sept2010quarterly.htm - Generated by SEC Publisher for SEC Filing
 
 

For the nine months ended September 30, 2010,  date, with General American posting marginally bet- 
the net asset value per Common Share  ter results than the averages. Recent economic 
increased 4.8%, while the investment return to  reports, which reflect continuing modest growth, and 
our stockholders increased by 3.9%. By comparison,  suggest that a double-dip recession is unlikely, may 
our benchmark, the Standard & Poor’s 500 Stock  well have contributed to the rally. 
Index (including income) increased 3.9%. For the   
twelve months ended September 30, 2010, the return  While equity valuations do not appear to be exces- 
on the net asset value per Common Share increased  sive, uncertainty and risk are present in abundance. 
by 8.4%, and the return to our stockholders increased  Over time, the imperative to grow the economy more 
by 4.0%; these compare with an increase of 10.2% for  rapidly, and thus reduce unemployment and stimulate 
the S&P 500. During both periods, the discount at  housing, via extraordinarily low interest rates and 
which our shares traded continued to fluctuate and on  deficit spending may be inconsistent with currency 
September 30, 2010, it was 15.4%.  stability and constrained inflation. 
As detailed in the accompanying financial statements  Our portfolio is structured to capture the greater 
(unaudited), as of September 30, 2010, the net assets  growth anticipated in offshore markets and to afford 
applicable to the Company’s Common Stock were  some protection against inflation and dollar weak- 
$870,887,262 equal to $28.81 per Common Share.  ness, while returning cash to shareholders in the form 
    of dividends and buybacks. 
The increase in net assets resulting from operations   
for the nine months ended September 30, 2010 was  Information about the Company, including our 
$35,100,739. During this period, the net realized  investment objectives, operating policies and 
gain on investments sold was $5,496,558, and the  procedures, investment results, record of dividend 
increase in net unrealized appreciation was  and distribution payments, financial reports and press 
$34,018,225. Net investment income for the  releases, is on our website and has been updated 
nine months was $4,069,938, and distributions to  through September 30, 2010. It can be accessed on 
Preferred Stockholders amounted to $8,483,982.  the internet at www.generalamericaninvestors.com. 
During the nine months, 1,192,429 shares of the  By Order of the Board of Directors, 
Company’s Common Stock were repurchased for  GENERAL AMERICAN INVESTORS COMPANY, INC. 
$28,643,454 at an average discount from net asset   
value of 14.5%.  Spencer Davidson 
    Chairman of the Board 
Owing to the best September in fifty years, equity  President and Chief Executive Officer 
markets have edged into the black for the year-to-   
    October 13, 2010 

 



      Value 
Shares  COMMON STOCKS    (note 1a) 
AEROSPACE/DEFENSE (2.7%)     
325,000  United Technologies Corporation  (Cost $22,957,205)  $23,149,750 
BUILDING AND REAL ESTATE (1.9%)     
1,946,880  CEMEX, S.A. de C.V. ADR* (a)  (Cost $23,385,068)  16,548,480 
COMMUNICATIONS AND INFORMATION SERVICES (6.2%)     
960,000  Cisco Systems, Inc. (a)    21,024,000 
78,000  Leap Wireless International, Inc. (a)    963,300 
700,000  QUALCOMM Incorporated    31,592,750 
    (Cost $41,318,834)  53,580,050 
COMPUTER SOFTWARE AND SYSTEMS (7.9%)     
1,290,000  Dell Inc. (a)    16,731,300 
570,000  Microsoft Corporation    13,959,300 
168,100  NetEase.com, Inc. (a)    6,629,864 
55,000  Nintendo Co., Ltd.    13,735,185 
450,000  Teradata Corporation (a)    17,352,000 
    (Cost $72,782,465)  68,407,649 
CONSUMER PRODUCTS AND SERVICES (12.4%)     
350,000  Diageo plc ADR*    24,153,500 
466,100  Hewitt Associates, Inc. Class A (a)    23,505,423 
450,000  Nestle S.A.    24,115,338 
300,000  PepsiCo, Inc.    19,932,000 
550,000  Unilever N.V.    16,403,519 
    (Cost $78,729,564)  108,109,780 
ENVIRONMENTAL CONTROL (INCLUDING SERVICES) (5.9%)     
949,000  Republic Services, Inc.    28,935,010 
630,000  Waste Management, Inc.    22,516,200 
    (Cost $38,960,134)  51,451,210 
FINANCE AND INSURANCE (24.2%)     
BANKING (4.0%)       
500,000  Bond Street Holdings LLC (a) (b)    10,000,000 
425,000  JPMorgan Chase & Co. (a)    16,175,500 
110,000  M&T Bank Corporation    8,999,100 
    (Cost $27,690,799)  35,174,600 
INSURANCE (13.0%)       
315,000  Arch Capital Group Ltd. (a)    26,397,000 
250,000  Everest Re Group, Ltd.    21,617,500 
700,000  Fidelity National Financial, Inc.    10,997,000 
37,500  Forethought Financial Group, Inc. Class A with Warrants (a)(c)    7,500,000 
280,000  MetLife, Inc.    10,766,000 
265,000  PartnerRe Ltd.    21,247,700 
83,000  Transatlantic Holdings, Inc.    4,218,060 
200,000  The Travelers Companies, Inc.    10,420,000 
    (Cost $56,850,449)  113,163,260 
OTHER (7.2%)       
325,000  American Express Company    13,659,750 
110  Berkshire Hathaway Inc. Class A (a)    13,695,000 
1,666,667  Epoch Holding Corporation    21,466,671 
603,500  Nelnet, Inc.    13,808,080 
    (Cost $29,554,593)  62,629,501 
    (Cost $114,095,841)  210,967,361 

