in a limited number of
companies that have superior long-term economic prospects and that sell at what
we believe are attractive prices. Because Sequoia is deliberately not
representative of the overall market, in any given year or years the performance
of the Fund will often vary significantly from that of the broad market indices.
We are less concerned with the annual returns from each of the stocks we
own than with their returns over time. We have a similar attitude towards
earnings: we pay much more heed to earnings growth over a number of years rather
than over a single year, much less a quarter.
The table below shows the twelve month stock total return for the Fund's
major positions at the end of 2007:
<Table>
<Caption>
% OF ASSETS TOTAL % OF ASSETS
POSITION 12/31/07 RETURN 12/31/06
- ------------------------------------------- ----------- ------ -----------
Berkshire Hathaway 24.8% 28.7% 27.0%
Mohawk Industries 6.9% -0.6% 6.8%
Martin Marietta Materials 6.6% nmf 0.0%
TJX Companies 6.2% 2.0% 6.0%
Porsche AG* 5.5% 60.3% 3.4%
Idexx Laboratories 5.1% 47.9% 3.4%
</Table>
* PERFORMANCE FOR PORSCHE AG IS CALCULATED IN U.S. DOLLARS.
The higher relative performance in 2007 versus the Index was largely driven
by price appreciation at Berk-shire Hathaway, our largest holding. Among our
other large holdings, Idexx and Porsche produced strong positive returns,
Mohawk, Martin Marietta Materials and TJX were flattish, while Progressive and
Bed Bath & Beyond experienced declines.
Berkshire Hathaway's stock price has performed well over the last two years
as the company's earnings power has increased significantly. Much of the growth
in earnings power is the result of aggressive redeployment of its ample but
low-yielding cash balances into higher earning assets.
At September 30, 2007, Berkshire still had $39 billion of cash, giving
Berkshire the opportunity to make deals as asset prices are falling in most
world markets. Most recently, in late December, Berkshire announced the
acquisition of a 60% stake in Marmon Holdings, an industrial conglomerate, for
$4.5 billion. Berkshire has agreed to purchase the remaining 40% of Marmon over
the next 5-6 years.
Mohawk weathered a difficult year. After showing modest growth in the first
nine months of the year, earnings per share (absent non-recurring gains and
losses) declined 16% in the fourth quarter.
For all of 2007, Mohawk's recurring earnings per share dropped 3%. The
Mohawk division suffered a 34% drop in operating profit as demand for carpet
declined substantially at the same time as intense cost pressures continued. The
company's two hard surface divisions performed better. Dal-Tile's earnings
declined only 5% on flat sales and Unilin generated a 27% earnings improvement
on a 20% rise in revenue. Unilin benefited from strong demand in Eastern Europe
and Russia.
Earnings per share may be down again in 2008 as the U.S. housing market
shows no sign of recovery and European markets soften. Management has indicated
that the first quarter will be particularly challenging, with earnings likely to
be down 25% or more. The company expects earnings to improve in subsequent
quarters as price increases and cost reduction initiatives take hold and
year-to-year comparisons become easier.
TJX continues to excel in a very difficult retailing environment,
particularly for apparel merchants. Earnings per share were up 15% (excluding
charges related to an intrusion of the company's computer system) in the first
nine months of the year and fourth quarter sales were strong, suggesting
earnings for the year will be up more than 15%. We believe that TJX's off-price
business model should perform relatively well in a consumer slowdown. The
company's opportunistic buying strategy allows it to provide excellent value to
its customers (typically first run branded merchandise at 20% to 60% below
department store prices) as surplus goods become increasingly plentiful and
department stores merge, close locations and cancel orders. Operating margins
expanded in the
<Page>
most recent quarter, reflecting the favorable buying environment and laudable
discipline on expenses.
Porsche's reported net income more than tripled, reflecting large gains
made from its investment in Volkswagen. Although reported earnings at the core
Porsche business declined, the company manages its net earnings down as much as
possible in order to reduce taxes and increase cash flow. We believe that
earnings at the core business were up solidly when adjusted for several
non-recurring items. Porsche is currently reducing the number of cars it ships
to the United States, mainly because of weak profitability on dollar-based sales
of sports cars that are produced in euro-based factories. But strong demand in
emerging markets is currently more than offsetting lower sales in North America.
Moreover, a number of new models are coming out over the next 18 months.
Several of our other major holdings, such as Fastenal, Idexx and
Expeditors, produced double digit returns in 2007 driven by solid growth in
earnings. Fastenal's earnings per share grew 17% for the year. We believe that
management's shift in strategy in 2007 (to open fewer stores in favor of
leveraging the existing store base by hiring more sales people) will produce
higher profitability for a longer period of time than we had previously
expected.
Idexx enjoyed a 19% growth in earnings per share and sales growth in excess
of 20%. We expect that future sales and earnings at this veterinary diagnostics
business will benefit from the expected launch of three new major products at
its largest division.
