GAM Holding AG
Annual Report 2001

Plain-text annual report

G E N E R A L A M E R I C A N I N V E S T O R S 2 0 0 1 A N N U A L R E P O R T GENERAL AMERICAN INVESTORS COMPANY, INC. Established in 1927, the Company is a closed-end investment company listed on the New York Stock Exchange. Its objective is long-term capital appreciation through investment in companies with above average growth potential. FINANCIAL SUMMARY Net assets-December 31 Preferred Stock liquidation preference Common Stock Net investment income Net realized gain Net decrease in unrealized appreciation Per Common Share-December 31 Net asset value Market price Discount from net asset value 2001 $1,247,529,720 150,000,000 1,097,529,720 12,512,405 70,720,822 (87,697,439) $35.14 33.47 -4.8% Common Shares outstanding-Dec. 31 Common stockholders of record-Dec. 31 Market price range* (high-low) Market volume-shares 31,231,563 4,900 $39.70-$27.50 5,009,500 *Unadjusted for dividend payments. 2000 $1,305,039,463 150,000,000 1,155,039,463 13,805,530 217,372,941 (45,048,910) $39.91 $36.00 -9.8% 28,940,544 5,182 $44.00-$35.63 4,896,700 DIVIDEND SUMMARY (per share) Record Date Payment Date Ordinary Income Long-Term Capital Gain Common Stock Nov. 15, 2001 Jan. 28, 2002 Dec. 20, 2001 Feb. 11, 2002 Total from 2001 earnings $0.82(a) .19(b) $1.01 (a) Includes short-term gain in the amount of $.45 per share. (b) Represents short-term gain. Nov. 13, 2000 Jan. 29, 2001 Dec. 21, 2000 Mar. 14, 2001 Total from 2000 earnings $1.97(c) .06(d) $2.03 (c) Includes short-term gain in the amount of $1.49 per share. (d) Represents short-term gain. $1.26 .11 $1.37 $4.14 2.02 $6.16 Preferred Stock Mar. 6, 2001 Jun. 6, 2001 Sep. 6, 2001 Dec. 6, 2001 Total for 2001 Mar. 23, 2001 Jun. 25, 2001 Sep. 24, 2001 Dec. 24, 2001 $.0963 .0963 .0963 .0963 $.3852(e) $ .3537 .3537 .3537 .3537 $1.4148 (e) Includes short-term gain in the amount of $.2224 per share ($.0556 per quarter). Mar. 6, 2000 Jun. 6, 2000 Sep. 6, 2000 Dec. 6, 2000 Total for 2000 Mar. 23, 2000 Jun. 23, 2000 Sep. 25, 2000 Dec. 26, 2000 $.1281 .1281 .1281 .1281 $.5124(f) $ .3219 .3219 .3219 .3219 $1.2876 (f) Includes short-term gain in the amount of $.4056 per share ($.1014 per quarter). General American Investors Company, Inc. 450 Lexington Avenue, New York, NY 10017 (212) 916-8400 (800) 436-8401 E-mail: InvestorRelations@gainv.com Total $2.08 .30 $2.38 $6.11 2.08 $8.19 $ .45 .45 .45 .45 $1.80 $ .45 .45 .45 .45 $1.80 1 T O T H E S T O C K H O L D E R S G e n e r a l A m e r i c a n I n v e s t o r s The year just ended marked General American Investors’ 75th Anniversary as a closed-end investment company. It will be remembered most for the tragic events of September 11th. It was also the first time since 1973-74 that our benchmark, the Standard & Poor’s 500 Stock Index (including income), posted back-to-back negative returns, losing 11.9%. By contrast, the return to our common stockholders (assuming reinvestment of all dividends) was 4.3%, resulting from a decline in net asset value per share of 1.20% together with significant shrinkage in the discount at which our shares trade. We are encouraged by our performance, especially when viewed in the context of the extraordinary results of recent years. The table that follows, which compares our returns on an annualized basis with the S&P 500, illustrates that over many years General American has produced superior investment results. Years Stockholder Return S&P 500 3 5 10 20 30 40 20.0% 26.5 15.4 16.6 15.9 13.7 -1.0% 10.7 12.9 15.2 12.3 10.9 Long-term capital gain distributions for 2001 will total $1.37 per share, including $.11 per share that will be distributed in February 2002. Because of tax requirements unique to our industry, gains re- alized in November and December are paid in the following calendar year. Total dividends attribut- able to 2001, including net income and short-term capital gains, amounted to $2.38 per share, or 6.8% of ending net asset value ("NAV"). This percentage has averaged 10.9% over the past 20 years. During 2001, 19,000 common shares of General American were purchased in the open market at an average discount to NAV of 9%. The Board of Directors has authorized repurchases of common shares when they are trading at a discount in excess of 8% of NAV. rates eleven times, to 1.75%, the lowest level in forty years. As a result, the real rate (the nominal rate less inflation) is presently below zero. Together with current deficit spending, these actions should ensure future economic growth. The recovery is likely to be sluggish, however, and gains in corporate profits may well be modest. Importantly, there would seem to be little pent-up demand for consumer durables like cars and hous- es, two traditional well-springs of a cyclical rebound. It may take some time, furthermore, to purge the structural excesses of the last boom when both business and consumer spending rose to levels well above their respective rates of savings. While the number of newly unemployed workers may be receding, the unemployment rate could rise for some time. This would weigh on consumer confidence and spending. In consequence, corporate profits face a number of headwinds and a return to vigorous growth may prove challenging. The relative strength of the dollar continues to impact export demand while adversely affecting the competitive position of U. S. manufacturers at home. With little inflation, more than adequate capacity and balance sheets already stretched, improving profit margins will not be accomplished easily. Markets, however, now reflect more fully subdued expectations for growth and profits. While a return to the environ- ment that produced the out-sized gains of the five years ended in 1999 seems improbable, we are less guarded with respect to the market outlook than we have been in recent reports. We have commenced work on the development of a website for General American. It will include corporate information, current NAV and market price data, historical reports, dividend payments, press releases and a means by which you can con- tact us and our transfer agent. Look for us on “the Web” at www.generalamericaninvestors.com toward the end of the first quarter. The economy appears to be stabilizing amid