GENERAL AMERICAN INVESTORS COMPANY, INC.
THIRD QUARTER REPORT
SEPTEMBER 30, 2000
A Closed-End Investment Company
listed on the New York Stock Exchange
450 Lexington Avenue
New York o N.Y. 10017
212-916-8400 1-800-436-8401
E-mail: [email protected]
<PAGE>
TO THE STOCKHOLDERS
For the nine months ended September 30, 2000, the investment return to our
stockholders was 18.5%, consisting of a 14.6% 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 year-end to 7.9%
currently. By comparison, our benchmark, the Standard & Poor's 500 Stock Index
(including income), declined 1.4%. For the twelve months ended September 30,
2000, the return to stockholders was 47.6% and the return on the net asset value
per Common Share was 46.8%; these compare to a return of 13.3% for the S&P 500.
As set forth in the accompanying financial statements (unaudited), as of
September 30, 2000, the net assets of the Company were $1,337,655,639. Net
assets applicable to the Common Stock were $1,187,655,639, equal to $45.40 per
Common Share.
The increase in net assets resulting from operations for the nine months ended
September 30, 2000 was $157,470,478. During this period, net realized gain on
securities sold was $149,209,952, of which approximately $138,953,000 ($5.31 per
share) is applicable to the Common Stock, and the decrease in unrealized
appreciation was $2,376,211. Net investment income for the nine months was
$10,636,737.
During the nine months, 987,500 shares of the Company's Common Stock were
repurchased for $38,865,898 at an average discount from net asset value of 8.7%.
The value of our holdings has continued to appreciate meaningfully. The gains
are particularly gratifying when compared to the general stock market.
Continuing this recent performance may be difficult, however, as the pace of
economic activity now seems less certain. Rising costs, including labor and
energy, most visibly, are pressuring corporate profit margins. An increase in
the price of fuel, of course, has the same adverse impact on consumer spending
as a tax increase. Surprises in reported earnings, meanwhile, have become more
frequent, and increasingly are negative rather than positive with predictably
deleterious consequences for the underlying equities. In this environment, our
shareholders should continue to be well served by our traditional investment
approach and adequate cash reserves.
We are pleased to report that registered stockholders can now obtain information
on their accounts at our transfer agent's website (www.chasemellon.com) in the
section titled Investor ServiceDirect. After establishing a personal
identification number and completing the log-on process, you can view the
certificate history and payment history on your account. You can change your
address of record and obtain a duplicate 1099. Market prices for General
American's Common Stock, going back to 1990, are available. When you need
information on shares registered in your name, we suggest that you try this
convenient online service.
By Order of the Board of Directors,
GENERAL AMERICAN INVESTORS COMPANY, INC.
Spencer Davidson
President and Chief Executive Officer
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES SEPTEMBER 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
ASSETS
<S> <C> <C>
------------------------------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT VALUE (NOTE 1a)
Common stocks (cost $534,243,504) $1,135,995,226
Corporate discount notes (cost $195,445,239) 195,445,239
------------
Total investments (cost $729,688,743) 1,331,440,465
CASH, RECEIVABLES AND OTHER ASSETS
Cash, including margin account balance of $1,587,579 $ 1,691,089
Receivable for securities sold 2,009,678
Receivable from broker for proceeds on securities sold short 89,177,711
Dividends, interest and other receivables 2,176,636
Prepaid expenses 4,883,896
Other 561,354 100,500,364
----------- ------------
TOTAL ASSETS 1,431,940,829
LIABILITIES
------------------------------------------------------------------------------------------------------------------------------------
Payable for securities purchased 4,013,467
Preferred dividend accrued but not yet declared 240,000
Securities sold short, at value (proceeds $89,177,711) (note 1a) 83,087,294
Accrued expenses and other liabilities 6,944,429
-----------
TOTAL LIABILITIES 94,285,190
------------
NET ASSETS $1,337,655,639
============
Net Assets applicable to Preferred Stock at a liquidation value of $25 per share $ 150,000,000
