<PAGE>
GENERAL AMERICAN INVESTORS COMPANY, INC.
Established in 1927, the Company is a closed-end investment company listed
on the New York Stock Exchange. Its objective is long-term capital appreciation
through investment in companies with above average growth potential.
FINANCIAL SUMMARY
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Net assets-December 31 .................... $1,244,519,124 $1,018,933,097
Preferred Stock liquidation preference . 150,000,000 150,000,000
Common Stock ........................... 1,094,519,124 868,933,097
Net investment income ..................... 11,168,875 11,554,362
Net realized gain ......................... 129,187,204 109,379,689
Net increase in unrealized appreciation ... 164,358,438 119,454,056
Per Common Share-December 31
Net asset value ........................ $ 41.74 $ 34.87
Market price ........................... $ 31.1875 $ 30.4375
Discount from net asset value ............. -10.9% -12.7%
Common Shares outstanding - Dec. 31........ 26,219,377 24,916,719
Common stockholders of record - Dec. 31 ... 5,452 5,752
Market price range* (high-low) ............ $37.19-$30.19 $32.88-$24.50
Market volume-shares ...................... 4,884,500 4,140,900
<FN>
*Unadjusted for dividend payments.
</FN>
</TABLE>
DIVIDEND SUMMARY (per share)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ordinary
Record Date /Payment Date Income Capital Gain Total
------------------------- ------ ------------ -----
<S>
Common Stock <C> <C> <C>
Nov. 15, 1999 / Dec. 21, 1999 .............. $ .71 (a) $ 2.41 $ 3.12
Jan. 24, 2000 / Mar. 7, 2000 .............. .33 (b) 1.64 1.97
------- -------- --------
Total from 1999 earnings ................... $ 1.04 $ 4.05 $ 5.09
======= ======== ========
(a) Includes short-term gain in the amount of $.29 per share.
(b) Represents short-term gain.
Nov. 16, 1998 / Dec. 22, 1998 .............. $ .4672 $ 3.0428 $ 3.51
Jan. 25, 1999 / Mar. 10, 1999 .............. -- 1.36 1.36
------- -------- --------
Total from 1998 earnings ................... $ .4672 $ 4.4028 $ 4.87
======= ======== ========
Preferred Stock
Mar. 8, 1999 / Mar. 23, 1999 .............. $ .0715 $ .3785 $ .45
Jun. 7, 1999 / Jun. 23, 1999 .............. .0715 .3785 .45
Sep. 7, 1999 / Sep. 23, 1999 .............. .0715 .3785 .45
Dec. 6, 1999 / Dec. 23, 1999 .............. .0715 .3785 .45
------- -------- --------
Total for 1999 ............................. $ .2860 (c) $ 1.5140 $ 1.80
======= ======== ========
(c) Includes short-term gain in the amount of $.1164 per share ($.0291 per quarter).
Sep. 8, 1998 / Sep. 23, 1998 .............. $ .0625 $ .4075 $ .47
Dec. 7, 1998 / Dec. 23, 1998 .............. .0599 .3901 .45
------- -------- --------
Total for 1998 ............................. $ .1224 $ .7976 $ .92
======= ======== ========
</TABLE>
General American Investors Company, Inc.
450 Lexington Avenue, New York, NY 10017
(212) 916-8400 (800) 436-8401
E-Mail: [email protected]
<PAGE>
1 TO THE STOCKHOLDERS
- -------------------------------------------------------------------------------
General American Investors
General American Investors has had an exceptional year. For the twelve months
ended December 31, 1999, the investment return to our common stockholders was
39.2%, consisting of a 36.4% increase in the net asset value per share (assuming
reinvestment of all dividends) together with a modest decline in the discount at
which our shares trade. By comparison, the rate of return (including income) for
our benchmark, the Standard & Poor's 500 Stock Index, was 21%.
The table that follows illustrates our returns on an annualized basis vs. the
S&P 500 for longer periods of time. It reflects management's continuing emphasis
on generating superior returns over many years.
Years Stockholder Return S&P 500
- -------------------------------------------------
3 37.6% 27.5%
5 30.4 28.5
10 20.5 18.2
20 19.3 17.9
Mirroring the market generally, the bulk of our gain last year derived from a
relatively small number of securities. Our performance benefitted, importantly,
from increases in the share prices of two portfolio stalwarts, Home Depot and
Wal-Mart, whose shares were purchased initially in 1985 and 1984, respectively.
The biggest contributors to last year's results, however, were two relatively
recent additions to the portfolio and hardly household names. The first, Lam
Research, a capital equipment supplier to the semiconductor industry, rose by
more than four fold. The second, IDEC Pharmaceuticals, a biopharmaceutical
company with several effective products, also registered a dramatic gain. Both
investment ideas are products of our internal research effort and are now among
our ten largest holdings.
Total assets are now in excess of $1.2 billion including the capital raised in
our $150 million preferred stock offering. By contrast, 5 years ago our assets
were approximately $500 million. General American remains wholly independent and
self-managed as it has been since its inception in 1927. The Company's operating
costs in relation to average net assets are well below the equity mutual fund
industry norm and portfolio turnover remains modest.
Capital gain distributions for 1999 will total $4.05 per share, including $1.64
per share that will be distributed in March 2000. Because of tax requirements
unique to our industry, gains realized in November and December are paid in the
following calendar year. Total dividends attributable to 1999, including
ordinary income, amounted to $5.09 per share or 12.2% of ending net asset value
("NAV"). This percentage has averaged 11.3% over the past 20 years.
The share repurchase program, a part of an ongoing effort to maximize NAV,
continues apace. In 1999, 928,593 common shares were acquired at an average
discount to NAV of 9.5%. The Board of Directors has authorized repurchases of
common shares when they are trading at a discount in excess of 8% of NAV.