nascent signs of recovery. In the past, aggressive Federal Reserve Board action has succeeded in end- ing recessions. In 2001, the Fed reduced interest By Order of the Board of Directors, Spencer Davidson President and Chief Executive Officer January 16, 2002 2 T H E C O M P A N Y G e n e r a l A m e r i c a n I n v e s t o r s Corporate Overview and 75th Year General American Investors, established in 1927, is one of the nation’s oldest closed-end investment com- panies. It is an independent organization, internally managed. For regu- latory purposes, the Company is classified as a diversified, closed-end management investment company; it is registered under and subject to the regulatory provisions of the Investment Company Act of 1940. As we celebrate our 75th year, we look back with pride on a record characterized by continuity of management and consistency of purpose with attendant superior returns. Over the last 75 years, the total return (exclusive of operating expenses) indicated for the Company is 13.1% compounded annually. In comparison, the total return for the Standard & Poor’s 500 Stock Index (including income) is 10.6% per year. During our first 21 years, Frank Altschul served as President and portfolio manager. He then served as Chairman followed by his son, Arthur G. Altschul (1961-1995), and by our current Chairman, Lawrence B. Buttenwieser. During this 75-year period, only 6 individuals served as President and portfolio manager; these titles are currently held by Spencer Davidson (since 1995). Investment Policy The primary objective of the Company is long-term capital appreciation. Lesser emphasis is placed on current income. In seeking to achieve its primary objective, the Company invests principally in common stocks believed by its management to have better than average growth potential. The Company’s investment approach focuses on the selection of individual stocks, each of which is expected to meet a clearly defined portfolio objective. A continuous investment research program, which stresses fundamental security analysis, is carried on by the officers and staff of the Company under the oversight of the Board of Directors. A listing of the directors with their principal affiliations, showing a broad range of experience in business and financial affairs, is on page 16 of this report. Portfolio Manager Mr. Spencer Davidson has been responsible for the man- agement of General American’s portfolio since he was elected President and Chief Executive Officer of the Company in August 1995. Mr. Davidson, who joined the Company in 1994 as senior investment counselor, has spent his entire business career on Wall Street since first joining an investment and banking firm in 1966. “GAM” Common Stock As a closed-end investment company, General American Investors does not offer its shares continuously. The Common Stock is listed on The New York Stock Exchange (symbol, GAM) and can be bought or sold with commissions deter- mined in the same manner as all listed stocks. Net asset value is computed daily (on an unau- dited basis) and is furnished upon request. It is also available on most electronic quotation services using the symbol "XGAMX." The fig- ure for net asset value per share, together with the market price and the percentage discount or premium from net asset value as of the close 3 T H E C O M P A N Y G e n e r a l A m e r i c a n I n v e s t o r s of each week, is published in The New York Times, The Wall Street Journal and Barron’s. The ratio of market price to net asset value has shown considerable variation over a long period of time. While shares of GAM usually sell at a discount from their underlying net asset value, as do the shares of most other domestic equity closed-end investment companies, they, periodically, sell at a premium over net asset value. The last time the Company’s shares sold at a premium for a prolonged period was the year-long period from March 1992 through April 1993. During 2001, the stock sold at premiums over and discounts from net asset value which ranged from a premium of 1.8% (July 6) to a discount of 8.5% (September 21). At December 31, the price of the stock was at a discount of 4.8% as compared with a discount of 9.8% a year earlier. “GAM Pr” Preferred Stock On June 19, 1998, the Company issued and sold in an underwritten offering 6,000,000 shares of its 7.20% Tax-Advantaged Cumulative Preferred Stock with a liquidation preference of $25 per share ($150,000,000 in the aggregate). The Preferred Shares are noncallable for 5 years, are rated "aaa" by Moody’s Investors Service, Inc. and are listed and traded on the New York Stock Exchange (symbol, GAM Pr). The preferred capital is available to leverage the investment performance of the Common Stockholders. As is the case for leverage in general, it may also result in higher market volatility for the Common Stockholders. Dividend Policy The Company’s dividend policy is to distribute to stock- holders before year-end substantially all ordinary income estimated for the full year and capital gains realized during the ten- month period ending October 31 of that year. If any additional capital gains are realized or ordinary income is earned during the last two months of the year, a "spill-over" distribution of these amounts will be paid early in the following year to Common Stockholders. Dividends on shares of Preferred Stock are paid quarterly. Distributions from capital gains and ordinary income are allocated proportionately among holders of shares of Common Stock and Preferred Stock. Dividends from income have been paid continuously on the Common Stock since 1939 and capital gain dividends in varying amounts have been paid for each of the years 1943-2001 (except for the year 1974). (A table listing dividends paid during the 20-year peri- od 1982-2001 is shown at the bottom of page 6.) To the extent that full shares can be issued, dividends are paid to Common Stockholders in additional shares of Common Stock unless the stockholder specifically requests payment in cash. Spill-over dividends of nominal amounts are paid in cash only. Privacy Policy and Practices General American Investors collects nonpublic personal in- formation about its customers (stockholders) with