General American Investors Company, Inc. Annual Report 2008

FY2008 Annual Report · General American Investors Company, Inc.

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General American Investors Company, Inc.
100 Park Avenue, New York, NY 10017
(212) 916-8400 (800) 436-8401
E-mail: InvestorRelations@gainv.com
www.generalamericaninvestors.com

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 8
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 (unaudited)

Net assets applicable to Common Stock -

December 31

Net investment income
Net realized gain
Net decrease in unrealized appreciation
Distributions to Preferred Stockholders

Per Common Share-December 31

Net asset value
Market price

Discount from net asset value

2008

2007

$674,597,801
13,446,046
16,414,799
(523,757,542)
(11,899,613)

$1,202,922,969
9,782,623
175,785,885
(71,533,458)
( 11,900,000)

$21.09
$17.40
-17.5%

$38.10
$34.70
- 8.9%

31,573,058
3,891
$43.87-$32.69
7,110,734

Common Shares outstanding-Dec. 31
Common Stockholders of record-Dec. 31
Market price range* (high-low)
Market volume-shares

31,980,872
3,806
$34.76-$13.01
10,131,229

*Unadjusted for dividend payments.

DIVIDEND SUMMARY (per share) (unaudited)

Record Date

Payment Date

Ordinary
Income

Long-Term
Capital Gain

Total

Common Stock

Nov. 14, 2008

Dec. 26, 2008

$.185594

$.254406

$.440000

Total from 2008 earnings

Nov. 16, 2007
Jan. 28, 2008

Dec. 27, 2007
Feb. 11, 2008

Total from 2007 earnings

$.709475 (a)
.005815
$.715290

$5.040525
.209479
$5.250004

$5.750000
.215294
$5.965294

(a) Includes short-term gains in the amount of $.009262 per share.

Preferred Stock

Mar. 7, 2008
Jun. 6, 2008
Sept. 8, 2008
Dec. 8, 2008

Total for 2008

Mar. 7, 2007
Jun. 7, 2007
Sept. 7, 2007
Dec. 7, 2007

Total for 2007

Mar. 24, 2008
Jun. 24, 2008
Sept. 24, 2008
Dec. 24, 2008

Mar. 26, 2007
Jun. 25, 2007
Sept. 24, 2007
Dec. 24, 2007

$.108585
.108585
.108585
.108585
$.434340

$.263290
.263290
.263290
.263290
$1.053160

$.045885
.045885
.045885
.045885
$.183540 (b)

$.325990
.325990
.325990
.325990
$1.303960

$.371875
.371875
.371875
.371875
$1.487500

(b) Includes short-term gains in the amount of $.002396 ($.000599 per quarter).

General American Investors Company, Inc.
100 Park Avenue, New York, NY 10017
(212) 916-8400 (800) 436-8401
E-mail: InvestorRelations@gainv.com
www.generalamericaninvestors.com

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 U.S. stock market was down 37.1% for the year

ended December 31, 2008, as measured by our
benchmark, the Standard & Poor's 500 Stock

Index (including income). General American Investors’
net asset value (NAV) per Common Share (assuming
reinvestment of all dividends) decreased 43.0%. The re-
turn to our Common Stockholders was negative by
48.2% because the discount at which our shares traded
to their NAV widened to 17.5% at this year end from
8.9% a year ago.

In order to provide a more comprehensive presentation
of our performance, return on NAV has been added to
the table that follows. Stockholder return reflects widen-
ing in the discount to NAV to the very high end of its
historic range, and may not fully illustrate that over
many years General American has produced superior in-
vestment results.

Years

Stockholder Return
(Market Value)

NAV Return

S&P 500

-13.0%

-11.6%

-8.5%

-3.4

3.0

11.8

14.2

10.4

-2.4

3.3

11.3

13.5

11.3

11.0

-2.3

-1.5

8.4

11.0

9.0

9.2

Last year, the world economy ended a remarkable half-
decade of strong growth and robust profitability in
dramatic fashion. As the credit crisis, whose origins lay
in inflated real estate prices that were fueled by easy
money and lax lending standards, played out, liquidity
evaporated. The concept of decoupling was thus
discredited as virtually all markets—major, emerging
and commodity—became correlated and plunged pre-
cipitously. It was the worst market for U.S. equities in
seven decades, with most of the damage occurring in
the fourth quarter. The recession, hinted at earlier in
the year, was well entrenched by year’s end, while re-
lentlessly bleak economic reports reflected accelerating
lay-offs and continuing declines in house prices, with
one in ten mortgages at least a month in arrears or in
foreclosure. Credit problems, which manifested first in
housing, before spreading to autos and retail, seem
likely to reach other sectors of the global economy as
the new year unfolds.

In the short-run, consumer demand, for durables in
particular, appears to be sated and consequently
savings are on the rise. While the benefits of increased
saving, which include the provision of funds for
productivity-enhancing research and development,
and an improved trade balance, may seem obvious,
they run into the paradox of thrift. That is to say, the
benefits tend to be long-term and are offset by more
severe economic contraction in the short-term as con-
sumers retrench. Since the demand for American
exports is likely to remain constrained, increased gov-
ernment spending appears to be a logical response to
this problem, with emphasis on defense and infrastruc-
ture. The former must be requisitioned from U.S.
manufacturers, by law, and the latter is mostly
supplied by domestic producers of cement and
structural steel, et.al.

Government intervention in the financial system, ini-
tially piecemeal but more comprehensive of late, is
beginning to have a thawing effect on the markets.
Improvement is notably visible in those areas receiving
state support, such as the interbank money and top
rated commercial paper markets. Although banks
remain reluctant lenders in the face of still-mounting
loan losses, and the path back to normalization is
almost certain to be long and bumpy, easier financial
conditions are likely to stabilize economic activity.
Once the financial markets are functioning normally,
confidence should slowly return. Massive monetary
easing and the stimulating effect of declining energy
costs should enable the recovery of the global
economy.

Credit creation may not return to boom-year levels and
it may well remain more of a Wal-Mart world than one
favoring aspirational goods and services. But we’ve
owned Wal-Mart for twenty-five years and the experi-
ence has been salutary. In general, stocks typically
bottom before the economy does, since money is creat-
ed faster than the economy’s ability to employ it.
Investors then use the excess liquidity to seek high re-
turns by purchasing riskier assets like equities. With the
yield on the S&P 500 currently more than 100 basis
points, or 1%, above that on ten-year Treasury bonds
for the first time since 1962, equity markets may have
discounted the preponderance of bad news. Our portfo-
lio continues to feature companies with strong
financial characteristics, reasonable earnings visibility
and powerful positions in their respective industries.
We retain abundant cash reserves and look forward to
their selective employment as opportunities present
themselves.

The share repurchase program, a part of our ongoing ef-
fort to maximize NAV, continues. In 2008, the
Company purchased 102,047 of its Common Shares on
the open market at an average discount to NAV of
19.8%. The Board of Directors has authorized
repurchases of Common Shares when they are trading
at a discount to NAV in excess of 8%.

In December 2008, the Board of Directors authorized the
repurchase of 1 million outstanding shares of its 5.95%
Cumulative Preferred Stock when the shares are trading
at a market price below the liquidation price of $25.00
per share. In 2008, the Company purchased 15,300 of
its Preferred Shares at an average price of $21.12 per
share.

