GENERAL AMERICAN INVESTORS COMPANY, INC.
FIRST QUARTER REPORT
MARCH 31, 2005
A Closed-End Investment Company
listed on the New York Stock Exchange
450 LEXINGTON AVENUE
NEW YORK, NY 10017
212-916-8400 1-800-436-8401
E-mail: InvestorRelations@gainv.com
www.generalamericaninvestors.com
TO THE STOCKHOLDERS
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For the three months ended March 31, 2005, our stockholders experienced a
decrease of 0.6% on their investment in our Common Stock (assuming reinvestment
of all dividends). The net asset value per Common Share decreased 0.3%. By
comparison, our benchmark, the Standard & Poor's 500 Stock Index (including
income) decreased 2.1%. For the twelve months ended March 31, 2005, the return
to our stockholders was 5.6% and the return on the net asset value per Common
Share was 7.4%; these compare with a return of 6.6% for the S&P 500. During each
period, the discount at which our shares traded fluctuated moderately and at
March 31, 2005, it was 12.1%.
As set forth in the accompanying financial statements (unaudited), as of March
31, 2005, the net assets applicable to the Company's Common Stock were
$1,019,560,296, equal to $35.10 per Common Share.
The decrease in net assets resulting from operations for the three months ended
March 31, 2005 was $3,890,401. During this period, the net realized gain on
securities sold was $10,981,404 and the decrease in unrealized appreciation was
$12,811,164. Net investment income for the three months was $914,359 and
distributions to Preferred Stockholders amounted to $2,975,000.
During the three months, 307,200 shares of the Company's Common Stock were
repurchased for $9,549,042 at an average discount from net asset value of 12%.
Stalled equity markets may well reflect the expectation that Fed tightening and
higher oil prices will retard economic growth later in the year. The failure to
digest successfully the sharp gains recorded in the final two months of 2004 may
also be a factor. Earnings are continuing to grow, meanwhile, although the pace
of advance is moderating, and inflation remains reasonably well constrained.
While interest rates are not declining, as they did last year, neither are they
rising dramatically. Increases in dividends and share buy backs are continuing
apace and are likely to support a positive outlook for security valuations.
We are pleased to report that on April 13, 2005, at the Company's annual
meeting, the Stockholders (1) elected eleven directors, including two directors
who were elected by the holders of the Company's Preferred Stock, and (2)
ratified the selection of Ernst & Young LLP as auditors of the Company for the
year 2005.
The information about the Company, including our investment objective, operating
policies and procedures, investment results, record of dividend payments,
financial reports and press releases, contained at our website has been updated
through March 31, 2005. It can be accessed on the Internet at
www.generalamericaninvestors.com.
By Order of the Board of Directors,
General American Investors Company, Inc.
Spencer Davidson
President and Chief Executive Officer
April 13, 2005
2 STATEMENT OF ASSETS AND LIABILITIES March 31, 2005 (Unaudited)
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General American Investors
ASSETS
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INVESTMENTS, AT VALUE (NOTE 1a)
Common stocks (cost $707,162,548) $1,170,360,097
Corporate note (cost $711,652) 712,747
Corporate discount notes (cost $40,380,055) 40,380,055
Money market fund (cost $7,834,211) 7,834,211
--------------
Total investments (cost $756,088,466) 1,219,287,110
CASH, RECEIVABLES AND OTHER ASSETS
Cash $39,729
Receivable for securities sold 4,317,436
Dividends, interest and other receivables 942,081
Prepaid expenses 7,632,440
Other 234,874 13,166,560
----------- -------------
TOTAL ASSETS 1,232,453,670
LIABILITIES
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Payable for securities purchased 5,242,815
Preferred dividend accrued but not yet declared 231,389
Accrued expenses and other liabilities 7,419,170
----------
12,893,374
TOTAL LIABILITIES
5.95% CUMULATIVE PREFERRED STOCK, SERIES B -
8,000,000 shares at a liquidation value of $25 per share (note 2) 200,000,000
-------------
NET ASSETS APPLICABLE TO COMMON STOCK - 29,046,599 shares (note 2) $1,019,560,296
