jun2012.htm - Generated by SEC Publisher for SEC Filing

Item 1:  Report to Shareholders

 


                    A Closed-End Investment Company
                   listed on the New York Stock Exchange

                               100 PARK AVENUE
                            NEW YORK • NY 10017
                       212-916-8400 • 1-800-436-8401
                 E-mail: InvestorRelations@gainv.com
                  www.generalamericaninvestors.com


For the six months ended June 30, 2012, the  Year-to-date results have been impacted adversely 
net asset value per Common Share increased  by a sharp sell-off in the second quarter. Economic 
7.3%, while the investment return to our  stress in the euro zone and signs of slowing growth in 
stockholders increased by 9.6%. By comparison, our  Asia have weighed heavily on markets, as skepticism 
benchmark, the Standard & Poor’s 500 Stock Index  that a solution to the crisis in Europe will be reached 
(including income), increased 9.5%. For the twelve  any time soon has increased. 
months ended June 30, 2012, the return on the net     
asset value per Common Share decreased by 0.2%,  While the collapse of the Euro, and the attendant 
and the return to our stockholders decreased by 0.8%;  dislocations that would ensue, remain a risk, recent 
these compare with an increase of 5.4% for the S&P  actions taken by the European Central Bank, among 
500. During both periods, the discount at which our  others, suggest a willingness to effect a solution 
shares traded continued to fluctuate and on June 30,  Equity valuations, meanwhile, appear to already 
2012, it was 14.6%.  discount a good deal of uncertainty, viewed in the 
  context of historically low interest rates and muted 
As detailed in the accompanying financial state-  inflation.   
ments (unaudited), as of June 30, 2012, the net assets     
applicable to the Company’s Common Stock were  Information about the Company, including our 
$915,445,667 equal to $31.95 per Common Share.  investment objectives, operating policies and 
  procedures, investment results, record of dividend 
The increase in net assets resulting from opera-  and distribution payments, financial reports and press 
tions for the six months ended June 30, 2012 was  releases, is on our website and has been updated 
$59,587,529. During this period, the net realized  through June 30, 2012. It can be accessed on the 
gain on investments sold was $51,438,605, and  internet at www.generalamericaninvestors.com. 
the increase in net unrealized appreciation was     
$11,337,768. Net investment income for the  By Order of the Board of Directors, 
six months was $2,467,142, and distributions to  GENERAL AMERICAN INVESTORS COMPANY, INC. 
Preferred Stockholders amounted to $5,655,986.     
  Spencer Davidson   
During the six months, 1,116,257 shares of the  Chairman of the Board   
Company’s Common Stock were repurchased for  and Chief Executive Officer 
$30,679,232 at an average discount from net asset     
value of 14.5%.  July 18, 2012   

 



      Value 
Shares  COMMON STOCKS    (note 1a) 
AEROSPACE/DEFENSE (2.7%)     
325,000  United Technologies Corporation  (Cost $22,957,205)  $24,547,250 
 
COMMUNICATIONS AND INFORMATION SERVICES (6.1%)     
960,000  Cisco Systems, Inc.    16,483,200 
700,000  QUALCOMM Incorporated    38,976,000 
    (Cost $38,582,394)  55,459,200 
 
COMPUTER SOFTWARE AND SYSTEMS (8.0%)     
50,000  Apple Inc.    29,200,000 
825,000  Dell Inc. (a)    10,320,750 
770,000  Microsoft Corporation    23,554,300 
145,000  Teradata Corporation (a)    10,441,450 
    (Cost $53,125,332)  73,516,500 
 
CONSUMER PRODUCTS AND SERVICES (15.7%)     
350,000  Diageo plc ADR    36,074,500 
450,000  Nestle S.A.    26,750,520 
1,264,063  Ford Motor Company (a)    12,122,364 
305,000  PepsiCo, Inc.    21,551,300 
206,000  Towers Watson & Co. Class A    12,339,400 
728,845  Unilever N.V.    24,385,142 
275,713  Visteon Corporation (a)    10,339,238 
    (Cost $113,927,407)  143,562,464 
 
DIVERSIFIED (1.5%)       
110  Berkshire Hathaway Inc. Class A (a)  (Cost $1,250,573)  13,743,950 
 
ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (5.1%)     
957,100  Republic Services, Inc.    25,324,866 
630,000  Waste Management, Inc.    21,042,000 
    (Cost $39,190,474)  46,366,866 
FINANCE AND INSURANCE (26.6%)     
BANKING (4.0%)       
425,000  Bond Street Holdings LLC, Class A (a) (b)    7,862,500 
75,000  Bond Street Holdings LLC, Class B (a) (c)    1,318,125 
520,000  JPMorgan Chase & Co.    18,579,600 
110,000  M&T Bank Corporation    9,082,700 
    (Cost $31,140,007)  36,842,925 
INSURANCE (13.1%)       
875,000  Arch Capital Group Ltd. (a)    34,728,750 
245,000  Everest Re Group, Ltd.    25,355,050 
53,500  Forethought Financial Group, Inc. Class A (a) (d)    12,037,500 
325,000  MetLife, Inc.    10,026,250 
285,000  PartnerRe Ltd.    21,565,950 
435,000  Platinum Underwriters Holdings, Ltd.    16,573,500 
    (Cost $60,650,358)  120,287,000 
   
OTHER (9.5%)       
315,000  American Express Company    18,336,150 
330,492  Aon Corporation    15,460,416 
1,666,667  Epoch Holding Corporation    37,966,674 
645,000  Nelnet, Inc.    14,835,000 
    (Cost $36,368,971)  86,598,240 
    (Cost $128,159,336)  243,728,165 

 




      Value 
Shares  COMMON STOCKS (continued)    (note 1a) 
HEALTH CARE / PHARMACEUTICALS (4.3%)     
150,000  Celgene Corporation (a)    $9,624,000 
529,900  Cytokinetics, Incorporated (a)    339,136 
214,300  Gilead Sciences, Inc. (a)    10,989,304 
413,800  Intercell AG (a)    1,006,833 
755,808  Pfizer Inc.    17,383,584 
4,883  Poniard Pharmaceuticals, Inc. (a)    1,719 
    (Cost $43,265,395)  39,344,576 
 
MACHINERY AND EQUIPMENT (3.3%)     
1,200,000  ABB Ltd. ADR    19,584,000 
900,000  The Manitowoc Company, Inc.    10,530,000 
    (Cost $23,703,922)  30,114,000 
 
METALS AND MINING (1.8%)     
467,700  Alpha Natural Resources, Inc. (a)    4,073,667 
200,000  Freeport-McMoRan Copper & Gold Inc.    6,814,000 
150,000  Nucor Corporation    5,685,000 
    (Cost $37,134,911)  16,572,667 
 
MISCELLANEOUS (5.1%)     
  Other (e)  (Cost $46,869,910)  47,102,364 
 
OIL AND NATURAL GAS (INCLUDING SERVICES) (9.7%)     
296,478  Apache Corporation    26,057,452 
300,000  Canadian Natural Resources Limited    8,055,000 
130,062  Devon Energy Corporation    7,542,295 
750,000  Halliburton Company    21,292,500 
2,050,000  Weatherford International Ltd. (a)    25,891,500 
    (Cost $74,984,196)  88,838,747 
 
RETAIL TRADE (15.6%)     
394,500  Costco Wholesale Corporation    37,477,500 
460,000  Target Corporation    26,767,400 
1,840,708  The TJX Companies, Inc.    79,021,594 
    (Cost $44,090,113)  143,266,494 
SEMICONDUCTORS (3.2%)     
575,000  ASML Holding N.V.  (Cost $13,463,950)  29,566,500 
 
TECHNOLOGY (1.3%)       
750,000  International Game Technology  (Cost $8,678,620)  11,812,500 
 
TOTAL COMMON STOCKS (110.0%)  (Cost $689,383,738)  1,007,542,243 
 
Warrants  WARRANT     
BANKING (0.3%)       
225,000  JPMorgan Chase & Co., expires 10/28/2018 (a)  (Cost $2,865,854)  2,198,250 

 




      Value 
Shares  SHORT-TERM SECURITY AND OTHER ASSETS    (note 1a) 
100,973,447  SSgA U.S. Treasury Money Market Fund (11.0%)  (Cost $100,973,447)  $100,973,447 
 
TOTAL INVESTMENTS (f) (121.3%)  (Cost $793,223,039)  1,110,713,940 
 
Liabilities in excess of cash, receivables and other assets (-0.5%)    (5,151,098) 
 
PREFERRED STOCK (-20.8%)    (190,117,175) 
NET ASSETS APPLICABLE TO COMMON STOCK (100%)    $915,445,667 

 

ADR - American Depository Receipt

(a) Non-income producing security.