 




      Value 
Shares  COMMON STOCKS (continued)    (note 1a) 
HEALTH CARE / PHARMACEUTICALS (6.7%)     
382,100  Cephalon, Inc. (a)    $23,858,324 
529,900  Cytokinetics, Incorporated (a)    1,398,936 
564,500  Gilead Sciences, Inc. (a)    20,101,845 
755,808  Pfizer Inc.    12,977,223 
195,344  Poniard Pharmaceuticals, Inc. (a)    113,300 
    (Cost $61,142,880)  58,449,628 
MACHINERY AND EQUIPMENT (4.3%)     
1,200,000  ABB Ltd. ADR*    25,344,000 
1,000,000  The Manitowoc Company, Inc.    12,110,000 
    (Cost $24,525,812)  37,454,000 
METALS (1.9%)       
264,200  Alpha Natural Resources, Inc. (a)    10,871,830 
150,000  Nucor Corporation    5,730,000 
    (Cost $20,312,019)  16,601,830 
MISCELLANEOUS (5.2%)     
  Other (d)  (Cost $42,508,572)  45,695,400 
OIL AND NATURAL GAS (INCLUDING SERVICES) (11.6%)     
296,478  Apache Corporation    28,983,689 
130,062  Devon Energy Corporation    8,420,214 
800,000  Halliburton Company    26,456,000 
2,150,000  Weatherford International Ltd. (a)    36,765,000 
    (Cost $66,813,403)  100,624,903 
RETAIL TRADE (17.2%)       
575,000  Costco Wholesale Corporation    37,081,750 
400,000  J.C. Penney Company, Inc.    10,872,000 
1,632,400  The TJX Companies, Inc.    72,854,012 
550,000  Wal-Mart Stores, Inc.    29,436,000 
    (Cost $61,504,566)  150,243,762 
SEMICONDUCTORS (2.4%)     
700,000  ASML Holding N.V.  (Cost $17,340,380)  20,811,000 
TECHNOLOGY (3.5%)       
750,000  International Game Technology    10,837,500 
1,900,000  Xerox Corporation    19,665,000 
    (Cost $34,368,474)  30,502,500 
TRANSPORTATION (0.9%)     
236,100  Alexander & Baldwin, Inc.  (Cost $11,005,032)  8,225,724 
          TOTAL COMMON STOCKS (114.9%)  (Cost $731,750,249)  1,000,823,027 
Warrants  WARRANT     
BANKING (0.2%)       
175,000  JPMorgan Chase & Co.     
  Expires 10/28/2018 (a)  (Cost $2,234,226)  2,042,250 
Principal Amount  CORPORATE DEBT (e)     
CONSUMER PRODUCTS AND SERVICES (1.2%)     
$9,600,000  Smithfield Foods, Inc.     
  7.75% due 5/15/2013  (Cost $8,058,690)  9,947,520 
TECHNOLOGY (1.1%)       
$10,000,000  VeriFone Holdings, Inc.     
  1.375% due 6/15/2012  (Cost $6,856,450)  9,912,500 
          TOTAL CORPORATE DEBT (2.3%)  (Cost $14,915,140)  19,860,020 

