<PAGE>
GENERAL AMERICAN INVESTORS
COMPANY, INC.
SEMI-ANNUAL REPORT
JUNE 30, 2000
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: [email protected]
<PAGE>
TO THE STOCKHOLDERS
--------------------------------------------------------------------------------
For the six months ended June 30, 2000, the investment return to our
stockholders was 11%, consisting of a 6.1% increase in net asset value per
Common Share (assuming reinvestment of all dividends) together with a decline in
the discount, at which our shares trade, from 10.9% at the end of 1999 to 6.8%
currently. By comparison, our benchmark, the Standard & Poor's 500 Stock Index
(including income), declined 0.4%. For the twelve months ended June 30, 2000,
the return to stockholders was 37.6% and the return on the net asset value per
Common Share was 32.2%; these compare to a return of 7.2% for the S&P 500.
As set forth in the accompanying financial statements (unaudited), as of June
30, 2000, the net assets of the Company were $1,269,250,719. Net assets
applicable to the Common Stock were $1,119,250,719, equal to $42.03 per Common
Share.
The increase in net assets resulting from operations for the six months ended
June 30, 2000 was $67,295,070. During this period, net realized gain on
securities sold was $147,890,374, of which approximately $137,466,000 ($5.16 per
share) is applicable to the Common Stock, and the decrease in unrealized
appreciation was $87,787,731. Net investment income for the six months was
$7,192,427.
During the six months, 517,900 shares of the Company's Common Stock were
repurchased for $19,795,409 at an average discount from net asset value of 9.2%.
During the second quarter, we implemented certain hedging techniques designed to
help protect the unrealized appreciation of several of the Company's portfolio
holdings and to take advantage of certain anomalies in the market place. These
practices are being employed judiciously with the continuing objective of
enhancing shareholder value.
While long-term interest rates appear to have stabilized, the Federal Reserve
Board's restraining impulse may have begun to impact the U.S. economy. This,
together with rising prices for energy and other inputs, has added a measure of
instability to corporate profits. Predictably, earnings disappointments are
occurring with increasing frequency and stock market performance has turned
ragged. Our performance relative to the market remains outstanding, but robust
absolute gains may be difficult to achieve in the current environment.
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, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
ASSETS
-------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS, AT VALUE ( NOTE 1a )
Common stocks (cost $525,297,139) ................... $1,046,161,741
Corporate discount notes (cost $228,844,505) ........ 228,844,505
-------------
Total investments (cost $754,141,644) .......... 1,275,006,246
CASH, RECEIVABLES AND OTHER ASSETS
Cash ................................................ $ 167,603
Receivable for securities sold ...................... 109,997
Receivable from broker for proceeds on securities
sold short ........................................ 42,516,955
Dividends, interest and other receivables ........... 2,609,099
Prepaid expenses .................................... 4,734,614
Other ............................................... 581,732 50,720,000
----------- -----------
TOTAL ASSETS .......................................... 1,325,726,246
LIABILITIES
-------------------------------------------------------------------------------------
Payable for securities purchased ................... 8,943,335
Preferred dividend accrued but not yet declared .... 240,000
Securities sold short, at value (proceeds
$42,516,955)(note 1a) ........................... 40,950,938
Accrued expenses and other liabilities ............. 6,341,254
-----------
TOTAL LIABILITIES ..................................... 56,475,527
------------
NET ASSETS ............................................ $1,269,250,719
==============
Net Assets applicable to Preferred Stock at a
liquidation value of $25 per share ............... $ 150,000,000
==============
Net Assets applicable to Common Stock ................. $1,119,250,719
==============
NET ASSET VALUE PER COMMON SHARE ...................... $ 42.03
==============
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 50,000,000 shares; outstanding
26,630,129 shares (exclusive of
376,300 shares in Treasury) ..................... 26,630,129
Additional paid-in capital (note 2) ................ 565,546,816
