GENERAL AMERICAN INVESTORS
COMPANY, INC
SEMI-ANNUAL REPORT
JUNE 30, 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 six months ended June 30, 2002, our stockholders experienced a decrease
of 16.5% on their investment in our Common Shares (assuming reinvestment of all
dividends). The net asset value per Common Share decreased 13.6%. By comparison,
our benchmark, the Standard & Poor's 500 Stock Index (including income),
declined 13.2%. For the twelve months ended June 30, 2002, the results were
negative as well. Our stockholders experienced a decrease of 21.3% and the net
asset value per Common Share decreased 15.1%; these compare with a decline of
18% for the S&P 500. During each period, the discount at which our shares traded
increased moderately and at June 30, 2002, it was 7.9%.
As set forth in the accompanying financial statements (unaudited), as of June
30, 2002, the net assets applicable to the Company's Common Stock were
$935,286,977, equal to $30.08 per Common Share.
The decrease in net assets resulting from operations for the six months ended
June 30, 2002 was $148,701,738. During this period, net realized loss on
securities sold was $20,031,348 and the decrease in unrealized appreciation was
$124,588,557. Net investment income for the six months was $1,318,167 and
distributions to preferred stockholders amounted to $5,400,000.
During the six months, 141,500 shares of the Company's Common Stock were
repurchased for $4,171,536 at an average discount from net asset value of 8.5%.
The decline in equities, now in its third year, accelerated in the period just
ended and may be approaching a climax. We have had virtually no exposure to the
debacle related to the telecommunications industry nor to any of the
headline-grabbing examples of corporate malfeasance. Our cash reserves,
furthermore, remain substantial. That our portfolio has declined in line with
the S&P 500 benchmark, nonetheless, reflects the fact that stock valuations have
remained high when viewed historically - an insuperable burden in the context of
only modest economic recovery.
Our major holdings remain largely unchanged. Without exception they are sound,
growing enterprises whose ownership should prove rewarding over time.
We would remind you 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.
By Order of the Board of Directors,
GENERAL AMERICAN INVESTORS COMPANY, INC.
Spencer Davidson
President and Chief Executive Officer
July 10, 2002
2 STATEMENT OF ASSETS AND LIABILITIES June 30, 2002 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
Assets
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT VALUE (NOTE 1a)
Common stocks (cost $430,793,009) $777,947,957
Corporate discount notes (cost $307,481,399) 307,481,399
------------
Total investments (cost $738,274,408) 1,085,429,356
CASH, RECEIVABLES AND OTHER ASSETS
Cash, including margin account balance of $11,944 $ 117,573
Receivable from broker for proceeds on securities sold short 22,024,835
Dividends, interest and other receivables 558,884
Prepaid expenses 6,137,016
Other 508,222 29,346,530
----------- ------------
TOTAL ASSETS 1,114,775,886
Liabilities
------------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 5,245,129
Preferred dividend accrued but not yet declared 240,000
Securities sold short, at value (proceeds $22,024,835) (note 1a) 16,296,340
Accrued expenses and other liabilities 7,707,440
-----------
TOTAL LIABILITIES 29,488,909
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 - 31,090,063 shares (note 2) $935,286,977
============
NET ASSET VALUE PER COMMON SHARE $ 30.08
============
Net Assets Applicable To Common Stock
------------------------------------------------------------------------------------------------------------------------------------
Common Stock, 31,090,063 shares at par value (note 2) $31,090,063
Additional paid-in capital (note 2) 575,384,945
Accumulated realized loss on investments (19,802,378)
Undistributed net income 1,370,904
Unallocated distributions on Preferred Stock (5,640,000)
Unrealized appreciation on investments and securities sold short
(including aggregate gross unrealized
appreciation of $407,770,928) 352,883,443
-----------
NET ASSETS APPLICABLE TO COMMON STOCK $935,286,977
============
(see notes to financial statements)
3 STATEMENT OF OPERATIONS Six Months Ended June 30, 2002 (Unaudited)
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General American Investors
Income
------------------------------------------------------------------------------------------------------------------------------------
Dividends (net of foreign withholding taxes of $21,770) $ 3,394,084
Interest 3,220,980
Other Income 229,782 $ 6,844,846
-----------
Expenses
------------------------------------------------------------------------------------------------------------------------------------
Investment research 3,518,378