 




      Value 
      Shares  SHORT-TERM SECURITY AND OTHER ASSETS    (note 1a) 
  38,457,588  SSgA Prime Money Market Fund (4.4%)  (Cost $38,457,588)  $38,457,588 
     TOTAL INVESTMENTS (f) (121.8%)  (Cost $787,357,203)  1,061,182,885 
     Liabilities in excess of cash, receivables and other assets (0.0%)    (178,448) 
PREFERRED STOCK (-21.8%)    (190,117,175) 
NET ASSETS APPLICABLE TO COMMON STOCK (100%)    $870,887,262 

 

* ADR - American Depository Receipt 
(a) Non-income producing security. 
(b) Level 3 fair value measurement, restricted security acquired 11/4/09, aggregate cost $10,000,000, unit cost and fair value is $20 per share, note 2. Fair 
value is based upon dated bid and transaction prices provided via the NASDAQ OMX Group, Inc. PORTAL Alliance trading and transfer system for pri- 
vately 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 11/3/09, aggregate cost $7,500,000, unit cost and fair value is $200 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. 
(d) Securities which have been held for less than one year, not previously disclosed, and not restricted. 
(e) Level 2 fair value measurement, note 2. Fair value is based upon the most current bid price provided by independent dealers. 
(f) At September 30, 2010: the cost of investments for Federal income tax purposes was the same as the cost for financial reporting purposes, aggregate 
gross unrealized appreciation was $319,264,530, aggregate gross unrealized depreciation was $45,438,848, and net unrealized appreciation was 
$273,825,682. 

 

(see notes to financial statements)



           


    SHARES  SHARES 
INCREASES  AMOUNT TRANSACTED  AMOUNT HELD 
NEW POSITION     
  Unilever N.V.  550,000 550,000
ADDITIONS 
  Apache Corporation  1,000 296,478
  Gilead Sciences, Inc.  20,000 564,500
  JPMorgan Chase & Co.  50,000 425,000
  JPMorgan Chase & Co., Warrants expiring 10/28/2018  20,000 175,000
  The Manitowoc Company, Inc.  391,802 1,000,000 (b) 
DECREASES   
ELIMINATIONS   
  Heineken N.V.  300,000 —
  Textron Inc.  215,000 —
REDUCTIONS   
  Everest Re Group, Ltd.  10,000 250,000
  Fidelity National Financial, Inc.  50,000 700,000
  M&T Bank Corporation  5,000 110,000
  Nelnet, Inc.  14,000 603,500
  PartnerRe Ltd.  10,000 265,000
(a)  Common shares unless otherwise noted; excludes transactions in Common Stocks - Miscellaneous - Other.   
(b)  Shares purchased in prior period and previously carried under Common Stocks - Miscellaneous - Other.   

 

           
The diversification of the Company’s net assets applicable to its Common Stock by industry group as of September 30, 2010 is shown in the following 
table.       
INDUSTRY CATEGORY  COST(000)  VALUE(000)  PERCENT COMMON NET ASSETS* 
Finance and Insurance       
Banking  $29,925  $37,217   4.2%
Insurance  56,850  113,163 13.0
Other  29,555  62,629 7.2
  116,330  213,009 24.4
Retail Trade  61,505  150,244 17.2
Consumer Products and Services  86,788  118,057 13.6
Oil and Natural Gas (Including Services)  66,814  100,625 11.6
Computer Software and Systems  72,782  68,408 7.9
Health Care/Pharmaceuticals  61,143  58,450 6.7
Communications and Information Services  41,319  53,580 6.2
Environmental Control (Including Services)  38,960  51,451 5.9
Miscellaneous**  42,509  45,695 5.2
Technology  41,225  40,415 4.6
Machinery and Equipment  24,526  37,454 4.3
Aerospace/Defense  22,957  23,150 2.7
Semiconductors  17,340  20,811 2.4
Metals  20,312  16,602 1.9
Building and Real Estate  23,385  16,548 1.9
Transportation  11,005  8,226 0.9
  748,900  1,022,725 117.4
Short-Term Securities  38,457  38,457 4.4
Total Investments  $787,357  1,061,182 121.8
Other Assets and Liabilities - Net    (178) (0.0)
Preferred Stock    (190,117) (21.8)
Net Assets Applicable to Common Stock    $870,887 100.0%
* Net Assets applicable to the Company’s Common Stock.     
** Securities which have been held for less than one year, not previously disclosed, and not restricted.   

