GENERAL AMERICAN INVESTORS Company, Inc.
Established in 1927, the Company is a closed-end investment company listed on
the New York Stock Exchange. Its objective is long-term capital appreciation
through investment in companies with above average growth potential.
FINANCIAL SUMMARY
2001 2000
------- ------
Net assets-December 31 $1,247,529,720 $1,305,039,463
Preferred Stock liquidation preference 150,000,000 150,000,000
Common Stock 1,097,529,720 1,155,039,463
Net investment income 12,512,405 13,805,530
Net realized gain 70,720,822 217,372,941
Net decrease in unrealized appreciation (87,697,439) (45,048,910)
Per Common Share-December 31
Net asset value $35.14 $39.91
Market price 33.47 $36.00
Discount from net asset value -4.8% -9.8%
Common Shares outstanding-Dec. 31 31,231,563 28,940,544
Common stockholders of record-Dec. 31 4,900 5,182
Market price range* (high-low) $39.70-$27.50 $44.00-$35.63
Market volume-shares 5,009,500 4,896,700
*Unadjusted for dividend payments.
DIVIDEND Summary (per share)
Ordinary Long-Term
Record Date Payment Date Income Capital Gain Total
----------- ------------ -------- ------------ -----
Common Stock
Nov. 15, 2001 Dec. 20, 2001 $0.82(a) $1.26 $2.08
Jan. 28, 2002 Feb. 11, 2002 .19(b) .11 .30
----- ----- -----
Total from 2001 earnings $1.01 $1.37 $2.38
===== ===== =====
(a) Includes short-term gain in the amount of $.45 per share.
(b) Represents short-term gain.
Nov. 13, 2000 Dec. 21, 2000 $1.97(c) $4.14 $6.11
Jan. 29, 2001 Mar. 14, 2001 .06(d) 2.02 2.08
----- ----- -----
Total from 2000 earnings $2.03 $6.16 $8.19
===== ===== =====
(c) Includes short-term gain in the amount of $1.49 per share.
(d) Represents short-term gain.
Preferred Stock
Mar. 6, 2001 Mar. 23, 2001 $.0963 $ .3537 $ .45
Jun. 6, 2001 Jun. 25, 2001 .0963 .3537 .45
Sep. 6, 2001 Sep. 24, 2001 .0963 .3537 .45
Dec. 6, 2001 Dec. 24, 2001 .0963 .3537 .45
------ ------- -----
Total for 2001 $.3852(e) $1.4148 $1.80
====== ======= =====
(e) Includes short-term gain in the amount of $.2224 per share ($.0556 per quarter).
Mar. 6, 2000 Mar. 23, 2000 $.1281 $ .3219 $ .45
Jun. 6, 2000 Jun. 23, 2000 .1281 .3219 .45
Sep. 6, 2000 Sep. 25, 2000 .1281 .3219 .45
Dec. 6, 2000 Dec. 26, 2000 .1281 .3219 .45
------ ------ -----
Total for 2000 $.5124(f) 1.2876 $1.80
====== ====== =====
(f) Includes short-term gain in the amount of $.4056 per share ($.1014 per quarter).
General American Investors Company, Inc.
450 Lexington Avenue, New York, NY 10017
(212) 916-8400 (800) 436-8401
E-mail: InvestorRelations@gainv.com
1 TO THE STOCKHOLDERS
-------------------------------------------------------------------------------
General American Investors
The year just ended marked General American Investors' 75th Anniversary as a
closed-end investment company. It will be remembered most for the tragic events
of September 11th. It was also the first time since 1973-74 that our benchmark,
the Standard & Poor's 500 Stock Index (including income), posted back-to-back
negative returns, losing 11.9%. By contrast, the return to our common
stockholders (assuming reinvestment of all dividends) was 4.3%, resulting from a
decline in net asset value per share of 1.20% together with significant
shrinkage in the discount at which our shares trade. We are encouraged by our
performance, especially when viewed in the context of the extraordinary results
of recent years.
The table that follows, which compares our returns on an annualized basis with
the S&P 500, illustrates that over many years General American has produced
superior investment results.
Years Stockholder Return S&P 500
3 20.0% -1.0%
5 26.5 10.7
10 15.4 12.9
20 16.6 15.2
30 15.9 12.3
40 13.7 10.9
Long-term capital gain distributions for 2001 will total $1.37 per share,
including $.11 per share that will be distributed in February 2002. Because of
tax requirements unique to our industry, gains realized in November and December
are paid in the following calendar year. Total dividends attributable to 2001,
including net income and short-term capital gains, amounted to $2.38 per share,
or 6.8% of ending net asset value ("NAV"). This percentage has averaged 10.9%
over the past 20 years.
During 2001, 19,000 common shares of General American were purchased in the open
market at an average discount to NAV of 9%. The Board of Directors has
authorized repurchases of common shares when they are trading at a discount in
excess of 8% of NAV.
The economy appears to be stabilizing amid nascent signs of recovery. In the
past, aggressive Federal Reserve Board action has succeeded in ending
recessions. In 2001, the Fed reduced interest rates eleven times, to 1.75%, the
lowest level in forty years. As a result, the real rate (the nominal rate less
inflation) is presently below zero. Together with current deficit spending,
these actions should ensure future economic growth. The recovery is likely to be
sluggish, however, and gains in corporate profits may well be modest.
Importantly, there would seem to be little pent-up demand for consumer durables
like cars and houses, two traditional well-springs of a cyclical rebound. It may
take some time, furthermore, to purge the structural excesses of the last boom
when both business and consumer spending rose to levels well above their
respective rates of savings. While the number of newly unemployed workers may be
receding, the unemployment rate could rise for some time. This would weigh on
consumer confidence and spending.
In consequence, corporate profits face a number of headwinds and a return to
vigorous growth may prove challenging. The relative strength of the dollar
continues to impact export demand while adversely affecting the competitive
position of U. S. manufacturers at home. With little inflation, more than
adequate capacity and balance sheets already stretched, improving profit margins
will not be accomplished easily. Markets, however, now reflect more fully
subdued expectations for growth and profits. While a return to the environment
that produced the out-sized gains of the five years ended in 1999 seems
improbable, we are less guarded with respect to the market outlook than we have
been in recent reports.