respect to their transactions in shares of the Company’s securities but only for those stockholders whose shares are registered in their names. This information includes the stockholder’s address, tax identification or Social Security number and dividend elections. We do not have knowledge of, nor do we collect personal information about, stockhold- ers who hold the Company’s securities at financial institutions such as brokers or banks in “street name” registration. We do not disclose any nonpublic personal in- formation about our stockholders or former stockholders to anyone, except as permitted by law. We restrict access to nonpublic personal infor- mation about our stockholders to those employees who need to know that information to provide services to our stockholders. We maintain physical, electron- ic and procedural safeguards that comply with federal standards to guard our stockholders’ nonpublic personal information. 4 I N V E S T M E N T R E S U L T S G e n e r a l A m e r i c a n I n v e s t o r s Total return on $10,000 investment 20 years ended December 31, 2001 T he investment return for a common stockholder of General American Investors (GAM) over the 20 years ended December 31, 2001 is shown in the table below and in the accompanying chart. The return based on GAM’s net asset value (NAV) per common share in comparison to the change in the Standard & Poor’s 500 Stock Index (S&P 500) is also displayed. Each illustra- tion assumes an investment of $10,000 at the beginning of 1982. The Stockholder Return is the return a common stockholder of GAM would have achieved assuming reinvestment of all optional dividends at the actual reinvestment price and reinvestment of all cash dividends at the average (mean between high and low) market price on the ex-dividend date. The GAM Net Asset Value (NAV) Return is the return on shares of the Company’s com- mon stock based on the NAV per share, including the reinvestment of all dividends. The S&P 500 Return is the time-weighted total rate of return on this widely-recognized, unmanaged index which is a measure of general stock market performance, including dividend income. The results illustrated are a record of past performance and may not be indicative of future results. GENERAL AMERICAN INVESTORS STOCKHOLDER RETURN NET ASSET VALUE RETURN STANDARD & POOR’S 500 RETURN CUMULATIVE INVESTMENT ANNUAL RETURN CUMULATIVE INVESTMENT ANNUAL RETURN CUMULATIVE INVESTMENT ANNUAL RETURN 1982 $ 11,929 19.29 % $ 11,842 18.42 % $12,155 21.55 % 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 13,875 12,881 16,077 17,873 14,994 18,181 27,017 28,098 51,981 59,664 50,165 46,222 56,031 66,946 95,451 1998 125,337 1999 174,494 2000 2001 207,822 216,821 16.31 -7.16 24.81 11.17 -16.11 21.26 48.60 4.00 85.00 14.78 -15.92 -7.86 21.22 19.48 42.58 31.31 39.22 19.10 4.33 14,567 13,534 18,271 20,312 20,826 24,485 33,755 36,013 58,013 60,073 59,021 57,404 70,940 85,107 112,384 151,875 207,158 243,701 240,776 23.01 -7.09 35.00 11.17 2.53 17.57 37.86 6.69 61.09 3.55 -1.75 -2.74 23.58 19.97 32.05 35.14 36.40 17.64 -1.20 14,896 15,831 20,861 24,760 26,057 30,365 39,966 38,731 50,505 54,339 59,838 60,598 83,322 102,411 136,544 175,528 212,318 193,019 170,069 22.55 6.28 31.77 18.69 5.24 16.53 31.62 -3.09 30.40 7.59 10.12 1.27 37.50 22.91 33.33 28.55 20.96 -9.09 -11.89 5 I N V E S T M E N T R E S U L T S G e n e r a l A m e r i c a n I n v e s t o r s 20-YEAR INVESTMENT RESULTS ASSUMING AN INITIAL INVESTMENT OF $10,000 CUMULATIVE VALUE OF INVESTMENT $250,000 COMPARATIVE ANNUALIZED INVESTMENT RESULTS YEARS ENDED DECEMBER 31, 2001 STOCKHOLDER RETURN GAM NET ASSET VALUE S&P 500 STOCK INDEX 1 year 5 years 10 years 15 years 20 years 4.3 % -1.2 % -11.9 % 26.5 15.4 18.1 16.6 23.1 15.3 17.9 17.2 10.7 12.9 13.7 15.2 GAM STOCKHOLDER RETURN GAM NET ASSET VALUE S&P 500 STOCK INDEX 1 9 8 2 1 9 8 3 1 9 8 4 1 9 8 5 1 9 8 6 1 9 8 7 1 9 8 8 1 9 8 9 1 9 9 0 1 9 9 1 1 9 9 2 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 225,000 200,000 175,000 150,000 125,000 100,000 75,000 50,000 25,000 6 M A J O R S T O C K C H A N G E S * : T H R E E M O N T H S E N D E D D E C E M B E R 3 1 , 2 0 0 1 ( U N A U D I T E D ) G e n e r a l A m e r i c a n I n v e s t o r s INCREASES NEW POSITIONS AXT, Inc. Millennium Pharmaceuticals, Inc. Newell Rubbermaid Inc. ADDITIONS Annuity and Life Re (Holdings), Ltd. Brooks Automation, Inc. Golden West Financial Corporation Health Net, Inc. IQE plc MedImmune, Inc. MetLife, Inc. Reinsurance Group of America, Incorporated Wind River Systems, Inc. DECREASES ELIMINATIONS AMR Corporation Brooktrout, Inc. REDUCTIONS AmerUs Group Co. Annaly Mortgage Management, Inc. BioReliance Corporation The Boeing Company Cisco Systems, Inc. Coca-Cola Enterprises Inc. Everest Re Group, Ltd. First Midwest Bancorp, Inc. The Home Depot, Inc. IDEC Pharmaceuticals Corporation John Hancock Financial Services, Inc. OSI Pharmaceuticals, Inc. PartnerRe Ltd. PRI Automation, Inc. Transatlantic Holdings, Inc. Uniroyal Technology Corporation SHARES DECEMBER 31, 2001 SHARES HELD 30,000 — — 10,000 100,000 40,000 100,000 196,000 25,000 50,000 50,000 189,500 500,000 225,000 20,000 50,000 98,200 25,000 25,000 250,000 35,000 58,750 100,000 80,000 20,000 30,000 25,000 200,000 5,000 148,000 213,500 120,000 150,000 (a) (b) (b) 560,000 275,000 525,000 400,000 2,646,000 264,000 300,000 600,000 339,500 — — 300,000 525,000 100,000 475,000 535,000 500,000 575,000 200,000 2,045,000 520,000 440,000 150,000 550,000 120,000 225,000 250,000 (c) * Excludes transactions in Stocks-Miscellaneous-Other. (a) Includes shares purchased in prior period and previously carried under Stocks-Miscellaneous-Other. (b) Shares purchased in prior period and previously carried under Stocks-Miscellaneous-Other. (c) Includes shares received in conjunction with a stock split. D I V I D E N D S P E R C O M M O N S H A R E ( 1 9 8 2 - 2 0 0 1 ) The following table shows aggregate dividends paid per share on the Company’s Common Stock for each year during the 20-year period 1982-2001. Amounts shown include payments made after year-end attributable to income and gain in each respective year. YEAR 1982 1983 1984 1985 1986 1987 1988 1989 1990 1991 DIVIDEND FROM INCOME# LONG-TERM CAPITAL GAINS $.36 .67 .28 .47 .36 .35 .29 .23 .21 .09 $1.15 2.38 1.35 1.07 2.15 1.54 1.69 1.56 1.65 3.07 YEAR 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 DIVIDEND FROM INCOME# LONG-TERM CAPITAL GAINS $.03 .06 .06 .13 .25 .21 .47 1.04 2.03 1.01 $2.93 2.34 1.59 2.77 2.71 2.95 4.40 4.05 6.16 1.37 #Includes short-term capital gains per share which amounted to $.28 in 1983, $.12 in 1985, $.02 in 1989, $.03 in 1995, $.05 in 1996, $.62 in 1999, $1.55 in 2000 and $.64 in 2001. 