 

(see notes to financial statements)




ASSETS       
INVESTMENTS, AT VALUE (NOTE 1a)     
     Common stocks (cost $731,750,249)    $1,000,823,027 
     Warrant (cost $2,234,226)    2,042,250 
     Corporate debt (cost $14,915,140)    19,860,020 
     Money market fund (cost $38,457,588)    38,457,588 
Total investments (cost $787,357,203)    1,061,182,885 
RECEIVABLES AND OTHER ASSETS     
     Receivable for securities sold  $3,488,930   
     Dividends, interest and other receivables  1,480,036   
     Qualified pension plan asset, net excess funded (note 7)  3,907,647   
     Prepaid expenses and other assets  2,602,755  11,479,368 
TOTAL ASSETS    1,072,662,253 
LIABILITIES       
     Payable for securities purchased  1,336,093   
     Accrued preferred stock dividend not yet declared  219,958   
     Accrued supplemental pension plan liability (note 7)  3,429,172   
     Accrued supplemental thrift plan liability (note 7)  2,487,668   
     Accrued expenses and other liabilities  4,184,925   
TOTAL LIABILITIES    11,657,816 
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 - 30,232,786 shares (note 5)    $870,887,262 
NET ASSET VALUE PER COMMON SHARE    $28.81 
NET ASSETS APPLICABLE TO COMMON STOCK       
Common Stock, 30,232,786 shares at par value (note 5)  $30,232,786   
Additional paid-in capital (note 5)  568,202,126   
Undistributed net investment income  5,496,558   
Undistributed realized gain on investments  6,592,600   
Accumulated other comprehensive income (note 7)  (4,758,553)   
Unallocated distributions on Preferred Stock  (8,703,937)   
Unrealized appreciation on investments  273,825,682   
NET ASSETS APPLICABLE TO COMMON STOCK    $870,887,262 
(see notes to financial statements)     

 



         

 
INCOME       
     Dividends (net of foreign withholding taxes of $580,183)  $11,175,204   
     Interest  2,321,061  $13,496,265 
EXPENSES       
     Investment research  5,226,807   
     Administration and operations  2,093,936   
     Office space and general  1,257,398   
     Auditing and legal fees  239,000   
     Directors’ fees and expenses  202,625   
     Miscellaneous taxes  161,036   
     Stockholders’ meeting and reports  123,525   
     Transfer agent, custodian and registrar fees and expenses  122,000  9,426,327 
NET INVESTMENT INCOME    4,069,938 
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 $1,688,654)  5,281,836   
          Written option transactions  214,722   
  5,496,558   
     Net increase in unrealized appreciation on investments  34,018,225   
NET GAIN ON INVESTMENTS    39,514,783 
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS    (8,483,982) 
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS    $35,100,739 

 