Undistributed realized gain on securities sold ..... 148,075,494
Undistributed net income ........................... 6,207,661
Unallocated distributions on Preferred Stock ....... (5,640,000)
Unrealized appreciation on investments
and securities sold short (including
aggregate gross unrealized appreciation of
$554,597,339) ................................... 522,430,619
------------
TOTAL NET ASSETS ...................................... $1,269,250,719
==============
<FN>
( see notes to financial statements )
</FN>
</TABLE>
<PAGE>
3 STATEMENT OF OPERATIONS Six Months Ended June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
INCOME
--------------------------------------------------------------------------------
<S> <C> <C>
Dividends ................................. $ 3,411,694
Interest .................................. 8,285,393 $ 11,697,087
----------
EXPENSES
--------------------------------------------------------------------------------
Investment research ....................... 2,386,908
Administration and operations ............. 1,431,192
Office space and general .................. 279,096
Transfer agent, custodian and registrar
fees and expenses ....................... 128,960
Directors' fees and expenses .............. 91,928
Stockholders' meeting and reports ......... 79,755
Auditing and legal fees ................... 63,000
Miscellaneous taxes (note 1b) ............. 43,821 4,504,660
--------- ---------
NET INVESTMENT INCOME ........................ 7,192,427
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1c AND 4)
-----------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Long transactions ....................... 148,154,629
Short sale transactions ................. (264,255)
-----------
Net realized gain on investments .......... 147,890,374
Net decrease in unrealized appreciation ... (87,787,731)
-----------
NET GAIN ON INVESTMENTS ...................... 60,102,643
------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. $ 67,295,070
==============
<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, 2000 December 31,
OPERATIONS (Unaudited) 1999
--------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ..................... $ 7,192,427 $ 11,168,875
Net realized gain on investments .......... 147,890,374 129,187,204
Net increase (decrease)
in unrealized appreciation ............ (87,787,731) 164,358,438
------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. 67,295,070 304,714,517
------------- -------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
--------------------------------------------------------------------------------
From net income, including
short-term capital gain ............... -- (1,716,000)
From long-term capital gain ............... -- (9,084,000)
Unallocated distributions on Preferred
Stock .................................. (5,400,000) --
------------- -------------
DECREASE IN NET ASSETS FROM PREFERRED
DISTRIBUTIONS ............................ (5,400,000) (10,800,000)
------------- -------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
--------------------------------------------------------------------------------
From net income, including
short-term capital gain ............... (8,635,961) (17,730,368)
From long-term capital gain ............... (42,918,106) (93,854,267)
------------- -------------
DECREASE IN NET ASSETS FROM COMMON
DISTRIBUTIONS ............................ (51,554,067) (111,584,635)
------------- -------------
CAPITAL SHARE TRANSACTIONS
--------------------------------------------------------------------------------
Value of Common Shares issued in payment
of dividends (note 2) ................... 34,186,001 73,742,396
Cost of Common Shares purchased (note 2) .. (19,795,409) (30,486,251)
------------- -------------
INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS 14,390,592 43,256,145
------------- -------------
NET INCREASE IN NET ASSETS ................... 24,731,595 225,586,027
NET ASSETS
--------------------------------------------------------------------------------
BEGINNING OF PERIOD .......................... 1,244,519,124 1,018,933,097
-------------- -------------
END OF PERIOD (including undistributed net
income of $6,207,661 and distributions
in excess of net income of $1,047,502,
respectively) ............................. $1,269,250,719 $1,244,519,124
============== ==============
<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, 2000 and
for each year in the five-year period ended December 31, 1999. 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, 2000 ------------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
