GAM Holding AG
Annual Report 2013

Plain-text annual report

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 3 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 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. 2013 2012 $1,229,469,746 5,228,019 69,657,472 243,076,683 (11,311,972) $41.07 $35.20 -14.3% $955,417,661 6,973,024 60,458,284 84,267,705 (11,311,972) $32.68 $27.82 -14.9% 29,939,568 $36.04-$28.55 6,984,029 29,233,972 $29.62-$25.37 9,079,151 DIVIDEND SUMMARY (per share) (unaudited) Record Date Payment Date Ordinary Income Long-Term Capital Gain Total Common Stock Nov. 18, 2013 Total from 2013 earnings Dec. 30, 2013 $0.184190 $1.915810 $2.100000 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 Preferred Stock Mar. 7, 2013 Jun. 7, 2013 Sept. 9, 2013 Dec. 9, 2013 Total for 2013 Mar. 7, 2012 Jun. 7, 2012 Sept. 7, 2012 Dec. 7, 2012 Total for 2012 Mar. 25, 2013 Jun. 24, 2013 Sept. 24, 2013 Dec. 24, 2013 Mar. 26, 2012 Jun. 25, 2012 Sept. 24, 2012 Dec. 24, 2012 $.032617 .032617 .032617 .032617 $.130468 $.042434 .042434 .042434 .042434 $.169736 (c) $.339258 .339258 .339258 .339258 $1.357032 $.329441 .329441 .329441 .329441 $1.317764 $.371875 .371875 .371875 .371875 $1.487500 $.371875 .371875 .371875 .371875 $1.487500 (c) Includes short-term gains in the amount of $.011180 per share ($.002795 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 Looking ahead, and notwithstanding current uncer- tainty regarding a number of fiscal policy issues and the withdrawal of QE among others, economic trends have improved modestly. Recent data regarding employ- ment and orders, as well as significant corporate cash balances and authorized but unexecuted share repur- chases of more than $300 billion, suggests that cautious optimism may be warranted for the longer term. As part of an ongoing effort to maximize shareholder value, over 1% of the Company’s shares were repur- chased in 2013 at an average discount to NAV of 14.3%. 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 2013, 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. The Company is pleased to report that on January 1, 2014, Linda J. Genid, an employee of the Company since 1983, was appointed Assistant Corporate Secretary. 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, Jeffrey W. Priest President and Chief Executive Officer January 22, 2014 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 33.3% for the year ended December 31, 2013. The U.S. stock market was up 32.4% 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 34.2% and the discount at which our shares traded to their NAV continued to fluctuate and on December 31, 2013, it was 14.3%. 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 15.1% 15.0% 19.4 7.4 11.1 11.9 13.5 11.9 18.3 7.4 11.1 12.4 13.2 12.4 16.2% 17.9 7.4 9.2 11.1 11.0 9.9 2013 was an extraordinary year for equities with the S&P 500 registering its biggest advance since 1997. Everywhere in the developed world, sizable returns were realized despite continuing muted economic growth. This performance was even more remarkable in light of earnings growth that came in well below initial expectations. With respect to the S&P 500, earnings were supplemented by share repurchases, which totaled over 2% of GDP. Although net income did improve, roughly 60% of the market’s gain re- flected expansion in its price to earnings multiple. Extraordinarily for US equities, no sector registered a negative return and substantial gains were recorded in information technology, healthcare and industri- als. Not even a mid-year jump in yields for ten year US Treasury Notes affected equity markets for long, with rates rising from a depressed 1.5% to nearly 3%. While the economy and the financial markets rarely follow the same road, they intersect often. Over the past year or so, the two diverged with the markets doing well, while the general economy remained lethargic. In 2014, these two roads may converge once again. How that happens is the subject of much debate, but it seems that the financial markets are ex- pecting a general improvement in economic conditions to offset a gentle withdrawal of Federal Reserve support in the form of Quantitative Easing (QE). 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 Mr. Jeffrey W. Priest, has been President of the Company since February 1, 2012 and has been respon- sible for the management of the Company since January 1, 2013 when he was appointed Chief Executive Officer and Portfolio Manager. Mr. Priest joined the Company in 2010 as a senior investment analyst and has spent his entire 28-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. 