         
  Nine Months Ended  Year Ended 
OPERATIONS  September 30, 2010    December 31, 2009 
     Net investment income  $4,069,938  $3,400,143 
     Net realized gain on investments  5,496,558  15,219,812 
     Net increase in unrealized appreciation  34,018,225  204,253,481 
  43,584,721  222,873,436 
     Distributions to Preferred Stockholders:     
          From net investment income  —  (3,389,107) 
          From short-term capital gains  —  (1,654,369) 
          From long-term capital gains  —  (6,107,907) 
          Return of capital  —  (333,668) 
          Unallocated distributions  (8,483,982)  11,047 
          Decrease in net assets from Preferred distributions  (8,483,982)  (11,474,004) 
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS  35,100,739  211,399,432 
OTHER COMPREHENSIVE INCOME (Note 7)  106,605  1,911,451 
DISTRIBUTIONS TO COMMON STOCKHOLDERS       
     From net investment income  —  (3,248,669) 
     From short-term capital gains  —  (1,585,814) 
     From long-term capital gains  —  (5,854,806) 
     Return of capital  —  (319,841) 
DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS  —  (11,009,130) 
CAPITAL SHARE TRANSACTIONS (NOTE 5)       
     Value of Common Shares issued in payment of dividends and distributions  —  6,430,088 
     Cost of Common Shares purchased  (28,643,454)  (19,553,159) 
     Benefit to Common Shareholders resulting from Preferred Shares purchased  —  546,889 
DECREASE IN NET ASSETS - CAPITAL TRANSACTIONS  (28,643,454)  (12,576,182) 
NET INCREASE IN NET ASSETS  6,563,890  189,725,571 
NET ASSETS APPLICABLE TO COMMON STOCK       
BEGINNING OF PERIOD  864,323,372  674,597,801 
END OF PERIOD (including undistributed net investment income of $5,496,558 and     
     $2,522,662, respectively)  $870,887,262  $864,323,372 
(see notes to financial statements)     

 




  The following table shows per share operating performance data, total investment return, ratios and supplemental data for the nine
months ended September 30, 2010 and for each year in the five-year period ended December 31, 2009. This information has been derived
from information contained in the financial statements and market price data for the Company’s shares.

  Nine Months           
  Ended           
  September 30, 2010      Year Ended December 31,     
  (Unaudited)  2009    2008    2007    2006    2005 
PER SHARE OPERATING PERFORMANCE             
     Net asset value, beginning of period  $27.50  $21.09  $38.10  $40.54  $39.00  $35.49 
        Net investment income  .14  .11  .42  .31  .34  .19 
        Net gain (loss) on investments -             
           realized and unrealized  1.45  6.94  (16.15)  3.39  4.72  5.85 
        Other comprehensive income  —  .07  (.25)  .02  .03  — 
     Distributions on Preferred Stock:             
       Dividends from net investment income  —  (.11)  (.11)  (.02)  (.04)  (.03) 
       Distributions from net short-term capital gains  —  (.05)  —  (.03)  (.01)  (.08) 
       Distributions from net long-term capital gains  —  (.19)  (.27)  (.36)  (.36)  (.30) 
       Distributions from return of capital  —  (.01)  —  —  —  — 
       Unallocated  (.28)  —  —  —  —  — 
  (.28)  (.36)  (.38)  (.41)  (.41)  (.41) 
     Total from investment operations  1.31  6.76  (16.36)  3.31  4.68  5.63 
     Distributions on Common Stock:             
       Dividends from net investment income  —  (.10)  (.19)  (.33)  (.29)  (.15) 
       Distributions from net short-term capital gains  —  (.05)  —  (.38)  (.04)  (.44) 
       Distributions from net long-term capital gains  —  (.19)  (.46)  (5.04)  (2.81)  (1.53) 
       Distributions from return of capital  —  (.01)  —  —  —  — 
  —  (.35)  (.65)  (5.75)  (3.14)  (2.12) 
     Net asset value, end of period  $28.81  $27.50  $21.09  $38.10  $40.54  $39.00 
     Per share market value, end of period  $24.38  $23.46  $17.40  $34.70  $37.12  $34.54 
TOTAL INVESTMENT RETURN - Stockholder             
       return, based on market price per share  3.92%*  36.86%  (48.20)%  8.72%  16.78%  17.40% 
RATIOS AND SUPPLEMENTAL DATA             
     Net assets applicable to Common Stock,             
       end of period (000’s omitted)  $870,887     $864,232 $674,598   $1,202,923   $1,199,453   $1,132,942 
     Ratio of expenses to average net assets             
       applicable to Common Stock  1.50%**  1.93%  0.87%  1.11%  1.06%  1.25% 
     Ratio of net income to average net assets             
       applicable to Common Stock  0.65%**  0.46%  1.31%  0.78%  0.86%  0.51% 
     Portfolio turnover rate   12.06%*     24.95%  25.52%  31.91%  19.10%  20.41% 
PREFERRED STOCK             
     Liquidation value, end of period (000’s omitted)  $190,117   $190,117  $199,617  $200,000  $200,000  $200,000 
     Asset coverage  558%  555%  438%  701%  700%  666% 
     Liquidation preference per share  $25.00  $25.00  $25.00  $25.00  $25.00  $25.00 
     Market value per share  $25.60  $24.53  $21.90  $21.99  $24.44  $24.07 
*Not annualized             
**Annualized             