==============
NET ASSET VALUE PER COMMON SHARE $35.10
=======
NET ASSETS APPLICABLE TO COMMON STOCK
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, 29,046,599 shares at par value (note 2) $29,046,599
Additional paid-in capital (note 2) 517,253,173
Undistributed realized gain on investments 10,949,498
Undistributed net investment income 2,318,771
Unallocated distributions on Preferred Stock (3,206,389)
Unrealized appreciation on investments 463,198,644
-----------
NET ASSETS APPLICABLE TO COMMON STOCK $1,019,560,296
==============
(see notes to financial statements)
3 STATEMENT OF OPERATIONS Three Months Ended March 31, 2005 (Unaudited)
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General American Investors
INCOME
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Dividends (net of foreign withholding taxes of $56,933) $3,844,381
Interest 325,923 $4,170,304
----------
EXPENSES
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Investment research 1,824,740
Administration and operations 1,093,960
Office space and general 129,801
Directors' fees and expenses 51,260
Transfer agent, custodian and registrar fees and expenses 47,026
Auditing and legal fees 42,900
Stockholders' meeting and reports 42,299
Miscellaneous taxes 23,959 3,255,945
--------- ---------
NET INVESTMENT INCOME 914,359
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1f AND 4)
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments:
Long transactions 10,780,985
Short sale transaction (note 1b) (755,114)
Option transactions (note 1c) 955,533
----------
Net realized gain on investments (long-term) 10,981,404
Net decrease in unrealized appreciation (12,811,164)
----------
NET LOSS ON INVESTMENTS (1,829,760)
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS (2,975,000)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($3,890,401)
===========
(see notes to financial statements)
4 STATEMENT OF CHANGES IN NET ASSETS
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General American Investors
Three Months
Ended Year Ended
March 31, 2005 December 31,
(Unaudited) 2004
-------------- ------------
OPERATIONS
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Net investment income $914,359 $9,253,481
Net realized gain on investments 10,981,404 36,774,029
Net increase (decrease) in unrealized appreciation (12,811,164) 62,361,773
----------- -----------
Distributions to Preferred Stockholders:
From net income - (2,686,304)
From long-term capital gains - (9,213,696)
Unallocated distributions on Preferred Stock (2,975,000) -
----------- -----------
Decrease in net assets from Preferred distributions (2,975,000) (11,900,000)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (3,890,401) 96,489,283
---------- -----------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
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From net income (58,303) (6,602,940)
From long-term capital gains (7,929,239) (22,647,281)
----------- -----------
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (7,987,542) (29,250,221)
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CAPITAL SHARE TRANSACTIONS
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Value of Common Shares issued in payment of dividends (note 2) 4,594,188 15,781,952
Cost of Common Shares purchased (note 2) (9,549,042) (32,963,032)
----------- -----------
DECREASE IN NET ASSETS - CAPITAL TRANSACTIONS (4,954,854) (17,181,080)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (16,832,797) 50,057,982
NET ASSETS APPLICABLE TO COMMON STOCK
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BEGINNING OF PERIOD 1,036,393,093 986,335,111
------------- -------------
END OF PERIOD (including undistributed net investment income of
$2,318,771 and $1,462,715, respectively) $1,019,560,296 $1,036,393,093
============== ==============
(see notes to financial statements)
5 FINANCIAL HIGHLIGHTS
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General American Investors
The following table shows per share operating performance data, total investment
return, ratios and supplemental data for the three months ended March 31, 2005
and for each year in the five-year period ended December 31, 2004. This
information has been derived from information contained in the financial
statements and market price data for the Company's shares.