Information about the Company, including our
investment objectives, operating policies and procedures,
investment results, record of dividend payments, finan-
cial reports and press releases, etc., is available on our
website, which can be accessed at
www.generalamericaninvestors.com.

By Order of the Board of Directors,

Spencer Davidson
Chairman of the Board
President and Chief Executive Officer
January 21, 2009

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

General American Investors,
established in 1927, is one
of the nation’s oldest closed-
end investment companies.
It is an independent organi-
zation that is 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 Investment Company
Act of 1940 and Sub-Chapter M of the
Internal Revenue Code.

Investment
Policy

The primary objective of
the Company is long-term
capital appreciation. Lesser
emphasis is placed on cur-
rent 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 con-
tinuous investment research program,
which stresses fundamental security analy-
sis, is carried on by the officers and staff of
the Company under the oversight of the
Board of Directors. The directors have a
broad range of experience in business and
financial affairs.

Portfolio
Manager

Mr. Spencer Davidson,
Chairman of the Board,
President and Chief
Executive Officer, has
been responsible for the
management of General American since
August 1995. Mr. Davidson, who joined
the Company in 1994 as senior investment
counselor, has spent his entire business ca-
reer 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 in the same manner as
all listed stocks. Net asset value is computed
and published on the Company’s website daily
(on an unaudited basis) and is also furnished
upon request. It is also available on most elec-
tronic quotation services using the symbol
"XGAMX." Net asset value per share (NAV),
market price, and the discount or premium
from NAV as of the close of each week, is pub-
lished in Barron’s and The Wall Street Journal,
Monday edition.

While shares of GAM usually sell at a discount
to NAV, as do the shares of most other domes-
tic equity closed-end investment companies,
they occasionally sell at a premium over NAV.
During 2008, the stock sold at discounts to
NAV which ranged from 7.3% (February 12) to
25.2% (November 21). At December 31, the
price of the stock was at a discount of 17.5%.

Since March 1995, the Board of Directors has
authorized the repurchase of Common Stock
in the open market when the shares trade at a
discount to net asset value of at least 8%.

“GAM Pr B”
Preferred
Stock

On September 24, 2003, the
Company issued and sold in
an underwritten offering
8,000,000 shares of its 5.95%
Cumulative Preferred Stock,
Series B with a liquidation preference of $25
per share ($200,000,000 in the aggregate).
The Preferred Shares are rated "Aaa" by
Moody’s Investors Service, Inc. and are listed
and traded on The New York Stock Exchange
(symbol, GAM Pr B). The Preferred Shares are
available to leverage the investment
performance of the Common Stockholders, it
may also result in higher market volatility for
the Common Stockholders.

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

On December 10, 2008, the Board of Directors
authorized the repurchase of 1 million
Preferred Shares in the open market at prices
below $25 per share.

Dividend
and
Distribution
Policy

The Company’s dividend and
distribution policy is to
distribute to stockholders be-
fore year-end substantially all
ordinary income estimated for

the full year and capital gains realized during
the ten-month period ended 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.
Dividends and distributions on shares of
Preferred Stock are paid quarterly.
Distributions from capital gains and dividends
from 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 distributions in varying
amounts have been paid for each of the years
1943-2008 (except for the year 1974). (A table
listing dividends and distributions paid during
the 20-year period 1989-2008 is shown at the
bottom of page 6.) To the extent that shares
can be issued, dividends and distributions are
paid to Common Stockholders in additional
shares of Common Stock unless the stockhold-
er specifically requests payment in cash.

Proxy Voting
Policies,
Procedures
and Record

The policies and procedures
used by General American
Investors to determine how
to vote proxies relating to
portfolio securities and the

Company’s proxy voting record for the 12-
month period ended June 30, 2008 are
available: (1) without charge, upon request, by
calling the Company at its toll-free number (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.

Direct
Registration

The Company makes available
direct registration for its
Common Shareholders. Direct
registration, which is an
element of the Investors
Choice Plan administered by our transfer
agent, is a system that allows for book-entry
ownership and electronic transfer of our
Common Shares. Accordingly, when
Common Shareholders, who hold their shares
directly, receive new shares resulting from a
purchase, transfer or dividend payment, they
will receive a statement showing the credit of
the new shares as well as their Plan account
and certificated share balances. A brochure
which describes the features and benefits of
the Investors Choice Plan, including the ability
of shareholders to deposit certificates with our
transfer agent, can be obtained by calling
American Stock Transfer & Trust Company at
1-800-413-5499, calling the Company at 1-
800-436-8401 or visiting our website:
www.generalamericaninvestors.com - click on
Distribution & Reports, then Report Downloads.

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 col-
lect personal information about, stockholders
who hold the Company’s securities at financial
institutions in “street name” registration.

We do not disclose any nonpublic personal in-
formation about our current or former
stockholders to anyone, except as permitted by
law. We also restrict access to nonpublic per-
sonal information about our stockholders to
those few employees who need to know that
information to perform their responsibilities.
We maintain safeguards that comply with fed-
eral standards to guard our stockholders’
personal information.

I N V E S T M E N T R E S U L T 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

Total return on
$10,000 investment
for 20 years ended
December 31, 2008

The investment return for a Common

Stockholder of General American
Investors (GAM) over the 20 years

ended December 31, 2008 is shown in the
table below and in the accompa ny ing 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 1989.

Stockholder Return is the return a
Common Stock holder of GAM would have
achieved assuming reinvestment of all
dividends and distributions at the actual rein-
vestment price and of all cash dividends at the

average (mean between high and low) market
price on the ex-dividend date.

Net Asset Value (NAV) Return is the return
on shares of the Company’s Common Stock
based on the NAV per share, including the
reinvestment of all dividends and distributions
at the reinvestment prices indicated above.

Standard & Poor’s 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.

Past performance reported below may not be
indicative of future results.

GENERAL AMERICAN INVESTORS

STANDARD & POOR’S 500

STOCKHOLDER RETURN

NET ASSET VALUE RETURN

RETURN

CUMULATIVE
INVESTMENT

ANNUAL
RETURN

CUMULATIVE
INVESTMENT

ANNUAL
RETURN

CUMULATIVE
INVESTMENT

ANNUAL
RETURN

$14,860

48.60%

$13,786

37.86%

$13,162

31.62%

15,454

28,591

32,816

27,592

25,423

30,818

36,821

52,500

68,938

95,975

114,306

119,256

86,806

110,253

119,944

140,814

164,443

178,782

92,609

4.00

85.00

14.78

-15.92

-7.86

21.22

19.48

42.58

31.31

39.22

19.10

4.33

-27.21

27.01

8.79

17.40

16.78

8.72

-48.20

14,708

23,694

24,535

24,105

23,445

28,973

34,759

45,899

62,028

84,607

99,531

98,337

75,700

96,442

106,443

123,686

138,825

149,945

85,439

6.69

61.09

3.55

-1.75

-2.74

23.58

19.97

32.05

35.14

36.40

17.64

-1.20

-23.02

27.40

10.37

16.20

12.24

8.01

-43.02

12,755

16,633

17,895

19,706

19,957

27,440

33,727

44,968

57,807

69,923

63,567

56,009

43,608

56,063

62,112

65,112

75,309

79,383

49,953

-3.09

30.40

7.59

10.12

1.27

37.50

22.91

33.33

28.55

20.96

-9.09

-11.89

-22.14

28.56

10.79

4.83

15.66

5.41

-37.07

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

I N V E S T M E N T R E S U L T 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

