The table below covers the period from July 15, 1970 (the date Fund shares were first offered to the public) to December 31, 1999. 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 $328,919, the total amount of dividends reinvested was $91,708.

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

Dear Shareholder:

Sequoia Fund's results for the fourth quarter and full year 1999 are shown below with comparable results for the leading market indexes:

As we stated in our third quarter report, 1999 has been a serious disappointment for Sequoia Fund shareholders, including ourselves. The market value of Sequoia shares declined 16.5% during the year. To date in 2000 as we write you, the momentum has continued and Sequoia is down an additional 9%. This means that Sequoia has retreated to a share value roughly equivalent to early 1998 when, after a three year run during which our stocks compounded at a 35% annual rate, we warned that Sequoia's performance was borrowing from the future. We didn't know how right we were.

In light of our recent results, we have had to take a good hard look at ourselves and our investment approach and ask, "Should we be doing something differently?"

Our longstanding approach to investing has been based on a few core principles. First, we try to own common stocks of high quality companies with good earnings growth prospects. We look for superior returns on invested capital, and we look for the returns to be sustainable well into the future. It's the last part of this requirement that is particularly tricky to assess.

Second, we try to buy these companies at prices we believe underestimate their real value. This criterion dramatically narrows the field of potential candidates, as great companies are usually already recognized by the market.

Third, when we find the first two elements together, we want to own a lot of the stock. And finally, we hope to hold these investments for many years as long as the fundamentals remain sound and earnings prospects remain favorable. We will generally hold an investment even if it faces some short-term challenges, or if its "sector" falls out of favor, or if it gets a bit ahead of itself. We will sell some or all of a position if we feel its valuation has reached levels which appear excessive relative to likely earnings prospects. These simple principles have served us well over the past 30 years, although we had a tendency to leave a fair amount of money on the table. As a result, in recent years we adopted a tolerance for holding stocks at higher valuation levels than in the past. This evolution contributed to our outsized results in 1997 and 1998, but also was a factor in our unusually poor results in 1999.

Between our important positions in Progressive Corporation and the Geico and General Re subsidiaries of Berkshire Hathaway, the Fund had a big investment in the auto insurance and general property/casualty reinsurance businesses going into 1999. The decline in market values of Progressive and Berkshire accounted for about 80% of the decline in the Fund's net asset value during the year. While we were well aware of cyclical profit pressures in auto insurance and had low expectations for near term reinsurance results, we underestimated the severity of the cycle and perhaps overestimated the ability of our companies' earnings to withstand the effects of the various industry pressures. However, we also believe that the market remains excessively fixated on Progressive's and Berkshire's next few quarters, ignoring both companies' superb track records and excellent long term opportunities.

A number of our shareholders have written us in frustration with our lack of direct technology investments. We are all mind-numbingly aware that technology stocks comprise the current & and virtually only -- area of market excitement today and have accounted for almost all the gains in the market indexes in 1999 and 2000 to date. Some shareholders have accused us of "smugness" in our staunch agnosticism in this area. Quite the contrary! Rather, we find it extremely daunting to analyze businesses characterized by rapid technological change with their resultant shorter periods of predictable competitive advantage. And generally these companies trade at very high valuations which implicitly assume that dramatic growth and very high profit levels will continue uninterrupted in almost flawless perpetuity, in sharp contrast to almost all economic history. That requires a sense of certainty that we simply cannot muster.

Investors abandon valuation considerations in investing from time to time. You might be interested to read the following commentary by Benjamin Graham in reviewing stock market behavior leading up to 1929: "The notion that the desirability of a common stock was entirely independent of its price seems incredibly absurd. Yet the new era theory led directly to this thesis..Instead of judging the market price by established standards of value, the new era based its standards of value upon the market price. Hence all upper limits disappeared, not only upon the price at which a stock could sell, but even upon the price at which it would deserve to sell..The results of such a doctrine could not fail to be tragic." (Emphasis ours.) These comments were written 66 years ago in Security Analysis, 1934 edition. Ironically enough in view of today's market conditions, the title of the chapter is "The New-Era Theory".