Three Months
Ended Year Ended December 31,
March 31, 2005 ------------------------------------------------------------
(Unaudited) 2004 2003 2002 2001 2000
------------ ------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $35.49 $33.11 $26.48 $35.14 $39.91 $41.74
------ ------ ------- ------ ------ ------
Net investment income .03 .32 .03 .19 .41 .53
Net gain (loss) on securities -
realized and unrealized (.05) 3.48 7.72 (7.88) (.66) 6.12
------ ------ ------- ------ ------ ------
Distributions on Preferred Stock:
Dividends from investment income - (.09) (.01) (.12) (.07) (a) (.11) (b)
Distributions from capital gains - (.32) (.35) (.23) (.29) (.29)
Unallocated (.10) - - - - -
------ ------ ------- ------ ------ ------
(.10) (.41) (.36) (.35) (.36) (.40)
------ ------ ------- ------ ------ ------
Total from investment operations (.12) 3.39 7.39 (8.04) (.61) 6.25
------ ------ ------- ------ ------ ------
Less distributions on Common Stock:
Dividends from investment income - (.23) (.02) (.21) (c) (.88) (d) (2.30) (e)
Distributions from capital gains (.27) (.78) (.52) (.41) (3.28) (5.78)
------ ------ ------- ------ ------ ------
(.27) (1.01) (.54) (.62) (4.16) (8.08)
------ ------ ------- ------ ------ ------
Capital Stock transaction -
effect of Preferred Stock offering - - (.22) - - -
------ ------ ------- ------ ------ ------
Net asset value, end of period $35.10 $35.49 $33.11 $26.48 $35.14 $39.91
====== ====== ======= ====== ====== ======
Per share market value, end of period $30.87 $31.32 $29.73 $23.85 $33.47 $36.00
====== ====== ======= ====== ====== ======
TOTAL INVESTMENT RETURN - Stockholder
Return, based on market price per share (0.56)%* 8.79% 27.01% (27.21)% 4.33% 19.10%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to Common Stock,
end of period (000's omitted) $1,019,560 $1,036,393 $986,335 $809,192 $1,097,530 $1,155,039
Ratio of expenses to average net assets
applicable to Common Stock 0.32%* 1.15% 1.23% 0.92% 0.97% 1.05%
Ratio of net income to average net assets
applicable to Common Stock 0.09%* 0.94% 0.13% 0.61% 1.15% 1.24%
Portfolio turnover rate 3.83%* 16.71% 18.62% 22.67% 23.81% 40.61%
PREFERRED STOCK
Liquidation value, end of
period (000's omitted) $200,000 $200,000 $200,000 $150,000 $150,000 $150,000
Asset coverage 610% 618% 593% 639% 832% 870%
Liquidation preference per share $25.00 $25.00 $25.00 $25.00 $25.00 $25.00
Market value per share $24.30 $24.97 $25.04 $25.85 $25.90 $24.25
(a) Includes short-term capital gain in the amount of $.04 per share.
(b) Includes short-term capital gain in the amount of $.09 per share.
(c) Includes short-term capital gain in the amount of $.19 per share.
(d) Includes short-term capital gain in the amount of $.51 per share.
(e) Includes short-term capital gain in the amount of $1.82 per share.
*Not annualized
6 STATEMENT OF INVESTMENTS March 31, 2005 (Unaudited)
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General American Investors
Shares or Value
Principal Amount COMMON STOCKS (note 1a)
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BUILDING AND REAL ESTATE (3.9%)
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1,100,000 CEMEX, S.A. de C.V. ADR (COST $29,121,764) $39,875,000
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COMMUNICATIONS AND INFORMATION SERVICES (6.9%)
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550,000 American Tower Corporation (a) 10,026,500
550,000 CIENA Corporation (a) 946,000
900,000 Cisco Systems, Inc. (a) 16,101,000
150,000 Juniper Networks, Inc. (a) 3,309,000
500,000 Lamar Advertising Company Class A (a) 20,145,000
4,600,000 Telecom Corporation of New Zealand Limited 19,826,000
----------
(COST $67,633,399) 70,353,500
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COMPUTER SOFTWARE AND SYSTEMS (5.1%)
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300,000 EMC Corporation (a) 3,696,000
1,525,000 Microsoft Corporation 36,859,250
623,000 NetIQ Corporation (a) 7,120,890
133,500 VeriSign, Inc. (a) 3,831,450
----------
(COST $53,801,539) 51,507,590
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CONSUMER PRODUCTS AND SERVICES (3.6%)
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350,000 Diageo plc 19,915,000
275,000 Ethan Allen Interiors Inc. 8,800,000
150,000 PepsiCo, Inc. 7,954,500
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(COST $28,303,579) 36,669,500
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ELECTRONICS (1.7%)
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715,000 Molex Incorporated Class A (COST $15,450,691) 16,874,000
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ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (3.8%)
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1,175,000 Republic Services, Inc. (COST $26,227,380) 39,339,000
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FINANCE AND INSURANCE (30.2%)
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BANKING (9.7%)
