GAM Holding AG
Annual Report 2012

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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 1 2 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 increase (decrease) in unrealized appreciation Distributions to Preferred Stockholders Per Common Share-December 31 Net asset value Market price Discount from net asset value Common Shares outstanding-Dec. 31 Market price range* (high-low) Market volume-shares *Unadjusted for dividend payments. 2012 2011 $955,417,661 6,973,024 60,458,284 84,267,705 (11,311,972) $32.68 $27.82 -14.9% 29,233,972 $29.62-25.37 9,079,151 $886,537,370 5,295,369 19,507,647 (42,899,858) (11,311,972) $29.78 $24.91 -16.4% 29,766,389 $28.68-$21.80 10,308,012 DIVIDEND SUMMARY (per share) (unaudited) Record Date Payment Date Ordinary Income Long-Term Capital Gain Total Common Stock Nov. 19, 2012 Dec. 24, 2012 Total from 2012 earnings (a) Includes short-term gains in the amount of $.011198 per share. (b) Includes short-term gains in the amount of $.003932 per share. Dec. 28, 2012 Jan. 31, 2013 $0.170000 (a) 0.059686 (b) $0.229686 $1.230000 0.540314 $1.770314 $1.400000 0.600000 $2.000000 Nov. 14, 2011 Total from 2011 earnings Dec. 23, 2011 $0.158060 (c) $0.341940 $0.500000 (c) Includes short-term gains in the amount of $.011020 per share. Preferred Stock Mar. 7, 2012 Jun. 7, 2012 Sept. 7, 2012 Dec. 7, 2012 Total for 2012 Mar. 26, 2012 Jun. 25, 2012 Sept. 24, 2012 Dec. 24, 2012 $.042434 .042434 .042434 .042434 $.169736 (d) $.329441 .329441 .329441 .329441 $1.317764 $.371875 .371875 .371875 .371875 $1.487500 (d) Includes short-term gains in the amount of $.011180 per share ($.002795 per quarter). Mar. 7, 2011 Jun. 7, 2011 Sept. 7, 2011 Dec. 7, 2011 Total for 2011 Mar. 24, 2011 Jun. 24, 2011 Sept. 26, 2011 Dec. 27, 2011 $.117557 .117557 .117557 .117557 $.470228 (e) $.254318 .254318 .254318 .254318 $1.017272 $.371875 .371875 .371875 .371875 $1.487500 (e) Includes short-term gains in the amount of $.032784 per share ($.008196 per quarter). 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 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 1 T O T H E S T O C K H O L D E R S G e n e r a l A m e r i c a n I n v e s t o r s General American Investors’ net asset value (NAV) per Common Share (assuming reinvestment of all dividends) increased 17.3% for the year ended December 31, 2012. The U.S. stock market was up 16.0% for the year, as measured by our benchmark, the Standard & Poor’s 500 Stock Index (including income). The return to our Common Stockholders increased by 19.8% and the discount at which our shares traded to their NAV continued to fluctuate and on December 31, 2012, it was 14.9%. The table that follows provides a comprehensive presen- tation of our performance and compares our returns on an annualized basis with the S&P 500. Years Stockholder Return (Market Value) NAV Return S&P 500 3 5 10 20 30 40 50 9.7% 9.3% 10.9% -1.3 6.8 8.5 11.4 11.8 11.6 -0.3 7.0 9.4 12.1 11.9 12.2 1.6 7.0 8.2 10.8 9.8 9.8 The U.S. economy generated modest economic growth in 2012, owing to improvements in employment, housing, and consumer spending. This performance occurred in the face of concerns over the increasing national debt—as reflected in the fiscal cliff debates, the coming debt-ceiling negotiations, and the bud- get sequestration battles in Congress—the effects of Hurricane Sandy, and a general worldwide economic malaise that has lingered for all too long. The upticks in growth, in conjunction with diminished fear over Europe’s economic future and the adoption of the fourth series of quantitative easing by the Fed, enabled world and U.S. equity markets to improve substantially during the past year, especially in the last quarter. Ironically, reported earnings for 2012 appear to be lower than many analysts had assumed earlier in the last year, leaving U.S. markets with higher than antici- pated earnings multiples. Simultaneously, forecasts for earnings of companies in the S&P 500 this year are back-end loaded, reflecting the political and fis- cal uncertainties still present both in the U.S. and Europe. Conversely, Asia, particularly China, appears to be maintaining positive momentum, via a number of fiscal and monetary policy levers, following a weaker performance in the first half of 2012. Given the magnitude of the budget and fiscal problems in most of the Organization of Economic Cooperation and Development, the rising inflationary implications of policies in the emerging markets, and the policy responses adopted to date by most countries, we con- tinue to look for only modest improvements in real economic growth both here in the US and abroad. But we remain guardedly optimistic that the improvements seen in markets and economies since the financial cri- sis of 2008 will continue. Thus reasonable valuations in equity markets, particu- larly when compared to bond yields, should provide for continued performance from equities as an asset class. Our focus remains on finding well-managed businesses at reasonable valuations and with opportunities for growth and successful capital allocation. As part of an ongoing effort to maximize shareholder value, over 4% of the Company’s shares were repur- chased in 2012 at an average discount to NAV of 14.5%. The Board of Directors has authorized repurchases of Common Shares when they are trading at a discount to NAV of at least 8%. In December 2012, the Board of Directors renewed au- thority originally granted in 2008 to repurchase up to 1 million outstanding shares of its 5.95% Cumulative Preferred Stock when the shares are trading at a market price below the liquidation preference of $25.00 per share. As announced on December 12, 2012, Spencer Davidson, President and Chief Executive Officer of the Company, retired effective December 31, 2012 after eighteen years of serivce as Chief Executive Officer. Effective January 1, 2013, Jeffrey W. Priest was appointed Chief Executive Officer and Portfolio Manager of the Company. Previously, he was appointed President of the Company on February 1, 2012. Also annouced on December 12, 2012, Carole Anne Clementi, an employee of the Company for more than thirty-nine years and Corporate Secretary since October 1994, retired effective December 31, 2012. Effective January 1, 2013, Maureen E. LoBello, who has been an employee of the Company since 1992 and Assistant Corporate Secretary since 2005, was appointed Corporate Secretary. In addition, the Company is pleased to report that on January 1, 2013, Craig A. Grassi, an employee of the Company since 1991 and Assistant Vice-President since 2005, was appointed Vice-President. Information about the Company, including our invest- ment 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 Jeffrey W. Priest President and Chief Executive Officer January 16, 2013 2 T H E C O M P A N Y G e n e r a l A m e r i c a n I n v e s t o r s Corporate Overview General American Investors, established in 1927, is one of the nation’s oldest closed- end investment companies. It is an independent organiza- tion that is internally managed. For regula- tory 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 continu- ous investment research program, which stresses fundamental security analysis, is carried on by the officers and staff of the Company under the oversight of the Board of Directors. The Directors have a broad range of experience in business and financial affairs. Portfolio Manager Effective January 1, 2013, Mr. Jeffrey W. Priest, became responsible for the man- agement of the Company. He was appointed Chief Executive Officer and Portfolio Manager on that date and he has been President since February 1, 2012. Mr. Priest joined the Company in 2010 as a se- nior investment analyst and has spent his entire 27-year business career on Wall Street. Mr. Priest succeeds Mr. Spencer Davidson who served as Chief Executive Officer and Portfolio Manager from 1995 through 2012. Mr. Davidson remains closely involved in the Company as its Chairman of the Board of Directors. GAM” Common Stock “GAM” Common Stock As a closed-end investment company, the Company does not offer its shares continu- ously. 