Expeditors produced a 14% increase in earnings per share in 2007. Earnings
growth in the fourth quarter was also up 14%, a particularly impressive result
given the difficulties the company had to overcome. These included a soft peak
season for freight, an extremely tight market for ocean freight capacity, and
higher legal and regulatory expenses. One difficult quarter is now behind the
company, but 2008 will be a challenging year because of the deteriorating
economy. The economically sensitive retail sector is Expeditor's largest
customer segment.
Progressive's share price generated a total return of negative 13%.
Earnings per share declined 22% as margins contracted. As we discussed in last
year's report, for several decades the company pursued a business model whose
objective was to grow premiums as rapidly as possible while earning no less than
a 4% underwriting margin. Progressive's low-cost structure and underwriting
skill allowed it to grow rapidly by taking market share from less efficient
competitors that couldn't match its rates and earn a profit.
Earlier in this decade, however, unusually benign loss trends allowed most
auto insurers to increase their profitability without raising rates. In such a
stable price environment, Progressive found consumers doing less comparison
shopping. Believing rate cuts would not stimulate much growth, Progressive chose
to let its underwriting margin expand. This fueled several years of exceptional
earnings growth and stock performance, but by 2006, policy counts and revenue
had stopped growing. Since the middle of 2006, the company has been reducing
rates. To date, consumers have not responded as hoped and Progressive's profit
margins have fallen without stimulating much revenue growth. However, several
large insurers are reporting declining profitability, and in some cases, no
underwriting profit. If the industry responds to these pressures by raising
rates, Progressive may start growing again.
Our worst performing stocks in 2007 included several of the consumer
discretionary companies we purchased or added to in recent years, such as Bed
Bath & Beyond (-23%), Target (-12%) and Lowes (-27%). We were clearly wrong in
our assessment of the near term business prospects of these retailers. We did
not recognize the extent to which consumer spending would slow in the second
half of 2007 and into 2008 as a result of the real estate crisis and credit
crunch. We believe that these companies (as well as TJX, Wal-Mart and Whole Food
Markets) are leading, if not dominant, participants in their retailing
categories and are well positioned in the long term for above average growth and
profitability. We expect that they will emerge from the current economic
downturn with greater market share and a stronger competitive position as they
continue to invest in their businesses while others falter.
<Page>
The decline in Bed Bath & Beyond's share price in 2007 largely reflects
investor expectations that slowing consumer spending will limit future growth.
We would note that even in a weak economy the balance sheet remains a source of
strength, substantial free cash flows are funding share repurchases and the
company's competitive position is improving. Since being taken private in 2006,
the financial condition of Bed Bath's closest competitor, Linens 'N Things, has
deteriorated dramatically.
We were also sanguine last year about the prospects for Target. Although it
now appears that the company's earnings may decline in 2008, Target strikes us
as well positioned for the future. It has excellent management, a pristine store
base and a close bond with its loyal shoppers. Management recently announced a
$10 billion stock buyback, which it intends to complete over three years. This
should reduce shares outstanding by roughly 20%.
Walgreen's stock suffered a negative 16% total return last year, despite
growing its earnings per share by 16% in fiscal 2007. The company has one of the
more remarkable earnings records in American business, averaging 15% growth in
annual earnings per share over the past 30 years. Despite this, the market
reacted to weak earnings in the fourth quarter of the fiscal year, ended in
August. Management, preoccupied with an acquisition and some internal projects,
failed to manage expenses in its drug stores. We believe this problem is fixable
and that Walgreen's core strengths remain: great real estate, good merchandising
and promotions, and more efficient pharmacies than its rivals. Moreover, from
2009 through 2011, a number of important branded drugs go generic. New generic
drugs are extremely profitable for drug stores, an indication that Walgreen
should enjoy strong earnings growth for several years.
We made a number of new investments in 2007, including Martin Marietta
Materials, Vulcan Materials, Rolls Royce and Whole Foods Market.
The largest of the new investments was Martin Marietta, which produces
aggregate used to make asphalt, cement and concrete. The company recently
announced disappointing fourth quarter results and cautious guidance for 2008.
Yet, 2007 earnings per share rose 15%, as positive pricing more than offset a
decline in volume. We believe that price increases plus share repurchases should
offset cyclical volume-related declines and drive reasonable earnings
performance in 2008. Longer-term, aggregate supplies in this country will grow
scarcer, as few communities are willing to permit dusty, noisy new quarries.
During 2007, we also sold our positions in Tiffany, Apollo and Patterson.
We sold Tiffany because we thought the valuation of the stock looked high
compared to its future earnings growth. We sold Apollo because we were concerned
that its future growth was dependent upon enrolling younger, less prepared
students who would be less likely to complete their degrees.
At the end of the year, Sequoia was 97.0% invested in stocks, compared to
94.2% a year earlier. In both years, the remainder of the Fund's assets was
largely held in short-term U.S. Treasury securities.
<Page>
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)
<Table>
ANNUAL FUND OPERATING EXPENSES
Management Fees 1.00%
Other Expenses 0.03%
----
Total Annual Fund Operating Expenses 1.03%
Expense Reimbursement* 0.03%
----
Net Expenses 1.00%
====
</Table>
* REFLECTS 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.
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 (July 1, 2007 to December 31, 2007).
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.
