GENERAL AMERICAN INVESTORS COMPANY, INC.
FIRST QUARTER REPORT
MARCH 31, 2002
A Closed-End Investment Company
listed on the New York Stock Exchange
450 Lexington Avenue
New York, N.Y. 10017
212-916-8400 1-800-436-8401
E-mail: InvestorRelations@gainv.com
www.generalamericaninvestors.com
TO THE STOCKHOLDERS
For the three months ended March 31, 2002, our stockholders experienced a
decrease of 0.6% on their investment in our Common Shares (assuming reinvestment
of all dividends). The net asset value per Common Share decreased 2.3%. By
comparison, our benchmark, the Standard & Poor's 500 Stock Index (including
income), increased 0.3%. For the twelve months ended March 31, 2002, the return
to our stockholders was 4% and the return on the net asset value per Common
Share was 2%; these compare with an increase of 0.2% for the S&P 500. During
each period, the discount at which our shares traded declined modestly and at
March 31, 2002, it was 3.1%.
As set forth in the accompanying financial statements (unaudited), as of March
31, 2002, the net assets of the Company were $1,212,973,779. Net assets
applicable to the Common Stock were $1,062,973,779, equal to $34.04 per Common
Share.
The decrease in net assets resulting from operations for the three months ended
March 31, 2002 was $22,486,472. During this period, net realized loss on
securities sold was $17,960,739 and the decrease in unrealized appreciation was
$5,037,227. Net investment income for the three months was $511,494.
The nascent signs of economic recovery seen late last year have become more
apparent. This strength is reflected in the outperformance during the first
quarter of two stock groups, Basic Materials and Energy, where our market
exposure is limited. Interest rates, meanwhile, have risen markedly with the
yield on the benchmark 10-year Treasury notes up over one percentage point, to
over five percent. Should this trend continue, two mainstays of the recovery,
housing and consumer spending are likely to suffer.
The importance of housing, and its related financing, to the health of the
economy and the market cannot be overstated since the average American family
has four times more equity in housing than in the stock market. In addition,
over the past year the average price of a house has increased by 12% - the
largest inflation adjusted gain in history.
We continue to believe that the recovery is likely to be below average and that
stock valuations remain high in the context of corporate profits pressured by
excess capacity, global competition and rising wage and heath care costs, among
others. We retain abundant cash reserves and look forward to their selective
employment as opportunities present themselves.
We are pleased to report that on April 10, 2002, 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 2002.
We are pleased to announce that on March 26, 2002 the Company completed the
development of a Web site. It can be accessed on the Internet at
www.generalamericaninvestors.com and contains a wealth of information about the
Company, including current NAV and market price data as well as historical
dividend payments, financial reports, notices and press releases.
It is with a feeling of great loss that we report the death on March 17, 2002 of
Arthur G. Altschul, our esteemed colleague and Chairman Emeritus. He served the
Company for 50 years, including 43 years as a Director, of which 34 years were
as Chairman of the Board, and 7 years as Chairman Emeritus. Over the years he
contributed to the success of the Company by giving it steady leadership and
guidance through many stock market cycles, and by providing management teams
with unfailing support and considered encouragement even after his retirement
from active involvement in the day-to-day affairs of the Company.
By Order of the Board of Directors,
GENERAL AMERICAN INVESTORS COMPANY, INC.
