<PAGE>
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
- -------------------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Net assets-December 31 .................... $1,018,933,097 $ 702,597,000
Preferred Stock liquidation preference . 150,000,000 --
Common Stock ........................... 868,933,097 702,597,000
Net investment income ..................... 11,554,362 5,149,987
Net realized gain ......................... 109,379,689 66,640,521
Net increase in unrealized appreciation ... 119,454,056 99,421,665
Per Common Share-December 31
Net asset value ........................ $ 34.87 $ 29.15
Market price ........................... $ 30.4375 $ 26.1875
Discount from net asset value ............. -12.7% -10.2%
Common Shares outstanding - Dec. 31........ 24,916,719 24,104,678
Common stockholders of record - Dec. 31 ... 5,752 6,048
Market price range* (high-low) ............ $32.88-$24.50 $28.19-$20.38
Market volume-shares ...................... 4,140,900 5,540,800
<FN>
*Unadjusted for dividend payments.
</FN>
</TABLE>
DIVIDEND SUMMARY (per share)
- ----------------------------------------------------------------------------
<TABLE>
<CAPTION>
Ordinary
Record Date /Payment Date Income Capital Gain Total
------------------------- ------ ------------ -----
<S>
Common Stock <C> <C> <C>
Nov. 16, 1998 / Dec. 22, 1998 .............. $ .4672 $ 3.0428 $ 3.51
Jan. 25, 1999 / Mar. 10, 1999 .............. -- 1.36 1.36
------- -------- --------
Total from 1998 earnings ................... $ .4672 $ 4.4028 $ 4.87
======= ======== ========
Nov. 14, 1997 / Dec. 23, 1997 .............. $ .20 $ 2.75 $ 2.95
Jan. 26, 1998 / Feb. 10, 1998 .............. .01 .20 .21
------- -------- --------
Total from 1997 earnings ................... $ .21 $ 2.95 $ 3.16
======= ======== ========
Preferred Stock <C> <C> <C>
Sep. 8, 1998 / Sep. 23, 1998 .............. $ .0625 $ .4075 $ .47
Dec. 7, 1998 / Dec. 23, 1998 .............. .0599 .3901 .45
------- -------- --------
Total for 1998 ............................. $ .1224 $ .7976 $ .92
======= ======== ========
</TABLE>
General American Investors Company, Inc.
450 Lexington Avenue, New York, NY 10017
(212) 916-8400 (800) 436-8401
<PAGE>
1 TO THE STOCKHOLDERS
- -------------------------------------------------------------------------------
General American Investors
General American Investors has had an outstanding year. For the twelve months
ended December 31, 1998, net asset value per common share rose by 35.1%
(assuming reinvestment of all dividends). The Standard & Poor's 500 Index and
the Dow Jones Industrial Average rose by 28.5% and 18.1%, respectively, on a
total return basis for the same period. Our results not only surpassed these
indices but also exceeded the results of the vast majority of funds.
It is worth noting that the annualized returns for General American over the
last 10 years (20.3% per year) and 20 years (18.9% per year) have exceeded those
of the S&P 500. Shareholders have benefitted from decisions made over many years
as reflected in some of our best performing and largest holdings, such as Home
Depot, Pfizer and Wal-Mart, which were purchased years ago at a fraction of
current prices.
Total assets are now in excess of $1 billion including the capital raised in our
$150 million preferred stock offering last June. By contrast, 3 years ago our
assets were under $600 million. General American is wholly independent and self-
managed as it has been since its inception in 1927. The Company's operating
costs in relation to average net assets of .95% are well below the equity mutual
fund industry norm of about 1.5%. Portfolio turnover, at 34.4%, remains modest.
Capital gain distributions for 1998 will total $4.40 per share, including $1.36
per share for the spill-over dividend payable in March 1999. Because of
accounting issues unique to our industry, gains realized in November and
December are paid in the following calendar year. Total dividends attributable
to 1998, including ordinary income, amounted to $4.87 per share or 14% of
ending net asset value ("NAV"). This percentage has averaged 11.3% over the past
20 years.
The share repurchase program, a part of an ongoing effort to maximize NAV,
continues apace. In 1998, 943,500 common shares were acquired at an average
discount to NAV of 11.1%. On October 14, 1998, the Board of Directors authorized
a reduction from 10% to 8% in the discount from NAV at which shares could be
repurchased.
We are confident that our portfolio companies have the attributes that should
result in continuing superior performance on a long-term basis. We remain
focused on dominant suppliers of consumer goods with strong financial
characteristics.
The economy continues to create jobs, while inflation and interest rates are
modest or declining. It has been compared, justifiably, to the baby's porridge
in the Goldilocks fable - not too hot and not too cold, but just right. This
current cycle has been characterized by strong earnings that boosted equity
prices and allowed households and companies to spend freely. Deficits have been
financed by capital from abroad attracted by rising asset prices. These inflows,
in turn, buoyed the dollar and kept inflation in check, interest rates low and
the stock market soaring. In fact, it appears that the stock market gains of
recent years, a so-callled wealth effect, may be driving the economy now rather
than the reverse.
With the securities markets having achieved unprecedented heights by traditional
measures of value, such as price-to-earnings ratio, price-to-book ratio, price-
to-sales ratio and dividend yield, the highly favorable cycle may be coming to
an end. Should a decelerating economy result in market dislocation, General
American retains sufficient cash to benefit from the opportunities that may
ensue.
By Order of the Board of Directors,
Spencer Davidson
President and Chief Executive Officer
<PAGE>
2 THE COMPANY
- -------------------------------------------------------------------------------
General American Investors
Corporate Overview
General American Investors, established in 1927, is one of the nation's oldest
closed-end investment companies. It is an independent organization, internally
managed. For regulatory purposes, the Company is classified as a diversified,
closed-end management investment company; it is registered under and subject to
the regulatory provisions of the Investment Company Act of 1940.
Investment Policy
The primary objective of the Company is long-term capital appreciation. Lesser
emphasis is placed on current income. In seeking to achieve its primary
objective, the Company invests principally in common stocks believed by its
management to have better than average growth potential. Normally, a
substantially fully-invested position in equities is maintained.
The Company's investment approach focuses on the selection of individual stocks,
each of which is expected to meet a clearly defined portfolio objective. A
continuous investment research program, with the stress on fundamental security
analysis, is carried on by the officers and staff of the Company under the
oversight of the Board of Directors. A listing of the directors with their
principal affiliations, showing a broad range of experience in business and
financial affairs, is on page 16 of this report.
Portfolio Manager
Mr. Spencer Davidson has been responsible for the management of General
American's portfolio since he was elected President and Chief Executive Officer
of the Company in August 1995. Mr. Davidson, who joined the Company in 1994 as
senior investment counselor, has spent his entire business career on Wall Street
since first joining an investment and banking firm in 1966.