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 pre- mium over NAV. During 2013, the stock sold at discounts to NAV which ranged from 12.1% (April 4) to 15.4% (August 13). At December 31, the price of the stock was at a discount of 14.3%. Since March 1995, the Board of Directors has authorized the repurchase of Common Stock in the open market when the shares trade at a discount to net asset value of at least 8%. “GAM Pr B” Preferred Stock On September 24, 2003, the Company issued and sold in an underwritten offering 8,000,000 shares of its 5.95% Cumulative Preferred Stock, Series B with a liquidation preference of $25 per share ($200,000,000 in the aggregate). The Preferred Shares are rated “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; higher market volatility for the Common Stockholders may result. The Board of Directors has authorized the re- purchase of up to 1 million Preferred Shares in the open market at prices below $25 per share. To date, 395,313 shares have been re- purchased. 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 1943-2013 (except for the year 1974). (A table listing dividends and distributions paid during the 20-year period 1994-2013 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, 2013 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, 2013 T he investment return for a Common Stockholder of General American Investors (GAM) over the 20 years ended December 31, 2013 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 1994. 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 $9,214 11,169 13,345 19,027 24,985 34,784 41,427 43,221 31,461 39,958 43,471 51,034 59,598 64,795 33,564 45,935 53,395 50,571 60,569 81,307 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 ANNUAL RETURN -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 34.24 CUMULATIVE INVESTMENT ANNUAL RETURN CUMULATIVE INVESTMENT ANNUAL RETURN $9,726 12,019 14,420 19,041 25,732 35,099 41,290 40,795 31,404 40,008 44,157 51,311 57,591 62,204 35,444 46,814 53,982 52,432 61,508 82,009 -2.74% $10,127 1.27% 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 33.33 13,925 17,115 22,819 29,334 35,482 32,257 28,422 22,129 28,449 31,519 33,041 38,215 40,283 25,349 32,054 36,881 37,666 43,689 57,849 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 32.41 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 4 - 2 0 1 3 ) ( 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 SHORT-TERM LONG-TERM RETURN OF YEAR INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL EARNINGS SOURCE SHORT-TERM LONG-TERM RETURN OF YEAR INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL 1994 $.060 .100 1995 .200 1996 .210 1997 .470 1998 .420 1999 .480 2000 .370 2001 2002 .030 .020 2003 — $.030 .050 — — .620 1.550 .640 — — — $1.590 — 2.770 — 2.710 — 2.950 — 4.400 — 4.050 6.160 — 1.370 — — — .330 .590 2004 $.217 .547 2005 .334 2006 .706 2007 .186 2008 .103 2009 .081 2010 .147 2011 .215 2012 .184 2013 — $.041 — .009 — .051 .033 .011 .015 — $.957 1.398 2.666 5.250 .254 .186 .316 .342 1.770 1.916 — — — — — $.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, 2013 STOCKHOLDER RETURN GAM NET ASSET VALUE S&P 500 STOCK INDEX 1 year 34.2% 33.3% 32.4% 5 years 19.4 18.3 17.9 10 years 15 years 7.4 8.2 7.4 8.0 20 years 11.1 11.1 7.4 4.6 9.2 $100000 $75000 $50000 $25000 4 9 9 1 5 9 9 1 6 9 9 1 7 9 9 1 8 9 9 1 9 9 9 1 0 0 0 2 1 0 0 2 2 0 0 2 3 0 0 2 4 0 0 2 5 0 0 2 6 0 0 2 7 0 0 2 8 0 0 2 9 0 0 2 0 1 0 2 1 1 0 2 2 1 0 2 3 1 0 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 3 ( 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 INCREASES NET SHARES TRANSACTED SHARES HELD NEW POSITIONS Cameco Corporation The Dow Chemical Company Intel Corporation ADDITIONS Ariad Pharmaceuticals, Inc. Bond Street Holdings LLC, Class A General Electric Company Merck & Co., Inc. Unilever N.V. DECREASES ELIMINATION Canadian Natural Resources Limited REDUCTIONS The ADT Corporation American Express Company Arch Capital Group Ltd. Everest Re Group, Ltd. JPMorgan Chase & Co. Nelnet, Inc. Platinum Underwriters Holdings, Ltd. The TJX Companies, Inc. Towers Watson & Co. Class A Visteon Corporation Vodafone Group plc ADR Weatherford International Ltd. 100,000 — 573,700 760,000 120,000 75,000 102,191 5,775 196,600 195,000 10,000 25,000 10,000 25,000 15,000 20,000 75,000 18,200 55,000 285,000 268,654 746,038 (b) 378,200 (b) 573,700 1,200,000 795,000 725,000 427,191 734,620 — 117,500 265,000 800,000 230,000 425,000 525,000 335,000 1,344,668 245,798 275,211 238,100 1,456,346 (a) Common shares unless otherwise noted; excludes transactions in Common Stocks - Miscellaneous - Other. (b) Shares purchased in prior period and previously carried under Common Stocks - Miscellaneous - Other. 