============
Net Assets applicable to Common Stock $1,187,655,639
============
NET ASSET VALUE PER COMMON SHARE $ 45.40
============
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 26,160,529 shares
(exclusive of 845,900 shares in Treasury) 26,160,529
Additional paid-in capital (note 2) 546,945,927
Undistributed realized gain on securities sold 149,395,072
Undistributed net income 9,651,972
Unallocated distributions on Preferred Stock (8,340,000)
Unrealized appreciation on investments and securities sold short
(including aggregate gross unrealized
appreciation of $628,435,331) 607,842,139
-----------
TOTAL NET ASSETS $1,337,655,639
============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS Nine Months Ended September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
INCOME
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Dividends $ 5,199,347
Interest 12,167,682 $ 17,367,029
-----------
EXPENSES
------------------------------------------------------------------------------------------------------------------------------------
Investment research 3,620,202
Administration and operations 2,146,981
Office space and general 387,143
Transfer agent, custodian and registrar fees and expenses 188,345
Stockholders' meeting and reports 114,665
Directors' fees and expenses 103,875
Auditing and legal fees 96,000
Miscellaneous taxes (note 1c) 73,081 6,730,292
----------- ------------
NET INVESTMENT INCOME 10,636,737
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
------------------------------------------------------------------------------------------------------------------------------------
Net realized gain (loss) on investments:
Long transactions 149,468,761
Short sale transactions (note 1b) (258,809)
-------------
Net realized gain on investments (long-term, except for $38,929,464) 149,209,952
Net decrease in unrealized appreciation (2,376,211)
-------------
NET GAIN ON INVESTMENTS 146,833,741
------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $157,470,478
============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Nine Months
Ended Year Ended
Sept. 30, 2000 December 31,
(Unaudited) 1999
-------------- ------------
<S> <C> <C>
OPERATIONS
------------------------------------------------------------------------------------------------------------------------------------
Net investment income $10,636,737 $ 11,168,875
Net realized gain on investments 149,209,952 129,187,204
Net increase (decrease) in unrealized appreciation (2,376,211) 164,358,438
----------- ------------
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 157,470,478 304,714,517
----------- ------------
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 (8,100,000) --
----------- ------------
DECREASE IN NET ASSETS FROM PREFERRED DISTRIBUTIONS (8,100,000) (10,800,000)
----------- ------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
------------------------------------------------------------------------------------------------------------------------------------
From net income, including short-term capital gain (8,635,960) (17,730,368)
From long-term capital gain (42,918,106) (93,854,267)
----------- ------------
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (51,554,066) (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) (38,865,898) (30,486,251)
----------- ------------
INCREASE (DECREASE) IN NET ASSETS - CAPITAL TRANSACTIONS (4,679,897) 43,256,145
----------- ------------
NET INCREASE IN NET ASSETS 93,136,515 225,586,027
NET ASSETS
------------------------------------------------------------------------------------------------------------------------------------
BEGINNING OF PERIOD 1,244,519,124 1,018,933,097
------------- -------------
END OF PERIOD (including undistributed net income of $9,651,972
and distributions in excess
of net income of $1,047,502, respectively) $1,337,655,639 $1,244,519,124
============== ==============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
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, 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>
Nine Months
Ended Year Ended December 31,
Sept. 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 .41 .45 .47 .21 .22 .08
Net gain on securities -
realized and unrealized 5.53 11.32 9.44 7.15 3.86 4.54
--------- --------- ------- ------- ------- --------
Total from investment operations 5.94 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 (.31) -- (.01) -- -- --
