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 three months ended March 31, 2013, the | specifically, housing and basic industry exhibited | ||||
| net asset value per Common Share increased | marked improvements, leading many to conclude | ||||
| 10.5%, while the investment return to our | that the U.S. continues to experience a broadening | ||||
| stockholders increased by 12.3%. By comparison, | expansion. | ||||
| our benchmark, the Standard & Poor’s 500 Stock | |||||
| Index (including income), increased 10.6%. For the | Asset classes with weak performance on a relative | ||||
| twelve months ended March 31, 2013, the return on | basis were largely confined to commodities and for- | ||||
| the net asset value per Common Share increased by | eign markets whose central banks did not engage in | ||||
| 13.4%, and the return to our stockholders increased | quantitative easing. Recent speeches and published | ||||
| by 15.7%; these compare with an increase of 14.0% | commentaries by members of the Federal Reserve | ||||
| for the S&P 500. During both periods, the discount at | suggest a long-term continuation of easy money poli- | ||||
| which our shares traded continued to fluctuate and on | cies and promises of more monetary stimulus, if con- | ||||
| March 31, 2013, it was 13.5%. | ditions warrant. In this environment, we continue to | ||||
| believe that equities offer a better outlook than fixed | |||||
| As detailed in the accompanying financial statements | income investments. Equity price-to-earnings ratios, | ||||
| (unaudited), as of March 31, 2013, the net assets | though modestly elevated by historical standards, | ||||
| applicable to the Company’s Common Stock were | appear less compelling if one accounts for corpo- | ||||
| $1,066,906,005 equal to $36.11 per Common Share. | rate profit margins, which are near 65-year highs. | ||||
| Because equities are no longer undervalued broadly, | |||||
| The increase in net assets resulting from operations | our expectations over the near-term are more muted. | ||||
| for the three months ended March 31, 2013 was | |||||
| $102,385,701. During this period, the net realized | Ms. D. Ellen Shuman, a director since 2004, decided | ||||
| gain on investments sold was $28,154,589, and | not to stand for re-election at the annual meeting | ||||
| the increase in net unrealized appreciation was | held today. Her wisdom, judgment, and service as | ||||
| $76,188,836 . Net investment income for the | the Chair of the Audit Committee and prior thereto | ||||
| three months was $870,269, and distributions to | as Chair of the Compliance Committee have been | ||||
| Preferred Stockholders amounted to $2,827,993. | invaluable to the Board of Directors. We express our | ||||
| gratitude and deep appreciation for her distinguished | |||||
| During the three months, 6,366 shares of the | service to the Company. | ||||
| Company’s Common Stock were repurchased for | |||||
| $197,952 at an average discount from net asset value | Information about the Company, including our | ||||
| of 13.0%. | investment objectives, operating policies and | ||||
| procedures, investment results, record of dividend | |||||
| The first quarter rally in stocks was among the best in | and distribution payments, financial reports and press | ||||