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, 2013 The diversification of the Company’s net assets applicable to its Common Stock by industry group as of December 31, 2013 is shown in the table. INDUSTRY CATEGORY Financials Banks Diversified Financials Insurance Information Technology Semiconductors & Semiconductor Equipment Software & Services Technology Hardware & Equipment Consumer Discretionary Automobiles & Components Consumer Services Retailing Consumer Staples Food, Beverage & Tobacco Food & Staples Retailing Energy Industrials Capital Goods Commercial & Professional Services $15,988 30,484 72,232 118,704 18,200 17,330 73,801 109,331 31,335 8,679 43,206 83,220 60,773 12,042 72,815 97,176 48,645 36,148 84,793 Health Care Pharmaceuticals, Biotechnology & Life Sciences 59,493 45,583 Miscellaneous** 11,908 Materials 6,090 Telecommunication Services 689,113 100,019 $789,132 Short-Term Securities Total Investments Other Assets and Liabilities - Net Preferred Stock Net Assets Applicable to Common Stock * 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) $24,933 71,021 219,028 314,982 41,768 25,478 123,423 190,669 42,041 13,620 130,920 186,581 116,361 46,953 163,314 142,202 69,121 72,213 141,334 107,792 49,585 16,792 9,360 1,322,611 100,019 1,422,630 (3,043) (190,117) $1,229,470 2.0% 5.8 17.8 25.6 3.4 2.1 10.0 15.5 3.4 1.1 10.7 15.2 9.5 3.8 13.3 11.6 5.6 5.9 11.5 8.8 4.0 1.4 0.7 107.6 8.1 115.7 (0.2) (15.5) 100.0% 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, 2013, shown on pages 8 and 9 includes 58 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 has benefited greatly from the global adoption of mobile data applications. ARCH CAPITAL GROUP LTD. Arch Capital, a Bermuda-based insurer/reinsurer, generates premiums of approximately $3.5 billion and has a high quality, well-reserved A-rated balance sheet. This company has a strong management team that exercises prudent underwriting discipline, efficient expense control, and steady capital management resulting in above-average earnings and book value growth. 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. APPLE INC. Apple designs, manufactures and markets mobile communications and media devices, personal computers and portable digital music players. It also sells device related software, services, peripherals and third-party content, including 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. 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. SHARES VALUE % COMMON NET ASSETS* 1,344,668 $85,695,692 7.0% 700,000 51,975,000 4.2 800,000 47,752,000 3.9 394,500 46,953,390 3.8 67,000 37,588,340 3.1 1,087,100 36,091,720 2.9 EVEREST RE GROUP, LTD. Everest Re is one of the largest independent U.S. property/casualty reinsurers, generates annual premiums of approximately $4.5 billion, has a high quality investment portfolio and a well-reserved A-rated balance sheet. This Bermuda domiciled company has a strong manage- ment team that exercises prudent underwriting discipline and efficient expense control, resulting in above-average earnings and book value growth. HALLIBURTON COMPANY Halliburton offers a broad suite of services and products to customers worldwide for the exploration, development and production of oil and gas. The company has the scale, product depth and technology to provide value-added customer service and produce an attractive long-term return on invested capital. 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, it 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. UNITED TECHNOLOGIES CORPORATION United Technologies provides products and services to the global aerospace and building industries. The company holds a leading position in many of the markets it serves which augments its ability to generate favorable long-term shareholder return via growth, dividends and share repurchases. *Net assets applicable to the Company’s Common Stock. 230,000 35,850,100 2.9 685,000 34,763,750 2.8 262,400 34,747,008 2.8 300,000 34,140,000 2.8 $445,557,000 36.2% 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 3 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 (15.2%) SHARES COMMON STOCKS AUTOMOBILES AND COMPONENTS (3.4%) 1,264,063 Ford Motor Company 275,211 Visteon Corporation (a) CONSUMER SERVICES (1.1%) VALUE (NOTE 1a) $19,504,492 22,537,029 42,041,521 (COST $31,334,689) 750,000 International Game Technology (COST $8,678,620) 13,620,000 RETAILING (10.7%) 284,050 Kohl’s Corporation 460,000 Target Corporation 1,344,668 The TJX Companies, Inc. CONSUMER STAPLES (13.3%) FOOD, BEVERAGE AND TOBACCO (9.5%) 262,400 Diageo plc ADR 450,000 Nestle S.A. 230,000 PepsiCo, Inc. 734,620 Unilever N.V. ENERGY (11.6%) FOOD AND STAPLES RETAILING (3.8%) 394,500 Costco Wholesale Corporation 1,683,269 Alpha Natural Resources, Inc. (a) 331,478 Apache Corporation 746,038 Cameco Corporation 685,000 Halliburton