Administration and operations 1,308,137
Office space and general 246,669
Transfer agent, custodian and registrar fees and expenses 125,284
Auditing and legal fees 124,000
Stockholders' meeting and reports 90,425
Directors' fees and expenses 71,092
Miscellaneous taxes 42,694 5,526,679
----------- ------------
NET INVESTMENT INCOME 1,318,167
Realized Loss and Change in Unrealized Appreciation on Investments (notes 1d and 4)
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Long transactions (21,212,129)
Short sale transactions (note 1b) 1,180,781
-----------
Net realized loss on investments (20,031,348)
Net decrease in unrealized appreciation (124,588,557)
-----------
NET LOSS ON INVESTMENTS (144,619,905)
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS (5,400,000)
------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($148,701,738)
============
(see notes to financial statements)
4 STATEMENT OF CHANGES IN NET ASSETS
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General American Investors
Six Months
Ended Year Ended
June 30, 2002 December 31,
(Unaudited) 2001
-------------- ------------
Operations
------------------------------------------------------------------------------------------------------------------------------------
Net investment income $ 1,318,167 $ 12,512,405
Net realized gain (loss) on investments (20,031,348) 70,720,822
Net decrease in unrealized appreciation (124,588,557) (87,697,439)
----------- -----------
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 (5,400,000) -
---------- ------------
Decrease In Net Assets From Preferred Distributions (5,400,000) (10,800,000)
---------- ------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (148,701,738) (15,264,212)
----------- ------------
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) (4,171,536) (692,675)
----------- -----------
INCREASE (DECREASE) IN NET ASSETS - CAPITAL TRANSACTIONS (4,171,536) 80,398,547
----------- -----------
NET DECREASE IN NET ASSETS (162,242,743) (57,509,743)
Net Assets Applicable to Common Stock
------------------------------------------------------------------------------------------------------------------------------------
BEGINNING OF PERIOD 1,097,529,720 1,155,039,463
------------ ------------
END OF PERIOD (including undistributed net income of
$1,370,904 and $52,737, respectively) $935,286,977 $1,097,529,720
=========== =============
(see notes to financial statements)
5 FINANCIAL HIGHLIGHTS
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General American Investors
The following table shows per share operating performance data, total investment
return, ratios and supplemental data for the six months ended June 30, 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.
Six Months
Ended Year Ended December 31,
June 30, 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 .04 .41 .53 .45 .47 .21
Net gain (loss) on securities -
realized and unrealized (4.63) (.66) 6.12 11.32 9.44 7.15
--------- --------- ------- ------- ------- --------
Distributions on Preferred Stock:
Dividends from investment income - (.07)(a) (.11)(b) (.07)(c) (.03) -
Distributions from capital gains - (.29) (.29) (.35) (.20) -
Unallocated (.17) - - - (.01) -
--------- --------- ------- ------- ------- --------
(.17) (.36) (.40) (.42) (.24) -
--------- --------- ------- ------- ------- --------
Total from investment operations (4.76) (.61) 6.25 11.35 9.67 7.36
--------- --------- ------- ------- ------- --------
Less distributions on Common Stock:
Dividends from investment income (.19)(d) (.88)(e) (2.30)(f) (.71)(g) (.48) (.26)(h)
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)
--------- --------- ------- ------- ------- --------
Capital Stock transaction -
effect of Preferred Stock offering - - - - (.23) -
--------- --------- ------- ------- ------- --------
Net asset value, end of period $30.08 $35.14 $39.91 $41.74 $34.87 $29.15
========= ========= ======= ======= ======= ========
Per share market value, end of period $27.70 $33.47 $36.00 $37.19 $30.44 $26.19
========= ========= ======= ======= ======= ========
TOTAL INVESTMENT RETURN - Stockholder
Return, based on market price per share (16.51)%* 4.33% 19.10% 39.22% 31.31% 42.58%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to Common Stock,
end of period (000's omitted) $935,287 $1,097,530 $1,155,039 $1,094,519 $868,933 $702,597
Ratio of expenses to average net assets
applicable to Common Stock 0.54%* 1.02% 1.09% 1.01% 0.95% 0.98%
Ratio of net income to average net assets
applicable to Common Stock 0.13%* 1.15% 1.24% 1.23% 1.50% 0.80%
Portfolio turnover rate 10.84%* 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 724% 832% 870% 830% 679% -
Liquidation preference per share $25.00 $25.00 $25.00 $25.00 $25.00 -
Market value per share $25.95 $25.90 $24.25 $21.75 $25.88 -
(a) Includes short-term capital gain in the amount of $.04 per share.
