<PAGE>
SEMI-ANNUAL REPORT
June 30, 1996
Dear Shareholder:
Sequoia Fund's results for the second quarter of 1996 are
shown below with the usual comparable results for the leading
market indexes:
Sequoia Dow Jones Standard &
To June 30, 1996 Fund Industrials Poor's 500
______ ___________ ___________
3 months -2.1% +1.8% +4.5%
6 months +5.4 +11.7 +10.1
As of this writing the Sequoia Fund is up just over 8% which
approximates the return of the S&P 500 to date for the year. We
take some satisfaction in the fact that Sequoia's decent gain by
absolute standards has been achieved in spite of a decline in the
market price of Berkshire Hathaway, the Fund's largest portfolio
position. While Berkshire's market value has been volatile in
recent months, we are very comfortable with the progress of the
company's intrinsic value which continues to increase nicely.
The equity markets in general were also highly volatile
during July, causing the enormous net cash inflows to domestic
equity funds to drop off dramatically. This behavior is not
surprising. However, we are indebted to Financial Times
columnist Barry Riley for pointing out an extreme of investor
behavior which we found startling. In 1990, after years of
stellar investment returns, Japanese investors had about $250
billion invested in Japanese equity mutual funds. U.S. investors
1
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literally had the same amount in U.S. equity mutual funds at that
time. However, in the ensuing years the Japanese market fell by
about half while the U.S. market more than doubled, and the twin
demons of fear and greed set to work. Today, U.S. investors,
with that warm and fuzzy feeling about stocks, have increased
their holdings of equity funds to over $1,500 billion while the
Japanese, perhaps contemplating hara-kiri, have reduced their
total equity fund holdings to $30 billion (less than the market
value of the Magellan Fund alone!). "Love them or leave them",
as the old saying goes.
We are convinced that U.S. investors in general continue to
harbor unrealistic expectations regarding likely future
investment returns. The 16% average annual compound returns
earned by domestic equities over the past fourteen years, capped
off by almost 40% gains last year, certainly fuel this cheerful
optimism. Anecdotal evidence of this was recently provided by a
client who is intelligent, mature, has a decent mastery of
arithmetic and who is near and dear to one of the undersigned.
She seeks our advice from time to time and generally follows it.
This client inquired about the wisdom of maintaining her credit
card balances which were costing her 18% to 20% in non-tax-
deductible interest payments annually and represented only a
modest portion of the total amount of her liquid investments in
Sequoia. We suggested that she retain one main credit card, cut
up all the others and take enough money from her Sequoia account
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to eliminate all card balances. To our amusement, although she
sent us the cut-up remnants of six credit cards and promised to
promptly pay new balances on the remaining card, she said, "I
simply don't want to sell my Sequoia" and therefore she retained
the old card balances. We appreciate her loyalty, but are sure
her confidence in us is overdone. In order to provide her with
an offsetting 18% annual return in after-tax dollars, Sequoia
would have to grow at an even higher pretax rate and this will
simply not happen for any extended period of time. You know who
we are talking about, Mrs. L, and maybe this paragraph will chide
you into being more realistic.
Speaking of credit, given that a significant part of our
portfolio includes companies that are in the business of
extending credit, we have been following very closely the
continuous deterioration in the quality of consumer lending. It
is surprising that this deterioration is taking place during a
period of economic expansion and low unemployment but resulting
in levels of charge-offs and bankruptcies previously seen only in
periods of recession. It appears that the credit excesses which
in previous cycles had been concentrated in real estate
construction, loans to Argentina, etc. may now be concentrated in
consumer lending. As an example, the American Banker recently
wrote of increasing delinquencies on home equity loans, including
those of various lenders offering loans worth up to 125% of a
3
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home's value, effectively "betting that real estate values will
increase sufficiently to cover any losses".
In addition, consumers clearly feel strapped by the leveling-
off of real incomes but continue to spend toward higher
aspirational levels of income and can find lenders today who are
ready and willing to fund these aspirations. This leaves them
especially vulnerable to bankruptcy in the event of an unexpected
occurrence such as job loss, divorce or illness. It is perhaps
telling that among the hot game shows these days is a show called
- -- believe it or not -- "Debt" on Lifetime Television which
debuted in June of this year. "Debt" contestants answer trivia
questions and the winner gets enough money to pay off all their
outstanding debts! In describing the origin of the concept, one
of the show's producers explained that in the old style game
shows you could win a glamorous vacation or washing machine, for
example, but today "...we figured that by the way Americans were
spending money, most of them had already bought their prizes.
What most people needed instead was a way to pay all those
bills."
