GENERAL AMERICAN INVESTORS
COMPANY, INC.
FIRST QUARTER REPORT
MARCH 31, 2003
A Closed-End Investment Company
listed on the New York Stock Exchange
450 LEXINGTON AVENUE
NEW YORK, NY 10017
212-916-8400
E-mail: InvestorRelations@gainv.com
www.generalamericaninvestors.com
TO THE STOCKHOLDERS
For the three months ended March 31, 2003, our stockholders experienced a
decrease of 2.4% on their investment in our Common Shares (assuming reinvestment
of all dividends). The net asset value per Common Share decreased 1.9%. By
comparison, our benchmark, the Standard & Poor's 500 Stock Index (including
income), declined 3.1%. For the twelve months ended March 31, 2003, the results
were negative as well. Our stockholders experienced a decrease of 28.5% and the
net asset value per Common Share decreased 22.7%; these compare with a decline
of 24.8% for the S&P 500. During each period, the discount at which our shares
traded increased moderately and at March 31, 2003, it was 10.4%.
As set forth in the accompanying financial statements (unaudited), as of March
31, 2003, the net assets applicable to the Company's Common Stock were
$779,178,178, equal to $25.94 per Common Share.
The decrease in net assets resulting from operations for the three months ended
March 31, 2003 was $16,554,131. During this period, the net realized loss on
securities sold was $10,130,319 and the decrease in unrealized appreciation was
$4,282,382. Net investment income for the three months was $558,570 and
distributions to preferred stockholders amounted to $2,700,000.
During the three months, 522,100 shares of the Company's Common Stock were
repurchased for $12,239,687 at an average discount from net asset value of 9.6%.
We have been net sellers of securities for most of the past two years and, while
we added modestly to the portfolio in the quarter just ended, the investment
climate remains challenging. Despite extraordinary monetary ease, the economy
continues to struggle and post-bubble excesses have yet to be purged fully, as
reflected in recurring earnings revisions and accounting scandals. More
recently, the war in Iraq, the threat of confrontation on the Korean peninsula
and the strain of pneumonia referred to as SARS have reduced visibility further
and added to uncertainty in the markets. Our core portfolio companies,
meanwhile, continue to generate satisfactory sales and earnings, buoyed by their
leading industry positions and strong balance sheets. We retain historically
high levels of cash and look forward to its employment as profitable
opportunities present themselves.
The information about the Company, including our investment objective, operating
policies and procedures, investment results, record of dividend payments,
financial reports and press releases, contained at our Web site has been updated
through the end of the first quarter. It can be accessed on the Internet at
www.generalamericaninvestors.com.
By Order of the Board of Directors,
General American Investors Company, Inc.
Spencer Davidson
President and Chief Executive Officer
April 9, 2003
2 STATEMENT OF ASSETS AND LIABILITIES March 31, 2003 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
ASSETS
---------------------------------------------------------------------------------------------------------------
INVESTMENTS, AT VALUE (NOTE 1a)
Common stocks (cost $414,811,384) $622,737,887
Convertible corporate notes (cost $9,668,925) 10,350,000
Corporate discount notes (cost $197,604,792) 197,604,792
U.S. Treasury bills (cost $95,721,565) 95,721,565
------------
Total investments (cost $718,806,666) 926,414,244
CASH, RECEIVABLES AND OTHER ASSETS
Cash, including margin account balance of $3,898 $90,912
Receivable for securities sold 848,268
Receivable from broker for proceeds on securities sold short 5,710,668
Dividends, interest and other receivables 927,656
Prepaid expenses 6,640,570
Other 422,895 14,640,969
----------- ------------
TOTAL ASSETS 941,055,213
LIABILITIES
---------------------------------------------------------------------------------------------------------------
Payable for securities purchased 470,357
Preferred dividend accrued but not yet declared 240,000
Securities sold short, at value (proceeds $5,710,668) (note 1a) 5,422,023
Accrued expenses and other liabilities 5,744,655
-----------
11,877,035
TOTAL LIABILITIES
7.20% TAX-ADVANTAGED CUMULATIVE PREFERRED STOCK -
6,000,000 shares at a liquidation value of $25 per share (note 2) 150,000,000
------------
NET ASSETS APPLICABLE TO COMMON STOCK - 30,039,256 shares (note 2) $779,178,178
============
NET ASSET VALUE PER COMMON SHARE $25.94
============