------------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period .............. $ 41.74 $ 34.87 $ 29.15 $ 25.24 $ 23.94 $ 22.31
------------ ---------- --------- --------- --------- ---------
Net investment income .......................... .27 .45 .47 .21 .22 .08
Net gain on securities -
realized and unrealized ................... 2.19 11.32 9.44 7.15 3.86 4.54
------------ ---------- --------- --------- --------- ---------
Total from investment operations .................. 2.46 11.77 9.91 7.36 4.08 4.62
------------ ---------- --------- --------- --------- ---------
Less Distributions on:
Common Stock:
Dividends from investment income ............... (.33)(a) (.71)(b) (.48) (.26)(c) (.20) (.11)(d)
Distributions from capital gains ............... (1.64) (3.77) (3.24) (3.19) (2.58) (2.87)
In excess of net income ........................ -- -- -- -- -- (.01)
------------ ---------- --------- --------- --------- ---------
(1.97) (4.48) (3.72) (3.45) (2.78) (2.99)
Preferred Stock:
Dividends from investment income ............... -- (.07)(e) (.03) -- -- --
Distributions from capital gains ............... -- (.35) (.20) -- -- --
Unallocated .................................... (.20) -- (.01) -- -- --
------------ ---------- --------- --------- --------- ---------
(.20) (.42) (.24) -- -- --
------------ ---------- --------- --------- --------- ---------
Total Distributions ............................... (2.17) (4.90) (3.96) (3.45) (2.78) (2.99)
------------ ---------- --------- --------- --------- ---------
Capital Stock transaction - effect of Preferred
Stock offering .................................. -- -- (.23) -- -- --
------------ ---------- --------- --------- ---------- ---------
Net asset value, end of period .................... $ 42.03 $ 41.74 $ 34.87 $ 29.15 $ 25.24 $ 23.94
============ ========== ========= ========= ========== =========
Per share market value, end of period ............. $ 39.19 $ 37.19 $ 30.44 $ 26.19 $ 21.00 $ 20.00
============ ========== ========= ========= ========== =========
TOTAL INVESTMENT RETURN - Stockholder Return, based
on market price per share ....................... 11.02%* 39.22% 31.31% 42.58% 19.48% 21.22%
RATIOS AND SUPPLEMENTAL DATA
Total net assets, end of period
(000's omitted) ................................ $ 1,269,251 $1,244,519 $1,018,933 $ 702,597 $ 597,597 $ 573,693
Net assets attributable to Common Stock, end
of period (000's omitted) ...................... $ 1,119,251 $1,094,519 $ 868,933 $ 702,597 $ 597,597 $ 573,693
Ratio of expenses to average net assets
applicable to Common Stock ..................... 0.41%* 1.01% 0.95% 0.98% 1.05% 1.25%
Ratio of net income to average net assets
applicable to Common Stock ..................... 0.66%* 1.23% 1.50% 0.80% 0.88% 0.36%
Portfolio turnover rate ......................... 25.89%* 33.68% 34.42% 32.45% 33.40% 29.14%
PREFERRED STOCK
Liquidation value, end of period (000's omitted) $ 150,000 $ 150,000 $ 150,000 -- -- --
Asset coverage .................................. 846% 830% 679% -- -- --
Liquidation preference per share ................ $ 25.00 $ 25.00 $ 25.00 -- -- --
Market value per share .......................... $ 22.06 $ 21.75 $ 25.88 -- -- --
<FN>
(a) Represents short-term capital gain.
(b) Includes short-term capital gain in the amount of $.29 per share.
(c) Includes short-term capital gain in the amount of $.05 per share.
(d) Includes short-term capital gain in the amount of $.03 per share.
(e) Includes short-term capital gain in the amount of $.028 per share.
* Not annualized
</FN>
</TABLE>
<PAGE>
6 STATEMENT OF INVESTMENTS June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS (NOTE 1a)
---------------------------------------------------------------------------------
<S> <C> <C>
COMMUNICATIONS AND INFORMATION SERVICES (7.5%)
Avanex Corporation (a) ............................ 75,000 $ 7,162,500
Brooktrout Technology, Inc. (a) ................... 175,000 3,817,188
Cisco Systems, Inc. (a) ........................... 640,000 40,680,000
Cox Communications, Inc. Class A (a) .............. 520,000 23,692,500
NTL Incorporated (a) .............................. 275,000 16,465,625
Wolters Kluwer NV-ADR ............................. 142,372 3,802,756
-----------
(COST $22,192,482) 95,620,569
-----------
COMPUTER SOFTWARE AND SYSTEMS (3.0%)
Manugistics Group, Inc. (a) ....................... 250,000 11,687,500
MetaCreations Corporation (a) ..................... 230,000 2,760,000
NCR Corporation (a) ............................... 200,000 7,787,500
SPSS Inc. (a) ..................................... 95,500 2,781,438