Spencer Davidson
President and Chief Executive Officer
April 10, 2002
2 STATEMENT OF ASSETS AND LIABILITIES March 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
ASSETS
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT VALUE (NOTE 1a)
Common stocks (cost $412,268,295) $879,431,309
Corporate discount notes (cost $329,147,345) 329,147,345
------------
Total investments (cost $741,415,640) 1,208,578,654
CASH, RECEIVABLES AND OTHER ASSETS
Cash, including margin account balance of $11,512 $ 135,419
Receivable for securities sold 1,325,742
Receivable from broker for proceeds on securities sold short 18,244,019
Dividends, interest and other receivables 692,006
Prepaid expenses 6,000,862
Other 482,516 26,880,564
----------- ------------
TOTAL ASSETS 1,235,459,218
LIABILITIES
------------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 2,615,200
Preferred dividend accrued but not yet declared 240,000
Securities sold short, at value (proceeds $18,244,019) (note 1a) 12,972,260
Accrued expenses and other liabilities 6,657,979
-----------
TOTAL LIABILITIES 22,485,439
------------
NET ASSETS $1,212,973,779
============
7.20% Tax-Advantaged Cumulative Preferred Stock - 6,000,000 shares at a
liquidation value of $25 per share (note 2) $150,000,000
============
Net Assets applicable to Common Stock - 31,231,563 shares (note 2) $1,062,973,779
============
NET ASSET VALUE PER COMMON SHARE $ 34.04
============
NET ASSETS APPLICABLE TO COMMON STOCK
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, 31,231,563 shares at par value (note 2) $31,231,563
Additional paid-in capital (note 2) 579,414,981
Accumulated realized loss on investments (17,731,769)
Undistributed net income 564,231
Unallocated distributions on Preferred Stock (2,940,000)
Unrealized appreciation on investments and securities sold short
(including aggregate gross unrealized appreciation of $506,368,087) 472,434,773
-----------
NET ASSETS APPLICABLE TO COMMON STOCK $1,062,973,779
=============
(see notes to financial statements)
3 STATEMENT OF OPERATIONS Three Months Ended March 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
INCOME
------------------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $21,770) $ 1,617,430
Interest 1,636,026
Other Income 135,281 $ 3,388,737
-----------
EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
Investment research 1,849,082
Administration and operations 691,867
Office space and general 126,256
Transfer agent, custodian and registrar fees and expenses 86,284
Auditing and legal fees 40,500
Directors' fees and expenses 33,599
Stockholders' meeting and reports 29,144
Miscellaneous taxes 20,511 2,877,243
----------- ------------
NET INVESTMENT INCOME 511,494
REALIZED LOSS AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Long transactions (19,141,520)
Short sale transactions (note 1b) 1,180,781
-------------
Net realized loss on investments (17,960,739)
Net decrease in unrealized appreciation (5,037,227)
-----------
NET LOSS ON INVESTMENTS (22,997,966)
------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($22,486,472)
============
(see notes to financial statements)
4 STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
General American Investors
Three Months
Ended Year Ended
March 31, 2002 December 31,
(Unaudited) 2001
-------------- ------------
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 511,494 $ 12,512,405
Net realized gain (loss) on investments (17,960,739) 70,720,822
Net decrease in unrealized appreciation (5,037,227) (87,697,439)
----------- ------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (22,486,472) (4,464,212)
----------- ------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
------------------------------------------------------------------------------------------------------------------------------------
From net income, including short-term capital gain -- (2,311,200)
From long-term capital gain -- (8,488,800)
Unallocated distributions on Preferred Stock (2,700,000) --
----------- ------------
DECREASE IN NET ASSETS FROM PREFERRED DISTRIBUTIONS (2,700,000) (10,800,000)
----------- ------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
------------------------------------------------------------------------------------------------------------------------------------
From net income, including short-term capital gain (5,933,997) (26,369,696)
From long-term capital gain (3,435,472) (96,274,382)
----------- ------------
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (9,369,469) (122,644,078)
----------- ------------
CAPITAL SHARE TRANSACTIONS
------------------------------------------------------------------------------------------------------------------------------------
Value of Common Shares issued in payment of dividends (note 2) -- 81,091,222
Cost of Common Shares purchased (note 2) -- (692,675)
----------- ------------
INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS -- 80,398,547
----------- ------------
