<PAGE>
GENERAL AMERICAN INVESTORS
COMPANY, INC.
THIRD QUARTER REPORT
SEPTEMBER 30, 1998
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
<PAGE>
TO THE STOCKHOLDERS
- --------------------------------------------------------------------------------
For the nine months ended September 30, 1998, the total return (assuming
reinvestment of all dividends) on the net asset value per Common Share of
General American Investors Company was 9.9%. By comparison, the rate of return
(including income) for the Standard & Poor's 500 Stock Index was 6%. For the
twelve months ended September 30, 1998, the return per Common Share was 13.9%;
this compares to a return of 9% for the S&P 500.
As set forth in the accompanying financial statements (unaudited), as of
September 30, 1998, the net assets of the Company were $891,428,463. Net assets
applicable to the Common Stock were $741,428,463, equal to $31.78 per Common
Share.
The increase in net assets resulting from operations for the nine months ended
September 30, 1998 was $74,615,654. During this period, realized gain on
securities sold was $78,188,412 ($3.35 per share); the decrease in unrealized
appreciation was $12,520,248. Net investment income for the nine months was
$8,947,490.
During the nine months, 774,300 shares of the Company's Common Stock were
repurchased for $22,250,963 at an average discount from net asset value of
11.4%.
By Order of the Board of Directors,
GENERAL AMERICAN INVESTORS COMPANY, INC.
Spencer Davidson
President and Chief Executive Officer
<PAGE>
2 STATEMENT OF ASSETS AND LIABILITIES September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
ASSETS
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS, AT VALUE ( NOTE 1a )
Common stocks (cost $294,843,650) $602,866,759
Convertible corporate note (cost $2,462,500) 8,325,000
Corporate discount notes (cost $274,385,263) 274,385,263
------------
Total investments (cost $571,691,413) 885,577,022
CASH, RECEIVABLES AND OTHER ASSETS
Cash ................................................ $ 143,735
Receivable for securities sold ...................... 5,309,948
Dividends, interest and other receivables ........... 2,051,317
Prepaid expenses .................................... 3,883,323
Other ............................................... 631,946 12,020,269
----------- -----------
TOTAL ASSETS .......................................... 897,597,291
LIABILITIES
- -------------------------------------------------------------------------------------
Payable for securities purchased ................... 1,135,567
Preferred dividend accrued but not yet declared .... 240,000
Accrued expenses and other liabilities ............. 4,793,261
-----------
TOTAL LIABILITIES ..................................... 6,168,828
------------
NET ASSETS ............................................ $891,428,463
============
Net Assets applicable to Preferred Stock at a
liquidation value of $25 per share ............... $150,000,000
============
Net Assets applicable to Common Stock ................. $741,428,463
============
NET ASSET VALUE PER COMMON SHARE ...................... $31.78
============
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
Common Stock, $1 par value (note 2)
Authorized 30,000,000 shares; outstanding
23,330,378 shares (exclusive of
817,600 shares in Treasury) ..................... 23,330,378
Additional paid-in capital ( note 2 ) .............. 465,073,880
Undistributed realized gain on securities sold ..... 77,844,839
Undistributed net income ........................... 8,353,757
Unallocated distributions on Preferred Stock ....... (3,060,000)
Unrealized appreciation on investments (including
aggregate gross unrealized appreciation of
$352,245,338) ................................... 313,885,609
------------
TOTAL NET ASSETS ...................................... $891,428,463
============
<FN>
( see notes to financial statements )
</FN>
</TABLE>
<PAGE>
3 STATEMENT OF OPERATIONS Nine Months Ended September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
INCOME
- --------------------------------------------------------------------------------
<S> <C> <C>
Dividends (net of foreign withholding taxes
of $185,768) ............................ $ 6,158,560
Interest .................................. 7,324,846
Investment advisory fees (note 1c) ........ 58,426 $ 13,541,832
----------
EXPENSES
- --------------------------------------------------------------------------------