"GAM" Common Stock
As a closed-end investment company, General American Investors does not offer
its shares continuously. The Common Stock is listed on The New York Stock
Exchange (symbol, GAM) and can be bought or sold with commissions determined in
the same manner as all listed stocks. Net asset value is computed daily (on an
unaudited basis) and is furnished upon request. It is also available on most
electronic quotation services using the symbol "XGAMX." The figure for net asset
value per share, together with the market price and the percentage discount or
premium from net asset value as of the close of each week, is published in The
New York Times, The Wall Street Journal and Barron's.
The ratio of market price to net asset value has shown considerable variation
over a period of time. While shares of GAM usually sell at a discount from
their underlying net asset value, as do the shares of most other domestic equity
closed-end investment companies, they, periodically, have sold at a premium over
net asset value. The last time the Company's shares sold at a premium was the
year-long period from March 1992 through April 1993. During 1998, the stock sold
at discounts from net asset value which ranged from 5.3% (November 9) to 14.5%
(July 10). At December 31, the price of the stock was at a discount of 12.7%
as compared with a discount of 10.2% a year earlier.
"GAM Pr" Preferred Stock
On June 19, 1998, the Company issued and sold in an underwritten offering
6,000,000 shares of its 7.20% Tax-Advantaged Cumulative Preferred Stock with a
liquidation preference of $25 per share ($150,000,000 in the aggregate).
The Preferred Shares are noncallable for 5 years, are rated "aaa" by Moody's
Investors Service, Inc. and are listed and traded on The New York Stock Exchange
(symbol, GAM Pr).
<PAGE>
3 THE COMPANY
- -------------------------------------------------------------------------------
General American Investors
The preferred capital is available to leverage the investment performance of the
Common Stockholders. As the case for leverage in general, it may also result in
higher market volatility for the Common Stockholders.
Dividend Policy
The Company's dividend policy is to distribute to stockholders before year-end
substantially all ordinary income estimated for the full year and capital gains
realized during the ten-month period ending October 31 of that year. If any
additional capital gains are realized or ordinary income is earned during the
last two months of the year, a "spill-over" distribution of these amounts will
be paid early in the following year to Common Stockholders. Dividends on shares
of Preferred Stock are paid quarterly. Distributions from capital gains and
ordinary income are allocated proportionately among holders of shares of Common
Stock and Preferred Stock.
Dividends from income have been paid continuously on the Common Stock since 1939
and capital gain dividends in varying amounts have been paid for each of the
years 1943-1998 (except for the year 1974). (A table listing dividends paid
during the 20-year period 1979 - 1998 is shown at the bottom of page 6.) To the
extent that full shares can be issued, dividends are paid to Common Stockholders
in additional shares of Common Stock unless the stockholder specifically
requests payment in cash. Spill-over dividends of nominal amounts are paid in
cash only.
Year 2000
Like other organizations around the world, General American Investors could be
adversely affected if the computer systems used by the Company, its service
providers or companies in which the Company invests do not properly process and
calculate information that relates to dates beginning on January 1, 2000, and
beyond. This situation may occur because for many years computer programs have
used only two digits to describe years, such as 98 for 1998. Such programs may
not work when they encounter the year 00.
While we have been assured by our vendors that the Company's mission critical
computer programs are Year 2000 compliant, the investment management and
accounting system used by the Company has recently been upgraded. Testing of the
upgraded programs is scheduled for the first quarter of 1999. Other computer
programs and computer hardware are scheduled to be upgraded, as required, and
tested in the first half of 1999. Thus, we expect our systems to be ready for
the Year 2000 by mid-1999. The cost of this effort is not expected to be
material to the Company's operations and should be viewed as part of the
Company's ongoing investment required to keep its systems up-to-date. As a
contingency, we plan to utilize battery operated laptop computers to perform
essential daily operations. The coningency plan will be tested well before 2000.
We are actively assessing the Year 2000 readiness of our custodian bank,
transfer agent and other sevice providers, as well as the companies held in our
portfolio, through the review of correspondence and/or published disclosure
documents.
Due to the general uncertainty inherent in the Year 2000 problem, the Company is
unable to determine at this time whether the consequences of Year 2000 failures
will have a material impact on the Company's results of operations or financial
condition.
- --------------------------------------------------------------------------------
The Letter to the Stockholders and the Statement on Year 2000 contain
forward-looking statements which reflect our current beliefs regarding the
anticipated effects of information available to us at this time. These
forward-looking statements are not guarantees and the Company's results could
vary materially from those indicated by such statements.
<PAGE>
4 INVESTMENT RESULTS
- -------------------------------------------------------------------------------
General American Investors
[CAPTION]
"Total return on $10,000 investment 20 years ended December 31, 1998"
The investment return for a common stockholder of General American Investors
(GAM) over the 20 years ended December 31, 1998 is shown in the table below and
in the accompanying chart. The return on GAM's total net assets in comparison to
the change in the Standard & Poor's 500 Stock Index (S&P 500) is also displayed.
Each illustration assumes an investment of $10,000 at the beginning of 1979.
The Stockholder Return is the return a common stockholder of GAM would have
achieved assuming reinvestment of all optional dividends at the actual
reinvestment price and reinvestment of all cash dividends at the average (mean
between high and low) market price on the ex-dividend date.
The Total Net Assets Return is the time-weighted total rate of return on the
Company's total net assets applicable to common stock, including dividend and
interest income but excluding advisory fee income and operating expenses, and
after adjustments for cash flows such as GAM dividends and purchases of GAM
shares.
The S&P 500 Return is the time-weighted total rate of return on this
widely-recognized, unmanaged index which is a measure of general stock market
performance, including dividend income.
The results illustrated are a record of past performance and may not be
indicative of future results.