As in past years, our investments are focused on companies with strong financial
characteristics and powerful positions in growing industries. Our fundamental
approach to research relies upon a highly skilled staff of professionals
supported by the latest technology.
While the economy remains robust in terms of Gross Domestic Product growth,
labor productivity and jobs creation, signs of strain are becoming more evident.
Inflation is rising steadily, if not spectacularly. Housing prices are among the
more obvious examples of this trend. Labor shortages, especially among skilled
workers, have become increasingly common. Finally, the price of money, the
interest rate, has risen markedly. One year ago, for example, 30-year government
bonds sold to yield 4.65%. Today, those bonds provide an interest rate of 6.71%.
The securities markets, which have been quite sensitive to interest rate changes
traditionally, have continued their unprecedented rally. While we remain
cautiously optimistic regarding the market and highly confident with respect to
the quality of our portfolio holdings, a sixth year of 20%+ gains may be simply
too much to ask for.
By Order of the Board of Directors,
Spencer Davidson
President and Chief Executive Officer
January 12, 2000
<PAGE>
2 THE COMPANY
- -------------------------------------------------------------------------------
General American Investors
Corporate Overview
General American Investors, established in 1927, is one of the nation's oldest
closed-end investment companies. It is an independent organization, internally
managed. For regulatory purposes, the Company is classified as a diversified,
closed-end management investment company; it is registered under and subject to
the regulatory provisions of the Investment Company Act of 1940.
Investment Policy
The primary objective of the Company is long-term capital appreciation. Lesser
emphasis is placed on current income. In seeking to achieve its primary
objective, the Company invests principally in common stocks believed by its
management to have better than average growth potential.
The Company's investment approach focuses on the selection of individual stocks,
each of which is expected to meet a clearly defined portfolio objective. A
continuous investment research program, which stresses fundamental security
analysis, is carried on by the officers and staff of the Company under the
oversight of the Board of Directors. A listing of the directors with their
principal affiliations, showing a broad range of experience in business and
financial affairs, is on page 16 of this report.
Portfolio Manager
Mr. Spencer Davidson has been responsible for the management of General
American's portfolio since he was elected President and Chief Executive Officer
of the Company in August 1995. Mr. Davidson, who joined the Company in 1994 as
senior investment counselor, has spent his entire business career on Wall Street
since first joining an investment and banking firm in 1966.
"GAM" Common Stock
As a closed-end investment company, General American Investors does not offer
its shares continuously. The Common Stock is listed on The New York Stock
Exchange (symbol, GAM) and can be bought or sold with commissions determined in
the same manner as all listed stocks. Net asset value is computed daily (on an
unaudited basis) and is furnished upon request. It is also available on most
electronic quotation services using the symbol "XGAMX." The figure for net asset
value per share, together with the market price and the percentage discount or
premium from net asset value as of the close of each week, is published in The
New York Times, The Wall Street Journal and Barron's.
<PAGE>
3 THE COMPANY
- -------------------------------------------------------------------------------
General American Investors
The ratio of market price to net asset value has shown considerable variation
over a long period of time. While shares of GAM usually sell at a discount from
their underlying net asset value, as do the shares of most other domestic equity
closed-end investment companies, they, periodically, have sold at a premium over
net asset value. The last time the Company's shares sold at a premium was the
year-long period from March 1992 through April 1993. During 1999, the stock sold
at discounts from net asset value which ranged from 4% (September 23) to 12.6%
(July 16). At December 31, the price of the stock was at a discount of 10.9%
as compared with a discount of 12.7% a year earlier.
"GAM Pr" Preferred Stock
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 ($150,000,000 in the aggregate).
The Preferred Shares are noncallable for 5 years, are rated "aaa" by Moody's
Investors Service, Inc. and are listed and traded on The New York Stock Exchange
(symbol, GAM Pr).
The preferred capital is available to leverage the investment performance of the
Common Stockholders. As is the case for leverage in general, it may also result
in higher market volatility for the Common Stockholders.
Dividend Policy
The Company's dividend policy is to distribute to stockholders before year-end
substantially all ordinary income estimated for the full year and capital gains
realized during the ten-month period ending October 31 of that year. If any
additional capital gains are realized or ordinary income is earned during the
last two months of the year, a "spill-over" distribution of these amounts will
be paid early in the following year to Common Stockholders. Dividends on shares
of Preferred Stock are paid quarterly. Distributions from capital gains and
ordinary income are allocated proportionately among holders of shares of Common
Stock and Preferred Stock.
Dividends from income have been paid continuously on the Common Stock since 1939
and capital gain dividends in varying amounts have been paid for each of the
years 1943-1999 (except for the year 1974). (A table listing dividends paid
during the 20-year period 1980 - 1999 is shown at the bottom of page 6.) To the
extent that full shares can be issued, dividends are paid to Common Stockholders
in additional shares of Common Stock unless the stockholder specifically
requests payment in cash. Spill-over dividends of nominal amounts are paid in
cash only.
<PAGE>
4 INVESTMENT RESULTS
- -------------------------------------------------------------------------------
General American Investors
[CAPTION]
"Total return on $10,000 investment 20 years ended December 31, 1999"
The investment return for a common stockholder of General American Investors
(GAM) over the 20 years ended December 31, 1999 is shown in the table below and
in the accompanying chart. The return on GAM's net asset value (NAV) per common
share in comparison to the change in the Standard & Poor's 500 Stock Index (S&P
500) is also displayed. Each illustration assumes an investment of $10,000 at
the beginning of 1980.
The Stockholder Return is the return a common stockholder of GAM would have
achieved assuming reinvestment of all optional dividends at the actual
reinvestment price and reinvestment of all cash dividends at the average (mean
between high and low) market price on the ex-dividend date.