20-YEAR INVESTMENT RESULTS
ASSUMING AN INITIAL
INVESTMENT OF $10,000

CUMULATIVE VALUE
OF INVESTMENT

$200,000

$180,000

$160,000

$140,000

$120,000

$100,000

$80,000

$60,000

$40,000

$20,000

COMPARATIVE ANNUALIZED INVESTMENT RESULTS

YEARS ENDED
DECEMBER 31, 2008

STOCKHOLDER

RETURN

GAM NET
ASSET VALUE

S&P 500
STOCK INDEX

1 year

-48.2 % -43.0 %

-37.1 %

5 years

10 years

15 years

-3.4

3.0

8.4

-2.4

3.3

8.8

20 years

11.8

11.3

-2.3

-1.5

6.4

8.4

GAM STOCKHOLDER RETURN

GAM NET ASSET VALUE

S&P 500 STOCK INDEX

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

2005

2006

2007

2008

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 8 ( 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

ADDITIONS

INCREASES

ABB Ltd. ADR
American Express Company
AXIS Capital Holdings Limited
Cisco Systems, Inc.
Lamar Advertising Company Class A
MetroPCS Communications, Inc.
PartnerRe Ltd.
PepsiCo, Inc.
Republic Services, Inc.

DECREASES

SHARES OR
PRINCIPAL AMOUNT
TRANSACTED

SHARES HELD
DECEMBER 31, 2008

200,000
25,000
140,000
45,000
50,000
190,000
10,000
15,000
67,500

ELIMINATIONS

Biogen Idec Inc.
General Motors Nova Scotia Finance Company

6.85% Guaranteed Notes Due 10/15/08

70,000

$13,750,000

REDUCTIONS

The Allstate Corporation
Apache Corporation
Arch Capital Group Ltd.
Berkshire Hathaway Inc. Class A
The Boeing Company
CEMEX, S.A. de C.V. ADR
Dell Inc.
Everest Re Group, Ltd.
Fidelity National Financial, Inc.
Heineken N.V.
Leap Wireless International, Inc.
McDermott International, Inc.
M&T Bank Corporation
MetLife, Inc.
Nelnet, Inc.
Nintendo Co., Ltd.
QUALCOMM Incorporated
Teradata Corporation
Textron Inc.
Transatlantic Holdings, Inc.
Waste Management, Inc.
Weatherford International Ltd.

* Excludes transactions in Common and Preferred Stocks-Miscellaneous-Other.

(a) Includes shares received from an assigned put option.
(b) Shares received in a merger with Allied Waste Industries, Inc.

225,000
40,000
15,000
50
300,000
430,727
75,000
50,000
150,000
50,000
74,500
100,000
20,000
15,000
300,000
2,900
100,000
125,000
182,000
5,000
50,000
420,000

1,200,000
400,000
440,000
960,000
374,100
1,400,000
285,000
255,000
949,000

(a)

(b)

(a)

—

100,000
459,800
300,000
150
300,000
1,875,862
1,480,000
250,000
800,000
375,000
68,000
250,000
195,000
235,000
550,000
67,100
700,000
565,000
418,700
83,000
630,000
2,050,000

D I V I D E N D S A N D D I S T R I B U T I O N S P E R C O M M O N S H A R E ( 1 9 8 9 - 2 0 0 8 ) ( U N A U D I T E D )

EARNINGS SOURCE
SHORT-TERM LONG-TERM

EARNINGS SOURCE

SHORT-TERM LONG-TERM

YEAR

INCOME CAPITAL GAINS CAPITAL GAINS

YEAR

INCOME CAPITAL GAINS CAPITAL GAINS

1989
1990
1991
1992
1993
1994
1995
1996
1997
1998

$.21
.21
.09
.03
.06
.06
.10
.20
.21
.47

$.02
—
—
—
—
—
.03
.05
—
—

$1.56
1.65
3.07
2.93
2.34
1.59
2.77
2.71
2.95
4.40

1999
2000
2001
2002
2003
2004
2005
2006
2007
2008

$.42
.48
.37
.03
.02
.217
.547
.334
.706
.186

$.62
1.55
.64
—
—
—
.041
—
.009
—

$4.05
6.16
1.37
.33
.59
.957
1.398
2.666
5.250
.254

This table shows
dividends and distribu-
tions on the Company’s
Common Stock for the
prior 20-year period.
Amounts shown are
based upon the year in
which the income was
earned, not the year
paid. Spill-over
payments made after
year-end are attributable
to income and gain
earned in the prior year.

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, 2008,
shown on pages 12 and
13 includes 52
security issues. Listed
here are the ten largest
holdings on that date.

THE TJX COMPANIES, INC.
Through its T.J. Maxx and Marshalls divisions, TJX is the leading
off-price retailer. The continued growth of these divisions, along
with expansion into related U.S. and foreign off-price formats,
provide ongoing growth opportunities.

VALUE

% COMMON
NET ASSETS*

1,675,000

$34,454,750

5.1%

APACHE CORPORATION
Apache is a large independent oil and gas company with a long
history of growing production and creating value for shareholders.
The company’s operations are primarily focused in North America,
Egypt, Australia, and the North Sea.

COSTCO WHOLESALE CORPORATION
Costco is the world’s largest wholesale club with a record of steady
growth in sales and profits as it continues to gain share of the consumer
dollar.

WAL-MART STORES, INC.
Wal-Mart is the world’s largest retailer offering value to consumers
in the U.S. and thirteen foreign countries.

QUALCOMM INCORPORATED
QUALCOMM is a leading developer of intellectual property and
semiconductors for the mobile communications industry. The
company stands to benefit greatly from the global adoption of
mobile data applications.

NINTENDO CO., LTD.
Nintendo is one of the world’s leading developers of video game
platforms and software. Its innovative approach to product
development and customer segmentation should lead to further
market share gains.

REPUBLIC SERVICES, INC.
Republic Services is a leading provider of non-hazardous, solid
waste collection and disposal services in the U.S. The efficient
operation of its routes and facilities combined with appropriate
pricing enable Republic Services to generate significant free cash
flow.

WEATHERFORD INTERNATIONAL LTD.
Weatherford supplies a broad range of oil field services and
equipment on a worldwide basis. Its focus on helping customers
increase production from existing fields and enhance recovery
from new wells should lead to earnings growth.

459,800

34,268,894

5.1

575,000

30,187,500

4.5

470,000

26,348,200

3.9

700,000

25,081,000

3.7

67,100

24,951,796

3.7

949,000

23,525,710

3.5

2,050,000

22,181,000

3.3

ARCH CAPITAL GROUP LTD.
Arch Capital, a Bermuda-based insurer/reinsurer, generates
premiums of approximately $3.5 billion and has a high quality,
well-reserved A-rated balance sheet. This company has a strong
management team that exercises prudent underwriting discipline and
efficient expense control, resulting in above-average earnings and
book value growth.

300,000

21,030,000

3.1

WASTE MANAGEMENT, INC.
Waste Management provides waste collection and disposal services
to over 20 million customers in the U.S. The company also
operates waste-to-energy plants, provides recycling services, and
captures landfill gases for beneficial uses. The company has a
strong record of returning excess cash flow to shareholders through
dividends and stock repurchases.

*Net assets applicable to the Company’s Common Stock.