<TABLE>
<CAPTION>
GENERAL AMERICAN INVESTORS
------------------------------------------------------
STOCKHOLDER RETURN TOTAL NET ASSETS RETURN STANDARD & POOR'S 500 RETURN
------------------ ----------------------- ----------------------------
CUMULATIVE ANNUAL RETURN CUMULATIVE ANNUAL RETURN CUMULATIVE ANNUAL RETURN
INVESTMENT INVESTMENT INVESTMENT
<S> <C> <C> <C> <C> <C> <C>
1979 $ 16,441 64.41% $ 14,283 42.83% $ 11,860 18.60%
1980 28,269 71.95 20,726 45.11 15,709 32.45
1981 32,007 13.22 21,400 3.25 14,928 (4.97)
1982 38,181 19.29 25,187 17.70 18,145 21.55
1983 44,410 16.31 31,036 23.22 22,236 22.55
1984 41,228 (7.16) 28,655 (7.67) 23,633 6.28
1985 51,457 24.81 38,928 35.85 31,141 31.77
1986 57,206 11.17 43,067 10.63 36,961 18.69
1987 47,988 (16.11) 43,428 0.84 38,898 5.24
1988 58,191 21.26 50,251 15.71 45,328 16.53
1989 86,469 48.60 68,728 36.77 59,661 31.62
1990 89,926 4.00 73,230 6.55 57,817 (3.09)
1991 166,365 85.00 118,544 61.88 75,394 30.40
1992 190,949 14.78 124,519 5.04 81,116 7.59
1993 160,559 (15.92) 122,975 (1.24) 89,325 10.12
1994 147,931 (7.86) 120,134 (2.31) 90,459 1.27
1995 179,326 21.22 147,873 23.09 124,382 37.50
1996 214,257 19.48 175,540 18.71 152,877 22.91
1997 305,497 42.58 231,397 31.82 203,831 33.33
1998 401,136 31.31 318,148 37.49 262,025 28.55
</TABLE>
<PAGE>
5 INVESTMENT RESULTS
- -------------------------------------------------------------------------------
General American Investors
[Line graph with heading "20-YEAR INVESTMENT RESULTS ASSUMING AN INITIAL
INVESTMENT OF $10,000" at top left hand side. The vertical axis is to the right
side of the page and is labeled "CUMULATIVE VALUE OF INVESTMENT." The axis range
is from $0 to $400,000 in $25,000 increments. The horizontal axis, on the bottom
of the page, consists of the years 1979 through 1998 in one year increments.
Within the graph are three lines. The first line represents GAM Stockholder
Return. The second line represents GAM Total Net Assets, and the third line
represents the S&P 500 Stock Index. The data points for the lines are derived
from the columns labeled "Cumulative Investment" from the table on the preceding
page. Also, embedded in upper left portion of the graph is a table which appears
as follows:]
<TABLE>
<CAPTION>
COMPARATIVE ANNUALIZED INVESTMENT RESULTS
- --------------------------------------------------------------------------------------
YEARS ENDED STOCKHOLDER GAM TOTAL S&P 500
DECEMBER 31, 1998 RETURN NET ASSETS STOCK INDEX
- ----------------- ------ ---------- -----------
<S> <C> <C> <C>
1 year ..................... 31.3% 37.5% 28.6%
5 years .................... 20.1 20.9 24.0
10 years .................... 21.3 20.3 19.2
15 years .................... 15.8 16.8 17.9
20 years .................... 20.3 18.9 17.7
</TABLE>
<PAGE>
6 MAJOR STOCK CHANGES*: THREE MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED)
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
SHARES OR
SHARES PRINCIPAL AMOUNT HELD
INCREASES OR PRINCIPAL AMOUNT DECEMBER 31, 1998
- --------------------------------------------------------------------------------------------------------
NEW POSITIONS
<S> <C> <C>
AMR Corporation 300,000 300,000
Berkshrire Hathaway Inc. Class A 315 315(a)
DuPont Photomasks, Inc. -- 100,000(b)
Kennametal Inc. 175,000 175,000
Veeco Instruments Inc. 100,000 100,000
ADDITIONS
AmerUs Life Holdings, Inc. Class A 137,500 387,500
Annaly Mortgage Management, Inc. 50,000 550,000
Chrysler Corporation 50,000 -- (c)
Everest Reinsurance Holdings, Inc. 45,000 320,000
FDX Corporation 40,000 100,000(d)
GelTex Pharmaceuticals, Inc. 55,000 205,000
Huntington Bancshares Incorporated 40,000 175,000(d)
IDEC Pharmaceuticals Corporation 5,000 425,000
NAC Re Corporation 10,000 166,000
NTL Incorporated -- 337,000(e)
ReliaStar Financial Corp. 7,500 127,500(d)
Waste Management, Inc. 47,000 460,000
DECREASES
- --------------------------------------------------------------------------------------------------------
ELIMINATIONS
Axiom Inc. 152,500 --
Comcast UK Cable Partners Limited Class A 304,500 -- (e)
General Re Corporation 90,000 -- (a)
Hewlett-Packard Company 40,000 --
Life Re Corporation 210,000 -- (f)
Merck & Co., Inc. 80,000 --
Platinum Software Corporation 75,000 --
TIG Holdings, Inc. 150,000 --
REDUCTIONS
American International Group, Inc. 7,500 135,000
AB Astra Class A 80,000 482,500
AB Astra Class B 80,000 720,000
Consolidated Stores Corporation 125,000 275,000(b)
Cox Communications, Inc. Class A 10,000 260,000
Crestar Financial Corp. 40,000 250,000
DaimlerChrysler A.G. 59,575 221,000(c)
The Home Depot, Inc. 20,000 1,780,000
Huntingdon Life Sciences Group plc-ADR 45,000 624,500
Lam Reasearch Corporation 125,000 476,000
M&T Bank Corporation 3,000 45,000
MedImmune, Inc., 7% Convertible Corporate Note
due 7/1/2003 $200,000 $2,300,000
Medtronic, Inc. 20,000 180,000
PepsiCo, Inc. 25,000 200,000
Pfizer Inc. 10,000 330,000
Philip Morris Companies Inc. 50,000 300,000
Repsol, S.A. - ADR 25,000 250,000
Wal-Mart Stores, Inc. 190,000 400,000
Wolters Kluwer NV - ADR 10,000 35,000
<FN>
* Excludes transactions in Stocks - Miscellaneous - Other.
(a) 315 shares of Berkshire Hathaway Inc. Class A were received in exchange for 90,000 shares of General Re Corporation
in conjunction with a merger.
(b) Purchased in prior period and previously carried under Stocks - Miscellaneous - Other.
(c) 280,575 shares of DaimlerChrysler A.G. were received in exchange for 450,000 shares of Chrysler Corporation
in conjunction with a merger.
(d) Includes shares purchased in prior period and previously carried under Stocks - Miscellaneous - Other.
(e) 114,035 shares of NTL Incorporated were received in exchange for 304,500 shares of Comcast UK Cable Partners Limited Class A
in conjunction with a merger.
(f) 210,000 shares of Life Re Corporation were tendered in conjunction with an acquisition.
</FN>
</TABLE>
[CAPTION]
"The following table shows aggregate dividends paid per share on the Company's
Common Stock for each year during the 20-year period 1979-1998. Amounts shown
include payments made after year-end attributable to income and gain in each
respective year."