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 electronic 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 the Company usually sell at a discount to NAV, as do the shares of most other domestic equity closed-end investment companies, they occasionally sell at a premium over NAV. During 2012, the stock sold at dis- counts to NAV which ranged from 13.2% (May 14) to 16.4% (January 3). At December 31, the price of the stock was at a discount of 14.9%. 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 cur- rently in the aggregate). The Preferred Shares are rated “A1” 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 mar- ket volatility for the Common Stockholders. On December 10, 2008, the Board of Directors authorized the repurchase of up to 1 million Preferred Shares in the open market at prices below $25 per share and that authority re- mains available to the Company. 3 T H E C O M P A N Y G e n e r a l A m e r i c a n I n v e s t o r s Dividend and Distribution Policy The Company’s dividend and distribution policy is to dis- tribute to stockholders before year-end substantially all or- dinary income estimated for the full year and capital gains realized during the ten-month period ended October 31 of that year. If any additional capi- tal gains are realized and available or ordinary income is earned during the last two months of the year, a “spill-over” distribution of these amounts may be paid. Dividends and distri- butions 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 con- tinuously on the Common Stock since 1939 and capital gain distributions in varying amounts have been paid for each of the years 1943-2012 (except for the year 1974). (A table listing dividends and distributions paid during the 20-year period 1993-2012 is shown at the bottom of page 4.) 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 the Company to de- termine how to vote proxies relating to portfolio securities and the Company’s proxy voting record for the 12- month period ended June 30, 2012 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.generalamerican- investors.com and (3) on the Securities and Exchange Commission’s website at www.sec. gov. Direct Registration The Company makes avail- able direct registration for its Common Shareholders. Direct registration, which is an element of the Investors Choice Plan admin- istered 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 pay- ment, 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, includ- ing 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 The Company collects non- public personal information about its customers (stock- holders) with respect to their transactions in shares of the Company’s securities but only for those stockholders whose shares are registered in their names. This information includes the stockholder’s address, tax identification or Social Security number and dividend elections. We do not have knowledge of, nor do we collect personal information about, stockholders who hold the Company’s securities at financial institutions in “street name” registration. We do not disclose any nonpublic personal information about our current or former stock- holders to anyone, except as permitted by law. We also restrict access to nonpublic personal information about our stockholders to those few employees who need to know that infor- mation to perform their responsibilities. We maintain safeguards that comply with federal standards to guard our stockholders’ personal information. 4 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, 2012 T he investment return for a Common Stockholder of General American Investors (GAM) over the 20 years ended December 31, 2012 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 illustration assumes an investment of $10,000 at the beginning of 1993. Stockholder Return is the return a Common Stock holder of GAM would have achieved assum- ing reinvestment of all dividends and distributions at the actual reinvestment 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 rein- vestment prices indicated above. Standard & Poor’s 500 Return is the time-weighted total rate of return on this widely-recog- nized, unmanaged index which is a measure of general stock market performance, including dividend income. Past performance may not be indicative of future results. The graph and tables below do not reflect the deduction of taxes that a stockholder would pay on Company distributions or the sale of Company shares. GENERAL AMERICAN INVESTORS STANDARD & POOR’S 500 STOCKHOLDER RETURN NET ASSET VALUE RETURN RETURN CUMULATIVE INVESTMENT $8,408 7,747 9,391 11,220 15,998 21,007 29,246 34,832 36,340 26,452 33,597 36,550 42,910 50,110 54,480 28,220 38,622 44,895 42,520 50,926 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 ANNUAL RETURN -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 36.86 16.24 -5.29 19.77 CUMULATIVE INVESTMENT ANNUAL RETURN CUMULATIVE INVESTMENT ANNUAL RETURN $9,825 9,556 11,809 14,167 18,708 25,282 34,485 40,568 40,081 30,854 39,308 43,385 50,413 56,583 61,116 34,824 45,995 53,037 51,515 60,432 -1.75% $11,012 10.12% -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 32.08 15.31 -2.87 17.31 11,152 15,334 18,847 25,128 32,303 39,073 35,521 31,298 24,369 31,328 34,709 36,385 42,083 44,360 27,914 35,297 40,613 41,478 48,111 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 26.45 15.06 2.13 15.99 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 9 3 - 2 0 1 2 ) ( U N A U D I T E D ) This table shows divi- dends and distributions 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 gains earned in the prior year. EARNINGS SOURCE EARNINGS SOURCE SHORT-TERM LONG-TERM RETURN OF YEAR INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL YEAR INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL SHORT-TERM LONG-TERM RETURN OF 1993 $.060 .060 1994 .100 1995 .200 1996 .210 1997 .470 1998 .420 1999 .480 2000 .370 2001 2002 .030 — — $.030 .050 — — .620 1.550 .640 — — $2.340 — 1.590 — 2.770 — 2.710 — 2.950 — 4.400 — 4.050 6.160 — 1.370 — — .330 2003 $.020 .217 2004 .547 2005 .334 2006 .706 2007 .186 2008 .103 2009 .081 2010 .147 2011 .215 2012 — — $.041 — .009 — .051 .033 .011 .015 $.590 .957 1.398 2.666 5.250 .254 .186 .316 .342 1.770 — — — — — — $.010 — — — 5 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 COMPARATIVE ANNUALIZED INVESTMENT RESULTS YEARS ENDED DECEMBER 