Investment research ....................... 2,212,662
Administration and operations ............. 1,376,250
Office space and general .................. 438,824
Transfer agent, custodian and registrar
fees and expenses ....................... 180,543
Stockholders' meeting and reports ......... 124,834
Directors' fees and expenses .............. 111,811
Auditing and legal fees ................... 84,000
Miscellaneous taxes (note 1b) ............. 65,418 4,594,342
--------- ---------
NET INVESTMENT INCOME ........................ 8,947,490
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
- -----------------------------------------------------------------------------------
Net realized gain on sales of securities
(long-term except for $1,355,752) ........ 78,188,412
Net decrease in unrealized appreciation .... (12,520,248)
----------
NET GAIN ON INVESTMENTS ..................... 65,668,164
------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. $ 74,615,654
==============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
4 STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
September 30, 1998 December 31,
OPERATIONS (Unaudited) 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ..................... $ 8,947,490 $ 5,149,987
Net realized gain on sales of securities .. 78,188,412 66,640,521
Net increase (decrease) in
unrealized appreciation ................ (12,520,248) 99,421,665
------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. 74,615,654 171,212,173
------------- -------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
- --------------------------------------------------------------------------------
Unallocated distributions from Preferred
Stock .................................... (3,060,000) --
------------- -------------
DECREASE IN NET ASSETS FROM PREFERRED
DISTRIBUTIONS ............................ (3,060,000) --
------------- -------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
- --------------------------------------------------------------------------------
From net income, including
short-term capital gain ................. (240,392) (5,925,735)
From long-term capital gain ............... (4,807,836) (72,383,436)
------------- -------------
DECREASE IN NET ASSETS FROM COMMON
DISTRIBUTIONS ............................ (5,048,228) (78,309,171)
------------- -------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Value of Common Shares issued in payment
of dividends (note 2) ................... -- 49,404,107
Cost of Common Shares purchased (note 2) .. (22,250,963) (37,306,802)
Net proceeds from the issuance of
Preferred Stock (note 2) ................ 144,575,000 --
------------- -------------
INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS 122,324,037 12,097,305
------------- -------------
NET INCREASE IN NET ASSETS ................... 188,831,463 105,000,307
NET ASSETS
- --------------------------------------------------------------------------------
BEGINNING OF PERIOD .......................... 702,597,000 597,596,693
-------------- -------------
END OF PERIOD (including undistributed net
income of $8,353,757 and distributions
in excess of net income of $353,341,
respectively) ............................. $ 891,428,463 $ 702,597,000
============= =============
<FN>
( see notes to financial statements )
</FN>
</TABLE>
<PAGE>
5 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
General American Investors
The following table shows per share operating performance data, total investment
return, ratios and supplemental data for the nine months ended September 30,
1998 and for each year in the five-year period ended December 31, 1997. This
information has been derived from information contained in the financial
statements and market price data for the Company's shares.
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended December 31,
Sept. 30, 1998 ------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ............... $ 29.15 $ 25.24 $ 23.94 $ 22.31 $ 24.75 $ 28.56
------------- --------- --------- --------- --------- ---------
Net investment income ........................... .38 .21 .22 .08 .05 .03
Net gain (loss) on securities -
realized and unrealized .................... 2.82 7.15 3.86 4.54 (.94) (.80)
------------- --------- --------- --------- --------- ---------
Total from investment operations ................... 3.20 7.36 4.08 4.62 (.89) (.77)
------------- --------- --------- --------- --------- ---------