Synopsis, Inc. (a) ................................ 225,000 7,776,562
Wind River Systems, Inc. (a) ...................... 150,000 5,681,250
----------
(COST $26,838,836) 38,474,250
----------
CONSUMER PRODUCTS AND SERVICES (8.0%)
Buffets, Inc. (a) ................................. 1,987,500 25,216,406
Coca-Cola Enterprises Inc. ........................ 450,000 7,340,625
Ethan Allen Interiors, Inc. ....................... 275,000 6,600,000
Ford Motor Company ................................ 850,000 36,550,000
Interim Services Inc.(a) .......................... 297,500 5,280,625
PepsiCo, Inc. ..................................... 200,000 8,887,500
The ServiceMaster Company ......................... 786,500 8,946,438
Visteon Corporation (a) ........................... 198,199 2,638,534
-----------
(COST $86,701,857) 101,460,128
-----------
ELECTRONICS (1.7%)
Molex Incorporated Class A ........................ 629,000 22,015,000
----------
(COST $13,216,267)
ENVIRONMENTAL CONTROL
(INCLUDING SERVICES) (0.6%)
Waste Management, Inc. ............................ 413,000 7,847,000
----------
(COST $ 5,954,561)
FINANCE AND INSURANCE (19.2%)
American International Group, Inc. ................ 140,000 16,454,381
AmerUs Life Holdings, Inc. Class A ................ 375,000 7,734,375
Annaly Mortgage Management, Inc. .................. 550,000 4,881,250
Annuity and Life Re (Holdings), Ltd. .............. 600,000 14,700,000
Berkshire Hathaway Inc. Class A (a) ............... 315 16,947,000
CCB Financial Corporation ......................... 155,000 5,737,418
Central Securities Corporation .................... 65,760 2,334,480
Everest Reinsurance Holdings, Inc. ................ 850,000 27,943,750
First Midwest Bancorp, Inc. ....................... 375,000 8,718,750
Golden West Financial Corporation ................. 480,000 19,590,000
John Hancock Financial Services, Inc. ............. 475,000 11,199,598
M&T Bank Corporation .............................. 45,000 20,250,000
MetLife, Inc. ..................................... 250,000 5,238,275
PartnerRe Ltd. .................................... 250,000 8,859,375
Reinsurance Group of America, Incorporated ........ 350,000 10,543,750
ReliaStar Financial Corp. ......................... 500,000 26,234,400
SunTrust Banks, Inc. .............................. 235,000 10,736,562
Transatlantic Holdings, Inc. ...................... 200,000 16,750,000
XL Capital Ltd .................................... 151,000 8,172,875
-----------
(COST $134,941,317) 243,026,239
-----------
</TABLE>
<PAGE>
7 STATEMENT OF INVESTMENTS June 30, 2000 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES VALUE
COMMON STOCKS (continued) (NOTE 1a)
---------------------------------------------------------------------------------
<S> <C> <C>
HEALTH CARE (11.7%)
PHARMACEUTICALS (9.8%)
Alkermes, Inc. (a) ................................ 50,000 $ 2,356,250
GelTex Pharmaceuticals, Inc. (a) .................. 300,000 6,131,250
IDEC Pharmaceuticals Corporation (a) .............. 375,000 43,992,188
Johnson & Johnson ................................. 77,500 7,897,738
Magainin Pharmaceuticals Inc. (a) ................. 270,000 1,248,750
MedImmune, Inc. (a) ............................... 189,000 13,986,000
OSI Pharmaceuticals, Inc. (a) ..................... 200,000 5,762,500
Pfizer Inc ........................................ 885,000 42,480,000
-----------
(COST $22,432,821) 123,854,676
-----------
MEDICAL INSTRUMENTS AND DEVICES (1.2%)
Medtronic, Inc. ................................... 300,000 14,953,140
-----------
(COST $ 906,118)
HEALTH CARE SERVICES (0.7%)
BioReliance Corporation (a) ....................... 317,000 1,545,375
Covance Inc. (a) .................................. 800,000 7,050,000
Huntingdon Life Sciences Group plc-ADR (a) ........ 1,049,000 917,875
-----------
(COST $14,503,554) 9,513,250
-----------
(COST $37,842,493) 148,321,066
-----------
MISCELLANEOUS (4.7%)
Other ............................................. 59,466,716
----------
(COST $53,372,056)
OIL & NATURAL GAS (INCLUDING SERVICES) (1.1%)
Repsol, S.A.- ADR ................................. 700,000 13,868,750
----------
(COST $ 8,236,884)
RETAIL TRADE (14.4%)
Costco Companies, Inc. (a) ........................ 300,000 9,900,000
The Home Depot, Inc. (b) .......................... 2,145,000 107,183,076
Saks Incorporated (a) ............................. 700,000 7,306,250
The TJX Companies, Inc. ........................... 1,350,000 25,312,500
Wal-Mart Stores, Inc. ............................. 570,000 32,864,091
------------