| decades and General American Investors participated | releases, is on our website and has been updated | ||||
| fully. | through March 31, 2013. It can be accessed on the | ||||
| internet at www.generalamericaninvestors.com. | |||||
| Faced with weakened European banks and economic | |||||
| performance, increases in payroll and upper-income | By Order of the Board of Directors, | ||||
| tax rates in the U.S., damage to infrastructure from | |||||
| Hurricane Sandy, and the prospect of the fiscal | GENERAL AMERICAN INVESTORS COMPANY, INC. | ||||
| sequester, many market forecasters anticipated weak | |||||
| equity market performance for the first half of the | Jeffrey W. Priest | ||||
| year. In fact, gloom was priced-in at the start of the | President and Chief Executive Officer | ||||
| New Year, and U.S. markets reached new highs. | April 10, 2013 | ||||
| Earnings modestly improved quarter-over-quarter— | |||||
| Value | |||||||
| Shares | COMMON STOCKS | (note 1a) | |||||
| CONSUMER | AUTOMOBILES AND COMPONENTS (3.3%) | ||||||
| DISCRETIONARY | 1,264,063 | Ford Motor Company | $16,622,428 | ||||
| (15.4 | %) | 330,211 | Visteon Corporation (a) | 19,053,175 | |||
| (Cost $34,971,752) | 35,675,603 | ||||||
| CONSUMER SERVICES (1.2%) | |||||||
| 750,000 | International Game Technology | (Cost $8,678,620) | 12,375,000 | ||||
| RETAILING (10.9%) | |||||||
| 284,050 | Kohl’s Corporation | 13,103,227 | |||||
| 460,000 | Target Corporation | 31,487,000 | |||||
| 1,544,668 | The TJX Companies, Inc. | 72,213,229 | |||||
| (Cost $44,127,891) | 116,803,456 | ||||||
| (Cost $87,778,263) | 164,854,059 | ||||||
| CONSUMER | FOOD, BEVERAGE AND TOBACCO (11.8%) | ||||||
| STAPLES | 350,000 | Diageo plc ADR | 44,044,000 | ||||
| (15.7 | %) | 450,000 | Nestle S.A. | 32,504,963 | |||
| 240,000 | PepsiCo, Inc. | 18,986,400 | |||||
| 728,845 | Unilever N.V. | 29,981,906 | |||||
| (Cost $66,076,185) | 125,517,269 | ||||||
| FOOD AND STAPLES RETAILING (3.9%) | |||||||
| 394,500 | Costco Wholesale Corporation | (Cost $12,041,935) | 41,860,395 | ||||
| (Cost $78,118,120) | 167,377,664 | ||||||
| ENERGY | 818,069 | Alpha Natural Resources, Inc. (a) | 6,716,346 | ||||
| (9.0 | %) | 331,478 | Apache Corporation | 25,576,842 | |||
| 300,000 | Canadian Natural Resources Limited | 9,639,000 | |||||
| 725,000 | Halliburton Company | 29,297,250 | |||||
| 2,050,000 | Weatherford International Ltd. (a) | 24,887,000 | |||||
| (Cost $74,347,982) | 96,116,438 | ||||||
| FINANCIALS | BANKS (1.8%) | ||||||
| (25.3 | %) | 425,000 | Bond Street Holdings LLC, Class A (a) (b) | 6,375,000 | |||
| 75,000 | Bond Street Holdings LLC, Class B (a) (c) | 1,068,750 | |||||
| 110,000 | M&T Bank Corporation | 11,347,600 | |||||
| (Cost $10,560,176) | 18,791,350 | ||||||
| DIVERSIFIED FINANCIALS (6.0%) | |||||||
| 315,000 | American Express Company | 21,249,900 | |||||
| 475,000 | JPMorgan Chase & Co. | 22,543,500 | |||||
| 587,500 | Nelnet, Inc. | 19,857,500 | |||||
| (Cost $35,912,515) | 63,650,900 | ||||||
| INSURANCE (17.5%) | |||||||
| 330,492 | Aon Corporation | 20,325,258 | |||||
| 825,000 | Arch Capital Group Ltd. (a) | 43,370,250 | |||||
| 110 | Berkshire Hathaway Inc. Class A (a) | 17,190,800 | |||||
| 240,000 | Everest Re Group, Ltd. | 31,166,400 | |||||
| 53,500 | Forethought Financial Group, Inc. Class A (a) (d) | 12,572,500 | |||||