Less Distributions on:
Common Stock:
Dividends from investment income ................ (.01) (.26)(a) (.20) (.11)(b) (.05) (.04)
Distributions from capital gains ................ (.20) (3.19) (2.58) (2.87) (1.49) (2.98)
In excess of net income ......................... -- -- -- (.01) (.01) (.02)
------------- --------- --------- --------- --------- ---------
(.21) (3.45) (2.78) (2.99) (1.55) (3.04)
Preferred Stock -- unallocated .................... (.13) -- -- -- -- --
------------- --------- --------- --------- --------- ---------
Total Distributions ................................ (.34) (3.45) (2.78) (2.99) (1.55) (3.04)
------------- --------- --------- --------- --------- ---------
Capital Stock transaction - effect of Preferred
Stock offering .................................. (.23) -- -- -- -- --
------------- --------- --------- --------- ---------- ---------
Net asset value, end of period ..................... $ 31.78 $ 29.15 $ 25.24 $ 23.94 $ 22.31 $ 24.75
============= ========= ========= ========= ========== =========
Per share market value, end of period .............. $ 29.00 $ 26.19 $ 21.00 $ 20.00 $ 19.00 $ 22.25
============= ========= ========= ========= ========== =========
TOTAL INVESTMENT RETURN - Stockholder Return, based
on market price per share 11.66%* 42.58% 19.48% 21.22% -7.86% -15.92%
RATIOS AND SUPPLEMENTAL DATA
Total net assets, end of period
(000's omitted) ................................. $ 891,428 $ 702,597 $ 597,597 $ 573,693 $ 519,722 $ 553,898
Net assets attributable to Common Stock, end
of period (000's omitted) ....................... $ 741,428 $ 702,597 $ 597,597 $ 573,693 $ 519,722 $ 553,898
Ratio of expenses to average net assets
applicable to Common Stock ...................... 0.61%* 0.98% 1.05% 1.25% 1.17% 1.16%
Ratio of net income to average net assets
applicable to Common Stock ...................... 1.18%* 0.80% 0.88% 0.36% 0.21% 0.14%
Portfolio turnover rate ............................ 25.86%* 32.45% 33.40% 29.14% 17.69% 19.50%
Average commission rate paid per share ............. $ .0500 $ .0504 $ .0500
PREFERRED STOCK
Liquidation value, end of period (000's omitted) ... $ 150,000 -- -- -- -- --
Asset coverage ..................................... 594% -- -- -- -- --
Liquidation preference per share ................... $ 25.00 -- -- -- -- --
Market value per share ............................. $ 26.19 -- -- -- -- --
<FN>
(a) Includes short-term capital gain in the amount of $.05 per share.
(b) Includes short-term capital gain in the amount of $.03 per share.
* Not annualized
</FN>
</TABLE>
<PAGE>
6 STATEMENT OF INVESTMENTS September 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES OR VALUE
COMMON STOCKS PRINCIPAL AMOUNT (NOTE 1a)
- ---------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS AND INFORMATION SERVICES (4.8%)
Axiom Inc.+ ....................................... 152,500 $ 209,687
Comcast UK Cable Partners Limited Class A + ....... 304,500 4,719,750
Cox Communications, Inc. Class A + ................ 270,000 14,748,750
NTL Incorporated + ................................ 223,000 9,589,000
Reuters Group plc-ADR ............................. 94,000 4,676,500
Wolters Kluwer NV-ADR ............................. 45,000 8,614,350
----------
(COST $17,967,312) -- 42,558,037
----------
COMPUTER SOFTWARE AND SYSTEMS (3.3%)
Cisco Systems, Inc.+ .............................. 240,000 14,835,000
Hewlett-Packard Company ........................... 40,000 2,117,500
MetaCreations Corporation + ....................... 300,000 1,162,500
Platinum Software Corporation + ................... 75,000 768,750
Seagate Technology, Inc.+ ......................... 430,000 10,776,875
----------
(COST $15,873,988) -- 29,660,625
----------
CONSUMER PRODUCTS AND SERVICES (8.3%)
Buffets, Inc.+ .................................... 773,500 8,363,469
Chrysler Corporation .............................. 400,000 19,150,000
Ford Motor Company ................................ 500,000 23,500,000
PepsiCo, Inc. ..................................... 225,000 6,623,438
Philip Morris Companies Inc. ...................... 350,000 16,187,500
----------
(COST $49,239,910) -- 73,824,407
----------
ELECTRONICS (1.0%)
Molex Incorporated Class A ........................ 315,000 8,544,375
----------
(COST $8,469,377)
ENVIRONMENTAL CONTROL
(INCLUDING SERVICES) (2.2%)
Waste Management, Inc. ............................ 413,000 19,849,813
----------
(COST $5,954,561)