(COST $49,433,303) 182,565,917
------------
SEMICONDUCTORS (7.2%)
Brooks Automation, Inc. (a) ....................... 175,000 11,189,062
Cirrus Logic, Inc. (a) ............................ 375,000 6,000,000
DuPont Photomasks, Inc. (a) ....................... 120,000 8,220,000
EMCORE Corporation (a) ............................ 200,000 24,000,000
Lam Research Corporation (a) ...................... 500,000 18,750,000
Mitel Corporation (a) ............................. 275,000 5,775,000
PRI Automation, Inc. (a) .......................... 135,000 8,827,731
Uniroyal Technology Corporation (a) ............... 766,000 8,473,875
-----------
(COST $40,270,947) 91,235,668
-----------
SPECIAL HOLDINGS (a)(c)(NOTE 6) (0.2%)
Sequoia Capital IV ................................ (e) 29,000
Standard MEMS, Inc. Series A Convertible Preferred 546,000 3,003,000
----------
(COST $ 3,992,654) 3,032,000(d)
----------
TECHNOLOGY (0.3%)
Thermo Electron Corporation (a) ................... 175,000 3,685,938
----------
(COST $ 2,930,774)
TRANSPORTATION (2.8%)
AMR Corporation (a) ............................... 800,000 21,150,000
Sabre Holdings Corporation (a) .................... 505,000 14,392,500
----------
(COST $39,372,709) 35,542,500
----------
TOTAL COMMON STOCKS (82.4%) (COST $525,297,140) ... 1,046,161,741
-------------
</TABLE>
<PAGE>
8 STATEMENT OF INVESTMENTS June 30, 2000 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Principal Value
SHORT-TERM SECURITIES AND OTHER ASSETS Amount (note 1a)
--------------------------------------------------------------------------------
<S> <C> <C>
Ford Motor Credit Company notes
due 7/10-8/8/00; 6.45%-6.52% $61,300,000 60,490,136
General Electric Capital Corp. notes
due 7/3-7/18/00; 6.12%-6.58% 54,300,000 53,585,505
General Motors Acceptance Corp. notes
due 7/6-7/27/00; 6.17%-6.77% 63,000,000 62,271,769
Sears Roebuck Acceptance Corp. notes
due 7/6-8/1/00; 6.40%-6.73% 53,200,000 52,497,095
-------------
(COST $228,844,505) 228,844,505
Liabilities in excess of cash, receivables and
other assets ............................ (5,755,527)
-------------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (17.6%)
223,088,978
--------------
NET ASSETS $1,269,250,719
==============
<FN>
(a) Non-income producing security. (c) Restricted security.
(b) 1,000,000 shares held by custodian (d) Fair value of each holding in the opinion of the Directors.
in a segregated custodian account as (e) A limited partnership interest.
collateral for open short positions.
</FN>
</TABLE>
--------------------------------------------------------------------------------
STATEMENT OF SECURITIES SOLD SHORT June 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Value
COMMON STOCKS Shares (Note 1a)
---------------------------------------------------------------------------------
<S> <C> <C>
Applied Materials, Inc. ........................... 65,000 $ 5,854,063
Asyst Technologies, Inc. .......................... 90,000 3,082,500
Atmel Corporation ................................. 36,000 1,327,500
Fisher Scientific International Inc. .............. 100,000 2,475,000
Leucadia National Corporation...................... 25,000 570,313
MIPS Technologies, Inc. Class A ................... 85,000 3,612,500
Molex Incorporated ................................ 308,000 14,822,500
Oracle Corporation ................................ 19,000 1,597,187
Sun Microsystems, Inc. ............................ 50,000 4,546,875
Telefonica, S.A. .................................. 25,000 1,601,500
WPP Group plc ..................................... 100,000 1,461,000
--------------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $42,516,955) $ 40,950,938
==============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
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 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 (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 and places the cash and/or securities
with that broker and in a segregated account with the custodian 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 increased between the date of the
short sale and the dated on which the Company replaces the borrowed securities.
c. FEDERAL INCOME TAXES The Company's policy is to fulfill the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all taxable income to its stockholders. Accordingly, no
provision for Federal income taxes is required.
d. OTHER As customary in the investment company industry, securities
transactions are recorded as of the trade date. Dividend income and
distributions to stockholders are recorded as of the ex-dividend dates.