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368,000 Bank of America Corporation 16,228,800
600,000 Golden West Financial Corporation 36,300,000
310,000 M&T Bank Corporation 31,638,600
205,000 SunTrust Banks, Inc. 14,774,350
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(COST $21,564,370) 98,941,750
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INSURANCE (19.2%)
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380,000 American International Group, Inc. 21,055,800
500,000 Annuity and Life Re (Holdings), Ltd. (a) 470,000
340,000 Arch Capital Group Ltd. (a) 13,613,600
300 Berkshire Hathaway Inc. Class A (a) 26,100,000
625,000 Everest Re Group, Ltd. 53,193,750
400,000 MetLife, Inc. 15,640,000
110,000 Montpelier Re Holdings Ltd. 3,866,500
475,000 PartnerRe Ltd. 30,685,000
350,000 Reinsurance Group of America, Incorporated 14,903,000
249,500 Transatlantic Holdings, Inc. 16,521,890
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(COST $92,539,813) 196,049,540
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OTHER (1.3%)
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275,000 Annaly Mortgage Management, Inc. 5,159,000
95,194 Central Securities Corporation 2,231,347
775,000 MFA Mortgage Investments, Inc. 5,897,750
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(COST $12,196,714) 13,288,097
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(COST $126,300,897) 308,279,387
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7 STATEMENT OF INVESTMENTS March 31, 2005 (Unaudited) - continued
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General American Investors
Shares or Value
Principal Amount COMMON STOCKS (continued) (note 1a)
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HEALTH CARE (10.9%)
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PHARMACEUTICALS (8.7%)
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340,000 Alkermes, Inc. (a) $3,529,200
200,000 Biogen Idec Inc. (a) 6,902,000
300,000 Bristol-Myers Squibb Company 7,638,000
275,000 Cytokinetics, Incorporated (a) 1,804,000
270,000 Genaera Corporation (a) 615,600
400,000 Genentech, Inc. (a) 22,644,000
455,000 MedImmune, Inc. (a) 10,833,550
120,000 Millennium Pharmaceuticals, Inc. (a) 1,010,400
1,275,000 Pfizer Inc 33,494,250
----------
(COST $75,007,951) 88,471,000
----------
MEDICAL INSTRUMENTS AND DEVICES (2.2%)
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450,000 Medtronic, Inc. (COST $10,483,716) 22,927,500
----------
(COST $85,491,667) 111,398,500
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MISCELLANEOUS (1.8%)
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Other (b) (COST $17,213,077) 17,900,910
----------
OIL & NATURAL GAS (INCLUDING SERVICES) (26.5%)
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665,000 Apache Corporation 40,717,950
1,600,000 Devon Energy Corporation 76,400,000
600,000 EOG Resources, Inc. 29,244,000
525,000 Halliburton Company 22,706,250
650,000 Patterson-UTI Energy, Inc. 16,263,000
330,000 Total S.A. ADR 38,685,900
750,000 Unocal Corporation 46,267,500
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(COST $173,682,466) 270,284,600
-----------
RETAIL TRADE (19.6%)
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700,000 Costco Wholesale Corporation 30,926,000
1,920,000 The Home Depot, Inc. (c) 73,420,800
2,500,000 The TJX Companies, Inc. 61,575,000
675,000 Wal-Mart Stores, Inc. 33,824,250
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(COST $68,036,225) 199,746,050
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SEMICONDUCTORS (0.8%)
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491,500 Brooks Automation, Inc. (a) 7,460,970
197,000 EMCORE Corporation (a) 663,890
----------
(COST $9,890,144) 8,124,860
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SPECIAL HOLDINGS (a) (d) (NOTE 5) (0.0%)
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144,000 Silicon Genesis Corporation 7,200
546,000 Standard MEMS, Inc. Series A Convertible Preferred -
---------
(COST $6,009,720) 7,200 (e)
---------
TOTAL COMMON STOCKS (114.8%) (COST $707,162,548) 1,170,360,097
-------------
CORPORATE NOTE
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COMMUNICATIONS AND INFORMATION SERVICES (0.1%)
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$678,000 American Tower Corporation 9 3/8% due 2/1/09 (COST $711,652) 712,747
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8 STATEMENT OF INVESTMENTS March 31, 2005 (Unaudited) - continued
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General American Investors
Principal Value
Amount SHORT-TERM SECURITIES AND OTHER ASSETS (note 1a)
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$12,500,000 American Express Credit Corporation notes due 4/5-5/16/05; 2.62%-2.77% $12,462,653
11,000,000 American General Finance Corporation notes due 4/11-4/18/05; 2.63%-2.68% 10,967,075