The lending institutions that Sequoia owns fall generally
into two categories: institutions with terrific credit cultures
and impeccable credit histories, and institutions which have a
strong credit culture but are willing to take some credit risk if
the risk appears mispriced or offers sufficient compensation. We
are focusing very closely on these companies to ascertain whether
4
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the evolution in lending practices and/or borrowers' attitudes
and behavior are likely to alter the profitability of these
businesses.
Sincerely,
/s/ Richard T. Cunniff
/s/ William J. Ruane
/s/ R.D. Goldfarb
August 13, 1996
Tax Note: For tax planning purposes, please note that we have
realized capital gains of approximately $5 per share to date
during 1996. The capital gains distribution is payable in
December, as usual. The final amount of the December
distribution is, of course, subject to change.
5
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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 June 30, 1996.
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.
Value of Value of Value of
Initial Cumulative Cumulative Total
$10,000 Capital Reinvested Value of
PERIOD ENDED: Investment Distributions Dividends Shares
____________ __________ _____________ __________ ________
July 15, 1970 $10,000 $0 $0 $10,000
May 31, 1971 11,750 0 184 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
June 30, 1996 82,220 327,560 176,931 586,711
6
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The total amount capital gains distributions accepted in shares
was $162,502, the total amount of dividends reinvested was
$79,187.
No adjustment has been made for any taxes payable by shareholders
on capital gains distributions and dividends reinvested in
shares.
7
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SEQUOIA FUND, INC.
Statement of Investments
June 30, 1996 (Unaudited)
COMMON STOCKS (90.40%)
Value
Shares Cost (Note 1)
______ ____ ________
BANK HOLDING COMPANIES (12.64%)
2,761,050 Fifth Third Bancorp $ 92,765,943 $ 149,096,700
2,100,000 First Bank Systems, Inc. 80,610,090 121,800,000
225,000 Mercantile Bankshares
Corporation 3,475,625 5,737,500
298,700 National Commerce Bancorp 7,406,981 9,409,050
160,000 Regions Financial Corporation 5,348,750 7,480,000
_____________ ______________
189,607,389 293,523,250
_____________ ______________
CONSUMER PRODUCTS (.34%)
169,600 Sturm, Ruger & Company, Inc. 361,700 7,886,400
_____________ ______________
FINANCIAL SERVICES (27.80%)
21,034 Berkshire Hathaway Inc.* 165,788,581 645,743,800
_____________ ______________
INSURANCE (8.76%)
4,400,000 Progressive Corporation-Ohio+ 150,092,362 203,500,000
_____________ ______________
MANUFACTURING - MOTORCYCLES (4.41%)
2,490,600 Harley Davidson, Inc. 66,707,726 102,425,925
_____________ ______________
MOTION PICTURES & VIDEO PRODUCTION (3.95%)
1,460,124 The Walt Disney Company 58,289,776 91,805,296
_____________ ______________
PERSONAL CREDIT (4.46%)
1,362,000 Household International, Inc. 53,180,142 103,512,000
_____________ ______________
PHARMACEUTICALS (5.88%)
2,760,000 Johnson & Johnson 55,292,183 136,620,000
_____________ ______________
SECURITIES BROKER-DEALER (4.15%)
1,684,400 Dean Witter Discover & Co. 87,654,906 96,431,900
_____________ ______________
SERVICES (13.07%)
3,550,000 Federal Home Loan Mortgage
Corporation 58,732,552 303,525,000
_____________ ______________
Miscellaneous Securities
8
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(4.94%) 119,285,679 114,636,113
_____________ ______________
TOTAL COMMON STOCKS $1,004,992,996 $2,099,609,684
______________ ______________
9
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SEQUOIA FUND, INC.
Statement of Investments
June 30, 1996 (Unaudited)
(continued)
Principal Value
Amount Cost (Note 1)
_________ ____ _______
U.S. GOVERNMENT OBLIGATIONS(9.60%)
$ 63,100,000 U.S. Treasury Bills due
7/11/96 through 8/15/96 $ 62,858,034 $ 62,858,034
160,000,000 U.S. Treasury Notes,
5-7/8% due 7/31/97 160,324,494 160,125,000
______________ ______________
TOTAL U.S. GOVERNMENT OBLIGATIONS 223,182,528 222,983,034
______________ ______________
TOTAL INVESTMENTS (100%)++ $1,228,175,524 $2,322,592,718
============== ==============
++ The cost for federal income tax purposes is identical.
* Non-income producing.
+ Refer to Note 7.
SEQUOIA FUND, INC.