The GAM Net Asset Value (NAV) Return is the return on shares of the Company's
common stock based on the NAV per share, including the reinvestment of all
dividends.
The S&P 500 Return is the time-weighted total rate of return on this
widely-recognized, unmanaged index which is a measure of general stock market
performance, including dividend income.
The results illustrated are a record of past performance and may not be
indicative of future results.
<TABLE>
<CAPTION>
GENERAL AMERICAN INVESTORS
------------------------------------------------------
STOCKHOLDER RETURN NET ASSET VALUE RETURN STANDARD & POOR'S 500 RETURN
------------------ ----------------------- ----------------------------
CUMULATIVE ANNUAL RETURN CUMULATIVE ANNUAL RETURN CUMULATIVE ANNUAL RETURN
INVESTMENT INVESTMENT INVESTMENT
<S> <C> <C> <C> <C> <C> <C>
1980 $ 17,195 71.95% $ 14,673 46.73% $ 13,245 32.45%
1981 19,468 13.22 14,834 1.10 12,587 (4.97)
1982 23,224 19.29 17,567 18.42 15,299 21.55
1983 27,011 16.31 21,609 23.01 18,749 22.55
1984 25,077 (7.16) 20,077 (7.09) 19,927 6.28
1985 31,299 24.81 27,104 35.00 26,257 31.77
1986 34,795 11.17 30,131 11.17 31,165 18.69
1987 29,190 (16.11) 30,894 2.53 32,798 5.24
1988 35,395 21.26 36,322 17.57 38,219 16.53
1989 52,598 48.60 50,073 37.86 50,304 31.62
1990 54,701 4.00 53,423 6.69 48,750 (3.09)
1991 101,198 85.00 86,059 61.09 63,570 30.40
1992 116,155 14.78 89,114 3.55 68,395 7.59
1993 97,663 (15.92) 87,555 (1.75) 75,316 10.12
1994 89,986 (7.86) 85,156 (2.74) 76,273 1.27
1995 109,082 21.22 105,236 23.58 104,875 37.50
1996 130,331 19.48 126,251 19.97 128,902 22.91
1997 185,826 42.58 166,715 32.05 171,865 33.33
1998 244,008 31.31 225,298 35.14 220,932 28.55
1999 339,707 39.22 307,307 36.40 267,239 20.96
</TABLE>
<PAGE>
5 INVESTMENT RESULTS
- -------------------------------------------------------------------------------
General American Investors
[Line graph with heading "20-YEAR INVESTMENT RESULTS ASSUMING AN INITIAL
INVESTMENT OF $10,000" at top left hand side. The vertical axis is to the right
side of the page and is labeled "CUMULATIVE VALUE OF INVESTMENT." The axis range
is from $0 to $350,000 in $25,000 increments. The horizontal axis, on the bottom
of the page, consists of the years 1980 through 1999 in one year increments.
Within the graph are three lines. The first line represents GAM Stockholder
Return. The second line represents GAM Net Asset Value, and the third line
represents the S&P 500 Stock Index. The data points for the lines are derived
from the columns labeled "Cumulative Investment" from the table on the preceding
page. Also, embedded in upper left portion of the graph is a table which appears
as follows:]
<TABLE>
<CAPTION>
COMPARATIVE ANNUALIZED INVESTMENT RESULTS
- --------------------------------------------------------------------------------------
YEARS ENDED STOCKHOLDER GAM NET S&P 500
DECEMBER 31, 1999 RETURN ASSET VALUE STOCK INDEX
- ----------------- ------ ------------ -----------
<S> <C> <C> <C>
1 year ..................... 39.2% 36.4% 21.0%
5 years .................... 30.4 29.3 28.5
10 years .................... 20.5 19.9 18.2
15 years .................... 19.0 19.9 18.9
20 years .................... 19.3 18.7 17.9
</TABLE>
<PAGE>
6 MAJOR STOCK CHANGES*: THREE MONTHS ENDED DECEMBER 31, 1999 (UNAUDITED)
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES HELD
INCREASES SHARES DECEMBER 31, 1999
- --------------------------------------------------------------------------------------------------------
NEW POSITIONS
<S> <C> <C>
Alkermes, Inc. -- 50,000(a)
Covance Inc. 273,000 450,000(b)
EMCORE Corporation 295,000 295,000
Johnson & Johnson 127,800(c) 127,800
Manugistics Group, Inc. 105,000 330,000(b)
Quintiles Transnational Corp. 250,000 250,000
Standard MEMS, Inc. Series A
Convertible Preferred 546,000 546,000
Wind River Systems, Inc. 50,000 200,000
ADDITIONS
AMR Corporation 100,000 350,000
Annuity and Life Re (Holdings), Ltd. 22,500 522,500
Buffets, Inc. 512,500 1,637,500
Everest Reinsurance Holdings, Inc. 125,000 850,000
Ford Motor Company 50,000 650,000
Saks Incorporated 100,000 600,000
The TJX Companies, Inc. 550,000 850,000
DECREASES
- --------------------------------------------------------------------------------------------------------
ELIMINATIONS
AstraZeneca plc 241,661 --
Centocor, Inc. 200,000(c) --
Kennametal Inc. 190,000 --
Reuters Group plc-ADR 94,000 --
Ryder System, Inc. 310,500 --
REDUCTIONS
American International Group, Inc. 6,250 150,000
Berkshire Hathaway Inc. Class A 5 315
CCB Financial Corp. 45,000 155,000
Cisco Systems, Inc. 15,000 420,000
The Home Depot, Inc. 250,000 2,145,000(d)
IDEC Pharmaceuticals Corporation 70,000 595,000(d)
MedImmune, Inc. 57,500 146,239
MetaCreations Corporation 25,000 275,000
Molex Incorporated Class A 65,000 497,500
NTL Incorporated 10,000 252,500(d)
ReliaStar Financial Corp. 10,000 290,000
SunTrust Banks, Inc. 5,000 235,000
TriQuint Semiconductor, Inc. 90,000 33,000
Wal-Mart Stores, Inc. 105,000 570,000
<FN>
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) 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) 127,800 shares of Johnson & Johnson were received in exchange for 200,000 shares of Centocor, Inc.
in conjunction with a merger.