7 T E N L A R G E S T I N V E S T M E N T H O L D I N G S ( U N A U D I T E D ) G e n e r a l A m e r i c a n I n v e s t o r s The statement of investments as of December 31, 2001, shown on pages 10 and 11 includes 59 stock is- sues. Listed here are the ten largest stock holdings on that date. THE HOME DEPOT, INC. The dominant company in home center retailing, Home Depot’s innovative merchandising, strong balance sheet and excellent management has enabled the Company to continue to gain share in a fragmented industry. THE TJX COMPANIES, INC. The leading off-price retailer, through divisions such as T.J. Maxx and Marshalls, of apparel and home fashions in the U.S. and worldwide. TJX has expanded through acquisitions and internal growth, has achieved financial strength and is positioned for sustainable growth. SHARES VALUE % TOTAL NET ASSETS 2,045,000 $104,315,450 8.4 % 1,325,000 52,814,500 4.2 EVEREST RE GROUP, LTD. The largest independent U.S. property/casualty reinsurer which generates annual premiums of $1.5 billion and has a high quality, well-reserved AA balance sheet. This Bermuda domiciled company has a strong management team that exercises prudent under- writing discipline and efficient expense control, resulting in above-average earnings growth. IDEC PHARMACEUTICALS CORPORATION A biopharmaceutical company which is committed to develop- ing and commercializing effective treatments of selected cancers and autoimmune diseases. With proven products such as Rituxan and a broad pipeline of product opportunities, IDEC is positioned for continued success. PFIZER INC. Well established as a leader in the pharmaceutical industry, Pfizer continues to reap the benefits of its commitment to research and development and its ability to effectively market products. The recent launch of several new products serving large markets and development of a pipeline rich with many promising drug candidates position Pfizer for strong long-term growth. WAL-MART STORES, INC. A policy of serving the mass market with everyday low prices, supported by the lowest cost structure has made Wal-Mart the world’s largest retailer with ongoing growth opportunities in the U.S. and overseas. GOLDEN WEST FINANCIAL CORPORATION A savings and loan holding company with $59 billion in assets headquartered in Oakland, CA. It has a strong, conservative management with a high level of insider ownership. Excellent asset quality, tight expense control and efficient capital manage- ment help produce above-average earnings increases. COSTCO WHOLESALE CORPORATION A growing chain of membership warehouses, located principally in the U.S., that sell high quality merchandise at competitive prices. Earnings are generated from high sales volume, low operating costs and rapid inventory turnover. PARTNERRE LTD. A leading global Bermuda-based multi-line reinsurer that generates annual premiums of $1.7 billion and has a well-capitalized and conservatively reserved AA balance sheet. PartnerRe has a deep and talented staff and is well positioned to benefit from the upcoming strong industry pricing cycle. FORD MOTOR COMPANY A global manufacturer of automobiles, trucks and related parts. The company provides financial services through its Ford Motor Credit subsidiary and owns 81% of Hertz, the top car rental firm in the U.S. 575,000 40,652,500 3.3 520,000 35,843,600 2.9 890,000 35,466,500 2.8 570,000 32,803,500 2.6 525,000 30,896,250 2.5 675,000 29,956,500 2.4 550,000 29,700,000 2.4 1,700,500 26,731,860 2.1 $419,180,660 33.6% 8 S T A T E M E N T O F A S S E T S A N D L I A B I L I T I E S G e n e r a l A m e r i c a n I n v e s t o r s ASSETS INVESTMENTS, AT VALUE (NOTE 1a) Common Stocks DECEMBER 31, 2001 2000 (cost $461,130,422 and $457,376,112, respectively) $ 931,026,318 $ 1,005,549,350 Corporate discount notes (cost $310,348,410 and $285,169,722, respectively) CASH, RECEIVABLES AND OTHER ASSETS Cash (including margin account balance of $20,966 and $2,899,267, respectively) Receivable for securities sold Receivable from broker for proceeds on securities sold short Dividends, interest and other receivables Prepaid Expenses Other TOTAL ASSETS LIABILITIES 310,348,410 1,241,374,728 285,169,722 1,290,719,072 40,931 2,827,707 23,334,454 1,261,862 5,804,035 513,446 3,112,551 434,736 67,808,111 2,754,152 5,078,299 557,437 1,275,157,163 1,370,464,358 Payable for securities purchased Preferred dividend accrued but not yet declared Securities sold short, at value (proceeds $23,334,454 and $67,808,111, respectively) (note 1a) Accrued expenses and other liabilities TOTAL LIABILITIES NET ASSETS 1,318,500 240,000 15,758,350 10,310,593 27,627,443 3,921,101 240,000 50,811,910 10,451,884 65,424,895 $1,247,529,720 $1,305,039,463 NET ASSETS APPLICABLE TO PREFERRED STOCK AT A LIQUIDATION VALUE OF $25 PER SHARE $150,000,000 $150,000,000 NET ASSETS APPLICABLE TO COMMON STOCK $1,097,529,720 $1,155,039,463 NET ASSET VALUE PER COMMON SHARE $35.14 $39.91 NET ASSETS 7.20% Tax-Advantaged Cumulative Preferred Stock, $1 par value (note 2) Authorized 10,000,000 shares; outstanding 6,000,000 shares Common Stock, $1 par value (note 2) Authorized 50,000,000 shares; outstanding 31,231,563 and 28,940,544 shares, respectively (exclusive of 9,400 shares held in Treasury in 2000) Additional paid-in capital ( note 2) Undistributed realized gain on securities sold (note 2) Undistributed net income and distributions in excess of net income, respectively (note 2) Unallocated distributions on Preferred Stock Unrealized appreciation on investments (including aggregate gross unrealized appreciation of $520,141,071 and $604,311,705, respectively) TOTAL NET ASSETS (see notes to financial statements) $6,000,000 $6,000,000 31,231,563 723,414,981 9,598,439 28,940,544 645,307,453 60,229,372 52,737 (240,000) (367,345) (240,000) 477,472,000 565,169,439 $1,247,529,720 $1,305,039,463 9 S T A T E M E N T O F O P E R A T I O N S G e n e r a l A m e r i c a n I n v e s t o r s INCOME Dividends (net of foreign withholding taxes of $55,790 and $71,050, respectively) Interest Other Income TOTAL INCOME EXPENSES Investment research Administration and operations Office space and general Transfer agent, custodian and registrar fees and expenses Directors’ fees and expenses Stockholders’ meeting and reports Auditing and legal fees Miscellaneous taxes TOTAL EXPENSES NET INVESTMENT INCOME YEAR ENDED DECEMBER 31, 2001 2000 $7,862,551 15,201,651 541,123 $7,646,236 17,819,536 431,836 23,605,325 25,897,608 7,145,088 2,656,023 534,127 224,807 167,907 128,337 152,700 83,931 8,031,203 2,710,018 550,679 250,036 187,653 146,510 132,000 83,979 11,092,920 12,092,078 12,512,405 13,805,530 REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4) Net realized gain on investments: Long transactions Short sale transactions (note 1b) Net realized gain on investments (long-term, except for $15,679,190 and $43,284,041, respectively) Net decrease in unrealized appreciation NET GAIN (LOSS) ON INVESTMENTS 52,639,769 18,081,053 213,312,192 4,060,749 70,720,822 (87,697,439) 217,372,941 (45,048,910) (16,976,617) 172,324,031 INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ($4,464,212) $186,129,561 S T A T E M E N T O F C H A N G E S I N N E T A S S E T S OPERATIONS YEAR ENDED DECEMBER 31, 2001 2000 Net investment income Net realized gain on sales of securities Net decrease in unrealized appreciation $12,512,405 $13,805,530 217,372,941 (45,048,910) 70,720,822 (87,697,439) INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS (4,464,212) 186,129,561 DISTRIBUTIONS TO PREFERRED STOCKHOLDERS From net income, including short-term capital gain From long-term capital gain DECREASE IN NET ASSETS FROM PREFERRED DISTRIBUTIONS (2,311,200) (8,488,800) (3,074,400) (7,725,600) (10,800,000) (10,800,000) DISTRIBUTIONS TO COMMON STOCKHOLDERS From net income, including short-term capital gain From long-term capital gain DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (26,369,696) (96,274,382) (122,644,078) (60,132,212) (151,138,654) (211,270,866) CAPITAL SHARE TRANSACTIONS Value of Common Shares issued in payment of dividends (note 2) Cost of Common Shares purchased (note 2) 81,091,222 136,477,203 (692,675) (40,015,559) INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS NET INCREASE (DECREASE) IN NET ASSETS 80,398,547 (57,509,743) 96,461,644 60,520,339 NET ASSETS BEGINNING OF YEAR 1,305,039,463 1,244,519,124 (see notes to financial statements) END OF YEAR (including undistributed net income of $52,737 and distributions in excess of net income of $367,345, respectively) $1,247,529,720 $1,305,039,463 1 0 S T A T E M E N T O F I N V E S T M E N T S : D E C E M B E R 3 1 , 2 0 0 1 G e n e r a l A m e r i c a n I n v e s t o r s COMMON STOCKS SHARES VALUE (NOTE 1a) 475,000 The Boeing Company (COST $14,344,668) $18,420,500 AEROSPACE/DEFENSE (1.5%) COMMUNICATIONS AND INFORMATION SERVICES (2.8%) 535,000 Cisco Systems, Inc. (a) 520,000 Cox Communications, Inc. Class A (a) 180,000 NTL Incorporated (a) 144,500 Wolters Kluwer NV-ADR COMPUTER SOFTWARE AND SYSTEMS (0.9%) 484,500 Oberthur Card Systems S.A. (a) 230,000 Viewpoint Corporation (a) 339,500 Wind River Systems, Inc. (a) CONSUMER PRODUCTS AND SERVICES (4.8%) 500,000 Coca-Cola Enterprises Inc. 275,000 Ethan Allen Interiors, Inc. 1,700,500 Ford Motor Company 150,000 Newell Rubbermaid Inc. 175,000 PepsiCo, Inc. (COST $9,681,525) (COST $15,966,968) (COST $53,064,273) 9,688,850 21,793,200 169,200 3,294,600 34,945,850 3,861,465 1,566,300 6,080,445 11,508,210 9,470,000 11,437,250 26,731,860 4,135,500 8,520,750 60,295,360 ELECTRONICS (1.5%) 692,500 Molex Incorporated Class A (COST $14,877,393) 18,732,125 280,000 Waste Management, Inc. (COST $3,690,021) 8,934,800 ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (0.7%) FINANCE AND INSURANCE (23.4%) 195,000 American International Group, Inc. 300,000 AmerUs Group Co. 525,000 Annaly Mortgage Management, Inc. 560,000 Annuity and Life Re (Holdings), Ltd. 315 Berkshire Hathaway Inc. Class A (a) 78,912 Central Securities Corporation 575,000 Everest Re Group, Ltd. 200,000 First Midwest Bancorp, Inc. 525,000 Golden West Financial Corporation 440,000 John Hancock Financial Services, Inc. 360,000 M&T Bank Corporation 300,000 MetLife, Inc. 550,000 PartnerRe Ltd. 600,000 Reinsurance Group of America, Incorporated 260,000 SunTrust Banks, Inc. 225,000 Transatlantic Holdings, Inc. HEALTH CARE (14.0%) PHARMACEUTICALS (11.9%) 220,000 Alkermes, Inc. (a) 425,000 Bristol-Myers Squibb Company 270,000 Genaera Corporation (a) 325,000 Genentech, Inc. (a) 520,000 IDEC Pharmaceuticals Corporation (a) 155,000 Johnson & Johnson 264,000 MedImmune, Inc. (a) 120,000 Millennium Pharmaceuticals, Inc. (a) 150,000 OSI Pharmaceuticals, Inc. (a) 890,000 Pfizer Inc. (COST $113,945,775) (COST $66,166,567) MEDICAL INSTRUMENTS AND DEVICES (1.2%) 290,000 Medtronic, Inc. (COST $862,614) 14,850,900 HEALTH CARE SERVICES (0.9%) 100,000 BioReliance Corporation (a) 400,000 Health Net, Inc. (a) (COST $7,734,076) (COST $74,763,257) 2,853,000 8,712,000 11,565,000 175,083,550 15,483,000 10,752,000 8,400,000 14,061,600 23,814,000 1,997,263 40,652,500 5,838,000 30,896,250 18,172,000 26,226,000 9,504,000 29,700,000 19,968,000 16,302,000 20,475,000 292,241,613 5,799,200 21,675,000 1,053,000 17,631,250 35,843,600 9,160,500 12,236,400 2,941,200 6,861,000 35,466,500 148,667,650 1 1 S T A T E M E N T O F I N V E S T M E N T S : D E C E M B E R 3 1 , 2 0 0 1 - c o n t i n u e d G e n e r a l A m e r i c a n I n v e s t o r s COMMON STOCKS (Continued) SHARES VALUE (NOTE 1a) MISCELLANEOUS (3.7%) Other (COST $56,000,845) $46,057,135 OIL AND NATURAL GAS (INCLUDING SERVICES) (0.8%) 700,000 Repsol, S.A.-ADR (COST $8,236,884) 10,171,000 RETAIL TRADE (17.7%) 675,000 Costco Wholesale Corporation (a) 2,045,000 The Home Depot, Inc. (b) 1,325,000 The TJX Companies, Inc. 570,000 Wal-Mart Stores, Inc. SEMICONDUCTORS (2.5%) 213,500 AXT, Inc.