Statement of Assets and Liabilities
June 30, 1996 (Unaudited)
ASSETS:
Investments in securities, at value
(cost $1,228,175,524) (Note 1) $2,322,592,718
Cash on deposit with custodian 2,066,467
Receivable for capital stock sold 382,458
Dividends and interest receivable 5,754,076
Other assets 34,452
______________
Total assets 2,330,830,171
==============
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LIABILITIES:
Payable for capital stock repurchased 27,911
Accrued expenses 1,907,832
______________
Total liabilities 1,935,743
______________
Net assets applicable to 28,325,228
shares of capital stock outstanding
(Note 4) $2,328,894,428
==============
Net asset value, offering price and
redemption price per share $82.22
=======
See to Notes Financial Statements.
11
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SEQUOIA FUND, INC.
Statement of Operations
Six Months Ended June 30, 1996 (Unaudited)
INVESTMENT INCOME:
Income:
Dividends:
Unaffiliated companies $ 10,193,140
Affiliated companies (Note 7) 484,000
Interest 5,241,143
____________
Total income 15,918,283
____________
Expenses:
Investment advisory fee (Note 2) 11,516,004
Legal and auditing fees 70,413
Stockholder servicing agent fees 105,581
Custodian fees 80,343
Directors fees and expenses (Note 5) 75,284
Other 49,675
____________
Total expenses 11,897,300
Less expenses reimbursed by Investment
Adviser (Note 2) 307,000
____________
Net expenses 11,590,300
____________
Net investment income 4,327,983
____________
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Realized gain on investments:
Unaffiliated companies 153,529,772
Net (decrease) in unrealized appreciation on:
Investments (39,391,352)
____________
Net realized and unrealized gain on investments 114,138,420
____________
Increase in net assets from operations $118,466,403
============
See Notes to Financial Statements.
12
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SEQUOIA FUND, INC.
Statements of Changes in Net Assets
Six Months
Ended Year
6/30/96 Ended
(Unaudited) 12/31/95
_____________ ___________
INCREASE (DECREASE) IN NET ASSETS:
From operations:
Net investment income $ 4,327,983 $ 8,739,165
Net realized gain (loss) 153,529,772 (13,914,683)
Net (decrease)increase in unrealized
appreciation (39,391,352) 646,622,517
______________ ______________
Net increase in net assets from operations 118,466,403 641,446,999
Distributions to shareholders from:
Net investment income (4,231,377) (8,810,242)
Net realized gain on investments 0 (2,200,955)
Capital share transactions (Note 4) 29,136,694 6,775,846
______________ ______________
Total increase 143,371,720 637,211,648
NET ASSETS:
Beginning of period 2,185,522,708 1,548,311,060
______________ ______________
End of period $2,328,894,428 $2,185,522,708
=============== ==============
NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) $1,094,760,086 $1,065,623,392
Undistributed net investment income 102,059 5,453
Undistributed net realized gains (losses) 139,615,089 (13,914,683)
Unrealized appreciation 1,094,417,194 1,133,808,546
______________ ______________
$2,328,894,428 $2,185,522,708
============== ==============
See Notes to Financial Statements.
13
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SEQUOIA FUND, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES:
Sequoia Fund Inc. is registered under the Investment Company
Act of 1940, as amended, as a non-diversified, open-end
management 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 by 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 at the last reported sales
price on the NASDAQ National Market System on the last
business day of the period; listed securities and securities
traded in the over-the-counter market for which no sale was
reported on that date are valued at the mean between the last
reported bid and asked prices; 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.
B. Accounting for investments: Investment transactions are
accounted for on the trade date and dividend income is
recorded on the ex-dividend date. 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: 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 generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
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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. Interest income is accrued as
earned.
NOTE 2--INVESTMENT ADVISORY CONTRACTS AND PAYMENTS TO INTERESTED
PERSONS:
The Fund retains Ruane, Cunniff & Co., Inc., as its
investment adviser. Ruane, Cunniff & Co., Inc. (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 management 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 six months ended June 30, 1996 and the Investment Adviser
reimbursed the Fund $307,000.
For the six months ended June 30, 1996, there were no amounts
accrued to interested persons, including officers and directors,
other than advisory fees of $11,516,004 and brokerage commissions
of $214,980 to Ruane, Cunniff & Co., Inc. Certain officers of
the Fund are also officers of the Investment Adviser and the
Fund's distributor. Ruane, Cunniff & Co., Inc., the Fund's
distributor, received no compensation from the Fund on the sale
of the Fund's capital shares during the six months ended June 30,
1996.
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, 1996 were $206,797,009 and
$335,674,580, respectively.
15
<PAGE>
At June 30, 1996 the aggregate gross unrealized appreciation
and depreciation of securities were $1,099,266,254 and
$4,849,060, respectively.
