GAM Holding AG
Annual Report 2014

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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 4 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. 2014 2013 $1,227,899,705 9,735,291 102,101,749 (27,988,358) (11,311,972) $1,229,469,746 5,228,019 69,657,472 243,076,683 (11,311,972) $39.77 $35.00 -12.0% $41.07 $35.20 -14.3% 30,871,844 $38.27-$32.31 9,864,111 29,939,568 $36.04-$28.55 6,984,029 DIVIDEND SUMMARY (per share) (unaudited) Record Date Payment Date Ordinary Income Long-Term Capital Gain Total Common Stock Nov. 17, 2014 Total from 2014 earnings Dec. 30, 2014 Nov. 18, 2013 Total from 2013 earnings Dec. 30, 2013 $0.574766 (a) $2.925234 $3.500000 $0.184190 $1.915810 $2.100000 (a) Includes short-term gains in the amount of $.253614. Preferred Stock Mar. 7, 2014 Jun. 9, 2014 Sept. 8, 2014 Dec. 8, 2014 Total for 2014 Mar. 7, 2013 Jun. 7, 2013 Sept. 9, 2013 Dec. 9, 2013 Total for 2013 Mar. 24, 2014 Jun. 24, 2014 Sept. 24, 2014 Dec. 24, 2014 Mar. 25, 2013 Jun. 24, 2013 Sept. 24, 2013 Dec. 24, 2013 $.061069 .061069 .061069 .061069 $.244276 (b) $.032617 .032617 .032617 .032617 $.130468 $.310806 .310806 .310806 .310806 $1.243224 $.339258 .339258 .339258 .339258 $1.357032 $.371875 .371875 .371875 .371875 $1.487500 $.371875 .371875 .371875 .371875 $1.487500 (b) Includes short-term gains in the amount of $.107786 per share ($.0269465 per quarter). General American Investors Company, Inc. 100 Park Avenue, New York, NY 10017 (212) 916-8400 (800) 436-8401 E-mail: InvestorRelations@gainv.com www.generalamericaninvestors.com T O T H E S T O C K H O L D E R S G e n e r a l A m e r i c a n I n v e s t o r s 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 6.5% for the year ended December 31, 2014. The U.S. stock market was up 13.7% for the year, as measured by our benchmark, the Standard & Poor’s 500 Stock Index (in- cluding income). The return to our Common Stockholders increased by 9.3% and the discount at which our shares traded to their NAV continued to fluctuate and on December 31, 2014, it was 12.0%. The table that follows provides a comprehensive presentation of our performance and compares our returns on an annual- ized basis with the S&P 500. Years Stockholder Return (Market Value) NAV Return S&P 500 3 5 10 20 30 40 50 20.7% 18.5% 14.1 7.4 12.0 12.5 14.8 11.8 13.3 7.1 11.6 12.9 14.5 12.0 20.4% 15.5 7.6 9.8 11.3 12.2 9.9 U.S. equity markets enjoyed a sixth year of positive returns, though with more dispersion in performance among capital- izations than in prior years. The S&P 500 recorded a double digit total return, while the Russell 2000 Small Capitalization Index returned less than half as much, due in part to relative- ly higher starting valuations among smaller company shares. Most international equity markets recorded modest returns in local currency, with the exception of a few emerging mar- kets which had negative returns. In U.S. dollar terms, those gains were reduced to losses in most cases. Much of our commentary during 2014 focused on the persis- tent divergence between the U.S. financial economy’s strong performance and our real economy’s continued modest growth rate. We also noted slowing economic growth in our trading partners, with Europe and Japan now teetering on the brink of recession and deflation while Asia is experiencing moderating gains, particularly in China. The property boom in China appears to be unwinding as recent data suggest 66 of 68 regional markets have recorded median property price de- clines year over year. Most developed nations have some form of monetary or fiscal stimulus policies ongoing. Bank deposit rates in many European countries are at zero interest rate or worse, negative interest rates. In other words, depositors are charged interest for deposits in their bank accounts. In con- junction with very low local sovereign bond yields, depositors have been pushed to seek returns elsewhere which has led to the U.S. Dollar’s significant increase in value relative to the