(b) Level 3 fair value measurement, restricted security acquired 11/4/09, aggregate cost $8,500,000, unit cost is $20.00 per share and fair value is $18.50 per share, note 2. Fair value is based upon bid and/or transaction prices provided via the NASDAQ OMX PORTAL Alliance trading and transfer system for privately placed equity securities traded in the over-the-counter market among qualified investors and an evaluation of book value per share.

(c) Level 3 fair value measurement, restricted security acquired 05/21/12, aggregate cost $1,500,000, unit cost is $20.00 per share and fair value is $17.58 per share, note 2. Fair value is based upon a judgmentally discounted bid price provided via the NASDAQ OMX PORTAL Alliance trading and transfer system for privately placed equity securities traded in the over-the-counter market among qualified investors and an evaluation of book value per share.

(d) 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 $225.00 per share, note 2. Fair valuation is based upon 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 as well as actual transaction prices resulting from limited trading in the security. Significant increases (decreases) in the relative valuation metrics of the peer group companies may result in higher (lower) estimates of fair value.

(e) Securities which have been held for less than one year, not previously disclosed, and not restricted.

(f) At June 30, 2012: the cost of investments for Federal income tax purposes was the same as the cost for financial reporting purposes, aggregate gross unrealized appreciation was $388,796,873, aggregate gross unrealized depreciation was $71,305,972, and net unrealized appreciation was $317,490,901.

(see notes to unaudited financial statements)




  SHARES  SHARES 
INCREASES  TRANSACTED  HELD 
NEW POSITION     
Ford Motor Company  —  1,264,063 (b) 
ADDITION     
Unilever N.V.  5,951  728,845     
 
DECREASES     
ELIMINATION     
Wal-Mart Stores, Inc.  191,050  —     
REDUCTIONS     
PepsiCo, Inc.  20,000  305,000     
Teradata Corporation  85,000  145,000     
The TJX Companies, Inc.  300,000  1,840,708     

 

(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 June 30, 2012 is shown in the following table.

PERCENT COMMON
INDUSTRY CATEGORY  COST(000)  VALUE(000)  NET ASSETS* 
Finance and Insurance       
Banking  $34,006  $39,041  4.3%      
Insurance  60,650  120,287  13.1         
Other  36,369  86,598  9.5         
  131,025  245,926  26.9         
Consumer Products and Services  113,928  143,562  15.7         
Retail Trade  44,090  143,266  15.6         
Oil and Natural Gas (Including Services)  74,984  88,839  9.7         
Computer Software and Systems  53,125  73,517  8.0         
Communications and Information Services  38,582  55,459  6.1         
Miscellaneous**  46,870  47,102  5.1         
Environmental Control (Including Services)  39,191  46,367  5.1         
Health Care/Pharmaceuticals  43,265  39,345  4.3         
Machinery and Equipment  23,704  30,114  3.3         
Semiconductors  13,464  29,567  3.2         
Aerospace/Defense  22,957  24,547  2.7         
Metals and Mining  37,135  16,573  1.8         
Diversified  1,251  13,744  1.5         
Technology  8,679  11,813  1.3         
  692,250  1,009,741  110.3         
Short-Term Securities  100,973  100,973  11.0         
Total Investments  $793,223  1,110,714  121.3         
Other Assets and Liabilities - Net    (5,151)  (0.5)        
Preferred Stock    (190,117)  (20.8)        
Net Assets Applicable to Common Stock    $915,446  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 unaudited financial statements)




ASSETS       
INVESTMENTS, AT VALUE (NOTE 1a)     
Common stocks (cost $689,383,738)    $1,007,542,243 
Warrant (cost $2,865,854)    2,198,250 
Money market fund (cost $100,973,447)    100,973,447 
             Total investments (cost $793,223,039)    1,110,713,940 
 