More recently, a highly respected figure in the investment community, Bob Kirby, caustically summarized much of what is going on currently in the stock market with two rules for investing in today's "new era": "Rule 1) Any stock that has tripled during the past 12 months is a serious purchase candidate; and Rule 2) Any stock that has been flat for the past month or two or - God forbid - has gone down, is immediately sold." Needless to say, our investment approach is not in sync with current conditions, but we will not abandon proven standards just to be with the crowd.

We have never had any success in forecasting either Sequoia's or the stock market's short term performance. However, our sense of valuation has proven to be a good barometer over longer periods of time. We feel quite strongly that our combined portfolio holdings will generate compound annual earnings growth well into the double-digits as far out as we can see. We believe that the current prices of our holdings, in the aggregate, significantly undervalue these prospects. In 1998 we warned that our exceptional gains in recent years were borrowing from future performance. With our underperformance in 1999 and thus far in 2000, we believe we have more than repaid this debt. The combination of attractive current valuations and strong earnings prospects for our portfolio companies should produce very satisfactory results over the next five years.

Sincerely,

February 17, 2000

++ The cost for federal income tax purposes is identical.

* Non-income producing.

+ Refer to Note 6.

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

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

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

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.

1. 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.
2. 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.
3. 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.
4. Use of Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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.
5. General: Dividends and distributions are recorded by the Fund on the ex-dividend date. Interest income is accrued as earned.

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, 1999 and the Investment Adviser reimbursed the Fund $729,000. For the year ended December 31, 1999, there were no amounts accrued to interested persons, including officers and directors, other than advisory fees of $45,280,173 and brokerage commissions of $131,970 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, 1999.

The aggregate cost of purchases and the proceeds from the sales of securities, excluding U.S. government obligations, for the year ended December 31, 1999 were $79,494,572 and $188,079,320,respectively. Included in proceeds of sales is $118,049,125 representing the value of securities disposed of in payment of redemptions in-kind resulting in realized gains of $100,076,130. As a result of the redemptions in-kind net realized gains differ for financial statement and tax purposes. These realized gains have been reclassified from undistributed realized gains to paid in surplus in the accompanying financial statements.

At December 31, 1999 the aggregate gross unrealized appreciation and depreciation of securities were $2,393,399,175 and $3,779,202, respectively.

At December 31, 1999 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock were as follows:

 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 year ended December 31, 1999 was $187,184.

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 December 31, 1999 aggregated $277,940,812 and $129,150,484, respectively. The summary of transactions for each affiliate during the period of their affiliation for the year ended December 31, 1999 is provided below:

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, 1999, and the results of its operations, the changes in its net assets and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States. 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 audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States, 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 audit, which included confirmation of securities at December 31, 1999 by correspondence with the custodian, provides a reasonable basis for the opinion expressed above. The financial statements of the Fund for the year ended December 31, 1998, including the financial highlights for each of the four years in the period then ended, were audited by other independent accountants whose report dated January 15, 1999 expressed an unqualified opinion on those financial statements.

New York, New York

January 14, 2000

On August 13, 1999, McGladrey & Pullen, LLP ("McGladrey") resigned as independent accountants of the Fund pursuant to an agreement by PricewaterhouseCoopers LLP ("PwC") to acquire McGladrey's investment company practice. The McGladrey partners and professionals serving the Fund at the time of the acquisition joined PwC.

The reports of McGladrey on the financial statements of the Fund during the past two fiscal years contained no adverse opinion or disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

In connection with its audits for the two most recent fiscal years and through August 13, 1999, there were no disagreements with McGladrey on any matter of accounting principle or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of McGladrey, would have caused it to make reference to the subject matter of disagreement in connection with its report.

On September 13, 1999 the Fund, with the approval of its Board of Directors and its Audit Committee, engaged PwC as its independent accountants.