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS
On June 19, 1998, the Company issued and sold 6,000,000 shares of its 7.20% Tax-
Advantaged Cumulative Preferred Stock. The stock has a liquidation preference of
$25.00 per share plus an amount equal to accumulated and unpaid dividends to the
date of redemption.
The Company is required to allocate distributions from long-term capital gains
and other types of income proportionately among holders of shares of Common
Stock and Preferred Stock. To the extent that dividends on the shares of
Preferred Stock are not paid from long-term capital gains, they will be paid
from ordinary income or net short-term capital gains or will represent a return
of capital.
Under the Investment Company Act of 1940, the Company is required to maintain an
asset coverage of at least 200% for the Preferred Stock. In addition, pursuant
to the Rating Agency Guidelines, the Company is required to maintain a certain
discounted asset coverage for its portfolio that equals or exceeds the Basic
Maintenance Amount under the guidelines established by Moody's Investors
Service, Inc. The Company has met these requirements since the issuance of the
Preferred Stock.
The holders of Preferred Stock have voting rights equivalent to those of the
holders of Common Stock (one vote per share) and, generally, vote together with
the holders of Common Stock as a single class.
At all times, holders of Preferred Stock will elect two members of the Company's
Board of Directors and the holders of Preferred and Common Stock, voting as a
single class, will elect the remaining directors. If the Company fails to pay
dividends on the Preferred Stock in an amount equal to two full years'
dividends, the holders of Preferred Stock will have the right to elect a
majority of the directors. In addition, the Investment Company Act of 1940
requires that approval of the holders of a majority of any outstanding preferred
shares, voting separately as a class, would be required to (a) adopt any plan of
reorganization that would adversely affect the Preferred Stock and (b) take any
action requiring a vote of security holders, including, among other things,
changes in the Company's subclassification as a closed-end investment company or
changes in its fundamental investment policies.
On March 8, 2000, stockholders approved an increase in the number of authorized
shares of Common Stock from 30,000,000 to 50,000,000.
Transactions in Common Stock during the six months ended June 30, 2000 and
the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
--------- ---------- ------------ -------------
2000 1999 2000 1999
--------- ---------- ------------ -------------
<S> <C> <C> <C> <C>
Shares issued in payment of dividends ................... 928,652 2,231,251 $ 928,652 $ 2,231,251
Increase in paid-in capital ............................. 33,257,349 71,511,145
------------ ------------
Total increase .................................... 34,186,001 73,742,396
------------ ------------
Shares purchased (at an average discount from net asset
value of 9.2% and 9.5%, respectively) ................. 517,900 928,593 ( 517,900) ( 928,593)
Decrease in paid-in capital ............................. ( 19,277,509) (29,557,658)
------------ ------------
Total decrease .................................... ( 19,795,409) (30,486,251)
------------ ------------
Net increase ............................................ $ 14,390,592 $ 43,256,145
============ ============
</TABLE>
The cost of the 376,300 shares of Common Stock held in Treasury at June 30,
2000 amounted to $14,516,309.
Dividends in excess of net income for financial statement purposes result
primarily from transactions where tax treatment differs from book treatment.
<PAGE>
10 NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
3. OFFICERS' COMPENSATION AND RETIREMENT AND THRIFT PLANS
The aggregate compensation paid by the Company during the six months ended
June 30, 2000 to its officers amounted to $1,925,870.
The Company has non-contributory retirement plans and a contributory thrift plan
which cover substantially all employees. The costs to the Company and the assets
and liabilities of the plans are not material. Costs of the plans are funded
currently.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities and securities sold short (other than
short-term securities) for the six months ended June 30, 2000 were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------ ------------
<S> <C> <C>
Long transactions ......................... $258,802,401 $281,860,803
Short sale transactions ................... 14,182,441 56,435,141
------------ ------------
Total ..................................... $272,984,842 $338,295,944
============ ============
</TABLE>
At June 30, 2000, 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, 2000 were
$485,286.