(b) Includes short-term capital gain in the amount of $.09 per share.
(c) Includes short-term capital gain in the amount of $.03 per share.
(d) Represents short-term capital gain.
(e) Includes short-term capital gain in the amount of $.51 per share.
(f) Includes short-term capital gain in the amount of $1.82 per share.
(g) Includes short-term capital gain in the amount of $.29 per share.
(h) Includes short-term capital gain in the amount of $.05 per share.
*Not annualized
6 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited)
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General American Investors
Value
Shares COMMON STOCKS (note 1a)
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AEROSPACE/DEFENSE (2.4%)
------------------------------------------------------------------------------------------------------------------------------------
500,000 The Boeing Company (COST $15,978,442) $22,500,000
----------
COMMUNICATIONS AND INFORMATION SERVICES (2.9%)
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535,000 Cisco Systems, Inc. (a) 7,463,250
728,700 Cox Communications, Inc. Class A (a) 20,075,685
180,000 NTL Incorporated (a) 5,760
----------
(COST $13,742,586) 27,544,695
----------
COMPUTER SOFTWARE AND SYSTEMS (0.2%)
------------------------------------------------------------------------------------------------------------------------------------
175,000 Oberthur Card Systems S.A. (a) 540,750
339,500 Wind River Systems, Inc. (a) 1,700,895
----------
(COST $8,061,069) 2,241,645
----------
CONSUMER PRODUCTS AND SERVICES (3.9%)
------------------------------------------------------------------------------------------------------------------------------------
275,000 Ethan Allen Interiors, Inc. 9,583,750
875,500 Ford Motor Company 14,008,000
150,000 Newell Rubbermaid Inc. 5,259,000
150,000 PepsiCo, Inc. 7,230,000
----------
(COST $24,180,403) 36,080,750
----------
ELECTRONICS (2.0%)
------------------------------------------------------------------------------------------------------------------------------------
692,500 Molex Incorporated Class A (COST $14,877,393) 18,995,275
----------
ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (1.7%)
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600,000 Waste Management, Inc. (COST $11,720,621) 15,630,000
----------
FINANCE AND INSURANCE (30.1%)
------------------------------------------------------------------------------------------------------------------------------------
300,000 American International Group, Inc. 20,469,000
275,000 AmerUs Group Co. 10,202,500
500,000 Annaly Mortgage Management, Inc. 9,700,000
700,000 Annuity and Life Re (Holdings), Ltd. 12,663,000
315 Berkshire Hathaway Inc. Class A (a) 21,042,000
78,912 Central Securities Corporation 1,672,145
625,000 Everest Re Group, Ltd. 34,968,750
500,000 Golden West Financial Corporation 34,390,000
440,000 John Hancock Financial Services, Inc. 15,488,000
350,000 M&T Bank Corporation 30,016,000
300,000 MetLife, Inc. 8,640,000
550,000 PartnerRe Ltd. 26,922,500
600,000 Reinsurance Group of America, Incorporated 18,492,000
260,000 SunTrust Banks, Inc. 17,607,200
225,000 Transatlantic Holdings, Inc. 18,000,000
----------
(COST $122,875,607) 280,273,095
----------
7 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited) - continued
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General American Investors
Value
Shares COMMON STOCKS (continued) (note 1a)
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HEALTH CARE (13.2%)
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PHARMACEUTICALS (10.4%)
------------------------------------------------------------------------------------------------------------------------------------
240,000 Alkermes, Inc. (a) $3,842,400
300,000 Bristol-Myers Squibb Company 7,710,000
270,000 Genaera Corporation (a) 480,600
600,000 Genentech, Inc. (a) 20,100,000
495,000 IDEC Pharmaceuticals Corporation (a) 17,547,750
264,000 MedImmune, Inc. (a) 6,969,600
140,000 Millennium Pharmaceuticals, Inc.(a) 1,701,000
150,000 OSI Pharmaceuticals, Inc. (a) 3,603,000
1,000,000 Pfizer Inc 35,000,000
----------
(COST $68,946,841) 96,954,350
----------
MEDICAL INSTRUMENTS AND DEVICES (1.3%)