RECEIVABLES AND OTHER ASSETS     
Receivable for securities sold  $1,929,383   
Dividends, interest and other receivables  1,127,002   
Qualified pension plan asset, net excess funded (note 7)  888,983   
Prepaid expenses and other assets  1,969,407  5,914,775 
TOTAL ASSETS    1,116,628,715 
 
LIABILITIES       
Payable for securities purchased  233,682   
Accrued preferred stock dividend not yet declared  219,955   
Accrued supplemental pension plan liability (note 7)  4,234,548   
Accrued supplemental thrift plan liability (note 7)  3,451,460   
Accrued expenses and other liabilities  2,926,228   
TOTAL LIABILITIES    11,065,873 
 
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 - 28,650,132 shares (note 5)    $915,445,667 
NET ASSET VALUE PER COMMON SHARE    $31.95 
 
NET ASSETS APPLICABLE TO COMMON STOCK       
Common Stock, 28,650,132 shares at par value (note 5)  $28,650,132   
Additional paid-in capital (note 5)  526,820,813   
Undistributed net investment income (note 5)  3,753,186   
Undistributed realized gain on investments  52,291,770   
Accumulated other comprehensive income (note 7)  (7,685,194)   
Unallocated distributions on Preferred Stock  (5,875,941)   
Unrealized appreciation on investments  317,490,901   
NET ASSETS APPLICABLE TO COMMON STOCK    $915,445,667 

 

(see notes to unaudited financial statements)




INCOME       
Dividends (net of foreign withholding taxes of $460,108)  $9,476,215   
Interest  2,730  $9,478,945 
EXPENSES       
Investment research  3,991,217   
Administration and operations  1,670,280   
Office space and general  825,421   
Directors’ fees and expenses  139,733   
Auditing and legal fees  118,500   
Transfer agent, custodian and registrar fees and expenses  91,422   
Miscellaneous taxes  87,973   
Stockholders’ meeting and reports  87,257  7,011,803 
NET INVESTMENT INCOME    2,467,142 
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1, 3 AND 4)
Net realized gain on investments:     
Securities transactions (long-term)  51,763,408   
                Written option transactions (notes 1b and 4)  (324,803)   
  51,438,605   
Net increase in unrealized appreciation on investments  11,337,768   
NET GAIN ON INVESTMENTS    62,776,373 
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS    (5,655,986) 
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS    $59,587,529 

 


  Six Months Ended   
  June 30, 2012  Year Ended 
OPERATIONS  (Unaudited)    December 31, 2011 
Net investment income  $2,467,142  $5,295,369 
Net realized gain on investments  51,438,605  19,507,647 
Net increase (decrease) in unrealized appreciation  11,337,768  (42,899,858) 
  65,243,515  (18,096,842) 
Distributions to Preferred Stockholders:     
From net investment income  —  (3,326,632) 
From short-term capital gains  —  (249,312) 
From long-term capital gains  —  (7,736,028) 
Unallocated distributions  (5,655,986)  — 
Decrease in net assets from Preferred distributions  (5,655,986)  (11,311,972) 
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  59,587,529  (29,408,814) 
OTHER COMPREHENSIVE INCOME - Funded status of defined benefit plans (note 7)  —  (2,864,213) 
 
DISTRIBUTIONS TO COMMON STOCKHOLDERS     
From net investment income  —  (4,388,308) 
From short-term capital gains  —  (328,878) 
From long-term capital gains  —  (10,204,952) 
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS  —  (14,922,138) 
 
CAPITAL SHARE TRANSACTIONS (NOTE 5)     
Value of Common Shares issued in payment of dividends and distributions  —  7,094,056 
Cost of Common Shares purchased  (30,679,232)  (24,302,457) 
DECREASE IN NET ASSETS - CAPITAL TRANSACTIONS  (30,679,232)  (17,208,401) 
NET INCREASE (DECREASE) IN NET ASSETS  28,908,297  (64,403,566) 
 
NET ASSETS APPLICABLE TO COMMON STOCK     
BEGINNING OF PERIOD  886,537,370  950,940,936 
END OF PERIOD (including undistributed net investment income of $3,753,186 and     
$1,286,147, respectively)  $915,445,667  $886,537,370 

 

(see notes to unaudited financial statements)




  The following table shows per share operating performance data, total investment return, ratios and supplemental data for the six months ended
June 30, 2012 and for each year in the five-year period ended December 31, 2011. This information has been derived from information contained in
the financial statements and market price data for the Company’s shares.