Company 120,000 Occidental Petroleum Corporation 803,803 Ultra Petroleum Corp. (a) 1,456,346 Weatherford International Ltd. (a) FINANCIALS (25.6%) BANKS (2.0%) 795,000 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 (5.8%) 265,000 American Express Company 425,000 JPMorgan Chase & Co. 525,000 Nelnet, Inc. INSURANCE (17.8%) (COST $43,206,265) (COST $83,219,574) (COST $60,773,115) (COST $12,041,935) (COST $72,815,050) (COST $96,794,116) (COST $15,988,426) (COST $30,483,653) 330,492 Aon Corporation 800,000 Arch Capital Group Ltd. (a) 110 Berkshire Hathaway Inc. Class A (a) 230,000 Everest Re Group, Ltd. 53,500 Forethought Financial Group Inc. Class A (a) (d) 365,000 MetLife, Inc. 260,000 PartnerRe Ltd. 335,000 Platinum Underwriters Holdings, Ltd. HEALTH CARE (8.8%) PHARMACEUTICALS, BIOTECHNOLOGY AND LIFE SCIENCES 1,200,000 Ariad Pharmaceuticals, Inc. (a) 100,000 Celgene Corporation (a) 131,535 Cytokinetics, Incorporated (a) 428,600 Gilead Sciences, Inc. (a) 858,979 Idenix Pharmaceuticals, Inc. (a) 427,191 Merck & Co., Inc. 755,808 Pfizer Inc. (COST $72,231,690) (COST $118,703,769) (COST $59,492,394) 16,119,837 29,104,200 85,695,692 130,919,729 186,581,250 34,747,008 32,953,910 19,076,200 29,583,654 116,360,772 46,953,390 163,314,162 12,018,541 28,487,219 15,495,209 34,763,750 11,412,000 17,402,335 22,558,800 142,137,854 11,130,000 997,500 12,806,200 24,933,700 24,043,450 24,854,000 22,123,500 71,020,950 27,724,974 47,752,000 19,569,000 35,850,100 20,510,295 19,680,800 27,411,800 20,528,800 219,027,769 314,982,419 8,184,000 16,896,800 854,977 32,187,860 5,136,694 21,380,910 23,150,399 107,791,640 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 3 - 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 (11.5%) CAPITAL GOODS (5.6%) 725,000 General Electric Company 360,000 Owens Corning (a) 300,000 United Technologies Corporation COMMERCIAL AND PROFESSIONAL SERVICES (5.9%) 117,500 The ADT Corporation 1,087,100 Republic Services, Inc. 245,798 Towers Watson & Co. Class A INFORMATION TECHNOLOGY (15.5%) SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT (3.4%) 286,850 ASML Holding N.V. 573,700 Intel Corporation SOFTWARE AND SERVICES (2.1%) 680,686 Microsoft Corporation TECHNOLOGY HARDWARE AND EQUIPMENT (10.0%) 67,000 Apple Inc. 820,000 Cisco Systems, Inc. 615,000 EMC Corporation 700,000 QUALCOMM Incorporated (COST $48,644,655) (COST $36,148,567) (COST $84,793,222) (COST $18,200,521) $20,321,750 14,659,200 34,140,000 69,120,950 4,755,225 36,091,720 31,366,283 72,213,228 141,334,178 26,877,845 14,890,383 41,768,228 (COST $17,329,639) 25,478,077 37,588,340 18,392,600 15,467,250 51,975,000 123,423,190 190,669,495 (COST $73,800,999) (COST $109,331,159) MATERIALS (1.4%) MISCELLANEOUS (4.0%) TELECOMMUNICATION SERVICES (0.7%) 378,200 The Dow Chemical Company (COST $11,908,071) 16,792,080 Other (e) (COST $45,583,278) 49,584,774 238,100 Vodafone Group plc ADR (COST $6,090,345) 9,359,711 TOTAL COMMON STOCKS (107.6%) (COST $688,730,978) 1,322,547,563 PUT OPTION ENERGY (0.0%) CONTRACTS (100 SHARES EACH) COMMON STOCK/EXPIRATION DATE/EXERCISE PRICE 4,000 Weatherford International Ltd./January 18, 2014/$15 SHARES SHORT-TERM SECURITIES AND OTHER ASSETS 100,018,779 SSgA U.S. Treasury Money Market Fund (a) (8.1%) (COST $100,018,779) 100,018,779 (COST $382,142) 64,000 TOTAL INVESTMENTS (f) (115.7%) Liabilities in excess of receivables and other assets (-0.2%) (COST $789,131,899) PREFERRED STOCK (-15.5%) NET ASSETS APPLICABLE TO COMMON STOCK (100%) 1,422,630,342 (3,043,421) 1,419,586,921 (190,117,175) $1,229,469,746 ADR - American Depository Receipt (a) Non-income producing security. (b) Level 3 fair value measurement, restricted security acquired in five installments as follows: 425,000 shares on 11/4/09, unit cost $20.00 per share; 150,000 shares on 4/2/13, unit cost $14.80 per share; 100,000 shares on 4/11/13, unit cost $14.05 per share; 100,000 shares on 10/4/13, unit cost $15.05 per share; and 20,000 shares on 10/14/13, unit cost $15.00 per share. Fair value is $14.00 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 .91% of net assets. (c) Level 3 fair value measurement, restricted security exchanged from Class A shares on 5/21/12, aggregate cost $1,500,000, unit cost is $20.00 per share and fair value is $13.30 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 evalua- tion of book value per share. Amount represents .08% of net assets. (d) Level 3 fair value measurement, restricted security acquired in two installments as follows: 37,500 shares on 11/3/09, unit cost $200.00 per share and 16,000 shares on 8/4/11, unit cost $203.00 per share. Fair value is $383.37 per share, note 2. Fair valuation until September 2013 was based upon a market approach using valu ation 