<PAGE>
GENERAL AMERICAN INVESTORS
COMPANY, INC.
SEMI-ANNUAL REPORT
JUNE 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 six months ended June 30, 1998, the total return (assuming reinvestment
of all dividends) on the net asset value per Common Share of General American
Investors Company was 19.6%. By comparison, the rate of return (including
income) for the Standard & Poor's 500 Stock Index was 17.7%. For the twelve
months ended June 30, 1998, the return per Common Share was 37.5%; this compares
to a return of 30.1% for the S&P 500.
As set forth in the accompanying financial statements (unaudited), as of June
30, 1998, the net assets of the Company were $966,239,284. Net assets applicable
to the Common Stock were $816,239,284, equal to $34.57 per Common Share.
The increase in net assets resulting from operations for the six months ended
June 30, 1998 was $138,353,757. During this period, realized gain on securities
sold was $45,748,148 ($1.94 per share); the increase in unrealized appreciation
was $88,055,739. Net investment income for the six months was $4,549,870.
During the six months, 490,200 shares of the Company's Common Stock were
repurchased for $13,878,245 at an average discount from net asset value of
11.5%.
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.
The Preferred Shares are noncallable for 5 years, are rated "aaa" by Moody's
Investors Service, Inc. and are listed on the New York Stock Exchange (symbol,
GAM Pr). Trading in the Preferred Shares began on June 30, 1998. Dividends on
the shares will be paid quarterly.
The net proceeds from the offering were $144,575,000, after deducting the
underwriting discounts and estimated offering expenses. The Company expects to
invest such proceeds in accordance with the Company's investment objectives and
policies over the next six months, depending on market conditions. Currently,
the new assets are being held in short-term debt securities.
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 June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
ASSETS
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS, AT VALUE ( NOTE 1a )
Common stocks (cost $265,310,612) $671,984,707
Convertible corporate note (cost $3,447,500) 11,235,000
Corporate discount notes (cost $285,390,872) 285,390,872
------------
Total investments (cost $554,148,984) 968,610,579
CASH, RECEIVABLES AND OTHER ASSETS
Cash ................................................ $ 91,450
Dividends, interest and other receivables ........... 1,649,571
Prepaid expenses .................................... 3,763,958
Other ............................................... 667,908 6,172,887
----------- -----------
TOTAL ASSETS .......................................... 974,783,466
LIABILITIES
- -------------------------------------------------------------------------------------
Payable for securities purchased ................... 3,238,465
Preferred dividend accrued but not yet declared .... 360,000
Accrued expenses and other liabilities ............. 4,945,717
-----------
TOTAL LIABILITIES ..................................... 8,544,182
------------
NET ASSETS ............................................ $966,239,284
============
Net Assets applicable to Preferred Stock at a
liquidation value of $25 per share ............... $150,000,000
============
Net Assets applicable to Common Stock ................. $816,239,284
============
NET ASSET VALUE PER COMMON SHARE ...................... $34.57
============
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
23,614,478 shares (exclusive of
533,500 shares in Treasury) ................... 23,614,478
Additional paid-in capital ( note 2 ) .............. 473,162,498
Undistributed realized gain on securities sold ..... 45,404,576
Undistributed net income ........................... 3,956,137
Preferred dividend accrued but not yet declared .... (360,000)
Unrealized appreciation on investments (including
aggregate gross unrealized appreciation of
$436,962,746) ................................... 414,461,595
------------
TOTAL NET ASSETS ...................................... $966,239,284
============
<FN>
( see notes to financial statements )
</FN>
</TABLE>
<PAGE>
3 STATEMENT OF OPERATIONS Six Months Ended June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
INCOME
- --------------------------------------------------------------------------------
<S> <C> <C>
Dividends (net of foreign withholding taxes
of $129,538) ............................ $ 4,317,399
Interest .................................. 3,439,444
Investment advisory fees (note 1c) ........ 49,933 $ 7,806,776
----------
EXPENSES
- --------------------------------------------------------------------------------
Investment research ....................... 1,547,277
Administration and operations ............. 969,953
Office space and general .................. 289,940
Transfer agent, custodian and registrar
fees and expenses ....................... 156,090
Stockholders' meeting and reports ......... 97,649
Directors' fees and expenses .............. 97,532
Auditing and legal fees ................... 54,000
Miscellaneous taxes (note 1b) ............. 44,465 3,256,906
--------- ---------
NET INVESTMENT INCOME ........................ 4,549,870
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
- -----------------------------------------------------------------------------------
Net realized gain on sales of securities
(long-term except for $2,192,689) ........ 45,748,148
Net increase in unrealized appreciation .... 88,055,730
----------
NET GAIN ON INVESTMENTS ..................... 133,803,887