DIVIDENDS PER COMMON SHARE (1979-1998)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
DIVIDEND FROM
LONG-TERM
YEAR INCOME # CAPITAL GAINS
- ---- ------- -------------
<S> <C> <C>
1979 $.38 $1.74
1980 .50 2.99
1981 .63 3.63
1982 .36 1.15
1983 .67 2.38
1984 .28 1.35
1985 .47 1.07
1986 .36 2.15
1987 .35 1.54
1988 .29 1.69
1989 .23 1.56
1990 .21 1.65
1991 .09 3.07
1992 .03 2.93
1993 .06 2.34
1994 .06 1.59
1995 .13 2.77
1996 .25 2.71
1997 .21 2.95
1998 .47 4.40
<FN>
#Includes short-term capital gains per share which amounted to $.04 in 1980,
$.08 in 1981, $.28 in 1983, $.12 in 1985, $.02 in 1989, $.03 in 1995 and $.05
in 1996.
</FN>
</TABLE>
<PAGE>
7 TEN LARGEST INVESTMENT HOLDINGS
- -------------------------------------------------------------------------------
General American Investors
[CAPTION]
"The statement of investments as of December 31, 1998, shown on pages 8 and 9
includes 52 stock issues. Listed here are the ten largest stock holdings on
that date."
<TABLE>
<CAPTION>
% TOTAL
SHARES VALUE NET ASSETS
<S> <C> <C> <C>
THE HOME DEPOT, INC. 1,780,000 $108,913,750 10.7%
The dominant company in home center retailing, Home Depot's innovative
merchandising, strong balance sheet and excellent management has enabled the
Company to continue to gain share in a fragmented industry.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
PFIZER INC. 330,000 41,250,000 4.0
Well established as a leader in the pharmaceutical industry, Pfizer
continues to reap the benefits of its commitment to research and development
and its ability to effectively market products. The recent launch of several
new products serving large markets and development of a pipeline rich with
many promising drug candidates position Pfizer for strong long-term growth.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
WAL-MART STORES, INC. 400,000 32,575,000 3.2
A policy of serving the mass market with everyday low prices, supported by the
lowest cost structure has made Wal-Mart the nation's largest retailer with
ongoing growth opportunities in the U.S. and overseas.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
FORD MOTOR COMPANY 500,000 29,343,750 2.9
A global manufacturer of automobiles, trucks and related parts. The company
provides financial services through its Ford Motor Credit subsidiary and
owns 81% of Hertz, the top car rental firm in the U.S.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
AB ASTRA 1,202,500 24,499,825 2.4
The proposed merger of Astra and Zeneca will create a global leader in
pharmaceuticals with broad coverage of several therapeutic areas. A strong
combined base of sales, numerous agents at later stages of development
and enhanced operating efficiencies provides Astra/Zeneca with an
opportunity to become a dominant entity in the pharmaceutical industry.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
M&T BANK CORPORATION 45,000 23,352,188 2.3
A bank holding company with $20 billion in assets headquartered in Buffalo, NY.
It has strong, opportunistic management with a high level of ownership
and a history of enhancing shareholder value. High asset quality, excellent
expense control, share repurchases and adroit acquisitions help generate
above-average earnings growth.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
CISCO SYSTEMS, INC. 240,000 22,275,000 2.2
The worldwide leader in networking for the internet whose hardware and software
solutions are used to link computers and related networks which facilitate
access to information. With beneficial solutions for their customers and strong
management, Cisco is positioned for continued above-average growth.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
BERKSHIRE HATHAWAY INC. 315 22,050,000 2.2
A holding company with substantial ownership interests in numerous high quality
businesses, including its world class insurance group which generates $11 billion
of annual premiums and has a AAA balance sheet. These interests, combined with
superior investment management, produce above-average long-term returns.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
WASTE MANAGEMENT, INC. 460,000 21,447,500 2.1
A rapidly growing integrated, non-hazardous, solid waste management company
serving municipal, industrial and residential customers nationwide.
- --------------------------------------------------------------------------------------- ------------ ------------ ----
DAIMLERCHRYSLER A.G. 221,000 21,229,813 2.1
Created by the 1998 merger of Daimler-Benz and Chrysler, the company manufactures
and markets automobiles, trucks and other vehicles worldwide and provides electronics,
telecommunications and financial services.
- --------------------------------------------------------------------------------------- ------------ ------------ -----
$346,936,826 34.1%
============ =====
</TABLE>
<PAGE>
8 STATEMENT OF INVESTMENTS: DECEMBER 31, 1998
- -------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
COMMON SHARES OR VALUE
STOCKS PRINCIPAL AMOUNT (NOTE 1a)
<S> <C> <C>
COMMUNICATIONS AND INFORMATION SERVICES (5.0%)
Cox Communications, Inc. Class A + ................. 260,000 $17,972,500
NTL Incorporated + ................................. 337,000 19,019,437
Reuters Holdings plc-ADR ........................... 94,000 5,957,250
Wolters Kluwer NV-ADR .............................. 35,000 7,482,300
----------
(COST $15,454,179) 50,431,487
----------
COMPUTER SOFTWARE AND SYSTEMS (3.6%)
Cisco Systems, Inc.+ ............................... 240,000 22,275,000
MetaCreations Corporation + ........................ 300,000 1,612,500
Seagate Technology, Inc. + ......................... 430,000 13,007,500
----------
(COST $13,689,573) 36,895,000
----------
CONSUMER PRODUCTS AND SERVICES (9.1%)