NET ASSETS APPLICABLE TO COMMON STOCK
---------------------------------------------------------------------------------------------------------------
Common Stock, 30,039,256 shares at par value (note 2) $30,039,256
Additional paid-in capital (note 2) 551,532,612
Accumulated realized loss on investments (9,956,217)
Undistributed net income 1,606,304
Unallocated distributions on Preferred Stock (2,940,000)
Unrealized appreciation on investments and securities sold short
(including aggregate gross unrealized appreciation of $294,527,664) 208,896,223
-----------
NET ASSETS APPLICABLE TO COMMON STOCK $779,178,178
============
(see notes to financial statements)
3 STATEMENT OF OPERATIONS Three Months Ended March 31, 2003 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
INCOME
---------------------------------------------------------------------------------------------------------------
Dividends $1,541,093
Interest 1,241,760
Other Income 114,891 $2,897,744
-----------
EXPENSES
---------------------------------------------------------------------------------------------------------------
Investment research 1,370,602
Administration and operations 636,056
Office space and general 151,194
Transfer agent, custodian and registrar fees and expenses 48,126
Auditing and legal fees 42,000
Directors' fees and expenses 35,874
Stockholders' meeting and reports 34,425
Miscellaneous taxes 20,897 2,339,174
----------- ------------
NET INVESTMENT INCOME 558,570
REALIZED LOSS AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
---------------------------------------------------------------------------------------------------------------
Net realized loss on investments (10,130,319)
Net decrease in unrealized appreciation (4,282,382)
-----------
NET LOSS ON INVESTMENTS (14,412,701)
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS (2,700,000)
-----------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($16,554,131)
===========
(see notes to financial statements)
4 STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
General American Investors
Three Months
Ended Year Ended
March 31, 2003 December 31,
(Unaudited) 2002
-------------- ------------
OPERATIONS
---------------------------------------------------------------------------------------------------------------
Net investment income $558,570 $5,698,197
Net realized gain (loss) on investments (10,130,319) 17,039,043
Net decrease in unrealized appreciation (4,282,382) (264,293,395)
------------ ------------
Distributions to Preferred Stockholders:
From net income - (3,726,000)
From long-term capital gain - (7,074,000)
Unallocated distributions on Preferred Stock (2,700,000) -
------------- -------------
Decrease In Net Assets From Preferred Distributions (2,700,000) (10,800,000)
------------- -------------
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (16,554,131) (252,356,155)
------------ -------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
---------------------------------------------------------------------------------------------------------------
From net income, including short-term capital gain in 2002 (305,033) (6,606,164)
From long-term capital gain (915,098) (12,540,285)
------------ ------------
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (1,220,131) (19,146,449)
------------ ------------
CAPITAL SHARE TRANSACTIONS
---------------------------------------------------------------------------------------------------------------
Value of Common Shares issued in payment of dividends (note 2) - 6,410,677
Cost of Common Shares purchased (note 2) (12,239,687) (23,245,666)
------------ -------------
DECREASE IN NET ASSETS - CAPITAL TRANSACTIONS (12,239,687) (16,834,989)
------------ -------------
NET DECREASE IN NET ASSETS (30,013,949) (288,337,593)
NET ASSETS APPLICABLE TO COMMON STOCK
---------------------------------------------------------------------------------------------------------------
BEGINNING OF PERIOD 809,192,127 1,097,529,720
----------- -------------
END OF PERIOD (including undistributed net income of
$1,606,304 and $1,352,767, respectively) $779,178,178 $809,192,127
============ =============
(see notes to financial statements)
5 FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
General American Investors
The following table shows per share operating performance data, total investment
return, ratios and supplemental data for the three months ended March 31, 2003
and for each year in the five-year period ended December 31, 2002. This
information has been derived from information contained in the financial
statements and market price data for the Company's shares.