------------------------------------------------------------------------------------------------------------------------------------
290,000 Medtronic, Inc. (COST $862,614) 12,426,500
----------
HEALTH CARE SERVICES (1.5%)
------------------------------------------------------------------------------------------------------------------------------------
74,000 BioReliance Corporation (a) 1,835,200
450,000 Health Net, Inc. (a) 12,046,500
-----------
(COST $9,077,421) 13,881,700
-----------
(COST $78,886,876) 123,262,550
-----------
MISCELLANEOUS (1.6%)
------------------------------------------------------------------------------------------------------------------------------------
Other (COST $28,830,503) 15,240,510
-----------
OIL & NATURAL GAS (INCLUDING SERVICES) (4.0%)
------------------------------------------------------------------------------------------------------------------------------------
850,000 El Paso Corporation 17,518,500
1,250,000 Halliburton Company 19,925,000
-----------
(COST $34,153,312) 37,443,500
-----------
RETAIL TRADE (19.7%)
------------------------------------------------------------------------------------------------------------------------------------
675,000 Costco Wholesale Corporation (a) 26,068,500
2,045,000 The Home Depot, Inc. (b) 75,112,850
2,650,000 The TJX Companies, Inc. 51,966,500
570,000 Wal-Mart Stores, Inc. 31,355,700
-----------
(COST $49,514,414) 184,503,550
-----------
SEMICONDUCTORS (1.3%)
------------------------------------------------------------------------------------------------------------------------------------
337,400 Brooks- PRI Automation, Inc. (a) 8,623,944
197,000 EMCORE Corporation (a) 1,182,000
1,644,900 IQE plc (a) 1,102,083
250,000 Zarlink Semiconductor Inc. (a) 1,272,500
-----------
(COST $21,075,656) 12,180,527
-----------
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 (83.2%) (COST $430,793,009) 777,947,957
-----------
8 STATEMENT OF INVESTMENTS June 30, 2002 (Unaudited) - continued
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General American Investors
Principal Value
Amount SHORT-TERM SECURITIES AND OTHER ASSETS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
$85,400,000 American Express Credit Corporation notes due 7/1-7/30/02; 1.75%-1.76% $85,256,935
47,000,000 Ford Motor Credit Company notes due 7/8-7/16/02; 2.02%-2.04% 46,884,110
74,700,000 General Electric Capital Corp. notes due 7/11-7/25/02; 1.74%-1.78% 74,565,582
64,400,000 General Motors Acceptance Corp. notes due 7/2-8/1/02; 2.00%-2.02% 64,265,032
36,600,000 Sears Roebuck Acceptance Corp. notes due 7/1-8/12/02; 1.70%-2.04% 36,509,740
-----------
(COST $307,481,399) 307,481,399
Liabilities in excess of cash, receivables and other assets (142,379)
-----------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (32.8%) 307,339,020
-----------
PREFERRED STOCK (-16.0%) (150,000,000)
-----------
NET ASSETS APPLICABLE TO COMMON STOCK (100%) $935,286,977
============
(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 June 30, 2002 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
Value
Shares COMMON STOCKS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
378,000 Molex Incorporated $12,674,340
100,000 Southwest Bancorporation of Texas Inc. 3,622,000
----------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $22,024,835) $16,296,340
==========
(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.
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 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 31,090,063 shares and 6,000,000 shares, respectively, were
outstanding at June 30, 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.
In accordance with Emerging Issues Task Force Topic No. D-98, "Classification
and Measurement of Redeemable Securities," effective for the current period, the
Company has reclassified its Preferred Stock outside of permanent equity in the
Statement of Assets and Liabilities. In addition, distributions to Preferred
Stockholders are now classified as a component of the "Increase (Decrease) in
Net Assets Resulting from Operations" in the Statements of Operations and of
Changes in Net Assets and as a component of the "Total from Investment
Operations" in the Financial Highlights. This change has no impact on the Net
Assets Applicable to the Common Stock of the Company.
