sep2011quarterlyrpt.htm - Generated by SEC Publisher for SEC Filing
 


For the nine months ended September 30,  The U.S. is not currently on a path that is fiscally 
2011, the net asset value per Common Share  sustainable. Our debts are excessive, our benefits too 
decreased 14.7%, while the investment return  great, and our revenues inadequate. There are policy 
to our stockholders decreased by 14.4%. By com-  solutions that allow for the burden sharing that must 
parison, our benchmark, the Standard & Poor’s 500  take place and it remains probable that they will be 
Stock Index (including income), decreased 8.7%.  found. Meanwhile, the past few months have seen a 
For the twelve months ended September 30, 2011,  deterioration in financial conditions. Extraordinarily, 
the return on the net asset value per Common Share  the yield on the stocks in the S&P 500 Index now 
decreased by 6.2%, and the return to our stockholders  exceeds that of 10-year treasury bonds, which dem- 
decreased by 4.3%; these compare with an increase of  onstrates that easy money may be a necessary, but not 
1.1% for the S&P 500. During both periods, the dis-  sufficient, condition for higher equity values. While 
count at which our shares traded continued to fluctuate  there are similarities to the environment leading up to 
and on September 30, 2011, it was 13.9%.    the 2008 financial crisis, including problem assets in 
          the banking system and spiking market volatility, dif- 
As detailed in the accompanying financial statements  ferences predominate. By most measures, valuations 
(unaudited), as of September 30, 2011, the net assets  are conservative, earnings have held up, companies 
applicable to the Company’s Common Stock were  are behaving cautiously by holding cash at record 
$795,682,693 equal to $26.66 per Common Share.  levels, and the prospect of a double-dip recession is 
receding. Recent data suggest an economy that con-
The decrease in net assets resulting from operations  tinues to expand modestly.
for the nine months ended September 30, 2011 was 
$139,818,926. During this period, the net realized  While our results have suffered, largely due to weak- 
gain on investments sold was $15,448,006, and  ness in energy-related securities, and mindful of the 
the decrease in net unrealized appreciation was  slowdown in the global economy and the prospect for 
$149,590,734. Net investment income for the  a prolonged subpar recovery from the past recession, 
nine months was $2,807,781, and distributions to  the case for equities, on a longer-term basis continues 
Preferred Stockholders amounted to $8,483,979.    intact. Although the investment climate may remain 
volatile our portfolio should be supported by low
During the nine months, 579,019 shares of the  interest rates and compelling valuations.
Company’s Common Stock were repurchased for 
$15,439,317 at an average discount from net asset  Information about the Company, including our 
value of 13.9%.        investment objectives, operating policies and 
procedures, investment results, record of dividend
Referencing our last commentary, the crisis in Europe  and distribution payments, financial reports and press
surrounding the sustainability of sovereign debt  releases, is on our website and has been updated
appears to be affecting global trade, as evidenced by  through September 30, 2011. It can be accessed on
lower commodity prices and slowing Asian demand.  the internet at www.generalamericaninvestors.com.
It seems clear that the scope of the problem is such 
that conventional remedies like austerity-based lend-  By Order of the Board of Directors, 
ing together with some structural reforms are inad-   
equate. We believe that European leaders will ulti-  GENERAL AMERICAN INVESTORS COMPANY, INC. 
mately summon the will to create a framework that   
allows for access to capital at reasonable rates and  Spencer Davidson 
restores investor confidence, but, because the cost  Chairman of the Board 
must be born by taxpayers from 17 different coun-  President and Chief Executive Officer 
tries, the time to reach consensus may be protracted.  October 12, 2011 

 