Three Months
Ended Year Ended December 31,
March 31, 2003 --------------------------------------------------------
(Unaudited) 2002 2001 2000 1999 1998
----------- --------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period $26.48 $35.14 $39.91 $41.74 $34.87 $29.15
------- ------ ------ ------ ------ ------
Net investment income .02 .19 .41 .53 .45 .47
Net gain (loss) on securities -
realized and unrealized (.43) (7.88) (.66) 6.12 11.32 9.44
------- ------ ------ ------ ------ ------
Distributions on Preferred Stock:
Dividends from investment income - (.12) (.07)(a) (.11)(b) (.07)(c) (.03)
Distributions from capital gains - (.23) (.29) (.29) (.35) (.20)
Unallocated (.09) - - - - (.01)
------- ------ ------ ------ ------ ------
(.09) (.35) (.36) (.40) (.42) (.24)
------- ------ ------ ------ ------ ------
Total from investment operations (.50) (8.04) (.61) 6.25 11.35 9.67
------- ------ ------ ------ ------ ------
Less distributions on Common Stock:
Dividends from investment income (.01) (.21)(d) (.88)(e) (2.30)(f) (.71)(g) (.48)
Distributions from capital gains (.03) (.41) (3.28) (5.78) (3.77) (3.24)
------- ------ ------ ------ ------ ------
(.04) (.62) (4.16) (8.08) (4.48) (3.72)
------- ------ ------ ------ ------ ------
Capital Stock transaction -
effect of Preferred Stock offering - - - - - (.23)
------- ------ ------ ------ ------ ------
Net asset value, end of period $25.94 $26.48 $35.14 $39.91 $41.74 $34.87
======= ====== ====== ====== ====== ======
Per share market value, end of period $23.25 $23.85 $33.47 $36.00 $37.19 $30.44
======= ====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN - Stockholder
Return, based on market price per share (2.35)%* (27.21)% 4.33% 19.10% 39.22% 31.31%
RATIOS AND SUPPLEMENTAL DATA
Net assets applicable to Common Stock,
end of period (000's omitted) $779,178 $809,192 $1,097,530 $1,155,039 $1,094,519 $868,933
Ratio of expenses to average net assets
applicable to Common Stock 0.30%* 0.97% 1.02% 1.09% 1.01% 0.95%
Ratio of net income to average net assets
applicable to Common Stock 0.07%* 0.61% 1.15% 1.24% 1.23% 1.50%
Portfolio turnover rate 1.38%* 22.67% 23.81% 40.61% 33.68% 34.42%
PREFERRED STOCK
Liquidation value, end of period
(000's omitted) $150,000 $150,000 $150,000 $150,000 $150,000 $150,000
Asset coverage 619% 639% 832% 870% 830% 679%
Liquidation preference per share $25.00 $25.00 $25.00 $25.00 $25.00 $25.00
Market value per share $25.30 $25.85 $25.90 $24.25 $21.75 $25.88
(a) Includes short-term capital gain in the amount of $.04 per share.
(b) Includes short-term capital gain in the amount of $.09 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 $.19 per share.
(e) Includes short-term capital gain in the amount of $.51 per share.
(f) Includes short-term capital gain in the amount of $1.82 per share.
(g) Includes short-term capital gain in the amount of $.29 per share.