---------- ---------- -------- ------- ------- --------
(.31) (.42) (.24) -- -- --
---------- ---------- -------- -------- -------- --------
Total distributions (2.28) (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 $45.40 $41.74 $34.87 $29.15 $25.24 $23.94
========= ========= ======= ======= ======= ========
Per share market value, end of period $41.81 $37.19 $30.44 $26.19 $21.00 $20.00
========= ========= ======= ======= ======= ========
TOTAL INVESTMENT RETURN - Stockholder
Return, based on market price per share 18.45%* 39.22% 31.31% 42.58% 19.48% 21.22%
RATIOS AND SUPPLEMENTAL DATA
Total net assets,
end of period (000's omitted) $1,337,656 $1,244,519 $1,018,933 $702,597 $597,597 $ 573,693
Net assets attributable to Common Stock,
end of period (000's omitted) $1,187,656 $1,094,519 $ 868,933 $702,597 $597,597 $ 573,693
Ratio of expenses to average net assets
applicable to Common Stock .60%* 1.01% .95% .98% 1.05% 1.25%
Ratio of net income to average net assets
applicable to Common Stock .95%* 1.23% 1.50% .80% .88% .36%
Portfolio turnover rate 37.28%* 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 892% 830% 679% -- -- --
Liquidation preference per share $ 25.00 $ 25.00 $25.00 -- -- --
Market value per share $ 23.50 $ 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>
STATEMENT OF INVESTMENTS September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Value
Shares COMMON STOCKS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C>
CHEMICAL (INCLUDING INSTRUMENTATION) (0.2%)
------------------------------------------------------------------------------------------------------------------------------------
80,000 Union Carbide Corporation (COST $3,566,534) $3,020,000
----------
COMMUNICATIONS AND INFORMATION SERVICES (6.3%)
------------------------------------------------------------------------------------------------------------------------------------
75,000 Avanex Corporation (a) 8,076,562
175,000 Brooktrout, Inc. (a) 5,764,063
640,000 Cisco Systems, Inc. (a) 35,360,000
520,000 Cox Communications, Inc. Class A (a) 19,890,000
275,000 NTL Incorporated (a) 12,735,937
142,500 Wolters Kluwer NV-ADR 2,892,750
----------
(COST $22,195,090) 84,719,312
----------
COMPUTER SOFTWARE AND SYSTEMS (4.4%)
------------------------------------------------------------------------------------------------------------------------------------
400,000 Allaire Corporation (a) 3,400,000
155,000 Manugistics Group, Inc. (a) 15,209,375
230,000 MetaCreations Corporation (a) 2,587,500
200,000 NCR Corporation (a) 7,537,500
300,000 Parametric Technology Corporation (a) 3,281,250
95,500 SPSS Inc. (a) 2,560,594
257,000 S3 Incorporated (a) 2,650,312
200,000 Smallworldwide plc (a) 3,962,500
275,000 Synopsys, Inc. (a) 10,415,625
150,000 Wind River Systems, Inc. (a) 7,190,625
----------
(COST $40,909,052) 58,795,281
----------
CONSUMER PRODUCTS AND SERVICES (7.9%)
------------------------------------------------------------------------------------------------------------------------------------
1,987,500 Buffets, Inc. (a) 27,328,125
525,000 Coca-Cola Enterprises Inc. 8,367,187
275,000 Ethan Allen Interiors, Inc. 7,785,937
1,650,500 Ford Motor Company 42,087,750
75,000 Keebler Foods Company 3,150,000
200,000 PepsiCo, Inc. 9,200,000
200,000 Shaw Industries, Inc. 3,700,000
64,500 Spherion Corporation (a) 769,969
175,500 Visteon Corporation 2,654,438
----------
(COST $80,339,170) 105,043,406
----------
ELECTRONICS (1.9%)
------------------------------------------------------------------------------------------------------------------------------------
629,000 Molex Incorporated Class A (COST $13,216,267) 26,064,188
----------
ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (0.5%)
------------------------------------------------------------------------------------------------------------------------------------
413,000 Waste Management, Inc. (COST $5,954,561) 7,201,688
----------
FINANCE AND INSURANCE (20.0%)
------------------------------------------------------------------------------------------------------------------------------------
195,000 American International Group, Inc. 18,659,062
375,000 AmerUs Group Co. 9,656,250
550,000 Annaly Mortgage Management, Inc. 5,018,750
600,000 Annuity and Life Re (Holdings), Ltd. 14,475,000
315 Berkshire Hathaway Inc. Class A (a) 20,286,000
65,760 Central Securities Corporation 2,367,360