<Table>
<Caption>
EXPENSES
PAID DURING
ENDING PERIOD*
BEGINNING ACCOUNT JULY 1, 2007
ACCOUNT VALUE TO
VALUE DECEMBER 31, DECEMBER 31,
JULY 1, 2007 2007 2007
------------ ------------ ------------
Actual $1,000 $1,024.40 $5.10
Hypothetical
(5% return
per year
before
expenses) $1,000 $1,020.16 $5.09
</Table>
* EXPENSES ARE EQUAL TO THE FUND'S ANNUALIZED EXPENSE RATIO OF 1.00%, MULTIPLIED
BY THE AVERAGE ACCOUNT VALUE OVER THE PERIOD, MULTIPLIED BY 184/365 (TO REFLECT
THE ONE-HALF YEAR PERIOD).
<Page>
SEQUOIA FUND, INC.
SCHEDULE OF INVESTMENTS
DECEMBER 31, 2007
COMMON STOCKS (96.96%)
<Table>
<Caption>
VALUE
SHARES (NOTE 1)
- --------- ------------
AEROSPACE/DEFENSE (2.20%)
7,122,145 Rolls-Royce Group plc (United Kingdom) $ 77,261,029
------------
AUTO PARTS (1.57%)
1,698,778 O'Reilly Automotive Inc. * 55,091,371
------------
AUTOMOTIVE MANUFACTURING (5.47%)
94,976 Porsche Automobil Holding SE (Germany) (a) 192,095,418
------------
BUILDING MATERIALS (7.58%)
1,756,749 Martin Marietta Materials Inc. 232,944,917
419,772 Vulcan Materials Company 33,199,767
------------
266,144,684
------------
PROPERTY AND CASUALTY INSURANCE (5.09%)
9,339,946 Progressive Corporation 178,953,365
------------
DIVERSIFIED COMPANIES (24.76%)
6,142 Berkshire Hathaway Inc. ClassA * 869,707,200
68 Berkshire Hathaway Inc. ClassB * 322,048
------------
870,029,248
------------
FINANCE (2.30%)
376,174 MasterCard Inc. 80,952,645
------------
FOOD - RETAIL (1.05%)
906,509 Whole Foods Market Inc. 36,985,567
------------
FREIGHT TRANSPORTATION (5.83%)
2,996,003 Expeditors International Inc. 133,861,414
4,797,605 Knight Transportation Inc. + 71,052,530
------------
204,913,944
------------
INDUSTRIAL & CONSTRUCTION SUPPLIES (4.66%)
4,051,430 Fastenal Company 163,758,801
------------
INSURANCE BROKERS (1.93%)
2,886,878 Brown & Brown Inc. 67,841,633
------------
DIVERSIFIED MANUFACTURING (0.96%)
383,880 Danaher Corporation 33,681,631
------------
</Table>
<Page>
<Table>
<Caption>
VALUE
SHARES (NOTE 1)
- --------- --------------
RETAILING (20.31%)
4,996,990 Bed Bath & Beyond Inc. * $ 146,861,536
39,775 Costco Wholesale Corporation 2,774,704
1,839,393 Lowe's Companies, Inc. 41,607,070
2,211,533 Target Corporation 110,576,650
7,625,026 TJX Companies, Inc. 219,066,997
2,118,568 Walgreen Company 80,675,069
2,357,730 Wal-Mart Stores, Inc. 112,062,907
--------------
713,624,933
--------------
FLOORING PRODUCTS (6.93%)
3,272,155 Mohawk Industries Inc. * 243,448,332
--------------
TRUCK MANUFACTURING (1.22%)
785,772 PACCAR Inc. 42,808,859
--------------
VETERINARY DIAGNOSTICS (5.10%)
3,055,834 Idexx Laboratories Inc. * 179,163,548
--------------
TOTAL COMMON STOCKS (COST $1,678,621,868) $3,406,755,008
--------------
</Table>
<Table>
<Caption>
PRINCIPAL
AMOUNT
- ------------
U.S. GOVERNMENT OBLIGATIONS (3.04%)
$106,800,000 U.S. Treasury Bills due 1/3/2008 through 1/10/2008 106,779,826
--------------
TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $106,779,826) 106,779,826
--------------
TOTAL INVESTMENTS (100.00%) ++
(Cost $1,785,401,694) 3,513,534,834
LIABILITIES LESS OTHER ASSETS (0.00%) (48,286)
--------------
NET ASSETS (100.00%) $3,513,486,548
==============
</Table>
- ----------
+ Refer to Note 8.
++ The cost for federal income tax purposes is identical.
* Non-income producing.
(a) The Fund is invested in preference shares of Porsche Automobil Holding SE
which possess the same economic interest as Porsche common stock but have
no voting rights.
The accompanying notes form an integral part of these Financial Statements.
<Page>
SEQUOIA FUND, INC.