*Not annualized
6 STATEMENT OF INVESTMENTS March 31, 2003 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
Shares or Value
Principal Amount COMMON STOCKS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
AEROSPACE/DEFENSE (1.6%)
------------------------------------------------------------------------------------------------------------------------------------
500,000 The Boeing Company (COST $15,978,443) $12,530,000
-----------
COMMUNICATIONS AND INFORMATION SERVICES (4.9%)
------------------------------------------------------------------------------------------------------------------------------------
550,000 CIENA Corporation (a) 2,403,500
900,000 Cisco Systems, Inc. (a) 11,682,000
620,000 Cox Communications, Inc. Class A (a) 19,288,200
450,000 Juniper Networks, Inc. (a) 3,676,500
712,500 Lucent Technologies Inc. (a) 1,047,375
----------
(COST $36,132,077) 38,097,575
----------
COMPUTER SOFTWARE AND SYSTEMS (0.2%)
------------------------------------------------------------------------------------------------------------------------------------
175,000 Oberthur Card Systems S.A. (a) 481,250
339,500 Wind River Systems, Inc. (a) 1,011,710
---------
(COST $8,061,069) 1,492,960
---------
CONSUMER PRODUCTS AND SERVICES (2.2%)
------------------------------------------------------------------------------------------------------------------------------------
275,000 Ethan Allen Interiors Inc. 8,093,250
125,000 Newell Rubbermaid Inc. 3,543,750
150,000 PepsiCo, Inc. 6,000,000
----------
(COST $12,312,784) 17,637,000
----------
ELECTRONICS (1.6%)
------------------------------------------------------------------------------------------------------------------------------------
692,500 Molex Incorporated Class A (COST $14,877,393) 12,742,000
----------
ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (1.6%)
------------------------------------------------------------------------------------------------------------------------------------
609,000 Waste Management, Inc. (COST $12,051,419) 12,898,620
----------
FINANCE AND INSURANCE (30.3%)
------------------------------------------------------------------------------------------------------------------------------------
415,000 American International Group, Inc. 20,521,750
500,000 Annaly Mortgage Management, Inc. 8,735,000
1,000,000 Annuity and Life Re (Holdings), Ltd. (a) 600,000
300 Berkshire Hathaway Inc. Class A (a) 19,140,000
84,548 Central Securities Corporation 1,305,421
700,000 Everest Re Group, Ltd. 40,047,000
425,000 Golden West Financial Corporation 30,570,250
435,000 John Hancock Financial Services, Inc. 12,084,300
320,000 M&T Bank Corporation 25,145,600
440,000 MetLife, Inc. 11,607,200
525,000 PartnerRe Ltd. 26,381,250
475,000 Reinsurance Group of America, Incorporated 12,483,000
230,000 SunTrust Banks, Inc. 12,109,500
230,000 Transatlantic Holdings, Inc. 15,076,500
-----------
(COST $123,416,755) 235,806,771
-----------
7 STATEMENT OF INVESTMENTS March 31, 2003 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
Shares or Value
Principal Amount COMMON STOCKS (continued) (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (14.9%)
------------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS (11.1%)
-------------------------------------------------------------------------------------------------------------------------------
340,000 Alkermes, Inc. (a) $3,083,800
300,000 Bristol-Myers Squibb Company 6,339,000
270,000 Genaera Corporation (a) 164,700
650,000 Genentech, Inc. (a) 22,756,500
400,000 Genta Incorporated (a) 2,854,800
250,000 IDEC Pharmaceuticals Corporation (a) 8,555,000
239,000 MedImmune, Inc. (a) 7,846,370
120,000 Millennium Pharmaceuticals, Inc.(a) 943,200
125,000 OSI Pharmaceuticals, Inc. (a) 2,000,000
1,025,000 Pfizer Inc 31,939,000
----------
(COST $74,728,653) 86,482,370
----------
MEDICAL INSTRUMENTS AND DEVICES (1.7%)
------------------------------------------------------------------------------------------------------------------------------------