31, 2012 STOCKHOLDER RETURN GAM NET ASSET VALUE S&P 500 STOCK INDEX 1 year 19.8% 17.3% 16.0% 5 years -1.3 -0.3 10 years 15 years 20 years 6.8 8.0 8.5 7.0 8.1 9.4 1.6 7.0 4.4 8.2 $80000 $60000 $40000 $20000 1 9 9 3 1 9 9 4 1 9 9 5 1 9 9 6 1 9 9 7 1 9 9 8 1 9 9 9 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 GAM Stockholder Return GAM Net Asset Value S&P 500 Stock Index $0 6 M A J O R S T O C K C H A N G E S ( a ) : 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 1 2 ( U N A U D I T E D ) ADDITIONS ELIMINATIONS REDUCTIONS G e n e r a l A m e r i c a n I n v e s t o r s INCREASES Apache Corporation Apple Inc. Cytokinetics, Incorporated Kohl’s Corporation MetLife, Inc. Nelnet, Inc. Towers Watson & Co. Class A Vodafone Group plc ADR DECREASES Dell Inc. Devon Energy Corporation Freeport-McMoRan Copper & Gold Inc. Intercell AG Teradata Corporation Alpha Natural Resources, Inc. Arch Capital Group Ltd. Epoch Holding Corporation JPMorgan Chase & Co. PartnerRe Ltd. Platinum Underwriters Holdings, Ltd. The Manitowoc Company, Inc. SHARES TRANSACTED SHARES HELD 35,000 17,000 202,111 50,000 50,000 14,500 23,000 80,000 555,000 130,062 200,000 198,479 100,000 342,700 35,000 754,105 20,000 15,000 20,000 75,000 331,478 67,000 702,111 284,050 400,000 670,000 263,998 473,100 — — — — — 425,000 825,000 912,562 500,000 260,000 400,000 825,000 (a) Common shares unless otherwise noted; excludes transactions in Common Stocks - Miscellaneous - Other. 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 COST(000) VALUE(000) PERCENT COMMON NET ASSETS* DECEMBER 31, 2012 The diversification of the Company’s net assets applicable to its Common Stock by industry group as of December 31, 2012 is shown in the table. INDUSTRY CATEGORY Financials Banks Diversified Financials Insurance Consumer Staples Food, Beverage & Tobacco Food & Staples Retailing Consumer Discretionary Automobiles & Components Consumer Services Retailing Information Technology Semiconductors & Semiconductor Equipment Software & Services Technology Hardware & Equipment Industrials Capital Goods Commercial & Professional Services $10,560 47,073 76,768 134,401 66,763 12,042 78,805 34,972 8,679 44,128 87,779 4,664 20,749 60,617 86,030 45,597 52,679 98,276 71,808 51,117 Energy Miscellaneous** Health Care Pharmaceuticals, Biotechnology & Life Sciences 29,510 12,457 Telecommunication Services 8,941 Materials 659,124 119,249 $778,373 Short-Term Securities Total Investments Other Assets and Liabilities - Net Preferred Stock Net Assets Applicable to Common Stock $20,012 88,179 160,371 268,562 114,986 38,949 153,935 34,142 10,627 104,998 149,767 20,080 21,234 97,821 139,135 64,537 64,168 128,705 87,779 54,211 46,929 11,917 8,632 1,049,572 119,249 1,168,821 (23,286) (190,117) $955,418 2.1% 9.2 16.8 28.1 12.0 4.1 16.1 3.6 1.1 11.0 15.7 2.1 2.2 10.2 14.5 6.8 6.7 13.5 9.2 5.7 4.9 1.2 0.9 109.8 12.5 122.3 (2.4) (19.9) 100.0% * Net assets applicable to the Company’s Common Stock. ** Securities which have been held for less than one year, not previously disclosed and not restricted. (see notes to financial statements) 7 T E N L A R G E S T I N V E S T M E N T H O L D I N G S ( U N A U D I T E D ) G e n e r a l A m e r i c a n I n v e s t o r s The statement of investments as of December 31, 2012, shown on pages 8 and 9 includes 51 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 in the U.S. and Europe, along with expansion of related U.S. and foreign off-price formats, provide ongoing growth opportunities. 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. DIAGEO PLC ADR Diageo produces, distills and markets alcoholic beverages worldwide. The company’s portfolio includes Smirnoff, Johnnie Walker, Jose Cuervo, Captain Morgan, Tanqueray and Guinness. Additionally, Diageo markets numerous regional and local brands. The company generates excess cash flow which it uses to acquire different brands, pay dividends and buyback its stock. 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 in the U.S. and overseas. ARCH CAPITAL GROUP LTD. Arch Capital, a Bermuda-based insurer/reinsurer, generates premiums of approximately $3 billion and has a high quality, well-reserved A-rated balance sheet. This company has a strong management team that exercises prudent underwriting discipline, efficient expense control, and steady capital management resulting in above-average earnings and book value growth. APPLE INC. Apple designs, manufactures and markets mobile communications and media devices, personal computers and portable digital music players, and sells device related software, services, peripherals and third-party content and applications. The company’s growth pro- spects look favorable as the shift to mobile computing expands globally and as more products and services are added to the Apple ecosystem. NESTLE S.A. Nestle is a well-managed geographically diversified global food company with a favorably-positioned product portfolio and an excellent AA-rated balance sheet. Solid volume growth, strong pricing power, expense control and steady capital management yield durable above-average long-term total return potential. 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 enables Republic Services to generate significant free cash flow. UNILEVER N.V. Unilever N.V. is a well-managed, primarily emerging market-based, global consumer goods manufacturer focusing on personal care, home care, food and refreshment products and operates with a solid A+ rated balance sheet. Advantageous geographic positioning coupled with strong volume growth, pricing power and manage- ment execution should provide above-average long-term total return. TARGET CORPORATION Target is the nation’s second largest discount chain with superior management and meaningful growth opportunities. *Net assets applicable to the Company’s Common Stock. SHARES VALUE % COMMON NET ASSETS* 1,544,668 $65,571,157 6.9% 700,000 43,301,720 4.5 350,000 40,803,000 4.3 394,500 38,948,985 4.1 825,000 36,316,500 3.8 67,000 35,655,584 3.7 450,000 29,290,122 3.1 957,100 28,071,743 2.9 728,845 27,717,429 2.9 460,000 27,218,200 2.8 $372,894,440 39.0% 8 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 1 2 G e n e r a l A m e r i c a n I n v e s t o r s CONSUMER DISCRETIONARY (15.7%) SHARES COMMON STOCKS AUTOMOBILES AND COMPONENTS (3.6%) 1,264,063 Ford Motor Company 330,211 Visteon Corporation (a) CONSUMER SERVICES (1.1%) VALUE (NOTE 1a) $16,369,616 17,771,956 34,141,572 (COST $34,971,752) 750,000 International Game Technology (COST $8,678,620) 10,627,500 RETAILING (11.0%) 284,050 Kohl’s Corporation 460,000 Target Corporation 1,544,668 The TJX Companies, Inc. CONSUMER STAPLES (16.1%) FOOD, BEVERAGE AND TOBACCO (12.0%) 350,000 Diageo plc ADR 450,000 Nestle S.A. 250,991 PepsiCo, Inc. 728,845 Unilever N.V. FOOD AND STAPLES RETAILING (4.1%) 394,500 Costco Wholesale Corporation ENERGY (9.2%) 425,000 Alpha Natural Resources, Inc. (a) 331,478 Apache Corporation 300,000 Canadian Natural Resources Limited 750,000 Halliburton Company 2,050,000 Weatherford International Ltd. (a) FINANCIALS (27.8%) BANKS (2.1%) 425,000 Bond Street Holdings LLC, Class A (a) (b) 75,000 Bond Street Holdings LLC, Class B (a) (c) 110,000 M&T Bank Corporation DIVERSIFIED FINANCIALS (8.9%) 315,000 American Express Company 912,562 Epoch Holding