currencies of our trading partners and likewise led those and other investors to purchase U.S. Treasuries, reducing yields to their lowest level in decades. The European central bank is broadly anticipated to adopt a more aggressive form of intervention at its next meeting in January. Its recent efforts have been less than effective due to the structure of debt markets in Europe and limitations on the types of debt that could be purchased. In contrast to Europe, the U.S. experienced an improving GDP growth rate in 2014. Our labor market continues to im- prove with December’s monthly employment data yielding 242,000 jobs and unemployment at 5.6%. The economy has recaptured all jobs lost during the financial crisis, though the number is not truly comparable as the labor participa- tion rate remains at a historically depressed level. Weekly hours worked have improved year over year and though wage gains continue to be muted, they have approximated the inflation rate. The significant decline in energy prices and resulting reductions in oil field operations may depress both wages and job growth over the near term as companies in the oil service and supply industries adjust capacity and production with cost cutting measures. Capital expendi- tures may decline as a significant amount of new equipment spending over the past few years was derived from the en- ergy industry. Much of these near term losses may be offset by increases in employment in those industries that benefit from lower energy and commodity costs. Consumers stand to benefit substantively from lower fuel costs, the rising pur- chasing power of the U.S. Dollar and low interest rates. On a valuation basis, the U.S. equity market continues to be relatively attractive when compared to bonds. The S&P 500 dividend yield is higher than the U.S. Treasury 10 year note and the median dividend payout ratio is only 35%. Large capitalized equities still have a valuation edge to small caps, but with more foreign revenue and earnings those advan- tages appear smaller. Cash flow and earnings quality have been relatively strong. In sum, low interest rates, moderate economic growth, muted labor costs and, more recently, lower raw material costs have coalesced to provide U.S. companies with his- torically high operating margins despite modest revenue growth. Managements have been able to employ low cost debt and free cash flow to benefit shareholders through share repurchases, dividend increases and acquisitions. It seems reasonable to assume that companies will continue this strategy to enhance shareholder value provided the U.S. continues on its current economic trajectory. Despite in- creased short-term volatility, we remain positive on the long term prospects for U.S. equities. As part of an ongoing effort to maximize shareholder value, over 1% of the Company’s shares were repurchased in 2014 at an average discount to NAV of 14.4%. 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 2014, the Board of Directors renewed author- ity 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 liq- uidation preference of $25.00 per share. The Company is pleased to report that on January 1, 2015, Anang Majmudar, an employee of the Company since 2012, was appointed Vice-President. Information about the Company, including our investment objectives, operating policies and procedures, investment results, record of dividend payments, financial 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 21, 2015 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, 2014 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 29-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 invest- ment companies, they occasionally sell at a premium over NAV. During 2014, the stock sold at discounts to NAV which ranged from 12.0% (December 31) to 15.7% (June 9). At December 31, the price of the stock was at a discount of 12.0%. 