(a) 275,000 Brooks Automation, Inc. (a) 197,000 EMCORE Corporation (a) 2,646,000 IQE plc (a) 120,000 PRI Automation, Inc. (a) 250,000 Uniroyal Technology Corporation (a) 380,000 Zarlink Semiconductor Inc. (a) (COST $49,514,414) (COST $40,148,272) SPECIAL HOLDINGS (a)(c) (NOTE 5) (0.3%) (d) Sequoia Capital IV 432,000 Silicon Genesis Corporation Series C Preferred 546,000 Standard MEMS, Inc. Series A Convertible Preferred (COST $6,896,127) 29,956,500 104,315,450 52,814,500 32,803,500 219,889,950 3,080,805 11,184,250 2,649,650 6,747,300 2,454,000 800,000 4,275,000 31,191,005 2,500 3,006,720 546,000 3,555,220(e) TOTAL COMMON STOCKS (74.6%) (COST $461,130,422) 931,026,318 SHORT-TERM SECURITIES AND OTHER ASSETS PRINCIPAL AMOUNT $75,900,000 63,900,000 75,600,000 66,400,000 29,500,000 American Express Credit Corporation notes due 1/7-1/17/02; 1.78%-2.04% Ford Motor Credit Company notes due 1/3-2/7/02; 2.54%-2.95% General Electric Capital Corp. notes due 1/8-1/29/02; 1.75%-1.93% General Motors Acceptance Corp. notes due 1/2-2/4/02; 2.40%-2.93% Sears Roebuck Acceptance Corp. notes due 1/22-1/31/02; 2.25%-2.90% Cash, receivables and other assets, less liabilities TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (25.4%) NET ASSETS (COST $310,348,410) (COST $316,503,402) (COST $777,633,824) 75,704,672 63,654,297 75,447,113 66,144,778 29,397,550 310,348,410 6,154,992 316,503,402 $1,247,529,720 (a) Non-income producing security. (b) 1,000,000 shares held by custodian in a segregated custodian account as collateral for open short positions. (c) Restricted security. (d) A limited partnership interest (e) Fair value of each holding in the opinion of the Directors. . S T A T E M E N T O F S E C U R I T I E S S O L D S H O R T : D E C E M B E R 3 1 , 2 0 0 1 G e n e r a l A m e r i c a n I n v e s t o r s COMMON STOCKS SHARES 338,000 175,000 Molex Incorporated Southwest Bancorporation of Texas, Inc. TOTAL SECURITIES SOLD SHORT (PROCEEDS $23,334,454) (see notes to financial statements) VALUE (NOTE 1a) $10,461,100 5,297,250 $15,758,350 1 2 N O T E S T O F I N A N C I A L S T A T E M E N T S G e n e r a l A m e r i c a n I n v e s t o r s 1. SIGNIFICANT ACCOUNTING POLICIES General American Investors Company, Inc. (the “Company”), established in 1927, is registered under the Investment Company Act of 1940 as a closed-end, diversified management investment company. It is internally managed by its officers under the direction of the Board of Directors. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Certain prior year financial statement items have been reclassified to conform to the current year presentation. a. SECURITY VALUATION Securities traded on securities exchanges or on the NASDAQ National Market System are valued at the last reported sales price on the last business day of the period. Listed and NASDAQ securities for which no sales are reported on that day and other securities traded in the over-the-counter market are valued at the last bid price (asked price for open short positions) on the valuation date. Corporate discount notes are valued at amortized cost, which approximates market value. Special holdings are valued at fair value in the opinion of the Directors. In determining fair value, in the case of restricted shares, consideration is given to cost, operating and other financial data and, where applicable, subsequent private offerings or market price of the issuer’s unrestricted shares (to which a 30 percent discount is applied); for limited partnership interests, fair value is based upon an evaluation of the part- nership’s net assets. b. SHORT SALES The Company may make short sales of securities for either speculative or hedging purposes. When the Company makes a short sale, it borrows the securities sold short from a broker; in addition, the Company places cash with that broker and securities in a segregated account with the custodian, both as collateral for the short posi- tion. The Company may be required to pay a fee to borrow the securities and may also be obligated to pay any divi- dends declared on the borrowed securities. The Company will realize a gain if the security price decreases and a loss if the security price increases between the date of the sale and the date on which the Company replaces the borrowed securities. c. FEDERAL INCOME TAXES The Company’s policy is to fulfill the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all taxable income to its stockholders. Accordingly, no provision for Federal income taxes is required. d. OTHER As customary in the investment company industry, securities transactions are recorded as of the trade date. Dividend income and distributions to stockholders are recorded as of the ex-dividend dates. 2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS On June 19, 1998, the Company issued and sold 6,000,000 shares of its 7.20% Tax-Advantaged Cumulative Preferred Stock. The stock has a liquidation preference of $25.00 per share plus an amount equal to accumulated and unpaid dividends to the date of redemption. The Company is required to allocate distributions from long-term capital gains and other types of income propor- tionately among holders of shares of Common Stock and Preferred Stock. To the extent that dividends on the shares of Preferred Stock are not paid from long-term capital gains, they will be paid from ordinary income or net short- term capital gains or will represent a return of capital. Under the Investment Company Act of 1940, the Company is required to maintain an asset coverage of at least 200% for the Preferred Stock. In addition, pursuant to the Rating Agency Guidelines, the Company is required to maintain a certain discounted asset coverage for its portfolio that equals or exceeds the Basic Maintenance Amount under the guidelines established by Moody’s Investors Service, Inc. The Company has met these requirements since the issuance of the Preferred Stock. The holders of Preferred Stock have voting rights equivalent to those of the holders of Common Stock (one vote per share) and, generally, vote together with the holders of Common Stock as a single class. At all times, holders of Preferred Stock will elect two members of the Company’s Board of Directors and the hold- ers 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 sub- classification as a closed-end investment company or changes in its fundamental investment