We have commenced work on the development of a website for General American. It
will include corporate information, current NAV and market price data,
historical reports, dividend payments, press releases and a means by which you
can contact us and our transfer agent. Look for us on "the Web" at
www.generalamericaninvestors.com toward the end of the first quarter.
By Order of the Board of Directors,
Spencer Davidson
President and Chief Executive Officer
January 16, 2002
2 THE COMPANY
--------------------------------------------------------------------------------
General American Investors
Corporate Overview and
75th Year
General American Investors, established in 1927, is one of the nation's oldest
closed-end investment companies. It is an independent organization, internally
managed. For regulatory purposes, the Company is classified as a diversified,
closed-end management investment company; it is registered under and subject to
the regulatory provisions of the Investment Company Act of 1940.
As we celebrate our 75th year, we look back with pride on a record characterized
by continuity of management and consistency of purpose with attendant superior
returns. Over the last 75 years, the total return (exclusive of operating
expenses) indicated for the Company is 13.1% compounded annually. In comparison,
the total return for the Standard & Poor's 500 Stock Index (including income) is
10.6% per year.
During our first 21 years, Frank Altschul served as President and portfolio
manager. He then served as Chairman followed by his son, Arthur G. Altschul
(1961-1995), and by our current Chairman, Lawrence B. Buttenwieser. During this
75-year period, only 6 individuals served as President and portfolio manager;
these titles are currently held by Spencer Davidson (since 1995).
Investment
Policy
The primary objective of the Company is long-term capital appreciation. Lesser
emphasis is placed on current income. In seeking to achieve its primary
objective, the Company invests principally in common stocks believed by its
management to have better than average growth potential.
The Company's investment approach focuses on the selection of individual stocks,
each of which is expected to meet a clearly defined portfolio objective. A
continuous investment research program, which stresses fundamental security
analysis, is carried on by the officers and staff of the Company under the
oversight of the Board of Directors. A listing of the directors with their
principal affiliations, showing a broad range of experience in business and
financial affairs, is on page 16 of this report.
Portfolio Manager
Mr. Spencer Davidson has been responsible for the management of General
American's portfolio since he was elected President and Chief Executive Officer
of the Company in August 1995. Mr. Davidson, who joined the Company in 1994 as
senior investment counselor, has spent his entire business career on Wall Street
since first joining an investment and banking firm in 1966.
"GAM" Common Stock
As a closed-end investment company, General American Investors does not offer
its shares continuously. The Common Stock is listed on The New York Stock
Exchange (symbol, GAM) and can be bought or sold with commissions determined in
the same manner as all listed stocks. Net asset value is computed daily (on an
unaudited basis) and is furnished upon request. It is also available on most
electronic quotation services using the symbol "XGAMX." The figure for net asset
value per share, together with the market price and the percentage discount or
premium from net asset value as of the close of each week, is published in The
New York Times, The Wall Street Journal and Barron's.
3 THE COMPANY
--------------------------------------------------------------------------------
General American Investors
The ratio of market price to net asset value has shown considerable variation
over a long period of time. While shares of GAM usually sell at a discount from
their underlying net asset value, as do the shares of most other domestic equity
closed-end investment companies, they, periodically, sell at a premium over net
asset value. The last time the Company's shares sold at a premium for a
prolonged period was the year-long period from March 1992 through April 1993.
During 2001, the stock sold at premiums over and discounts from net asset value
which ranged from a premium of 1.8% (July 6) to a discount of 8.5% (September
21). At December 31, the price of the stock was at a discount of 4.8% as
compared with a discount of 9.8% a year earlier.
"GAM Pr" Preferred Stock
On June 19, 1998, the Company issued and sold in an underwritten offering
6,000,000 shares of its 7.20% Tax-Advantaged Cumulative Preferred Stock with a
liquidation preference of $25 per share ($150,000,000 in the aggregate).
The Preferred Shares are noncallable for 5 years, are rated "aaa" by Moody's
Investors Service, Inc. and are listed and traded on the New York Stock Exchange
(symbol, GAM Pr).
The preferred capital is available to leverage the investment performance of the
Common Stockholders. As is the case for leverage in general, it may also result
in higher market volatility for the Common Stockholders.
Dividend Policy
The Company's dividend policy is to distribute to stockholders before year-end
substantially all ordinary income estimated for the full year and capital gains
realized during the ten-month period ending October 31 of that year. If any
additional capital gains are realized or ordinary income is earned during the
last two months of the year, a "spill-over" distribution of these amounts will
be paid early in the following year to Common Stockholders. Dividends on shares
of Preferred Stock are paid quarterly. Distributions from capital gains and
ordinary income are allocated proportionately among holders of shares of Common
Stock and Preferred Stock.
Dividends from income have been paid continuously on the Common Stock since 1939
and capital gain dividends in varying amounts have been paid for each of the
years 1943-2001 (except for the year 1974). (A table listing dividends paid
during the 20-year period 1982-2001 is shown at the bottom of page 6.) To the
extent that full shares can be issued, dividends are paid to Common Stockholders
in additional shares of Common Stock unless the stockholder specifically
requests payment in cash. Spill-over dividends of nominal amounts are paid in
cash only.
Privacy Policy and Practices
General American Investors collects nonpublic personal information about its
customers (stockholders) with respect to their transactions in shares of the
Company's securities but only for those stockholders whose shares are registered
in their names. This information includes the stockholder's address, tax
identification or Social Security number and dividend elections. We do not have
knowledge of, nor do we collect personal information about, stockholders who
hold the Company's securities at financial institutions such as brokers or banks
in "street name" registration.
We do not disclose any nonpublic personal information about our stockholders or
former stockholders to anyone, except as permitted by law.
We restrict access to nonpublic personal information about our stockholders to
those employees who need to know that information to provide services to our
stockholders. We maintain physical, electronic and procedural safeguards that
comply with federal standards to guard our stockholders' nonpublic personal
information.
4 INVESTMENT RESULTS
--------------------------------------------------------------------------------
General American Investors
Total return on $10,000 investment 20 years ended December 31, 2001
The investment return for a common stockholder of General American Investors
(GAM) over the 20 years ended December 31, 2001 is shown in the table below and
in the accompa ny ing chart. The return based on GAM's net asset value (NAV) per
common share in comparison to the change in the Standard & Poor's 500 Stock
Index (S&P 500) is also displayed. Each illustration assumes an investment of
$10,000 at the beginning of 1982.