  Six Months             
  Ended             
  June 30, 2012    Year Ended December 31,
  (Unaudited)    2011  2010  2009  2008  2007 
PER SHARE OPERATING PERFORMANCE               
Net asset value, beginning of period  $29.78    $31.26  $27.50  $21.09  $38.10  $40.54 
Net investment income  .09    .18  .19  .11  .42  .31 
Net gain (loss) on securities -               
realized and unrealized  2.28    (.68)  4.37  6.94  (16.15)  3.39 
Other comprehensive income  —    (.10)  —  .07  (.25)  .02 
  2.37    (.60)  4.56  7.12  (15.98)  3.72 
Distributions on Preferred Stock:               
Dividends from net investment income  —    (.11)  (.07)  (.11)  (.11)  (.02) 
Distributions from net short-term capital gains  —    (.01)  (.03)  (.05)  —  (.03) 
Distributions from net long-term capital gains  —    (.26)  (.27)  (.19)  (.27)  (.36) 
Distributions from return of capital  —    —  —  (.01)  —  — 
Unallocated  (.20)    —  —  —  —  — 
  (.20)    (.38)  (.37)  (.36)  (.38)  (.41) 
Total from investment operations  2.17    (.98)  4.19  6.76  (16.36)  3.31 
Distributions on Common Stock:               
Dividends from net investment income  —    (.15)  (.08)  (.10)  (.19)  (.33) 
Distributions from net short-term capital gains  —    (.01)  (.03)  (.05)  —  (.38) 
Distributions from net long-term capital gains  —    (.34)  (.32)  (.19)  (.46)  (5.04) 
Distributions from return of capital  —    —  —  (.01)  —  — 
  —    (.50)  (.43)  (.35)  (.65)  (5.75) 
Net asset value, end of period  $31.95    $29.78  $31.26  $27.50  $21.09  $38.10 
Per share market value, end of period  $27.30    $24.91  $26.82  $23.46  $17.40  $34.70 
 
TOTAL INVESTMENT RETURN - Stockholder               
return, based on market price per share  9.60%*    (5.29%)  16.24%  36.86%  (48.20%)  8.72% 
RATIOS AND SUPPLEMENTAL DATA               
Net assets applicable to Common Stock,               
end of period (000’s omitted)  $915,446   $886,537 $950,941  $864,323  $674,598 $1,202,923 
Ratio of expenses to average net assets               
applicable to Common Stock  1.51%**    1.39%  1.54%  1.93%  0.87%  1.11% 
Ratio of net income to average net assets               
applicable to Common Stock  0.54%**    0.56%  0.66%  0.46%  1.31%  0.78% 
Portfolio turnover rate  3.49%*    11.17%  18.09%  24.95%  25.52%  31.91% 
PREFERRED STOCK               
Liquidation value, end of period (000’s omitted)  $190,117   $190,117 $190,117  $190,117  $199,617  $200,000 
Asset coverage  582%    566%  600%  555%  438%  701% 
Liquidation preference per share  $25.00    $25.00  $25.00  $25.00  $25.00  $25.00 
Market value per share  $25.66    $25.47  $24.95  $24.53  $21.90  $21.99 

 

*Not annualized

**Annualized

(see notes to unaudited 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 (“U.S. GAAP”) 
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 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 specifi c procedures appropriate to each security as established 
by and under the general supervision of the Board of Directors. The determination of fair value involves subjective judgments. As a 
result, using fair value to price a security may result in a price materially different from the price used by other investors or the price 
that may be realized upon the actual sale of the security. 
 
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 pre- 
mium on investments, is earned from settlement date and is recognized on the accrual basis. Cost of short-term investments represent 
amortized cost. 
 
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 supervi- 
sion 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 distribu- 
tions 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. In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, man- 
agement has analyzed the Company’s tax positions taken or expected to be taken on Federal and State income tax returns for all open 
tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Company’s 
financial statements. 
 