Corporation 500,000 JPMorgan Chase & Co. 670,000 Nelnet, Inc. INSURANCE (16.8%) (COST $44,127,891) (COST $87,778,263) (COST $66,763,393) (COST $12,041,935) (COST $78,805,328) (COST $71,807,643) (COST $10,560,176) (COST $44,207,265) 330,492 Aon Corporation 825,000 Arch Capital Group Ltd. (a) 110 Berkshire Hathaway Inc. Class A (a) 240,000 Everest Re Group, Ltd. 53,500 Forethought Financial Group Inc. Class A (a) (d) 400,000 MetLife, Inc. 260,000 PartnerRe Ltd. 400,000 Platinum Underwriters Holdings, Ltd. HEALTH CARE (4.9%) PHARMACEUTICALS, BIOTECHNOLOGY AND LIFE SCIENCES (4.9%) 150,000 Celgene Corporation (a) 702,111 Cytokinetics, Incorporated (a) 214,300 Gilead Sciences, Inc. (a) 755,808 Pfizer Inc. (COST $76,767,943) (COST $131,535,384) (COST $29,510,182) 12,208,469 27,218,200 65,571,157 104,997,826 149,766,898 40,803,000 29,290,122 17,175,314 27,717,429 114,985,865 38,948,985 153,934,850 4,139,500 26,021,023 8,661,000 26,017,500 22,939,500 87,778,523 7,862,500 1,318,125 10,831,700 20,012,325 18,106,200 25,460,480 21,984,500 19,959,300 85,510,480 18,378,660 36,316,500 14,746,600 26,388,000 12,037,500 13,176,000 20,927,400 18,400,000 160,370,660 265,893,465 11,770,500 463,393 15,740,335 18,954,909 46,929,137 9 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 1 2 - 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 SHARES COMMON STOCKS (Continued) VALUE (NOTE 1a) INDUSTRIALS (13.5%) CAPITAL GOODS (6.8%) 1,200,000 ABB Ltd. ADR 825,000 The Manitowoc Company, Inc. 325,000 United Technologies Corporation COMMERCIAL AND PROFESSIONAL SERVICES (6.7%) 957,100 Republic Services, Inc. 263,998 Towers Watson & Co. Class A 630,000 Waste Management, Inc. (COST $45,597,425) (COST $52,678,764) (COST $98,276,189) $24,948,000 12,936,000 26,653,250 64,537,250 28,071,743 14,839,328 21,256,200 64,167,271 128,704,521 INFORMATION TECHNOLOGY (14.5%) SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT (2.1%) 311,850 ASML Holding N.V. (COST $4,663,838) 20,080,021 SOFTWARE AND SERVICES (2.2%) 795,000 Microsoft Corporation (COST $20,749,343) 21,234,211 TECHNOLOGY HARDWARE AND EQUIPMENT (10.2%) 67,000 Apple Inc. 960,000 Cisco Systems, Inc. 700,000 QUALCOMM Incorporated (COST $60,616,756) (COST $86,029,937) 35,655,584 18,863,424 43,301,720 97,820,728 139,134,960 MATERIALS (0.9%) MISCELLANEOUS (5.7%) TELECOMMUNICATION SERVICES (1.2%) 200,000 Nucor Corporation (COST $8,941,303) 8,632,000 Other (e) (COST $51,117,146) 54,211,389 473,100 Vodafone Group plc ADR (COST $12,456,566) 11,917,389 TOTAL COMMON STOCKS (109.5%) (COST $656,257,940) 1,046,903,132 FINANCIALS (0.3%) WARRANTS 225,000 WARRANT JPMorgan Chase & Co. Expires 10/28/2018 (a) (COST $2,865,853) 2,668,500 SHARES SHORT-TERM SECURITIES AND OTHER ASSETS 119,248,846 SSgA U.S. Treasury Money Market Fund (a) (12.5%) (COST $119,248,846) 119,248,846 TOTAL INVESTMENTS (f) (122.3%) Liabilities in excess of receivables and other assets (-2.4%) (COST $778,372,639) PREFERRED STOCK (-19.9%) NET ASSETS APPLICABLE TO COMMON STOCK (100%) 1,168,820,478 (23,285,642) 1,145,534,836 (190,117,175) $955,417,661 S T A T E M E N T O F C A L L O P T I O N S W R I T T E N CONTRACTS CALL OPTION (100 SHARES EACH) COMMON STOCK/EXPIRATION DATE/EXERCISE PRICE VALUE (NOTE 1a) SEMICONDUCTORS AND EQUIPMENT 300 ASML Holding N.V./April 20, 2013/$4.40 (PREMIUM RECEIVED $104,999) $132,000 ADR - American Depository Receipt (a) Non-income producing security. (b) Level 3 fair value measurement, restricted security acquired 11/04/09, aggregate cost $8,500,000, unit cost is $20.00 per share and fair value is $18.50 per share, note 2. Fair value is based upon bid and or transaction prices provided via the NASDAQ OMX PORTAL Alliance trading and transfer system for privately placed equity securities traded in the over-the-counter market among qualified investors and an evaluation of book value per share. Amount represents .82% of net assets. (c) Level 3 fair value measurement, restricted security acquired 05/21/12, aggregate cost $1,500,000, unit cost is $20.00 per share and fair value is $17.58 per share,note 2. Fair value is based upon a judgmentally discounted bid price provided via the NASDAQ OMX PORTAL Alliance trading and transfer system for privately placed equity securities traded in the over-the-counter market among qualified investors and an evaluation of book value per share. Amount represents .14% of net assets. (d) Level 3 fair value measurement, restricted security acquired 11/03/09, aggregate cost $10,748,000, unit cost is $200.90 per share and fair value is $225.00 per share, note 2. Fair valuation is based upon a market approach using valuation metrics (market price-earnings and market price-book value multiples), and changes therein, relative to a peer group of companies established by the underwriters as well as actual transaction prices resulting from limited trading in the security. Significant increases (decreases) in the relative valuation metrics of the peer group companies may result in higher (lower) estimates of fair value. Amount represents 1.26% of net assets. (e) Securities which have been held for less than one year, not previously disclosed, and not restricted. (f) At December 31, 2012, the cost of investments for Federal income tax purposes was: aggregate gross unrealized appreciation of $412,723,576, aggregate gross unrealized depreciation of $22,329,865, and net unrealized appreciation of $390,393,711. The difference between book-basis and tax-basis net unrealized appreciation (depreciation) was attributable to the tax deferral of losses on wash sales. (see notes to financial statements) 1 0 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 DECEMBER 31, 2012 INVESTMENTS, AT VALUE (NOTE 1a) Common stocks (cost $656,257,940) Warrant (cost $2,865,853) Money market fund (cost $119,248,846) Total investments (cost $778,372,639) RECEIVABLES AND OTHER ASSETS Receivable for securities sold Dividends, interest and other receivables Qualified pension plan asset, net excess funded (note 7) Prepaid expenses, fixed assets and other assets TOTAL ASSETS LIABILITIES Payables for securities purchased Dividend accrued on common stock Accrued preferred stock dividend not yet declared Outstanding option written, at value (premium received $104,999) Accrued supplemental pension plan liability (note 7) Accrued supplemental thrift plan liability (note 7) Accrued expenses and other liabilities TOTAL LIABILITIES 5.95% CUMULATIVE PREFERRED STOCK, SERIES B - 7,604,687 at a liquidation value of $25 per share (note 5) NET ASSETS APPLICABLE TO COMMON STOCK - 29,233,972 (note 5) NET ASSET VALUE PER COMMON SHARE NET ASSETS APPLICABLE TO COMMON STOCK Common Stock, 29,233,972 shares at par value (note 5) Additional paid-in capital (note 5) Undistributed realized gain on securities sold Undistributed net investment income (note 5) Accumulated other comprehensive loss (note 7) Unallocated distributions on Preferred Stock Unrealized appreciation on investments and option written NET ASSETS APPLICABLE TO COMMON STOCK (see notes to financial statements) $1,046,903,132 2,668,500 119,248,846 1,168,820,478 694,235 899,703 995,001 1,877,099 1,173,286,516 1,711,573 17,080,713 219,955 132,000 5,016,410 2,504,276 1,086,753 27,751,680 190,117,175 $955,417,661 $32.68 $29,233,972 542,441,142 367,302 