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, 2003. 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.

The total amount of capital gains distributions accepted in shares was $620,263, the total amount of dividends reinvested was $116,740.

No adjustment has been made for any taxes payable by shareholders on capital gain distributions, dividends reinvested in shares or sale of fund shares.

To the Shareholders of
Sequoia Fund, Inc.

Dear Shareholder:

Sequoia Fund's results for the quarter and year ended December 31, 2003 appear below, along with comparable figures for the major market indices.

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.

While we aim to exceed the performance of the major indices over long periods of time, we do not pay much attention to relative results in any given year (a convenient point of view, given our underperformance this year!). We do, however, pay very close attention to the annual operating results of the businesses we own. And we pay even closer attention to developments that may cause the intrinsic value of our businesses to increase more quickly or slowly than properly calculated per-share earning power. Such developments might include a structural shift in competitive position, an adjustment in our assessment of management's ability to execute effectively or a change in the long-term prospects of an industry in which one of our companies participates. When positive in nature, any of these developments might lead us to conclude that one of our investees has the ability to earn higher returns on capital or invest more capital at existing rates of return than we previously thought. You might call this the Sequoia Fund equivalent of the "positive earnings surprises" with which Wall Street often seems so obsessed.

During 2003, we are pleased to report that the per-share earning power and intrinsic value of our major holdings overall increased at a satisfactory rate. But as we mentioned in our third quarter report, none of our largest holdings—or our smaller ones, for that matter—trade cheaply. While this may sound odd to some shareholders, we wish that they did. As net buyers of stocks, and as investors in businesses that are generally net buyers of their own stocks, we're prepared to act aggressively –and hopefully profit handsomely – in an environment of low share values. We only hope for high prices on the rare occasion when we'd like to sell one of our positions.

Given this philosophy, some shareholders may wonder why we continue to hold positions that they (or perhaps we) consider fully valued or even momentarily overvalued. In response, we would note that the truly exceptional businesses we prefer are frustratingly hard to find. If we sold our interests in these companies every time their share prices rose above our estimates of true business value, we would make this task even more demanding. And while we certainly enjoy a challenge, the sad fact is that we make life difficult enough on ourselves as it is. Indeed, most of our biggest mistakes over the years have involved the sale of interests in wonderful businesses on account of temporary changes in valuation, rather than permanent changes in intrinsic worth and long-term competitive prospects. Had we kept these stakes for longer periods, your Fund shares would surely be worth much more than they are today.

These past lessons in the pitfalls of impatience make us wary of liquidating a position for reasons other than (1) truly extraordinary overvaluation, (2) a discernable decline in intrinsic business value or (3) the emergence of alternative opportunities that we think are simply too good to pass up. While the year is still very young and things can change quickly in today's world, we do not currently think that any of these circumstances apply to our present collection of major holdings. In many cases, our portfolio companies trade at or near the valuation of the market averages. In some smaller cases, they trade meaningfully in excess of the broader market's valuation. In all cases, however, we believe the quality of our major investees' operations and prospects materially exceeds that of the average American business, as represented by the major indices. Just as importantly, our companies have achieved these results without the use of undue financial leverage, the assumption of over-optimistic pension plan returns, the establishment of misleading "restructuring" reserves or the issuance of excessive amounts of equity to option holders.

At present, we have every reason to believe that our principal "subsidiaries" will deliver similarly robust results in the future. We continue to believe firmly that over long periods of time, strong business performance translates into strong investment performance. As we have warned in the past, though, present levels of valuation suggest that satisfactory investment performance will mean something very different in the future than it has in the past. In other words, you should not expect future results to remotely approximate our historical rate of compound. In saying this, we mean to underscore the simple fact that full valuations represent the enemy of high investment returns. To borrow a phrase from the preeminent Midwesterner who runs our largest holding, if you don't believe that, you should pursue a career in sales, but not mathematics!

Career advice aside, we appreciate as always the trust you have placed in us as stewards of your savings. We will continue to do our best to make it well deserved during the coming year.

Sincerely,

SEQUOIA FUND, INC.
Schedule of Investments
December 31, 2003

 SEQUOIA FUND, INC.
Statement of Assets and Liabilities
December 31, 2003

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

 SEQUOIA FUND, INC.
 Statement of Operations
Year Ended December 31, 2003

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

SEQUOIA FUND, INC.
Statements of Changes in Net Assets

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

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.

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 year ended December 31, 2003 and the Investment Adviser reimbursed the Fund $869,000.

For the year ended December 31, 2003, there were no amounts accrued or paid to interested persons, including officers and directors, other than advisory fees of $36,760,026 and brokerage commissions of $186,821 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 year ended December 31, 2003.

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, 2003 were $99,591,705 and $528,152,540, respectively. Included in proceeds of sales is $436,224,694 representing the value of securities distributed as in-kind payment of redemptions, resulting in realized gains of $302,348,141.

At December 31, 2003 the aggregate gross unrealized appreciation of securities was $2,452,671,119.

NOTE 4—CAPITAL STOCK:

At December 31, 2003 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock were as follows:

NOTE 5—DISTRIBUTIONS TO SHAREHOLDERS:

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, 2003 permanent differences due to a net investment loss not deductible for tax purposes and realized gains on redemptions in kind not recognized for tax purposes resulted in a net decrease in net accumulated loss of $16,725,720 and undistributed net realized gains of $302,348,141 with a corresponding increase in paid in surplus of $285,622,421. These reclassifications had no effect on net assets.

The tax character of distributions paid during 2002 and 2003 was as follows:

As of December 31, 2003, the components of distributable earnings on a tax basis were as follows:

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, 2003 was $180,599.

NOTE 7—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, 2003 aggregated $347,877,863 and $222,524,851, respectively. The summary of transactions for each affiliate during the period of their affiliation for the year ended December 31, 2003 is provided below:

NOTE 8—FINANCIAL HIGHLIGHTS:

REPORT OF INDEPENDENT AUDITORS

To the Board of Directors and Shareholders of
Sequoia Fund, Inc.

In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Sequoia Fund, Inc. (the "Fund") at December 31, 2003, the results of its operations for the year then ended, and the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at December 31, 2003 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.

PricewaterhouseCoopers LLP
New York, New York
February 6, 2004

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.

SEQUOIA FUND, INC.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798
Website: www.sequoiafund.com

DIRECTORS

William J. Ruane
Richard T. Cunniff
Robert D. Goldfarb
David M. Poppe
Vinod Ahooja
Roger Lowenstein
Francis P. Matthews
C. William Neuhauser
Robert L. Swiggett

OFFICERS

William J. Ruane	— Chairman of the Board
Richard T. Cunniff	— Vice Chairman
Robert D. Goldfarb	— President
David M. Poppe	— Executive 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
MF Custody Administration Department
100 Church Street, 10th 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
One Battery Park Plaza
New York, New York 10004

This report has been prepared for the information of shareholders of Sequoia Fund, Inc.