11,000,000 General Electric Capital Corporation notes due 4/25-5/9/05; 2.70%-2.76% 10,966,310
6,000,000 Prudential Funding, LLC note due 5/2/05; 2.74% 5,984,017
7,834,211 SSgA Prime Money Market Fund 7,834,211
-----------
TOTAL SHORT-TERM SECURITIES (4.7%) (COST $48,214,266) 48,214,266
-------------
TOTAL INVESTMENTS (f) (119.6%) (COST $756,088,466) 1,219,287,110
Cash, receivables and other assets less liabilities (0.0%) 273,186
-------------
1,219,560,296
-------------
PREFERRED STOCK (-19.6%) (200,000,000)
-------------
NET ASSETS APPLICABLE TO COMMON STOCK (100%) $1,019,560,296
==============
(a) Non-income producing security.
(b) Securities which have been held for less than one year.
(c) 1,000,000 shares held by custodian in a segregated custodian account as collateral for open short positions.
(d) Restricted security.
(e) Fair value of each holding in the opinion of the directors.
(f) At March 31, 2005: (1) the cost of investments for Federal income tax purposes was the same as the cost for financial reporting
purposes, (2) aggregate gross unrealized appreciation was $510,849,253, (3) aggregate gross unrealized depreciation was
$47,650,609, and (4) net unrealized appreciation was $463,198,644.
(see notes to financial statements)
9 NOTES TO FINANCIAL STATEMENTS (Unaudited)
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General American Investors
1. SIGNIFICANT ACCOUNTING POLICIES
General American Investors Company, Inc. (the "Company"), established in 1927,
is registered under the Investment Company Act of 1940 as a closed-end,
diversified management investment company. It is internally managed by its
officers under the direction of the Board of Directors.
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 amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
a. SECURITY VALUATION Securities traded on a national securities exchange are
valued at the last reported sales price on the last business day of the period.
Securities reported on the NASDAQ national market are valued at the official
closing price on that day. Listed and NASDAQ securities for which no sales are
reported on that day and other securities traded in the over-the-counter market
are valued at the last bid price on the valuation date. Securities traded
primarily in foreign markets are generally valued at the preceding closing price
of such securities on their respective exchanges or markets. If, after the close
of the foreign market, conditions change significantly, the price of certain
foreign securities may be adjusted to reflect fair value as of the time of the
valuation of the portfolio. Corporate discount notes are valued at amortized
cost, which approximates market value. Special holdings (restricted securities)
and other securities for which quotations are not readily available are valued
at fair value determined in good faith pursuant to procedures established by and
under the general supervision of the Board of Directors.
b. SHORT SALES The Company may make short sales of securities for either
speculative or hedging purposes. When the Company makes a short sale, it borrows
the securities sold short from a broker; in addition, the Company places cash
with that broker and securities in a segregated account with the custodian, both
as collateral for the short position. The Company may be required to pay a fee
to borrow the securities and may also be obligated to pay any dividends declared
on the borrowed securities. The Company will realize a gain if the security
price decreases and a loss if the security price increases between the date of
the short sale and the date on which the Company replaces the borrowed
securities.
c. OPTIONS The Company may purchase and write (sell) put and call options. The
risk associated with purchasing an option is that the Company pays a premium
whether or not the option is exercised. Additionally, the Company bears the risk
of loss of the premium and a change in market value should the counterparty not
perform under the contract. Put and call options purchased are accounted for in
the same manner as portfolio securities. Premiums received from writing options
that expire unexercised are treated by the Company on the expiration date as
realized gains from investments. The difference between the premium received and
the amount paid on effecting a closing purchase transaction, including brokerage
commissions, is also treated as a realized gain, or, if the premium is less than
the amount paid for the closing purchase transaction, as a realized loss. If a
call option is exercised, the premium is added to the proceeds from the sale of
the underlying security in determining whether the Company has realized a gain
or loss. If a put option is exercised, the premium reduces the cost basis for
the securities purchased by the Company. The Company as writer of an option
bears the market risk of an unfavorable change in the price of the security
underlying the written option.