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 1943-2014 (except for the year 1974). (A table listing dividends and distributions paid during the 20-year period 1995-2014 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, 2014 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, 2014 T he investment return for a Common Stockholder of General American Investors (GAM) over the 20 years ended December 31, 2014 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 1995. 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 following tables and graph 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 $12,122 ANNUAL RETURN CUMULATIVE INVESTMENT ANNUAL RETURN CUMULATIVE INVESTMENT ANNUAL RETURN 21.22% $12,358 23.58% $13,750 37.50% 14,483 20,650 27,116 37,751 44,961 46,908 34,144 43,367 47,179 55,388 64,682 70,322 36,427 49,854 57,950 54,885 65,735 88,243 96,467 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 9.32 14,826 19,578 26,457 36,088 42,453 41,944 32,288 41,136 45,401 52,756 59,214 63,957 36,442 48,133 55,502 53,910 63,241 84,320 89,767 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 6.46 16,900 22,533 28,966 35,037 31,852 28,065 21,852 28,092 31,124 32,627 37,736 39,778 25,032 31,653 36,420 37,196 43,143 57,126 64,947 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 13.69 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 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 5 - 2 0 1 4 ) ( 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 1995 $.100 .200 1996 .210 1997 .470 1998 .420 1999 .480 2000 2001 .370 2002 .030 .020 2003 .217 2004 $.030 .050 — — .620 1.550 .640 — — — — $2.770 — 2.710 — 2.950 — 4.400 — 4.050 6.160 — 1.370 — — — — .330 .590 .957 2005 $.547 .334 2006 .706 2007 .186 2008 .103 2009 .081 2010 .147 2011 .215 2012 .184 2013 .321 2014 $.041 — .009 — .051 .033 .011 .015 — .254 $1.398 2.666 5.250 .254 .186 .316 .342 1.770 1.916 2.925 — — — — $.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, 2014 STOCKHOLDER RETURN GAM NET ASSET VALUE S&P 500 STOCK INDEX 1 year 9.3% 6.5% 13.7% 5 years 14.1 13.3 15.5 10 years 15 years 7.4 6.5 7.1 6.3 20 years 12.0 11.6 7.6 4.2 9.8 $100000 $75000 $50000 $25000 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 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 4 ( 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 ADDITIONS Anadarko Petroleum Corporation Ensco plc - Class A Gilead Sciences, Inc. Occidental Petroleum Corporation Owens Corning Repros Therapeutics Inc. Towers Watson & Co. Class A DECREASES REDUCTIONS American Express Company Apache Corporation Apple Inc. Costco Wholesale Corporation Everest Re Group, Ltd. JPMorgan Chase & Co. Kohl's Corporation Platinum Underwriters Holdings, Ltd. Target Corporation 25,000 15,000 15,000 10,000 15,000 58,900 18,000 10,000 30,000 15,000 86,700 10,000 10,000 25,000 10,000 88,700 140,000 355,000 413,600 155,000 375,000 508,375 273,798 245,000 301,478 414,000 307,800 135,000 370,000 259,050 325,000 371,300 (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, 2014 The diversification of the Company’s net assets applicable to its Common Stock by industry group as of December 31, 2014 is shown in the table. INDUSTRY CATEGORY Financials Banks Diversified Financials Insurance Information Technology Semiconductors & Semiconductor Equipment Software & Services Technology Hardware & Equipment Consumer Staples Food, Beverage & Tobacco Food & Staples Retailing Consumer Discretionary Automobiles & Components Consumer Services Retailing Industrials Capital Goods Commercial & Professional Services Transportation $13,662 27,337 56,136 97,135 24,320 27,810 67,797 119,927 70,473 9,322 79,795 16,175 7,979 37,092 61,246 54,010 32,629 1,569 88,208 Health Care Pharmaceuticals, Biotechnology & Life Sciences 62,843 121,762 Energy 41,178 Telecommunication Services 33,313 Miscellaneous** 10,566 Materials 715,973 104,227 $820,200 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) $32,211 70,273 192,715 295,199 57,951 45,794 131,762 235,507 120,469 43,631 164,100 19,593 11,903 129,429 160,925 71,051 72,729 1,808 145,588 122,474 116,323 40,390 24,548 15,339 1,320,393 104,227 1,424,620 (6,603) (190,117) $1,227,900 2.6% 5.7 15.7 24.0 4.7 3.8 10.7 19.2 9.8 3.6 13.4 1.6 1.0 10.5 13.1 5.8 5.9 0.1 11.8 10.0 9.5 3.3 2.0 1.2 107.5 8.5 116.0 (0.5) (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, 2014, 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. 