6. RESTRICTED SECURITIES
<TABLE>
<CAPTION>
DATE VALUE
ACQUIRED COST (NOTE 1a)
-------- ---------- ----------
<S> <C> <C> <C>
Sequoia Capital IV* ............................... 1/31/84 $ 989,654 $ 29,000
Standard MEMS, Inc. Series A Convertible Preferred 12/17/99 3,003,000 3,003,000
---------- ----------
$3,992,654 $3,032,000
========== ==========
<FN>
* The amounts shown are net of distributions from this limited partnership
interest which, in the aggregate, amounted to $4,703,157. The initial investment
in the limited partnership was $2,000,000.
</FN>
</TABLE>
7. 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 $153,700 for the six months ended June 30, 2000.
Minimum rental commitments under the operating lease are approximately $403,000
per annum in 2000 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 2000 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.
--------------------------------------------------------------------------------
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.
<PAGE>
11 MAJOR STOCK CHANGES* Three Months Ended June 30, 2000 (Unaudited)
-------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES HELD
INCREASES SHARES JUNE 30, 2000
--------------------------------------------------------------------------------------------------------
NEW POSITIONS
<S> <C> <C>
Alkermes, Inc. 50,000 50,000
Avanex Corporation 75,000 75,000
Brooks Automations, Inc. -- 175,000 (a)
Central Securities Corporation -- 65,760 (a)
Coca-Cola Enterprises Inc. 450,000 450,000
Costco Companies, Inc. 300,000 300,000
MetLife, Inc. 250,000 250,000
Mitel Corporation -- 275,000 (a)
OSI Pharmaceuticals, Inc. 200,000 200,000
PartnerRe Ltd. 250,000 250,000
SPSS Inc. 5,000 95,500 (b)
Synopsis, Inc. 125,000 225,000 (b)
Visteon Corporation 100,000 198,199 (c)
ADDITIONS
AMR Corporation 100,000 800,000
Annuity and Life Re (Holdings), Ltd. 77,500 600,000
Buffets, Inc. 100,000 1,987,500
Covance Inc. 300,000 800,000
Ford Motor Company 200,000 850,000
John Hancock Financial Services, Inc. 75,000 475,000
Huntingdon Life Sciences Group plc-ADR 524,500 1,049,000
Molex Incorporated Class A 8,000 629,000
The TJX Companies, Inc. 110,000 1,350,000
DECREASES
--------------------------------------------------------------------------------------------------------
ELIMINATIONS
C-Cube Microsystems Inc. 70,000 --
Consolidated Stores Corporation 200,000 --
Philip Morris Companies Inc. 150,000 --
Quintiles Transnational Corp. 240,000 --
TriQuint Semiconductor, Inc. 46,000 --
REDUCTIONS
American International Group, Inc. 10,000 140,000
Cisco Systems, Inc. 75,000 640,000
IDEC Pharmaceuticals Corporation 10,000 375,000
Interim Services Inc. 102,500 297,500
Johnson & Johnson 50,000 77,500
Lam Research Corporation 602,500 500,000
MedImmune, Inc. 5,000 189,000 (d)
<FN>
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) Shares purchased in prior period and previously carried under Stocks-Miscellaneous-Other.
(b) Includes shares purchased in prior period and previously carried under Stocks - Miscellaneous - Other.
(c) 98,199 shares of Visteon Corporation were received in conjunction with a
spinoff from Ford Motor Company.
(d) Includes shares received in conjunction with a stock split.
</FN>
</TABLE>
<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
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
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.
P.O. Box 3315
South Hackensack, NJ 07606-1915
1-800-413-5499
www.chasemellon.com
INDEPENDENT ACCOUNTANTS' REVIEW REPORT
--------------------------------------------------------------------------------
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, 2000 and the related
statements of operations and changes in net assets and financial highlights for
the six month period ended June 30, 2000. 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 for the year ended December
31, 1999 and financial highlights for each of the five years in the period then
ended and in our report, dated January 14, 2000, we expressed an unqualified
opinion on such financial statement and financial highlights.
ERNST & YOUNG LLP
New York, New York
July 14, 2000