Buffets, Inc.+ .................................... 773,500 9,233,656
DaimlerChrysler A.G. .............................. 221,000 21,229,813
FDX Corporation + ................................. 100,000 8,918,750
Ford Motor Company ................................ 500,000 29,343,750
PepsiCo, Inc. ..................................... 200,000 8,175,000
Philip Morris Companies Inc. ...................... 300,000 16,050,000
----------
(COST $49,193,225) 92,950,969
----------
ELECTRONICS (1.0%)
Molex Incorporated Class A ........................ 315,000 10,040,625
----------
(COST $8,469,377)
ENVIRONMENT CONTROL
(INCLUDING SERVICES) (2.1%)
Waste Management, Inc. ............................ 460,000 21,447,500
----------
(COST $7,875,160)
FINANCE AND INSURANCE (18.2%)
American International Group, Inc. ................ 135,000 13,044,375
AmerUs Life Holdings, Inc. Class A ................ 387,500 8,670,312
Annaly Mortgage Management, Inc. ................. 550,000 4,537,500
Annuity and Life Re (Holdings), Ltd. .............. 475,000 12,825,000
Berkhire Hathaway Inc. Class A + .................. 315 22,050,000
CCB Financial Corp. ............................... 217,000 12,369,000
Crestar Financial Corp. ........................... 250,000 18,000,000
Everest Reinsurance Holdings, Inc. ................ 320,000 12,460,000
First Midwest Bancorp, Inc. ....................... 252,500 9,610,781
Golden West Financial Corporation ................. 160,000 14,670,000
Huntington Bancshares Incorporated ................ 175,000 5,260,937
M&T Bank Corporation .............................. 45,000 23,352,188
NAC Re Corporation ................................ 166,000 7,791,625
ReliaStar Financial Corp. ......................... 127,500 5,880,938
Transatlantic Holdings, Inc. ...................... 200,000 15,112,500
-----------
(COST $85,353,192) 185,635,156
-----------
HEALTH CARE (10.6%)
PHARMACEUTICALS (9.0%)
AB Astra Class A .................................. 482,500 9,847,825
AB Astra Class B .................................. 720,000 14,652,000
GelTex Pharmaceuticals, Inc.+ ..................... 205,000 4,638,125
IDEC Pharmaceuticals Corporation + ................ 425,000 19,975,000
Magainin Pharmaceuticals Inc.+ .................... 300,000 956,250
Pfizer Inc. ....................................... 330,000 41,250,000
----------
(COST $27,508,098) 91,319,200
----------
MEDICAL INSTRUMENTS AND DEVICES (1.3%)
Medtronic, Inc. .................................. 180,000 13,370,625
-----------
(COST $1,167,144)
HEALTH CARE SERVICES (0.3%)
BioReliance Corporation + ........................ 317,000 2,536,000
Huntingdon Life Sciences Group plc-ADR + ......... 624,500 780,625
-----------
(COST $8,335,304) 3,316,625
-----------
(COST $37,010,546) 108,006,450
-----------
</TABLE>
<PAGE>
9 STATEMENT OF INVESTMENTS: DECEMBER 31, 1998
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
COMMON SHARES OR VALUE
STOCKS (continued) PRINCIPAL AMOUNT (NOTE 1a)
<S> <C> <C>
MACHINERY & EQUIPMENT (0.9%)
Deere & Company .................................. 150,000 $ 4,931,250
Kennametal Inc. .................................. 175,000 3,718,750
----------
(COST $7,802,776) 8,650,000
----------
MISCELLANEOUS (1.5%)
Other ............................................ 15,491,250
----------
(COST $12,240,395)
OIL & NATURAL GAS (INCLUDING SERVICES) (1.3%)
Repsol, S.A.-ADR ................................. 250,000 13,656,250
----------
(COST $ 8,914,519)
RETAIL TRADE (14.4%)
Consolidated Stores Corporation + ................ 275,000 5,551,563
The Home Depot, Inc. ............................. 1,780,000 108,913,750
Wal-Mart Stores, Inc. ............................ 400,000 32,575,000
-----------
(COST $10,488,900) 147,040,313
-----------
SEMICONDUCTORS (1.8%)
DuPont Photomasks, Inc.+ ......................... 100,000 4,243,750
Lam Research Corporation + ....................... 476,000 8,478,750
Veeco Instruments Inc.+ .......................... 100,000 5,312,500
----------
(COST $15,902,940) 18,035,000
----------
SPECIAL HOLDINGS #+ (NOTE 6) (0.0%)
Sequoia Capital IV ................................ ++ 79,200
Welsh, Carson, Anderson & Stowe III ............... ++ 750
---------
(COST $ 1,255,531) 79,950*
---------
TRANSPORTAION (1.8%)
AMR Corporation + ................................. 300,000 17,812,500
----------
(COST $16,040,475)
TOTAL COMMON STOCKS (71.3%) (COST $289,690,788) 726,172,450
------------
CONVERTIBLE CORPORATE NOTE (1.1%)
- --------------------------------------------------------------------------------
MedImmune, Inc., 7% due 7/1/2003** ................ $2,300,000 11,643,750
(COST $2,265,500)
SHORT-TERM SECURITIES AND OTHER ASSETS
- --------------------------------------------------------------------------------
Ford Motor Credit Company notes
due 1/5-1/28/99; 5.18%-5.50% $73,700,000 72,911,952
General Electric Capital Corp. notes
due 1/11-1/21/99; 5.09%-5.31% 71,000,000 70,253,146
General Motors Acceptance Corp. notes
due 1/4-1/13/99; 5.17%-5.32% 65,800,000 65,047,450
Sears Roebuck Acceptance Corp. notes
due 1/19-1/25/99; 5.05%-5.40% 72,700,000 71,885,498
-------------
(COST $280,098,046) 280,098,046
Cash, receivables, prepaid expenses and
other assets, less liabilities 1,018,851
-------------
TOTAL SHORT-TERM SECURITIES AND OTHER ASSETS, NET (27.6%)
(COST $281,116,897) 281,116,897
--------------
NET ASSETS (COST $573,073,185) $1,018,933,097
==============
<FN>
+Non-income producing security. * Fair value of each holding in the opinion of the Directors.
++ A limited partnership interest. **Security exempt from registration under Rule 144A of the
# Restricted security. Securities Act of 1933. This Security may be resold in
transactions exempt from registration, normally to qualified
institutional buyers.