290,000 Medtronic, Inc. (COST $862,614) 13,084,800
----------
HEALTH CARE SERVICES (2.1%)
------------------------------------------------------------------------------------------------------------------------------------
600,000 Health Net, Inc. (a) (COST $12,334,246) 16,062,000
----------
(COST $87,925,513) 115,629,170
-----------
MISCELLANEOUS (1.3%)
------------------------------------------------------------------------------------------------------------------------------------
Other (COST $9,487,132) 10,264,000
----------
OIL & NATURAL GAS (INCLUDING SERVICES) (2.2%)
------------------------------------------------------------------------------------------------------------------------------------
475,000 El Paso Corporation 2,873,750
700,000 Halliburton Company 14,511,000
----------
(COST $18,639,384) 17,384,750
----------
RETAIL TRADE (18.1%)
------------------------------------------------------------------------------------------------------------------------------------
700,000 Costco Wholesale Corporation (a) 21,021,000
1,945,000 The Home Depot, Inc. (b) 47,380,200
2,425,000 The TJX Companies, Inc. 42,680,000
570,000 Wal-Mart Stores, Inc. 29,657,100
-----------
(COST $48,567,239) 140,738,300
-----------
SEMICONDUCTORS (0.7%)
------------------------------------------------------------------------------------------------------------------------------------
250,000 ASM International N.V. (a) 2,495,000
168,500 Brooks Automation, Inc. (a) 1,629,395
197,000 EMCORE Corporation (a) 325,050
1,644,900 IQE plc (a) 65,796
250,000 Zarlink Semiconductor Inc. (a) 887,500
---------
(COST $18,466,049) 5,402,741
---------
SPECIAL HOLDINGS (a) (c) (NOTE 5) (0.3%)
------------------------------------------------------------------------------------------------------------------------------------
400,000 Cytokinetics, Incorporated Series E Preferred 2,000,000
(d) Sequoia Capital IV 42,000
432,000 Silicon Genesis Corporation Series C Preferred 72,000
546,000 Standard MEMS, Inc. Series A Convertible Preferred -
---------
(COST $8,896,127) 2,114,000(e)
---------
TOTAL COMMON STOCKS (79.9%) (COST $414,811,384) 622,737,887
-----------
CONVERTIBLE CORPORATE NOTE
------------------------------------------------------------------------------------------------------------------------------------
HEALTH CARE (1.3%)
------------------------------------------------------------------------------------------------------------------------------------
$10,000,000 MedImmune Vaccines, Inc. 5 1/4% due 2/1/08 (COST $9,668,925) 10,350,000
----------
8 STATEMENT OF INVESTMENTS March 31, 2003 (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
Principal Value
Amount SHORT-TERM SECURITIES AND OTHER ASSETS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
$33,300,000 AIG Funding, Inc. notes due 4/1-4/14/03; 1.19%-1.24% $33,260,699
36,700,000 American Express Credit Corporation notes due 4/8-5/6/03; 1.23% 36,656,270
13,100,000 Ford Motor Credit Company notes due 5/5/03; 1.51%-1.53% 13,074,382
52,700,000 General Electric Capital Corp. notes due 4/3-5/1/03; 1.22%-1.25% 52,636,660
43,800,000 General Motors Acceptance Corp. notes due 4/7-5/8/03; 1.51%-1.54% 43,716,683
18,300,000 Sears Roebuck Acceptance Corp. notes due 4/30-5/12/03; 1.60% 18,260,098
96,000,000 U.S. Treasury bills due 4/24-5/15/03; 1.15% 95,721,565
-----------
Total Short-Term Securities (37.6%) (COST $293,326,357) 293,326,357
Cash, receivables and other assets less liabilities 2,763,934
-----------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (38.1%) 296,090,291
-----------
PREFERRED STOCK (-19.3%) (150,000,000)
-----------
NET ASSETS APPLICABLE TO COMMON STOCK (100%) $779,178,178
============
(a) Non-income producing security. (d) A limited partnership interest.
(b) 1,000,000 shares held by custodian in a segregated (e) Fair value of each holding in the opinion of the Directors.
custodian account as collateral for open short positions.
(c) Restricted security.