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2007
<Table>
ASSETS:
Investments in securities, at value (Note 1)
Unaffiliated companies (cost $1,702,120,136) $3,442,482,304
Affiliated companies (cost $83,281,558) (Note 8) 71,052,530
--------------
Total investment in securities (cost $1,785,401,694) 3,513,534,834
Cash on deposit with custodian 2,055,858
Receivable for capital stock sold 620,022
Dividends receivable 1,845,136
Other assets 33,261
--------------
Total assets 3,518,089,111
--------------
LIABILITIES:
Payable for capital stock repurchased 1,634,052
Accrued investment advisory fee 2,770,062
Accrued other expenses 198,449
--------------
Total liabilities 4,602,563
--------------
Net assets applicable to 25,255,388 shares of capital stock
outstanding (Note 4) $3,513,486,548
==============
Net asset value, offering price and redemption price per share $ 139.12
==============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) $.10 par value
capital stock,
100,000,000 shares of authorized $1,769,562,273
Undistributed net investment income (Note 5) 232,200
Undistributed net realized gains (Note 5) 15,558,935
Unrealized appreciation 1,728,133,140
--------------
Total Net Assets $3,513,486,548
==============
</Table>
The accompanying notes form an integral part of these Financial Statements.
<Page>
SEQUOIA FUND, INC.
STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 2007
<Table>
INVESTMENT INCOME:
Income:
Dividends:
Unaffiliated companies, net of $291,797 foreign tax withheld $ 34,208,085
Affiliated companies (Note 8) 463,970
Interest 12,485,946
Other income 66,675
-------------
Total income 47,224,676
-------------
Expenses:
Investment advisory fee (Note 2) 36,575,544
Legal and auditing fees 206,278
Stockholder servicing agent fees 491,309
Custodian fees 80,000
Directors fees and expenses (Note 6) 238,074
Other 169,095
-------------
Total expenses 37,760,300
Less expenses reimbursed by Investment Adviser (Note 2) 1,036,000
-------------
Net expenses 36,724,300
-------------
Net investment income 10,500,376
-------------
REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
Realized gain on:
Investments:
Unaffiliated companies 580,074,159
Affiliated companies (Note 8) 1,220
Foreign currency transactions 2,294
-------------
Net realized gain on investments and foreign currencies 580,077,673
Net decrease in unrealized appreciation on:
Investments:
Unaffiliated companies (279,941,622)
Affiliated companies (Note 8) (8,690,829)
-------------
Net realized and unrealized gain on investments and
foreign currencies 291,445,222
-------------
Net increase in net assets from operations $ 301,945,598
=============
</Table>
The accompanying notes form an integral part of these Financial Statements.
<Page>
SEQUOIA FUND, INC.
STATEMENTS OF CHANGES IN NET ASSETS
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
--------------------------------
2007 2006
-------------- ---------------
INCREASE/(DECREASE) IN NET ASSETS:
From operations:
Net investment income (loss) $ 10,500,376 $ (16,445,199)
Net realized gain on investments and foreign currencies 580,077,673 541,619,787
Net decrease in unrealized appreciation (288,632,451) (239,222,412)
-------------- ---------------
Net increase in net assets from operations 301,945,598 285,952,176
Distributions to shareholders from:
Net investment income (10,217,454) --
Net realized gains (617,051,755) (340,945,549)
Capital share transactions (Note 4) 239,000,131 81,492,062
-------------- ---------------
Total increase (decrease) (86,323,480) 26,498,689
NET ASSETS:
Beginning of period 3,599,810,028 3,573,311,339
-------------- ---------------
End of period (including undistributed net investment
income of $232,200 and $0, respectively) $3,513,486,548 $ 3,599,810,028
============== ===============
</Table>
The accompanying notes form an integral part of these Financial Statements.
<Page>
SEQUOIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
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 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 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 last reported
sales price 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
Advisor, 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 sales of foreign currencies, currency gains or
losses realized between the trade and settlement dates on securities
transactions, and 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.
<Page>
C. FEDERAL INCOME TAXES: It is the Fund's policy to comply with the
requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute 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 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 values 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 year ended
December 31, 2007 and the Investment Adviser reimbursed the Fund $1,036,000.
Such reimbursement is not subject to recoupment by the Investment Adviser.
For the year ended December 31, 2007, there were no amounts accrued or paid
to interested persons, including officers and directors, other than advisory
fees of $36,575,544 to Ruane, Cunniff & Goldfarb Inc. and brokerage commissions
of $710,970 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 year ended December 31,
2007.
NOTE 3--PORTFOLIO TRANSACTIONS:
The aggregate cost of purchases and the proceeds from the sales of
securities, excluding U.S. government obligations, for the year ended December
31, 2007 were $433,929,783 and $706,757,733, respectively. Included in proceeds
of sales is $81,763,014 representing the value of securities disposed of in
payment of redemptions in-kind, resulting in realized gains of $73,575,946.
At December 31, 2007 the aggregate gross tax basis unrealized appreciation
and depreciation of securities were $1,781,469,206 and $53,336,066,
respectively.