The Stockholder Return is the return a common stock holder of GAM would have
achieved assuming reinvestment of all optional dividends at the actual
reinvestment price and reinvestment of all cash dividends at the average (mean
between high and low) market price on the ex-dividend date.
The GAM Net Asset Value (NAV) Return is the return on shares of the Company's
common stock based on the NAV per share, including the reinvestment of all
dividends.
The S&P 500 Return is the time-weighted total rate of return on this
widely-recognized, unmanaged index which is a measure of general stock market
performance, including dividend income.
The results illustrated are a record of past performance and may not be
indicative of future results.
GENERAL AMERICAN INVESTORS
----------------------------------------------------- STANDARD & POOR'S 500
STOCKHOLDER RETURN NET ASSET VALUE RETURN RETURN
----------------------------------------------------- ----------------------
CUMULATIVE ANNUAL CUMULATIVE ANNUAL CUMULATIVE ANNUAL
INVESTMENT RETURN INVESTMENT RETURN INVESTMENT RETURN
----------------------------------------------------- -----------------------
1982 $ 11,929 19.29 % $ 11,842 18.42 % $12,155 21.55 %
1983 13,875 16.31 14,567 23.01 14,896 22.55
1984 12,881 -7.16 13,534 -7.09 15,831 6.28
1985 16,077 24.81 18,271 35.00 20,861 31.77
1986 17,873 11.17 20,312 11.17 24,760 18.69
------------------------------------------------------------------------------------------------
1987 14,994 -16.11 20,826 2.53 26,057 5.24
1988 18,181 21.26 24,485 17.57 30,365 16.53
1989 27,017 48.60 33,755 37.86 39,966 31.62
1990 28,098 4.00 36,013 6.69 38,731 -3.09
1991 51,981 85.00 58,013 61.09 50,505 30.40
1992 59,664 14.78 60,073 3.55 54,339 7.59
1993 50,165 -15.92 59,021 -1.75 59,838 10.12
1994 46,222 -7.86 57,404 -2.74 60,598 1.27
1995 56,031 21.22 70,940 23.58 83,322 37.50
1996 66,946 19.48 85,107 19.97 102,411 22.91
------------------------------------------------------------------------------------------------
1997 95,451 42.58 112,384 32.05 136,544 33.33
1998 125,337 31.31 151,875 35.14 175,528 28.55
1999 174,494 39.22 207,158 36.40 212,318 20.96
2000 207,822 19.10 243,701 17.64 193,019 -9.09
2001 216,821 4.33 240,776 -1.20 170,069 -11.89
5 INVESTMENT RESULTS
--------------------------------------------------------------------------------
General American Investors
[Line graph with heading "20-YEAR INVESTMENT RESULTS ASSUMING AN INITIAL
INVESTMENT OF $10,000" at top left hand side. The vertical axis is to the right
side of the page and is labeled "CUMULATIVE VALUE OF INVESTMENT." The axis range
is from $0 to $250,000 in $25,000 increments. The horizontal axis, on the bottom
of the page, consists of the years 1982 through 2001 in one year increments.
Within the graph are three lines. The first line represents GAM Stockholder
Return. The second line represents GAM Net Asset Value, and the third line
represents the S&P 500 Stock Index. The data points for the lines are derived
from the columns labeled "Cumulative Investment" from the table on the preceding
page. Also, embedded in upper left portion of the graph is a table which appears
as follows:]
COMPARATIVE ANNUALIZED INVESTMENT RESULTS
-----------------------------------------------------
YEARS ENDED STOCKHOLDER GAM NET S&P 500
DECEMBER 31, 2001 RETURN ASSET VALUE STOCK INDEX
------------------------------------------------------
1 year 4.3 % -1.2 % -11.9 %
5 years 26.5 23.1 10.7
10 years 15.4 15.3 12.9
15 years 18.1 17.9 13.7
20 years 16.6 17.2 15.2
6 MAJOR STOCK CHANGES*: THREE MONTHS ENDED DECEMBER 31, 2001 (UNAUDITED)
--------------------------------------------------------------------------------
General American Investors
SHARES HELD
INCREASES SHARES DECEMBER 31,2001
--------------------------------------------------------------------------------
NEW POSITIONS
AXT, Inc. 30,000 213,500 (a)
Millennium Pharmaceuticals, Inc. - 120,000 (b)
Newell Rubbermaid Inc. - 150,000 (b)
ADDITIONS
Annuity and Life Re (Holdings), Ltd. 10,000 560,000
Brooks Automation, Inc. 100,000 275,000
Golden West Financial Corporation 40,000 525,000
Health Net, Inc. 100,000 400,000
IQE plc 196,000 2,646,000
MedImmune, Inc. 25,000 264,000
MetLife, Inc. 50,000 300,000
Reinsurance Group of America, Incorporated 50,000 600,000
Wind River Systems, Inc. 189,500 339,500
DECREASES
--------------------------------------------------------------------------------
ELIMINATIONS
AMR Corporation 500,000 -
Brooktrout, Inc. 225,000 -
REDUCTIONS
AmerUs Group Co. 20,000 300,000
Annaly Mortgage Management, Inc. 50,000 525,000
BioReliance Corporation 98,200 100,000
The Boeing Company 25,000 475,000
Cisco Systems, Inc. 25,000 535,000
Coca-Cola Enterprises Inc. 250,000 500,000
Everest Re Group, Ltd. 35,000 575,000
First Midwest Bancorp, Inc. 58,750 200,000 (c)
The Home Depot, Inc. 100,000 2,045,000
IDEC Pharmaceuticals Corporation 80,000 520,000
John Hancock Financial Services, Inc. 20,000 440,000
OSI Pharmaceuticals, Inc. 30,000 150,000
PartnerRe Ltd. 25,000 550,000
PRI Automation, Inc. 200,000 120,000
Transatlantic Holdings, Inc. 5,000 225,000
Uniroyal Technology Corporation 148,000 250,000
* Excludes transactions in Stocks-Miscellaneous-Other.
(a) Includes shares purchased in prior period and previously carried under Stocks-Miscellaneous-Other.
(b) Shares purchased in prior period and previously carried under Stocks-Miscellaneous-Other.