947,161 (7,772,799) ( 219,955) 390,420,838 $955,417,661 1 1 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 $525,669) Interest TOTAL INCOME EXPENSES Investment research Administration and operations Office space and general Directors’ fees and expenses Auditing and legal fees Miscellaneous taxes Transfer agent, custodian and registrar fees and expenses Stockholders’ meeting and reports TOTAL EXPENSES NET INVESTMENT INCOME YEAR ENDED DECEMBER 31, 2012 $22,732,018 2,790 22,734,808 9,187,143 3,913,109 1,678,113 263,895 227,842 191,086 170,927 129,669 15,761,784 6,973,024 Realized Gain And Change In Unrealized Appreciation On Investments (Notes 1, 3 and 4) Net realized gain on investments: Securities transactions (long-term, except for $741,626) Written option transactions (notes 1b and 4) Net increase in unrealized appreciation NET INVESTMENT INCOME ON INVESTMENTS DISTRIBUTIONS TO PREFERRED STOCKHOLDERS 60,684,089 (225,805) 60,458,284 84,267,705 151,699,013 (11,311,972) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $140,387,041 (see notes to financial statements) 1 2 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 increase (decrease) in unrealized appreciation Distributions to Preferred Stockholders: From net investment income From short-term capital gains From long-term capital gains Decrease in net assets from Preferred distributions YEAR ENDED DECEMBER 31, 2012 2011 $6,973,024 60,458,284 84,267,705 151,699,013 $5,295,369 19,507,647 (42,899,858) (18,096,842) (1,205,766) (85,020) (10,021,186) (11,311,972) (3,326,632) (249,312) (7,736,028) (11,311,972) INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER COMPREHENSIVE LOSS 140,387,041 (29,408,814) Funded status of defined benefit plans (note 7) (87,605) (2,864,213) DISTRIBUTIONS TO COMMON STOCKHOLDERS From net investment income From short-term capital gains From long-term capital gains (6,109,048) (430,801) (50,405,654) (4,388,308) (328,878) (10,204,952) DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (56,945,503) (14,922,138) CAPITAL SHARE TRANSACTIONS (NOTE 5) Value of Common Shares issued in payment of dividends and distributions Cost of Common Shares purchased DECREASE IN NET ASSETS - CAPITAL TRANSACTIONS NET INCREASE (DECREASE) IN NET ASSETS NET ASSETS APPLICABLE TO COMMON STOCK 21,554,674 (36,028,316) 7,094,056 (24,302,457) (14,473,642) (17,208,401) 68,880,291 (64,403,566) BEGINNING OF YEAR 886,537,370 950,940,936 END OF YEAR (including undistributed net investment income of $947,161 and $1,286,147, respectively) $955,417,661 $886,537,370 (see notes to financial statements) 1 3 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 table shows per share operating performance data, total investment return, ratios and supple- mental data for each year in the five-year period ended December 31, 2012. This information has been derived from infor- mation 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 (loss) Distributions on Preferred Stock: Dividends from net investment income Distributions from net short-term capital gains Distributions from net long-term capital gains Distributions from return of capital Total from investment operations Distributions on Common Stock: 2012 2011 2010 2009 2008 $29.78 .24 $31.26 .18 $27.50 .19 $21.09 .11 $38.10 .42 5.05 — 5.29 (.68) (.10) (.60) 4.37 — 4.56 6.94 .07 7.12 (16.15) (.25) (15.98) (.04) (.11) (.07) (.11) (.11) (.01) (.01) (.03) (.05) — (.34) — (.39) (4.90) (.26) — (.38) (.98) (.27) — (.37) 4.19 (.19) (.01) (.36) 6.76 (.27) — (.38) (16.36) Dividends from net investment income (.21) (.15) (.08) (.10) (.19) Distributions from net short-term capital gains Distributions from net long-term capital gains Distributions from return of capital (.02) (.01) (.03) (.05) — (1.77) — (2.00) (.34) — (.50) (.32) — (.43) (.19) (.01) (.35) (.46) — (.65) Net asset value, end of year Per share market value, end of year $32.68 $27.82 $29.78 $24.91 $31.26 $26.82 $27.50 $23.46 $21.09 $17.40 TOTAL INVESTMENT RETURN - Stockholder Return, based on market price per share RATIOS AND SUPPLEMENTAL DATA Net assets applicable to Common Stock, 19.77% (5.29%) 16.24% 36.86% (48.20%) end of year (000’s omitted) $955,418 $886,537 $950,941 $864,323 $674,598 Ratio of expenses to average net assets applicable to Common Stock 1.67% 1.39% 1.54% 1.93% 0.87% Ratio of net income to average net assets applicable to Common Stock Portfolio turnover rate 0.74% 9.56% 0.56% 11.17% 0.66% 18.09% 0.46% 24.95% 1.31% 25.52% PREFERRED STOCK Liquidation value, end of year (000’s omitted) Asset coverage Liquidation preference per share Market value per share (see notes to financial statements) $190,117 603% $190,117 566% $190,117 600% $190,117 $199,617 438% 555% $25.00 $25.54 $25.00 $25.47 $25.00 $24.95 $25.00 $24.53 $25.00 $21.90 1 4 N O T E S T O F I N A N C I A L S T A T E M E N T S G e n e r a l A m e r i c a n I n v e s t o r s 1. SIGNIFICANT ACCOUNTING POLICIES General American Investors Company, Inc. (the “Company”), established in 1927, is registered under the Investment Company Act of 1940 as a closed-end, diversified management investment company. It is internally managed by its officers under the direction of the Board of Directors. The preparation of financial statements in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”)requires management to make estimates and assumptions that affect the amounts reported in the financial state- ments and accompanying notes. Actual results could differ from those estimates. a. SECURITY VALUATION Equity securities traded on a national securities exchange are valued at the last reported sales price on the last business day of the period. Equity securities reported on the NASDAQ national market are valued at the official closing price on that day. Listed and NASDAQ equity securities for which no sales are reported on that day and other securities traded in the over-the-counter market are valued at the last bid price (asked price for options written) on the valuation date. Equity securities traded primarily in foreign markets are valued at the closing price of such securities on their respective exchanges or markets. Corporate debt securities, domestic and foreign, are generally traded in the over-the-counter market rather than on a securities exchange. The Company utilizes the latest bid prices provided by independent dealers and information with respect to transactions in such securities to determine current market value. If, after the close of foreign markets, 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. Special holdings (restricted securities) and other securities for which quotations are not readily available are valued at fair value determined in good faith pursuant to spe- cific procedures appropriate to each security as established by and under the general supervision of the Board of Directors. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the price used by other investors or the price that may be realized upon the actual sale of the security. b. OPTIONS The Company may purchase and write (sell) put and call options. The Company typically purchases put options or writes call options to hedge the value of portfolio investments while it typically purchases call options and writes put options to obtain equity market exposure under specified circumstances. 