NET DECREASE IN NET ASSETS (34,555,941) (57,509,743)
NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
BEGINNING OF PERIOD 1,247,529,720 1,305,039,463
----------- ------------
END OF PERIOD (including undistributed net income of $564,231
and $52,737, respectively) $1,212,973,779 $1,247,529,720
=========== ============
(see notes to financial statements)
5 FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
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, 2002
and for each year in the five-year period ended December 31, 2001. 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, 2002
(Unaudited) 2001 2000 1999 1998 1997
--------- -----------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $35.14 $39.91 $41.74 $34.87 $29.15 $25.24
--------- --------- ------- ------- ------- --------
Net investment income .02 .41 .53 .45 .47 .21
Net gain (loss) on securities -
realized and unrealized (.73) (.66) 6.12 11.32 9.44 7.15
--------- --------- ------- ------- ------- --------
Total from investment operations (.71) (.25) 6.65 11.77 9.91 7.36
--------- --------- ------- ------- ------- --------
Less distributions on:
Common Stock:
Dividends from investment income (.19)(a) (.88)(b) (2.30)(c) (.71)(d) (.48) (.26)(e)
Distributions from capital gains (.11) (3.28) (5.78) (3.77) (3.24) (3.19)
--------- --------- ------- ------- ------- --------
(.30) (4.16) (8.08) (4.48) (3.72) (3.45)
---------- ---------- -------- -------- -------- --------
Preferred Stock:
Dividends from investment income -- (.07)(f) (.11)(g) (.07)(h) (.03) --
Distributions from capital gains -- (.29) (.29) (.35) (.20) --
Unallocated (.09) -- -- -- (.01) --
---------- ---------- -------- ------- ------- --------
(.09) (.36) (.40) (.42) (.24) --
---------- ---------- --------- -------- -------- --------
Total distributions (.39) (4.52) (8.48) (4.90) (3.96) (3.45)
---------- ---------- --------- -------- -------- --------
Capital Stock transaction -
effect of Preferred Stock offering -- -- -- -- (.23) --
--------- --------- ------- ------- ------- --------
Net asset value, end of period $34.04 $35.14 $39.91 $41.74 $34.87 $29.15
========= ========= ======= ======= ======= ========
Per share market value, end of period $31.55 $33.47 $36.00 $37.19 $30.44 $26.19
========= ========= ======= ======= ======= ========
TOTAL INVESTMENT RETURN - Stockholder
Return, based on market price per share (0.59)%* 4.33% 19.10% 39.22% 31.31% 42.58%
RATIOS AND SUPPLEMENTAL DATA
Total net assets, end of
period (000's omitted) $1,212,974 $1,247,530 $1,305,039 $1,244,519 $1,018,933 $702,597
Net assets attributable to Common Stock,
end of period (000's omitted) $1,062,974 $1,097,530 $1,155,039 $1,094,519 $868,933 $702,597
Ratio of expenses to average net assets
applicable to Common Stock 0.27%* 1.02% 1.09% 1.01% 0.95% 0.98%
Ratio of net income to average net assets
applicable to Common Stock 0.05%* 1.15% 1.24% 1.23% 1.50% 0.80%
Portfolio turnover rate 3.13%* 23.81% 40.61% 33.68% 34.42% 32.45%
PREFERRED STOCK
Liquidation value, end of
period (000's omitted) $150,000 $150,000 $150,000 $150,000 $150,000 --
Asset coverage 809% 832% 870% 830% 679% --
Liquidation preference per share $25.00 $25.00 $25.00 $25.00 $25.00 --
Market value per share $25.78 $25.90 $24.25 $21.75 $25.88 --
(a) Represents short-term capital gain.
(b) Includes short-term capital gain in the amount of $.51 per share.
(c) Includes short-term capital gain in the amount of $1.82 per share.
(d) Includes short-term capital gain in the amount of $.29 per share.
(e) Includes short-term capital gain in the amount of $.05 per share.
(f) Includes short-term capital gain in the amount of $.04 per share.
(g) Includes short-term capital gain in the amount of $.09 per share.
(h) Includes short-term capital gain in the amount of $.03 per share.
*Not annualized
6 STATEMENT OF INVESTMENTS March 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
Value
Shares COMMON STOCKS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE (1.7%)
------------------------------------------------------------------------------------------------------------------------------------
425,000 The Boeing Company (COST $12,796,662) $20,506,250
----------
COMMUNICATIONS AND INFORMATION SERVICES (2.5%)
------------------------------------------------------------------------------------------------------------------------------------
535,000 Cisco Systems, Inc. (a) 9,057,550
578,700 Cox Communications, Inc. Class A (a) 21,782,268
180,000 NTL Incorporated (a) 36,000
----------
(COST $9,875,444) 30,875,818
----------
COMPUTER SOFTWARE AND SYSTEMS (0.6%)
------------------------------------------------------------------------------------------------------------------------------------
250,000 Oberthur Card Systems S.A. (a) 1,780,000
226,100 Viewpoint Corporation (a) 1,365,644
339,500 Wind River Systems, Inc. (a) 4,613,805
----------
(COST $10,435,875) 7,759,449
----------
CONSUMER PRODUCTS AND SERVICES (3.9%)