      Value 
Shares  COMMON STOCKS    (note 1a) 
AEROSPACE/DEFENSE (2.9%)     
325,000  United Technologies Corporation  (Cost $22,957,205)  $22,867,000 
COMMUNICATIONS AND INFORMATION SERVICES (7.1%)     
960,000  Cisco Systems, Inc.    14,880,000 
255,000  MSCI Inc. Class A (a)    7,734,150 
700,000  QUALCOMM Incorporated    34,041,000 
    (Cost $46,083,491)  56,655,150 
COMPUTER SOFTWARE AND SYSTEMS (9.5%)     
60,000  Apple Inc. (a)    22,879,200 
1,015,000  Dell Inc. (a)    14,352,100 
770,000  Microsoft Corporation    19,165,300 
360,000  Teradata Corporation    19,270,800 
    (Cost $65,058,433)  75,667,400 
CONSUMER PRODUCTS AND SERVICES (13.4%)     
350,000  Diageo plc ADR*    26,575,500 
450,000  Nestle S.A.    24,673,325 
325,000  PepsiCo, Inc.    20,117,500 
206,000  Towers Watson & Co. Class A    12,314,680 
712,288  Unilever N.V.    22,467,957 
    (Cost $81,355,585)  106,148,962 
ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (6.0%)     
957,100  Republic Services, Inc.    26,856,226 
630,000  Waste Management, Inc.    20,512,800 
    (Cost $39,190,474)  47,369,026 
FINANCE AND INSURANCE (26.6%)     
BANKING (4.2%)       
500,000  Bond Street Holdings LLC (a) (b)    10,250,000 
520,000  JPMorgan Chase & Co.    15,662,400 
110,000  M&T Bank Corporation    7,689,000 
    (Cost $31,140,007)  33,601,400 
INSURANCE (13.0%)       
875,000  Arch Capital Group Ltd. (a)    28,590,625 
245,000  Everest Re Group, Ltd.    19,448,100 
53,500  Forethought Financial Group, Inc. Class A (a) (c)    10,860,500 
325,000  MetLife, Inc.    9,103,250 
275,000  PartnerRe Ltd.    14,374,250 
400,000  Platinum Underwriters Holdings, Ltd.    12,300,000 
180,000  The Travelers Companies, Inc.    8,771,400 
    (Cost $65,172,570)  103,448,125 
OTHER (9.4%)       
315,000  American Express Company    14,143,500 
330,492  Aon Corporation    13,874,054 
110  Berkshire Hathaway Inc. Class A (a)    11,748,000 
1,666,667  Epoch Holding Corporation    22,616,671 
645,000  Nelnet, Inc.    12,113,100 
    (Cost $37,619,544)  74,495,325 
    (Cost $133,932,121)  211,544,850 

 




      Value 
Shares  COMMON STOCKS (continued)    (note 1a) 
HEALTH CARE / PHARMACEUTICALS (6.1%)     
40,000  Amgen Inc.    $2,198,400 
170,000  Celgene Corporation (a)    10,524,700 
529,900  Cytokinetics, Incorporated (a)    619,983 
564,500  Gilead Sciences, Inc. (a)    21,902,600 
755,808  Pfizer Inc.    13,362,685 
195,344  Poniard Pharmaceuticals, Inc. (a)    24,418 
    (Cost $50,609,652)  48,632,786 
MACHINERY AND EQUIPMENT (3.3%)     
1,200,000  ABB Ltd. ADR*    20,496,000 
900,000  The Manitowoc Company, Inc.    6,039,000 
    (Cost $23,703,922)  26,535,000 
METALS AND MINING (1.6%)     
467,700  Alpha Natural Resources, Inc. (a)    8,273,613 
150,000  Nucor Corporation    4,746,000 
    (Cost $25,756,342)  13,019,613 
MISCELLANEOUS (5.5%)     
  Other (d)  (Cost $67,119,289)  43,487,727 
OIL AND NATURAL GAS (INCLUDING SERVICES) (11.0%)     
296,478  Apache Corporation    23,789,395 
300,000  Canadian Natural Resources Limited    8,781,000 
130,062  Devon Energy Corporation    7,210,637 
750,000  Halliburton Company    22,890,000 
2,050,000  Weatherford International Ltd. (a)    25,030,500 
    (Cost $74,984,196)  87,701,532 
RETAIL TRADE (19.6%)     
394,500  Costco Wholesale Corporation    32,400,285 
460,000  Target Corporation    22,558,400 
1,512,400  The TJX Companies, Inc.    83,892,828 
333,000  Wal-Mart Stores, Inc.    17,282,700 
    (Cost $60,947,765)  156,134,213 
SEMICONDUCTORS (2.5%)     
575,000  ASML Holding N.V.  (Cost $13,463,950)  19,860,500 
TECHNOLOGY (3.0%)       
750,000  International Game Technology    10,897,500 
1,900,000  Xerox Corporation    13,243,000 
    (Cost $34,368,474)  24,140,500 
           TOTAL COMMON STOCKS (118.1%)  (Cost $739,530,899)  939,764,259 
Warrants  WARRANT     
BANKING (0.3%)       
225,000  JPMorgan Chase & Co., expires 10/28/2018 (a)  (Cost $2,865,853)  2,094,750 

 