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 pre- mium and a change in market value should the counterparty not perform under the contract. Put and call options purchased are accounted for in the same manner as portfolio securities. Premiums received from writing options are reported as a liability on the Statement of Assets and Liabilities. Those that expire unexercised are treated by the Company on the expiration date as realized gains on written option transactions in the Statement of Operations. The 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 on written option transactions in the Statement of Operations. 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 on investments in the Statement of Operations. If a put option is exercised, the premium reduces the cost basis for the securities purchased by the Company and is parenthetically disclosed under cost of investments on the Statement of Assets and Liabilities. The Company as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option. See Note 4 for written option activity. c. SECURITIES TRANSACTIONS AND INVESTMENT INCOME 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 dis- count and premium on investments, is earned from settlement date and is recognized on the accrual basis. Cost of short-term investments represents amortized cost. d. FOREIGN CURRENCY TRANSLATION AND TRANSACTIONS Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollars based on the exchange rate of such currencies versus U.S. dollars on the date of valu- ation. Purchases and sales of securities, income and expense items denominated in foreign currencies are translated into U.S. dollars at the exchange rate in effect on the transaction date. Events may impact the availability or reliability of foreign ex- change rates used to convert the U.S. dollar equivalent value. If such an event occurs, the foreign exchange rate will be valued at fair value using procedures established and approved by the Company’s Board of Directors. The Company does not sepa- rately report the effect of changes in foreign exchange rates from changes in market prices on securities held. Such changes are included in net realized and unrealized gain or loss from investments on the Statement of Operations. Realized foreign exchange gains or losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions and the difference between the recorded amounts of dividends, interest, and foreign withholding taxes and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in foreign exchange rates on foreign denominated assets and liabilities other than investments in securities held at the end of the reporting period. Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. companies as a result of, among other factors, the possibility of political or economic instability or the level of governmen- tal supervision and regulation of foreign securities markets. e. DIVIDENDS AND DISTRIBUTIONS The Company expects to pay dividends of net investment income and distributions of net real- ized capital and currency gains, if any, annually to common shareholders and quarterly to preferred shareholders. Dividends and distributions to common and preferred shareholders, which are determined in accordance with Federal income tax regula- tions are recorded on the ex-dividend date. Permanent book/tax differences relating to income and gains are reclassified to paid-in capital as they arise. f. FEDERAL INCOME TAXES The Company’s policy is to fulfill the requirements of the Internal Revenue Code applicable to regu- lated investment companies and to distribute substantially all taxable income to its stockholders. Accordingly, no provision for Federal income taxes is required. In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Company’s tax positions taken or expected to be taken on federal and state income tax returns for all open tax years (the current and the prior three tax years) and has concluded that no provision for income tax is required in the Company’s financial statements. 1 5 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 1. SIGNIFICANT ACCOUNTING POLICIES - (Continued from previous page.) g. CONTINGENT LIABILITIES Amounts related to contingent liabilities are accrued if it is probable that a liability has been incurred and an amount is reasonably estimable. Management evaluates whether there are incremental legal or other costs directly associated with the ultimate resolution of a matter that are reasonably estimable and, if so, they are included in the accrual. h. INDEMNIFICATIONS In the ordinary course of business, the Company enters into contracts that contain a variety of indem- nifications. 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. 2. FAIR VALUE MEASUREMENTS Various data inputs are used in determining the value of the Company’s investments. These inputs are summarized in a hierarchy consisting of the three broad levels listed below: Level 1 - quoted prices in active markets for identical securities (including money market funds which are valued using am- ortized 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 in- vestments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with invest- ing in those securities. The following is a summary of the inputs used to value the Company’s net assets as of December 31, 2012: Assets Common stocks Warrant Money market fund Total Liabilities Options Written Level 1 $1,025,685,007 2,668,500 119,248,846 $1,147,602,353 ($132,000) Level 2 — — — — Level 3 $21,218,125 — — $21,218,125 Total $1,046,903,132 2,668,500 119,248,846 $1,168,820,478 ($132,000) The aggregate value of Level 3 portfolio investments changed during the year ended December 31, 2012 as follows: Change in portfolio valuations using significant unobservable inputs Fai r value at December 31, 2011 Net change in unrealized appreciation on investments Fair value at December 31, 2012 Level 3 $19,860,500 1,357,625 $21,218,125 The increase in net unrealized appreciation included in the results of operations attributable to Level 3 assets held at December 31, 2012 and reported within the caption Net change in unrealized appreciation in the Statement of Operations: $1,357,625 Transfers, if any, are reported as of the end of the reporting period. There were no transfers between Levels during the year ended December 31, 2012. 3. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (other than short-term securities and options) during 2012 amounted to $99,438,407 and $226,293,234, on long transactions, respectively. 4. WRITTEN OPTIONS The level of activity in written options varies from year to year based upon market conditions. Transactions in written call options and collateralized put options during the year ended December 31, 2012 were as follows: Options outstanding, December 31, 2011 Options written Options exercised Options terminated in closing purchase transaction Options outstanding, December 31, 2012 COVERED CALLS COLLATERALIZED PUTS CONTRACTS 0 600 (100) (200) 300 PREMIUMS $0 416,106 (101,421) (209,686) $104,999 CONTRACTS 0 1,510 (670) (840) 0 PREMIUMS $0 906,543 (586,475) (320,068) $0 5. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS The authorized capital stock of the Company consists of 50, 000, 000 shares of Common Stock, $1.00 par value, and 10, 000, 000 shares of Preferred Stock, $1.00 par value. With respect to the Common Stock, 29,233,972 shares were issued and outstanding; 8, 000, 000 Preferred Shares were originally issued and 7, 604, 687 were outstanding on December 31, 2012. 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 accumulated and unpaid dividends to the date of redemption. On December 10, 2008, the Board of Directors authorized the repurchase of up to 1 million Preferred Shares in the open market at prices below $25.00 per share. To date, 395,313 shares have been repurchased. 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. 1 6 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. CAPITAL STOCK AND DIVIDEND DISTRIBUTIONS - (Continued from previous page.) Under the Investment Company Act of 1940, the Company is required to maintain an asset coverage of at least 200% of the Preferred Stock. In addition, pursuant to Moody’s Investor Service, Inc. Rating Agency Guidelines, the Company is required to maintain a certain discounted asset coverage for its portfolio that equals or exceeds a Basic Maintenance Amount. The Company has met these require- ments since the issuance of the Preferred Stock. If the Company fails to meet these requirements in the future and does not cure such failure, the Company may be required to redeem, in whole or in part, shares of Preferred Stock at a redemption price of $25.00 per share plus accumulated and unpaid dividends. In addition, failure to meet the foregoing asset coverage requirements could restrict the Company’s ability to pay dividends on shares of Common Stock and could lead to sales of portfolio securities at inopportune times. The holders of Preferred Stock have voting rights equivalent to those of the holders of Common Stock (one vote per share) and, gen- erally, vote together with the holders of Common Stock as a single class. Holders of Preferred Stock 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 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 addi- tion, the Investment Company Act of 1940 requires that approval of the holders of a majority of any outstanding Preferred Shares, vot- ing 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 presents its Preferred Stock, for which its redemption is outside of the Company’s control, outside of the net assets applicable to Common Stock in the Statement of Assets and Liabilities. Transactions in Common Stock during 2012 and 2011 were as follows: SHARES AMOUNT 2012 2011 2012 2011 Shares issued in payment of dividends and distributions (includes 766,116 and 278,416 shares issued from treasury, respectively) Increase in paid-in capital Total increase Shares purchased (at an average discount from net asset value of 14.5% and 14.6%, respectively) Decrease in paid-in capital Total decrease Net decrease 766,116 278,416 $766,116 20,788,558 21,554,674 $278,416 6,815,640 7,094,056 (1,298,533) (935,321) (532,417) (656,905) (1,298,533) (34,729,783) (36,028,316) ($14,473,642) (935,321) (23,367,136) (24,302,457) ($17,208,401) At December 31, 2012, the Company held in its treasury 2,746,900 shares of Common Stock with an aggregate cost of $72,428,089. The tax basis distribution during the year ended December 31, 2012 is as follows: ordinary distributions of $7,830,635 and long- term capital gains distributions of $60,426,840. As of December 31, 2012, distributable earnings on a tax basis included $295,371 from undistributed net long-term capital gains, $378,924 from undistributed ordinary income and $390,366,710 from net unrealized appreciation on investments if realized in future years. Reclassifications arising from permanent “book/tax” differences reflect non-tax deductible expenses and redesignation of dividends incurred during the year ended December 31, 2012. As a result, undistributed net investment income was increased by $2,804, additional paid-in capital was decreased by $1,318 and accumulated net realized gain on investment transactions was decreased by $1,486. Net assets were not affected by this reclassification. 6. OFFICERS’ COMPENSATION The aggregate compensation accrued and paid by the Company during the year ended December 31, 2012 to its officers (identified on page 20) amounted to $8,201,333. 7. BENEFIT PLANS The Company has funded (Qualified) and unfunded (Supplemental) defined contribution thrift plans that are available to its employees. The aggregate cost of such plans for 2012 was $986,040. The qualified thrift plan acquired 51,055 shares, sold 6,900 shares and distributed 139,163 shares of the Company’s Common Stock during the year ended December 31, 2012, and held 484,836 shares of the Company’s Common Stock at December 31, 2012. 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. The Company recognizes the overfunded or underfunded status of a defined benefit postretirement plan as an asset or liability in the Statement of Assets and Liabilities and recognizes changes in funded status in the year in which the changes occur through other com- prehensive income. 1 7 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 7. BENEFIT PLANS - (Continued from previous page.) OBLIGATIONS AND FUNDED STATUS OF DEFINED BENEFIT PLANS: CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year Service cost Interest cost Benefits paid Actuarial losses 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 DECEMBER 31, 2012 (MEASUREMENT DATE) QUALIFIED SUPPLEMENTAL PLAN PLAN TOTAL $13,126,845 387,163 573,441 (627,915) 948,513 14,408,047 14,161,765 1,869,198 — (627,915) 15,403,048 $995,001 $4,175,735 130,543 179,471 (192,537) 723,198 5,016,410 — — 192,537 (192,537) — ($5,016,410) $17,302,580 517,706 752,912 (820,452) 1,671,711 19,424,457 14,161,765 1,869,198 192,537 (820,452) 15,403,048 ($4,021,409) Accumulated benefit obligation at end of year $13,215,019 $4,534,664 $17,749,683 CHANGE IN FUNDED STATUS: Noncurrent benefit asset LIABILITIES Current benefit liability Noncurrent benefit liability BEFORE $1,034,920 ADJUSTMENTS ($39,919) AFTER $995,001 (249,660) (3,926,075) (24,938) (815,737) (274,598) ( 4,741,812) ACCUMULATED OTHER COMPREHENSIVE LOSS 7,685,194 87,605 7,772,799 AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME CONSIST OF: Net actuarial gain Prior service cost $7,484,834 200,360 $7,685,194 $134,199 (46,594) $87,605 $7,619,033 153,766 $7,772,799 WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31, 2012 AND FOR DETERMINING NET PERIODIC BENEFIT COST FOR THE YEAR ENDED DECEMBER 31, 2012: 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 4.35% 7.50% 4.25% 4.35% N/A 4.25% $387,163 573,441 (1,023,384) 45,837 691,698 $674,755 $130,543 179,471 — 757 — $310,771 $517,706 752,912 (1,023,384) 46,594 691,698 $985,526 PLAN ASSETS The Company’s qualified pension plan asset allocation by asset class at December 31, 2012, is as follows: ASSET CATEGORY Equity securities Debt securities Money market fund Total LEVEL 1 $12,088,395 276,585 710,950 $13,075,930 LEVEL 2 $2,490,516 — — $2,490,516 EXPECTED CASH FLOWS QUALIFIED PLAN SUPPLEMENTAL PLAN Expected Company contributions for 2013 Expected benefit payments: 2013 2014 2015 2016 2017 2018-2022 — $685,896 723,666 768,066 787,203 793,567 4,108,050 $274,598 $274,598 267,921 267,521 266,307 257,470 1,185,490 LEVEL 3 — — — — TOTAL $14,578,911 276,585 710,950 $15,566,446 TOTAL $274,598 $960,494 991,587 1,035,587 1,053,510 1,051,037 5,293,540 1 8 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 8. OPERATING LEASE COMMITMENT In September 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 beginning in February 2013. The Company has the option to renew the lease after February 2018 for five years at market rates. Rental expense approximated $1, 104,200 for the year ended December 31, 2012. Minimum rental commitments under the operating lease are approximately $1, 183, 000 per annum in 2013 through 2017, and $99, 000 in 2018. 