------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. $ 138,353,757
==============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
4 STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
June 30, 1998 December 31,
OPERATIONS (Unaudited) 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ..................... $ 4,549,870 $ 5,149,987
Net realized gain on sales of securities .. 45,748,148 66,640,521
Net increase in unrealized appreciation ... 88,055,739 99,421,665
------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. 138,353,757 171,212,173
------------- -------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
- --------------------------------------------------------------------------------
Preferred dividend accrued but not yet
declared ................................ (360,000) --
------------- -------------
DECREASE IN NET ASSETS FROM PREFERRED
DISTRIBUTIONS ............................ (360,000) --
------------- -------------
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) .. (13,878,245) (37,306,802)
Net proceeds from the issuance of
Preferred Stock (note 2) ................ 144,575,000 --
------------- -------------
INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS 130,696,755 12,097,305
------------- -------------
NET INCREASE IN NET ASSETS ................... 263,642,284 105,000,307
NET ASSETS
- --------------------------------------------------------------------------------
BEGINNING OF PERIOD .......................... 702,597,000 597,596,693
-------------- -------------
END OF PERIOD (including undistributed net
net income of $3,956,137 and distributions
in excess of net income of $353,341,
respectively) ............................. $ 966,239,284 $ 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 six months ended June 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>
Six Months
Ended Year Ended December 31,
June 30, 1998 ------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year ................. $ 29.15 $ 25.24 $ 23.94 $ 22.31 $ 24.75 $ 28.56
------------- --------- --------- --------- --------- ---------
Net investment income ........................... .19 .21 .22 .08 .05 .03
Net gain (loss) on securities -
realized and unrealized .................... 5.67 7.15 3.86 4.54 (.94) (.80)
------------- --------- --------- --------- --------- ---------
Total from investment operations ................... 5.86 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)
------------- --------- --------- --------- --------- ---------
Total distributions on Common Stock ................ (.21) (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 ..................... $ 34.57 $ 29.15 $ 25.24 $ 23.94 $ 22.31 $ 24.75
============= ========= ========= ========= ========= =========
Per share market value, end of period .............. $ 30.44 $ 26.19 $ 21.00 $ 20.00 $ 19.00 $ 22.25
============= ========= ========= ========= ========= =========
TOTAL INVESTMENT RETURN - Stockholder Return, based
on market price per share 17.20%* 42.58% 19.48% 21.22% -7.86% -15.92%
RATIOS AND SUPPLEMENTAL DATA
Total net assets, end of period
(000's omitted) ................................. $ 966,239 $ 702,597 $ 597,597 $ 573,693 $ 519,722 $ 553,898
Net assets attributable to Common Stock, end
of period (000's omitted) ....................... $ 816,239 $ 702,597 $ 597,597 $ 573,693 $ 519,722 $ 553,898
Ratio of expenses to average net assets
applicable to Common Stock ...................... 0.43%* 0.98% 1.05% 1.25% 1.17% 1.16%
Ratio of net income to average net assets
applicable to Common Stock ...................... 0.60%* 0.80% 0.88% 0.36% 0.21% 0.14%
Portfolio turnover rate ............................ 13.74%* 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 ..................................... 644% -- -- -- -- --
Liquidation preference per share ................... $ 25.00 -- -- -- -- --
Market value per share ............................. $ 25.75 -- -- -- -- --
<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 June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES OR VALUE
COMMON STOCKS PRINCIPAL AMOUNT (NOTE 1a)
- ---------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS AND INFORMATION SERVICES (4.9%)
Axiom Inc.+ ....................................... 152,500 $ 419,375
Comcast UK Cable Partners Limited Class A + ....... 304,500 4,776,996
Cox Communications, Inc. Class A + ................ 330,000 15,984,540
NTL Incorporated + ................................ 227,000 12,144,500
Reuters Holdings plc-ADR .......................... 94,000 6,439,000
Wolters Kluwer NV-ADR ............................. 55,500 7,606,830
----------
(COST $19,787,089) -- 47,371,241
----------
COMPUTER SOFTWARE AND SYSTEMS (3.9%)
Cisco Systems, Inc.+ .............................. 180,000 16,571,340
Hewlett-Packard Company ........................... 40,000 2,395,000
MetaCreations Corporation + ....................... 300,000 1,387,500
Platinum Software Corporation + ................... 125,000 3,046,875
Seagate Technology, Inc.+ ......................... 600,000 14,325,000
----------
(COST $21,268,975) -- 37,725,715
----------
CONSUMER PRODUCTS AND SERVICES (8.8%)
Buffets, Inc.+ .................................... 773,500 12,134,668
Chrysler Corporation .............................. 365,000 20,576,875
Ford Motor Company ................................ 500,000 29,500,000
PepsiCo, Inc. ..................................... 225,000 9,267,300
Philip Morris Companies Inc. ...................... 350,000 13,781,250
----------