      Value 
Shares  SHORT-TERM SECURITY AND OTHER ASSETS    (note 1a) 
49,153,165  SSgA U.S. Treasury Money Market Fund (6.2%)  (Cost $49,153,165)  $49,153,165 
        TOTAL INVESTMENTS (e) (124.6%)  (Cost $791,549,917)  991,012,174 
        Liabilities in excess of cash, receivables and other assets (-0.7%)    (5,212,306) 
PREFERRED STOCK (-23.9%)    (190,117,175) 
NET ASSETS APPLICABLE TO COMMON STOCK (100%)    $795,682,693 
* ADR - American Depository Receipt     
(a) Non-income producing security.     
(b) Level 3 fair value measurement, restricted security acquired 11/4/09, aggregate cost $10,000,000, unit cost is $20 per share and fair value is $20.50 per 
     share, note 2. Fair value is based upon bid and/or transaction prices provided via the NASDAQ OMX Group, Inc. PORTAL Alliance trading and trans- 
     fer system for privately placed equity securities traded in the over-the-counter market among qualified investors.   
(c) Level 3 fair value measurement, restricted security acquired 11/3/09, aggregate cost $10,748,000, unit cost is $200.90 per share and fair value is $203 per 
     share, note 2. Fair valuation is based upon recent transactions and, secondarily, a market approach using valuation metrics (market price-earnings and 
     market price-book value multiples), and changes therein, relative to a peer group of companies established by the underwriters.   
(d) Securities which have been held for less than one year, not previously disclosed, and not restricted.   
(e) At September 30, 2011: the cost of investments for Federal income tax purposes was the same as the cost for financial reporting purposes, aggre- 
     gate gross unrealized appreciation was $289,908,884, aggregate gross unrealized depreciation was $90,446,627, and net unrealized appreciation was 
     $199,462,257.       
(see notes to financial statements)     

 




    SHARES  SHARES 
INCREASES  TRANSACTED  HELD 
NEW POSITION     
  Platinum Underwriters Holdings, Ltd.  25,000  400,000  (b)
ADDITIONS     
  Alpha Natural Resources, Inc.  100,000  467,700 
  Forethought Financial Group, Inc. Class A  16,000  53,500 
  Halliburton Company  35,000  750,000 
  JPMorgan Chase & Co.  45,000  520,000 
  Nelnet, Inc.  40,000  645,000 
  PartnerRe Ltd.  15,000  275,000 
  Target Corporation  129,000  460,000 
  Unilever N.V.  5,809  712,288 
DECREASES     
ELIMINATIONS     
  CEMEX, S.A. de C.V. ADR  1,516,755  — 
  Cephalon, Inc.  122,600  — 
  J.C. Penney Company, Inc.  400,000  — 
  Nintendo Co., Ltd.  55,000  — 
REDUCTIONS     
  American Express Company  35,000  315,000 
  Arch Capital Group Ltd.  40,000  875,000 
  Celgene Corporation  30,000  170,000 
  Costco Wholesale Corporation  180,500  394,500 
  MSCI Inc. Class A  45,000  255,000 
  The Travelers Companies, Inc.  10,000  180,000 
(a)  Common shares unless otherwise noted; excludes transactions in Common Stocks - Miscellaneous - Other.   
(b)  Shares purchased in prior period and previously carried under Common Stocks - Miscellaneous - Other.   

 


The diversification of the Company’s net assets applicable to its Common Stock by industry group as of September 30, 2011 is shown in the following 
table.       
PERCENT COMMON
INDUSTRY CATEGORY  COST(000)  VALUE(000)   NET ASSETS*      
Finance and Insurance       
Banking  $34,006  $35,696  4.5% 
Insurance  65,173  103,448  13.0 
Other  37,620  74,495  9.4 
  136,799  213,639  26.9 
Retail Trade  60,948  156,134  19.6 
Consumer Products and Services  81,356  106,149  13.4 
Oil and Natural Gas (Including Services)  74,984  87,702  11.0 
Computer Software and Systems  65,058  75,667  9.5 
Communications and Information Services  46,083  56,655  7.1 
Health Care/Pharmaceuticals  50,610  48,633  6.1 
Environmental Control (Including Services)  39,191  47,369  6.0 
Miscellaneous**  67,119  43,488  5.5 
Machinery and Equipment  23,704  26,535  3.3 
Technology  34,368  24,140  3.0 
Aerospace/Defense  22,957  22,867  2.9 
Semiconductors  13,464  19,861  2.5 
Metals and Mining  25,756  13,020  1.6 
  742,397  941,859  118.4 
Short-Term Securities  49,153  49,153  6.2 
Total Investments  $791,550  991,012  124.6 
Other Assets and Liabilities - Net    (5,212)  (0.7) 
Preferred Stock    (190,117)  (23.9) 
Net Assets Applicable to Common Stock    $795,683  100.0% 
* Net Assets applicable to the Company’s Common Stock.     
** Securities which have been held for less than one year, not previously disclosed, and not restricted.   
(see notes to financial statements)       

 