| 400,000 | MetLife, Inc. | 15,208,000 | |||||
| 260,000 | PartnerRe Ltd. | 24,208,600 | |||||
| 400,000 | Platinum Underwriters Holdings, Ltd. | 22,324,000 | |||||
| (Cost $76,767,943) | 186,365,808 | ||||||
| (Cost $123,240,634) | 268,808,058 | ||||||
| Value | ||||||
| Shares | COMMON STOCKS (continued) | (note 1a) | ||||
| HEALTH CARE | PHARMACEUTICALS, BIOTECHNOLOGY AND LIFE SCIENCES | |||||
| (5.7 | %) | 120,000 | Celgene Corporation (a) | $13,909,200 | ||
| 789,211 | Cytokinetics, Incorporated (a) | 899,701 | ||||
| 428,600 | Gilead Sciences, Inc. (a) | 20,975,684 | ||||
| 858,979 | Idenix Pharmaceuticals, Inc. (a) | 3,040,786 | ||||
| 755,808 | Pfizer Inc. | 21,812,619 | ||||
| (Cost $32,892,208) | 60,637,990 | |||||
| INDUSTRIALS | CAPITAL GOODS (6.5%) | |||||
| (14.7 | %) | 1,200,000 | ABB Ltd. ADR | 27,312,000 | ||
| 360,000 | Owens Corning (a) | 14,194,800 | ||||
| 300,000 | United Technologies Corporation | 28,029,000 | ||||
| (Cost $44,819,903) | 69,535,800 | |||||
| COMMERCIAL AND PROFESSIONAL SERVICES (8.2%) | ||||||
| 292,500 | The ADT Corporation | 14,314,950 | ||||
| 1,087,100 | Republic Services, Inc. | 35,874,300 | ||||
| 263,998 | Towers Watson & Co. Class A | 18,300,341 | ||||
| 475,000 | Waste Management, Inc. | 18,624,750 | ||||
| (Cost $62,822,378) | 87,114,341 | |||||
| (Cost $107,642,281) | 156,650,141 | |||||
| INFORMATION | SEMICONDUCTORS AND EQUIPMENT (2.0%) | |||||
| TECHNOLOGY | 311,850 | ASML Holding N.V. | (Cost $4,663,838) | 21,202,682 | ||
| (14.5 | %) | |||||
| SOFTWARE AND SERVICES (2.1%) | ||||||
| 795,000 | Microsoft Corporation | (Cost $20,749,343) | 22,740,975 | |||
| TECHNOLOGY HARDWARE AND EQUIPMENT (10.4%) | ||||||
| 67,000 | Apple Inc. | 29,658,220 | ||||
| 960,000 | Cisco Systems, Inc. | 20,059,200 | ||||
| 615,000 | EMC Corporation (a) | 14,692,350 | ||||
| 700,000 | QUALCOMM Incorporated | 46,858,000 | ||||
| (Cost $76,036,872) | 111,267,770 | |||||
| (Cost $101,450,053) | 155,211,427 | |||||
| MATERIALS | 100,000 | Nucor Corporation | (Cost $4,231,438) | 4,615,000 | ||
| (0.4 | %) | |||||
| MISCELLANEOUS | Other (e) | (Cost $43,255,337) | 44,121,408 | |||
| (4.1 | %) | |||||
| TELECOMMUNICATION | 523,100 | Vodafone Group plc ADR | (Cost $13,766,306) | 14,856,040 | ||
| SERVICES (1.4 | %) | |||||
| TOTAL COMMON STOCKS (106.2%) | (Cost $666,722,622) | 1,133,248,225 | ||||
| Value | ||||
| Shares | SHORT-TERM SECURITY AND OTHER ASSETS | (note 1a) | ||
| 130,653,060 | SSgA U.S. Treasury Money Market Fund (12.2%) | (Cost $130,653,060) | $130,653,060 | |
| TOTAL INVESTMENTS (f) (118.4%) | (Cost $797,375,682) | 1,263,901,285 | ||
| Liabilities in excess of cash, receivables and other assets (-0.6%) | (6,878,105 | ) | ||
| PREFERRED STOCK (-17.8%) | (190,117,175 | ) | ||
| NET ASSETS APPLICABLE TO COMMON STOCK (100%) | $1,066,906,005 | |||
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 $15.00 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 $14.25 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 $235.00 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 March 31, 2013 the cost of investments for Federal income tax purposes was the same as the cost for financial reporting purposes, aggregate gross unrealized appreciation was $482,894,542 aggregate gross unrealized depreciation was $16,368,939, and net unrealized appreciation was $466,525,603.