850,000 Everest Re Group, Ltd. 42,075,000
355,000 First Midwest Bancorp, Inc. 9,451,875
480,000 Golden West Financial Corporation 25,740,000
475,000 John Hancock Financial Services, Inc. 12,765,625
45,000 M&T Bank Corporation 22,950,000
250,000 MetLife, Inc. 6,562,500
325,000 National Commerce Bancorporation 6,479,688
82,000 Nvest Companies, L.P. 3,228,750
300,000 PartnerRe Ltd. 14,231,250
350,000 Reinsurance Group of America, Incorporated 11,987,500
235,000 SunTrust Banks, Inc. 11,720,625
200,000 Transatlantic Holdings, Inc. 18,500,000
151,000 XL Capital Ltd 11,174,000
----------
(COST $121,561,876) 267,329,235
----------
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS September 30, 2000 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Value
Shares COMMON STOCKS (continued) (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
<S><C> <C> <C> <C>
HEALTH CARE (13.4%)
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS (11.5%)
------------------------------------------------------------------------------------------------------------------------------------
120,000 Alkermes, Inc. (a) $4,635,000
300,000 GelTex Pharmaceuticals, Inc. (a) 14,043,750
365,000 IDEC Pharmaceuticals Corporation (a) 64,006,172
77,500 Johnson & Johnson 7,280,156
270,000 Magainin Pharmaceuticals Inc. (a) 843,750
189,000 MedImmune, Inc. (a) 14,600,250
180,000 OSI Pharmaceuticals, Inc. (a) 12,600,000
790,000 Pfizer Inc 35,485,195
----------
(COST $24,253,707) 153,494,273
----------
MEDICAL INSTRUMENTS AND DEVICES (1.1%)
------------------------------------------------------------------------------------------------------------------------------------
290,000 Medtronic, Inc. (COST $862,614) 15,025,625
----------
HEALTH CARE SERVICES (0.8%)
------------------------------------------------------------------------------------------------------------------------------------
317,000 BioReliance Corporation (a) 4,755,000
750,000 Covance Inc. (a) 6,140,625
70,000 Huntingdon Life Sciences Group plc-ADR (a) 131,250
------------
(COST $8,442,908) 11,026,875
------------
(COST $33,559,229) 179,546,773
------------
MISCELLANEOUS (4.8%)
------------------------------------------------------------------------------------------------------------------------------------
Other (COST $69,985,487) 64,125,319
------------
OIL & NATURAL GAS (INCLUDING SERVICES) (1.0%)
------------------------------------------------------------------------------------------------------------------------------------
700,000 Repsol, S.A.-ADR (COST $8,236,884) 13,256,250
------------
RETAIL TRADE (14.4%)
------------------------------------------------------------------------------------------------------------------------------------
600,000 Costco Companies, Inc. (a) 20,962,500
2,145,000 The Home Depot, Inc. (b) 113,550,938
1,350,000 The TJX Companies, Inc. 30,375,000
570,000 Wal-Mart Stores, Inc. 27,431,250
------------
(COST $47,869,734) 192,319,688
------------
SEMICONDUCTORS (7.3%)
------------------------------------------------------------------------------------------------------------------------------------
175,000 Brooks Automation, Inc. (a) 5,796,875
425,000 Cirrus Logic, Inc. (a) 17,132,812
85,000 DuPont Photomasks, Inc. (a) 4,993,750
400,000 EMCORE Corporation (a) 16,631,250
2,150,000 IQE plc (a) 17,200,000
500,000 Lam Research Corporation (a) 10,468,750
133,624 MIPS Technologies, Inc. Class B (a) 5,144,524
230,000 Mitel Corporation (a) 4,715,000
200,000 PRI Automation, Inc. (a) 3,650,000
766,000 Uniroyal Technology Corporation (a) 11,490,000
------------
(COST $57,281,522) 97,222,961
------------
SPECIAL HOLDINGS (a) (c) (NOTE 6) (0.2%)
------------------------------------------------------------------------------------------------------------------------------------
(e) Sequoia Capital IV 30,000
546,000 Standard MEMS, Inc. Series A Convertible Preferred 3,003,000
------------
(COST $3,992,654) 3,033,000 (d)
------------
TECHNOLOGY (0.3%)
------------------------------------------------------------------------------------------------------------------------------------
175,000 Thermo Electron Corporation (a) (COST $2,930,773) 4,550,000
------------
TRANSPORTATION (2.0%)
------------------------------------------------------------------------------------------------------------------------------------
800,000 AMR Corporation (COST $19,172,141) 26,200,000
------------
UTILITIES (0.3%)
