Sequoia Fund, Inc. Semi-Annual Report logo

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, 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.

PERIOD ENDED: Value of
Initial
$10,000
Investment
Value of
Cumulative
Capital Gains
Distributions
Value of
Cumulative
Reinvested
Dividends
Total
Value of
Shares





July 15, 1970 $10,000 $— $— $10,000
May 31, 1971 11,750 184 11,934
May 31, 1972 12,350 706 451 13,507
May 31, 1973 9,540 1,118 584 11,242
May 31, 1974 7,530 1,696 787 10,013
May 31, 1975 9,490 2,137 1,698 13,325
May 31, 1976 12,030 2,709 2,654 17,393
May 31, 1977 15,400 3,468 3,958 22,826
Dec. 31, 1977 18,420 4,617 5,020 28,057
Dec. 31, 1978 22,270 5,872 6,629 34,771
Dec. 31, 1979 24,300 6,481 8,180 38,961
Dec. 31, 1980 25,040 8,848 10,006 43,894
Dec. 31, 1981 27,170 13,140 13,019 53,329
Dec. 31, 1982 31,960 18,450 19,510 69,920
Dec. 31, 1983 37,110 24,919 26,986 89,015
Dec. 31, 1984 39,260 33,627 32,594 105,481
Dec. 31, 1985 44,010 49,611 41,354 134,975
Dec. 31, 1986 39,290 71,954 41,783 153,027
Dec. 31, 1987 38,430 76,911 49,020 164,361
Dec. 31, 1988 38,810 87,760 55,946 182,516
Dec. 31, 1989 46,860 112,979 73,614 233,453
Dec. 31, 1990 41,940 110,013 72,633 224,586
Dec. 31, 1991 53,310 160,835 100,281 314,426
Dec. 31, 1992 56,660 174,775 112,428 343,863
Dec. 31, 1993 54,840 213,397 112,682 380,919
Dec. 31, 1994 55,590 220,943 117,100 393,633
Dec. 31, 1995 78,130 311,266 167,129 556,525
Dec. 31, 1996 88,440 397,099 191,967 677,506
Dec. 31, 1997 125,630 570,917 273,653 970,200
Dec. 31, 1998 160,700 798,314 353,183 1,312,197
Dec. 31, 1999 127,270 680,866 286,989 1,095,125
Dec. 31, 2000 122,090 903,255 289,505 1,314,850
Dec. 31, 2001 130,240 1,002,955 319,980 1,453,175
Dec. 31, 2002 126,630 976,920 311,226 1,414,776
June 30, 2003 130,370 1,012,616 320,418 1,463,404

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 and dividends reinvested in shares.

To the Shareholders of
Sequoia Fund, Inc.

Dear Shareholder:

Sequoia Fund's results for the second quarter of 2003 are shown below with comparable results for the leading market indexes:

To June 30, 2003 Sequoia
Fund
Dow Jones
Industrials
Standard &
Poor's 500



3 Months 11.73% 12.94% 15.39%
6 Months 3.44% 9.03% 11.76%
1 Year 2.34% -0.50% 0.25%
5 Years (Annualized) 3.24% 1.89% -1.61%
10 Years (Annualized) 14.59% 12.12% 10.04%

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.


Once again we have combined the first and second quarter reports so that we might provide you with a transcript of the Sequoia Fund annual meeting which was held on May 9th.

As so often happens, Sequoia's results varied significantly from those of the general market and its first half return of 3.4% lagged the S&P by about 7.5%. Because our performance is strongly influenced by our heavy concentration in Berkshire, Fifth Third, Mohawk, Progressive and TJX, we underperformed the S&P 500, as all but Progressive had little change in price in the first half. Our 20% investment in short-term U.S. Treasuries, as expected, also showed little change in value. Our confidence in the long-term prospects of these excellent companies remains unchanged.

Furthermore, we believe that the investment climate is such that it is important to maintain a reserve for future purchasing power in the safest of securities, i.e., short-term U.S. Treasuries, even though they currently yield barely 1%. We think there is a high probability that this will be a prudent policy through the unpredictable markets of the next five years. In this regard, you should not assume that our reserve in Treasuries achieves that goal since we can readily invest this money any time attractive opportunities may arise.