FINANCE AND INSURANCE (19.8%)
AmerUs Life Holdings, Inc. Class A ................ 250,000 5,484,375
American International Group, Inc. ................ 142,500 11,168,438
Annaly Mortgage Management, Inc. .................. 500,000 4,062,500
Annuity and Life Re (Holdings), Ltd.+ ............. 475,000 9,381,250
CCB Financial Corp. ............................... 108,500 10,931,375
Crestar Financial Corp. ........................... 290,000 16,457,500
Everest Reinsurance Holdings, Inc. ................ 275,000 10,243,750
First Midwest Bancorp, Inc. ....................... 252,500 9,989,531
General Re Corporation ............................ 90,000 18,270,000
Golden West Financial Corporation ................. 160,000 13,090,000
Life Re Corporation ............................... 210,000 19,306,875
M&T Bank Corporation .............................. 48,000 22,128,000
NAC Re Corporation ................................ 156,000 7,683,000
TIG Holdings, Inc. ................................ 150,000 2,109,375
Transatlantic Holdings, Inc. ...................... 200,000 16,550,000
-----------
(COST $79,280,830) -- 176,855,969
-----------
HEALTH CARE (11.1%)
PHARMACEUTICALS (9.3%)
AB Astra Class A .................................. 562,500 9,618,750
AB Astra Class B .................................. 800,000 13,168,000
GelTex Pharmaceuticals, Inc.+ ..................... 150,000 3,168,750
IDEC Pharmaceuticals Corporation + ................ 420,000 9,975,000
Magainin Pharmaceuticals Inc.+ .................... 300,000 975,000
Merck & Co., Inc. ................................. 80,000 10,365,000
Pfizer Inc. ....................................... 340,000 35,955,000
----------
(COST $35,241,119) -- 83,225,500
----------
MEDICAL INSTRUMENTS AND DEVICES (1.3%)
Medtronic, Inc. ................................... 200,000 11,600,000
-----------
(COST $1,341,162)
</TABLE>
<PAGE>
7 STATEMENT OF INVESTMENTS September 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES OR VALUE
COMMON STOCKS (continued) PRINCIPAL AMOUNT (NOTE 1a)
- ---------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE SERVICES (0.5%)
BioReliance Corporation + ......................... 317,258 $ 3,331,209
Huntingdon Life Sciences Group plc-ADR + .......... 669,500 795,031
-----------
(COST $9,227,332) -- 4,126,240
-----------
(COST $45,809,613) -- 98,951,740
-----------
MACHINERY & EQUIPMENT (0.5%)
Deere & Company ................................... 150,000 4,537,500
-----------
(COST $4,773,625)
MISCELLANEOUS (3.1%)
Other ............................................. 27,064,030
----------
(COST $38,606,202)
OIL & NATURAL GAS (INCLUDING SERVICES) (1.3%)
Repsol, S.A.- ADR ................................. 275,000 11,601,563
----------
(COST $9,943,444)
RETAIL TRADE (11.6%)
The Home Depot, Inc. .............................. 1,800,000 71,100,000
Wal-Mart Stores, Inc. ............................. 590,000 32,228,750
-----------
(COST $ 2,465,412) -- 103,328,750
-----------
SEMICONDUCTORS (0.7%)
Lam Research Corporation + ........................ 601,000 6,010,000
----------
(COST $15,203,845)
SPECIAL HOLDINGS #+ (NOTE 6) (0.0%)
Sequoia Capital IV ................................ ++ 79,200
Welsh, Carson, Anderson & Stowe III ............... ++ 750
---------
(COST $ 1,255,531) -- 79,950*
---------
TOTAL COMMON STOCKS (67.7%) (COST $294,843,650) ... 602,866,759
------------
CONVERTIBLE CORPORATE NOTE (0.9%)
- --------------------------------------------------------------------------------
MedImmune, Inc., 7% due 7/1/2003 .................. $ 2,500,000 8,325,000
------------
(COST $ 2,462,500)
SHORT-TERM SECURITIES AND OTHER ASSETS
- --------------------------------------------------------------------------------
Ford Motor Credit Company notes
due 10/13-1/5/99; 5.27%-5.47% $73,900,000 73,057,391
General Electric Capital Corp. notes
due 10/5-10/19/98; 5.47%-5.51% 65,000,000 64,212,681
General Motors Acceptance Corp. notes
due 10/1-1/12/99; 5.05%-5.52% 68,800,000 68,010,252
Sears Roebuck Acceptance Corp. notes
due 10/22-1/19/99; 5.05%-5.50% 69,900,000 69,104,939
-------------
(COST $274,385,263) 274,385,263
Cash, receivables, prepaid expenses
and other assets, less liabilities ......... 5,851,441
-------------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (31.4%)
(COST $280,236,704) 280,236,704
-------------
NET ASSETS (COST $577,542,854) $891,428,463
=============
<FN>
+Non-income producing security. # Restricted security.