(c) Includes shares received in conjunction with a stock split.
[CAPTION]
The following table shows aggregate dividends paid per share on the Company's
Common Stock for each year during the 20-year period 1982-2001. Amounts shown
include payments made after year-end attributable to income and gain in each
respective year.
DIVIDENDS PER COMMON SHARE (1982-2001)
---------------------------------------------
DIVIDEND FROM
LONG-TERM
YEAR INCOME# CAPITAL GAINS
----------------------------------------------
1982 $.36 $1.15
1983 .67 2.38
1984 .28 1.35
1985 .47 1.07
1986 .36 2.15
1987 .35 1.54
1988 .29 1.69
1989 .23 1.56
1990 .21 1.65
1991 .09 3.07
1992 .03 2.93
1993 .06 2.34
1994 .06 1.59
1995 .13 2.77
1996 .25 2.71
1997 .21 2.95
1998 .47 4.40
1999 1.04 4.05
2000 2.03 6.16
2001 1.01 1.37
#Includes short-term capital gains per share which amounted to $.28 in 1983,
$.12 in 1985, $.02 in 1989, $.03 in 1995, $.05 in 1996, $.62 in 1999, $1.55 in
2000 and $.64 in 2001.
7 TEN LARGEST INVESTMENT HOLDINGS (UNAUDITED)
--------------------------------------------------------------------------------
General American Investors
[CAPTION]
The statement of investments as of December 31, 2001, shown on pages 10 and 11
includes 59 stock issues. Listed here are the ten largest stock holdings on that
date.
% TOTAL
SHARES VALUE NET ASSETS
------------------------------------------------------------------------------------------------------------
THE HOME DEPOT, INC. 2,045,000 $104,315,450 8.4%
The dominant company in home center retailing, Home Depot's
innovative merchandising, strong balance sheet and excellent
management has enabled the Company to continue to gain
share in a fragmented industry.
------------------------------------------------------------------------------------------------------------
THE TJX COMPANIES, INC. 1,325,000 52,814,500 4.2
The leading off-price retailer, through divisions such as T.J. Maxx
and Marshalls, of apparel and home fashions in the U.S. and
worldwide. TJX has expanded through acquisitions and internal
growth, has achieved financial strength and is positioned for
sustainable growth.
------------------------------------------------------------------------------------------------------------
EVEREST RE GROUP, LTD. 575,000 40,652,500 3.3
The largest independent U.S. property/casualty reinsurer which
generates annual premiums of $1.5 billion and has a high quality,
well-reserved AA balance sheet. This Bermuda domiciled company
has a strong management team that exercises prudent under-
writing discipline and efficient expense control, resulting in
above-average earnings growth.
------------------------------------------------------------------------------------------------------------
IDEC PHARMACEUTICALS CORPORATION 520,000 35,843,600 2.9
A biopharmaceutical company which is committed to develop-
ing and commercializing effective treatments of selected cancers
and autoimmune diseases. With proven products such as
Rituxan and a broad pipeline of product opportunities, IDEC is
positioned for continued success.
------------------------------------------------------------------------------------------------------------
PFIZER INC. 890,000 35,466,500 2.8
Well established as a leader in the pharmaceutical industry, Pfizer
continues to reap the benefits of its commitment to research
and development and its ability to effectively market products.
The recent launch of several new products serving large markets
and development of a pipeline rich with many promising drug
candidates position Pfizer for strong long-term growth.
------------------------------------------------------------------------------------------------------------
WAL-MART STORES, INC. 570,000 32,803,500 2.6
A policy of serving the mass market with everyday low prices,
supported by the lowest cost structure has made Wal-Mart the
world's largest retailer with ongoing growth opportunities in
the U.S. and overseas.
------------------------------------------------------------------------------------------------------------
GOLDEN WEST FINANCIAL CORPORATION 525,000 30,896,250 2.5
A savings and loan holding company with $59 billion in assets
headquartered in Oakland, CA. It has a strong, conservative
management with a high level of insider ownership. Excellent
asset quality, tight expense control and efficient capital manage-
ment help produce above-average earnings increases.
------------------------------------------------------------------------------------------------------------
COSTCO WHOLESALE CORPORATION 675,000 29,956,500 2.4
A growing chain of membership warehouses, located principally
in the U.S., that sell high quality merchandise at competitive
prices. Earnings are generated from high sales volume, low
operating costs and rapid inventory turnover.
------------------------------------------------------------------------------------------------------------
PARTNERRE LTD. 550,000 29,700,000 2.4
A leading global Bermuda-based multi-line reinsurer that generates
annual premiums of $1.7 billion and has a well-capitalized and
conservatively reserved AA balance sheet. PartnerRe has a deep
and talented staff and is well positioned to benefit from the
strong industry pricing cycle.
------------------------------------------------------------------------------------------------------------
FORD MOTOR COMPANY 1,700,500 26,731,860 2.1
A global manufacturer of automobiles, trucks and related parts.
The company provides financial services through its Ford Motor
Credit subsidiary and owns 81% of Hertz, the top car rental firm
in the U.S.