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 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. ARCH CAPITAL GROUP LTD. Arch Capital, a Bermuda-based insurer/reinsurer, generates premiums of approximately $4.5 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. 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. 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. GILEAD SCIENCES, INC. Gilead Sciences is a U.S. based biotechnology company that discovers, develops and commercializes therapeutics. Originally founded to focus predominantly on antiviral drugs to treat patients with HIV, Hepatitis B, CMV, influenza and, most recently Hepatitis C, the company has expanded its reach into cardiopulmonary medicine and oncology. 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 value via growth, dividends and share repurchases. NESTLÉ S.A. Nestlé 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. MICROSOFT CORPORATION Microsoft is a leading global provider of software services and hardware devices. The company produces the Windows operating system, Office productivity suite, Azure public cloud service, and Xbox gaming console. *Net assets applicable to the Company’s Common Stock. SHARES VALUE % COMMON NET ASSETS* 1,244,668 $85,359,331 6.9% 414,000 45,697,320 3.7 750,000 44,325,000 3.6 307,800 43,630,650 3.6 1,037,100 41,743,275 3.4 536,200 39,855,746 3.2 413,600 38,985,936 3.2 300,000 34,500,000 2.8 450,000 33,019,011 2.7 680,686 31,617,865 2.6 $438,734,134 35.7% 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 4 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 (13.1%) SHARES COMMON STOCKS AUTOMOBILES AND COMPONENTS (1.6%) 1,264,063 Ford Motor Company CONSUMER SERVICES (1.0%) VALUE (NOTE 1a) (COST $16,174,723) $19,592,977 690,000 International Game Technology (COST $7,978,541) 11,902,500 CONSUMER STAPLES (13.4%) ENERGY (9.5%) RETAILING (10.5%) 259,050 Kohl’s Corporation 371,300 Target Corporation 1,244,668 The TJX Companies, Inc. FOOD, BEVERAGE AND TOBACCO (9.8%) 196,039 Danone 237,400 Diageo plc ADR 450,000 Nestlé S.A. 195,000 PepsiCo, Inc. 734,620 Unilever N.V. FOOD AND STAPLES RETAILING (3.6%) 307,800 Costco Wholesale Corporation 2,133,269 Alpha Natural Resources, Inc. (a) 140,000 Anadarko Petroleum Corporation 301,478 Apache Corporation 1,232,344 Cameco Corporation 355,000 Ensco plc - Class A 585,000 Halliburton Company 155,000 Occidental Petroleum Corporation 803,803 Ultra Petroleum Corp. (a) 470,000 Weatherford International plc (a) FINANCIALS (24.0%) BANKS (2.6%) 670,000 FCB Financial Holdings, Inc. (a) 125,000 M&T Bank Corporation DIVERSIFIED FINANCIALS (5.7%) 245,000 American Express Company 370,000 JPMorgan Chase & Co. 525,000 Nelnet, Inc. INSURANCE (15.7%) 293,492 Aon plc 750,000 Arch Capital Group Ltd. (a) 110 Berkshire Hathaway Inc. Class A (a) 135,000 Everest Re Group, Ltd. 365,000 MetLife, Inc. 255,000 PartnerRe Ltd. 325,000 Platinum Underwriters Holdings, Ltd. HEALTH CARE (10.0%) PHARMACEUTICALS, BIOTECHNOLOGY AND LIFE SCIENCES 1,200,000 Ariad Pharmaceuticals, Inc. (a) 200,000 Celgene Corporation (a) 413,600 Gilead Sciences, Inc. (a) 427,191 Merck & Co., Inc. 755,808 Pfizer Inc. 508,375 Repros Therapeutics Inc. (a) (COST $36,741,888) (COST $60,895,152) (COST $70,472,922) (COST $9,322,526) (COST $79,795,448) (COST $121,761,691) (COST $13,662,263) (COST $27,336,503) (COST $56,136,033) (COST $97,134,799) (COST $62,843,407) 15,812,412 28,185,383 85,359,331 129,357,126 160,852,603 12,914,865 27,084,966 33,019,011 18,439,200 29,010,981 120,469,023 43,630,650 164,099,673 3,562,559 11,550,000 18,893,626 20,222,765 10,632,250 23,008,050 12,494,550 10,578,047 5,381,500 116,323,347 16,508,800 15,702,500 32,211,300 22,794,800 