++ A limited partnership interest. * Fair value of each holding in the opinion of the
(see notes to financial statements) Directors.
</FN>
</TABLE>
<PAGE>
8 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 Company is also
registered under the Investment Advisers Act of 1940 as an investment adviser.
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.
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 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. 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.
c. INVESTMENT ADVISORY FEES Income from fees (charged at the annual rate of 1/2%
of assets under management, computed quarterly) is recorded as the related
advisory services are performed by the Company.
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 the nine months ended September 30, 1998 and
the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
--------- ---------- ------------ -------------
1998 1997 1998 1997
--------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Shares issued in payment of dividends ................... -- 2,015,188 -- $ 2,015,188
Increase in paid-in capital ............................. -- 47,388,919
------------ ------------
Total increase .................................... -- 49,404,107
------------ ------------
Shares purchased (at an average discount from net asset
value of 11.4% and 15.1%, respectively) ............... 774,300 1,589,200 ($774,300) (1,589,200)
Decrease in paid-in capital ............................. ( 21,476,663) (35,717,602)
------------ ------------
Total decrease .................................... ( 22,250,963) (37,306,802)
------------ ------------
Net increase (decrease) ................................. ($22,250,963) $ 12,097,305
============ ============
</TABLE>
The cost of the 817,600 shares of Common Stock held in Treasury at September 30,
1998 amounted to $23,347,960.
Dividends in excess of net income for financial statement purposes result
primarily from transactions where tax treatment differs from book treatment.
<PAGE>
9 NOTES TO FINANCIAL STATEMENTS (Unaudited)
- --------------------------------------------------------------------------------
General American Investors
3. OFFICERS' COMPENSATION AND RETIREMENT AND THRIFT PLANS
The aggregate compensation paid by the Company during the nine months ended
September 30, 1998 to its officers amounted to $1,753,500.
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 securities (other than short-term securities) for the
nine months ended September 30, 1998 were $166,247,091 and $222,500,101,
respectively. At September 30, 1998, the cost of investments for Federal income
tax purposes was the same as the cost for financial reporting purposes.
5. GENERAL INFORMATION
Brokerage commissions during the nine months ended September 30, 1998 were
$320,994, including $38,760 paid to Goldman, Sachs & Co. The Chairman Emeritus
of the Company is a limited partner of The Goldman Sachs Group, L.P. which is an
affiliate of Goldman, Sachs & Co.
6. RESTRICTED SECURITIES
<TABLE>
<CAPTION>
DATE VALUE
ACQUIRED COST (NOTE 1a)
-------- ---------- ----------
<S> <C> <C> <C>
Sequoia Capital IV* ............................... 1/31/84 $1,003,144 $ 79,200
Welsh, Carson, Anderson & Stowe III* .............. 3/10/83 252,387 750
---------- ----------
Total ............................................. $1,255,531 $ 79,950
========== ==========
<FN>
* The amounts shown are net of distributions from these limited partnership
interests which, in the aggregate, amounted to $4,689,667 and $3,626,167,
respectively. The initial investment in each limited partnership was $2,000,000.
The Company also owns 5,262 shares of non-voting common stock of Multisystems,
Inc. which have no cost and are carried at no value.