630,000

20,878,200

3.1

$262,907,050 39.0%

P O R T F O L I O D I V E R S I F I C A T I O N ( 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

INDUSTRY CATEGORY

COST(000)

VALUE(000)

2008

2007

DECEMBER 31, 2008

PERCENT COMMON NET ASSETS*
DECEMBER 31

The diversification of
the Company’s net
assets applicable to its
Common Stock by
industry group as of
December 31, 2008 and
2007 is shown in the
following table.

Finance and Insurance

Banking
Insurance
Other

Retail Trade
Oil and Natural Gas
(Including Services)

Consumer Products and Services
Computer Software and Systems
Communications and
Information Services
Environmental Control
(Including Services)

Aerospace/Defense
Miscellaneous**
Health Care/Pharmaceuticals
Machinery and Equipment
Building and Real Estate
Technology
Semiconductors
Transportation
Metals

Short-Term Securities
Total Investments

Other Assets and Liabilities - Net
Preferred Stock
Net Assets Applicable to

Common Stock

$995
63,102
34,617
98,714
54,015

74,054
75,989
91,648

85,027

38,960
62,254
37,553
11,168
13,364
24,457
25,690
16,353
11,005
—
720,251
118,897
$839,148

$11,195
116,673
27,952
155,820
102,492

79,219
75,062
69,404

68,046

44,404
36,028
32,261
24,203
18,012
17,145
15,143
12,649
5,917
—
755,805
118,897
874,702
(487)
(199,617)

1.7%

4.0%

17.3
4.1
23.1
15.2

11.8
11.1
10.3

10.1

6.6
5.3
4.8
3.6
2.7
2.5
2.2
1.9
0.9
—
112.1
17.6
129.7
(0.1)
(29.6)

17.2
3.0
24.2
14.4

19.5
10.8
10.9

6.9

4.1
5.1
4.2
2.9
2.4
4.8
2.6
—
1.0
2.0
115.8
0.8
116.6
0.0
(16.6)

$674,598

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.

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 and preferred stocks

DECEMBER 31,

2008

2007

(cost $710,373,320 and $816,594,960, respectively)

$745,830,202

$1,374,257,148

Corporate note (cost $9,877,906 and

$19,053,293, respectively)

Money market fund (cost $118,896,974 and
$9,165,709, respectively)
Total investments (cost $839,148,200 and

$844,813,962, respectively)

RECEIVABLES AND OTHER ASSETS

9,975,000

19,183,125

118,896,974

9,165,709

874,702,176

1,402,605,982

Receivable for securities sold
Premium deposited with brokers for options written
Dividends, interest and other receivables
Qualified pension plan asset, net excess funded (note 5)
Prepaid expenses and other assets

2,638,460
—
1,461,811
1,899,294
3,245,437

—
3,712,458
1,333,175
9,244,527
2,549,782

TOTAL ASSETS

LIABILITIES

883,947,178

1,419,445,924

Payable for securities purchased
Accrued preferred stock dividend not yet declared
Accrued supplemental pension plan liability (note 5)
Outstanding options written at value (premiums deposited

with brokers $3,712,458 for 2007) (notes 1a and 6)

Accrued supplemental thrift plan liability
Accrued expenses and other liabilities

TOTAL LIABILITIES

1,347,832
231,002
3,195,179

—
1,747,234
3,210,630
9,731,877

—
231,389
3,174,022

2,192,960
3,393,011
7,531,573
16,522,955

5.95% CUMULATIVE PREFERRED STOCK, SERIES B -

7,984,700 and 8,000,000 shares, respectively, at a liquidation
value of $25 per share (note 2)

NET ASSETS APPLICABLE TO COMMON STOCK - 31,980,872

and 31,573,058 shares, respectively (note 2)

199,617,500

200,000,000

$674,597,801

$1,202,922,969

NET ASSET VALUE PER COMMON SHARE

$21.09

$38.10

NET ASSETS APPLICABLE TO COMMON STOCK

Common Stock, 31,980,872 and 31,573,058 shares at

par value, respectively (note 2)
Additional paid-in capital (note 2)
Undistributed realized gain (loss) on investments (note 2)
Undistributed net investment income (note 2)
Accumulated other comprehensive income (loss) (note 5)
Unallocated distributions on Preferred Stock
Unrealized appreciation on investments and options

$31,980,872
608,328,298
(16,916)
5,759,182
(6,776,609)
(231,002)
35,553,976

$31,573,058
602,738,135
6,711,263
1,711,821
1,108,563
(231,389)
559,311,518

NET ASSETS APPLICABLE TO COMMON STOCK

$674,597,801

$1,202,922,969

(see notes to financial statements)

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 $413,817 and $353,438, respectively)

Interest

TOTAL INCOME

EXPENSES

Investment research
Administration and operations
Office space and general
Directors’ fees and expenses
Auditing and legal fees
Transfer agent, custodian and registrar fees and expenses
Stockholders’ meeting and reports
Miscellaneous taxes

TOTAL EXPENSES

NET INVESTMENT INCOME

YEAR ENDED DECEMBER 31,

2008

2007

$19,355,826
3,037,848

$20,925,587
2,809,754

22,393,674

23,735,341

3,868,008
2,597,320
1,579,448
275,634
215,601
170,542
126,838
114,237

9,312,122
3,104,891
562,787
266,033
307,829
169,891
131,872
97,293

8,947,628

13,952,718

13,446,046

9,782,623

Realized Gain (Loss) And Change In Unrealized Appreciation On Investments (Notes 1, 4 and 6)

Net realized gain on investments:

Long transactions
Written option transactions (notes 1b and 6)

Net realized gain on investments

(long-term except $3,224,498 for 2007)

Net decrease in unrealized appreciation

8,649,744
7,765,055

176,058,639
( 272,754)

16,414,799

175,785,885

(523,757,542)

(71,533,458)

NET INVESTMENT INCOME AND GAIN (LOSS) ON INVESTMENTS

(493,896,697)

114,035,050

DISTRIBUTIONS TO PREFERRED STOCKHOLDERS

(11,899,613)

(11,900,000)

INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS

($505,796,310) $102,135,050

(see notes to financial statements)

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

G e n e r a l A m e r i c a n I n v e s t o r s

OPERATIONS

Net investment income
Net realized gain on investments
Net decrease in unrealized appreciation

Distributions to Preferred Stockholders:

From net investment income
From short-term capital gains
From long-term capital gains
Unallocated distributions
Decrease in net assets from Preferred distributions

YEAR ENDED DECEMBER 31,

2008

2007

$13,446,046
16,414,799
(523,757,542)
(493,896,697)

$9,782,623
175,785,885
(71,533,458)
114,035,050

(3,474,724)
—
(8,425,276)
387
(11,899,613)

( 689,497)
( 778,809)
( 10,431,694)
—
(11,900,000)

INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
OTHER COMPREHENSIVE INCOME

(505,796,310)

102,135,050

Adjustment to apply FAS 158 (note 5)

(7,885,172)

456,004

DISTRIBUTIONS TO COMMON STOCKHOLDERS

From net investment income
From short-term capital gains
From long-term capital gains

DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS

CAPITAL SHARE TRANSACTIONS (NOTE 2)

Value of Common Shares issued in payment of dividends

and distributions

Cost of Common Shares purchased
Benefit to Common Shareholders resulting from

Preferred Shares purchased

INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS

NET INCREASE (DECREASE) IN NET ASSETS

NET ASSETS APPLICABLE TO COMMON STOCK

(6,024,428)
—
(14,620,307)