23,154,600 24,323,250 70,272,650 27,831,846 44,325,000 24,860,000 22,990,500 19,742,850 29,103,150 23,861,500 192,714,846 295,198,796 8,244,000 22,372,000 38,985,936 24,260,177 23,543,419 5,068,499 122,474,031 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 4 - 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 (11.8%) CAPITAL GOODS (5.8%) 915,000 General Electric Company 375,000 Owens Corning 300,000 United Technologies Corporation COMMERCIAL AND PROFESSIONAL SERVICES (5.9%) 1,037,100 Republic Services, Inc. 273,798 Towers Watson & Co. Class A TRANSPORTATION (0.1%) 72,500 Hertz Global Holdings, Inc. (a) INFORMATION TECHNOLOGY (19.2%) SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT (4.7%) 256,850 ASML Holding N.V. 833,700 Intel Corporation SOFTWARE AND SERVICES (3.8%) 680,686 Microsoft Corporation 338,654 Synchronoss Technologies, Inc. (a) TECHNOLOGY HARDWARE AND EQUIPMENT (10.7%) 414,000 Apple Inc. 1,000,000 Cisco Systems, Inc. 615,000 EMC Corporation 536,200 QUALCOMM Incorporated (COST $54,009,596) (COST $32,629,367) $23,122,050 13,428,750 34,500,000 71,050,800 41,743,275 30,985,720 72,728,995 (COST $1,569,031) (COST $88,207,994) 1,808,150 145,587,945 (COST $24,319,428) (COST $27,810,203) (COST $67,731,344) (COST $119,860,975) 27,696,136 30,254,973 57,951,109 31,617,865 14,176,056 45,793,921 45,697,320 27,815,000 18,290,100 39,855,746 131,658,166 235,403,196 MATERIALS (1.2%) MISCELLANEOUS (2.0%) TELECOMMUNICATION SERVICES (3.3%) 336,300 The Dow Chemical Company (COST $10,566,260) 15,338,643 Other (b) (COST $33,312,853) 24,548,381 459,702 Verizon Communications Inc. 552,688 Vodafone Group plc ADR (COST $41,177,835) 21,504,860 18,885,349 40,390,209 TOTAL COMMON STOCKS (107.5%) (COST $715,556,414) 1,320,216,824 PUT OPTIONS (100 SHARES EACH) COMMON STOCK/EXPIRATION DATE/EXERCISE PRICE CONTRACTS CONSUMER DISCRETIONARY RETAILING INFORMATION TECHNOLOGY TECHNOLOGY HARDWARE AND EQUIPMENT 1,900 Target Corporation/January 17, 2015/$72.50 (COST $350,577) 72,200 200 Apple Inc./January 17, 2015/$115 (COST $65,875) (COST $416,452) 104,000 176,200 SHARES SHORT-TERM SECURITIES AND OTHER ASSETS 104,226,944 SSgA U.S. Treasury Money Market Fund (a) (8.5%) (COST $104,226,944) 104,226,944 TOTAL INVESTMENTS (c) (116.0%) Liabilities in excess of receivables and other assets (-0.5%) (COST $820,199,810) PREFERRED STOCK (-15.5%) NET ASSETS APPLICABLE TO COMMON STOCK (100%) 1,424,619,968 (6,603,088) 1,418,016,880 (190,117,175) $1,227,899,705 ADR - American Depository Receipt (a) Non-income producing security. (b) Securities which have been held for less than one year, not previously disclosed, and not restricted. (c) At December 31, 2014, the cost of investments for Federal income tax purposes was $820,199,810; aggregate gross unrealized appreciation was $649,068,915; aggregate gross unrealized depreciation was $44,648,757; and net unrealized appreciation was $604,420,158. (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 $715,556,414) Purchased Options (cost $416,452) Money market fund (cost $104,226,944) Total investments (cost $820,199,810) RECEIVABLES AND OTHER ASSETS Cash 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 Payable for securities purchased Accrued compensation payable to officers and employees Accrued preferred stock dividend not yet declared Outstanding options written, at value (premiums received $245,504) 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 - 30,871,844 (note 5) NET ASSET VALUE PER COMMON SHARE NET ASSETS APPLICABLE TO COMMON STOCK Common Stock, 30,871,844 shares at par value (note 5) Additional paid-in capital (note 5) Undistributed realized gain on securities sold Over distributed net investment income (note 5) Accumulated other comprehensive loss (note 7) Unallocated distributions on Preferred Stock Unrealized appreciation on investments, options written and other NET ASSETS APPLICABLE TO COMMON STOCK DECEMBER 31, 2014 $1,320,216,824 176,200 104,226,944 1,424,619,968 892 3,395,845 3,345,568 2,588,326 1,192,581 1,435,143,180 