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 associated 
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 cations. 
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 $1.00 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 June 30, 2012: 

 

Assets  Level 1  Level 2  Level 3  Total 
Common stocks  $986,324,118  —  $21,218,125  $1,007,542,243 
Warrant  2,198,250  —  —  2,198,250 
Money market fund  100,973,447  —  —  100,973,447 
     Total  $1,089,495,815  —  $21,218,125  $1,110,713,940 

 

The aggregate value of Level 3 portfolio investments changed during the six months ended June 30, 2012 as follows: 
 
Change in portfolio valuations using signifi cant unobservable inputs    Level 3 
Fair value at December 31, 2011    $19,860,500 
Net change in unrealized appreciation on investments    1,357,625 
Fair value at June 30, 2012    $21,218,125 
 
The increase in net unrealized appreciation included in the results of operations attributable to   
Level 3 assets held at June 30, 2012 and reported within the caption Net change in   
unrealized appreciation/depreciation in the Statement of Operations:    $1,357,625 
3. PURCHASES AND SALES OF SECURITIES - Purchases and sales of securities (other than short-term securities and options) for the six 
months ended June 30, 2012 amounted to $36,480,601 and $121,288,949, on long transactions, respectively. 
4. WRITTEN OPTIONS - Transactions in written call options during the six months ended June 30, 2012 were as follows: 
  Contracts  Premiums 
Options outstanding, December 31, 2011  0  $0 
Options written  300  311,107 
Options exercised  (100)  (101,421) 
Options terminated in closing purchase transaction  (200)  (209,686) 
Options outstanding, June 30, 2012  0  $0 

 

5. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS - The authorized capital stock of the Company consists of 50,000,000 shares 
Common Stock, $1.00 par value, and 10,000,000 shares of Preferred Stock, $1.00 par value. With respect to the Common Stock, 
28,650,132 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on 
June 30, 2012. 
 
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 up to 1 million Preferred Shares in the open market at prices below $25.00 per share. To date, 
395,313 shares have been repurchased. 
 
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. 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 to 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. 

 




5. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS - (Continued from bottom of previous page.) 
The Company presents its Preferred Stock, for which its redemption is 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 six months ended June 30, 2012 and the year ended December 31, 2011 were as follows: 

 

  Shares Amount 
  2012    2011  2012  2011 
Shares issued in payment of dividends and distributions             
 (includes 278,416 shares issued from treasury)  —    278,416  —  $278,416 
Increase in paid-in capital        —  6,815,640 
 Total increase        —  7,094,056 
Shares purchased (at an average discount from net asset value           
 of 14.5% and 14.6%, respectively)  1,116,257    935,321  ($1,116,257)  (935,321) 
Decrease in paid-in capital        (29,562,975)  (23,367,136) 
 Total decrease        (30,679,232)  (24,302,457) 
Net decrease        ($30,679,232)  ($17,208,401) 

 

At June 30, 2012, the Company held in its treasury 3,330,740 shares of Common Stock with an aggregate cost in the amount of 
$85,816,368. 
 
6. OFFICERS’ COMPENSATION - The aggregate compensation accrued and paid by the Company during the six months ended June 30, 
2012 to its offi cers (identifi ed on back cover) amounted to $3,430,333. 
 
7. BENEFIT PLANS - The Company has funded (qualifi ed) and unfunded (supplemental) noncontributory defi ned benefi t pension plans 
that are available to its employees. The plans provide defi ned benefi ts based on years of service and final average salary with an offset 
for a portion of social security covered compensation. The components of the net periodic benefi t cost (income) of the plans for the six 
months ended June 30, 2012 were: 

 

Service cost  $258,853 
Interest cost  376,456 
Expected return on plan assets  (511,692) 
Amortization of prior service cost  23,297 
Recognized net actuarial loss  345,849 
Net periodic benefi t cost  $492,763 

 

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 
employees. The aggregate cost of such plans for the six months ended June 30, 2012 was $433,216. The qualifi ed thrift plan acquired 
15,200 shares of the Company’s Common Stock during the six months ended June 30, 2012 and held 595,044 shares of the Company’s 
Common Stock at June 30, 2012. 
 