</FN>
</TABLE>
7. OPERATING LEASE COMMITMENT
In July 1992, the Company entered into an operating lease agreement for new
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 $227,000 for the nine months ended September 30,
1998. Minimum rental commitments under the operating lease are approximately
$403,000 per annum in 1998 through 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 per annum in 1998 through 2002 and $64,000
in 2003. The Company will also receive its proportionate share of operating
expenses and real property taxes under the sublease.
<PAGE>
10 MAJOR STOCK CHANGES* Three Months Ended September 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES OR
SHARES OR PRINCIPAL AMOUNT HELD
INCREASES PRINCIPAL AMOUNT SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------------------------------
NEW POSITIONS
<S> <C> <C>
Deere & Company 150,000 150,000
GelTex Pharmaceuticals, Inc. --- 150,000 (a)
ADDITIONS
AmerUs Life Holdings, Inc. Class A 60,000 250,000
Annaly Mortgage Management, Inc. 25,000 500,000
Annuity and Life Re (Holdings), Ltd. 325,000 475,000
Chrysler Corporation 35,000 400,000
Everest Reinsurance Holdings, Inc. 75,000 275,000
First Midwest Bancorp, Inc. 149 252,500 (b)
IDEC Pharmaceuticals Corporation 45,000 420,000
Lam Research Corporation 201,000 601,000
Merck & Co., Inc. 25,500 80,000
Repsol, S.A. - ADR 15,000 275,000
DECREASES
- --------------------------------------------------------------------------------------------------------
ELIMINATIONS
Access Corporation 41,450 --
Aetna, Inc. 50,000 --
Banco Popular Espanol, S.A. 25,000 --
R.P. Scherer Corporation 40,000 --
Texaco Inc. 179,000 --
U.S. Bancorp 185,000 --
REDUCTIONS
American International Group, Inc. 7,500 142,500 (c)
Cisco Systems, Inc. 30,000 240,000 (c)
Cox Communications, Inc. Class A 60,000 270,000
Crestar Financial Corp. 10,000 290,000
Life Re Corporation 65,000 210,000
M&T Bank Corporation 2,000 48,000
MedImmune, Inc. 7% Convertible Corporate
Note due 7/1/2003 $1,000,000 $2,500,000
Medtronic, Inc. 70,000 200,000
NTL Incorporated 4,000 223,000
Platinum Software Corporation 50,000 75,000
Seagate Technology, Inc. 170,000 430,000
Transatlantic Holdings, Inc. 2,500 200,000
Wal-Mart Stores, Inc. 40,000 590,000
Wolters Kluwer NV-ADR 10,500 45,000
<FN>
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) Purchased in prior period and previously carried under Stocks - Miscellaneous - Other.
(b) 19,300 shares of Heritage Financial Services (purchased in prior period and previously
carried under Stocks - Miscellaneous - Other) were exchanged for 14,851 of First
Midwest Bancorp in conjunction with a merger.
(c) Includes shares received in conjunction with a stock split.
</FN>
</TABLE>
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In addition to purchases of the Company's Common Stock as set forth in Note 2 on
page 8, 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.
<PAGE>
DIRECTORS
- --------------------------------------------------------------------------------
Lawrence B. Buttenwieser, Chairman
Arthur G. Altschul, Jr.
Lewis B. Cullman
Spencer Davidson
Gerald M. Edelman
Anthony M. Frank
John D. Gordan, III
Bill Green
Victoria Hamilton
Sidney R. Knafel
Richard R. Pivirotto
Joseph T. Stewart, Jr.
Raymond S. Troubh
Arthur G. Altschul, Chairman Emeritus
William O. Baker, Director Emeritus
William T. Golden, Director Emeritus
OFFICERS
- --------------------------------------------------------------------------------
Spencer Davidson, President & Chief Executive Officer
Victoria Hamilton, Executive Vice-President & Chief Operating 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
- --------------------------------------------------------------------------------
COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Ernst & Young LLP
CUSTODIAN
Bankers Trust Company
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-413-5499
www.chasemellon.com