------------------------------------------------------------------------------------------------------------
$419,180,660 33.6%
============= ======
8 STATEMENT OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
General American Investors
DECEMBER 31,
--------------------------------------
2001 2000
ASSETS
----------------------------------------------------------------------------------------------------
INVESTMENTS, AT VALUE (note 1a)
Common Stocks (cost $461,130,422 and
$457,376,112, respectively) $ 931,026,318 $ 1,005,549,350
Corporate discount notes
(cost $310,348,410 and $285,169,722, respectively) 310,348,410 285,169,722
-------------- ---------------
1,241,374,728 1,290,719,072
CASH, RECEIVABLES AND OTHER ASSETS
Cash (including margin account balance of $20,966
and $2,899,267, respectively) 40,931 3,112,551
Receivable for securities sold 2,827,707 434,736
Receivable from broker for proceeds on securities sold
short 23,334,454 67,808,111
Dividends, interest and other receivables 1,261,862 2,754,152
Prepaid Expenses 5,804,035 5,078,299
Other 513,446 557,437
-------------- -------------
TOTAL ASSETS 1,275,157,163 1,370,464,358
-------------- -------------
LIABILITIES
----------------------------------------------------------------------------------------------------
Payable for securities purchased 1,318,500 3,921,101
Preferred dividend accrued but not yet declared 240,000 240,000
Securities sold short, at value (proceeds $23,334,454
and $67,808,111, respectively) (note 1a) 15,758,350 50,811,910
Accrued expenses and other liabilities 10,310,593 10,451,884
------------- ------------
TOTAL LIABILITIES 27,627,443 65,424,895
------------- ------------
NET ASSETS $1,247,529,720 $1,305,039,463
============== ==============
NET ASSETS APPLICABLE TO PREFERRED STOCK AT A LIQUIDATION VALUE
OF $25 PER SHARE $150,000,000 $150,000,000
============ ============
NET ASSETS APPLICABLE TO COMMON STOCK $1,097,529,720 $1,155,039,463
============== ==============
NET ASSET VALUE PER COMMON SHARE $35.14 $39.91
====== ======
NET ASSETS
---------------------------------------------------------------------------------------------------
7.20% Tax-Advantaged Cumulative Preferred Stock, $1 par value
(note 2) Authorized 10,000,000 shares; outstanding
6,000,000 shares $6,000,000 $6,000,000
Common Stock, $1 par value (note 2)
Authorized 50,000,000 shares; outstanding 31,231,563
and 28,940,544 shares, respectively (exclusive of 9,400
shares held in Treasury in 2000) 31,231,563 28,940,544
Additional paid-in capital ( note 2) 723,414,981 645,307,453
Undistributed realized gain on securities sold (note 2) 9,598,439 60,229,372
Undistributed net income and distributions in excess of
net income, respectively (note 2) 52,737 (367,345)
Unallocated distributions on Preferred Stock (240,000) (240,000)
Unrealized appreciation on investments
(including aggregate gross unrealized appreciation of
$520,141,071 and $604,311,705, respectively) 477,472,000 565,169,439
-------------- --------------
TOTAL NET ASSETS $1,247,529,720 $1,305,039,463
============== ==============
(see notes to financial statements)
9 STATEMENT OF OPERATIONS
--------------------------------------------------------------------------------
General American Investors
YEAR ENDED DECEMBER 31,
-----------------------------
2001 2000
-----------------------------
INCOME
---------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes
of $55,790 and $71,050, respectively) $7,862,551 $7,646,236
Interest 15,201,651 17,819,536
Other Income 541,123 431,836
---------- ----------
TOTAL INCOME 23,605,325 25,897,608
---------- ----------
EXPENSES
---------------------------------------------------------------------------------------------------
Investment research 7,145,088 8,031,203
Administration and operations 2,656,023 2,710,018
Office space and general 534,127 550,679
Transfer agent, custodian and registrar fees and expenses 224,807 250,036
Directors' fees and expenses 167,907 187,653
Stockholders' meeting and reports 128,337 146,510
Auditing and legal fees 152,700 132,000
Miscellaneous taxes 83,931 83,979
---------- ----------
TOTAL EXPENSES 11,092,920 12,092,078
---------- ----------
NET INVESTMENT INCOME 12,512,405 13,805,530
---------- ----------
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
---------------------------------------------------------------------------------------------------
Net realized gain on investments:
Long transactions 52,639,769 213,312,192
Short sale transactions (note 1b) 18,081,053 4,060,749
---------- -----------
Net realized gain on investments (long-term, except for
$15,679,190 and $43,284,041, respectively) 70,720,822 217,372,941
Net decrease in unrealized appreciation (87,697,439) (45,048,910)
----------- -----------
NET GAIN (LOSS) ON INVESTMENTS (16,976,617) 172,324,031
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ($4,464,212) $186,129,561
=========== ============
---------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-----------------------------
2001 2000
OPERATIONS
---------------------------------------------------------------------------------------------------
Net investment income $12,512,405 $13,805,530
Net realized gain on sales of securities 70,720,822 217,372,941
Net decrease in unrealized appreciation (87,697,439) (45,048,910)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (4,464,212) 186,129,561
=========== ===========
---------------------------------------------------------------------------------------------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
---------------------------------------------------------------------------------------------------
From net income, including short-term capital gain (2,311,200) (3,074,400)
From long-term capital gain (8,488,800) (7,725,600)
----------- -----------
DECREASE IN NET ASSETS FROM PREFERRED DISTRIBUTIONS (10,800,000) (10,800,000)
----------- -----------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
---------------------------------------------------------------------------------------------------
From net income, including short-term capital gain (26,369,696) (60,132,212)
From long-term capital gain (96,274,382) (151,138,654)
------------ ------------
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (122,644,078) (211,270,866)
------------ ------------
CAPITAL SHARE TRANSACTIONS
----------------------------------------------------------------------------------------------------
Value of Common Shares issued in payment of dividends (note 2) 81,091,222 136,477,203
Cost of Common Shares purchased (note 2) (692,675) (40,015,559)
----------- -----------
INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS 80,398,547 96,461,644
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS (57,509,743) 60,520,339
NET ASSETS
-----------------------------------------------------------------------------------------------------
BEGINNING OF YEAR 1,305,039,463 1,244,519,124
------------- -------------
END OF YEAR (including undistributed net income of $52,737 and
distributions in excess of net income of $367,345, respectively) $1,247,529,720 $1,305,039,463
============== ==============
(see notes to financial statements)
10 STATEMENT OF INVESTMENTS:DECEMBER 31, 2001
