Sequoia Fund, Inc.

767 Fifth Avenue, Suite 4701
New York, NY 10153
(800) 686-6884

For the Period Ended September 30, 2000

Dear Shareholder:

Sequoia Fund's results for the third quarter of 2000 are shown below with comparable results for the leading market indexes:

To September 30, 2000 Sequoia
Dow Jones
Standard &
Poor's 500
3 months +13.6% +2.3% -1.0%
9 months +10.7% -6.3% -1.4%

Suffice it to say that we are very pleased to report the above absolute and relative results for the Sequoia Fund in the first nine months of 2000. This has been a wild year for the market, as a large group of money managers has followed a herd instinct trying to be where the action is. The vacillating lure of the new versus the old, and the tech versus almost everything else, has led to dramatic volatility for the market overall and even more so in many individual issues. Many IPOs soared above their offering prices like Peter Pan singing "I believe". However, just as in many high school productions of the play, the thin wire that holds Peter high in the air can snap, bruising not just his performance but certain parts of his anatomy.

Trading volumes are staggering. Take the example of a single stock, Cisco Systems, a relatively unscathed favorite of many. On average, over $3 billion worth of Cisco shares changes hands on any given day. This means that investors are madly swapping over $800 billion on an annualized basis to own a piece of a company which will itself sell perhaps $26 billion of internet switching equipment in the next year. We are clearly a long way from the scenario in one of our favorite cartoons, where a TV news announcer, reading from a script for the evening news into a microphone on his desk, says: "There was zero trading on the New York Stock Exchange today. Everyone owned exactly what they wanted".

Despite the frantic trading activity, we sense that the market is now sorting things out in a more logical way. As we have said before, value and growth are not two distinct categories of investments. Growth is merely one aspect of the value equation. has produced enormous growth but has been sorely lacking to date in the most significant determinant of value — profits. We are seeing much more discrimination — though far from enough — in investors' examination of the fundamental earning power of the technology sector. In time, it will become even clearer that a limited number of companies are creating enduring growth in value while an enormous number will prove to have been very unprofitable investments.

The net inflow of money into stock mutual funds remains high. This indicates that the public still has unrealistically high expectations for returns and that the will to believe remains a powerful force. We are fairly certain that in time this optimism will dim but we are absolutely certain we don't know when this will happen.

This year's volatile markets have given us a number of opportunities to make new investments that we believe are sound. However, we still retain a cash reserve of about 25% of your funds for future investments.

We appreciate your loyalty through this highly volatile market and will make every effort to continue to earn that loyalty in the future.


Carley Cunniff
Executive Vice President

Richard T. Cunniff
Vice Chairman

Robert D. Goldfarb

William J. Ruane

November 6, 2000

In our June report, we estimated that Sequoia's year-end capital gains distribution, payable in December, would be in excess of $20 per share. Based on subsequent activity, we can now state that the capital gains distribution will be approximately $28 per share. The record date for the distribution will be December 8th and the payment date will be December 11th. At the 20% federal tax rate on long-term capital gains, the federal tax due on a $28 per share capital gains distribution would be $5.60 per share. We recommend that our taxable shareholders keep this in mind for their tax planning.

Given the relatively large size of the distribution, we thought it would be helpful to review the mathematics of the transaction in an example. Let's assume you are a shareholder who owns 1,000 shares of Sequoia at a net asset value of $140 per share on the record date. Assume that a $28 per share distribution is paid on the following payment date.

Prior to the distribution, your total investment in the Fund is valued at $140,000. The per share net asset value of the Fund will be adjusted on the day of the distribution to reflect the amount of the distribution, or, in this example, by $28 to $112 (all else equal). If you have elected to reinvest your capital gains distributions, your total investment in Sequoia will still be $140,000 after the distribution. However, instead of owning 1,000 shares valued at $140 per share, you will own 1,250 shares valued at $112 each, or $140,000 in total.

If you have elected to receive your capital gains distributions in cash, you will receive a check or wire in the amount of the distribution, or, in this example, for $28,000. However, after the distribution, you will still own assets totaling $140,000, of which $112,000 will be your ongoing investment in Sequoia and $28,000 will be in cash.

Statement of Investments

September 30, 2000 (Unaudited)

Shares   Value (a)
8,937,993 Fifth Third Bancorp $481,534,373
249,700 Mercantile Bankshares Corporation 9,063,330
1,638,900 National Commerce Bancorp 32,675,568
3,799,700 US Bancorp 86,443,175
20,175 Berkshire Hathaway Inc. Class A (c) 1,299,270,000
2,355,400 Ethan Allen Interiors, Inc. (b) 66,687,263
  INSURANCE (8.0%)
3,800,900 Progressive Corporation (b) 311,198,687
2,163,400 Dover Corporation 101,544,588
851,600 Harley Davidson, Inc. 40,770,350
1,667,200 Household International Inc. 94,405,200
  Miscellaneous Securities (7.0%) 274,611,325
  TOTAL COMMON STOCKS $2,798,203,859


  Value (a)
$ 37,000,000 U.S. Treasury Bills due 11/2/00 through 11/16/00 $36,740,129
127,000,000 U.S. Treasury Notes, 5 1/2% due 8/31/2001 126,107,031
763,500,000 U.S. Treasury Notes, 6 1/8% due 12/31/2001 762,784,219
187,500,000 U.S. Treasury Notes, 6 3/8% due 1/31/2002 187,968,750
Common Stocks 71.7% $2,798,203,859
U.S. Government Obligations 28.5% 1,113,600,129
Net Liabilities (0.2)% (10,382,129)
Net Assets   $3,901,421,859
Number of Shares Outstanding   27,782,518
Net Asset Value Per Share   $140.43


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; securities traded in the over-the-counter market and listed securities 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 sixty 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) 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."
(c) Non-income producing.

767 Fifth Avenue, Suite 4701
New York, New York 10153-4798

William J. Ruane
Richard T. Cunniff
Robert D. Goldfarb
Carol L. Cunniff
John M. Harding
Roger Lowenstein
Francis P. Matthews
C. William Neuhauser
Robert L. Swiggett

William J. Ruane — Chairman of the Board
Richard T. Cunniff — Vice Chairman
Robert D. Goldfarb — President
Carol L. Cunniff — Executive Vice President
Joseph Quinones, Jr. — Vice President, Secretary & Treasurer

Ruane, Cunniff & Co., Inc.
767 Fifth Avenue, Suite 4701
New York, New York 10153-4798

The Bank of New York
MF Custody Administration Department
100 Church Street, 10th Floor
New York, New York 10286

DST Systems, Inc.
P.O. Box 219477
Kansas City, Missouri 64121

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.