10 NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
2. Capital Stock and Dividend Distributions - continued
Transactions in Common Stock during the six months ended June 30, 2002 and the
year ended December 31, 2001 were as follows:
Shares Amount
-------------------- --------------------
2002 2001 2002 2001
---- ---- ---- ----
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 8.5% and 9.0%, respectively) 141,500 19,000 ($141,500) (19,000)
Decrease in paid-in capital (4,030,036) (673,675)
------------ ----------
Total decrease (4,171,536) (692,675)
------------ ----------
Net increase (decrease) ($4,171,536) $80,398,547
============ ==========
At June 30, 2002, the Company held in its treasury 141,500 shares of Common
Stock with an aggregate cost in the amount of $4,171,536.
3. Officers' Compensation and Retirement and Thrift Plans
The aggregate compensation paid by the Company during the six months ended June
30, 2002 to its officers amounted to $2,711,500.
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 six months ended June 30, 2002 were as
follows:
Purchases Sales
------------ ------------
Long transactions $91,740,453 $100,865,737
Short sale transactions 3,909,654 3,780,816
------------ ------------
Total $95,650,107 $104,646,553
============ ============
At June 30, 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 $139,200 for the six months ended June 30, 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 June 30, 2002 (Unaudited)
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General American Investors
Shares Held
Increases Shares June 30, 2002
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New Positions
El Paso Corporation 850,000 850,000
Additions
Alkermes, Inc. 20,000 240,000
American International Group, Inc. 70,000 300,000
The Boeing Company 75,000 500,000
Brooks-PRI Automation, Inc. 62,400 (a) 337,400
Cox Communications, Inc. Class A 150,000 728,700
Everest Re Group, Ltd. 75,000 625,000
Genentech, Inc. 275,000 600,000
Health Net, Inc. 50,000 450,000
Millennium Pharmaceuticals, Inc. 20,000 140,000
Pfizer Inc 110,000 1,000,000
Decreases
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Eliminations
AXT, Inc. 105,000 -
Coca-Cola Enterprises Inc. 475,000 -
Johnson & Johnson 155,000 -
PRI Automation, Inc. 120,000 (a) -
Viewpoint Corporation 226,100 -
Reductions
AmerUs Group Co. 25,000 275,000
Annaly Mortgage Management, Inc. 25,000 500,000
BioReliance Corporation 26,000 74,000
Golden West Financial Corporation 25,000 500,000
Halliburton Company 150,000 1,250,000
IQE plc 201,100 1,644,900
M&T Bank Corporation 10,000 350,000
Oberthur Card Systems S.A. 75,000 175,000
PepsiCo, Inc. 25,000 150,000
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) Received 62,400 shares of Brooks-PRI Automation, Inc. in exchange for 120,000 shares
of PRI Automation, Inc. in conjunction with a merger.
DIRECTORS
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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
Deutsche Bank Trust
Company Americas
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
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
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To the Board of Directors and Stockholders of
GENERAL AMERICAN INVESTORS COMPANY, INC.
We have reviewed the accompanying statement of assets and liabilities of General
American Investors Company, Inc., including the statements of investments and
securities sold short, as of June 30, 2002, and the related statements of
operations and changes in net assets and financial highlights for the six month
period ended June 30, 2002. These financial statements and financial highlights
are the responsibility of the Company's management.
We conducted our review in accordance with standards established by the American
Institute of Certified Public Accountants. A review of interim financial
information consists principally of applying analytical procedures to financial
data, and making inquiries of persons responsible for financial and accounting
matters. It is substantially less in scope than an audit in accordance with
generally accepted auditing standards, the objective of which is the expression
of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.
Based on our review, we are not aware of any material modifications that should
be made to the interim financial statements referred to above for them to be in
conformity with accounting principles generally accepted in the United States.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of changes in net assets for the year ended December
31, 2001 and financial highlights for each of the five years in the period then
ended and in our report, dated January 15, 2002, we expressed an unqualified
opinion on such financial statement and financial highlights.
New York, New York ERNST & YOUNG LLP
July 15, 2002