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
10 STATEMENT OF ASSETS AND LIABILITIES
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
December 31,
----------------------------
ASSETS 1998 1997
- -------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENTS, AT VALUE ( NOTE 1a )
Common Stocks
(cost $289,690,788 and $271,430,749, respectively) $ 726,172,450 $592,696,605
Convertible corporate note
(cost $2,265,500 and $3,940,000, respectively) 11,643,750 9,080,000
Corporate discount notes
(cost $280,098,046 and $97,665,722, respectively) 280,098,046 97,665,722
------------- ------------
1,017,914,246 699,442,327
CASH, RECEIVABLES AND OTHER ASSETS
Cash .............................................. 63,648 105,948
Receivable for securities sold .................... 380,256 2,279,763
Dividends, interest and other receivables ......... 3,422,621 1,390,699
Prepaid Expenses .................................. 4,002,793 3,505,933
Other ............................................. 597,461 729,507
------------- -----------
TOTAL ASSETS ........................................ 1,026,381,025 707,454,177
------------- -----------
LIABILITIES
- -------------------------------------------------------------------------------------
Payable for securities purchased ................. 1,041,228 91,755
Preferred dividend accrued but not yet declared .. 240,000 --
Accrued expenses and other liabilities ........... 6,166,700 4,765,422
------------ ------------
TOTAL LIABILITIES ................................... 7,447,928 4,857,177
------------ ------------
NET ASSETS .......................................... $1,018,933,097 $702,597,000
============== ============
NET ASSETS APPLICABLE TO PREFERRED STOCK AT
A LIQUIDATION VALUE OF $25 PER SHARE .............. $150,000,000 --
============ ============
NET ASSETS APPLICABLE TO COMMON STOCK ............... $868,933,097 $702,597,000
============ ============
NET ASSET VALUE PER COMMON SHARE .................... $34.87 $29.15
============ ============
NET ASSETS
- --------------------------------------------------------------------------------
7.20% Tax-Advantaged Cumulative Preferred Stock,
$1 par value (note 2)
Authorized 10,000,000 shares; outstanding
6,000,000 shares .............................. $ 6,000,000 --
Common Stock, $1 par value (note 2)
Authorized 30,000,000 shares; outstanding
24,916,719 and 24,104,678 shares, respectively
(exclusive of 36,000 and 43,300 shares,
respectively, held in Treasury) ............... 24,916,719 $ 24,104,678
Additional paid-in Capital (note 2) .............. 509,613,489 347,975,543
Undistributed realized gain on
securities sold (note 2) ...................... 33,430,631 4,464,264
Distributions in excess of net income (note 2) ... (647,654) (353,341)
Unallocated distributions on Preferred Stock ..... (240,000) --
Unrealized appreciation on investments (including
aggregate gross unrealized appreciation of
$460,462,209 and $346,906,567, respectively) .. 445,859,912 326,405,856
------------ ------------
TOTAL NET ASSETS .................................... $1,018,933,097 $702,597,000
============== ============
<FN>
(see notes to financial statements)
</FN>
</TABLE>
<PAGE>
11 STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
General American Investors
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
INCOME --------------------------
1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Dividends (net of foreign withholding taxes
of $185,768 and $180,993, respectively) ..... $ 7,552,080 $ 6,348,110
Interest ...................................... 11,223,985 5,021,256
Investment advisory fees (note 1c) 58,426 93,123
----------- ----------
TOTAL INCOME ..................................... 18,834,491 11,462,489
----------- ----------
EXPENSES
- --------------------------------------------------------------------------------
Investment research ........................... 3,738,547 3,031,066
Administration and operations ................. 2,146,732 1,943,409
Office space and general ...................... 621,478 617,391
Transfer agent, custodian and registrar
fees and expenses ........................... 218,043 194,445
Directors' fees and expenses .................. 200,180 203,415
Stockholders' meeting and reports ............. 163,051 124,376
Auditing and legal fees ....................... 108,000 114,000
Miscellaneous taxes (note 1b) ................. 84,098 84,400
--------- ---------
TOTAL EXPENSES ................................... 7,280,129 6,312,502
--------- ---------
NET INVESTMENT INCOME ............................ 11,554,362 5,149,987
---------- ---------
REALIZED GAIN AND CHANGE IN UNREALIZED APPRECIATION ON INVESTMENTS (NOTES 1d AND 4)
- -----------------------------------------------------------------------------------
Net realized gain on sales of securities
(long-term) .................................. 109,379,689 66,640,521
Net increase in unrealized appreciation ........ 119,454,056 99,421,665
------------ ------------
NET GAIN ON INVESTMENTS ......................... 228,833,745 166,062,186
------------ ------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ..................... $240,388,107 $171,212,173
============= ============
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
OPERATIONS 1998 1997
- --------------------------------------------------------------------------------
<S> <C> <C>
Net investment income ..................... $ 11,554,362 $ 5,149,987
Net realized gain on sales of securities .. 109,379,689 66,640,521
Net increase in unrealized appreciation ... 119,454,056 99,421,665
------------- -------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS ................. 240,388,107 171,212,173
------------- -------------
DISTRIBUTIONS TO PREFERRED STOCKHOLDERS
- --------------------------------------------------------------------------------
From net income ........................... (734,400) --
From long-term capital gain ............... (4,785,600) --
Unallocated distributions on
Preferred Stock ......................... (240,000) --
------------- -------------
DECREASE IN NET ASSETS FROM PREFERRED
DISTRIBUTIONS ............................. (5,760,000) --
------------- -------------
DISTRIBUTIONS TO COMMON STOCKHOLDERS
- --------------------------------------------------------------------------------
From net income ........................... (11,114,275) (5,925,735)
From long-term capital gain ............... (75,627,722) (72,383,436)
------------- -------------
DECREASE IN NET ASSETS FROM COMMON
DISTRIBUTIONS ............................. (86,741,997) (78,309,171)
------------- -------------
CAPITAL SHARE TRANSACTIONS
- --------------------------------------------------------------------------------
Value of Common Shares issued in payment
of dividends (note 2) ................... 51,184,992 49,404,107
Cost of Common Shares purchased (note 2) .. (27,310,005) (37,306,802)
Net proceeds from the issuance of Preferred
Stock (note 2) .......................... 144,575,000 --
------------- -------------
INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS 168,449,987 12,097,305
------------- -------------
NET INCREASE IN NET ASSETS ................... 316,336,097 105,000,307
NET ASSETS
- --------------------------------------------------------------------------------
BEGINNING OF YEAR ............................ 702,597,000 597,596,693
------------- -------------
END OF YEAR (including distributions in
excess of net income of $647,654 and
$353,341, respectively) ................... $1,018,933,097 $ 702,597,000
============== =============
<FN>
( see notes to financial statements )
</FN>
</TABLE>
<PAGE>
12 NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
General American Investors
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 Company is also
registered under the Investment Advisers Act of 1940 as an investment adviser
but the Company's notice of withdrawal as a registered investment adviser is
expected to become effective on January 19, 1999. The Company ceased providing
investment advisory services to outside accounts on July 31, 1998.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
a. SECURITY VALUATION Securities traded on securities exchanges or on the NASDAQ
National Market System are valued at the last reported sales price on the last
business day of the period. Listed and NASDAQ securities for which no sales are
reported on that day and other securities traded in the over-the-counter market
are valued at the last bid price on the valuation date. Corporate discount notes
are valued at amortized cost, which approximates market value. Special holdings
are valued at fair value in the opinion of the Directors. In determining fair
value, in the case of restricted shares, consideration is given to cost,
operating and other financial data and, where applicable, subsequent private
offerings or market price of the issuer's unrestricted shares (to which a 30
percent discount is applied); for limited partnership interests, fair value is
based upon an evaluation of the partnership's net assets.
b. 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.
c. INVESTMENT ADVISORY FEES Income from fees (charged at the annual rate of 1/2%
of assets under management, computed quarterly) was recorded as the related
advisory services were performed by the Company.
d. OTHER As customary in the investment company industry, securities
transactions are recorded as of the trade date. Dividend income and
distributions to stockholders are recorded as of the ex-dividend dates.
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS
On June 19, 1998, the Company issued and sold 6,000,000 shares of its 7.20% Tax-
Advantaged Cumulative Preferred Stock. The stock has a liquidation preference of
$25.00 per share plus an amount equal to accumulated and unpaid dividends to the
date of redemption.