<Page>
NOTE 4--CAPITAL STOCK:
At December 31, 2007 there were 100,000,000 shares of $.10 par value
capital stock authorized. Transactions in capital stock for the years ended
December 31, 2007 and 2006 were as follows:
<Table>
<Caption>
2007 2006
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- ------------
Shares sold 518,372 $ 80,168,810 561,045 $ 88,910,655
Shares issued to stockholders on reinvestment of:
Net investment income 7,799 1,150,503 -- --
Net realized gains on Investments 3,264,559 486,651,260 1,776,306 270,251,108
--------- ------------ --------- ------------
3,790,730 567,970,573 2,337,351 359,161,763
Shares repurchased 2,102,724 328,970,442 1,756,309 277,669,701
--------- ------------ --------- ------------
Net increase 1,688,006 $239,000,131 581,042 $ 81,492,062
========= ============ ========= ============
</Table>
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 based on federal tax regulations.
During the year ended December 31, 2007 permanent differences primarily due to
realized gains on redemptions in kind not recognized for tax purposes and
different book and tax treatment of net realized gains on foreign currency
transactions resulted in a net decrease in undistributed net realized gains of
$73,525,224 with a corresponding increase in paid in surplus of $73,575,946, and
a decrease to undistributed net investment income of $50,722. These
reclassifications had no effect on net assets.
The tax character of distributions paid during 2007 and 2006 was as
follows:
<Table>
<Caption>
2007 2006
------------ ------------
Distributions paid from:
Ordinary income $ 11,700,120 $ 0
Long-term capital gains 615,569,089 340,945,549
------------ ------------
Total distributions $627,269,209 $340,945,549
============ ============
</Table>
As of December 31, 2007, the components of distributable earnings on a tax
basis were as follows:
<Table>
Undistributed ordinary income $ 232,200
Undistributed long-term gain 15,558,935
Unrealized appreciation 1,728,133,140
--------------
$1,743,924,275
==============
</Table>
The difference between book basis and tax basis distributions is a result
of different book and tax treatments of short-term capital gain distributions.
In June 2006, the Financial Accounting Standards Board issued
Interpretation No. 48, "Accounting for Uncertainty in Income Taxes -- an
Interpretation of FASB Statement No. 109" (the "Interpretation"). The
Interpretation
<Page>
establishes a minimum threshold for financial statement recognition of the
benefit of positions taken in filing tax returns and requires certain expanded
tax disclosures. Management has applied the Interpretation to the Fund during
the year ended December 31, 2007. As a result of the application of the
Interpretation, there was no impact on the financial statements.
NOTE 6--DIRECTORS FEES AND EXPENSES:
Directors who are not deemed "interested persons" receive fees of $6,000
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 year ended December 31, 2007 was $238,074.
NOTE 7--NEW ACCOUNTING PRONOUNCEMENT:
In September 2006, Statement of Financial Accounting Standards No. 157,
"Fair Value Measurements" (SFAS 157), was issued and is effective for fiscal
years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management has not yet determined the impact the
adoption of SFAS 157 will have on the Fund's financial statement disclosures.
NOTE 8--AFFILIATED COMPANIES:
Portfolio companies 5% or more of whose outstanding voting securities are
held by the Fund are defined in the Investment Company Act of 1940 as
"affiliated companies." The total value and cost of investments in affiliates at
December 31, 2007 aggregated $71,052,530 and $83,281,558, respectively. The
summary of transactions for each affiliate during the period of their
affiliation for the year ended December 31, 2007 is provided below:
<Table>
<Caption>
PURCHASES SALES
--------------------- ---------------- REALIZED DIVIDEND
AFFILIATE SHARES COST SHARES COST GAIN INCOME
- ---------------------------- ------- ----------- ------ ------- -------- --------
Knight Transportation Inc. 800,000 $11,580,340 2,395 $36,981 $1,220 $463,970
</Table>
<Page>
NOTE 9--FINANCIAL HIGHLIGHTS:
<Table>
<Caption>
YEAR ENDED DECEMBER 31,
----------------------------------------------------
2007 2006 2005 2004 2003
-------- -------- -------- -------- --------
Per Share Operating Performance (for a share
outstanding throughout the period)
Net asset value, beginning of period $ 152.75 $ 155.45 $ 154.27 $ 147.61 $ 126.63
-------- -------- -------- -------- --------
Net investment income (loss) 0.46 (0.70) (0.75) (0.58) (0.62)
Net realized and unrealized gains on investments 13.48 13.60 12.57 7.45 22.21
-------- -------- -------- -------- --------
Total from investment operations 13.94 12.90 11.82 6.87 21.59
-------- -------- -------- -------- --------
Dividends from net investment income (0.45) (0.00) (0.00) (0.00) (0.00)
Distributions from net realized gains (27.12) (15.60) (10.64) (0.21) (0.61)
-------- -------- -------- -------- --------
Total distributions (27.57) (15.60) (10.64) (0.21) (0.61)
-------- -------- -------- -------- --------
Net asset value, end of period $ 139.12 $ 152.75 $ 155.45 $ 154.27 $ 147.61
======== ======== ======== ======== ========
Total Return 8.40% 8.34% 7.78% 4.66% 17.12%
Net assets, end of period (in millions) $3,513.5 $3,599.8 $3,573.3 $3,772.4 $3,973.6
Expenses * 1.0% 1.0% 1.0% 1.0% 1.0%
Net investment income 0.3% -0.5% -0.5% -0.4% -0.5%
Portfolio turnover rate 13% 14% 8% 6% 3%
</Table>
- ----------
* The ratios of expenses to average net assets were not affected by the
waiver of a portion of the investment advisory fees.