ASSETS       
INVESTMENTS, AT VALUE (NOTE 1a)     
  Common stocks (cost $739,530,899)    $939,764,259 
  Warrant (cost $2,865,853)    2,094,750 
  Money market fund (cost $49,153,165)    49,153,165 
        Total investments (cost $791,549,917)    991,012,174 
RECEIVABLES AND OTHER ASSETS     
  Dividends, interest and other receivables  $1,117,733   
  Qualified pension plan asset, net excess funded (note 7)  3,671,440   
  Prepaid expenses and other assets  2,229,314  7,018,487 
TOTAL ASSETS    998,030,661 
LIABILITIES       
  Payable for securities purchased  1,087,915   
  Accrued preferred stock dividend not yet declared  219,955   
  Accrued supplemental pension plan liability (note 7)  3,845,670   
  Accrued supplemental thrift plan liability (note 7)  3,133,044   
  Accrued expenses and other liabilities  3,944,209   
TOTAL LIABILITIES    12,230,793 
5.95% CUMULATIVE PREFERRED STOCK, SERIES B -     
  7,604,687 shares at a liquidation value of $25 per share (note 5)    190,117,175 
NET ASSETS APPLICABLE TO COMMON STOCK - 29,844,275 shares (note 5)    $795,682,693 
NET ASSET VALUE PER COMMON SHARE    $26.66 
NET ASSETS APPLICABLE TO COMMON STOCK       
  Common Stock, 29,844,275 shares at par value (note 5)  $29,844,275   
  Additional paid-in capital (note 5)  558,059,097   
  Undistributed net investment income (note 5)  6,529,285   
  Undistributed realized gain on investments  15,312,694   
  Accumulated other comprehensive income (note 7)  (4,820,981)   
  Unallocated distributions on Preferred Stock  (8,703,934)   
  Unrealized appreciation on investments  199,462,257   
NET ASSETS APPLICABLE TO COMMON STOCK    $795,682,693 
(see notes to financial statements)     

 




INCOME       
  Dividends (net of foreign withholding taxes of $528,642)  $12,966,589   
  Interest  16,430  $12,983,019 
EXPENSES       
  Investment research  5,786,525   
  Administration and operations  2,313,160   
  Office space and general  1,241,444   
  Directors’ fees and expenses  213,421   
  Auditing and legal fees  206,987   
  Miscellaneous taxes  156,164   
  Transfer agent, custodian and registrar fees and expenses  153,661   
  Stockholders’ meeting and reports  103,876  10,175,238 
NET INVESTMENT INCOME    2,807,781 
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1, 3 AND 4)       
  Net realized gain on investments:     
       Securities transactions (long-term, except for $288,080)  15,341,265   
          Written option transactions (note 1b and 4)  106,741   
  15,448,006   
  Net decrease in unrealized appreciation on investments  (149,590,734)   
NET LOSS ON INVESTMENTS    (134,142,728) 
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS    (8,483,979) 
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS    ($139,818,926) 

 


  Nine Months Ended   
  September 30, 2011  Year Ended 
OPERATIONS  (Unaudited)    December 31, 2010 
  Net investment income  $2,807,781  $5,626,730 
  Net realized gain on investments  15,448,006  19,636,107 
  Net increase (decrease) in unrealized appreciation  (149,590,734)  109,245,534 
  (131,334,947)  134,508,371 
  Distributions to Preferred Stockholders:     
    From net investment income  —  (2,112,684) 
    From short-term capital gains  —  (878,926) 
    From long-term capital gains  —  (8,320,362) 
    Unallocated distributions  (8,483,979)  — 
    Decrease in net assets from Preferred distributions  (8,483,979)  (11,311,972) 
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  (139,818,926)  123,196,399 
OTHER COMPREHENSIVE INCOME - Funded status of defined benefit plans (note 7)  —  44,177 
DISTRIBUTIONS TO COMMON STOCKHOLDERS       
  From net investment income  —  (2,427,967) 
  From short-term capital gains  —  (1,010,091) 
  From long-term capital gains  —  (9,562,040) 
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS  —  (13,000,098) 
CAPITAL SHARE TRANSACTIONS (NOTE 5)       
  Value of Common Shares issued in payment of dividends and distributions  —  7,219,220 
  Cost of Common Shares purchased  (15.439,317)  (30,842,134) 
DECREASE IN NET ASSETS - CAPITAL TRANSACTIONS  (15,439,317)  (23,622,914) 
NET INCREASE (DECREASE) IN NET ASSETS  (155,258,243)  86,617,564 
NET ASSETS APPLICABLE TO COMMON STOCK       
BEGINNING OF PERIOD  950,940,936  864,323,372 
END OF PERIOD (including undistributed net investment income of $6,529,285 and     
    $3,721,504, respectively)  $795,682,693  $950,940,936 
(see notes to financial statements)     

 




The following table shows per share operating performance data, total investment return, ratios and supplemental data for the nine months ended
September 30, 2011 and for each year in the five-year period ended December 31, 2010. This information has been derived from information con-
tained in the financial statements and market price data for the Company’s shares.