Sincerely,

Richard T. Cunniff Robert D. Goldfarb
David M. Poppe William J. Ruane
July 17, 2003

SEQUOIA FUND, INC.
Schedule of Investments
June 30, 2003 (Unaudited)

 

COMMON STOCKS (82.17%)
Shares Value
(Note 1)


BANK HOLDING COMPANIES (12.00%)
7,489,993 Fifth Third Bancorp $429,476,199
155,200 Mercantile Bankshares Corporation 6,111,776

435,587,975

BUILDING MATERIALS (2.87%)
3,071,900 Fastenal Company 104,260,286

DIVERSIFIED COMPANIES (33.77%)
16,906 Berkshire Hathaway Inc. Class A* 1,225,685,000

FREIGHT TRANSPORTATION (2.10%)
2,199,600 Expeditors International of Washington, Inc. 76,194,144

HOME FURNISHINGS (2.01%)
2,075,800 Ethan Allen Interiors Inc. † 72,985,128

INSURANCE (12.63%)
6,270,000 Progressive Corporation 458,337,000

LAUNDRY SERVICES (0.35%)
356,400 Cintas Corporation 12,630,816

MANUFACTURING (0.23%)
206,800 Harley Davidson, Inc. 8,243,048

TEXTILE—CARPETS (5.92%)
3,866,400 Mohawk Industries, Inc. †* 214,701,192

PROCESS CONTROL INSTRUMENTS (0.43%)
226,800 Danaher Corporation 15,433,740

RETAILING (9.77%)
47,000 Costco Wholesale Corporation* 1,720,200
1,375,900 Tiffany & Company 44,964,412
13,475,700 TJX Companies, Inc. 253,882,188
1,797,600 Walgreen Company 54,107,760

354,674,560

Miscellaneous Securities (0.09%) 3,217,442

TOTAL COMMON STOCKS ($916,273,845) 2,981,950,331

Principal
Amount

U.S. GOVERNMENT OBLIGATIONS (17.83%)
647,500,000 U.S. Treasury Bills due 7/10/03 through 8/21/03 647,088,442

TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $647,088,442)
647,088,442

TOTAL INVESTMENTS (100%)††
(Cost $1,563,362,287)
$3,629,038,773



†† 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.

SEQUOIA FUND, INC.
Statement of Assets and Liabilities
June 30, 2003 (Unaudited)

ASSETS:
     Investments in securities, at value (cost $1,563,362,287) (Note 1) $3,629,038,773
     Cash on deposit with custodian 4,884,679
     Receivable for capital stock sold 1,750,258
     Dividends and interest receivable 2,246,563
     Other assets 31,016

          Total assets 3,637,951,289

LIABILITIES:
     Payable for capital stock repurchased 876,095
     Accrued investment advisory fee 2,997,147
     Accrued other expenses 103,605

          Total liabilities 3,976,847

Net assets applicable to 27,873,461 shares of capital stock outstanding (Note 4) $3,633,974,442


Net asset value, offering price and redemption price per share $130.37


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

SEQUOIA FUND, INC.
Statement of Operations
Six Months Ended June 30, 2003 (Unaudited)

INVESTMENT INCOME:
     Income:
          Dividends:
               Unaffiliated companies $6,772,702
               Affiliated companies (Note 6) 256,080
          Interest 3,435,385
          Other Income 4,244

                    Total income 10,468,411

Expenses:
     Investment advisory fee (Note 2) 17,422,152
     Legal and auditing fees 52,397
     Stockholder servicing agent fees 207,230
     Custodian fees 40,000
     Directors fees and expenses (Note 5) 92,343
     Other 81,828

                    Total expenses 17,895,950
Less expenses reimbursed by Investment Adviser (Note 2) 400,000

                    Net expenses 17,495,950

                    Net investment (loss) (7,027,539)

REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
     Realized gain on investments:
          Unaffiliated companies 205,786,910
          Affiliated companies (Note 6) 5,909,423

                    Net realized gain on investments 211,696,333
     Net (decrease) in unrealized appreciation on:
          Investments (94,811,359)

                    Net realized and unrealized gain on investments 116,884,974

Increase in net assets from operations $109,857,435


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

SEQUOIA FUND, INC.
Statements of Changes in Net Assets

Six Months
Ended
6/30/03
(Unaudited)
Year
Ended
12/31/02
INCREASE IN NET ASSETS:

     From operations:
          Net investment (loss) $(7,027,539) $(12,720,703)
          Net realized gain 211,696,333 137,518,447
          Net (decrease) in unrealized appreciation (94,811,359) (237,620,489)