------------------------------------------------------------------------------------------------------------------------------------
110,000 GPU, Inc. (COST $3,472,530) 3,568,125
------------
TOTAL COMMON STOCKS (84.9%) (COST $534,243,504) 1,135,995,226
------------
</TABLE>
<PAGE>
STATEMENT OF INVESTMENTS September 30, 2000 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Principal Value
Amount SHORT-TERM SECURITIES AND OTHER ASSETS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
$43,500,000 Ford Motor Credit Company notes due 10/12-11/06/00; 6.47%-6.49% $42,933,931
55,000,000 General Electric Capital Corp. notes due 10/5-10/17/00; 6.45%-6.53% 54,364,022
56,100,000 General Motors Acceptance Corp. notes due 10/2-10/24/00; 6.47%-6.51% 55,439,969
43,300,000 Sears Roebuck Acceptance Corp. notes due 10/23-10/31/00; 6.70%-6.75% 42,707,317
----------
(COST $195,445,239) 195,445,239
Cash, receivables and other assets, less liabilities 6,215,174
------------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (15.1%) (COST $201,660,413) 201,660,413
------------
NET ASSETS (COST $735,903,917) $1,337,655,639
============
<FN>
(a) Non-income producing security.
(b) 1,300,000 shares held by custodian in a segregated custodian account as collateral
for open short positions.
(c) Restricted security.
(d) Fair value of each holding in the opinion of the Directors.
(e) A limited partnership interest.
</FN>
------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
STATEMENT OF SECURITIES SOLD SHORT September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
Value
Shares COMMON STOCKS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
25,000 Aixtron AG $3,110,750
50,000 Applied Materials, Inc. 2,965,625
60,000 Asyst Technologies, Inc. 1,215,000
122,000 Atmel Corporation 1,852,875
102,000 CNET Networks, Inc. 2,484,656
35,000 Chartered Semiconductor Manufacturing Ltd- ADR 2,124,062
128,800 The Dow Chemical Company 3,211,950
100,000 EMCORE Corporation 4,157,813
25,000 Fisher Scientific International Inc. 846,875
50,000 INTERSHOP Communications AG 3,287,500
100,000 IDEC Pharmaceuticals Corporation 17,535,938
250,000 Lam Research Corporation 5,234,375
25,000 Manugistics Group, Inc. 2,453,125
131,250 MIPS Technologies, Inc. Class A 6,037,500
308,000 Molex Incorporated 16,766,750
100,000 STMicroelectronics NV 4,762,500
60,000 Symantec Corporation 2,640,000
200,000 WPP Group plc 2,400,000
----------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $89,177,711) $83,087,294
==========
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
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; in addition, the Company places cash
with that broker and securities in a segregated account with the custodian, both
as collateral for the short position. The Company may be required to pay a fee
to borrow the securities and may also be obligated to pay any dividends declared
on the borrowed securities. The Company will realize a gain if the security
price decreases and a loss if the security price increases between the date of
the short sale and the date on which the Company replaces the borrowed
securities.
c. FEDERAL INCOME TAXES The Company's policy is to fulfill the requirements of
the Internal Revenue Code applicable to regulated investment companies and to
distribute substantially all taxable income to its stockholders. Accordingly, no
provision for Federal income taxes is required.
d. OTHER As customary in the investment company industry, securities
transactions are recorded as of the trade date. Dividend income and
distributions to stockholders are recorded as of the ex-dividend dates.
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS
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 nine months ended September 30, 2000 and
the year ended December 31, 1999 were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
-------------------- -------------------------
<S> <C> <C> <C> <C>
2000 1999 2000 1999
--------- -------- ----------- -----------
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 8.7% and
9.5%, respectively) 987,500 928,593 (987,500) (928,593)
Decrease in paid-in capital (37,878,398) (29,557,658)
----------- -----------
Total decrease (38,865,898) (30,486,251)
----------- -----------
Net increase (decrease) ($4,679,897) $43,256,145
=========== ===========
</TABLE>
The cost of the 845,900 shares of Common Stock held in Treasury at September 30,
2000 amounted to $33,586,798.