--------------------------------------------------------------------------------
STATEMENT OF SECURITIES SOLD SHORT March 31, 2003 (Unaudited)
--------------------------------------------------------------------------------
General American Investors
Value
Shares COMMON STOCKS (note 1a)
------------------------------------------------------------------------------------------------------------------------------------
75,000 Electronic Arts Inc. $4,398,000
34,100 Southwest Bancorporation of Texas Inc. 1,024,023
----------
TOTAL SECURITIES SOLD SHORT (PROCEEDS $5,710,668) $5,422,023
==========
(see notes to financial statements)
9 NOTES TO FINANCIAL STATEMENTS (Unaudited)
--------------------------------------------------------------------------------
General American Investors
1. SIGNIFICANT ACCOUNTING POLICIES
General American Investors Company, Inc. (the "Company"), established in 1927,
is registered under the Investment Company Act of 1940 as a closed-end,
diversified management investment company. It is internally managed by its
officers under the direction of the Board of Directors.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 and U.S. Treasury bills 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. Interest
income, adjusted for amortization of discount and premium on investments, is
earned from settlement date and is recognized on the accrual basis. Cost of
investments represents amortized cost.
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS
The authorized capital stock of the Company consists of 50,000,000 shares of
Common Stock, $1.00 par value, and 10,000,000 shares of Preferred Stock, $1.00
par value, of which 30,039,256 shares and 6,000,000 shares, respectively, were
outstanding at March 31, 2003.
On June 19, 1998, the Company issued and sold 6,000,000 shares of its 7.20%
Tax-Advantaged Cumulative Preferred Stock. The Preferred Shares are noncallable
for 5 years and have 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.
The Company classifies its preferred stock pursuant to the requirements of EITF
D-98, Classification and Measurement of Redeemable Securities, which requires
that preferred stock for which its redemption is outside of the Company's
control should be presented outside of net assets in the statement of assets and
liabilities.
10 NOTES TO FINANCIAL STATEMENTS (Unaudited) - continued
--------------------------------------------------------------------------------
General American Investors
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS -
(Continued from bottom of previous page.)
Transactions in Common Stock during the three months ended March 31, 2003 and
the year ended December 31, 2002 were as follows:
SHARES AMOUNT
--------------------- -----------------------
2003 2002 2003 2002
--------------------- -----------------------
Shares issued in payment of dividends (includes 251,893
shares issued from treasury) - 251,893 - $251,893
Increase in paid-in capital - 6,158,784
-------- ---------
Total increase - 6,410,677
-------- ---------
Shares purchased (at an average discount from net
asset value of 9.6% and 9.1%, respectively) 522,100 922,100 ($522,100) (922,100)
Decrease in paid-in capital (11,717,587) (22,323,566)
----------- -----------
Total decrease (12,239,687) (23,245,666)
----------- -----------
Net decrease ($12,239,687) ($16,834,989)
=========== ===========
Distributions for tax and book purposes are substantially the same.
At March 31, 2003, the Company held in its treasury 1,192,307 shares of Common
Stock with an aggregate cost in the amount of $28,517,060.
3. OFFICERS' COMPENSATION AND RETIREMENT AND THRIFT PLANS
The aggregate compensation paid by the Company during the three months ended
March 31, 2003 to its officers amounted to $1,107,500.
The Company has non-contributory retirement plans and a contributory thrift plan
which cover substantially all employees. The costs to the Company and the assets
and liabilities of the plans are not material. Costs of the plans are funded
currently.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (other than short-term securities) for the
three months ended March 31, 2003 amounted to $14,266,847 and $8,730,763,
respectively.
At March 31, 2003, the cost of investments for Federal income tax purposes was
the same as the cost for financial reporting purposes.