--------------------------------------------------------------------------------
General American Investors
COMMON STOCKS
------------------------------------------------------------------------------------
SHARES VALUE (NOTE 1a)
--------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE (1.5%) 475,000 The Boeing Company (COST $14,344,668) $18,420,500
--------------------------------------------------------------------------------------------------------------
COMMUNICATIONS AND 535,000 Cisco Systems, Inc. (a) 9,688,850
INFORMATION SERVICES 520,000 Cox Communications, Inc. Class A (a) 21,793,200
(2.8%) 180,000 NTL Incorporated (a) 169,200
144,500 Wolters Kluwer NV-ADR 3,294,600
-----------
(COST $9,681,525) 34,945,850
-----------
--------------------------------------------------------------------------------------------------------------
COMPUTER SOFTWARE 484,500 Oberthur Card Systems S.A. (a) 3,861,465
AND SYSTEMS (0.9%) 230,000 Viewpoint Corporation (a) 1,566,300
339,500 Wind River Systems, Inc. (a) 6,080,445
-----------
(COST $15,966,968) 11,508,210
-----------
--------------------------------------------------------------------------------------------------------------
CONSUMER PRODUCTS 500,000 Coca-Cola Enterprises Inc. 9,470,000
AND SERVICES (4.8%) 275,000 Ethan Allen Interiors, Inc. 11,437,250
1,700,500 Ford Motor Company 26,731,860
150,000 Newell Rubbermaid Inc. 4,135,500
175,000 PepsiCo, Inc. 8,520,750
-----------
(COST $53,064,273) 60,295,360
-----------
--------------------------------------------------------------------------------------------------------------
ELECTRONICS (1.5%) 692,500 Molex Incorporated Class A (COST $14,877,393) 18,732,125
-----------
--------------------------------------------------------------------------------------------------------------
ENVIRONMENTAL CONTROL
(INCLUDING SERVICES)
(0.7%) 280,000 Waste Management, Inc. (COST $3,690,021) 8,934,800
----------
--------------------------------------------------------------------------------------------------------------
FINANCE AND INSURANCE 195,000 American International Group, Inc. 15,483,000
(23.4%) 300,000 AmerUs Group Co. 10,752,000
525,000 Annaly Mortgage Management, Inc. 8,400,000
560,000 Annuity and Life Re (Holdings), Ltd. 14,061,600
315 Berkshire Hathaway Inc. Class A (a) 23,814,000
78,912 Central Securities Corporation 1,997,263
575,000 Everest Re Group, Ltd. 40,652,500
200,000 First Midwest Bancorp, Inc. 5,838,000
525,000 Golden West Financial Corporation 30,896,250
440,000 John Hancock Financial Services, Inc. 18,172,000
360,000 M&T Bank Corporation 26,226,000
300,000 MetLife, Inc. 9,504,000
550,000 PartnerRe Ltd. 29,700,000
600,000 Reinsurance Group of America, Incorporated 19,968,000
260,000 SunTrust Banks, Inc. 16,302,000
225,000 Transatlantic Holdings, Inc. 20,475,000
------------
(COST $113,945,775) 292,241,613
------------
--------------------------------------------------------------------------------------------------------------
HEALTH CARE (14.0%) PHARMACEUTICALS (11.9%)
---------------------------------------------------------------------------------------
220,000 Alkermes, Inc. (a) 5,799,200
425,000 Bristol-Myers Squibb Company 21,675,000
270,000 Genaera Corporation (a) 1,053,000
325,000 Genentech, Inc. (a) 17,631,250
520,000 IDEC Pharmaceuticals Corporation (a) 35,843,600
155,000 Johnson & Johnson 9,160,500
264,000 MedImmune, Inc. (a) 12,236,400
120,000 Millennium Pharmaceuticals, Inc. (a) 2,941,200
150,000 OSI Pharmaceuticals, Inc. (a) 6,861,000
890,000 Pfizer Inc. 35,466,500
------------
(COST $66,166,567) 148,667,650
------------
MEDICAL INSTRUMENTS AND DEVICES (1.2%)
---------------------------------------------------------------------------------------
290,000 Medtronic, Inc. (COST $862,614) 14,850,900
----------
HEALTH CARE SERVICES (0.9%)
---------------------------------------------------------------------------------------
100,000 BioReliance Corporation (a) 2,853,000
400,000 Health Net, Inc. (a) 8,712,000
-----------
(COST $7,734,076) 11,565,000
-----------
(COST $74,763,257) 175,083,550
===========
11 STATEMENT OF INVESTMENTS:DECEMBER 31, 2001 - continued
--------------------------------------------------------------------------------
General American Investors
COMMON STOCKS (Continued)
---------------------------------------------------------------------------------------
SHARES VALUE (NOTE 1a)
---------------------------------------------------------------------------------------
MISCELLANEOUS (3.7%) Other (COST $56,000,845) $46,057,135
-----------
--------------------------------------------------------------------------------------------------------------
OIL AND NATURAL GAS
(INCLUDING SERVICES)
(0.8%) 700,000 Repsol, S.A.-ADR (COST $8,236,884) 10,171,000
----------
--------------------------------------------------------------------------------------------------------------
RETAIL TRADE (17.7%) 675,000 Costco Wholesale Corporation (a) 29,956,500
2,045,000 The Home Depot, Inc. (b) 104,315,450
1,325,000 The TJX Companies, Inc. 52,814,500
570,000 Wal-Mart Stores, Inc. 32,803,500
-----------
(COST $49,514,414) 219,889,950
-----------
--------------------------------------------------------------------------------------------------------------
SEMICONDUCTORS (2.5%) 213,500 AXT, Inc.(a) 3,080,805
275,000 Brooks Automation, Inc. (a) 11,184,250
197,000 EMCORE Corporation (a) 2,649,650
2,646,000 IQE plc (a) 6,747,300
120,000 PRI Automation, Inc. (a) 2,454,000
250,000 Uniroyal Technology Corporation (a) 800,000
380,000 Zarlink Semiconductor Inc. (a) 4,275,000
----------
(COST $40,148,272) 31,191,005
--------------------------------------------------------------------------------------------------------------
SPECIAL HOLDINGS (d) Sequoia Capital IV 2,500
(a)(c) 432,000 Silicon Genesis Corporation Series C Preferred 3,006,720
(NOTE 5)(0.3%) 546,000 Standard MEMS, Inc. Series A Convertible Preferred 546,000
----------
(COST $6,896,127) 3,555,220(e)
----------
--------------------------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS (74.6%) (COST $461,130,422) 931,026,318
--------------------------------------------------------------------------------------------------------------
SHORT-TERM SECURITIES AND OTHER ASSETS
------------------------------------------------------------------------------------------
PRINCIPAL AMOUNT
--------------------------------------------------------------------------------------------------------------
$75,900,000 American Express Credit Corporation notes due 1/7-1/17/02; 1.78%-2.04% 75,704,672
63,900,000 Ford Motor Credit Company notes due 1/3-2/7/02; 2.54%-2.95% 63,654,297
75,600,000 General Electric Capital Corp. notes due 1/8-1/29/02; 1.75%-1.93% 75,447,113
66,400,000 General Motors Acceptance Corp. notes due 1/2-2/4/02; 2.40%-2.93% 66,144,778
29,500,000 Sears Roebuck Acceptance Corp. notes due 1/22-1/31/02; 2.25%-2.90% 29,397,550
-----------
(COST $310,348,410) 310,348,410
Cash, receivables and other assets, less liabilities 6,154,992
-----------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (25.4%) (COST $316,503,402) 316,503,402
--------------
NET ASSETS (COST $777,633,824) $1,247,529,720
==============
(a) Non-income producing security. .
