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, 2004. 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
Dec. 31, 2003 147,610 1,146,523 362,790 1,656,923
June 30, 2004 152,120 1,183,964 373,874 1,709,958

The total amount of capital gains distributions accepted in shares was $622,658, 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 2004 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 2.64% 1.19% 1.72%
6 Months 3.20% 0.87% 3.44%
1 Year 16.85% 18.76% 19.11%
5 Years (Annualized) 6.26% 0.91% 2.20%
10 Years (Annualized) 16.10% 13.44% 11.83%

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.


We have combined the first and second quarter reports so that we could provide you with a copy of the transcript of the Sequoia Fund annual meeting which was held on May 7th.

Sequoia outperformed the S&P 500 in the first quarter by 2.8 percentage points. By the end of the second quarter, however, Sequoia lagged behind the S&P by 0.24 percentage points. The performance of the fund tracked the stock price movement of Sequoia's major positions. Berkshire Hathaway's stock price rose 11% in the first quarter, but dropped 5% from the end of March through June. Much the same pattern of price movement held with Progressive, TJX, and Mohawk. The share price of Fifth Third, however, fell in both quarters. We remain confident in the long-term prospects of these excellent companies.

Sincerely,

 

Richard T. Cunniff Robert D. Goldfarb David M. Poppe William J. Ruane
July 20, 2004

SEQUOIA FUND, INC.
Schedule of Investments
June 30, 2004 (Unaudited)

COMMON STOCKS (91.97%)
Shares Value
(Note 1)


BANK HOLDING COMPANIES (9.62%)
7,143,630 Fifth Third Bancorp $384,184,421
73,761 Mercantile Bankshares Corporation 3,453,490

387,637,911

BUILDING MATERIALS (3.27%)
2,321,335 Fastenal Company 131,921,468

CHEMICAL DIAGNOSTIC SUBSTANCES (1.26%)
806,479 IDEXX Laboratories Inc.* 50,759,788

DIVERSIFIED COMPANIES (35.60%)
16,119 Berkshire Hathaway Inc. Class A* 1,433,785,050
156 Berkshire Hathaway Inc. Class B* 460,980

1,434,246,030

FREIGHT TRANSPORTATION (2.49%)
2,033,676 Expeditors International of Washington, Inc. 100,483,931

HOME FURNISHINGS (1.76%)
1,979,807 Ethan Allen Interiors Inc. 71,094,869

CASUALTY INSURANCE (12.66%)
5,980,057 Progressive Corporation 510,098,862

INSURANCE AGENTS & BROKERS (1.74%)
1,626,706 Brown & Brown Inc. 70,111,029

MANUFACTURING (0.52%)
335,682 Harley Davidson, Inc. 20,792,143

MEDICAL & HOSPITAL EQUIPMENT (0.13%)
67,624 Patterson Companies Inc.* 5,172,560

TEXTILE — CARPETS (6.71%)
3,687,603 Mohawk Industries, Inc.* 270,411,928

PROCESS CONTROL INSTRUMENTS (0.56%)
432,619 Danaher Corporation 22,431,295

RETAILING (11.10%)
44,826 Costco Wholesale Corporation $1,841,004
1,312,277 Tiffany & Company 48,357,407
12,852,544 TJX Companies, Inc. 310,260,412
2,387,553 Walgreen Company 86,453,294

446,912,117

Miscellaneous Securities (4.55%) 183,605,722

TOTAL COMMON STOCKS ($1,166,650,116) $3,705,679,653

Principal
Amount

U.S. GOVERNMENT OBLIGATIONS (8.03%)
$324,000,000 U.S. Treasury Bill due 08/05/04 323,664,525

TOTAL U.S. GOVERNMENT OBLIGATIONS
(Cost $323,664,525)
323,664,525

TOTAL INVESTMENTS (100%)
(Cost $1,490,314,641)
$4,029,344,178



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, 2004 (Unaudited)

ASSETS:
Investments in securities, at value (cost $1,490,314,641) (Note 1) $4,029,344,178
Cash on deposit with custodian 942,207
Receivable for capital stock sold 563,789
Dividends and interest receivable 2,571,202
Other assets 30,985

Total assets 4,033,452,361

LIABILITIES:
Payable for capital stock repurchased 806,415
Payable for investments securities purchased unsettled 10,525,269
Accrued investment advisory fee 3,357,102
Accrued other expenses 118,957

Total liabilities 14,807,743

Net assets applicable to 26,417,755 shares of capital stock outstanding (Note 4) $4,018,644,618


Net asset value, offering price and redemption price per share $152.12


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

SEQUOIA FUND, INC.
Statement of Operations
Six Months Ended June 30, 2004 (Unaudited)

INVESTMENT INCOME:
Income:
Dividends:
Unaffiliated companies $7,455,766
Affiliated companies (Note 6) 6,345,746
Interest 2,006,617
Other Income 2,663

Total income 15,810,792

Expenses:
Investment advisory fee (Note 2) 20,061,362
Legal and auditing fees 76,334
Stockholder servicing agent fees 214,606
Custodian fees 40,000
Directors fees and expenses (Note 5) 95,481
Other 85,417

Total expenses 20,573,200
Less expenses reimbursed by Investment Adviser (Note 2) 438,000

Net expenses 20,135,200

Net investment (loss) (4,324,408)

REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Realized gain on investments:
Unaffiliated companies 43,295,279
Affiliated companies (Note 6) 2,571,658

Net realized gain on investments 45,866,937
Net increase in unrealized appreciation on:
Investments 86,358,418

Net realized and unrealized gain on investments 132,225,355

Increase in net assets from operations $127,900,947


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

SEQUOIA FUND, INC.
Statements of Changes in Net Assets

  Six Months
Ended
6/30/04
(Unaudited)
Year
Ended
12/31/03


INCREASE IN NET ASSETS:
From operations:
Net investment (loss) $(4,324,408) $(16,725,720)
Net realized gain 45,866,937 308,007,558
Net increase in unrealized appreciation 86,358,418 292,183,274


Net increase in net assets from operations 127,900,947 583,465,112
Distributions to shareholders from:
Net investment income
Net realized gains (5,637,546) (16,944,455)
Capital share transactions (Note 4) (77,205,950) (498,069,470)


Total increase 45,057,451 68,451,187
NET ASSETS:
Beginning of period 3,973,587,167 3,905,135,980


End of period $4,018,644,618 $3,973,587,167




NET ASSETS CONSIST OF:
Capital (par value and paid in surplus) $1,483,948,059 $1,515,277,416
Undistributed net investment (loss) (4,324,408)
Undistributed net realized (losses) gains (8,570) 5,638,632
Unrealized appreciation 2,539,029,537 2,452,671,119


Total Net Assets $4,018,644,618 $3,973,587,167




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 & Goldfarb Inc., as its investment adviser. Ruane, Cunniff & Goldfarb 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, 2004 and the Investment Adviser reimbursed the Fund $438,000.

For the six months ended June 30, 2004, there were no amounts accrued to interested persons, including officers and directors, other than advisory fees of $20,061,362 to Ruane, Cunniff & Goldfarb Inc. and brokerage commissions of $209,731 to Ruane, Cunniff & Goldfarb LLC, an affiliate of the Investment Adviser. Certain officers of the Fund are also officers of the Investment Adviser and the Fund's distributor. Ruane, Cunniff & Goldfarb LLC, 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, 2004.

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, 2004 were $235,684,683 and $63,488,805, respectively. Included in proceeds of sales is $63,488,805 representing the value of securities disposed of in payment of redemptions in-kind, resulting in realized gains of $45,876,593. 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, 2004 the aggregate gross unrealized appreciation and depreciation of securities were $2,551,848,931 and $12,819,394, respectively.

NOTE 4—CAPITAL STOCK:

At June 30, 2004 there were 100,000,000 shares of $.10 par value capital stock authorized. Transactions in capital stock for the six months ended June 30, 2004 and the year ended December 31, 2003 were as follows:

2004

2003



Shares Amount Shares Amount




Shares sold 565,582 $86,611,703 1,275,248 $166,839,514
Shares issued to stockholders on reinvestment of:
Net investment income
Net realized gains on investments 31,351 4,737,103 111,262 14,470,754




Shares repurchased 596,933 91,348,806 1,386,510 181,310,268
1,099,117 168,554,756 5,304,441 679,379,738




Net (decrease) (502,184) $(77,205,950) (3,917,931) $(498,069,470)








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, 2004 was $95,481.

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, 2004 aggregated $341,506,797 and $219,560,768, respectively. The summary of transactions for each affiliate during the period of their affiliation for the six months ended June 30, 2004 is provided below:

Purchases Sales


Affiliate Shares Cost Shares Cost Realized
Gain
Dividend
Income







Ethan Allen Interiors Inc. 5,000 $191,550 32,933 $817,446 $624,071 $6,345,746
Mohawk Industries Inc. 52,030 $2,338,187 1,947,587


$2,571,658 $6,345,746




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,
2004

Year Ended December 31,


2003

2002

2001

2000

1999







Per Share Operating Performance (for a share outstanding throughout the period)
Net asset value, beginning of period $147.61 $126.63 $130.24 $122.09 $127.27 $160.7






Income from investment operations:
Net investment income (loss) (0.16) (0.62) (0.41) 0.97 1.66 0.84
Net realized and unrealized gains (losses) on investments 4.88 22.21 (3.03) 11.52 23.33 (26.83)






Total from investment operations 4.72 21.59 (3.44) 12.49 24.99 (25.99)






Less distributions:
Dividends from net investment income (0.00) (0.00) (0.01) (0.97) (1.66) (0.85)
Distributions from net realized gains (0.21) (0.61) (0.16) (3.37) (28.51) (6.59)






Total distributions (0.21) (0.61) (0.17) (4.34) (30.17) (7.44)






Net asset value, end of period $152.12 $147.61 $126.63 $130.24 $122.09 $127.27












Total Return 3.2% 17.1% 2.6% 10.5% 20.1% 16.5%
Ratios/Supplemental data
Net assets, end of period (in millions) $4,018.6 $3,973.6 $3,905.1 $4,230.1 $3,943.9 $3,896.9
Ratio to average net assets:
Expenses 1.0%* 1.0% 1.0% 1.0% 1.0% 1.0%
Net investment income 0.2%* 0.5% 0.3% 0.8% 1.2% 0.6%
Portfolio turnover rate 4%* 3% 8% 7% 36% 12%

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
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

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
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.