d. FEDERAL INCOME TAXES The Company's policy is to fulfill the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all taxable income to its stockholders. Accordingly, no
provision for Federal income taxes is required.
e. INDEMNIFICATIONS In the ordinary course of business, the Company enters into
contracts that contain a variety of indemnifications. The Company's maximum
exposure under these arrangements is unknown. However, the Company has not had
prior claims or losses pursuant to these indemnification provisions and expects
the risk of loss thereunder to be remote.
f. OTHER As customary in the investment company industry, securities
transactions are recorded as of the trade date. Dividend income and
distributions to stockholders are recorded as of the ex-dividend dates. Interest
income, adjusted for amortization of discount and premium on investments, is
earned from settlement date and is recognized on the accrual basis. Cost of
short-term investments represents amortized cost.
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, $1.00 par value, and 10,000,000 shares of Preferred Stock, $1.00
par value, of which 29,046,599 shares and 8,000,000 shares, respectively, were
outstanding at March 31, 2005.
On September 24, 2003, the Company issued and sold 8,000,000 shares of its 5.95%
Cumulative Preferred Stock, Series B in an underwritten offering. The Preferred
Shares are noncallable for 5 years and have a liquidation preference of $25.00
per share plus an amount equal to accumulated and unpaid dividends to the date
of redemption. The underwriting discount and other expenses associated with the
Preferred Stock offering amounted to $6,700,000 and were charged to paid-in
capital.
The Company is required to allocate distributions from long-term capital gains
and other types of income proportionately among holders of shares of Common
Stock and Preferred Stock. To the extent that dividends on the shares of
Preferred Stock are not paid from long-term capital gains, they will be paid
from ordinary income or net short-term capital gains or will represent a return
of capital.
Under the Investment Company Act of 1940, the Company is required to maintain an
asset coverage of at least 200% for the Preferred Stock. In addition, pursuant
to the Rating Agency Guidelines, the Company is required to maintain a certain
discounted asset coverage for its portfolio that equals or exceeds the Basic
Maintenance Amount under the guidelines established by Moody's Investors
Service, Inc. The Company has met these requirements since the issuance of the
Preferred Stock. If the Company fails to meet these requirements in the future
and does not cure such failure, the Company may be required to redeem, in whole
or in part, shares of Preferred Stock at a redemption price of $25.00 per share
plus accumulated and unpaid dividends (whether or not earned or declared). In
addition, the Company's failure to meet the foregoing asset coverage
requirements could restrict its ability to pay dividends on shares of Common
Stock and could lead to sales of portfolio securities at inopportune times.
The holders of Preferred Stock have voting rights equivalent to those of the
holders of Common Stock (one vote per share) and, generally, vote together with
the holders of Common Stock as a single class.
At all times, holders of Preferred Stock will elect two members of the Company's
Board of Directors and the holders of Preferred and Common Stock, voting as a
single class, will elect the remaining directors. If the Company fails to pay
dividends on the Preferred Stock in an amount equal to two full years'
dividends, the holders of Preferred Stock will have the right to elect a
majority of the directors. In
10 NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
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General American Investors
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS -
(Continued from bottom of previous page.)
addition, the Investment Company Act of 1940 requires that approval of the
holders of a majority of any outstanding Preferred Shares, voting separately as
a class, would be required to (a) adopt any plan of reorganization that would
adversely affect the Preferred Stock and (b) take any action requiring a vote of
security holders, including, among other things, changes in the Company's
subclassification as a closed-end investment company or changes in its
fundamental investment policies.
The Company classifies its Preferred Stock pursuant to the requirements of EITF
D-98, Classification and Measurement of Redeemable Securities, which require
that preferred stock for which its redemption is outside of the company's
control should be presented outside of net assets in the statement of assets and
liabilities.