------------------------------------------------------------------------------------------------------------------------------------
475,000 Coca-Cola Enterprises Inc. 8,920,500
275,000 Ethan Allen Interiors, Inc. 10,466,500
875,500 Ford Motor Company 14,436,995
150,000 Newell Rubbermaid Inc. 4,794,000
175,000 PepsiCo, Inc. 9,012,500
----------
(COST $31,660,287) 47,630,495
----------
ELECTRONICS (1.7%)
------------------------------------------------------------------------------------------------------------------------------------
692,500 Molex Incorporated Class A (COST $14,877,393) 21,183,575
----------
ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (1.3%)
------------------------------------------------------------------------------------------------------------------------------------
600,000 Waste Management, Inc. (COST $11,720,621) 16,350,000
----------
FINANCE AND INSURANCE (23.6%)
------------------------------------------------------------------------------------------------------------------------------------
230,000 American International Group, Inc. 16,592,200
300,000 AmerUs Group Co. 11,535,000
525,000 Annaly Mortgage Management, Inc. 8,914,500
700,000 Annuity and Life Re (Holdings), Ltd. 13,545,000
315 Berkshire Hathaway Inc. Class A (a) 22,396,500
78,912 Central Securities Corporation 2,011,467
550,000 Everest Re Group, Ltd. 38,137,000
525,000 Golden West Financial Corporation 33,337,500
440,000 John Hancock Financial Services, Inc. 16,803,600
360,000 M&T Bank Corporation 28,933,200
300,000 MetLife, Inc. 9,450,000
550,000 PartnerRe Ltd. 30,030,000
600,000 Reinsurance Group of America, Incorporated 18,786,000
260,000 SunTrust Banks, Inc. 17,349,800
225,000 Transatlantic Holdings, Inc. 18,477,000
----------
(COST $115,429,459) 286,298,767
----------
7 STATEMENT OF INVESTMENTS March 31, 2002 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
Value
Shares COMMON STOCKS (continued) (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (13.0%)
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS (10.8%)
------------------------------------------------------------------------------------------------------------------------------------
220,000 Alkermes, Inc. (a) $5,733,200
300,000 Bristol-Myers Squibb Company 12,147,000
270,000 Genaera Corporation (a) 861,300
325,000 Genentech, Inc. (a) 16,396,250
495,000 IDEC Pharmaceuticals Corporation (a) 31,828,500
155,000 Johnson & Johnson 10,067,250
264,000 MedImmune, Inc. (a) 10,383,120
120,000 Millennium Pharmaceuticals, Inc.(a) 2,677,200
150,000 OSI Pharmaceuticals, Inc. (a) 5,872,500
890,000 Pfizer Inc. 35,368,600
----------
(COST $59,271,905) 131,334,920
----------
MEDICAL INSTRUMENTS AND DEVICES (1.1%)
------------------------------------------------------------------------------------------------------------------------------------
290,000 Medtronic, Inc. (COST $862,614) 13,110,900
----------
HEALTH CARE SERVICES (1.1%)
------------------------------------------------------------------------------------------------------------------------------------
100,000 BioReliance Corporation (a) 2,294,000
400,000 Health Net, Inc. (a) 10,976,000
------------
(COST $7,734,076) 13,270,000
------------
(COST $67,868,595) 157,715,820
-------------
MISCELLANEOUS (2.2%)
------------------------------------------------------------------------------------------------------------------------------------
Other (COST $38,095,586) 27,171,385
------------
OIL & NATURAL GAS (INCLUDING SERVICES) (2.0%)
------------------------------------------------------------------------------------------------------------------------------------
1,400,000 Halliburton Company (COST $19,393,327) 23,898,000
------------
RETAIL TRADE (17.8%)
------------------------------------------------------------------------------------------------------------------------------------
675,000 Costco Wholesale Corporation (a) 26,878,500
2,045,000 The Home Depot, Inc. (b) 99,407,450
1,325,000 The TJX Companies, Inc. 53,013,250
570,000 Wal-Mart Stores, Inc. 34,941,000
------------
(COST $49,514,414) 214,240,200
------------
SEMICONDUCTORS (2.0%)
------------------------------------------------------------------------------------------------------------------------------------
105,000 AXT, Inc (a) 1,123,500
275,000 Brooks Automation, Inc. (a) 12,496,000
197,000 EMCORE Corporation (a) 1,893,170
1,846,000 IQE plc (a) 3,027,440
120,000 PRI Automation, Inc. (a) 2,797,080
250,000 Zarlink Semiconductor Inc. (a) 2,412,500
------------
(COST $23,704,505) 23,749,690
------------
SPECIAL HOLDINGS (a) (c) (NOTE 5) (0.2%)
------------------------------------------------------------------------------------------------------------------------------------
(d) Sequoia Capital IV 2,500
432,000 Silicon Genesis Corporation Series C Preferred 1,503,360
546,000 Standard MEMS, Inc. Series A Convertible Preferred 546,000
------------
(COST $6,896,127) 2,051,860(e)
------------
TOTAL COMMON STOCKS (72.5%) (COST $412,268,295) 879,431,309
------------