| Contracts | Value | ||||
| Call Option | (100 shares each) | COMMON STOCK/EXPIRATION DATE/EXERCISE PRICE | (note 1a) | ||
| SEMICONDUCTORS | |||||
| AND EQUIPMENT | 300 | ASML Holding N.V./April 20, 2013/$4.70 | (Premium Received with Broker $104,999) | $141,000 | |
| Put Option | |||||
| SOFTWARE | |||||
| AND SERVICES | 900 | eBay Inc./May 18, 2013/$50.00 | (Premium Deposited with Broker $202,872) | 82,800 | |
| TOTAL CALL AND PUT OPTIONS | (Premiums $307,871) | $223,800 | |||
(see notes to unaudited financial statements)
| SHARES | SHARES | |||
| INCREASES | TRANSACTED | HELD | ||
| NEW POSITIONS | ||||
| The ADT Corporation | — | 292,500 | (b) | |
| EMC Corporation | 185,000 | 615,000 | (b) | |
| Idenix Pharmaceuticals, Inc. | 488,565 | 858,979 | (b) | |
| Owens Corning | — | 360,000 | (b) | |
| ADDITIONS | ||||
| Alpha Natural Resources, Inc. | 393,069 | 818,069 | ||
| Cytokinetics, Incorporated | 87,100 | 789,211 | ||
| Republic Services, Inc. | 130,000 | 1,087,100 | ||
| Vodafone Group Plc ADR | 50,000 | 523,100 | ||
| DECREASES | ||||
| ELIMINATIONS | ||||
| Epoch Holding Corporation | 912,562 | — | ||
| JPMorgan Chase & Co. Warrants Expiring 10/28/2018 | 225,000 | — | ||
| The Manitowoc Company, Inc. | 825,000 | — | ||
| REDUCTIONS | ||||
| Celgene Corporation | 30,000 | 120,000 | ||
| Halliburton Company | 25,000 | 725,000 | ||
| JPMorgan Chase & Co. | 25,000 | 475,000 | ||
| Nelnet, Inc. | 82,500 | 587,500 | ||
| Nucor Corporation | 100,000 | 100,000 | ||
| PepsiCo, Inc. | 10,991 | 240,000 | ||
| United Technologies Corporation | 25,000 | 300,000 | ||
| Waste Management, Inc. | 155,000 | 475,000 |
| (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. |
| PERCENT COMMON | |||||||
| INDUSTRY CATEGORY | COST(000) | VALUE(000) | NET ASSETS | ||||
| Financials | |||||||
| Banks | $10,560 | $18,791 | 1.8 | % | |||
| Diversified Financials | 35,913 | 63,651 | 6.0 | ||||
| Insurance | 76,768 | 186,366 | 17.5 | ||||
| 123,241 | 268,808 | 25.3 | |||||
| Consumer Staples | |||||||
| Food, Beverage & Tobacco | 66,076 | 125,517 | 11.8 | ||||
| Food & Staples Retailing | 12,042 | 41,861 | 3.9 | ||||
| 78,118 | 167,378 | 15.7 | |||||
| Consumer Discretionary | |||||||
| Automobiles & Components | 34,972 | 35,676 | 3.3 | ||||
| Consumer Services | 8,679 | 12,375 | 1.2 | ||||
| Retailing | 44,128 | 116,803 | 10.9 | ||||
| 87,779 | 164,854 | 15.4 | |||||
| Industrials | |||||||
| Capital Goods | 44,820 | 69,536 | 6.5 | ||||
| Commercial & Professional Services | 62,822 | 87,114 | 8.2 | ||||
| 107,642 | 156,650 | 14.7 | |||||
| Information Technology | |||||||
| Semiconductors & Equipment | 4,664 | 21,203 | 2.0 | ||||
| Software & Services | 20,749 | 22,741 | 2.1 | ||||
| Technology Hardware & Equipment | 76,037 | 111,268 | 10.4 | ||||
| 101,450 | 155,212 | 14.5 | |||||
| Energy | 74,348 | 96,116 | 9.0 | ||||
| Health Care | |||||||
| Pharmaceuticals, Biotechnology & Life Sciences |
32,892 | 60,638 | 5.7 | ||||
| Miscellaneous** | 43,255 | 44,121 | 4.1 | ||||
| Telecommunication Services | 13,766 | 14,856 | 1.4 | ||||
| Materials | 4,232 | 4,615 | 0.4 | ||||
| 666,723 | 1,133,248 | 106.2 | |||||
| Short-Term Securities | 130,653 | 130,653 | 12.2 | ||||
| Total Investments | $797,376 | 1,263,901 | 118.4 | ||||
| Other Assets and Liabilities - Net | (6,878 | ) | (0.6 | ) | |||
| Preferred Stock | (190,117 | ) | (17.8 | ) | |||
| Net Assets Applicable to Common Stock | $1,066,906 | 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 $666,722,622) | $1,133,248,225 | |||
| Money market fund (cost $130,653,060) | 130,653,060 | |||
| Total investments (cost $797,375,682) | 1,263,901,285 | |||