( 9,603,869)
( 10,847,882)
( 145,301,188)

(20,644,735)

( 165,752,939)

7,928,339
(1,986,688)

96,902,914
( 30,271,148)

59,398

—

6,001,049

66,631,766

(528,325,168)

3,469,881

BEGINNING OF YEAR

1,202,922,969

1,199,453,088

END OF YEAR (including undistributed net investment

income of $5,759,182 and $1,711,821, respectively)

$674,597,801 $1,202,922,969

(see notes to financial statements)

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 8

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 AND PREFERRED STOCKS

AEROSPACE/DEFENSE
(5.3%)

300,000 The Boeing Company
418,700 Textron Inc.
325,000 United Technologies Corporation

(COST $62,253,609)

VALUE (NOTE 1a)

$12,801,000
5,807,369
17,420,000
36,028,369

1,875,862 CEMEX, S.A.B. de C.V. ADR (a)

(COST $24,456,722)

17,145,379

BUILDING AND
REAL ESTATE (2.5%)

COMMUNICATIONS AND

INFORMATION SERVICES
(10.1%)

COMPUTER SOFTWARE
AND SYSTEMS (10.3%)

960,000 Cisco Systems, Inc. (a)
374,100 Lamar Advertising Company Class A (a)

68,000 Leap Wireless International, Inc. (a)
1,400,000 MetroPCS Communications, Inc. (a)

700,000 QUALCOMM Incorporated

1,480,000 Dell Inc. (a)

570,000 Microsoft Corporation
445,100 NetEase.com, Inc. (a)
67,100 Nintendo Co., Ltd.

565,000 Teradata Corporation (a)

CONSUMER PRODUCTS
AND SERVICES (11.1%)

350,000 Diageo plc ADR
375,000 Heineken N.V.
466,100 Hewitt Associates, Inc. Class A (a)
425,000 Nestle S.A.
255,000 PepsiCo, Inc.

ENVIRONMENTAL CONTROL
(INCLUDING SERVICES) (6.6%)

949,000 Republic Services, Inc.
630,000 Waste Management, Inc.

15,648,000
4,698,696
1,828,520
20,790,000
25,081,000
68,046,216

15,155,200
11,080,800
9,836,710
24,951,796
8,378,950
69,403,456

19,859,000
11,444,940
13,227,918
16,563,614
13,966,350
75,061,822

23,525,710
20,878,200
44,403,910

(COST $85,026,705)

(COST $91,647,625)

(COST $75,988,936)

(COST $38,960,134)

FINANCE AND INSURANCE
(23.1%)

BANKING (1.7%)

195,000 M&T Bank Corporation

(COST $994,686)

11,194,950

INSURANCE (17.3%)

100,000 The Allstate Corporation
300,000 Arch Capital Group Ltd. (a)
440,000 AXIS Capital Holdings Limited

150 Berkshire Hathaway Inc. Class A (a)

250,000 Everest Re Group, Ltd.
800,000 Fidelity National Financial, Inc.
235,000 MetLife, Inc.
285,000 PartnerRe Ltd.

83,000 Transatlantic Holdings, Inc.

OTHER (4.1%)

400,000 American Express Company
1,666,667 Epoch Holding Corporation

550,000 Nelnet, Inc. (a)

HEALTH CARE /
PHARMACEUTICALS
(3.6%)

529,900 Cytokinetics, Incorporated (a)
200,000 Genentech, Inc. (a)
119,500 Gilead Sciences, Inc. (a)

3,276,000
21,030,000
12,812,800
14,490,000
19,035,000
14,200,000
8,192,100
20,311,950
3,324,980
116,672,830

7,420,000
12,650,002
7,881,500
27,951,502
155,819,282

1,510,215
16,582,000
6,111,230
24,203,445

(COST $63,101,799)

(COST $34,617,385)
(COST $98,713,870)

(COST $11,167,600)

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 8 - 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

MACHINERY AND
EQUIPMENT (2.7%)

COMMON AND PREFERRED STOCKS (Continued)

VALUE (NOTE 1a)

1,200,000 ABB Ltd. ADR

(COST $13,364,456)

$18,012,000

MISCELLANEOUS (3.3%)

Other (b)

(COST $27,675,427)

22,286,370

OIL AND NATURAL GAS
(INCLUDING SERVICES)
(11.8%)

459,800 Apache Corporation
800,000 Halliburton Company
250,000 McDermott International, Inc. (a)
500,000 Patterson-UTI Energy, Inc.

2,050,000 Weatherford International Ltd. (a)

RETAIL TRADE (15.2%)

575,000 Costco Wholesale Corporation
333,100 Target Corporation

1,675,000 The TJX Companies, Inc. (c)

470,000 Wal-Mart Stores, Inc.

34,268,894
14,544,000
2,470,000
5,755,000
22,181,000
79,218,894

30,187,500
11,501,943
34,454,750
26,348,200
102,492,393

(COST $74,054,171)

(COST $54,015,566)

SEMICONDUCTORS (1.9%)

700,000 ASML Holding N.V.

(COST $16,353,613)

12,649,000

TECHNOLOGY (2.2%)

1,900,000 Xerox Corporation

(COST $25,689,854)

15,143,000

TRANSPORTATION (0.9%)

236,100 Alexander & Baldwin, Inc.

(COST $11,005,032)

5,916,666

TOTAL COMMON STOCKS (110.6%)

(COST $710,373,320)

745,830,202

MISCELLANEOUS (1.5%)

Other (b) (e)

(COST $9,877,906)

9,975,000

CORPORATE NOTE

SHORT-TERM SECURITIES AND OTHER ASSETS

118,896,974

SSgA Prime Money Market Fund (17.6%)

(COST $118,896,974)

118,896,974

TOTAL INVESTMENTS (d) (129.7%)

Liabilities in excess of receivables and other assets (-0.1%)

(COST $839,148,200)

PREFERRED STOCK (-29.6%)
NET ASSETS APPLICABLE TO COMMON STOCK (100%)

874,702,176
(486,875)
874,215,301
(199,617,500)
$674,597,801

(a) Non-income producing security.
(b) Securities which have been held for less than one year, not previously disclosed, and not restricted.
(c) 400,000 shares held by custodian in a segregated custodial account as collateral for short positions and options, if any.
(d) At December 31, 2008: (1) the cost of investments for Federal income tax purposes was the same as the cost for financial

reporting purposes, (2) aggregate gross unrealized appreciation was $197,012,086, (3) aggregate gross unrealized depreciation
was $161,458,110, and (4) net unrealized appreciation was $35,553,976.

(e) Level 2 fair measurement, note 8.

(see notes to financial statements)

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 offi-
cers under the direction of the Board of Directors.

The preparation of financial statements in conformity with accounting principles generally accepted in the United

States requires management to make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those estimates.
a. SECURITY VALUATION Securities traded on a national securities exchange are valued at the last reported sales price
on the last business day of the period. Securities reported on the NASDAQ national market are valued at the official clos-
ing price on that day. 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 options written) on the valuation
date. Securities traded primarily in foreign markets are generally valued at the preceding closing price of such securities
on their respective exchanges or markets. If, after the close of the foreign market, conditions change significantly, the
price of certain foreign 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.
b. OPTIONS The Company may purchase and write (sell) put and call options. 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 that expire unexercised are treated by the Company on the expiration date as realized gains from invest-
ments. The difference between the premium received and the amount paid on effecting a closing purchase transaction,
including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the
closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from
the sale of the underlying security in determining whether the Company has realized a gain or loss. If a put option is
exercised, the premium reduces the cost basis for the securities purchased by the Company. 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.