policies. Transactions in Common Stock during 2001 and 2000 were as follows: Shares issued in payment of dividends (includes 28,400 and 1,113,200 shares issued from Treasury, respectively) Increase in paid-in capital Total increase Shares purchased (at an average discount from net asset value of 9.0% and 8.6%, respectively) Decrease in paid-in capital Total decrease Net increase SHARES AMOUNT 2001 2000 2001 2000 2,310,019 3,738,367 $ 2,310,019 78,781,203 81,091,222 $ 3,738,367 132,738,836 136,477,203 19,000 1,017,200 (19,000) (673,675) (692,675) $80,398,547 (1,017,200) (38,998,359) (40,015,559) $96,461,644 1 3 N O T E S T O F I N A N C I A L S T A T E M E N T S - c o n t i n u e d G e n e r a l A m e r i c a n I n v e s t o r s 2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS (Continued from bottom of previous page) Distributions in excess of net income for financial statement purposes result primarily from transactions where tax treatment differs from book treatment. As of December 31, 2001, the components of distributable earnings on a tax basis were as follows: Undistributed ordinary income Undistributed long-term gain Unrealized appreciation $5,926,412 3,342,802 477,472,000 $486,741,214 3. OFFICERS’ COMPENSATION AND RETIREMENT AND THRIFT PLANS The aggregate compensation paid by the Company during 2001 and 2000 to its officers amounted to $5,334,000 and $5,254,000, respectively. The Company has non-contributory retirement plans and a contributory thrift plan which cover substantially all employees. The costs to the Company and the assets and liabilities of the plans are not material. Costs of the plans are funded currently. 4. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities and securities sold short (other than short-term securities) during 2001 were as fol- lows: Long transactions Short sale transactions Total PURCHASES $217,712,654 28,442,689 $246,155,343 SALES $266,598,113 2,050,085 $268,648,198 At December 31, 2001, the cost of investments for Federal income tax purposes was the same as the cost for finan- cial reporting purposes. 5. RESTRICTED SECURITIES Sequoia Capital IV* Silicon Genesis Corporation Series C Preferred Standard MEMS, Inc. Series A Convertible Preferred Total DATE ACQUIRED 1/31/84 2/16/01 12/17/99 COST $886,407 3,006,720 3,003,000 $6,896,127 VALUE (NOTE 1a) $2,500 3,006,720 546,000 $3,555,220 * The amounts shown are net of distributions from this limited partnership interest which, in the aggregate, amounted to $4,806,404. The initial investment in the limited partnership was $2,000,000. 6. OPERATING LEASE COMMITMENT In July 1992, the Company entered into an operating lease agreement for office space which expires in 2007 and provides for future rental payments in the aggregate amount of approximately $5.6 million. The lease agreement contains a clause whereby the Company received twenty months of free rent beginning in December 1992 and escalation clauses relating to operating costs and real property taxes. Rental expense approximated $322,000 for 2001. Minimum rental commitments under the operating lease are approximately $403,000 in 2002 and $504,000 per annum in 2003 through 2007. In March 1996, the Company entered into a sublease agreement which expires in 2003 and provides for future rental receipts. Minimum rental receipts under the sublease are approximately $203,000 in 2002 and $64,000 in 2003. The Company will also receive its proportionate share of operating expenses and real property taxes under the sublease. 7. SUBSEQUENT EVENT On January 16, 2002, the Board of Directors declared on the Common Stock a dividend of $9,369,469 from realized gains, including $3,435,472 from long-term capital gains and the balance from short-term gains (ordinary income). This dividend is payable in cash on February 11, 2002. Unaudited In addition to purchases of the Company’s Common Stock as set forth in Note 2 on page 12, purchases of Common Stock may be made at such times, at such prices, in such amounts and in such manner as the Board of Directors may deem advisable. 1 4 F I N A N C I A L H I G H L I G H T S G e n e r a l A m e r i c a n I n v e s t o r s The following table shows per share operating performance data, total investment return, ratios and supplemental data for each year in the five- year period ended December 31, 2001. This information has been derived from information contained in the financial statements and market price data for the Company’s shares. PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year Net investment income Net gain on securities - realized and unrealized Total from investment operations Less distributions on: Common Stock: 2001 2000 1999 1998 1997 $ 39.91 .41 $ 41.74 .53 $ 34.87 .45 $ 29.15 .47 $ 25.24 .21 (.66) (.25) 6.12 6.65 11.32 11.77 9.44 9.91 7.15 7.36 Dividends from investment income Distributions from capital gains (.88)(a) (3.28) (4.16) (2.30)(b) (5.78) (8.08) (.71)(c) (3.77) (4.48) (.48) (3.24) (3.72) (.26)(d) (3.19) (3.45) Preferred Stock: Dividends from investment income Distributions from capital gains Unallocated (.07)(e) (.29) — (.36) (.11)(f) (.29) — (.40) (.07)(g) (.35) — (.42) (.03) (.20) (.01) (.24) — — — — Total distributions (4.52) (8.48) (4.90) (3.96) (3.45) Capital Stock transaction - effect of Preferred Stock offering — — — (.23) — Net asset value, end of year Per share market value, end of year $35.14 $33.47 $ 39.91 $ 36.00 $ 41.74 $ 37.19 $ 34.87 $ 30.44 $ 29.15 $ 26.19 TOTAL INVESTMENT RETURN - Stockholder Return, based on market price per share 4.33% 19.10% 39.22% 31.31% 42.58% RATIOS AND SUPPLEMENTAL DATA Total net assets, end of year (000’s omitted) Net assets attributable to Common Stock, end of year (000’s omitted) Ratio of expenses to average net assets $1,247,530 $1,305,039 $1,244,519 $1,018,933 $702,597 $1,097,530 $1,155,039 $1,094,519 $868,933 $702,597 applicable to Common Stock 1.02% 1.09% 1.01% 0.95% 0.98% Ratio of net income to average net assets applicable to Common Stock Portfolio turnover rate PREFERRED STOCK Liquidation value, end of year 1.15% 23.81% 1.24% 40.61% 1.23% 33.68% 1.50% 34.42% 0.80% 32.45% (000’s omitted) $150,000 $150,000 $150,000 $150,000 Asset coverage Liquidation preference per share Market value per share 832% 870% 830% 679% $25.00 $25.90 $25.00 $24.25 $25.00 $21.75 $25.00 $25.88 — — — — (a) Includes short-term capital gain in the amount of $0.51 per share. (b) Includes short-term capital gain in the amount of $1.82 per share. (c) Includes short-term capital gain in the amount of $.29 per share. (d) Includes short-term capital gain in the amount of $.05 per share. (e) Includes short-term capital gain in the amount of $.04 per share. (f) Includes short-term capital gain in the amount of $.09 per share. (g) Includes short-term capital gain in the amount of $.03 per share. 