  Nine Months           
  Ended           
  September 30, 2011      Year Ended December 31,     
  (Unaudited)  2010    2009    2008    2007    2006 
PER SHARE OPERATING PERFORMANCE             
Net asset value, beginning of period  $31.26  $27.50  $21.09  $38.10  $40.54  $39.00 
  Net investment income  .10  .19  .11  .42  .31  .34 
  Net gain (loss) on securities -             
    realized and unrealized  (4.42)  4.37  6.94  (16.15)  3.39  4.72 
  Other comprehensive income  —  —  .07  (.25)  .02  .03 
  (4.32)  4.56  7.12  (15.98)  3.72  5.09 
Distributions on Preferred Stock:             
    Dividends from net investment income  —  (.07)  (.11)  (.11)  (.02)  (.04) 
    Distributions from net short-term capital gains  —  (.03)  (.05)  —  (.03)  (.01) 
    Distributions from net long-term capital gains  —  (.27)  (.19)  (.27)  (.36)  (.36) 
    Distributions from return of capital  —  —  (.01)  —  —  — 
    Unallocated  (.28)  —  —  —  —  — 
  (.28)  (.37)  (.36)  (.38)  (.41)  (.41) 
Total from investment operations  (4.60)  4.19  6.76  (16.36)  3.31  4.68 
Distributions on Common Stock:             
    Dividends from net investment income  —  (.08)  (.10)  (.19)  (.33)  (.29) 
    Distributions from net short-term capital gains  —  (.03)  (.05)  —  (.38)  (.04) 
    Distributions from net long-term capital gains  —  (.32)  (.19)  (.46)  (5.04)  (2.81) 
    Distributions from return of capital  —  —  (.01)  —  —  — 
  —  (.43)  (.35)  (.65)  (5.75)  (3.14) 
Net asset value, end of period  $26.66  $31.26  $27.50  $21.09  $38.10  $40.54 
Per share market value, end of period  $22.96  $26.82  $23.46  $17.40  $34.70  $37.12 
TOTAL INVESTMENT RETURN - Stockholder             
    return, based on market price per share  (14.39%)*  16.24%  36.86%  (48.20%)  8.72%  16.78% 
RATIOS AND SUPPLEMENTAL DATA             
Net assets applicable to Common Stock,             
    end of period (000’s omitted)  $795,683   $950,941   $864,323  $674,598   $1,202,923     $1,199,453  
Ratio of expenses to average net assets             
    applicable to Common Stock  1.43%**  1.54%  1.93%  0.87%  1.11%  1.06% 
Ratio of net income to average net assets             
    applicable to Common Stock  0.39%**  0.66%  0.46%  1.31%  0.78%  0.86% 
Portfolio turnover rate  10.60%*  18.09%  24.95%  25.52%  31.91%  19.10% 
PREFERRED STOCK             
Liquidation value, end of period (000’s omitted)  $190,117   $190,117   $190,117  $199,617  $200,000  $200,000 
Asset coverage  519%  600%  555%  438%  701%  700% 
Liquidation preference per share  $25.00  $25.00  $25.00  $25.00  $25.00  $25.00 
Market value per share  $25.57  $24.95  $24.53  $21.90  $21.99  $24.44 
*Not annualized             
**Annualized             
(see notes to financial statements)             

 