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.

The Company is subject to the provisions of FASB Interpretation No. 48, Accounting for Uncertainties in Income Taxes
(FIN 48). As of and during the period ended December 31, 2008, the Company did not have any liabilities for any unrec-
ognized 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.
d. 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 losses pursuant to these indemnification provisions and expects the risk of loss thereunder to
be remote.

e. 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. Interest income, adjusted for
amortization of discount and premium on investments, is earned from settlement date and is recognized on the accrual
basis. Cost of short-term investments represents amortized cost.

2. 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, 31,980,872 shares were issued
and outstanding; 8,000,000 Preferred Shares were originally issued and 7,984,700 were outstanding on December 31,
2008.

On September 24, 2003, the Company issued and sold 8,000,000 shares of its 5.95% Cumulative Preferred Stock, Series
B in an underwritten offering. The Preferred Shares were noncallable for the 5 year period ended September 24, 2008 and
have a liquidation preference of $25.00 per share plus an amount equal to 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 15,300 Preferred Shares were repurchased at an average cost
per share of $21.12 during the year ended December 31, 2008. The average discount of $3.88 per Preferred Share,
$59,398 in the aggregate, was credited to additional paid-in capital of the Common Stock.

The Company is required to allocate distributions from long-term capital gains and other types of income proportion-

ately 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 capi-
tal gains or will represent a return of capital.

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 previous page.)

Under the Investment Company Act of 1940, the Company is required to maintain asset coverage of at least 200% of the
Preferred Stock. In addition, pursuant to the Rating Agency Guidelines, the Company is required to maintain a certain dis-
counted asset coverage for its portfolio that equals or exceeds the Basic Maintenance Amount under the guidelines estab-
lished by Moody’s Investors Service, Inc. 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 (whether or not earned or declared). In addition, the Company’s failure to meet the
foregoing asset coverage requirements could restrict its 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, generally, vote together with the holders of Common Stock as a single class.

At all times, holders of Preferred Stock will elect two members to the Company’s Board of Directors and the holders of
Preferred and Common Stock, voting as a single class, will elect the remaining directors. If the Company fails to pay divi-
dends 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.

The Company classifies its Preferred Stock pursuant to the requirements of EITF D-98, Classification and Measurement of

Redeemable Securities, which requires that preferred stock for which its redemption is outside of the company’s control
should be presented outside of net assets in the statement of assets and liabilities.

Transactions in Common Stock during 2008 and 2007 were as follows:

AMOUNT

2008

2007

2008

2007

Shares issued in payment of dividends and

distributions (includes 103,047 and
2,404,965 shares issued from treasury,
respectively)

Increase in paid-in capital

Total increase

Shares purchased (at an average

discount from net asset value of
19.8% and 10.4%, respectively)

Decrease in paid-in capital

Total decrease

Net increase

509,861

2,747,460

$509,861
7,418,478
7,928,339

$2,747,460
94,155,454
96,902,914

102,047

763,600

(102,047)
(1,884,641)
(1,986,688)
$5,941,651

( 763,600)
( 29,507,548)
( 30,271,148)
$66,631,766

Distributions for tax and book purposes are substantially the same.
As of December 31, 2008, the components of distributable earnings on a tax basis were as follows:

Undistributed ordinary income
Undistributed capital losses
Unrealized appreciation

$1,940,080
(16,916)
35,553,976
$37,477,140

In accordance with U.S. Treasury Regulations, the Company has elected to defer $16,916 of net realized capital losses

arising after October 31, 2008. Such losses are treated for tax purposes as arising on January 1, 2009.

To reflect reclassification arising from permanent “book/tax” differences for tax distribution reclassification and non-de-

ductible expenses during the year ended December 31, 2008, undistributed net investment income was increased by
$100,467, undistributed net realized gain on investments was decreased by $97,395 and additional paid-in capital was de-
creased by $3,072. Net assets were not affected by this reclassification.

3. OFFICERS’ COMPENSATION
The aggregate compensation paid by the Company during 2008 and 2007 to its officers (identified on page 20) amounted
to $5,257,000 and $8,874,500, respectively.

4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (other than short-term securities and options) during 2008 amounted to $301,033,584
and $425,080,355, on long transactions, respectively.

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

5. BENEFIT PLANS
The Company has funded (Qualified) and unfunded (Supplemental) defined contribution thrift plans that are available to its
employees. Due to the decline in the value of the Company’s shares, a net reduction in cost during 2008 of $1,405,619 was real-
ized. The aggregate cost of such plans for 2007 was $633,127. The Company also has both funded (Qualified) and unfunded
(Supplemental) noncontributory defined benefit pension plans that cover its employees. The pension plan provides a defined
benefit based on years of service and final average salary with an offset for a portion of Social Security covered compensation.
Effective December 31, 2006, the Company adopted the recognition provisions of Financial Accounting Standards Board
(“FASB”) Statement of Financial Accounting Standards No. 158 “Employers’ Accounting for Defined Benefit Pension and Other
Postretirement Plans” (“FAS158”) which was released on September 2006. FAS 158 improves financial reporting by requiring
employers to recognize the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in
the statement of assets and liabilities and to recognize changes in funded status in the year in which the changes occur through
other comprehensive income.

OBLIGATIONS AND FUNDED STATUS OF DEFINED BENEFIT PLANS:

DECEMBER 31, 2008 (MEASUREMENT DATE)
SUPPLEMENTAL
PLAN

QUALIFIED
PLAN

TOTAL

DECEMBER 31, 2007 (MEASUREMENT DATE)
SUPPLEMENTAL
PLAN

QUALIFIED
PLAN

TOTAL

CHANGE IN BENEFIT OBLIGATION:

Benefit obligation at beginning of year
Service cost
Interest cost
Benefits paid
Actuarial (gains)/losses
Plan amendments
Projected benefit obligation at end of year

CHANGE IN PLAN ASSETS:

Fair value of plan assets at beginning of year
Actual return on plan assets
Employer contributions
Benefits paid
Fair value of plan assets at end of year

FUNDED STATUS AT END OF YEAR

$9,337,068
214,114
554,874
(538,394)
(33,128)
—
9,534,534

18,581,595
(6,609,373)
—
(538,394)
11,433,828
$1,899,294

$3,174,022
101,236
185,076
(165,253)
(99,902)
—
3,195,179

—
—
165,253
(165,253)

—
($3,195,179)

$12,511,090
315,350
739,950
(703,647)
(133,030)
—
12,729,713

18,581,595
(6,609,373)
165,253
(703,647)
11,433,828
($1,295,885)

$9,062,488
206,228
538,587
(544,838)
13,491
61,112
9,337,068

17,719,247
1,407,186
—
(544,838)
18,581,595
$9,244,527

$3,320,726
95,332
181,712
(165,253)
(197,383)
(61,112)
3,174,022

—
—
165,253
(165,253)
—
($3,174,022)