<Page>
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
Sequoia Fund, Inc.
We have audited the accompanying statement of assets and liabilities of
Sequoia Fund, Inc. (the "Fund"), including the schedule of investments, as of
December 31, 2007, and the related statements of operations and changes in net
assets and the financial highlights for the year then ended. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit. The statement of changes
in net assets for the year ended December 31, 2006 and the financial highlights
for each of the years in the four year period ended December 31, 2006 were
audited by other auditors whose report dated February 21, 2007 expressed an
unqualified opinion on such financial statement and financial highlights.
We conducted our audit in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 2007 by correspondence with
the custodian. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
Sequoia Fund, Inc. as of December 31, 2007, the results of its operations,
changes in its net assets and its financial highlights for the year then ended,
in conformity with accounting principles generally accepted in the United States
of America.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
February 21, 2008
<Page>
APPROVAL OF ADVISORY CONTRACT
(UNAUDITED)
At a meeting held on December 10, 2007, the Board of Directors of Sequoia
Fund, Inc. (the "Fund"), including a majority of the independent directors,
evaluated and approved the renewal of the advisory contract between the Fund and
Ruane, Cunniff & Goldfarb Inc. (the "Investment Adviser"). In approving the
renewal of the advisory contract, the directors considered all information they
deemed reasonably necessary to evaluate the terms of the contract.
NATURE AND QUALITY OF SERVICES. The directors reviewed the nature, extent
and quality of the services provided by the Investment Adviser to the Fund. They
considered the personnel responsible for the day-to-day management of the Fund,
the Investment Adviser's existing and planned staffing levels and the Investment
Adviser's research capability and overall reputation. The directors considered
the Investment Adviser's representation that it had no current plans to change
the manner in which it managed the Fund. They considered information concerning
the Investment Adviser's compliance policies and procedures, which are designed,
among other things, to ensure the Fund's compliance with its investment
objective, policies and restrictions and those regulatory requirements
applicable to the Fund and to address the Investment Adviser's conflicts of
interest in providing services to the Fund and its other advisory clients. Based
on these factors, the directors concluded that they were satisfied with the
nature, extent and quality of services provided to the Fund by the Investment
Adviser under the advisory contract.
INVESTMENT PERFORMANCE. The directors reviewed the Fund's performance under
the Investment Adviser's management. They considered the Fund's performance and
the performance of the S&P 500 Index for the first 10 months of 2007 and for the
1-year, 3-year, 5-year and 10-year periods ended December 31, 2006. They noted
that since the Fund's inception through the year ended December 31, 2006, the
Fund generated a compound annual rate of return (net of fees) of 15.68% versus a
return for the S&P 500 Index of 11.85%. They also considered the Investment
Adviser's statement that it makes no effort on behalf of the Fund to reflect the
composition of the S&P 500 Index in the Fund's investments. They also considered
the Fund's performance compared to the performance of peer-group funds for the
1-year, 3-year, 5-year and 10-year periods ended November 30, 2007.
The directors reviewed specific securities that contributed positively and
negatively to the Fund's performance. The directors considered the Fund's
performance in light of reports provided periodically by the Investment Adviser
and of the portfolio managers' statements at the meeting that the Fund's
performance was generally higher than the performance of the Investment
Adviser's other advisory clients. They also considered the Fund's performance in
light of the Fund's compliance with its investment policies and legal and
regulatory requirements. The directors concluded that the Fund's performance was
satisfactory and sufficient to approve the renewal of the contract.
FEES. Next, the directors examined the fees paid to the Investment Adviser
under the advisory contract and the Fund's overall expense ratio. They
considered the advisory fee compared to the fees charged by peer-group funds.
They noted that the Fund's expense ratio of 1.00% compared favorably with the
average expense ratio of 1.17% for the peer-group funds. They considered the
Investment Adviser's obligation under the contract to reimburse the Fund for the
excess, if any, in any year of the Fund's operating expenses over 1 1/2 % of the
Fund's average daily net asset values up to a maximum of $30 million, plus 1% of
the Fund's average daily net asset values in excess of $30 million and that the
Fund was closed to new investors. The directors did not compare the fees charged
to the Fund by the Investment Adviser with the fees charged by the Investment
Adviser to its other advisory accounts because the services provided by the
Investment Adviser to its other advisory accounts are materially different from
the services provided by the Investment Adviser to the Fund. Based on these
factors, the
<Page>
directors determined that the fees charged to the Fund by the Investment Adviser
under the advisory contract were reasonable in light of the services provided by
the Investment Adviser and the fees charged by other advisers to similar funds
offering similar services.
PROFITABILITY AND OTHER BENEFITS TO THE INVESTMENT ADVISER. The directors
considered the income and expenses of the Fund and the profitability of the Fund
to the Investment Adviser. They reviewed a written analysis of the profitability
of the Fund to the Investment Adviser for the ten months ended October 31, 2007.