3,588,329 3,559,000 219,955 370,300 5,997,210 2,793,532 597,974 17,126,300 190,117,175 $1,227,899,705 $39.77 $30,871,844 596,606,977 1,775,541 (857,611) (5,786,254) (219,955) 605,509,163 $1,227,899,705 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 RETAILING INFORMATION TECHNOLOGY TECHNOLOGY HARDWARE AND EQUIPMENT 1,900 Target Corporation/January 17, 2015/$75 $366,700 200 Apple Inc./January 17, 2015/$120 (PREMIUMS RECEIVED $245,504) 3,600 $370,300 (see notes to financial statements) 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 $691,354) TOTAL INCOME EXPENSES Investment research Administration and operations Office space and general Auditing and legal fees Directors’ fees and expenses Transfer agent, custodian and registrar fees and expenses State and local taxes Stockholders’ meeting and reports TOTAL EXPENSES NET INVESTMENT INCOME YEAR ENDED DECEMBER 31, 2014 $23,349,033 23,349,033 7,175,363 3,726,365 1,696,033 326,349 239,928 174,539 165,344 109,821 13,613,742 9,735,291 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 decrease in unrealized appreciation NET INVESTMENT INCOME, GAINS AND APPRECIATION ON INVESTMENTS DISTRIBUTIONS TO PREFERRED STOCKHOLDERS INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 101,444,827 656,922 102,101,749 (27,988,358) 83,848,682 (11,311,972) $72,536,710 (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 net 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, 2014 2013 $9,735,291 102,101,749 (27,988,358) 83,848,682 $5,228,019 69,657,472 243,076,683 317,962,174 (1,037,961) (10,274,011) (11,311,972) (992,168) (10,319,804) (11,311,972) 72,536,710 306,650,202 (3,962,010) 5,948,555 From net investment income From net capital gains (9,462,665) (93,663,921) (5,382,759) (55,987,513) DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (103,126,586) (61,370,272) CAPITAL SHARE TRANSACTIONS (NOTE 5) Value of Common Shares issued in payment of dividends and distributions Cost of Common Shares purchased INCREASE IN NET ASSETS - CAPITAL TRANSACTIONS NET INCREASE (DECREASE) IN NET ASSETS NET ASSETS APPLICABLE TO COMMON STOCK 51,886,970 (18,905,125) 35,871,304 (13,047,704) 32,981,845 22,823,600 (1,570,041) 274,052,085 BEGINNING OF YEAR 1,229,469,746 955,417,661 END OF YEAR (including over distributed net investment income of ($857,611) and ($191,539), respectively) $1,227,899,705 $1,229,469,746 (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, 2014. 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 capital gains Total from investment operations Distributions on Common Stock: Dividends from net investment income Distributions from net capital gains 2014 2013 2012 2011 2010 $41.07 .32 $32.68 .17 $29.78 .24 $31.26 .18 $27.50 .19 2.39 (.13) 2.58 (.04) (.34) (.38) 2.20 (.32) (3.18) (3.50) 10.51 .20 10.88 (.04) (.35) (.39) 10.49 (.18) (1.92) (2.10) 5.05 — 5.29 (.04) (.35) (.39) 4.90 (.21) (1.79) (2.00) (.68) (.10) (.60) (.11) (.27) (.38) (.98) (.15) (.35) (.50) 4.37 — 4.56 (.07) (.30) (.37) 4.19 (.08) (.35) (.43) Net asset value, end of year Per share market value, end of year $39.77 $35.00 $41.07 $35.20 $32.68 $27.82 $29.78 $24.91 $31.26 $26.82 TOTAL INVESTMENT RETURN - Stockholder Return, based on market price per share RATIOS AND SUPPLEMENTAL DATA Net assets applicable to Common Stock, 9.32% 34.24% 19.77% (5.29%) 16.24% end of year (000’s omitted) $1,227,900 $1,229,470 $955,418 $886,537 $950,941 Ratio of expenses to average net assets applicable to Common Stock 1.10% 1.27% 1.67% 1.39% 1.54% Ratio of net income to average net assets applicable to Common Stock Portfolio turnover rate 0.78% 14.98% 0.47% 17.12% 0.74% 9.56% 0.56% 11.17% 0.66% 18.09% 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) $190,117 746% $190,117 747% $190,117 603% $190,117 $190,117 600% 566% $25.00 $26.01 $25.00 $25.30 $25.00 $25.54 $25.00 $25.47 $25.00 $24.95 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 accompanying financial statements have been prepared in accordance with United States generally accepted account- ing principles (“U.S. GAAP”) pursuant to the requirements for reporting in Accounting Standards Codification 946, Financial Services - Investment Companies (“ASC 946"), and Articles 6 and 10 of Regulation S-X. The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assump- tions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income, expenses and gains and losses during the reported period. Changes in the economic environment, financial mar- kets, and any other parameters used in determining these estimates could cause actual results to differ, and these differences could be material. 