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 (de creases) in the relative valuation metrics of the peer group companies may result in higher (lower) estimates of fair value. Thereafter fair valuation was based upon a discount to the proposed acquisition price of the company by a third party. As of year end, valuation is based upon discounts applied to the components comprising the total estimated acquisition price of the company. The initial closing took place on 1/3/14 and proceeds of $353.78 per share were collected. The majority of the remaining proceeds are expected to be collected within one year with residual escrow balances paid within approximately three years of the initial closing. Amount represents 1.67% of net assets. (e) Securities which have been held for less than one year, not previously disclosed, and not restricted. (f) At December 31, 2013, the cost of investments for Federal income tax purposes was $789,131,899; aggregate gross unrealized appreciation of $637,902,284; aggregate gross unrealized depreciation of $4,403,841 and net unrealized appreciation of $633,498,443. 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 INVESTMENTS, AT VALUE (NOTE 1a) Common stocks (cost $688,730,978) Purchased Option (cost $382,142) Money market fund (cost $100,018,779) Total investments (cost $789,131,899) RECEIVABLES AND OTHER ASSETS Receivable for written option Dividends, interest and other receivables Qualified pension plan asset, net excess funded (note 7) Prepaid expenses, fixed assets and other assets TOTAL ASSETS LIABILITIES Accrued preferred stock dividend not yet declared Outstanding option written, at value (premium received $229,628) Accrued supplemental pension plan liability (note 7) Accrued supplemental thrift plan liability (note 7) Accrued compensation payable to officers and employees 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 - 29,939,568 (note 5) NET ASSET VALUE PER COMMON SHARE NET ASSETS APPLICABLE TO COMMON STOCK Common Stock, 29,939,568 shares at par value (note 5) Additional paid-in capital (note 5) Undistributed realized gain on securities sold Undistributed net investment loss (note 5) Accumulated other comprehensive loss (note 7) Unallocated distributions on Preferred Stock Unrealized appreciation on investments and options written NET ASSETS APPLICABLE TO COMMON STOCK DECEMBER 31, 2013 $1,322,547,563 64,000 100,018,779 1,422,630,342 161,738 1,480,111 5,578,192 1,505,011 1,431,355,394 219,955 230,550 4,627,182 2,338,841 3,673,500 678,445 11,768,473 190,117,175 $1,229,469,746 $41.07 $29,939,568 564,558,132 3,710,263 (191,539) (1,824,244) (219,955) 633,497,521 $1,229,469,746 S T A T E M E N T O F O P T I O N S W R I T T E N CONTRACTS CALL OPTIONS (100 SHARES EACH) COMMON STOCK/EXPIRATION DATE/EXERCISE PRICE VALUE (NOTE 1a) CONSUMER DISCRETIONARY (0.0%) AUTOMOBILES AND COMPONENTS ENERGY (0.0%) 250 950 (see notes to financial statements) Visteon Corporation/February 22, 2014/$75 Weatherford International Ltd./February 22, 2014/$17 (PREMIUMS RECEIVED $229,628) $212,500 18,050 $230,550 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 $542,797) TOTAL INCOME EXPENSES Investment research Administration and operations Office space and general Directors’ fees and expenses Auditing and legal fees Transfer agent, custodian and registrar fees and expenses Miscellaneous taxes Stockholders’ meeting and reports TOTAL EXPENSES NET INVESTMENT INCOME YEAR ENDED DECEMBER 31, 2013 $19,284,397 19,284,397 7,651,058 3,756,624 1,730,929 242,745 225,000 206,260 166,373 77,389 14,056,378 5,228,019 Realized Gain And Change In Unrealized Appreciation On Investments (Notes 1, 3 and 4) Net realized gain on investments: Securities transactions Written options transactions (notes 1b and 4) Net increase in unrealized appreciation NET INVESTMENT INCOME, GAINS AND APPRECIATION ON INVESTMENTS DISTRIBUTIONS TO PREFERRED STOCKHOLDERS 68,658,311 999,161 69,657,472 243,076,683 317,962,174 (11,311,972) INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $306,650,202 (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 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 INCREASE IN NET ASSETS RESULTING FROM OPERATIONS OTHER COMPREHENSIVE INCOME (LOSS) Funded status of defined benefit plans (note 7) DISTRIBUTIONS TO COMMON STOCKHOLDERS YEAR ENDED DECEMBER 31, 2013 2012 $5,228,019 69,657,472 243,076,683 317,962,174 $6,973,024 60,458,284 84,267,705 151,699,013 (992,168) — (10,319,804) (11,311,972) (1,205,766) (85,020) (10,021,186) (11,311,972) 306,650,202 140,387,041 5,948,555 (87,605) From net investment income From short-term capital gains From long-term capital gains (5,382,759) — (55,987,513) (6,109,048) (430,801) (50,405,654) DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (61,370,272) (56,945,503) CAPITAL SHARE TRANSACTIONS (NOTE 5) Value of Common Shares issued in payment of dividends and distributions Cost of Common Shares purchased 35,871,304 (13,047,704) 21,554,674 (36,028,316) INCREASE (DECREASE) IN NET ASSETS - CAPITAL TRANSACTIONS 22,823,600 (14,473,642) NET INCREASE IN NET ASSETS 274,052,085 68,880,291 NET ASSETS APPLICABLE TO COMMON STOCK BEGINNING OF YEAR 955,417,661 886,537,370 END OF YEAR (including undistributed net investment income (loss) of ($191,539) and $947,161, respectively) $1,229,469,746 $955,417,661 (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, 2013. 