They also considered other benefits to the Investment Adviser and its affiliates
as a result of their relationship with the Fund, including a written analysis of
the amounts and rates of brokerage commissions paid by the Fund to Ruane,
Cunniff & Goldfarb LLC, a broker-dealer affiliate of the Investment Adviser,
during those months. Based on these factors, the directors concluded that the
Investment Adviser's profitability was not such as to prevent them from
approving the renewal of the contract.
ECONOMIES OF SCALE. The directors considered information concerning
economies of scale and whether the existing fees might require adjustment in
light of any economies of scale. The directors determined that no modification
of the existing fee level was necessary in light of the fact that the Fund is
closed to new investors and that the Fund's total annual expense ratio was less
than the average expense ratio of the mutual funds included in the peer group.
In evaluating the aforementioned considerations, the directors did not
identify any single factor as all-important or controlling in their evaluation
of the contract. In light of the Fund's performance, the Investment Adviser's
provision of advisory and other services, and the reasonableness of the Fund's
overall expenses compared to the expenses of the peer-group funds, the directors
concluded that retention of the Investment Adviser was in the best interest of
the Fund and its stockholders. Based upon such conclusions, the directors,
including a majority of the independent directors, approved the renewal of the
advisory contract.
<Page>
INFORMATION ABOUT SEQUOIA FUND OFFICERS AND DIRECTORS:
The SAI includes additional information about Fund directors and is
available, without charge, upon request. You may call toll-free 1-800-686-6884
to request the SAI.
<Table>
<Caption>
OTHER
TERM OF OFFICE AND PRINCIPAL DIRECTORSHIPS
POSITION HELD LENGTH OF TIME OCCUPATION DURING HELD BY
NAME, AGE, AND ADDRESS WITH FUND SERVED PAST 5 YEARS DIRECTOR
- ------------------------ -------------------- ------------------ -------------------- -------------
Richard T. Cunniff, 84 Vice Chairman & Term -- 1 Year & Vice Chairman & None
767 Fifth Avenue Director Length of Time Director of Ruane,
New York, NY 10153 served -- 37 Years Cunniff & Goldfarb
Inc.
Robert D. Goldfarb, 63 President & Director Term -- 1 Year & Chairman & Director None
767 Fifth Avenue Length of Time of Ruane, Cunniff &
New York, NY 10153 served -- 29 Years Goldfarb Inc.
David M. Poppe, 42 Executive Vice Term -- 1 Year & President & Director None
767 Fifth Avenue President & Director Length of Time of Ruane, Cunniff &
New York, NY 10153 served -- 4 Years Goldfarb Inc.
Joseph Quinones, Jr., 62 Vice President, Term -- 1 Year & Vice President, None
767 Fifth Avenue Secretary, Length of Time Secretary,
New York, NY 10153 Treasurer & Chief served -- 12 Years Treasurer & Chief
Compliance Officer Compliance Officer
of Ruane, Cunniff &
Goldfarb Inc.
Michael Valenti, 38 Assistant Secretary Term -- 1 Year & Administrator of None
767 Fifth Avenue Length of Time Ruane, Cunniff &
New York, NY 10153 served -- 1 Year Goldfarb Inc.
Francis P. Matthews, 85 Director Term -- 1 Year & Retired None
767 Fifth Avenue Length of Time
New York, NY 10153 served -- 35 Years
C. William Neuhauser, 81 Director Term -- 1 Year & Retired None
767 Fifth Avenue Length of Time
New York, NY 10153 served -- 33 Years
Robert L. Swiggett, 85 Director -- Term -- 1 Year & Retired None
767 Fifth Avenue Chairman of the Length of Time
New York, NY 10153 Board served -- 37 Years
Sharon Osberg, 58 Director Term -- 1 Year & Consultant Internet None
767 Fifth Avenue Length of Time Mobile Technology
New York, NY 10153 served -- 4 Years
Roger Lowenstein, 53 Director Term -- 1 Year & Writer major None
767 Fifth Avenue Length of Time Financial and News
New York, NY 10153 served -- 9 Years Publications
Vinod Ahooja, 56 Director Term -- 1 Year & Retired None
767 Fifth Avenue Length of Time
New York, NY 10153 served -- 7 Years
</Table>
<Page>
CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers LLP ("PwC") was previously the Fund's independent
registered public accounting firm. On June 11, 2007, PwC's appointment as
independent registered public accounting firm was terminated and Briggs, Bunting
& Dougherty, LLP ("BBD") was engaged as independent registered public accounting
firm. The decision to change independent registered public accounting firms was
approved by the Fund's audit committee and Board of Directors.
PwC's reports on the Fund's financial statements for the Fund's two most
recently completed fiscal years ended December 31, 2006 and December 31, 2005
did not contain any adverse opinion or disclaimer of opinion, and were not
qualified or modified as to uncertainty, audit scope, or accounting principles.
During the Fund's two most recently completed fiscal years ended December 31,
2006 and December 31, 2005 and through June 11, 2007, there were no
disagreements between the Fund and PwC on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure, which
disagreements, if not resolved to the satisfaction of PwC, would have caused it
to make reference to the subject matter of the disagreements in connection with
its reports. During the two years ended December 31, 2006 and 2005 and through
June 11, 2007, there were no "reportable events" within the meaning of Item 304,
paragraph (a)(1)(v), of Regulation S-K under the Securities Exchange Act of
1934.