Transactions in Common Stock during the three months ended March 31, 2005 and
the year ended December 31, 2004 were as follows:
SHARES AMOUNT
----------------------- ---------------------
2005 2004 2005 2004
-------- -------- ------- --------
Shares issued in payment of dividends (includes 148,487
and 508,849 shares issued from treasury, respectively)148,487 508,849 $148,487 $508,849
Increase in paid-in capital 4,445,701 15,273,103
--------- ----------
Total increase 4,594,188 15,781,952
--------- ----------
Shares purchased (at an average discount from net
asset value of 12.0% and 10.3%, respectively) 307,200 1,092,800 (307,200) (1,092,800)
Decrease in paid-in capital (9,241,842) (31,870,232)
------------ ------------
Total decrease (9,549,042) (32,963,032)
------------ ------------
Net decrease ($4,954,854) ($17,181,080)
============ ============
At March 31, 2005, the Company held in its treasury 2,184,964 shares of Common
Stock with an aggregate cost in the amount of $55,535,254.
Distributions for tax and book purposes are substantially the same.
3. OFFICERS' COMPENSATION
The aggregate compensation paid by the Company during the three months ended
March 31, 2005 to its officers amounted to $1,346,250.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities and securities sold short (other than
short-term securities and options) for the three months ended March 31, 2005
amounted to on long transactions $45,247,394 and $52,169,690, respectively, and,
with respect to short sale transactions, purchases for the three months amounted
to $3,825,799.
5. RESTRICTED SECURITIES
DATE VALUE
ACQUIRED COST (NOTE 1a)
----------- ---------- -----------
Silicon Genesis Corporation 2/16/01 $3,006,720 $7,200
Standard MEMS, Inc. Series A Convertible Preferred 12/17/99 3,003,000 -
---------- -----------
Total $6,009,720 $7,200
========== ===========
6. PENSION BENEFIT PLANS
The Company has funded (Qualified) and unfunded (Supplemental) noncontributory
defined benefit pension plans that cover substantially all of its employees. The
plans provide defined benefits based on years of service and final average
salary with an offset for a portion of social security covered compensation. The
components of the net periodic benefit cost of the plans for the three months
ended March 31, 2005 were:
Service cost $70,055
Interest cost 145,757
Expected return on plan assets (269,548)
Amortization of:
Prior service cost 6,806
Recognized net actuarial loss (gain) (2,047)
---------
Net periodic benefit cost (income) ($48,977)
=========
The Company also has funded and unfunded contributory defined contribution
thrift plans that cover substantially all employees. The aggregate cost of such
plans for the three months ended March 31, 2005 was $143,142. The unfunded
liability included in other liabilities at March 31, 2005 was $2,581,898.
11 NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
7. OPERATING LEASE COMMITMENT
In July 1992, the Company entered into an operating lease agreement for office
space which expires in 2007 and provides for future rental payments in the
aggregate amount of approximately $5.6 million. The lease agreement contains a
clause whereby the Company received twenty months of free rent beginning in
December 1992 and escalation clauses relating to operating costs and real
property taxes.
Rental expense approximated $93,000 for the three months ended March 31, 2005.
Minimum rental commitments under the operating lease are approximately $505,000
per annum in 2005 through 2007.
In January 2003, the Company extended a sublease agreement (originally entered
into in March 1996) which expires in 2007 and provides for future rental
receipts. Minimum rental receipts under the sublease are approximately $254,000
per annum in 2005 through 2007. The Company will also receive its proportionate
share of operating expenses and real property taxes under the sublease.
Unaudited
--------------------------------------------------------------------------------
In addition to purchases of the Company's Common Stock as set forth in Note 2 on
page 10, purchases of Common Stock may be made at such times, at such prices, in
such amounts and in such manner as the Board of Directors may deem advisable.