8 STATEMENT OF INVESTMENTS March 31, 2002 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
Principal Value
Amount SHORT-TERM SECURITIES AND OTHER ASSETS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
$94,000,000 American Express Credit Corporation notes due 4/9-4/30/02; 1.79%-1.82% $93,808,968
44,400,000 Ford Motor Credit Company notes due 4/16-4/22/02; 2.26%-2.28% 44,268,774
83,300,000 General Electric Capital Corp. notes due 4/2-4/29/02; 1.78%-1.80% 83,121,389
68,800,000 General Motors Acceptance Corp. notes due 4/4-5/2/02; 2.10%-2.29% 68,623,389
39,400,000 Sears Roebuck Acceptance Corp. notes due 4/1-5/6/02; 1.25%-2.25% 39,324,825
----------
(COST $329,147,345) 329,147,345
Cash, receivables and other assets, less liabilities 4,395,125
------------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (27.5%) (COST $333,542,470) 333,542,470
------------
NET ASSETS (COST $745,810,765) $1,212,973,779
============
(a) Non-income producing security. (d) A limited partnership interest.
(b) 1,000,000 shares held by custodian in a segregated (e) Fair value of each holding in the opinion of the Directors.
custodian account as collateral for open short positions.
(c) Restricted security.
STATEMENT OF SECURITIES SOLD SHORT March 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
Value
Shares COMMON STOCKS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
278,000 Molex Incorporated $9,638,260
100,000 Southwest Bancorporation of Texas Inc. 3,334,000
----------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $18,244,019) $12,972,260
==========
(see notes to financial statements)
9 NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
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 securities exchanges or on the NASDAQ
National Market System are valued at the last reported sales price on the last
business day of the period. 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 (asked price for open short positions) on the
valuation date. Corporate discount notes are valued at amortized cost, which
approximates market value. Special holdings are valued at fair value in the
opinion of the Directors. In determining fair value, in the case of restricted
shares, consideration is given to cost, operating and other financial data and,
where applicable, subsequent private offerings or market price of the issuer's
unrestricted shares (to which a 30 percent discount is applied); for limited
partnership interests, fair value is based upon an evaluation of the
partnership's net assets.
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. 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.
d. 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.
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 31,231,563 shares and 6,000,000 shares, respectively, were
outstanding at March 31, 2002. On June 19, 1998, the Company issued and sold
6,000,000 shares of its 7.20% Tax-Advantaged Cumulative Preferred Stock. 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 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. 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 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.
During the three months ended March 31, 2002 there were no transactions in
Common Stock. Transactions in Common Stock during the year ended December 31,
2001 were as follows:
SHARES AMOUNT
-------------------- -------------------------
Shares issued in payment of dividends
(includes 28,400 shares
issued from Treasury) 2,310,019 $2,310,019
Increase in paid-in capital 78,781,203
-----------
Total increase 81,091,222
-----------
Shares purchased (at an average discount from net
asset value of 9.0%) 19,000 (19,000)
Decrease in paid-in capital (673,675)
-----------
Total decrease (692,675)
-----------
Net increase $80,398,547
===========
Distributions in excess of net income for financial statement purposes result
primarily from transactions where tax treatment differs from book treatment.
10 NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
3. OFFICERS' COMPENSATION AND RETIREMENT AND THRIFT PLANS
The aggregate compensation paid by the Company during the three months ended
March 31, 2002 to its officers amounted to $1,355,750. The Company has
non-contributory retirement plans and a contributory thrift plan which cover
substantially all employees. The costs to the Company and the assets and
liabilities of the plans are not material. Costs of the plans are funded
currently.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of investment securities and securities sold short (other
than short-term securities) for the three months ended March 31, 2002 were as
follows:
PURCHASES SALES
------------- -----------
Long transactions $26,068,863 $55,789,463
Short sale transactions 3,909,654 -
------------- -----------
Total $29,978,517 $55,789,463
============= ============
At March 31, 2002, the cost of investments for Federal income tax purposes was
the same as the cost for financial reporting purposes.