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, 2012, and the related statement of operations for the year then ended, the statement of 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 respon- sibility 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 design- ing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. 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, 2012, by correspon- dence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by manage- ment, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opin- ion. 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, 2012, the results of its oper- ations for the year then ended, 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 con- formity with U.S. generally accepted accounting principles. New York, New York February 6, 2013 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 Jeffrey W. Priest (50) 2010 Andrew V. Vindigni (53) 1988 Eugene S. Stark (54) 2005 Craig A. Grassi (44) 1991 President of the Company since 2012 and Chief Executive Officer effective 2013, Managing Member and President, Amajac Capital Management, LLC (1999-2010) Senior Vice-Prewident of the Company since 2006, Vice-President 1995-2006 securities analyst (financial services and consumer non-durables industries) Sally A. Lynch, Ph.D. (53) Vice-President of the 1997 Company since 2006, securities analyst (biotechnology industry) Michael Robinson (40) 2006 Diane G. Radosti (60) 1980 Vice-President of the Company since 2010, securities analyst (general industries) Treasurer of the Company since 1990, Principal Accounting Officer since 2003 Vice-President, Administration Maureen E. LoBello (62) of the Company and Principal Financial Officer since 2005, Chief Compliance Officer since 2006 1992 Corporate Secretary effective 2013, Assistant Corporate Secretary since 2005 benefits administration Vice-President effective 2013, Assistant Vice-President of the Company since 2005 securities analyst and information technology All officers serve for a term of one year and are elected by the Board of Directors at the time of its annual organization meeting on the second Wednesday in April. The address for each officer is the Company’s office. All information as of February 6, 2013. 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, LLC 6201 15th Avenue Brooklyn, NY 11219 1-800-413-5499 www.amstock.com Previous purchases of the Company’s Common and Preferred Stock are set forth in Note 5, on pages 15 and 16. Prospective pur- chases 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, 2012 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.generalamericaninves- tors.com and (3) on the Securities and Exchange Commission’s website at www.sec.gov. In addition to distributing financial statements as of the end of each quarter, General American Investors files a Quarterly Schedule of Portfolio Holdings (Form N-Q) with the Securities and Exchange Commission (“SEC”) as of the end of the first and third calendar quarters. The Company’s Forms N-Q are available at www.generalamericaninvestors.com and on the SEC’s website: www.sec.gov. Also, Forms N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. A copy of the Company’s Form N-Q may be obtained by calling us at 1-800-436-8401. On May 2, 2012, 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 re- lated 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 INDEPENDENT DIRECTORS Arthur G. Altschul, Jr. (48) 1995 PRINCIPAL OCCUPATION DURING PAST 5 YEARS Co-Founder and Chairman Kolltan Pharmaceuticals, Inc. Managing Member Diaz & Altschul Capital Management, LLC (private investment company) Rodney B. Berens (67) 2007 Founding Partner Berens Capital Management, LLC Lewis B. Cullman (94) 1961 Philanthropist CURRENT DIRECTORSHIPS AND AFFILIATIONS Child Mind Institute, Director Delta Opportunity Fund, Ltd., Director Neurosciences Research Foundation, Trustee The Overbrook Foundation, Director Agni Capital Management Ltd., Member of Investment Committee Alfred P. Sloan Foundation, Member of Investment Committee Peterson Institute for International Economics, Member of Investment Committee Pierpont Morgan Library, Trustee and Head of Investment Committee The Woods Hole Oceanographic Institute, Trustee and Member 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 (83) 1976 John D. Gordan, III (67) 1986 Member and Professor (formerly, Chairman) of the Department of Neurobiology The Scripps Research Institute Neurosciences Institute of the Neurosciences Research Foundation Director and President NGN Capital, Chairman, Advisory Board Promosome, LLC, Chairman, Scientific Advisory Board Retired, Senior Counsel (2010-June 2011) Partner (1994-2010) Morgan, Lewis & Bockius LLP (law firm) Betsy F. Gotbaum (74) 2010 New York City’s Public Advocate (2002-December 2009) Sidney R. Knafel (82) 1994 Daniel M. Neidich (63) 2007 D. Ellen Shuman (57) 2004 Lead Independent Director Managing Partner SRK Management Company (private investment company) Chief Executive Officer Dune Real Estate Partners LP (since December 2009) Founding Partner and Co-Chief Executive Officer Dune Capital Management LP (2005-December 2009) Vice President and Chief Investment Officer Carnegie Corporation of New York (1999-July 2011) Raymond S. Troubh (86) 1989 Financial Consultant INTERESTED DIRECTORS Spencer Davidson (70) 1995 Chairman of the Board General American Investors Company, Inc. President and Chief Executive Officer (1995-2012) Jeffrey W. Priest (50) 2013 President of the Company since 2012 and Chief Executive Officer effective 2013 Community Service Society, Trustee Coro Leadership, Trustee Fisher Center for Alzheimer’s Research Foundation, Trustee Learning Leaders, Trustee Visiting Nurse Association of New York, Trustee IGENE Biotechnology, Inc., Director Child Mind Institute, Director Prep for Prep, Director Real Estate Roundtable, Chairman, Board of Directors Urban Land Institute, Trustee American Academy of Arts and Letters, Investment Advisor Bowdoin College, Trustee Brandywine Group Advisors Inc., Consultant and Member of Investment Committee Community Foundation of Greater New Haven, Investment Advisor Corsair Capital, Advisory Board Member Edna McConnell Clark Foundation, Trustee Diamond Offshore Drilling, Inc., Director Gentiva Health Services, Inc., Director The Wendy’s Company, Director Neurosciences Research Foundation, Trustee All Directors serve for a term of one year and are elected by Stockholders at the time of the annual meeting on the second Wednesday in April. The address for each Director is the Company’s office. All information as of February 6, 2013.

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