(d) Includes shares received in a stock split.
</FN>
</TABLE>
[CAPTION]
"The following table shows aggregate dividends paid per share on the Company's
Common Stock for each year during the 20-year period 1980-1999. Amounts shown
include payments made after year-end attributable to income and gain in each
respective year."
DIVIDENDS PER COMMON SHARE (1980-1999)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDEND FROM
LONG-TERM
YEAR INCOME # CAPITAL GAINS
- ---- ------- -------------
<S> <C> <C>
1980 $.50 $2.99
1981 .63 3.63
1982 .36 1.15
1983 .67 2.38
1984 .28 1.35
1985 .47 1.07
1986 .36 2.15
1987 .35 1.54
1988 .29 1.69
1989 .23 1.56
1990 .21 1.65
1991 .09 3.07
1992 .03 2.93
1993 .06 2.34
1994 .06 1.59
1995 .13 2.77
1996 .25 2.71
1997 .21 2.95
1998 .47 4.40
1999 1.04 4.05
<FN>
#Includes short-term capital gains per share which amounted to $.04 in 1980,
$.08 in 1981, $.28 in 1983, $.12 in 1985, $.02 in 1989, $.03 in 1995, $.05
in 1996 and $.62 in 1999.
</FN>
</TABLE>
<PAGE>
7 TEN LARGEST INVESTMENT HOLDINGS (UNAUDITED)
- -------------------------------------------------------------------------------
General American Investors
[CAPTION]
"The statement of investments as of December 31, 1999, shown on pages 8 and 9
includes 58 stock issues. Listed here are the ten largest stock holdings on
that date."
<TABLE>
<CAPTION>
% TOTAL
SHARES VALUE NET ASSETS
<S> <C> <C> <C>
THE HOME DEPOT, INC. 2,145,000 $147,468,750 11.9%
The dominant company in home center retailing, Home Depot's innovative
merchandising, strong balance sheet and excellent management has enabled the
Company to continue to gain share in a fragmented industry.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
LAM RESEARCH CORPORATION 535,000 59,685,938 4.8
Recognized worldwide as a leading supplier of semiconductor production
equipment in the etch market, the company designs, manufactures and
services equipment used in the fabrication of integrated circuits.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
IDEC PHARMACEUTICALS CORPORATION 595,000 58,458,750 4.7
A biopharmaceutical company which is committed to developing and
commercializing effective treatments of selected cancers and
autoimmune diseases. With proven products such as Rituxan and a
broad pipeline of product opportunities, IDEC is positioned for
continued success.
- --------------------------------------------------------------------------------------- ------------ ----------- ----
CISCO SYSTEMS, INC. 420,000 44,992,500 3.6
The worldwide leader in networking for the internet whose hardware and software
solutions are used to link computers and related networks which facilitate
access to information. With beneficial solutions for their customers and strong
management, Cisco is positioned for continued above-average growth.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
WAL-MART STORES, INC. 570,000 39,401,250 3.2
A policy of serving the mass market with everyday low prices, supported by the
lowest cost structure has made Wal-Mart the nation's largest retailer with
ongoing growth opportunities in the U.S. and overseas.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
FORD MOTOR COMPANY 650,000 34,653,125 2.8
A global manufacturer of automobiles, trucks and related parts. The company
provides financial services through its Ford Motor Credit subsidiary and
owns 81% of Hertz, the top car rental firm in the U.S.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
COX COMMUNICATIONS, INC. 644,180 33,175,270 2.7
Among the nation's largest broadband communications companies with highly clustered
cable television systems, Cox focuses on cable television programming,
telecommunications and broadband networks.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
NTL INCORPORATED 252,500 31,499,375 2.5
A leading alternative telecommunications provider, NTL delivers a vast range
of communications services to over 22 million customers in the United Kingdom
and offers a diversity of solutions not available from any other single supplier.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
PFIZER INC. 885,000 28,707,188 2.3
Well established as a leader in the pharmaceutical industry, Pfizer
continues to reap the benefits of its commitment to research and development
and its ability to effectively market products. The recent launch of several
new products serving large markets and development of a pipeline rich with
many promising drug candidates position Pfizer for strong long-term growth.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
MEDIMMUNE, INC. 146,239 24,257,394 1.9
A biotechnology company concentrating on the development of products to meet
medical needs in the areas of infectious diseases, transplants and cancer,
MedImmune has several efficacious products, including Synagis, and a diverse
product development portfolio.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
$502,299,540 40.4%
============ =====
</TABLE>
<PAGE>
8 STATEMENT OF INVESTMENTS: DECEMBER 31, 1999
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
COMMON SHARES VALUE
STOCKS (NOTE 1a)
<S> <C> <C>
COMMUNICATIONS AND INFORMATION SERVICES (9.2%)
Cisco Systems, Inc.+ ............................... 420,000 $ 44,992,500
Cox Communications, Inc. Class A + ................. 644,180 33,175,270
NTL Incorporated + ................................. 252,500 31,499,375
Wolters Kluwer NV-ADR .............................. 140,000 4,741,800
-----------
(COST $16,690,657) 114,408,945
-----------
COMPUTER SOFTWARE AND SYSTEMS (3.2%)
Manugistics Group, Inc.+ ........................... 330,000 10,663,125
MetaCreations Corporation + ........................ 275,000 2,363,281
Seagate Technology, Inc.+ .......................... 430,000 20,021,875
