Closed-End Funds

A closed-end fund is a form of investment company that is registered with the SEC under the Investment Company Act of 1940. The assets in closed-end funds are professionally managed pursuant to stated investment objectives. In turn, shares of closed-end funds are traded on securities exchanges and are available to investors through their brokers.

General American Investors Company is an independent organization. We are one of a limited number of closed-end funds in operation today, formed prior to 1940, which is characterized as “internally managed.” This means that we incur directly all costs and expenses associated with the management of our portfolio and the operation of our Company. There is no outside investment advisory company which typically provides these services under a fee-based advisory agreement or management contract.

Some of the advantages attributable to the closed-end structure include:

• The opportunity for an investor to purchase shares at a discount (below the underlying net asset value).
• The stability of the asset base that permits the portfolio manager to focus on investment decisions without having to be concerned with cash flow factors based on investor sentiment.
• The ability of an investor to trade shares of the fund throughout the business day.
• The opportunity to use leverage in the form of senior securities (preferred stock or debentures) as a means to improve the return to investors.

The Closed-End Fund Association has published a brochure titled “Understanding the Advantages of Closed-End Funds” that describes in greater detail the nature of CEFs and some of the reasons investors should consider including shares of CEFs in their personal portfolios. The brochure is available at the Association’s website: www.closed-endfunds.com. (Look for the heading on the home page marked Free Booklets, then click on Understanding the Advantages of Closed-End Funds.)