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 $548,300 for the six months ended June 30, 2012. Minimum rental commitments 
under the operating lease are approximately $1,183,000 in 2013 through 2017, and $99,000 in 2018. 

 


Previous purchases of the Company’s Common and Preferred Stock are set forth in Note 5 on pages 10 and 11. Prospective purchases of Common 
and Preferred Stock 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, 2012 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 May 18, 2012, the Company submitted a CEO annual certification to the New York Stock Exchange (“NYSE”) on which the Company’s princi- 
pal 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, Chief Executive Officer 
Jeffrey W. Priest, President 
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  6201 15th Avenue
Ernst & Young LLP  Brooklyn, NY 11219
  1-800-413-5499
CUSTODIAN  www.amstock.com
State Street Bank and 
     Trust Company   

 

  REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM

To the Board of Directors and Stockholders of
GENERAL AMERICAN INVESTORS COMPANY, INC.

We have reviewed the accompanying statement of assets and liabilities of Gen-
eral American Investors Company, Inc., (the “Company”) including the statements
of investments and call options written, as of June 30, 2012, the related statements
of operations and changes in net assets and financial highlights for the six-month
period ended June 30, 2012. These financial statements and financial highlights are
the responsibility of the Company’s management.

We conducted our review in accordance with the standards of the Public Com-
pany Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures to financial data,
and making inquiries of persons responsible for financial and accounting matters. It
is substantially less in scope than an audit in accordance with the standards of the
Public Company Accounting Oversight Board, the objective of which is the expres-
sion of an opinion regarding the financial statements taken as a whole. Accordingly,
we do not express such an opinion.

Based on our review, we are not aware of any material modifications that should
be made to the interim financial statements referred to above for them to be in con-
formity with U.S. generally accepted accounting principles.

We have previously audited, in accordance with the standards of the Public
Company Accounting Oversight Board, the statement of changes in net assets for
the year ended December 31, 2011 and financial highlights for each of the five years
in the period then ended and in our report, dated February 3, 2012 we expressed an
unqualified opinion on such financial statements and financial highlights.

New York, New York

ERNST & YOUNG LLP

August 2, 2012

www.generalamericaninvestors.com 


ITEM 2. CODE OF ETHICS.

 

Not applicable to this semi-annual report.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

 

Not applicable to this semi-annual report.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

Not applicable to this semi-annual report.

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

Not applicable to this semi-annual report.

 

ITEM 6. SCHEDULE OF INVESTMENTS

 

The schedule of investments in securities of unaffiliated issuers is included as

part of the report to stockholders filed under Item 1 of this form.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END

MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable to this semi-annual report.

 

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable to this semi-annual report.

 

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

 

(a) General American Investors Company, Inc. Common Stock (GAM)

 

Period

(a) Total Number

(b) Average Price

(c) Total Number of Shares

(d) Maximum Number (or Approximate

2012

of shares (or Units)

Paid per Share

(or Units) Purchased as Part

Dollar Value) of Shares (or Units)

 

Purchased

(or Unit)

of Publicly Announced Plans

that May Yet Be Purchased Under

 

 

 

or Programs

the Plans or Programs

01/01-01/31

285,000

26.1098

285,000

813,818

02/01-02/28

147,673

28.1544

147,673

666,145

03/01-03/31

154,484

28.7027

154,484

511,661

04/01-04/30

168,100

28.8046

168,100

343,561

05/01-05/31

206,200

27.5528

206,200

137,361

06/01-06/30

154,800

26.6328

154,800

982,561

 

 

 

 

 

Total for year

1,116,257

 

1,116,257

 

 

 

 

 

 

 

  On June 11, 2012, the Board of Directors authorized and the registrant announced the repurchase of

  up to 1,000,000 shares of the registranst's common stock when the shares are trading at a discount from the

Note-

underlying net asset value of at least 8%. This represents a continuation of the repurchase program which began

 

in March 1995.  As of the beginning of the period, January 1, 2012, there were 1,098,818 shares available for 

 

repurchase under such authorization. As of the end of the period, June 30, 2012, there were 982,561

 

shares available for repurchase under this program.