The Company is required to allocate distributions from long-term capital gains
and other types of income proportionately among holders of shares of Common
Stock and Preferred Stock. To the extent that dividends on the shares of
Preferred Stock are not paid from long-term capital gains, they will be paid
from ordinary income or net short-term capital gains or will represent a return
of capital.
Under the Investment Company Act of 1940, the Company is required to maintain an
asset coverage of at least 200% for the Preferred Stock. In addition, pursuant
to the Rating Agency Guidelines, the Company is required to maintain a certain
discounted asset coverage for its portfolio that equals or exceeds the Basic
Maintenance Amount under the guidelines established by Moody's Investors
Service, Inc. The Company has met these requirements since the issuance of the
Preferred Stock.
The holders of Preferred Stock have voting rights equivalent to those of the
holders of Common Stock (one vote per share) and, generally, vote together with
the holders of Common Stock as a single class.
At all times, holders of Preferred Stock will elect two members of the Company's
Board of Directors and the holders of Preferred and Common Stock, voting as a
single class, will elect the remaining directors. If the Company fails to pay
dividends on the Preferred Stock in an amount equal to two full years'
dividends, the holders of Preferred Stock will have the right to elect a
majority of the directors. In addition, the Investment Company Act of 1940
requires that approval of the holders of a majority of any outstanding preferred
shares, voting separately as a class, would be required to (a) adopt any plan of
reorganization that would adversely affect the Preferred Stock and (b) take any
action requiring a vote of security holders, including, among other things,
changes in the Company's subclassification as a closed-end investment company or
changes in its fundamental investment policies.
Transactions in Common Stock during 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
SHARES AMOUNT
------------------------ ------------------------------
1998 1997 1998 1997
------------------------ ------------------------------
<S> <C> <C> <C> <C>
Shares issued in payment of dividends
(includes 950,800 and 1,981,626
shares issued from
Treasury, respectively) ......... 1,755,541 2,015,188 $ 1,755,541 $ 2,015,188
Increase in paid-in capital ......... 49,429,451 47,388,919
------------ -----------
Total increase ................... 51,184,992 49,404,107
------------ -----------
Shares purchased (at an average
discount from net asset value of
11.1% and 15.1%, respectively).... 943,500 1,589,200 (943,500) (1,589,200)
Decrease in paid-in capital ......... (26,366,505) (35,717,602)
------------ -----------
Total decrease ................... (27,310,005) (37,306,802)
------------ -----------
Net increase ........................ $23,874,987 $12,097,305
============ ===========
</TABLE>
<PAGE>
13 NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
General American Investors
2. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS
(Continued from bottom of previous page)
The cost of the 36,000 shares of Common Stock held in Treasury at December 31,
1998 amounted to $1,091,713.
On January 13, 1999, the Board of Directors declared on the Common Stock
a dividend of $33,670,906 from capital gains. This dividend is payable in Common
Stock, or in cash upon request, on March 10, 1999.
Dividends in excess of net income for financial statement purposes result
primarily from transactions where tax treatment differs from book treatment.
3. OFFICERS' COMPENSATION AND RETIREMENT AND THRIFT PLANS
The aggregate compensation paid by the Company during 1998 and 1997 to its
officers amounted to $3,070,000 and $2,437,000, respectively.
The Company has non-contributory retirement plans and a contributory thrift plan
which cover substantially all employees. The costs to the Company and the assets
and liabilities of the plans are not material. Costs of the plans are funded
currently.
4. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (other than short-term securities) during 1998
were $225,712,753 and $318,506,904, respectively. At December 31, 1998, the cost
of investments for Federal income tax purposes was the same as the cost for
financial reporting purposes.
5. GENERAL INFORMATION
Brokerage commissions during 1998 were $459,033, including $84,154 paid to
Goldman, Sachs & Co. The Chairman Emeritus of the Company is a limited partner
of The Goldman Sachs Group, L.P. which is an affiliate of Goldman, Sachs & Co.
6. RESTRICTED SECURITIES
<TABLE>
<CAPTION>
DATE VALUE
ACQUIRED COST (NOTE 1a)
-------- ----------- -----------
<S> <C> <C> <C>
Sequoia Capital IV* ............................... 1/31/84 $1,003,144 $ 79,200
Welsh, Carson, Anderson & Stowe III* .............. 3/10/83 252,387 750
---------- ----------
Total ............................................. $1,255,531 $ 79,950
========== ==========
<FN>
* The amounts shown are net of distributions from these limited partnership
interests which, in the aggregate, amounted to $4,689,667 and $3,626,167,
respectively. The initial investment in each limited partnership was $2,000,000.
The Company also owns 5,262 shares of non-voting common stock of Multisystems,
Inc. which have no cost and are carried at no value.
</FN>
</TABLE>
7. OPERATING LEASE COMMITMENT
In July 1992, the Company entered into an operating lease agreement for office
space which expires in 2007 and provides for future rental payments in the
aggregate amount of approximately $5.6 million. The lease agreement contains a
clause whereby the Company received twenty months of free rent beginning in
December 1992 and escalation clauses relating to operating costs and real
property taxes.
Rental expense approximated $320,000 for 1998. Minimum rental commitments under
the operating lease are approximately $403,000 per annum in 1999 through 2002
and $504,000 per annum in 2003 through 2007.
In March 1996, the Company entered into a sublease agreement which expires in
2003 and provides for future rental receipts. Minimum rental receipts under the
sublease are approximately $203,000 per annum in 1999 through 2002 and $64,000
in 2003. The Company will also receive its proportionate share of operating
expenses and real property taxes under the sublease.
Unaudited
- --------------------------------------------------------------------------------
In addition to purchases of the Company's Common Stock as set forth in Note 2 on
page 12, purchases of Common Stock may be made at such times, at such prices, in
such amounts and in such manner as the Board of Directors may deem advisable.
<PAGE>
14 FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
General American Investors
[CAPTION]
"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, 1998. This information has been derived from
information contained in the financial statements and market price data for the
Company's shares."