OTHER INFORMATION
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.
<Page>
SEQUOIA FUND, INC.
767 FIFTH AVENUE, SUITE 4701
NEW YORK, NEW YORK 10153-4798
(800) 686-6884
WEBSITE: www.sequoiafund.com
DIRECTORS
Richard T. Cunniff
Robert D. Goldfarb
David M. Poppe
Vinod Ahooja
Roger Lowenstein
Francis P. Matthews
C. William Neuhauser
Sharon Osberg
Robert L. Swiggett, Chairman of the Board
OFFICERS
Richard T. Cunniff -- VICE CHAIRMAN
Robert D. Goldfarb -- PRESIDENT
David M. Poppe -- EXECUTIVE VICE PRESIDENT
Joseph Quinones, Jr. -- VICE PRESIDENT, SECRETARY,
TREASURER & CHIEF COMPLIANCE OFFICER
Michael Valenti -- ASSISTANT SECRETARY
INVESTMENT ADVISER
Ruane, Cunniff & Goldfarb Inc.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
DISTRIBUTOR
Ruane, Cunniff & Goldfarb LLC
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
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
This report has been prepared for the information of shareholders of Sequoia
Fund, Inc.
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, applicable to its principal
executive officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions. A copy of this code of
ethics is filed as an exhibit to this Form N-CSR, and also made available on the
Fund's website at: http://www.sequoiafund.com/code_of_ethics.htm. During the
period covered by this report, no substantive amendments were approved or
waivers were granted to the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's Board of Directors has determined that the registrant does not
have an audit committee financial expert serving on its audit committee. The
registrant's Board of Directors has determined that, based on the background and
extensive experience of each of the members of the audit committee in the
financial services industry, a designated audit committee financial expert is
unnecessary. The members of the audit committee are well-known and respected
members of the investment management industry and the registrant is satisfied
that their collective knowledge and experience is sufficient for them to perform
their duties as audit committee members.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) - (d) Aggregate fees billed to the registrant for the last two fiscal year
for professional services rendered by the registrant's independent auditor were
as follows:
December 31, 2007 December 31, 2006
----------------- -----------------
Audit Fees $28,000 $49,000
Audit-Related Fees n/a n/a
Tax Fees $4,000 $8,000
Other Fees n/a n/a
Audit fees include amounts related to the audit of the registrant's annual
financial statements and services normally provided by the auditor in connection
with statutory and regulatory filings. Tax fees include amounts related to tax
compliance and tax advice. Fees for the year ended December 31, 2006 were paid
to PricewaterhouseCoopers LLP.
(e)(1) The registrant's audit committee has the responsibility to pre-approve
all audit and non-audit services provided to the registrant by its independent
auditor in advance at regularly scheduled audit committee meetings. The
registrant's audit committee also has the responsibility to pre-approve all
non-audit services provided by the registrant's independent auditor to the
registrant's investment adviser and any entity controlling, controlled by, or
under common control with the investment adviser that provides ongoing services
to the registrant, if the engagement relates directly to the operations and
financial reporting of the registrant, in advance at regularly scheduled audit
committee meetings.
(e)(2) All services included in (b)-(d) were approved pursuant to paragraph
c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable.
(g) The aggregate fees billed for the most recent fiscal year and the preceding
fiscal year by the registrant's independent auditor for non-audit services
rendered to the registrant, its investment adviser, and any entity controlling,
controlled by, or under common control with the investment adviser that provides
ongoing services to the registrant were $41,785 and $58,300, respectively. Fees
paid to PricewaterhouseCoopers LLP were $29,785 and $58,300, respectively.
(h) Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS - INCLUDED IN ITEM 1, REPORTS TO STOCKHOLDERS
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 11. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial
officer have concluded that as of a date within 90 days of the filing of this
report there were no significant deficiencies in the design or operation of the
disclosure controls and procedures of the registrant which would have adversely
affected the ability of the registrant to record, process, summarize and report
the subject matter contained in this report.
(b) There were no significant changes in the registrant's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.
ITEM 12. EXHIBITS.
(a)(1) The registrant's code of ethics pursuant to Item 2 of Form N-CSR is
attached.
(a)(2) Separate certifications by the registrant's principal executive officer
and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley
Act of 2002 and required by Rule 30a-2(a) under the Investment Company Act of
1940, are attached.
(b) A certification by the registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002 and required by Rule 30a-2(b) under the Investment Company Act, is
attached.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
SEQUOIA FUND, INC.
By: /s/ Robert D. Goldfarb
------------------------------
Robert D. Goldfarb
President and Principal Executive Officer
Date: February 29, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By: /s/ Robert D. Goldfarb
------------------------------
Robert D. Goldfarb
President and Principal Executive Officer
Date: February 29, 2008
By: /s/ Joseph Quinones, Jr.
---------------------------
Joseph Quinones, Jr.
Vice President, Secretary, Treasurer
Date: February 29, 2008