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, diversifi ed management investment company. It is internally managed by 
its offi cers 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 man- 
agement 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 Equity securities traded on a national securities exchange are valued at the last reported sales price on the 
   last business day of the period. Equity securities reported on the NASDAQ national market are valued at the offi cial closing price on 
   that day. Listed and NASDAQ equity 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 options written) on the valuation date. Equity securities traded 
   primarily in foreign markets are valued at the closing price of such securities on their respective exchanges or markets. Corporate 
   debt securities, domestic and foreign, are generally traded in the over-the-counter market rather than on a securities exchange. The 
   Company utilizes the latest bid prices provided by independent dealers and information with respect to transactions in such securities 
   to determine current market value. If, after the close of foreign markets, conditions change signifi cantly, the price of certain foreign 
   securities may be adjusted to refl ect fair value as of the time of the valuation of the portfolio. Investments in money market funds 
   are valued at their net asset value. Special holdings (restricted securities) and other securities for which quotations are not readily 
   available are valued at fair value determined in good faith pursuant to procedures established by and under the general supervision 
   of the Board of Directors. 
   b. OPTIONS The Company may purchase and write (sell) put and call options. The Company typically purchases put options or writes 
   call options to hedge the value of portfolio investments while it typically purchases call options and writes put options to obtain equity 
   market exposure under specifi ed circumstances. The risk associated with purchasing an option is that the Company pays a premium 
   whether or not the option is exercised. Additionally, the Company bears the risk of loss of the premium and a change in market 
   value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner 
   as portfolio securities. Premiums received from writing options are reported as a liability on the Statement of Assets and Liabilities. 
   Those that expire unexercised are treated by the Company on the expiration date as realized gains on written option transactions 
   in the Statement of Operations. The difference between the premium received and the amount paid on effecting a closing purchase 
   transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for 
   the closing purchase transaction, as a realized loss on written option transactions in the Statement of Operations. If a call option is 
   exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the Company has 
   realized a gain or loss on investments in the Statement of Operations. If a put option is exercised, the premium reduces the cost basis 
   for the securities purchased by the Company and is parenthetically disclosed under cost of investments on the Statement of Assets and 
   Liabilities. The Company as writer of an option bears the market risk of an unfavorable change in the price of the security underlying 
   the written option. See Note 4 for written option activity. 
   c. SECURITY TRANSACTIONS AND INVESTMENT INCOME Security 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. 
   d. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS Portfolio securities and other assets and liabilities denominated in foreign 
   currencies are translated into U.S. dollars based on the exchange rate of such currencies versus U.S. dollars on the date of valuation. 
   Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at 
   the exchange rate in effect on the transaction date. Events may impact the availability or reliability of foreign exchange rates used 
   to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using 
   procedures established and approved by the Company’s Board of Directors. The Company does not separately report the effect of 
   changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and 
   unrealized gain or loss from investments on the Statement of Operations. 
     Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the 
   trade and settlement dates on security transactions and the difference between the recorded amounts of dividends, interest, 
   and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign 
   exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than 
   investments in securities held at the end of the reporting period. 
     Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of 
   U.S. companies as a result of, among other factors, the possibility of political or economic instability or the level of governmental 
   supervision and regulation of foreign securities markets. 
   e. DIVIDENDS AND DISTRIBUTIONS The Company expects to pay dividends of net investment income and distributions of net realized 
   capital and currency gains, if any, annually to common shareholders and quarterly to preferred shareholders. Dividends and 
   distributions to common and preferred shareholders, which are determined in accordance with Federal income tax regulations 
   are recorded on the ex-dividend date. Distributions for tax and book purposes are substantially the same. Permanent book/tax 
   differences relating to income and gains are reclassifi ed to paid-in capital as they arise. 
   f. FEDERAL INCOME TAXES The Company’s policy is to fulfi ll 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. As of and during the period ended September 30, 2011, the Company did not have any liabilities for any 
   unrecognized tax positions. The Company recognizes interest and penalties, if any, related to unrecognized tax positions as income 
   tax expense in the Statement of Operations. During the period, the Company did not incur any interest or penalties. 
   g. CONTINGENT LIABILITIES Amounts related to contingent liabilities are accrued if it is probable that a liability has been incurred and 
   an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly associ- 
   ated with the ultimate resolution of a matter that are reasonably estimable and, if so, they are included in the accrual. 
   h. INDEMNIFICATIONS In the ordinary course of business, the Company enters into contracts that contain a variety of indemnifi ca- 
   tions. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior 
   claims or losses pursuant to these indemnifi cation provisions and expects the risk of loss thereunder to be remote. 

 




2. FAIR VALUE MEASUREMENTS - Various data inputs are used in determining the value of the Company’s investments. These inputs are 
summarized in a hierarchy consisting of the three broad levels listed below: 
Level 1 - quoted prices in active markets for identical securities (including money market funds which are valued using amortized cost 
and which transact at net asset value, typically $1 per share), 
Level 2 - other signifi cant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.), and 
Level 3 - signifi cant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments). 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those 
securities. The following is a summary of the inputs used to value the Company’s net assets as of September 30, 2011: 

 

Assets  Level 1  Level 2  Level 3  Total 
Common stocks  $918,653,759  —  $21,110,500  $939,764,259 
Warrant  2,094,750  —  —  2,094,750 
Money market fund  49,153,165  —  —  49,153,165 
    Total  $969,901,674  —  $21,110,500  $991,012,174 

 