| RECEIVABLES AND OTHER ASSETS | ||||
| Cash held by custodian in segregated account* | $4,964,826 | |||
| Receivable for securities sold | 963,684 | |||
| Dividends, interest and other receivables | 1,116,949 | |||
| Qualified pension plan asset, net excess funded (note 7) | 826,312 | |||
| Prepaid expenses and other assets | 1,789,748 | 9,661,519 | ||
| TOTAL ASSETS | 1,273,562,804 | |||
| LIABILITIES | ||||
| Payable for securities purchased | 6,792,843 | |||
| Accrued preferred stock dividend not yet declared | 219,955 | |||
| Outstanding option written, at value (premium received $307,871) | 223,800 | |||
| Accrued supplemental pension plan liability (note 7) | 5,035,144 | |||
| Accrued supplemental thrift plan liability (note 7) | 2,674,651 | |||
| Accrued expenses and other liabilities | 1,593,231 | |||
| TOTAL LIABILITIES | 16,539,624 | |||
| 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 - 29,547,654 shares (note 5) | $1,066,906,005 | |||
| NET ASSET VALUE PER COMMON SHARE | $36.11 | |||
| NET ASSETS APPLICABLE TO COMMON STOCK | ||||
| Common Stock, 29,547,654 shares at par value (note 5) | $29,547,654 | |||
| Additional paid-in capital (note 5) | 551,230,103 | |||
| Undistributed net investment income (note 5) | 1,817,430 | |||
| Undistributed realized gain on investments | 28,521,891 | |||
| Accumulated other comprehensive income (note 7) | (7,772,799 | ) | ||
| Unallocated distributions on Preferred Stock | (3,047,948 | ) | ||
| Unrealized appreciation on investments | 466,609,674 | |||
| NET ASSETS APPLICABLE TO COMMON STOCK | 1,066,906,005 | |||
* Collateral for options written.
(see notes to unaudited financial statements)
| INCOME | |||||
| Dividends (net of foreign withholding taxes of $49,213) | $3.984,446 | ||||
| EXPENSES | |||||
| Investment research | $1,584,587 | ||||
| Administration and operations | 869,996 | ||||
| Office space and general | 417,063 | ||||
| Directors’ fees and expenses | 65,917 | ||||
| Auditing and legal fees | 60,000 | ||||
| Transfer agent, custodian and registrar fees and expenses | 53,899 | ||||
| Miscellaneous taxes | 53,141 | ||||
| Stockholders’ meeting and reports | 9,574 | 3,114,177 | |||
| NET INVESTMENT INCOME | 870,269 | ||||
| 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 $1,173,149) | 28,153,554 | ||||
| Written option transactions (notes 1b and 4) | 1,035 | ||||
| 28,154,589 | |||||
| Net increase in unrealized appreciation on investments | 76,188,836 | ||||
| NET GAIN ON INVESTMENTS | 104,343,425 | ||||
| DISTRIBUTIONS TO PREFERRED STOCKHOLDERS | (2,827,993 | ) | |||
| INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $102,385,701 | ||||
| Three Months Ended | ||||||
| March 31, 2013 | Year Ended | |||||
| OPERATIONS | (Unaudited) | December 31, 2012 | ||||
| Net investment income | $870,269 | $6,973,024 | ||||
| Net realized gain on investments | 28,154,589 | 60,458,284 | ||||
| Net increase in unrealized appreciation | 76,188,836 | 84,267,705 | ||||
| 105,213,694 | 151,699,013 | |||||
| Distributions to Preferred Stockholders: | ||||||
| From net investment income | — | (1,205,766 | ) | |||
| From short-term capital gains | — | (85,020 | ) | |||
| From long-term capital gains | — | (10,021,186 | ) | |||
| Unallocated distributions | (2,827,993 | ) | — | |||
| Decrease in net assets from Preferred distributions | (2,827,993 | ) | (11,311,972 | ) | ||
| INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | 102,385,701 | 140,387,041 | ||||
| OTHER COMPREHENSIVE INCOME - Funded status of defined benefit plans (note 7) | — | (87,605 | ) | |||
| DISTRIBUTIONS TO COMMON STOCKHOLDERS | ||||||