NOTE 4--CAPITAL STOCK:
At June 30, 1996 there were 40,000,000 shares of $.10 par
value capital stock authorized. Transactions in capital stock
for the six months ended June 30, 1996 and the year ended
December 31, 1995 were as follows
1996 1995
_____________________ ___________________
Shares Amount Shares Amount
________ ________ ________ ________
Shares sold 921,934 $ 76,129,122 1,446,747 $ 94,340,709
Shares issued to
stockholders on
reinvestment of:
Net investment income 37,457 3,125,371 93,996 6,408,962
Net realized gain on
investments 0 0 34,096 2,045,382
__________ ___________ __________ ___________
959,391 79,254,493 1,574,839 102,795,053
Shares repurchased 606,030 50,117,799 1,453,448 96,019,207
__________ ___________ __________ ___________
353,361 $ 29,136,694 121,391 $ 6,775,846
========== =========== ========== ===========
NOTE 5--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 six months ended June 30, 1996 was
$75,284.
NOTE 6--AFFILIATED COMPANIES:
Investment in 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 June 30,
1996 aggregated $203,500,000 and $150,092,362, respectively. The
summary of transactions for each affiliate during the period of
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their affiliation for the six months ended June 30, 1996 is
provided below:
Purchases Sales
______________ _____________ Realized Dividend
Affiliate Shares Cost Shares Cost Gain Income
_______________________ ______ _____ ______ ____ _____ _______
Progressive Corp - Ohio -- -- -- -- -- $484,000
========
NOTE 7--The interim financial statements have not been examined
by the Fund's independent accountants and accordingly they do not
express an opinion thereon.
NOTE 8--SELECTED FINANCIAL INFORMATION:
Six
Months Year Ended December 31,
Ended ____________________________________
June 30
1996 1995 1994 1993 1992 1991
_____ ____ _____ _____ _____ ____
Per Share Operating Performance
(for a share outstanding
throughout the period)
Net asset value, beginning of
period $78.13 $55.59 $54.84 $56.66 $53.31 41.94
_____ ____ _____ _____ _____ ____
Income from investment
operations:
Net investment income 0.15 0.31 0.42 0.64 0.93 1.35
Net realized and unrealized
gains on investments 4.09 22.62 1.41 5.39 3.98 14.96
_____ ____ _____ _____ _____ ____
Total from investment
operations 4.24 22.93 1.83 6.03 4.91 16.31
_____ ____ _____ _____ _____ ____
Less distributions:
Dividends from net investment
income (0.15) (0.31) (0.42) (0.65) (0.93)(1.36)
Distributions from net
realized gains (0.00) (0.08) (0.66) (7.20) (0.63)(3.58)
_____ ____ _____ _____ _____ ____
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<PAGE>
Total distributions (0.15) (0.39) (1.08) (7.85) (1.56)(4.94)
_____ ____ _____ _____ _____ ____
Net asset value, end
of period $82.22 $78.13 $55.59 $54.84 $56.66 $53.31
====== ====== ===== ====== ====== ======
Total Return 5.4%+ 41.4% 3.3% 10.8% 9.4% 40.0%
Average commission
rate paid $0.0556++ --- --- --- --- ---
18
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Ratios/Supplemental data
Net assets, end of
period (in millions) $2,328.9 $2,185.5 $1,548.3 $1,512.1$1,389.3 $1,251.4
Ratio to average net
assets:
Expenses 1.0%* 1.0% 1.0% 1.0% 1.0% 1.0%
Net investment income 0.4%* 0.5% 0.8% 1.1% 1.8% 2.8%
Portfolio turnover rate 29% 15% 32% 24% 28% 36%
+ Not annualized
* Annualized
++ Required by regulations issued in 1995
19
<PAGE>
SEQUOIA
FUND, INC.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
DIRECTORS
William J. Ruane
Richard T. Cunniff
Robert D. Goldfarb
John M. Harding
Francis P. Matthews
C. William Neuhauser
Robert L. Swiggett
OFFICERS
William J. Ruane - Chairman of the Board
Richard T. Cunniff - President
Robert D. Goldfarb - Vice President
Carol L. Cunniff - Vice President
Joseph Quinones, Jr. - Vice President, Secretary &
Treasurer
INVESTMENT ADVISER & DISTRIBUTOR
Ruane, Cunniff & Co., Inc.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
CUSTODIAN
The Bank of New York
90 Washington Street
New York, New York 10286
REGISTRAR AND SHAREHOLDER
SERVICING AGENT
DST Systems, Inc.
P.O. Box 419477
Kansas City, Missouri 64141
LEGAL COUNSEL
Seward & Kissel
One Battery Park Plaza
New York, New York 10004
This report has been prepared for the information of shareholders
of Sequoia Fund and is not authorized for distribution to
prospective investors unless preceded or accompanied by an
effective prospectus that includes information regarding the
Fund's objectives, policies, management, records and other
information.
20
69900020.AO0