(b) 1,000,000 shares held by custodian in a segregated custodian account as collateral for open short positions.
(c) Restricted security.
(d) A limited partnership interest
(e) Fair value of each holding in the opinion of the Directors.
STATEMENT OF SECURITIES SOLD SHORT:DECEMBER 31, 2001
--------------------------------------------------------------------------------------
General American Investors
COMMON STOCKS
SHARES VALUE (NOTE 1a)
--------------------------------------------------------------------------------------------------------------
338,000 Molex Incorporated $10,461,100
175,000 Southwest Bancorporation of Texas, Inc. 5,297,250
-----------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $23,334,454) $15,758,350
===========
(see notes to financial statements)
12 NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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 generally accepted
accounting principles 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.
Certain prior year financial statement items have been reclassified to conform
to the current year presentation.
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
issuerunrestricted 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 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
On June 19, 1998, the Company issued and sold 6,000,000 shares of its 7.20%
Tax-Advantaged Cumulative Preferred Stock. The stock has 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.
Transactions in Common Stock during 2001 and 2000 were as follows:
SHARES AMOUNT
------------------------------------------------------------------------------------------------------------------
2001 2000 2001 2000
------------------------------------------------------------------------------------------------------------------
Shares issued in payment of dividends
(includes 28,400 and 1,113,200 shares
issued from Treasury, respectively) 2,310,019 3,738,367 $ 2,310,019 $ 3,738,367
Increase in paid-in capital 78,781,203 132,738,836
------------ ------------
Total increase 81,091,222 136,477,203
------------ ------------
Shares purchased (at an average
discount from net asset value of
9.0% and 8.6%, respectively) 19,000 1,017,200 (19,000) (1,017,200)
Decrease in paid-in capital (673,675) (38,998,359)
------------ ------------
Total decrease (692,675) (40,015,559)
------------ ------------
Net increase $80,398,547 $96,461,644
============ ============
13 NOTES TO FINANCIAL STATEMENTS - CONTINUED
--------------------------------------------------------------------------------
General American Investors
--------------------------------------------------------------------------------
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS (Continued from bottom of
previous page)
Distributions in excess of net income for financial statement purposes result
primarily from transactions where tax treatment differs from book treatment.
As of December 31, 2001, the components of distributable earnings on a tax basis
were as follows:
Undistributed ordinary income $5,926,412
Undistributed long-term gain 3,342,802
Unrealized appreciation 477,472,000
------------
$486,741,214
============
--------------------------------------------------------------------------------
3. OFFICERS' COMPENSATION AND RETIREMENT AND THRIFT PLANS
The aggregate compensation paid by the Company during 2001 and 2000 to its
officers amounted to $5,334,000 and $5,254,000, respectively.
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 securities and securities sold short (other than
short-term securities) during 2001 were as follows:
PURCHASES SALES
-------------- ------------
Long transactions $217,712,654 $266,598,113
Short sale transactions 28,442,689 2,050,085
-------------- ------------
Total $246,155,343 $268,648,198
============== ============
December 31, 2001, 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 3,006,720
Standard MEMS, Inc. Series A Convertible Preferred 12/17/99 3,003,000 546,000
---------- ----------
Total $6,896,127 $3,555,220
========== ==========
* 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 $322,000 for 2001. 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.
--------------------------------------------------------------------------------
7. SUBSEQUENT EVENT
On January 16, 2002, the Board of Directors declared on the Common Stock a
dividend of $9,369,469 from realized gains, including $3,435,472 from long-term
capital gains and the balance from short-term gains (ordinary income). This
dividend is payable in cash on February 11, 2002.
Unaudited
--------------------------------------------------------------------------------
In addition to purchases of the Company's Common Stock as set forth in Note 2 on
page 12, 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.
14 FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
General American Investors
The following table shows per share operating performance data, total investment
return, ratios and supplemental data 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.
2001 2000 1999 1998 1997
---------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year $ 39.91 $ 41.74 $ 34.87 $ 29.15 $ 25.24
------- ------- ------- ------- -------
Net investment income .41 .53 .45 .47 .21
Net gain on securities - realized
and unrealized (.66) 6.12 11.32 9.44 7.15
------- ------- ------- ------- -------
Total from investment operations (.25) 6.65 11.77 9.91 7.36
------- ------- ------- ------- -------
Less distributions on:
Common Stock:
Dividends from investment income (.88)(a) (2.30)(b) (.71)(c) (.48) (.26)(d)
Distributions from capital gains (3.28) (5.78) (3.77) (3.24) (3.19)
------- ------- ------- ------- -------
(4.16) (8.08) (4.48) (3.72) (3.45)
Preferred Stock:
Dividends from investment income (.07)(e) (.11)(f) (.07)(g) (.03) -
Distributions from capital gains (.29) (.29) (.35) (.20) -
Unallocated - - - (.01) -
------- ------- ------- ------- -------
(.36) (.40) (.42) (.24) -
Total distributions (4.52) (8.48) (4.90) (3.96) (3.45)
------- ------- ------- ------- -------
Capital Stock transaction -
effect of Preferred Stock offering - - - (.23) -
------- ------- ------- ------- -------
Net asset value, end of year $35.14 $ 39.91 $ 41.74 $ 34.87 $ 29.15
======= ======= ======= ======= =======
Per share market value, end of year $33.47 $ 36.00 $ 37.19 $ 30.44 $ 26.19
======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN - Stockholder
Return, based on market price per share 4.33% 19.10% 39.22% 31.31% 42.58%
RATIOS AND SUPPLEMENTAL DATA
Total net assets, end of year
(000's omitted) $1,247,530 $1,305,039 $1,244,519 $1,018,933 $702,597
Net assets attributable to
Common Stock, end of year
(000's omitted) $1,097,530 $1,155,039 $1,094,519 $868,933 $702,597
Ratio of expenses to average net
assets applicable to Common Stock 1.02% 1.09% 1.01% 0.95% 0.98%
Ratio of net income to average net
assets applicable to Common Stock 1.15% 1.24% 1.23% 1.50% 0.80%
Portfolio turnover rate 23.81% 40.61% 33.68% 34.42% 32.45%
PREFERRED STOCK
Liquidation value, end of year
(000's omitted) $150,000 $150,000 $150,000 $150,000 -
Asset coverage 832% 870% 830% 679% -
Liquidation preference per share $25.00 $25.00 $25.00 $25.00 -
Market value per share $25.90 $24.25 $21.75 $25.88 -
(a) Includes short-term capital gain in the amount of $0.51 per share.