Wind River Systems, Inc.+ .......................... 200,000 7,325,000
----------
(COST $20,061,447) 40,373,281
----------
CONSUMER PRODUCTS AND SERVICES (6.7%)
Buffets, Inc.+ .................................... 1,637,500 16,375,000
Ford Motor Company ................................ 650,000 34,653,125
Interim Services Inc.+ ............................ 400,000 9,900,000
PepsiCo, Inc. ..................................... 200,000 7,050,000
Philip Morris Companies Inc. ...................... 250,000 5,750,000
The ServiceMaster Company ......................... 786,500 9,683,781
----------
(COST $69,593,344) 83,411,906
----------
ELECTRONICS (1.8%)
Molex Incorporated Class A ........................ 497,500 22,511,875
----------
(COST $12,942,502)
ENVIRONMENTAL CONTROL
(INCLUDING SERVICES) (0.6%)
Waste Management, Inc. ............................ 413,000 7,098,438
----------
(COST $5,954,561)
FINANCE AND INSURANCE (15.2%)
American International Group, Inc. ................ 150,000 16,218,750
AmerUs Life Holdings, Inc. Class A ................ 450,000 10,350,000
Annaly Mortgage Management, Inc. ................. 550,000 4,812,500
Annuity and Life Re (Holdings), Ltd. .............. 522,500 13,650,313
Berkshire Hathaway Inc. Class A + ................. 315 17,671,500
CCB Financial Corp. ............................... 155,000 6,752,187
Everest Reinsurance Holdings, Inc. ................ 850,000 18,965,625
First Midwest Bancorp, Inc. ....................... 412,500 10,931,250
Golden West Financial Corporation ................. 480,000 16,080,000
Huntington Bancshares Incorporated ................ 192,500 4,595,937
M&T Bank Corporation .............................. 45,000 18,641,250
ReliaStar Financial Corp. ......................... 290,000 11,364,375
SunTrust Banks, Inc. .............................. 235,000 16,170,938
Transatlantic Holdings, Inc. ...................... 200,000 15,612,500
XL Capital Ltd .................................... 151,890 7,879,294
-----------
(COST $105,215,889) 189,696,419
-----------
HEALTH CARE (12.6%)
PHARMACEUTICALS (10.7%)
Alkermes, Inc.+ ................................... 50,000 2,456,250
GelTex Pharmaceuticals, Inc.+ ..................... 535,000 6,854,687
IDEC Pharmaceuticals Corporation + ................ 595,000 58,458,750
Johnson & Johnson ................................. 127,800 11,917,350
Magainin Pharmaceuticals Inc.+ .................... 270,000 489,375
MedImmune, Inc.+ .................................. 146,239 24,257,394
Pfizer Inc. ....................................... 885,000 28,707,188
----------
(COST $32,284,878) 133,140,994
----------
MEDICAL INSTRUMENTS AND DEVICES (0.9%)
Medtronic, Inc. .................................. 300,000 10,931,250
-----------
(COST $906,118)
HEALTH CARE SERVICES (1.0%)
BioReliance Corporation + ........................ 317,000 1,812,843
Covance Inc.+ .................................... 450,000 4,865,625
Huntingdon Life Sciences Group plc-ADR + ......... 524,500 491,719
Quintiles Transnational Corp.+ ................... 250,000 4,671,875
-----------
(COST $15,083,126) 11,842,062
-----------
(COST $48,274,122) 155,914,306
-----------
</TABLE>
<PAGE>
9 STATEMENT OF INVESTMENTS: DECEMBER 31, 1999
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
COMMON SHARES VALUE
STOCKS (continued) (NOTE 1a)
<S> <C> <C>
MISCELLANEOUS (2.4%)
Other ............................................ $ 29,614,854
----------
(COST $20,925,859)
OIL & NATURAL GAS (INCLUDING SERVICES) (1.3%)
Repsol, S.A.-ADR ................................. 700,000 16,275,000
----------
(COST $ 8,236,884)
RETAIL TRADE (17.7%)
Consolidated Stores Corporation + ................ 375,000 6,093,750
The Home Depot, Inc. ............................. 2,145,000 147,468,750
Saks Incorporated + .............................. 600,000 9,337,500
The TJX Companies, Inc. .......................... 850,000 17,371,875
Wal-Mart Stores, Inc. ............................ 570,000 39,401,250
-----------
(COST $38,803,977) 219,673,125
-----------
SEMICONDUCTORS (8.4%)
C-Cube Microsystems Inc.+ ........................ 150,000 9,337,500
DuPont Photomasks, Inc.+ ......................... 120,000 5,790,000
EMCORE Corporation + ............................. 295,000 10,030,000
Lam Research Corporation + ....................... 535,000 59,685,938
PRI Automation, Inc.+ ............................ 245,000 16,445,625
TriQuint Semiconductor, Inc.+ .................... 33,000 3,671,250
-----------
(COST $30,888,775) 104,960,313
-----------
SPECIAL HOLDINGS #+ (NOTE 6) (0.2%)
Sequoia Capital IV ................................ ++ 27,800
Standard MEMS, Inc. Series A Convertible Preferred. 546,000 3,003,000
---------
(COST $ 3,992,654) 3,030,800*
---------
TRANSPORTATION (1.9%)
AMR Corporation + ................................. 350,000 23,450,000
----------
(COST $18,620,241)
TOTAL COMMON STOCKS (81.2%) (COST $400,200,912) 1,010,419,262
-------------
SHORT-TERM SECURITIES AND OTHER ASSETS
- --------------------------------------------------------------------------------
Ford Motor Credit Company notes
due 1/4-2/17/00; 5.25%-6.15% $70,000,000 69,235,932
General Electric Capital Corp. notes
due 1/18-2/14/00; 5.65%-6.33% 53,900,000 53,237,851
General Motors Acceptance Corp. notes
due 1/7-1/26/00; 5.99%-6.40% 54,900,000 54,257,100
Sears Roebuck Acceptance Corp. notes
due 1/11-2/1/00; 6.10%-6.15% 57,000,000 56,287,755
-------------
(COST $233,018,638) 233,018,638
Cash, receivables, prepaid expenses and
other assets, less liabilities 1,081,224
-------------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (18.8%)
(COST $234,099,862) 234,099,862
--------------
NET ASSETS (COST $634,300,774) $1,244,519,124
==============
<FN>
+Non-income producing security.