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: 2013 2012 2011 2010 2009 $32.68 .17 $29.78 .24 $31.26 .18 $27.50 .19 $21.09 .11 10.51 .20 10.88 5.05 — 5.29 (.68) (.10) (.60) 4.37 — 4.56 6.94 .07 7.12 (.04) (.04) (.11) (.07) (.11) — (.01) (.01) (.03) (.05) (.35) — (.39) 10.49 (.34) — (.39) 4.90 (.26) — (.38) (.98) (.27) — (.37) 4.19 (.19) (.01) (.36) 6.76 Dividends from net investment income (.18) (.21) (.15) (.08) (.10) Distributions from net short-term capital gains Distributions from net long-term capital gains Distributions from return of capital — (.02) (.01) (.03) (1.92) — (2.10) (1.77) — (2.00) (.34) — (.50) (.32) — (.43) (.05) (.19) (.01) (.35) Net asset value, end of year Per share market value, end of year $41.07 $35.20 $32.68 $27.82 $29.78 $24.91 $31.26 $26.82 $27.50 $23.46 TOTAL INVESTMENT RETURN - Stockholder Return, based on market price per share RATIOS AND SUPPLEMENTAL DATA Net assets applicable to Common Stock, 34.24% 19.77% (5.29%) 16.24% 36.86% end of year (000’s omitted) $1,229,470 $955,418 $886,537 $950,941 $864,323 Ratio of expenses to average net assets applicable to Common Stock 1.27% 1.67% 1.39% 1.54% 1.93% Ratio of net income to average net assets applicable to Common Stock Portfolio turnover rate 0.47% 17.12% 0.74% 9.56% 0.56% 11.17% 0.66% 18.09% 0.46% 24.95% 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) $190,117 747% $190,117 603% $190,117 566% $190,117 $190,117 555% 600% $25.00 $25.30 $25.00 $25.54 $25.00 $25.47 $25.00 $24.95 $25.00 $24.53 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, 2013: Assets Common stocks Purchased Option Money market fund Total Liabilities Options Written Level 1 $1,289,909,768 64,000 100,018,779 $1,389,992,547 ($230,550) Level 2 — — — — Level 3 $32,637,795 — — $32,637,795 Total $1,322,547,563 64,000 100,018,779 $1,422,630,342 ($230,550) The aggregate value of Level 3 portfolio investments changed during the year ended December 31, 2013 as follows: Change in portfolio valuations using significant unobservable inputs Fai r value at December 31, 2012 Purchases Net change in unrealized appreciation on investments Fair value at December 31, 2013 Level 3 $21,218,125 5,428,250 5,991,420 $32,637,795 The increase in net unrealized appreciation included in the results of operations attributable to Level 3 assets held at December 31, 2013 and reported within the caption Net change in unrealized appreciation in the Statement of Operations: $5,991,420 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, 2013. 3. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (other than short-term securities and options) during 2013 amounted to $202,444,700 and $241,495,826, 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, 2013 were as follows: Options outstanding, December 31, 2012 Options written Options exercised Options terminated in closing purchase transaction Options outstanding, December 31, 2013 COVERED CALLS CONTRACTS 3 00 4,250 0 (3,350) 1,200 PREMIUMS $104,999 447,590 0 (322,961) $229,628 COLLATERALIZED PUTS CONTRACTS 0 6,153 (1,375) (4,778) 0 PREMIUMS $0 1,674,723 (451,255) (1,223,468) $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, 29,939,568 shares were issued and outstanding; 8, 000, 000 Preferred Shares were originally issued and 7, 604, 687 were outstanding on December 31, 2013. 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 allocates 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 repre- sent 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. 