| From net investment income | — | (6,109,048 | ) | |||
| From short-term capital gains | — | (430,801 | ) | |||
| From long-term capital gains | — | (50,405,654 | ) | |||
| DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS | — | (56,945,503 | ) | |||
| CAPITAL SHARE TRANSACTIONS (NOTE 5) | ||||||
| Value of Common Shares issued in payment of dividends and distributions | 9,300,595 | 21,554,674 | ||||
| Cost of Common Shares purchased | (197,952 | ) | (36,028,316 | ) | ||
| INCREASE (DECREASE) IN NET ASSETS - CAPITAL TRANSACTIONS | 9,102,643 | (14,473,642 | ) | |||
| NET INCREASE IN NET ASSETS | 111,488,344 | 68,880,291 | ||||
| NET ASSETS APPLICABLE TO COMMON STOCK | ||||||
| BEGINNING OF PERIOD | 955,417,661 | 886,537,370 | ||||
| END OF PERIOD (including undistributed net investment income of $1,817,430 and | ||||||
| $947,161, respectively) | $1,066,906,005 | $955,417,661 | ||||
(see notes to unaudited financial statements)
The following table shows per share operating performance data, total investment return, ratios and supplemental data for the three months ended
March 31, 2013 and for each year in the five-year period ended December 31, 2012. This information has been derived from information contained
in the financial statements and market price data for the Company’s shares.
| Three Months | |||||||||||||
| Ended | |||||||||||||
| March 31, 2013 | Year Ended December 31, | ||||||||||||
| (Unaudited) | 2012 | 2011 | 2010 | 2009 | 2008 | ||||||||
| PER SHARE OPERATING PERFORMANCE | |||||||||||||
| Net asset value, beginning of period | $32.68 | $29.78 | $31.26 | $27.50 | $21.09 | $38.10 | |||||||
| Net investment income | .03 | .24 | .18 | .19 | .11 | .42 | |||||||
| Net gain (loss) on securities - | |||||||||||||
| realized and unrealized | 3.50 | 5.05 | (.68 | ) | 4.37 | 6.94 | (16.15 | ) | |||||
| Other comprehensive income | — | — | (.10 | ) | — | .07 | (.25 | ) | |||||
| 3.53 | 5.29 | (.60 | ) | 4.56 | 7.12 | (15.98 | ) | ||||||
| Distributions on Preferred Stock: | |||||||||||||
| Dividends from net investment income | — | (.04 | ) | (.11 | ) | (.07 | ) | (.11 | ) | (.11 | ) | ||
| Distributions from net short-term capital gains | — | (.01 | ) | (.01 | ) | (.03 | ) | (.05 | ) | — | |||
| Distributions from net long-term capital gains | — | (.34 | ) | (.26 | ) | (.27 | ) | (.19 | ) | (.27 | ) | ||
| Distributions from return of capital | — | — | — | — | (.01 | ) | — | ||||||
| Unallocated | (.10 | ) | — | — | — | — | — | ||||||
| (.10 | ) | (.39 | ) | (.38 | ) | (.37 | ) | (.36 | ) | (.38 | ) | ||
| Total from investment operations | 3.43 | 4.90 | (.98 | ) | 4.19 | 6.76 | (16.36 | ) | |||||
| Distributions on Common Stock: | |||||||||||||
| Dividends from net investment income | — | (.21 | ) | (.15 | ) | (.08 | ) | (.10 | ) | (.19 | ) | ||
| Distributions from net short-term capital gains | — | (.02 | ) | (.01 | ) | (.03 | ) | (.05 | ) | — | |||
| Distributions from net long-term capital gains | — | (1.77 | ) | (.34 | ) | (.32 | ) | (.19 | ) | (.46 | ) | ||
| Distributions from return of capital | — | — | — | — | (.01 | ) | — | ||||||
| — | (2.00 | ) | (.50 | ) | (.43 | ) | (.35 | ) | (.65 | ) | |||
| Net asset value, end of period | $36.11 | $32.68 | $29.78 | $31.26 | $27.50 | $21.09 | |||||||
| Per share market value, end of period | $31.23 | $27.82 | $24.91 | $26.82 | $23.46 | $17.40 | |||||||
| TOTAL INVESTMENT RETURN - Stockholder | |||||||||||||
| return, based on market price per share | 12.26 | %* | 19.77 | % | (5.29 | %) | 16.24 | % | 36.86 | % | (48.20 | %) | |
| RATIOS AND SUPPLEMENTAL DATA | |||||||||||||
| Net assets applicable to Common Stock, | |||||||||||||