(b) Includes short-term capital gain in the amount of $1.82 per share.
(c) Includes short-term capital gain in the amount of $.29 per share.
(d) Includes short-term capital gain in the amount of $.05 per share.
(e) Includes short-term capital gain in the amount of $.04 per share.
(f) Includes short-term capital gain in the amount of $.09 per share.
(g) Includes short-term capital gain in the amount of $.03 per share.
15 REPORT OF INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
General American Investors
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF GENERAL AMERICAN INVESTORS
COMPANY, INC.
We have audited the accompanying statement of assets and liabilities, including
the statements of investments and securities sold short, of General American
Investors Company, Inc. as of December 31, 2001, and the related statements of
operations and changes in net assets for each of the two years in the period
then ended, and financial highlights for each of the five years in the period
then ended. These financial state ments and financial highlights are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 2001, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
General American Investors Company, Inc. at December 31, 2001, the results of
its operations and the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.
Ernst & Young LLP
New York, New York
January 15, 2002
OFFICERS
--------------------------------------------------------------------------------
Name (age) Position with Company Name (age) Position with Company
Employee Since Since Employee Since Since
---------------------------- ------------------------ ---------------------- ---------------------
Spencer Davidson (59) President and Chief Peter P. Donnelly (53) Vice-President 1991
1994 Executive Officer 1974 securities trader
1995
Andrew V. Vindigni (42) Vice-President 1995 Diane G. Radosti (49) Treasurer 1990
1988 security analyst 1980 corporate accounting
(financial services and financial reporting
industry)
Eugene L. DeStaebler, Jr. (63) Vice-President, Carole Anne Clementi (55) Secretary 1994
1975 Administration 1978 1982 shareholder relations
operations and finance and office management
All officers serve for a term of one year and are elected by the board of
directors at the time of its annual organization meeting on the second Wednesday
in April. The address for each officer is the Company's office. Other
directorships and affiliations for Mr. Davidson are shown in the listing of
Directors on page 16.
SERVICE COMPANIES
--------------------------------------------------------------------------------
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
16 DIRECTORS
--------------------------------------------------------------------------------
General American Investors
Name (age) Principal Occupation
Director Since During Past 5 Years Other Directorships and Affiliations
----------------------------------------------------------------------------------------------------
Independent ("disinterested") Directors
----------------------------------------------------------------------------------------------------
Lawrence B. Buttenwieser(70) Partner
Chairman of the Board Rosenman & Colin LLP
of Directors (lawyers)
1967
Arthur G. Altschul, Jr. (37) Managing Member Delta Opportunity Fund, Ltd., Director
1995 Diaz & Altschul Group, LLC Medicis Pharmaceutical Corporation,
(investments and securities) Director
The Overbrook Foundation, Trustee
Lewis B. Cullman (83) President Chess-in-the-Schools, Chairman,
1961 Cullman Ventures LLC Board of Trustees
(catalogs) Metropolitan Museum of Art, Trustee
Neurosciences Research Foundation, Trustee
The New York Botanical Garden, Senior
Vice Chairman, Board of Managers
Gerald M. Edelman (72) Member and Chairman of the Neurosciences Institute of the
1976 Department of Neurobiology Neurosciences Research Foundation, Director
The Scripps Research Institute and President
John D. Gordan, III (56) Partner
1986 Morgan, Lewis & Bockius LLP
(lawyers)
Bill Green (72) Corporate director and trustee ClientSoft, Inc., Director
1993 Commercial Capital Corp., Director
Energy Answers Corporation, Director
New York City Housing Development
Corporation, Member and Vice Chair
Sidney R. Knafel (71) Managing Partner BioReliance Corporation, Chairman
1994 SRK Management Company IGENE Biotechnology, Inc., Director
(private investment company) Insight Communications Company, Inc.,
Chairman
NTL Incorporated, Director
Source Media, Inc., Director
Richard R. Pivirotto (71) President General Theological Seminary, Trustee
1971 Richard R. Pivirotto Co., Inc. The Gillette Company, Director
(self-employed consultant) The Greenwich Bank and Trust Company,
Director
Greenwich Hospital Corporation, Trustee
Immunomedics, Inc., Director
New York Life Insurance Company,
Director
Princeton University, Charter Trustee
Emeritus
Joseph T. Stewart, Jr. (72) Corporate director and trustee Foundation of the University of
1987 Medicine and Dentistry of New Jersey,
Trustee
Marine Biological Laboratory, Member,
Advisory Council
Raymond S. Troubh (75) Financial Consultant Ariad Pharmaceuticals, Inc., Director
1989 Diamond Offshore Drilling, Inc., Director
Enron Corp., Director
Gentiva Health Services, Inc., Director
Health Net, Inc., Director
Hercules Incorporated, Director
Petrie Stores Liquidating Trust, Trustee
Starwood Hotels & Resorts, Trustee
Triarc Companies, Inc., Director
WHX Corporation, Director
Inside ("interested") Director
--------------------------------------------------------------------------------------------------------
Spencer Davidson (59) President and Chief Executive Medicis Pharmaceutical Corporation, Director
1995 Officer Neurosciences Research Foundation, Trustee
General American Investors
Company, Inc. since 1995
All directors serve for a term of one year and are elected by stockholders at
the time of the annual meeting on the second Wednesday in April. The address for
each director is the Company's office.
--------------------------------------------------------------------------------
Arthur G. Altschul, Chairman Emeritus
William O. Baker, Director Emeritus
William T. Golden, Director Emeritus