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 fore- going 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 2013 and 2012 were as follows: SHARES AMOUNT 2013 2012 2013 2012 Shares issued in payment of dividends and distributions (includes 1,090,772 and 766,116 shares issued from treasury, respectively) Increase in paid-in capital Total increase Shares purchased (at an average discount from net asset value of 14.3% and 14.5%, respectively) Decrease in paid-in capital Total decrease Net increase (decrease) 1,090,772 766,116 $1,090,772 34,780,532 35,871,304 $766,116 20,788,558 21,554,674 (385,176) (1,298,533) 705,596 (532,417) (385,176) (12,662,528) (13,047,704) $22,823,600 (1,298,533) (34,729,783) (36,028,316) ($14,473,642) At December 31, 2013, the Company held in its treasury 2,041,304 shares of Common Stock with an aggregate cost of $57,970,489. The tax basis distribution during the year ended December 31, 2013 is as follows: ordinary distributions of $6,746,658 and long-term capital gains distributions of $65,935,586. As of December 31, 2013, distributable earnings on a tax basis included $3,963,127 from undistributed net long-term capital gains and $633,497,521 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 dur- ing the year ended December 31, 2013. As a result, undistributed net investment loss was decreased by $8,208 and additional paid-in capital was decreased by $1,014 and undistributed net realized gain on securities sold was decreased by $7,194. As of December 31, 2013 the Company had straddle loss deferrals of $252,864. 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, 2013 to its officers (identified on page 20) amounted to $6,897,833 of which $3,370,000 was payable as of year end. 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 2013 was $932,301. The qualified thrift plan acquired 54,684 shares, sold 28,800 shares and distrib- uted 25,719 shares of the Company’s Common Stock during the year ended December 31, 2013. It held 485,001 shares of the Company’s Common Stock at December 31, 2013. 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 investment policy of the pension plan is to invest not less than 80% of its assets, under ordinary conditions, in equity securities and the balance in fixed income securities. The investment strategy is to invest in a portfolio of diversified registered investment funds (open-end and exchange traded) and an unregistered partnership. Open-end funds and the unregistered partnership are valued at net asset value based upon the fair market value of the underlying investment portfolios. Exchange traded funds are valued based upon their closing market price. 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 gain 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, 2013 (MEASUREMENT DATE) QUALIFIED SUPPLEMENTAL PLAN PLAN TOTAL $14,408,047 338,953 568,078 (730,777) (1,074,745) 13,509,556 15,403,048 4,415,477 — (730,777) 19,087,748 $5,578,192 $5,016,410 115,857 196,537 (272,034) (429,588) 4,627,182 — — 272,034 (272,034) — ($4,627,182) $19,424,457 454,810 764,615 (1,002,811) (1,504,333) 18,136,738 15,403,048 4,415,477 272,034 (1,002,811) 19,087,748 $951,010 Accumulated benefit obligation at end of year $12,620,383 $4,334,264 $16,954,647 CHANGE IN FUNDED STATUS: Noncurrent benefit asset LIABILITIES Current benefit liability Noncurrent benefit liability BEFORE $995,001 ADJUSTMENTS $4,583,191 AFTER $5,578,192 (274,598) (4,741,810) (23,522) 412,750 (298,120) (4,329,060) ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) 7,772,799 (5,948,555) 1,824,244 AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME CONSIST OF: Net actuarial (gain) loss Prior service cost $7,619,033 153,766 $7,772,799 ($5,901,966) (46,589) ($5,948,555) $1,717,067 107,177 $1,824,244 WEIGHTED-AVERAGE ASSUMPTIONS AS OF DECEMBER 31, 2013 AND FOR DETERMINING NET PERIODIC BENEFIT COST FOR THE YEAR ENDED DECEMBER 31, 2013: Discount rate Expected return on plan assets* Salary scale assumption 3.80% 7.50% 4.25% 3.80% N/A 4.25% *Determined based upon a discount to the long-term average historical performance of the plan. 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 $338,953 568,078 (986,483) 45,832 886,945 $853,325 $115,857 196,537 — 757 81,693 $394,844 $454,810 764,615 (986,483) 46,589 968,638 $1,248,169 PLAN ASSETS The Company’s qualified pension plan asset allocation by asset class at December 31, 2013, is as follows: ASSET CATEGORY Equity securities Debt securities Money market fund Total LEVEL 1 $15,930,673 282,077 34,049 $16,246,799 LEVEL 2 $2,840,949 — — $2,840,949 LEVEL 3 — — — — TOTAL $18,771,622 282,077 34,049 $19,087,748 EXPECTED CASH FLOWS QUALIFIED PLAN SUPPLEMENTAL PLAN Expected Company contributions for 2014 Expected benefit payments: 2014 2015 2016 2017 2018 2019-2023 — $760,683 798,702 810,719 813,796 820,666 4,252,209 $298,120 $298,120 297,089 294,996 285,025 279,684 1,276,304 TOTAL $298,120 $1,058,803 1,095,791 1,105,715 1,098,821 1,100,350 5,528,513 The estimated amount that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2014 is $438,397. 