| end of period (000’s omitted) | $1,066,906 | $955,418 | $886,537 | $950,941 | $864,323 | $674,598 | |||||||
| Ratio of expenses to average net assets | |||||||||||||
| applicable to Common Stock | 1.23 | %** | 1.67 | % | 1.39 | % | 1.54 | % | 1.93 | % | 0.87 | % | |
| Ratio of net income to average net assets | |||||||||||||
| applicable to Common Stock | 0.34 | %** | 0.74 | % | 0.56 | % | 0.66 | % | 0.46 | % | 1.31 | % | |
| Portfolio turnover rate | 4.27 | %* | 9.56 | % | 11.17 | % | 18.09 | % | 24.95 | % | 25.52 | % | |
| PREFERRED STOCK | |||||||||||||
| Liquidation value, end of period (000’s omitted) | $190,117 | $190,117 | $190,117 | $190,117 | $190,117 | $199,617 | |||||||
| Asset coverage | 661 | % | 603 | % | 566 | % | 600 | % | 555 | % | 438 | % | |
| Liquidation preference per share | $25.00 | $25.00 | $25.00 | $25.00 | $25.00 | $25.00 | |||||||
| Market value per share | $25.57 | $25.54 | $25.47 | $24.95 | $24.53 | $21.90 | |||||||
*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 securities 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. 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 March 31, 2013: |
| Assets | Level 1 | Level 2 | Level 3 | Total | |||||
| Common stocks | $1,113,231,975 | — | $20,016,250 | $1,133,248,225 | |||||
| Money market fund | 130,653,060 | — | — | 130,653,060 | |||||
| Total | $1,243,885,035 | — | $20,016,250 | $1,263,901,285 | |||||
| Liabilities | |||||||||
| Options Written | ($223,800) | ($223,800) | |||||||
| The aggregate value of Level 3 portfolio investments changed during the three months ended March 31, 2013 as follows: |
| Change in portfolio valuations using signifi cant unobservable inputs | Level 3 | ||
| Fair value at December 31, 2012 | $21,218,125 | ||
| Net change in unrealized appreciation on investments | (1,201,875) | ||
| Fair value at March 31, 2013 | $20,016,250 | ||
| The decrease in net unrealized appreciation included in the results of operations attributable to | |||
| Level 3 assets held at March 31, 2013 and reported within the caption Net change in | |||
| unrealized appreciation in the Statement of Operations: | ($1,201,875) | ||
| 3. PURCHASES AND SALES OF SECURITIES - Purchases and sales of securities (other than short-term securities and options) for the three |
| months ended March 31, 2013 amounted to $46,356,496 and $66,911,221, on long transactions, respectively. |
| 4. WRITTEN OPTIONS - The level of activity in written options varies from year to year based upon market conditions. Transactions in |
| written call options and collateralized put options during the three months ended March 31, 2013 were as follows: |
| Covered Calls | Collateralized Puts | ||||||
| Contracts | Premiums | Contracts | Premiums | ||||
| Options outstanding, December 31, 2012 | 300 | $104,999 | 0 | $0 | |||
| Options written | 0 | 0 | 927 | 208,722 | |||
| Options exercised | 0 | 0 | 0 | 0 | |||
| Options terminated in closing purchase transaction | 0 | 0 | (27) | (5,850) | |||
| Options outstanding, March 31, 2013 | 300 | $104,999 | 900 | $202,872 | |||
| 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, |
| 29,547,654 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on |
| March 31, 2013. |
| 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 three months ended March 31, 2013 and the year ended December 31, 2012 were as follows: |
| Shares | Amount | ||||||||||
| 2013 | 2012 | 2013 | 2012 | ||||||||
| Shares issued in payment of dividends and distributions | |||||||||||
| (includes 320,048 and 766,116 shares issued from treasury) | 320,048 | 766,116 | $320,048 | $766,116 | |||||||