 




1. SIGNIFICANT ACCOUNTING POLICIES - General American Investors Company, Inc. (the “Company”), established in 1927, is registered 
under the Investment Company Act of 1940 as a closed-end, diversified management investment company. It is internally managed by 
its officers under the direction of the Board of Directors. 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires man- 
agement to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual 
results could differ from those estimates. 
   a. SECURITY VALUATION Equity securities traded on a national securities exchange are valued at the last reported sales price on the 
   last business day of the period. Equity securities reported on the NASDAQ national market are valued at the official 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 pri- 
   marily 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 securi- 
   ties to determine current market value. If, after the close of foreign markets, conditions change significantly, the price of certain for- 
   eign securities may be adjusted to reflect fair value as of the time of the valuation of the portfolio. Investments in money market funds 
   are valued at their net asset value. Special holdings (restricted securities) and other securities for which quotations are not readily 
   available are valued at fair value determined in good faith pursuant to procedures established by and under the general supervision 
   of the Board of Directors. 
   b. OPTIONS The Company may purchase and write (sell) put and call options. The Company purchases put options or writes call 
   options to hedge the value of portfolio investments while it purchases call options and writes put options to obtain equity market 
   exposure. 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 differ- 
   ence between the premium received and the amount paid on effecting a closing purchase transaction, including brokerage commis- 
   sions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a real- 
   ized loss on written option transactions in the Statement of Operations. If a call option is exercised, the premium is added to the pro- 
   ceeds 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 writ- 
   ten 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 repre- 
   sents 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 proce- 
   dures established and approved by the Company’s Board of Directors. The Company does not separately report the effect of changes 
   in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized 
   gain or loss from investments on the Statement of Operations. 
   Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade 
   and settlement dates on security transactions and the difference between the recorded amounts of dividends, interest, and foreign 
   withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains 
   and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in secu- 
   rities 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 super- 
   vision 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 distri- 
   butions to common and preferred shareholders, which are determined in accordance with Federal income tax regulations are record- 
   ed on the ex-dividend date. Distributions for tax and book purposes are substantially the same. Permanent book/tax differences relat- 
   ing to income and gains are reclassified to paid-in capital as they arise. 
   f. 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. As of and during the period ended September 30, 2010, the Company did not have any liabilities for any 
   unrecognized tax positions. The Company recognizes interest and penalties, if any, related to unrecognized tax positions as income 
   tax expense in the Statement of Operations. During the period, the Company did not incur any interest or penalties. 
   g. CONTINGENT LIABILITIES Amounts related to contingent liabilities are accrued if it is probable that a liability has been incurred and 
   an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly 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 indemnifications. 
   The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or loss- 
   es pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. 

 




2. FAIR VALUE MEASUREMENTS - Various data inputs are used in determining the value of the Company’s investments. These inputs are 
summarized in a hierarchy consisting of the three broad levels listed below: 
Level 1 - quoted prices in active markets for identical securities (including money market funds which are valued using amortized cost 
and which transact at net asset value, typically $1 per share), 
Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.), and 
Level 3 - significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments). 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those 
securities. The following is a summary of the inputs used to value the Company’s net assets as of September 30, 2010: 

 

Assets  Level 1  Level 2  Level 3  Total 
Common stocks  $983,323,027  —  $17,500,000  $1,000,823,027 
Warrant  2,042,250  —  —  2,042,250 
Corporate debt  —  $19,860,020  —  19,860,020 
Money market fund  38,457,588  —  —  38,457,588 
   Total  $1,023,822,865  $19,860,020  $17,500,000  $1,061,182,885 

 

The aggregate value of Level 3 portfolio investments changed during the nine months ended September 30, 2010 as follows: 
  Level 3 
Fair value at December 31, 2009  $16,850,000 
Net change in unrealized appreciation on investments  650,000 
Fair value at September 30, 2010  $17,500,000 