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. 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.) 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. 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, 2014: Assets Common stocks Purchased options Money market fund Total Liabilities Options written Level 1 $1,320,216,824 176,200 104,226,944 $1,424,619,968 ($370,300) Level 2 — — — — Level 3 — — — — Total $1,320,216,824 176,200 104,226,944 $1,424,619,968 ($370,300) The aggregate value of Level 3 portfolio investments changed during the year ended December 31, 2014 as follows: Change in portfolio valuations using significant unobservable inputs: Fair value at December 31, 2013 Realized gain Net change in unrealized appreciation Proceeds from sale Transfer to Level 1 Fair value at December 31, 2014 Level 3 $32,637,795 9,328,522 (4,181,595) (24,076,522) (13,708,200) $0 Transfers are reported as of the actual date of reclassification. Transfers from Level 3 to Level 1 occurred during the year ended December 31, 2014 upon Forethought Financial Group being acquired by a third party and FCB Financial Holdings, Inc. completing its initial public offering. 3. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (other than short-term securities and options) during 2014 amounted to $197,165,910 and $271,368,849, 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, 2014 were as follows: Options outstanding, December 31, 2013 Options written Options exercised Options expired Options terminated in closing purchase transaction Options outstanding, December 31, 2014 CONTRACTS 1,200 5,100 (250) (523) (3,427) 2,100 PREMIUMS $229,628 487,478 (161,738) (37,375) (272,489) $245,504 CONTRACTS 0 5,800 (1,500) (2,500) (1,800) 0 PREMIUMS $0 818,553 (147,489) (57,940) (613,124) $0 COVERED CALLS COLLATERALIZED PUTS 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, 30,871,844 shares were issued and outstanding; 8, 000, 000 Preferred Shares were originally issued and 7, 604, 687 were outstanding on December 31, 2014. 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. 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.) 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 net 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 net capital gains, they will be paid from investment company taxable income, or will represent a return of capital. Under the Investment Company Act of 1940, the Company is required to maintain an asset coverage of at least 200% 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 2014 and 2013 were as follows: SHARES AMOUNT 2014 2013 2014 2013 Shares issued in payment of dividends and distributions (includes 1,473,643 and 1,090,772 shares issued from treasury, respectively) Increase in paid-in capital Total increase Shares purchased (at an average discount from net asset value of 14.4% and 14.3%, respectively) Decrease in paid-in capital Total decrease Net increase (decrease) 1,473,643 1,090,772 $1,473,643 50,413,327 51,886,970 $1,090,772 34,780,532 35,871,304 (541,367) (385,176) 932,276 705,596 (541,367) (18,363,758) (18,905,125) $32,981,845 (385,176) (12,662,528) (13,047,704) $22,823,600 At December 31, 2014, the Company held in its treasury 1,109,028 shares of Common Stock with an aggregate cost of $37,307,527. The tax basis distribution during the year ended December 31, 2014 is as follows: ordinary distributions of $18,792,969 and net capital