(COST $47,346,284) -- 85,260,093
----------
ELECTRONICS (0.8%)
Molex Incorporated Class A ........................ 315,000 7,363,125
----------
(COST $8,469,377)
ENVIRONMENTAL CONTROL
(INCLUDING SERVICES) (2.1%)
USA Waste Services, Inc.+ ......................... 413,000 20,391,875
----------
(COST $5,954,561)
FINANCE AND INSURANCE (20.8%)
AmerUs Life Holdings, Inc. Class A ................ 190,000 6,151,250
American International Group, Inc. ................ 100,000 14,600,000
Annaly Mortgage Management, Inc. .................. 475,000 4,304,925
Annuity and Life Re (Holdings), Ltd.+ ............. 150,000 3,318,750
Banco Popular Espanol, S.A. ....................... 25,000 2,136,000
CCB Financial Corp. ............................... 108,500 11,528,125
Crestar Financial Corp. ........................... 300,000 16,368,900
Everest Reinsurance Holdings, Inc. ................ 200,000 6,887,600
First Midwest Bancorp, Inc. ....................... 237,500 10,442,638
General Re Corporation ............................ 90,000 22,815,000
Golden West Financial Corporation ................. 160,000 17,010,080
Life Re Corporation ............................... 275,000 22,790,625
M&T Bank Corporation .............................. 50,000 27,700,000
NAC Re Corporation ................................ 156,000 8,326,500
TIG Holdings, Inc. ................................ 150,000 3,450,000
Transatlantic Holdings, Inc. ...................... 202,500 15,655,883
U.S. Bancorp ...................................... 185,000 7,955,000
-----------
(COST $71,321,231) -- 201,441,276
-----------
HEALTH CARE (11.7%)
PHARMACEUTICALS (8.9%)
AB Astra Class A .................................. 562,500 11,480,625
AB Astra Class B .................................. 800,000 15,928,000
IDEC Pharmaceuticals Corporation + ................ 375,000 8,836,125
Magainin Pharmaceuticals Inc.+ .................... 300,000 1,593,900
Merck & Co., Inc. ................................. 54,500 7,289,375
Pfizer Inc. ....................................... 340,000 36,953,920
R.P. Scherer Corporation + ........................ 40,000 3,545,000
----------
(COST $28,814,119) -- 85,626,945
----------
MEDICAL INSTRUMENTS AND DEVICES (1.8%)
Medtronic, Inc. ................................... 270,000 17,212,500
-----------
(COST $1,950,223)
</TABLE>
<PAGE>
7 STATEMENT OF INVESTMENTS June 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES OR VALUE
COMMON STOCKS (continued) PRINCIPAL AMOUNT (NOTE 1a)
- ---------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE SERVICES (1.0%)
Aetna, Inc. ....................................... 50,000 $ 3,806,250
BioReliance Corporation + ......................... 317,258 4,778,857
Huntingdon Life Sciences Group plc-ADR + .......... 669,500 1,130,116
-----------
(COST $12,271,027) -- 9,715,223
-----------
(COST $43,035,369) -- 112,554,668
-----------
MISCELLANEOUS (1.5%)
Other ............................................. 14,096,287
----------
(COST $16,593,785)
OIL & NATURAL GAS (INCLUDING SERVICES) (2.6%)
Repsol, S.A.-ADR .................................. 260,000 14,300,000
Texaco Inc. ....................................... 179,000 10,684,152
----------
(COST $15,335,173) -- 24,984,152
----------
RETAIL TRADE (11.7%)
The Home Depot, Inc. .............................. 900,000 74,756,700
Wal-Mart Stores, Inc. ............................. 630,000 38,272,500
-----------
(COST $ 2,562,137) -- 113,029,200
-----------
SEMICONDUCTORS (0.7%)
Lam Research Corporation + ........................ 400,000 7,650,000
----------
(COST $11,864,344)
SPECIAL HOLDINGS #+ (NOTE 6) (0.0%)
Access Corporation ................................ 41,450 20,725
Sequoia Capital IV ................................ ++ 95,600
Welsh, Carson, Anderson & Stowe III ............... ++ 750
---------
(COST $ 1,772,287) -- 117,075*
---------
TOTAL COMMON STOCKS (69.5%) (COST $265,310,612) ... 671,984,707
------------
CONVERTIBLE CORPORATE NOTE
- --------------------------------------------------------------------------------
MedImmune, Inc., 7% due 7/1/2003 .................. $ 3,500,000 11,235,000
------------
(COST $3,447,500)
SHORT-TERM SECURITIES AND OTHER ASSETS
- --------------------------------------------------------------------------------
Ford Motor Credit Company notes
due 7/1-9/14/98; 5.50%-5.71% $70,900,000 70,203,514
General Electric Capital Corp. notes
due 7/6-10/5/98; 5.50%-5.52% 69,000,000 68,179,931
General Motors Acceptance Corp. notes
due 7/9-9/21/98; 5.47%-5.54% 75,000,000 74,209,347
Sears Roebuck Acceptance Corp. notes
due 7/20-9/28/98; 5.48%-5.53% 73,600,000 72,798,080
-------------
(COST $285,390,872) 285,390,872
Liabilities in excess of cash, receivables, pre-
paid expenses and other assets ............. (2,371,295)
-------------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (29.3%)
(COST $283,019,577) 283,019,577
-------------
NET ASSETS (COST $551,777,689) $966,239,284
=============
<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 six months ended June 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 11.5% and 15.1%, respectively) ............... 490,200 1,589,200 (490,200) (1,589,200)
Decrease in paid-in capital ............................. ( 13,388,045) (35,717,602)
------------ ------------
Total decrease .................................... ( 13,878,245) (37,306,802)
------------ ------------
Net increase (decrease) ................................. ($13,878,245) $ 12,097,305
============ ============
</TABLE>
The cost of the 533,500 shares of Common Stock held in Treasury at June 30, 1998
amounted to $14,975,242.