++ A limited partnership interest.
# Restricted security.
* Fair value of each holding in the opinion of the Directors.
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
10 STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
December 31,
------------------------------
ASSETS 1999 1998
- ---------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS, AT VALUE ( NOTE 1a )
Common Stocks
(cost $400,200,912 and $289,690,788, respectively) $1,010,419,262 $ 726,172,450
Convertible corporate note
(cost $2,265,500) -- 11,643,750
Corporate discount notes
(cost $233,018,638 and $280,098,046, respectively) 233,018,638 280,098,046
------------- --------------
1,243,437,900 1,017,914,246
CASH, RECEIVABLES AND OTHER ASSETS
Cash .............................................. 92,743 63,648
Receivable for securities sold .................... 4,352,729 380,256
Dividends, interest and other receivables ......... 2,613,692 3,422,621
Prepaid Expenses .................................. 4,423,775 4,002,793
Other ............................................. 580,184 597,461
------------- -------------
TOTAL ASSETS ........................................ 1,255,501,023 1,026,381,025
------------- -------------
LIABILITIES
- ---------------------------------------------------------------------------------------
Payable for securities purchased ................. 2,781,760 1,041,228
Preferred dividend accrued but not yet declared .. 240,000 240,000
Accrued expenses and other liabilities ........... 7,960,139 6,166,700
------------ -------------
TOTAL LIABILITIES ................................... 10,981,899 7,447,928
------------ --------------
NET ASSETS .......................................... $1,244,519,124 $1,018,933,097
============== ==============
NET ASSETS APPLICABLE TO PREFERRED STOCK AT
A LIQUIDATION VALUE OF $25 PER SHARE .............. $150,000,000 $150,000,000
============ ==============
NET ASSETS APPLICABLE TO COMMON STOCK ............... $1,094,519,124 $868,933,097
============= ==============
NET ASSET VALUE PER COMMON SHARE .................... $41.74 $34.87
============ ==============
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 $6,000,000
Common Stock, $1 par value (note 2)
Authorized 30,000,000 shares; outstanding
26,219,377 and 24,916,719 shares, respectively
(exclusive of 105,400 and 36,000 shares,
respectively, held in Treasury) ............... 26,219,377 24,916,719
Additional paid-in Capital (note 2) .............. 551,566,976 509,613,489
Undistributed realized gain on
securities sold (note 2) ...................... 51,801,923 33,430,631
Distributions in excess of net income (note 2) ... (1,047,502) (647,654)
Unallocated distributions on Preferred Stock ..... (240,000) (240,000)
Unrealized appreciation on investments (including
aggregate gross unrealized appreciation of
$638,728,297 and $460,462,209, respectively) .. 610,218,350 445,859,912
------------ --------------
TOTAL NET ASSETS .................................... $1,244,519,124 $1,018,933,097
============== ==============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
11 STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
INCOME --------------------------
1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Dividends (net of foreign withholding taxes
of $198,010 and $185,768, respectively) ..... $ 6,927,077 $ 7,552,080
Interest ...................................... 13,355,343 11,223,985
Investment advisory fees (note 1c) -- 58,426
----------- ----------
TOTAL INCOME ..................................... 20,282,420 18,834,491
----------- ----------
EXPENSES
- --------------------------------------------------------------------------------
Investment research ........................... 5,291,925 3,738,547
Administration and operations ................. 2,372,064 2,146,732
Office space and general ...................... 680,511 621,478
Transfer agent, custodian and registrar
fees and expenses ........................... 220,989 218,043
Directors' fees and expenses .................. 184,675 200,180
Stockholders' meeting and reports ............. 149,881 163,051
Auditing and legal fees ....................... 120,000 108,000
Miscellaneous taxes (note 1b) ................. 93,500 84,098
--------- ---------
TOTAL EXPENSES ................................... 9,113,545 7,280,129
--------- ----------
NET INVESTMENT INCOME ............................ 11,168,875 11,554,362
---------- ----------
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
- -----------------------------------------------------------------------------------
Net realized gain on sales of securities
(long-term, except for $16,905,418 in 1999)... 129,187,204 109,379,689
Net increase in unrealized appreciation ........ 164,358,438 119,454,056
------------ ------------
NET GAIN ON INVESTMENTS ......................... 293,545,642 228,833,745
------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $304,714,517 $240,388,107
============= ============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
OPERATIONS 1999 1998
- --------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ..................... $ 11,168,875 $ 11,554,362
Net realized gain on sales of securities .. 129,187,204 109,379,689
Net increase in unrealized appreciation ... 164,358,438 119,454,056
------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. 304,714,517 240,388,107
------------- -------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
- --------------------------------------------------------------------------------
From net income, including short-term
capital gain ........................... (1,716,000) (734,400)
From long-term capital gain ............... (9,084,000) (4,785,600)
Unallocated distributions on
Preferred Stock ......................... -- (240,000)
------------- -------------
DECREASE IN NET ASSETS FROM PREFERRED
DISTRIBUTIONS ............................. (10,800,000) (5,760,000)
------------- -------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
- --------------------------------------------------------------------------------
From net income, including short-term
capital gain ........................... (17,730,368) (11,114,275)
From long-term capital gain ............... (93,854,267) (75,627,722)
------------- -------------
DECREASE IN NET ASSETS FROM COMMON
DISTRIBUTIONS ............................. (111,584,635) (86,741,997)
------------- -------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Value of Common Shares issued in payment
of dividends (note 2) ................... 73,742,396 51,184,992
Cost of Common Shares purchased (note 2) .. (30,486,251) (27,310,005)
Net proceeds from the issuance of Preferred
Stock (note 2) .......................... -- 144,575,000
------------- -------------
INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS 43,256,145 168,449,987
------------- -------------
NET INCREASE IN NET ASSETS ................... 225,586,027 316,336,097
NET ASSETS
- --------------------------------------------------------------------------------
BEGINNING OF YEAR ............................ 1,018,933,097 702,597,000
------------- -------------
END OF YEAR (including distributions in
excess of net income of $1,047,502 and
$647,654, respectively) ................... $1,244,519,124 $1,018,933,097
============== =============
<FN>
( see notes to financial statements )
</FN>
</TABLE>
<PAGE>
12 NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
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 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) was recorded as the related
advisory services were performed by the Company. The Company ceased providing
investment advisory services to outside accounts on July 31, 1998.