 

3. PURCHASES AND SALES OF SECURITIES - Purchases and sales of securities (other than short-term securities and options) for the nine 
months ended September 30, 2010 amounted to $118,121,381 and $139,340,515, on long transactions, respectively. 
4. WRITTEN OPTIONS - Transactions in written covered call and collateralized put options during the nine months ended September 30, 
2010 were as follows: 

 

  Covered Call  Collateralized Put 
  Contracts  Premiums  Contracts  Premiums 
Options outstanding, December 31, 2009  —  —  250  $46,223 
Options written  1,655  $168,500  —  — 
Options expired  (1,655)  (168,500)  (250)  (46,223) 
Options outstanding, September 30, 2010  0  $0  0  $0 

 

5. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS - The authorized capital stock of the Company consists of 50,000,000 shares of 
Common Stock, $1.00 par value, and 10,000,000 shares of Preferred Stock, $1.00 par value. With respect to the Common Stock, 
30,232,786 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on 
September 30, 2010. 
On September 24, 2003, the Company issued and sold 8,000,000 shares of its 5.95% Cumulative Preferred Stock, Series B in an under- 
written offering. The Preferred Shares were noncallable for the 5 year period ended September 24, 2008 and have a liquidation prefer- 
ence of $25.00 per share plus accumulated and unpaid dividends to the date of redemption. On December 10, 2008, the Board of 
Directors authorized the repurchase of 1 million Preferred Shares in the open market at prices below $25.00 per share. A total of 395,313 
Preferred Shares have been repurchased at an aggregate cost of $9,276,538, an average cost per share of $23.47, through December 31, 
2009; no Preferred Shares were repurchased during the nine months ended September 30, 2010. The average discount of $1.53 per 
Preferred Share, $606,287 in the aggregate, was credited to additional paid-in capital of Common Stock. 
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 cer- 
tain discounted asset coverage for its portfolio that equals or exceeds a Basic Maintenance Amount. The Company has met these 
requirements 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, gen- 
erally, vote together with the holders of Common Stock as a single class. 
Holders of Preferred Stock elect two members of the Company’s Board of Directors and the holders of Preferred and Common Stock, 
voting as a single class, elect the remaining directors. If the Company fails to pay dividends on the Preferred Stock in an amount equal 
to two full years’ dividends, the holders of Preferred Stock will have the right to elect a majority of the directors. In addition, the 
Investment Company Act of 1940 requires that approval of the holders of a majority of any outstanding Preferred Shares, 
voting separately as a class, would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Stock 
and (b) take any action requiring a vote of security holders, including, among other things, changes in the Company’s subclassification 
as a closed-end investment company or changes in its fundamental investment policies. 

 




5. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS - (Continued from bottom of previous page.) 
The Company presents its Preferred Stock, for which its redemption can be outside of the Company’s control, outside of the net assets 
applicable to Common Stock in the Statement of Assets and Liabilities. 
Transactions in Common Stock during the nine months ended September 30, 2010 and the year ended December 31, 2009 were as follows: 

 

  Shares Amount 
  2010    2009  2010  2009 
Increase in par value of shares issued in payment of dividends and           
  distributions (includes 281,281 shares issued from treasury)  —    281,281  —  $281,281 
Increase in paid-in capital        —  6,148,807 
  Total increase        —  6,430,088 
Decrease in par value of shares purchased (average discount from           
  NAV of 14.5% and13.6%, respectively)  1,192,429    836,938  ($1,192,429)  (836,938) 
Decrease in paid-in capital        (27,451,025)  (18,716,221) 
  Total decrease        (28,643,454)  (19,553,159) 
Net decrease        ($28,643,454)  ($13,123,071) 

 

At September 30, 2010, the Company held in its treasury 1,748,086 shares of Common Stock with an aggregate cost in the amount of 
$41,997,676. 
6. OFFICERS’ COMPENSATION - The aggregate compensation paid and accrued by the Company pertaining to the nine months ended 
September 30, 2010 to its officers (identified on back cover) amounted to $5,038,100. 
7. BENEFIT PLANS - The Company has funded (qualified) and unfunded (supplemental) noncontributory defined benefit pension plans 
that cover its employees. The plans provide defined benefits based on years of service and final average salary with an offset for a por- 
tion of social security covered compensation. The components of the net periodic benefit cost (income) of the plans for the nine months 
ended September 30, 2010 were: 