| Increase in paid-in capital | 8,980,547 | 20,788,558 | |||||||||
| Total increase | 9,300,595 | 21,554,674 | |||||||||
| Shares purchased (at an average discount from net asset value | |||||||||||
| of 13.0% and 14.5%, respectively) | (6,366 | ) | (1,298,533) | (6,366) | (1,298,533) | ||||||
| Decrease in paid-in capital | (191,586) | (34,729,783) | |||||||||
| Total decrease | (197,952) | (36,028,316) | |||||||||
| Net increase (decrease) | 313,682 | (532,417) | $9,102,643 | ($14,473,642) | |||||||
| At March 31, 2013, the Company held in its treasury 2,433,218 shares of Common Stock with an aggregate cost in the amount of |
| $65,118,717. |
| 6. OFFICERS’ COMPENSATION - The aggregate compensation accrued and paid by the Company during the three months ended March 31, |
| 2013 to its offi cers (identifi ed on back cover) amounted to $1,336,958. |
| 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 |
| three months ended March 31, 2013 were: |
| Service cost | $150,125 | ||
| Interest cost | 185,717 | ||
| Expected return on plan assets | (247,135) | ||
| Amortization of prior service cost | 11,647 | ||
| Recognized net actuarial loss | 219,531 | ||
| Net periodic benefi t cost | $319,885 | ||
| 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 three months ended March 31, 2013 was $269,195. The qualifi ed thrift plan acquired |
| 15,617 shares, sold 28,800 shares and distributed 19,585 shares of the Company’s Common Stock during the three months ended March |
| 31, 2013 and held 452,068 shares of the Company’s Common Stock at March 31, 2013. |
| 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 $274,800 for the three months ended March 31, 2013. 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 April 15, 2013, 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 | Jeffrey W. Priest |
| Gerald M. Edelman | Raymond S. Troubh |
| John D. Gordan, III | |
| *Information as of April 10, 2013 | |
| OFFICERS | |
| Jeffrey W. Priest, President and Chief Executive Officer | |
| Andrew V. Vindigni, Senior Vice-President | |
| Craig A. Grassi, Vice-President | |
| Sally A. Lynch, Vice-President | |
| Michael W. Robinson, Vice-President | |
| Eugene S. Stark, Vice-President, Administration & | |
| Chief Compliance Officer | |
| Diane G. Radosti, Treasurer | |
| Maureen E. LoBello, Secretary | |
| SERVICE COMPANIES | |
| COUNSEL | TRANSFER AGENT AND REGISTRAR |
| Sullivan & Cromwell LLP | American Stock Transfer & Trust |
| INDEPENDENTAUDITORS | Company, LLC |
| Ernst & Young LLP | 6201 15th Avenue |
| Brooklyn, NY 11219 | |
| CUSTODIAN | 1-800-413-5499 |
| State Street Bank and | www.amstock.com |
| Trust Company | |
| RESULTS OF THE ANNUAL MEETING | ||
| OF STOCKHOLDERS | ||
| The votes cast by stockholders at the Company’s annual meeting held | ||
| on April 10, 2013 were as follows: | ||
| FOR | WITHHELD | |
| Election of Directors: | ||
| Rodney B. Berens | 28,037,292 | 4,942,092 |
| Lewis B. Cullman | 28,921,250 | 4,058,134 |
| Spencer Davidson | 30,368,462 | 2,610,922 |
| Gerald M. Edelman | 30,243,001 | 2,736,383 |
| John D. Gordan, III | 30,505,188 | 2,474,196 |
| Betsy F. Gotbaum | 31,223,032 | 1,756,352 |
| Sidney R. Knafel | 30,302,299 | 2,677,085 |
| Daniel M. Neidich | 27,940,798 | 5,038,586 |
| Jeffrey W. Priest | 30,531,206 | 2,448,178 |
| Elected by holders of Preferred Stock only: | ||
| Arthur G. Altschul, Jr. | 6,945,805 | 149,868 |
| Raymond S. Troubh | 6,918,278 | 177,395 |
| Ratification of the selection of Ernst & Young LLP as auditors of the | ||
| Company for the year 2013: | ||
| For - 31,628,031; | Against - 227,765; | Abstain - 1,123,588 |