The aggregate value of Level 3 portfolio investments changed during the nine months ended September 30, 2011 as follows:   
    Change in portfolio valuations using signifi cant unobservable inputs  Level 3 
    Fair value at December 31, 2010  $17,550,000 
    Purchases  3,248,000 
    Net change in unrealized appreciation on investments  312,500 
    Fair value at September 30, 2011  $21,110,500 
    The increase in net unrealized appreciation included in the results of operations attributable to   
       Level 3 assets held at September 30, 2011 and reported within the caption Net change in   
       unrealized appreciation/depreciation in the Statement of Operations:  $312,500 

 

3. PURCHASES AND SALES OF SECURITIES - Purchases and sales of securities (other than short-term securities and options) for the nine 
months ended September 30, 2011 amounted to $119,655,626 and $157,210,065, on long transactions, respectively. 
4. WRITTEN OPTIONS - Transaction in collateralized put options during the nine months ended September 30, 2011 was as follows: 

 

  Contracts  Premiums 
Options outstanding, December 31, 2010  —  — 
Options written  409  $357,424 
Options expired  (200)  (193,833) 
Options exercised  (209)  (163,591) 
Options outstanding, September 30, 2011  0  $0 

 

5. 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. With respect to the Common Stock, 
29,844,275 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on 
September 30, 2011. 
On September 24, 2003, the Company issued and sold 8,000,000 shares of its 5.95% Cumulative Preferred Stock, Series B in an 
underwritten offering. The Preferred Shares were noncallable for the 5 year period ended September 24, 2008 and have a liquidation 
preference of $25.00 per share plus accumulated and unpaid dividends to the date of redemption. On December 10, 2008, the Board of 
Directors authorized the repurchase of 1 million Preferred Shares in the open market at prices below $25.00 per share. 
The Company is required to allocate distributions from long-term capital gains and other types of income proportionately among hold- 
ers of shares of Common Stock and Preferred Stock on an annual basis. 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% of the Preferred 
Stock. In addition, pursuant to Moody’s Investor Service, Inc. Rating Agency Guidelines, the Company is required to maintain a certain 
discounted asset coverage for its portfolio that equals or exceeds a Basic Maintenance Amount. The Company has met these require- 
ments since the issuance of the Preferred Stock. If the Company fails to meet these requirements in the future and does not cure such 
failure, the Company may be required to redeem, in whole or in part, shares of Preferred Stock at a redemption price of $25.00 per 
share plus accumulated and unpaid dividends. In addition, failure to meet the foregoing asset coverage requirements could restrict the 
Company’s ability to pay dividends on shares of Common Stock and could lead to sales of portfolio securities at inopportune times. 
The holders of Preferred Stock have voting rights equivalent to those of the holders of Common Stock (one vote per share) and, gener- 
ally, vote together with the holders of Common Stock as a single class. 
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 subclassifi cation 
as a closed-end investment company or changes in its fundamental investment policies. 

 

10



5. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS - (Continued from bottom of previous page.) 
The Company presents its Preferred Stock, for which its redemption can be outside of the Company’s control, outside of the net assets 
applicable to Common Stock in the Statement of Assets and Liabilities. 
Transactions in Common Stock during the nine months ended September 30, 2011 and the year ended December 31, 2010 were as follows: 

 

  Shares Amount 
  2011    2010  2011  2010 
Increase in par value of shares issued in payment of dividends and           
   distributions (includes 277,555 shares issued from treasury)  —    277,555  —  $277,555 
Increase in paid-in capital        —  6,941,665 
   Total increase        —  7,219,220 
Decrease in par value of shares purchased (average discount from           
   NAV of 13.9% and 14.6%, respectively)  579,019    1,279,476  ($579,019)  (1,279,476) 
Decrease in paid-in capital        (14,860,298)  (29,562,658) 
   Total decrease        (15,439,317)  (30,842,134) 
Net decrease        ($15,439,317)  ($23,622,914) 

 

At September 30, 2011, the Company held in its treasury 2,136,597 shares of Common Stock with an aggregate cost in the amount of
$52,742,139.   
6. OFFICERS’ COMPENSATION - The aggregate compensation accrued and paid by the Company during the nine months ended September
30, 2011 to its offi cers (identifi ed on back cover) amounted to $5,135,625.
7. BENEFIT PLANS - The Company has funded (qualifi ed) and unfunded (supplemental) noncontributory defi ned benefi t pension plans
that cover its employees. The plans provide defi ned benefi ts based on years of service and final average salary with an offset for a por-
tion of social security covered compensation. The components of the net periodic benefi t cost (income) of the plans for the nine months
ended September 30, 2011 were:   
Service cost  $318,122 
Interest cost  585,311 
Expected return on plan assets  (825,541) 
Amortization of prior service cost  34,946 
Recognized net actuarial loss  335,318 
Net periodic benefi t cost  $448,156 

 