5. RESTRICTED SECURITIES
DATE VALUE
ACQUIRED COST (NOTE 1a)
------------ ----------- -----------
Cytokinetics, Incorporated Series E Preferred 3/21/03 $2,000,000 $2,000,000
Sequoia Capital IV* 1/31/84 886,407 42,000
Silicon Genesis Corporation Series C Preferred 2/16/01 3,006,720 72,000
Standard MEMS, Inc. Series A Convertible Preferred 12/17/99 3,003,000 -
----------- -----------
Total $8,896,127 $2,114,000
=========== ===========
* The amounts shown are net of distributions from this limited partnership
interest which, in the aggregate, amounted to $4,806,404. The initial investment
in the limited partnership was $2,000,000.
6. 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 $114,000 for the three months ended March 31, 2003.
Minimum rental commitments under the operating lease are approximately $505,000
per annum in 2003 through 2007.
In January 2003, the Company extended a sublease agreement (originally entered
into in March 1996) which expires in 2007 and provides for future rental
receipts. Minimum rental receipts under the sublease are approximately $254,000
per annum in 2003 through 2007. The Company will also receive its proportionate
share of operating expenses and real property taxes under the sublease.
Unaudited
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In addition to purchases of the Company's Common Stock as set forth in Note 2
above, 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.
11 MAJOR STOCK CHANGES* Three Months Ended March 31, 2003 (Unaudited)
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General American Investors
SHARES OR SHARES HELD
INCREASES PRINCIPAL AMOUNT MARCH 31, 2003
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NEW POSITIONS
ASM International N.V. - 250,000 (a)
Cytokinetics, Incorporated Series E Preferred 400,000 400,000
Genta Incorporated - 400,000 (a)
Juniper Networks, Inc. - 450,000 (a)
ADDITIONS
American International Group, Inc. 70,000 415,000
Everest Re Group, Ltd. 25,000 700,000
Health Net, Inc. 50,000 600,000
Newell Rubbermaid Inc. 25,000 125,000
Waste Management, Inc. 20,000 609,000
DECREASES
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ELIMINATIONS
Ford Motor Company 225,000 -
NTL Incorporated 180,000 -
El Paso Corporation 0% Convertible
Notes Due 2/28/21 $5,000,000 -
REDUCTIONS
El Paso Corporation 275,000 475,000
Halliburton Company 150,000 700,000
Reinsurance Group of America, Incorporated 15,000 475,000
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) Shares purchased in prior period and previously carried under Stocks - Miscellaneous - Other.
12 DIRECTORS
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Lawrence B. Buttenwieser, Chairman
Arthur G. Altschul, Jr. John D. Gordan, III
Lewis B. Cullman Sidney R. Knafel
Spencer Davidson Richard R. Pivirotto
Gerald M. Edelman Joseph T. Stewart, Jr.
Raymond S. Troubh
William O. Baker, Director Emeritus
William T. Golden, Director Emeritus
OFFICERS
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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
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COUNSEL
Sullivan & Cromwell LLP TRANSFER AGENT AND REGISTRAR
Mellon Investor Services LLC
INDEPENDENT AUDITORS P.O. BOX 3315
Ernst & Young LLP South Hackensack, NJ 07606-1915
1-800-413-5499
CUSTODIAN www.mellon-investor.com
Deutsche Bank Trust
Company Americas
RESULTS OF THE ANNUAL MEETING
OF STOCKHOLDERS
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The votes cast by stockholders at the Company's annual
meeting held on April 9, 2003 were as follows:
Election of Directors:
FOR WITHHELD
Lawrence B. Buttenwieser 31,447,709 627,469
Lewis B. Cullman 31,461,342 613,836
Spencer Davidson 31,564,613 510,565
Gerald M. Edelman 31,468,446 606,732
John D. Gordan, III 31,587,430 487,748
Richard R. Pivirotto 31,467,291 607,887
Joseph T. Stewart, Jr. 31,527,863 547,315
Raymond S. Troubh 31,427,665 647,513
Elected by holders of Preferred Stock:
Arthur G. Altschul, Jr. 5,442,676 38,403
Sidney R. Knafel 5,437,633 43,446
Ratification of the selection of Ernst & Young LLP as auditors of the Company
for the year 2003:
For - 31,638,265; Against - 177,519; Abstain - 259,394