1 5 R E P O R T O F I N D E P E N D E N T A U D I T O R S G e n e r a l A m e r i c a n I n v e s t o r s TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF GENERAL AMERICAN INVESTORS COMPANY, INC. We have audited the accompanying statement of assets and liabilities, including the statements of investments and securities sold short, of General American Investors Company, Inc. as of December 31, 2001, and the related statements of operations and changes in net assets for each of the two years in the period then ended, and financial highlights for each of the five years in the period then ended. These financial state- ments and financial highlights are the responsi- bility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material mis- statement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 2001, by correspon- dence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by manage- ment, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial posi- tion of General American Investors Company, Inc. at December 31, 2001, the results of its oper- ations and the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States. New York, New York January 15, 2002 O F F I C E R S NAME (AGE) EMPLOYEE SINCE Spencer Davidson (59) 1994 Andrew V. Vindigni (42) 1988 POSITION WITH COMPANY NAME (AGE) POSITION WITH COMPANY SINCE President and Chief Executive Officer 1995 Vice-President 1995 security analyst (financial services industry) EMPLOYEE SINCE SINCE Peter P. Donnelly (53) 1974 Vice-President 1991 securities trader Diane G. Radosti (49) Treasurer 1990 1980 corporate accounting and financial reporting Eugene L. DeStaebler, Jr. (63) Vice-President, Carole Anne Clementi (55) Secretary 1994 1975 Administration 1978 operations and finance 1982 shareholder relations and office management All officers serve for a term of one year and are elected by the board of directors at the time of its annual organization meeting on the second Wednesday in April. The address for each officer is the Company’s office. Other directorships and affiliations for Mr. Davidson are shown in the listing of Directors on page 16. S E R V I C E C O M P A N I E S COUNSEL Sullivan & Cromwell INDEPENDENT AUDITORS Ernst & Young LLP CUSTODIAN Bankers Trust Company TRANSFER AGENT AND REGISTRAR Mellon Investor Services LLC P.O. Box 3315 South Hackensack, NJ 07606-1915 1-800-413-5499 www.mellon-investor.com 1 6 D I R E C T O R S G e n e r a l A m e r i c a n I n v e s t o r s NAME (AGE) DIRECTOR SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS INDEPENDENT (“DISINTERESTED”) DIRECTORS Partner Lawrence B. Buttenwieser (70) Rosenman & Colin LLP CHAIRMAN OF THE BOARD (lawyers) OF DIRECTORS 1967 Arthur G. Altschul, Jr. (37) 1995 Managing Member Diaz & Altschul Group, LLC (investments and securities) Lewis B. Cullman (83) 1961 President Cullman Ventures LLC (catalogs) OTHER DIRECTORSHIPS AND AFFILIATIONS Delta Opportunity Fund, Ltd., Director Medicis Pharmaceutical Corporation, Director The Overbrook Foundation, Trustee Chess-in-the-Schools, Chairman, Board of Trustees Metropolitan Museum of Art, Trustee Neurosciences Research Foundation, Trustee The New York Botanical Garden, Senior Vice Chairman, Board of Managers Gerald M. Edelman (72) 1976 John D. Gordan, III (56) 1986 Bill Green (72) 1993 Member and Chairman of the Department of Neurobiology The Scripps Research Institute Neurosciences Institute of the Neurosciences Research Foundation, Director and President Partner Morgan, Lewis & Bockius LLP (lawyers) Corporate director and trustee ClientSoft, Inc., Director Commercial Capital Corp., Director Energy Answers Corporation, Director New York City Housing Development Corporation, Member and Vice Chair Sidney R. Knafel (71) 1994 Managing Partner SRK Management Company (private investment company) BioReliance Corporation, Chairman IGENE Biotechnology, Inc., Director Insight Communications Company, Inc., Chairman NTL Incorporated, Director Source Media, Inc., Director Richard R. Pivirotto (71) 1971 President Richard R. Pivirotto Co., Inc. (self-employed consultant) General Theological Seminary, Trustee The Gillette Company, Director The Greenwich Bank and Trust Company, Joseph T. Stewart, Jr. (72) 1987 Raymond S. Troubh (75) 1989 Financial Consultant Director Greenwich Hospital Corporation, Trustee Immunomedics, Inc., Director New York Life Insurance Company, Director Princeton University, Charter Trustee Emeritus Corporate director and trustee Foundation of the University of Medicine and Dentistry of New Jersey, Trustee Marine Biological Laboratory, Member, Advisory Council Ariad Pharmaceuticals, Inc., Director Diamond Offshore Drilling, Inc., Director Enron Corp., Director Gentiva Health Services, Inc., Director Health Net, Inc., Director Hercules Incorporated, Director Petrie Stores Liquidating Trust, Trustee Starwood Hotels & Resorts, Trustee Triarc Companies, Inc., Director WHX Corporation, Director INSIDE (“INTERESTED”) DIRECTOR Spencer Davidson (59) 1995 President and Chief Executive Officer General American Investors Company, Inc. since 1995 Medicis Pharmaceutical Corporation, Director Neurosciences Research Foundation, Trustee All directors serve for a term of one year and are elected by stockholders at the time of the annual meeting on the second Wednesday in April. The address for each director is the Company’s office. Arthur G. Altschul, CHAIRMAN EMERITUS William O. Baker, DIRECTOR EMERITUS William T. Golden, DIRECTOR EMERITUS General American Investors Company, Inc. 450 Lexington Avenue, New York, NY 10017 (212) 916-8400 (800) 436-8401 E-mail: InvestorRelations@gainv.com 

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