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 1999 and 1998 were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------ ------------------------------
1999 1998 1999 1998
------------------------ ------------------------------
<S> <C> <C> <C> <C>
Shares issued in payment of dividends
(includes 859,193 and 950,800
shares issued from
Treasury, respectively) ......... 2,231,251 1,755,541 $ 2,231,251 $ 1,755,541
Increase in paid-in capital ......... 71,511,145 49,429,451
------------ -----------
Total increase ................... 73,742,396 51,184,992
------------ -----------
Shares purchased (at an average
discount from net asset value of
9.5% and 11.1%, respectively).... 928,593 943,500 (928,593) (943,500)
Decrease in paid-in capital ......... (29,557,658) (26,366,505)
------------ -----------
Total decrease ................... (30,486,251) (27,310,005)
------------ -----------
Net increase ........................ $43,256,145 $23,874,987
============ ===========
</TABLE>
<PAGE>
13 NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
General American Investors
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS
(Continued from bottom of previous page)
The cost of the 105,400 shares of Common Stock held in Treasury at December 31,
1999 amounted to $3,687,526.
On January 12,2000, the Board of Directors declared on the Common Stock a
dividend of $51,554,067 from realized gains, including $42,918,106 from
long-term capital gains and the balance from short-term gains (ordinary income).
This dividend is payable in Common Stock, or in cash upon request, on March 7,
2000.
Dividends in excess of net income for financial statement purposes result
primarily from transactions where tax treatment differs from book treatment.
3. OFFICERS' COMPENSATION AND RETIREMENT AND THRIFT PLANS
The aggregate compensation paid by the Company during 1999 and 1998 to its
officers amounted to $3,669,000 and $3,070,000, respectively.
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) during 1999
were $273,280,700 and $294,147,625, respectively. At December 31, 1999, 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 1999 were $552,399, including $71,400 paid to
Goldman, Sachs & Co. The Chairman Emeritus of the Company is a retired partner
of Goldman, Sachs & Co.
6. RESTRICTED SECURITIES
<TABLE>
<CAPTION>
DATE VALUE
ACQUIRED COST (NOTE 1a)
-------- ----------- -----------
<S> <C> <C> <C>
Sequoia Capital IV* ............................... 1/31/84 $ 989,654 $ 27,800
Standard MEMS, Inc. Series A
Convertible Preferred ........................... 12/17/99 3,003,000 3,003,000
---------- ----------
Total ............................................. $3,992,654 $3,030,800
========== ==========
<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 $320,000 for 1999. 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.
Unaudited
- --------------------------------------------------------------------------------
In addition to purchases of the Company's Common Stock as set forth in Note 2 on
page 12, 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>
14 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
General American Investors
[CAPTION]
"The following table shows per share operating performance data, total
investment return, ratios and supplemental data 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>
1999 1998 1997 1996 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year ................................. $ 34.87 $ 29.15 $ 25.24 $ 23.94 $ 22.31
--------- --------- --------- --------- -------
Net investment income ........................................... .45 .47 .21 .22 .08
Net gain on securities - realized and unrealized ................ 11.32 9.44 7.15 3.86 4.54
--------- --------- --------- --------- -------
Total from investment operations ................................... 11.77 9.91 7.36 4.08 4.62
--------- --------- --------- --------- -------
Less Distributions on:
Common Stock:
Dividends from investment income ................................ (.71)(a) (.48) (.26)(b) (.20) (.11)(c)
Distributions from capital gains ................................ (3.77) (3.24) (3.19) (2.58) (2.87)
In excess of net income ......................................... -- -- -- -- (.01)
--------- --------- --------- --------- -------
(4.48) (3.72) (3.45) (2.78) (2.99)
Preferred Stock:
Dividends from investment income ................................ (.07)(d) (.03) -- -- --
Distributions from capital gains ................................ (.35) (.20) -- -- --
Unallocated ..................................................... -- (.01) -- -- --
--------- --------- --------- --------- -------
(.42) (.24) -- -- --
Total distributions ................................................ (4.90) (3.96) (3.45) (2.78) (2.99)
--------- --------- --------- --------- -------
Capital Stock transaction -
effect of Preferred Stock offering .............................. -- (.23) -- -- --
--------- --------- --------- --------- -------
Net asset value, end of year ....................................... $ 41.74 $ 34.87 $ 29.15 $ 25.24 $ 23.94
========== ========== ========= ========= =======
Per share market value, end of year ................................ $ 37.19 $ 30.44 $ 26.19 $ 21.00 $ 20.00
========== ========== ========= ========= =======
TOTAL INVESTMENT RETURN - Stockholder Return, based on
market price per share 39.22% 31.31% 42.58% 19.48% 21.22%
RATIOS AND SUPPLEMENTAL DATA
Total net assets, end of year
(000's omitted) ................................................. $1,244,519 $1,018,933 $ 702,597 $ 597,597 $573,693
Net assets attributable to Common Stock,
end of year (000's omitted) ..................................... $1,094,519 $868,933 $ 702,597 $ 597,597 $573,693
Ratio of expenses to average net assets
applicable to Common Stock ...................................... 1.01% 0.95% 0.98% 1.05% 1.25%
Ratio of net income to average net assets
applicable to Common Stock ...................................... 1.23% 1.50% 0.80% 0.88% 0.36%
Portfolio turnover rate ............................................ 33.68% 34.42% 32.45% 33.40% 29.14%
PREFERRED STOCK
Liquidation value, end of year
(000's omitted) ................................................. $ 150,000 $ 150,000 -- -- --
Asset coverage ..................................................... 830% 679% -- -- --
Liquidation preference per share ................................... $25.00 $25.00 -- -- --
Market value per share ............................................. $21.75 $25.88 -- -- --
<FN>
(a) Includes short-term capital gain in the amount of $.29 per share.