 

 

 

 

(b) General American Investors Company, Inc. Preferred Stock (GAMpB)

 

Period

(a) Total Number

(b) Average Price

(c) Total Number of Shares

(d) Maximum Number (or Approximate

2012

of shares (or Units)

Paid per Share

(or Units) Purchased as Part

Dollar Value) of Shares (or Units)

 

Purchased

(or Unit)

of Publicly Announced Plans

that May Yet Be Purchased Under

 

 

 

or Programs

the Plans or Programs

01/01-01/31

-

 

-

604,687

02/01-02/28

-

 

-

604,687

03/01-03/31

-

 

-

604,687

04/01-04/30

-

 

-

604,687

05/01-05/31

-

 

-

604,687

06/01-06/30

-

 

-

604,687

 

 

 

 

 

Total

0

 

0

 

 

 

 

 

 

 

Note-

The Board of Directors has authorized the repurchase of the registrant's preferred stock when the shares are

 

trading at a price not in excess of $25.00 per share. This represents a repurchase program which began on

 

December 10, 2008. As of the beginning of the period, January 1, 2012, there were 604,687 shares available

 

for repurchase under such authorization. As of the end of the period, June 30, 2012,

 

there were 604,687 shares available for repurchase under this program.

 

 

  ITEM 10.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

There have been no material changes to the procedures by which shareholders may

recommend nominees to the registrant's   Board of Directors as set forth in the

registrant's Proxy Statement, dated February 22, 2012.

 

ITEM 11. CONTROLS AND PROCEDURES.

 

Conclusions of principal officers concerning controls and procedures

 

(a) As of June 30, 2012, an evaluation was performed   under the   supervision and with   the  

participation of the officers of General American Investors Company, Inc. (the "Registrant"),
including the principal executive officer ("PEO") and principal financial officer ("PFO"), to
assess the effectiveness of the Registrant's disclosure controls and procedures. Based on that
evaluation, the Registrant's officers, including the PEO and PFO, concluded that, as of
June 30, 2012, the Registrant's disclosure controls and procedures were reasonably designed
so as to ensure: (1) that information required to be disclosed by the Registrant on Form N-CSR
is recorded, processed, summarized and reported within the time periods specified by the rules
and forms of the Securities and Exchange Commission; and (2) that material information relating
to the Registrant is made known to the PEO and PFO as appropriate to allow timely decisions
regarding required disclosure.

 

(b) There have been no significant changes in the Registrant's internal control

over financial reporting   (as defined in Rule   30a-3(d)   under the   Investment

Company Act of 1940 (17 CFR 270.30a-3(d))   that occurred during the Registrant's

last fiscal quarter that has   materially   affected,   or is reasonably   likely to

materially affect, the Registrant's internal control over financial reporting.

 

ITEM 12. EXHIBITS

 

(a)(1) The code of ethics disclosure required by Item 2 is not applicable to

this semi-annual report.

 

(a)(2)   Certifications   of the   principal   executive   officer and the   principal

financial officer pursuant to Rule 30a-2(a)under the Investment Company Act of

1940.

 

(a)(3) There were no written   solicitations   to purchase   securities   under Rule

23c-1 under the Investment   Company Act of 1940 during the period covered by the

report.

 

(b)   Certifications   of   the   principal   executive   officer   and   the   principal

financial officer, as required by Rule 30a-2(b) under the Investment Company Act

of 1940.

 

 

SIGNATURES

 

   Pursuant to the requirements of the Securities Exchange Act of 1934 and

the Investment Company Act of 1940, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

 

General American Investors Company, Inc.

 

By:      /s/Eugene S. Stark

Eugene S. Stark

Vice-President, Administration

 

Date: August 6, 2012

 

   Pursuant to the requirements of the Securities Exchange Act of 1934 and

the Investment Company Act of 1940, this report has been signed below by the

following persons on behalf of the registrant and in the capacities and on the

dates indicated.

 

By:      /s/Spencer Davidson

             Spencer Davidson

Chairman, President and Chief Executive Officer

(Principal Executive Officer)

 

Date: August 6, 2012

 

By:      /s/Eugene S. Stark

Eugene S. Stark

Vice-President, Administration

(Principal Financial Officer)

 

Date: August 6, 2012