The Company recognizes the overfunded or underfunded status of a defi ned benefi t postretirement plan as an asset or liability in the 
Statement of Assets and Liabilities and recognizes changes in funded status in the year in which the changes occur through other com- 
prehensive income. 
The Company also has funded (qualifi ed) and unfunded (supplemental) defi ned contribution thrift plans that are available to its employ- 
ees. The aggregate cost of such plans for the nine months ended September 30, 2011 was $405,834. The qualifi ed thrift plan acquired 
16,100 shares and sold 3,306 shares of the Company’s Common Stock during the nine months ended September 30, 2011 and held 
564,929 shares of the Company’s Common Stock at September 30, 2011. 
8. OPERATING LEASE COMMITMENT - In September 2007, the Company entered into an operating lease agreement for offi ce space which 
expires in February 2018 and provided for future rental payments in the aggregate amount of approximately $10,755,000, net of con- 
struction credits. The lease agreement contains clauses whereby the Company receives free rent for a specifi ed number of months and 
credit towards construction of offi ce improvements, and incurs escalations annually relating to operating costs and real property taxes 
and to annual rent charges beginning in February 2013. The Company has the option to renew the lease after February 2018 for five 
years at market rates. Rental expense approximated $815,500 for the nine months ended September 30, 2011. Minimum rental com- 
mitments under the operating lease are approximately $1,075,000 per annum in 2012, $1,183,000 in 2013 through 2017, and $99,000 
in 2018. 
9. LITIGATION - The Company is subject to a legal action arising from a construction worker’s personal injury that is covered under 
the terms of its insurance policies. Defense and legal costs are being funded by the insurer; damages of an amount that is immaterial 
to the Company are being negotiated at this time. No liabilities or expenses have been incurred by the Company to date. 

 


Purchases of the Company’s Common Stock as set forth in Note 5 on page 11, may be at such times, at such prices, in such amounts and in such 
manner as the Board of Directors may deem advisable. 
The policies and procedures used by the Company to determine how to vote proxies relating to portfolio securities and the Company’s proxy voting 
record for the twelve-month period ended June 30, 2011 are available: (1) without charge, upon request, by calling us at our toll-free telephone num- 
ber (1-800-436-8401), (2) on the Company’s website at www.generalamericaninvestors.com and (3) on the Securities and Exchange Commission’s 
website at www.sec.gov. 
In addition to distributing financial statements as of the end of each quarter, General American Investors files a Quarterly Schedule of Portfolio 
Holdings (Form N-Q) with the Securities and Exchange Commission (“SEC”) as of the end of the first and third calendar quarters. The Company’s 
Forms N-Q are available at www.generalamericaninvestors.com and on the SEC’s website: www.sec.gov. Also, Forms N-Q may be reviewed and 
copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the SEC’s Public Reference Room may be obtained 
by calling 1-800-SEC-0330. A copy of the Company’s Form N-Q may also be obtained by calling us at 1-800-436-8401. 
On April 25, 2011, the Company submitted a CEO annual certification to the New York Stock Exchange (“NYSE”) on which the Company’s prin- 
cipal executive officer certified that he was not aware, as of that date, of any violation by the Company of the NYSE’s Corporate Governance listing 
standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Company’s principal executive and 
principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among other things, 
the Company’s disclosure controls and procedures and internal control over financial reporting, as applicable. 

 



DIRECTORS
Spencer Davidson, Chairman
Sidney R. Knafel, Lead Independent Director 
Arthur G. Altschul, Jr.  Betsy F. Gotbaum 
Rodney B. Berens  Daniel M. Neidich 
Lewis B. Cullman  D. Ellen Shuman 
Gerald M. Edelman  Raymond S. Troubh 
John D. Gordan, III   

 

OFFICERS 
     Spencer Davidson, President & Chief Executive Officer 
     Andrew V. Vindigni, Senior Vice-President 
     Sally A. Lynch, Vice-President 
     Michael W. Robinson, Vice-President 
     Eugene S. Stark, Vice-President, Administration & 
          Chief Compliance Officer 
     Jesse R. Stuart, Vice-President 
     Diane G. Radosti, Treasurer 
     Carole Anne Clementi, Secretary 
     Craig A. Grassi, Assistant Vice-President 
     Maureen E. LoBello, Assistant Secretary 

 

SERVICE COMPANIES
COUNSEL  TRANSFER AGENT AND REGISTRAR 
Sullivan & Cromwell LLP  American Stock Transfer & Trust 
   Company, LLC 
INDEPENDENTAUDITORS  59 Maiden Lane 
Ernst & Young LLP  New York, NY 10038 
  1-800-413-5499 
CUSTODIAN  www.amstock.com 
State Street Bank and 
   Trust Company