5. RESTRICTED SECURITIES
DATE VALUE
ACQUIRED COST (NOTE 1a)
------------ ----------- -----------
Sequoia Capital IV* 1/31/84 $ 886,407 $ 2,500
Silicon Genesis Corporation Series C Preferred 2/16/01 3,006,720 1,503,360
Standard MEMS, Inc. Series A Convertible Preferred 12/17/99 3,003,000 546,000
----------- -----------
Total $ 6,896,127 $2,051,860
=========== ===========
* The amounts shown are net of distributions from this limited partnership
interest which, in the aggregate, amounted to $4,806,404. The initial investment
in the limited partnership was $2,000,000.
6. 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 $71,400 for the three months ended March 31, 2002.
Minimum rental commitments under the operating lease are approximately $403,000
in 2002 and $504,000 per annum in 2003 through 2007.
In March 1996, the Company entered into a sublease agreement which expires in
2003 and provides for future rental receipts. Minimum rental receipts under the
sublease are approximately $203,000 in 2002 and $64,000 in 2003. The Company
will also receive its proportionate share of operating expenses and real
property taxes under the sublease.
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In addition to purchases of the Company's Common Stock as set forth in Note 2 on
page 9, 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.
11 MAJOR STOCK CHANGES* Three Months Ended March 31, 2002 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
SHARES HELD
INCREASES SHARES MARCH 31, 2002
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ADDITIONS
American International Group, Inc. 35,000 230,000
Annuity and Life Re (Holdings), Ltd. 140,000 700,000
Cox Communications, Inc. Class A 58,700 578,700
Halliburton Company 100,000 1,400,000 (a)
Waste Management, Inc. 320,000 600,000
DECREASES
ELIMINATIONS
First Midwest Bancorp, Inc. 200,000 --
Repsol, S.A. - ADR 700,000 --
Uniroyal Technology Corporation 250,000 --
Wolters Kluwer NV - ADR 144,500 --
REDUCTIONS
AXT, Inc. 108,500 105,000
The Boeing Company 50,000 425,000
Bristol-Myers Squibb Company 125,000 300,000
Coca-Cola Enterprises Inc. 25,000 475,000
Everest Re Group, Ltd. 25,000 550,000
Ford Motor Company 825,000 875,500
IDEC Pharmaceuticals Corporation 25,000 495,000
IQE plc 800,000 1,846,000
Oberthur Card Systems S.A. 234,500 250,000
Zarlink Semiconductor Inc. 130,000 250,000
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) Includes shares purchased in prior period and previously carried under
Stocks - Miscellaneous -Other.
DIRECTORS
Lawrence B. Buttenwieser, Chairman
Arthur G. Altschul, Jr. Bill Green
Lewis B. Cullman Sidney R. Knafel
Spencer Davidson Richard R. Pivirotto
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
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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
SERVICE COMPANIES
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COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Ernst & Young LLP
CUSTODIAN
Bankers Trust Company
TRANSFER AGENT AND REGISTRAR
Mellon Investor Services LLC
P.O. Box 3315
South Hackensack, NJ 07606-1915
1-800-413-5499
www.mellon-investor.com
RESULTS OF THE ANNUAL MEETING
OF STOCKHOLDERS
The votes cast by stockholders at the Company's annual meeting held on April 10,
2002 were as follows: Election of Directors:
FOR WITHHELD
Arthur G. Altschul, Jr. 31,533,425 263,318
Lawrence B. Buttenwieser 31,511,566 285,177
Lewis B. Cullman 31,384,971 411,772
Spencer Davidson 31,529,748 266,995
Gerald M. Edelman 31,432,056 364,687
John D. Gordan, III 31,531,772 264,971
Richard R. Pivirotto 31,438,830 357,913
Joseph T. Stewart, Jr. 31,498,541 298,202
Raymond S. Troubh 31,346,613 450,130
Elected by holders of Preferred Stock:
Bill Green 5,478,745 37,760
Sidney R. Knafel 5,481,753 34,752
Ratification of the selection of Ernst & Young LLP as auditors of the Company
for the year 2002: For - 31,453,316; Against - 166,114; Abstain - 177,313