(b) Includes short-term capital gain in the amount of $.05 per share.
(c) Includes short-term capital gain in the amount of $.03 per share.
(d) Includes short-term capital gain in the amount of $.028 per share.
</FN>
</TABLE>
<PAGE>
15 REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
General American Investors
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
GENERAL AMERICAN INVESTORS COMPANY, INC.
We have audited the accompanying statement of assets and liabilities, including
the statement of investments, of General American Investors Company, Inc. as of
December 31, 1999, and the related statements of operations and changes in net
assets for each of the two years in the period then ended, and financial
highlights for each of the five years in the period then ended. These financial
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1999, by correspondence with the custodian and brokers.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
General American Investors Company, Inc. at December 31, 1999, the results of
its operations and the changes in its net assets for each of the two years in
the period then ended, and the financial highlights for each of the five years
in the period then ended, in conformity with accounting principles generally
accepted in the United States.
Ernst & Young LLP
New York, New York
January 14, 2000
OFFICERS
- --------------------------------------------------------------------------------
SPENCER DAVIDSON
President and Chief
Executive Officer
ANDREW V. VINDIGNI
Vice-President
EUGENE L. DeSTAEBLER, JR.
Vice-President, Administration
PETER P. DONNELLY
Vice-President and 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
<PAGE>
16 DIRECTORS
- --------------------------------------------------------------------------------
General American Investors
LAWRENCE B. BUTTENWIESER, CHAIRMAN
Rosenman & Colin LLP, Partner
ARTHUR G. ALTSCHUL, JR.
Diaz & Altschul Group, LLC, Co-Chairman
Delta Opportunity Fund, Ltd., Director
Medicis Pharmaceutical Corporation, Director
The Overbrook Foundation, Trustee
Soliloquy, Inc., Chairman
LEWIS B. CULLMAN
Cullman Ventures, LLC, President
Chess-in-the-Schools, Chairman, Board of Trustees
Metropolitan Museum of Art, Trustee
Museum of Modern Art, Vice Chairman, International
Council and Honorary Trustee
The New York Botanical Garden,
Senior Vice Chairman, Board of Managers
SPENCER DAVIDSON
General American Investors Company, Inc.,
President and Chief Executive Officer
Medicis Pharmaceutical Corporation, Director
Neurosciences Research Foundation, Trustee
GERALD M. EDELMAN
Neurosciences Institute of the Neurosciences
Research Foundation, Director and President
The Scripps Research Institute,
Chairman, Department of Neurobiology
Becton, Dickinson and Company, Director
ANTHONY M. FRANK
Belvedere Capital Partners, Chairman
Financial Security Assurance Holdings Ltd., Director
The Charles Schwab Corporation, Director
Temple-Inland Inc., Director
JOHN D. GORDAN,III
Morgan, Lewis & Bockius LLP, Partner
BILL GREEN
ClientSoft, Inc., Director
Commercial Capital Corp., Director
Energy Answers Corporation, Director
New York City Campaign Finance Board, Member
New York City Housing
Development Corporation, Member and Vice Chair
SIDNEY R. KNAFEL
SRK Management Company, Managing Partner
BioReliance Corporation, Chairman
CoreComm Incorporated, Director
Insight Communications Company, Inc., Chairman
NTL Incorporated, Director
RICHARD R. PIVIROTTO
CBS Inc., Director
General Theological Seminary, Trustee
The Gillette Company, Director
The Greenwich Bank and Trust Company, Director
Greenwich Hospital Corporation, Trustee
Immunomedics, Inc., Director
Infinity Broadcasting Corporation, Director
New York Life Insurance Company, Director
Princeton University, Charter Trustee Emeritus
Yale New Haven Health Systems, Trustee
JOSEPH T. STEWART, JR.
Foundation of the University of Medicine
and Dentistry of New Jersey, Trustee
Liposome Co., Inc., Director
Marine Biological Laboratory, Member, Advisory Council
RAYMOND S. TROUBH
Becton, Dickinson and Company, Director
Diamond Offshore Drilling, Inc., Director
Foundation Health Systems, Inc., Director
Starwood Hotels & Resorts, Trustee
Triarc Companies, Inc., Director
- --------------------------------------------------------
ARTHUR G. ALTSCHUL, CHAIRMAN EMERITUS
WILLIAM O. BAKER, DIRECTOR EMERITUS
WILLIAM T. GOLDEN, DIRECTOR EMERITUS
<PAGE>
General American Investors Company, Inc.
450 Lexington Avenue, New York, NY 10017
(212) 916-8400 (800) 436-8401
E-mail: [email protected]