--------------------------------------------------------------------------------
MAJOR STOCK CHANGES* Three Months Ended March 31, 2005 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
SHARES OR
SHARES OR PRINCIPAL AMOUNT
INCREASES PRINCIPAL AMOUNT HELD MARCH 31, 2005
--------------------------------------------------------------------------------------------------------------------
NEW POSITIONS
Patterson-UTI Energy, Inc. 650,000 650,000
ADDITIONS
American International Group, Inc. 45,000 380,000
Arch Capital Group Ltd. 140,000 340,000 (a)
EOG Resources, Inc. 25,000 600,000 (b)
Total S.A. ADR 55,000 330,000
Unocal Corporation 50,000 750,000
DECREASES
--------------------------------------------------------------------------------------------------------------------
ELIMINATIONS
El Paso Corporation 0% notes due 2/28/21 $22,500,000 -
Genta Incorporated 375,000 -
REDUCTIONS
American Tower Corporation 9 3/8% notes due 2/1/09 $636,000 $678,000
Annaly Mortgage Management, Inc. 325,000 275,000
Biogen Idec Inc. 50,000 200,000
Genentech, Inc. 160,000 400,000
Golden West Financial Corporation 20,000 600,000
MFA Mortgage Investments, Inc. 75,000 775,000
Montpelier Re Holdings Ltd. 50,000 110,000
Reinsurance Group of America, Incorporated 35,000 350,000
Transatlantic Holdings, Inc. 25,500 249,500
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) Includes shares purchased in prior period and previously carried under Stocks - Miscellaneous - Other.
(b) Includes shares purchased in prior period and previously carried under Stocks - Miscellaneous - Other and shares received in
conjunction with a stock split.
PROXY VOTING POLICIES and PROCEDURES and PROXY VOTING RECORD (Unaudited)
--------------------------------------------------------------------------------
General American Investors
The policies and procedures used by the Company to determine how to vote proxies
relating to portfolio securities and the Company's proxy voting record for the
twelve-month period ended June 30, 2004 are available: (1) without charge, upon
request, by calling us at our toll-free telephone number (1-800-436-8401), (2)
on the Company's website at http://www.generalamericaninvestors.com and (3) on
the Securities and Exchange Commission's website at http://www.sec.gov.
DIRECTORS
--------------------------------------------------------------------------------
Lawrence B. Buttenwieser, Chairman
Arthur G. Altschul, Jr. Sidney R. Knafel
Lewis B. Cullman Richard R. Pivirotto
Spencer Davidson D. Ellen Shuman
Gerald M. Edelman Joseph T. Stewart, Jr.
John D. Gordan, III Raymond S. Troubh
William O. Baker, Director Emeritus
William T. Golden, Director Emeritus
OFFICERS
--------------------------------------------------------------------------------
Spencer Davidson, President & Chief Executive Officer
Andrew V. Vindigni, Vice-President
Eugene L. DeStaebler, Jr., Vice-President, Administration
Peter P. Donnelly, Vice-President & Trader
Diane G. Radosti, Treasurer
Carole Anne Clementi, Secretary
Craig A. Grassi, Assistant Vice-President
Maureen E. LoBello, Assistant Secretary
SERVICE COMPANIES
--------------------------------------------------------------------------------
COUNSEL
Sullivan & Cromwell LLP
INDEPENDENT AUDITORS
Ernst & Young LLP
CUSTODIAN
State Street Bank and
Trust Company
Transfer Agent and Registrar
American Stock Transfer & Trust
Company
59 Maiden Lane
New York, NY 10038
1-800-413-5499
www.amstock.com
RESULTS OF THE ANNUAL MEETING
OF STOCKHOLDERS
--------------------------------------------------------------------------------
The votes cast by stockholders at the Company's annual
meeting held on April 13, 2005 were as follows:
Election of Directors:
FOR WITHHELD
Lawrence B. Buttenwieser 32,214,593 503,581
Lewis B. Cullman 32,296,075 422,099
Spencer Davidson 32,326,934 391,240
Gerald M. Edelman 32,388,169 330,005
John D. Gordan, III 32,362,721 355,452
Richard R. Pivirotto 32,428,302 289,872
D. Ellen Shuman 32,454,676 263,498
Joseph T. Stewart, Jr. 32,332,416 385,758
Raymond S. Troubh 32,387,103 331,071
Elected by holders of Preferred Stock:
Arthur G. Altschul, Jr. 7,589,685 45,877
Sidney R. Knafel 7,589,685 45,877
Ratification of the selection of Ernst & Young LLP as auditors of the Company
for the year 2005:
For - 32,405,598; Against - 182,623; Abstain - 129,953