Dividends in excess of net income for financial statement purposes result
primarily from transactions where tax treatment differs from book treatment.
<PAGE>
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 nine months ended
September 30, 2000 to its officers amounted to $2,888,805. 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 nine months ended September 30, 2000 were as
follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- -----------
<S> <C> <C>
Long transactions $384,262,438 $399,757,055
Short sale transactions 46,758,274 135,711,852
------------- -----------
Total $431,020,712 $535,468,907
============= ============
</TABLE>
At September 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 nine months ended September 30, 2000 were
$832,315.
6. RESTRICTED SECURITIES
<TABLE>
<CAPTION>
DATE VALUE
ACQUIRED COST (NOTE 1a)
------------ ----------- -----------
<S> <C> <C> <C>
Sequoia Capital IV* 1/31/84 $ 989,654 $ 30,000
Standard MEMS, Inc. Series A Convertible Preferred 12/17/99 3,003,000 3,003,000
----------- -----------
Total $ 3,992,654 $3,033,000
=========== ===========
</TABLE>
* 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.
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 $221,200 for the nine months ended September 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>
MAJOR STOCK CHANGES* Three Months Ended September 30, 2000 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES HELD
INCREASES SHARES SEPTEMBER 30, 2000
------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
NEW POSITIONS
Allaire Corporation 400,000 400,000
GPU, Inc. 110,000 110,000
IQE plc -- 2,150,000 (a)
Keebler Foods Company 75,000 75,000
MIPS Technologies, Inc. Class B 46,250 133,624 (b)
National Commerce Bancorporation 325,000 (c) 325,000
Nvest Companies, L.P. 82,000 82,000
Parametric Technology Corporation 300,000 300,000
S3 Incorporated 257,000 257,000
Shaw Industries, Inc. 200,000 200,000
Smallworldwide plc 200,000 200,000
Union Carbide Corporation 80,000 80,000
ADDITIONS
Alkermes, Inc. 70,000 120,000
Cirrus Logic, Inc. 50,000 425,000
Coca-Cola Enterprises Inc. 75,000 525,000
Costco Companies, Inc. 300,000 600,000
Ford Motor Company 164,552 1,650,500 (d)
PRI Automation, Inc. 65,000 200,000
PartnerRe Ltd. 50,000 300,000
Synopsys, Inc. 50,000 275,000
DECREASES
------------------------------------------------------------------------------------------------------------------------------------
ELIMINATIONS
CCB Financial Corporation 155,000 (c) --
ReliaStar Financial Corp. 500,000 --
Sabre Holdings Corporation 505,000 --
Saks Incorporated 700,000 --
The ServiceMaster Company 786,500 --
REDUCTIONS
American International Group, Inc. 10,000 195,000 (e)
Covance Inc. 50,000 750,000
DuPont Photomasks, Inc. 35,000 85,000
First Midwest Bancorp, Inc. 20,000 355,000
Huntingdon Life Sciences Group plc-ADR 139,800 70,000 (f)
IDEC Pharmaceuticals Corporation 10,000 365,000
Manugistics Group, Inc. 95,000 155,000
Medtronic, Inc. 10,000 290,000
Mitel Corporation 45,000 230,000
OSI Pharmaceuticals, Inc. 20,000 180,000
Pfizer Inc 95,000 790,000
Spherion Corporation (g) 233,000 64,500
Visteon Corporation 35,793 175,500
<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) 325,000 shares of National Commerce Bancorporation were received in exchange for 155,000 shares of
CCB Financial Corporation in conjunction with a merger.
(d) 1,485,948 shares of Ford Motor Company were received in exchange for 850,000
shares in conjunction with a recapitalization.
(e) Includes shares received in conjunction with a stock split.
(f) Includes share reduction in conjunction with a reverse stock split.
(g) Formerly Interim Services Inc.
</FN>
</TABLE>
<PAGE>
DIRECTORS
--------------------------------------------------------------------------------
Lawrence B. Buttenwieser, Chairman
Arthur G. Altschul, Jr. John D. Gordan, III
Lewis B. Cullman Bill Green
Spencer Davidson Sidney R. Knafel
Gerald M. Edelman Richard R. Pivirotto
Anthony M. Frank 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