$12,383,214
301,560
720,299
(710,091)
(183,892)
—
12,511,090

17,719,247
1,407,186
165,253
(710,091)
18,581,595
$6,070,505

Accumulated benefit obligation at end of year

$8,912,352

$2,997,332

$11,909,684

$8,726,625

$3,000,603

$11,727,228

INCREMENTAL EFFECT OF ADOPTING FAS 158

BEFORE

ADJUSTMENTS

AFTER

BEFORE

ADJUSTMENTS

AFTER

Noncurrent benefit asset

LIABILITIES

Current benefit liability
Noncurrent benefit liability

$9,244,527

($7,345,233)

$1,899,294

$8,656,759

$587,768

$9,244,527

209,039
2,964,984

59,179
(38,024)

268,218
2,926,960

213,549
3,107,178

(4,510)
(142,194)

209,039
2,964,984

Accumulated other comprehensive income

(1,108,563)

7,885,172

6,776,609

(652,559)

(456,004)

(1,108,563)

AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME CONSIST OF:

Net actuarial gain
Prior service cost

($1,445,586)
337,023
($1,108,563)

$7,907,265
(22,093)
$7,885,172

$6,461,679
314,930
$6,776,609

($1,011,676)
359,117
($652,559)

($433,910)
(22,094)
($456,004)

($1,445,586)
337,023
($1,108,563)

WEIGHTED-AVERAGE ASSUMPTIONS AS OF END OF FISCAL YEAR:

Discount rate
Expected return on plan assets
Salary scale assumption

COMPONENTS OF NET PERIODIC BENEFIT COST:

Service cost
Interest cost
Expected return on plan assets
Amortization of:

Prior service cost
Recognized net actuarial loss
Net periodic benefit cost (gain)

6.00%
7.20%
4.25%

$214,114
554,874
(1,430,924)

19,309
—
($642,627)

6.00%
N/A
4.25%

$101,236
185,076
—

2,784
—
$289,096

6.00%
8.75%
4.25%

$315,350
739,950
(1,430,924)

$206,228
538,587
(1,253,375)

6.00%
N/A
4.25%

$95,332
181,712
—

22,093
—
($353,531)

19,309
96,207
($393,044)

2,784
—
$279,828

$301,560
720,299
(1,253,375)

22,093
96,207
($113,216)

WEIGHTED-AVERAGE ASSUMPTIONS FOR DETERMINING NET PERIODIC BENEFIT COST FOR YEARS ENDED DECEMBER 31:

Discount rate

Expected long-term rate of return on plan assets

Rate of salary increase

6.00%

8.75%

4.25%

6.00%

N/A

4.25%

5.75%

8.75%

4.25%

5.75%

N/A

4.25%

PLAN ASSETS
The Company’s qualified pension plan asset allocations by asset

EXPECTED CASH FLOWS

Qualified
Plan

Supplemental
Plan

Total

category at December 31, 2008 and 2007, are as follows:

Expected Company contributions for 2009

—

$268,218

ASSET CATEGORY

Equity securities

Debt securities

Other

Total

December 31

2008

79.3%

—

20.7

2007

89.6%

10.4

—

100.0%

Expected benefit payments:

2009

2010

2011

2012

2013

Generally, not less than 80% of plan assets are invested in

2014-2018

investment companies that invest in equity securities.

$568,843

$268,218

$837,061

594,892

622,966

637,288

648,248

317,733

362,765

401,266

434,525

912,625

985,731

1,038,554

1,082,773

3,561,276

2,641,850

6,203,126

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

6. WRITTEN OPTIONS
Transactions in a written covered call and collateralized put options during the year ended December 31, 2008 were as follows:

Options outstanding, December 31, 2007
Options written
Options expired
Options exercised
Options terminated in closing purchase transaction
Options outstanding, December 31, 2008

Contracts
7,500
25,456
(16,124)
(1,002)
(15,830)
0

Premiums
$3,073,787
11,980,669
(7,404,060)
(557,561)
(7,092,835)
$0

Contracts
1,999
7,016
—
(2,409)
(6,606)
0

Premiums
$638,671
2,362,990
—
(999,771)
(2,001,890)
$0

Covered Calls

Collateralized Puts

7. OPERATING LEASE COMMITMENT
In June 2007, the Company entered into an operating lease agreement for office space which expires in February 2018 and provides
for future rental payments in the aggregate amount of approximately $10,755,000, net of construction 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 begin-
ning in February 2013. The Company has the option to renew the lease after February 2018 for five years at market rates. Rental
expense approximated $988,000 for the year ended December 31, 2008. Minimum rental commitments under the operating lease are
approximately $1,075,000 per annum in 2009 through 2012, $1,183,000 in 2013 through 2017, and $99,000 in 2018.

8. FAIR VALUE MEASUREMENTS
Effective January 1, 2008, the Company adopted FASB Statement of Financial Accounting Standard No. 157 “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 December 31, 2008:

Valuation Inputs

Investments in Securities

Level 1 - Quoted prices

Level 2 - Other significant observable inputs (see (e), page 13)

Level 3 - Unobservable inputs

Total

$864,727,176

9,975,000

—

$874,702,176

1 8

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, 2008.
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 (loss) on securities - realized

and unrealized

Other comprehensive income

Distributions on Preferred Stock:

Dividends from net investment income
Distributions from net short-term

capital gains

Distributions from net long-term

capital gains

Total from investment operations

Distributions on Common Stock:

Dividends from net investment income
Distributions from net short-term

capital gains

Distributions from net long-term

capital gains

2008

2007

2006

2005

2004

$38.10
.42

$40.54
.31

$39.00
.34

$35.49
.19

$33.11
.32

(16.15)
(.25)

(.11)

—

(.27)
(.38)
(16.36)

(.19)

—

(.46)
(.65)

3.39
.02

(.02)

(.03)

(.36)
(.41)
3.31

(.33)

(.38)

(5.04)
(5.75)

4.72
.03

(.04)

(.01)

(.36)
(.41)
4.68

(.29)

(.04)

(2.81)
(3.14)

5.85
—

(.03)

(.08)

(.30)
(.41)
5.63

(.15)

(.44)

3.48
—

(.09)

—

(.32)
(.41)
3.39

(.23)

—

(1.53)
(2.12)

(.78)
(1.01)

Net asset value, end of year
Per share market value, end of year

$21.09
$17.40

$38.10
$34.70

$40.54
$37.12

$39.00
$34.54

$35.49
$31.32

TOTAL INVESTMENT RETURN - Stockholder

Return, based on market price per share

(48.20%)

8.72%

16.78%

17.40%

8.79%

RATIOS AND SUPPLEMENTAL DATA

Net assets applicable to Common Stock,

end of year (000’s omitted)

$674,598 $1,202,923 $1,199,453 $1,132,942 $1,036,393

Ratio of expenses to average net assets

applicable to Common Stock

0.87%

1.11%

1.06%

1.25%

1.15%

Ratio of net income to average net assets

applicable to Common Stock

Portfolio turnover rate

1.31%
25.52%

0.78%
31.91%

0.86%
19.10%

0.51%
20.41%

0.94%
16.71%

PREFERRED STOCK

Liquidation value, end of year

(000’s omitted)

Asset coverage
Liquidation preference per share
Market value per share

$199,617
438%

$25.00
$21.90

$200,000
701%

$200,000
700%

$200,000
666%

$200,000
618%

$25.00
$21.99

$25.00
$24.44

$25.00
$24.07

$25.00
$24.97

1 9

R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M

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 statement of
investments, of General American Investors
Company, Inc. as of December 31, 2008, 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 responsibility of the Company’s management.
Our responsibility is to express an opinion on
these financial state ments and financial
highlights based on our audits.