<TABLE>
1998 1997 1996 1995 1994
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year ................................. $ 29.15 $ 25.24 $ 23.94 $ 22.31 $ 24.75
--------- --------- --------- --------- ---------
Net investment income ........................................... .47 .21 .22 .08 .05
Net gain (loss) on securities - realized and unrealized ......... 9.44 7.15 3.86 4.54 (.94)
--------- --------- --------- --------- ---------
Total from investment operations ................................... 9.91 7.36 4.08 4.62 (.89)
--------- --------- --------- --------- ---------
Less Distributions on:
Common Stock:
Dividends from investment income ................................ (.48) (.26)* (.20) (.11)** (.05)
Distributions from capital gains ................................ (3.24) (3.19) (2.58) (2.87) (1.49)
In excess of net income ......................................... -- -- -- (.01) (.01)
--------- --------- --------- --------- ---------
(3.72) (3.45) (2.78) (2.99) (1.55)
Preferred Stock:
Dividends from investment income ................................ (.03) -- -- -- --
Distributions from capital gains ................................ (.20) -- -- -- --
Unallocated ..................................................... (.01) -- -- -- --
--------- --------- --------- --------- ---------
(.24) -- -- -- --
Total distributions ................................................ (3.96) (3.45) (2.78) (2.99) (1.55)
--------- --------- --------- --------- ---------
Capital Stock Transaction -
effect of Preferred Stock offering .............................. (.23) -- -- -- --
--------- --------- --------- --------- ---------
Net asset value, end of year ....................................... $ 34.87 $ 29.15 $ 25.24 $ 23.94 $ 22.31
========== ========= ========= ========= =========
Per share market value, end of year ................................ $ 30.44 $ 26.19 $ 21.00 $ 20.00 $ 19.00
========== ========= ========= ========= =========
TOTAL INVESTMENT RETURN - Stockholder Return, based on
market price per share 31.31% 42.58% 19.48% 21.22% -7.86%
RATIOS AND SUPPLEMENTAL DATA
Total net assets, end of year
(000's omitted) ................................................. $1,018,933 $ 702,597 $ 597,597 $ 573,693 $ 519,722
Net assets attributable to Common Stock,
end of year (000's omitted) ..................................... $ 868,933 $ 702,597 $ 597,597 $ 573,693 $ 519,722
Ratio of expenses to average net assets
applicable to Common Stock ...................................... 0.95% 0.98% 1.05% 1.25% 1.17%
Ratio of net income to average net assets
applicable to Common Stock ...................................... 1.50% 0.80% 0.88% 0.36% 0.21%
Portfolio turnover rate ............................................ 34.42% 32.45% 33.40% 29.14% 17.69%
PREFERRED STOCK
Liquidation value, end of year
(000's omitted) ................................................. $ 150,000 -- -- -- --
Asset coverage ..................................................... 679% -- -- -- --
Liquidation preference per share ................................... $25.00 -- -- -- --
Market value per share ............................................. $25.88 -- -- -- --
<FN>
* Includes short-term capital gain in the amount of $.05 per share.
** Includes short-term capital gain in the amount of $.03 per share.
</FN>
</TABLE>
<PAGE>
15 REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
General American Investors
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, 1998, 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
statements and financial highlights are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. 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. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
General American Investors Company, Inc. at December 31, 1998, the results of
its operations 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 generally accepted accounting
principles.
Ernst & Young LLP
New York, New York
January 15, 1999
OFFICERS
- --------------------------------------------------------------------------------
SPENCER DAVIDSON
President and Chief
Executive Officer
ANDREW V. VINDIGNI
Vice-President
EUGENE L. DeSTAEBLER, JR.
Vice-President, Administration
PETER P. DONNELLY
Vice-President and Trader
DIANE G. RADOSTI
Treasurer
CAROLE ANNE CLEMENTI
Secretary
SERVICE COMPANIES
- --------------------------------------------------------------------------------
COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Ernst & Young LLP
CUSTODIAN
Bankers Trust Company
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C.
Overpeck Centre
85 Challenger Road
Ridgefield Park, NJ 07660
1-800-413-5499
www.chasemellon.com
<PAGE>
16 DIRECTORS
- --------------------------------------------------------------------------------
General American Investors
LAWRENCE B. BUTTENWIESER, CHAIRMAN
Rosenman & Colin LLP, Partner
ARTHUR G. ALTSCHUL, JR.
Diaz & Altschul Group, LLC, Co-Chairman
Delta Opportunity Fund, Ltd., Director
Medicis Pharmaceutical Corporation, Director
New York Council for the Humanities, Director
LEWIS B. CULLMAN
Cullman Ventures, Inc., President
Chess-in-the-Schools, Chairman, Board of Trustees
Metropolitan Museum of Art, Trustee
Museum of Modern Art, Vice Chairman, International
Council and Honorary Trustee
The New York Botanical Garden, Member,
Board of Managers
SPENCER DAVIDSON
General American Investors Company, Inc.,
President and Chief Executive Officer
Medicis Pharmaceutical Corporation, Director
Neurosciences Research Foundation, Trustee
GERALD M. EDELMAN
Neurosciences Institute of the Neurosciences
Research Foundation, Director and President
The Scripps Research Institute,
Chairman, Department of Neurobiology
Becton, Dickinson and Company, Director
ANTHONY M. FRANK
Belvedere Capital Partners, Chairman
Financial Security Assurance Holdings Ltd., Director
The Charles Schwab Corporation, Director
Temple-Inland Inc., Director
JOHN D. GORDAN,III
Morgan, Lewis & Bockius LLP, Partner
BILL GREEN
ClientSoft, Inc., Director
Commercial Capital Corp., Director
Energy Answers Corporation, Director
New York City Campaign Finance Board, Member
New York City Housing
Development Corporation, Member and Vice Chair
SIDNEY R. KNAFEL
SRK Management Company, Managing Partner
BioReliance Corporation, Chairman
Cellular Communications International, Inc., Director
CoreComm Incorporated, Director
NTL Incorporated, Director
RICHARD R. PIVIROTTO
CBS Inc., Director
General Theological Seminary, Trustee
The Gillette Company, Director
The Greenwich Bank and Trust Company, Director
Greenwich Hospital Corporation, Trustee
Immunomedics, Inc., Director
Infinity Broadcasting Corporation, Director
New York Life Insurance Company, Director
Princeton University, Charter Trustee Emeritus
Yale New Haven Health Systems, Trustee
JOSEPH T. STEWART, JR.
Johnson & Johnson, Executive Consultant
Foundation of the University of Medicine
and Dentistry of New Jersey, Trustee
Liposome Co., Inc., Director
Marine Biological Laboratory, Member, Advisory Council
RAYMOND S. TROUBH
Becton, Dickinson and Company, Director
Diamond Offshore Drilling, Inc., Director
Foundation Health Systems, Inc., Director
Olsten Corporation, Director
Starwood Hotels & Resorts, Trustee
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ARTHUR G. ALTSCHUL, CHAIRMAN EMERITUS
WILLIAM O. BAKER, DIRECTOR EMERITUS
WILLIAM T. GOLDEN, DIRECTOR EMERITUS
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General American Investors Company, Inc.
450 Lexington Avenue, New York, NY 10017
(212) 916-8400 (800) 436-8401