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 provided for aggregate rental payments of approximately $10, 755, 000, net of construction credits. The lease agreement con- tains clauses whereby the Company receives free rent for a specified number of months and credit towards construction of office improvements, and incurs escalations annually relating to operating costs and real property taxes and to annual rent charges begin- ning in February 2013. The Company has the option to renew the lease after February 2018 for five years at market rates. Rental expense approximated $1, 110,300 for the year ended December 31, 2013. Minimum rental commitments under the operating lease are approximately $1, 183, 000 per annum in 2014 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. (the “Company”) as of December 31, 2013, 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 high- lights are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial state ments and finan- cial 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, 2013, 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, 2013, 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 7, 2014 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 Sally A. Lynch, Ph.D. (54) Vice-President of the 1997 Company since 2006, securities analyst (biotechnology industry) Jeffrey W. Priest (51) 2010 Andrew V. Vindigni (54) 1988 Eugene S. Stark (55) 2005 Craig A. Grassi (45) 1991 President of the Company since 2012 and Chief Executive Officer since 2013, Managing Member and President, Amajac Capital Management, LLC (1999-2010) Senior Vice-President of the Company since 2006, Vice-President 1995-2006 securities analyst (financial services and consumer non-durables industries) Michael Robinson (41) 2006 Diane G. Radosti (61) 1980 Vice-President, Administration Maureen E. LoBello (63) of the Company and Principal Financial Officer since 2005, Chief Compliance Officer since 2006 1992 Linda J. Genid (55) 1983 Vice-President since 2013, Assistant Vice-President of the Company 2005-2012 securities analyst and information technology Vice-President of the Company since 2010, securities analyst (general industries) Treasurer of the Company since 1990, Principal Accounting Officer since 2003 Corporate Secretary since 2013, Assistant Corporate Secretary 2005-2012 benefits administration Assistant Corporate Secretary effective 2014 network administration All officers serve for a term of one year and are elected by the Board of Directors at the time of its annual organization meeting in April. The address for each officer is the Company’s office. All information is as of February 7, 2014. 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, 2013 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, 2013, 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. (49) 1995 Rodney B. Berens (68) 2007 PRINCIPAL OCCUPATION DURING PAST 5 YEARS Co-Founder and Chairman Kolltan Pharmaceuticals, Inc. Managing Member Diaz & Altschul Capital Management, LLC (private investment company) Founding Partner Berens Capital Management, LLC (investment management) Lewis B. Cullman (95) 1961 Philanthropist Gerald M. Edelman (84) 1976 Member and Professor The Scripps Research Institute John D. Gordan, III (68) 1986 Attorney Beazley USA Services, Inc. (2013) (insurance) Senior Counsel (2010-2011) Partner (1994-2010) (Retired) Morgan, Lewis & Bockius LLP Betsy F. Gotbaum (75) 2010 New York City’s Public Advocate (2002-2009) 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 Pierpont Morgan Library, Trustee and Chairman of Investment Sub-Committee The Woods Hole Oceanographic Institute, Trustee and Member of Investment Committee Chess-in-the-Schools, Chairman 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 Neurosciences Institute of the Neurosciences Research Foundation, Director and President NGN Capital, Chairman, Advisory Board Promosome, LLC, Chairman, Scientific Advisory Board 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 Sidney R. Knafel (83) 1994 Lead Independent Director IGENE Biotechnology, Inc., Director Daniel M. Neidich (64) 2007 Managing Partner SRK Management Company (private investment company) Chief Executive Officer Dune Real Estate Partners LP (since 2009) Founding Partner and Co-Chief Executive Officer Dune Capital Management LP (2005-2009) Raymond S. Troubh (87) 1989 Financial Consultant INTERESTED DIRECTORS Spencer Davidson (71) 1995 Chairman of the Board General American Investors Company, Inc. President and Chief Executive Officer (1995-2012) Jeffrey W. Priest (51) 2013 President of the Company since 2012 and Chief Executive Officer since 2013 Child Mind Institute, Director Prep for Prep, Director Real Estate Roundtable, Director (formerly Chairman) 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. The address for each Director is the Company’s office. All information is as of February 7, 2014. 

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