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 six months ended June
30, 1998 to its officers amounted to $1,169,000.
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 six
months ended June 30, 1998 were $88,850,205 and $141,210,993, respectively. At
June 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 six months ended June 30, 1998 were $158,364,
including $30,720 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>
Access Corporation ................................ 6/27/68 & 12/27/73 $ 500,300 $ 20,725
Sequoia Capital IV* ............................... 1/31/84 1,019,600 95,600
Welsh, Carson, Anderson & Stowe III* .............. 3/10/83 252,387 750
---------- ----------
Total ............................................. $1,772,287 $ 117,075
========== ==========
<FN>
* The amounts shown are net of distributions from these limited partnership
interests which, in the aggregate, amounted to $4,673,211 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. and 6,872 shares of series A preferred stock of Teleprocessing Products,
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 $160,000 for the six months ended June 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 June 30, 1998 (Unaudited)
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Shares Held
INCREASES SHARES JUNE 30, 1998
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NEW POSITIONS
<S> <C> <C>
Annuity and Life Re (Holdings), Ltd. 150,000 150,000
Molex Incorporated Class A 315,000 315,000
ADDITIONS
AmerUs Life Holdings, Inc. Class A 27,500 190,000
Annaly Mortgage Management, Inc. 100,000 475,000
Everest Reinsurance Holdings, Inc. 10,000 200,000
Ford Motor Company 80,000 500,000
IDEC Pharmaceuticals Corporation 125,000 375,000
Lam Research Corporation 67,500 400,000
Magainin Pharmaceuticals Inc. 70,000 300,000
MetaCreations Corporation 100,000 300,000
Seagate Technology, Inc. 225,000 600,000
DECREASES
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ELIMINATIONS
Associates First Capital Corporation 110,076(a) --
Broderbund Software, Inc. 160,000 --
Dialogic Corporation 36,000 --
MedPartners, Inc. 98,500 --
PETsMART, Inc. 800,000 --
REDUCTIONS
AB Astra Class A 20,000 562,500
American International Group, Inc. 5,000 100,000
Banco Popular Espanol, S.A. 39,000 25,000
Buffets, Inc. 195,000 773,500
Chrysler Corporation 20,000 365,000
Cisco Systems, Inc. 12,000 180,000
Golden West Financial Corporation 8,500 160,000
Hewlett-Packard Company 20,000 40,000
The Home Depot, Inc. 90,000 900,000
Medtronic, Inc. 10,000 270,000
NTL Incorporated 5,000 227,000
Pfizer Inc. 25,000 340,000
R.P. Scherer Corporation 147,000 40,000
USA Waste Services, Inc. 40,000 413,000
U.S. Bancorp 25,000 185,000(b)
Wal-Mart Stores, Inc. 40,000 630,000
<FN>
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) 110,076 shares of Associates First Capital Corporation were received in conjunction with
a spinoff from Ford Motor Company.
(b) 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
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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
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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
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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
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 statement of
investments, as of June 30, 1998 and the related statements of operations and
changes in net assets and financial highlights for the six month period ended
June 30, 1998. 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, which will be performed
for the full year with the objective of expressing 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 generally accepted accounting principles.
We have previously audited, in accordance with generally accepted auditing
standards, the statement of changes in net assets and financial highlights for
the year ended December 31, 1997 and financial highlights for each of the five
years in the period then ended and in our report, dated January 14, 1998, we
expressed an unqualified opinion on such financial statement and financial
highlights.
ERNST & YOUNG LLP
New York, New York
July 9, 1998