We conducted our audits in accordance with the
standards of the Public Company Accounting
Oversight Board (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 misstatement. We were not
engaged to perform an audit of the Company’s
internal control over financial reporting. Our
audits included consideration of internal control
over financial reporting as a basis for designing
audit procedures that are appropriate in the
circumstances, but not for the purpose of express-
ing an opinion on the effectiveness of the

Company’s internal control over financial report-
ing. Accordingly, we express no such opinion.
An audit includes examining, on a test basis, evi -
dence supporting the amounts and disclosures in
the financial statements. Our procedures
included confirmation of securities owned as of
December 31, 2008, by correspon dence with the
custodian and brokers. An audit also includes
assessing the accounting principles used and sig-
nificant estimates made by management, as well
as evaluating the overall financial statement pre-
sentation. 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, 2008, 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 U.S.
generally accepted accounting principles.

New York, New York
February 3, 2009

2 0

O F F I C 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

NAME (AGE)

EMPLOYEE SINCE

PRINCIPAL OCCUPATION
DURING PAST 5 YEARS

NAME (AGE)

EMPLOYEE SINCE

PRINCIPAL OCCUPATION
DURING PAST 5 YEARS

Spencer Davidson (66)

1994

Chairman of the Board since 2007
President and Chief

Executive Officer of the
Company since 1995

Sally A. Lynch, Ph.D. (49)

Vice-President of the

1997

Company since 2006
securities analyst
(biotechnology industry)

Andrew V. Vindigni (49)

Senior Vice-President of the

Diane G. Radosti (56)

Treasurer of the

1988

Company since 2006
Vice-President 1995-2006
securities analyst (financial
services and consumer
non-durables industries)

1980

Company since 1990
Principal Accounting
Officer since 2003

Carole Anne Clementi (62) Secretary of the

Eugene S. Stark (50)

Vice-President, Administration

1982

2005

Jesse Stuart (42)

2003

of the Company and
Principal Financial Officer
since 2005, Chief Compliance
Officer since 2006
Chief Financial Officer of
Prospect Energy Corporation
(2005); Vice President of
Prudential Financial, Inc.
(1987-2004)

Vice-President of the

Company since 2006
securities analyst (general
industries)

Craig A. Grassi (40)

1991

Maureen E. LoBello (58)

1992

Company since 1994
shareholder relations
and office management

Assistant Vice-President of
the Company since 2005
information technology

Assistant Secretary of the
Company since 2005
benefits administration

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 third 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 the inside back cover of this report.

S E R V I C E O R G A N I Z A T I O N S

COUNSEL
Sullivan & Cromwell LLP

INDEPENDENT AUDITORS
Ernst & Young LLP

CUSTODIAN
State Street Bank and Trust
Company

TRANSFER AGENT AND REGISTRAR
American Stock Transfer & Trust Company
59 Maiden Lane
New York, NY 10038
1-800-413-5499
www.amstock.com

In addition to purchases of the Company’s Common and Preferred Stock as set forth in Note 2, on pages 14 and 15, purchases of
Common and Preferred 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.

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, 2008 are available: (1) without charge, upon request,
by calling us at our toll-free telephone number (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 opera-
tion 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 be
obtained by calling us at 1-800-436-8401.

On April 30, 2008, the Company submitted a CEO annual certification to the New York Stock Exchange (“NYSE”) on which the
Company’s principal executive officer certified that he was not aware, as of that date, of any violation by the Company of the
NYSE’s Corporate Governance listing standards. In addition, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and relat-
ed 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.

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

OTHER DIRECTORSHIPS AND AFFILIATIONS

INDEPENDENT DIRECTORS
Arthur G. Altschul, Jr. (44)
1995

Co-Founder and Chairman
Kolltan Pharmaceuticals, Inc.

Managing Member
Diaz & Altschul Capital

Management, LLC

(private investment company)

Delta Opportunity Fund, Ltd., Director
Diversified Natural Products, Inc., Director
Medicis Pharmaceutical Corporation, Director
Medrium, Inc., Chairman, Board of Directors
National Public Radio Foundation, Trustee
Neurosciences Research Foundation, Trustee
The Overbrook Foundation, Director

Rodney B. Berens (63)
2007

Founding Partner
Berens Capital Management, LLC

Lewis B. Cullman (90)
1961

Philanthropist

Agni Capital Management Ltd., Member of Investment Committee
Alfred P. Sloan Foundation, Member of Investment Committee
Pendragon Capital Management Limited, Non-Executive Director
Peterson Institute for International Economics, Member of

Investment Committee

Pierpont Morgan Library, Vice President of Finance and Head

of Investment Sub-Committee

The Woods Hole Oceanographic Institute, Trustee and Head

of Investment Committee

Chess-in-the-Schools, Chairman Emeritus
Metropolitan Museum of Art, Honorary Trustee
Museum of Modern Art, Vice Chairman, International Council

and Honorary Trustee

Neurosciences Research Foundation, Vice Chairman, Board

of Trustees

The New York Botanical Garden, Senior Vice Chairman,

Board of Managers

The New York Public Library, Trustee

Gerald M. Edelman (79)
1976

John D. Gordan, III (63)
1986

Sidney R. Knafel (78)
1994

Daniel M. Neidich (59)
2007

Member, Professor and Chairman of the

Neurosciences Institute of the Neurosciences Research

Department of Neurobiology
The Scripps Research Institute

Partner
Morgan, Lewis & Bockius LLP
(lawyers)

Managing Partner
SRK Management Company
(private investment company)

Founding Partner and Co-Chief

Executive Officer

Dune Capital Management LP
(since March 2005)

Co-Head, Merchant Banking Division
Chairman, Whitehall Investment Committee
Member, Management Committee
Goldman Sachs
(prior to March 2005)

Foundation, Director and President
NGN Capital, Chairman, Advisory Board
Promosome, LLC, Chairman, Scientific Advisory Board

IGENE Biotechnology, Inc., Director
Insight Communications Company, Inc., Chairman,

Board of Directors

VirtualScopics, Inc., Director
Vocollect, Inc., Director

Capmark, Director
New York Child Study Center, Director
Prep for Prep, Director
Real Estate Roundtable, Chairman Elect
Urban Land Institute, Trustee

D. Ellen Shuman (53)
2004

Vice President and

Chief Investment Officer

Carnegie Corporation of New York

Bowdoin College, Trustee
Edna McConnell Clark Foundation, Investment Advisor
The Investment Fund for Foundations -TIFF Advisory

Joseph T. Stewart, Jr. (79)
1987

Lead Independent Director since July 2007
Corporate director and trustee

Raymond S. Troubh (82)
1989

Financial Consultant

INTERESTED DIRECTOR
Spencer Davidson (66)
1995

Chairman of the Board
President and Chief Executive Officer
General American Investors

Company, Inc.

Services, Director

Foundation of the University of Medicine and Dentistry

of New Jersey, Trustee

Marine Biological Laboratory, Member, Advisory Council
United States Merchant Marine Academy, Member,

Board of Advisors

United States Merchant Marine Academy Foundation,

Trustee

Diamond Offshore Drilling, Inc., Director
Gentiva Health Services, Inc., Director
Wendy’s/Arby’s Group, Inc., Director

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 third Wednesday in
April. The address for each Director is the Company’s office.