               Net increase (decrease) in net assets from operations 109,857,435 (112,822,745)
     Distributions to shareholders from:
          Net investment income 0 (352,691)
          Net realized gains (16,944,482) (4,996,914)
          Capital share transactions (Note 4) (364,074,491) (206,821,129)


               Total (decrease) (271,161,538) (324,993,479)
NET ASSETS:
     Beginning of period 3,905,135,980 4,230,129,459


     End of period $3,633,974,442 $3,905,135,980




NET ASSETS CONSIST OF:
     Capital (par value and paid in surplus) $1,581,423,840 $1,727,724,465
     Undistributed net investment (loss) income (7,027,539) 0
     Undistributed net realized (losses) gains (6,098,345) 16,923,670
     Unrealized appreciation 2,065,676,486 2,160,487,845


          Total Net Assets $3,633,974,442 $3,905,135,980




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.

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 in accordance with NASDAQ Official Closing Price 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 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.
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, 2003 and the Investment Adviser reimbursed the Fund $400,000.

For the six months ended June 30, 2003, there were no amounts accrued to interested persons, including officers and directors, other than advisory fees of $17,422,152 and brokerage commissions of $90,715 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, 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 six months ended June 30, 2003 were $8,732,351 and $373,283,340, respectively. Included in proceeds of sales is $318,319,965 representing the value of securities disposed of in payment of redemptions in-kind, resulting in realized gains of $217,773,866. 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 June 30, 2003 the aggregate gross unrealized appreciation of securities was $2,065,676,486.

NOTE 4—CAPITAL STOCK:

At June 30, 2003 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock for the six months ended June 30, 2003 and the year ended December 31, 2002 were as follows:

2003 2002


Shares Amount Shares Amount




Shares sold 685,790 $85,267,382 1,287,555 $166,163,172
Shares issued to stockholders on reinvestment of:
     Net investment income 0 0 10,323 1,368,620
     Net realized gains on Investments 111,262 14,470,754 25,829 3,239,739




797,052 99,738,136 1,323,707 170,771,531
Shares repurchased 3,761,461 463,812,627 2,964,295 377,592,660




Net (decrease) (2,964,409) $(364,074,491) (1,640,588) $(206,821,129)








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, 2003 was $92,343.

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, 2003 aggregated $287,686,320 and $229,907,471, respectively. The summary of transactions for each affiliate during the period of their affiliation for the six months ended June 30, 2003 is provided below:

Purchases Sales


Affiliate Shares Cost Shares Cost Realized
Gain
Dividend
Income







Ethan Allen Interiors 227,300 $5,538,429 $1,912,426 $256,080
Mohawk Industries Inc 423,300 18,978,915 3,996,997


$5,909,423 $256,080




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—FINANCIAL HIGHLIGHTS:

Six
Months
Ended
June 30,
Year Ended December 31,


2003 2002 2001 2000 1999 1998






Per Share Operating Performance (for a share outstanding throughout the period)
Net asset value, beginning of Period $126.63 $130.24 $122.09 $127.27 $160.70 $125.63






Income from investment operations:
Net investment income (loss) (0.25) (0.41) 0.97 1.66 0.84 0.39
Net realized and unrealized gains
(losses) on investments 4.60 (3.03) 11.52 23.33 (26.83) 43.07






          Total from investment operations 4.35 (3.44) 12.49 24.99 (25.99) 43.46






Less distributions:
Dividends from net investment income (0.00) (0.01) (0.97) (1.66) (0.85) (0.37)
Distributions from net realized gains (0.61) (0.16) (3.37) (28.51) (6.59) (8.02)






          Total distributions (0.61) (0.17) (4.34) (30.17) (7.44) (8.39)






Net asset value, end of period $130.37 $126.63 $130.24 $122.09 $127.27 $160.70












Total Return 3.4%† -2.6% 10.5% 20.1% -16.5% 35.3%
Ratios/Supplemental data
Net assets, end of period (in millions) $3,634.0 $3,905.1 $4,230.1 $3,943.9 $3,896.9 $5,001.9
Ratio to average net assets:
     Expenses 1.0%* 1.0% 1.0% 1.0% 1.0% 1.0%
     Net investment income -0.4%* -0.3% 0.8% 1.2% 0.6% 0.3%
Portfolio turnover rate 1%* 8% 7% 36% 12% 21%

Not annualized
* Annualized

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
Francis P. Matthews
C. William Neuhauser
Robert L. Swiggett
Roger Lowenstein

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.