 

  
Service cost  $299,432 
Interest cost  593,938 
Expected return on plan assets  (851,444) 
Amortization of prior service cost  34,507 
Recognized net actuarial loss  151,815 
Net periodic benefit cost  $228,248 

 

The Company recognizes the overfunded or underfunded status of a defined benefit 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 (qualified) and unfunded (supplemental) defined contribution thrift plans that are available to its employ- 
ees. The aggregate cost of such plans for the nine months ended September 30, 2010 was $219,823. The qualified thrift plan acquired 
23,100 shares of the Company’s Common Stock during the nine months ended September 30, 2010 and held 539,786 shares of the 
Company’s Common Stock at September 30, 2010. 
8. OPERATING LEASE COMMITMENT - In September 2007, the Company entered into an operating lease agreement for office 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 specified number of months and 
credit towards construction of office 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 $829,000 for the nine months ended September 30, 2010. Minimum rental commit- 
ments under the operating lease are approximately $1,075,000 per annum in 2011 through 2012, $1,183,000 in 2013 through 2017, and 
$99,000 in 2018. 
9. LITIGATION - The Company is subject to a legal action arising from a construction worker’s personal injury that is covered under 
the terms of its insurance policies. Defense and legal costs are being funded by the insurer; damages of an amount that is immaterial 
to the Company are being negotiated at this time. No liabilities or expenses have been incurred by the Company to date. 

 


Purchases of the Company’s Common Stock as set forth in Note 5 on page 10, may be made 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, 2010 are available: (1) without charge, upon request, by calling us at our toll-free telephone num- 
ber (1-800-436-8401), (2) on the Company’s website at www.generalamericaninvestors.com and (3) on the Securities and Exchange Commission’s 
website at www.sec.gov. 
In addition to distributing financial statements as of the end of each quarter, General American Investors files a Quarterly Schedule of Portfolio 
Holdings (Form N-Q) with the Securities and Exchange Commission (“SEC”) as of the end of the first and third calendar quarters. The Company’s 
Forms N-Q are available at www.generalamericaninvestors.com and on the SEC’s website: www.sec.gov. Also, Forms N-Q may be reviewed and 
copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the SEC’s Public Reference Room may be obtained 
by calling 1-800-SEC-0330. A copy of the Company’s Form N-Q may also be obtained by calling us at 1-800-436-8401. 
On May 12, 2010, 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 list- 
ing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and related SEC rules, the Company’s principal executive 
and principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among other 
things, the Company’s disclosure controls and procedures and internal control over financial reporting, as applicable. 

 



DIRECTORS
Spencer Davidson, Chairman
Sidney R. Knafel, Lead Independent Director
   Arthur G. Altschul, Jr.  Betsy F. Gotbaum 
   Rodney B. Berens  Daniel M. Neidich 
   Lewis B. Cullman  D. Ellen Shuman 
   Gerald M. Edelman  Raymond S. Troubh 
   John D. Gordan, III   
OFFICERS
   Spencer Davidson, President & Chief Executive Officer 
   Andrew V. Vindigni, Senior Vice-President 
   Sally A. Lynch, Vice-President 
   Michael W. Robinson, Vice-President 
     Eugene S. Stark, Vice-President, Administration &
      Chief Compliance Officer 
   Jesse R. Stuart, Vice-President 
   Diane G. Radosti, Treasurer 
   Carole Anne Clementi, Secretary 
   Craig A. Grassi, Assistant Vice-President 
   Maureen E. LoBello, Assistant Secretary 
SERVICE COMPANIES
COUNSEL  TRANSFER AGENT AND REGISTRAR 
Sullivan & Cromwell LLP  American Stock Transfer & Trust 
     Company, LLC
INDEPENDENT AUDITORS  59 Maiden Lane
Ernst & Young LLP  New York, NY 10038
  1-800-413-5499
CUSTODIAN  www.amstock.com
State Street Bank and 
   Trust Company