gains distributions of $95,645,589. As of December 31, 2014, distributable earnings on a tax basis included $2,028,405 from undistrib- uted net capital gains and $605,509,163 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 during the year ended December 31, 2014. As a result, additional paid-in capital was decreased by $724, accumulated net realized gain on investment transac- tions was decreased by $98,539 and net investment increased by $99,263. As of December 31, 2014 the Company had straddle loss defer- rals 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, 2014 to its officers (identified on page 20) amounted to $6,905,000 of which $3,162,500 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 employ- ees. The aggregate cost of such plans for 2014 was $696,191. The qualified thrift plan acquired 64,687 shares and sold 11,100 shares of the Company’s Common Stock during the year ended December 31, 2014. It held 538,588 shares of the Company’s Common Stock at December 31, 2014. 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 loss 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, 2014 (MEASUREMENT DATE) QUALIFIED SUPPLEMENTAL PLAN PLAN TOTAL $13,509,556 333,984 646,681 (752,944) 3,141,624 16,878,901 19,087,748 1,132,423 — (752,944) 19,467,227 $2,588,326 $4,627,182 132,217 228,336 (308,234) 1,317,709 5,997,210 — — 308,234 (308,234) — ($5,997,210) $18,136,738 466,201 875,017 (1,061,178) 4,459,333 22,876,111 19,087,748 1,132,423 308,234 (1,061,178) 19,467,227 ($3,408,884) Accumulated benefit obligation at end of year $15,582,709 $5,351,862 $20,934,571 WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE OBLIGATION AT YEAR END: Discount rate Salary scale assumption CHANGE IN FUNDED STATUS: Noncurrent benefit asset - qualified plan LIABILITIES: Current benefit liability - supplemental plan Noncurrent benefit liability - supplemental plan 3.90% 4.25% 3.90% 4.25% BEFORE $5,578,192 ADJUSTMENTS ($2,989,866) AFTER $2,588,326 ($298,120) (4,329,060) ($7,850) (1,362,180) ($305,970) (5,691,240) AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME CONSIST OF: Net actuarial loss Prior service cost ACCUMULATED OTHER COMPREHENSIVE INCOME $1,717,067 107,177 $1,824,244 $4,008,595 (46,585) $3,962,010 $5,725,662 60,592 $5,786,254 WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET PERIODIC BENEFIT COST DURING YEAR: Discount rate Expected return on plan assets* Salary scale assumption 4.70% 7.50% 4.25% 4.70% 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 $333,984 646,681 (1,129,587) 45,828 414,349 $311,255 $132,217 228,336 — 757 33,553 $394,863 $466,201 875,017 (1,129,587) 46,585 447,902 $706,118 PLAN ASSETS The Company’s qualified pension plan asset allocation by asset class at December 31, 2014, is as follows: ASSET CATEGORY Equity securities Money market fund Total LEVEL 1 $15,548,867 1,030,782 $16,579,649 LEVEL 2 $2,887,578 — $2,887,578 LEVEL 3 — — — TOTAL $18,436,445 1,030,782 $19,467,227 EXPECTED CASH FLOWS QUALIFIED PLAN SUPPLEMENTAL PLAN Expected Company contributions for 2015 Expected benefit payments: 2015 2016 2017 2018 2019 2020-2024 — $815,698 839,857 853,541 869,545 884,478 4,664,102 $305,970 $305,970 305,563 297,255 293,518 289,297 1,394,316 TOTAL $305,970 $1,121,668 1,145,420 1,150,796 1,163,063 1,173,775 6,058,418 The estimated amount that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2015 is $683,094. 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, 116,600 for the year ended December 31, 2014. Minimum rental commitments under the operating lease are approximately $1, 183, 000 per annum in 2015 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 state- ments of investments and options written, of General American Investors Company, Inc. (the “Company”) as of December 31, 2014, 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, 2014, 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, 2014, 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, 2015 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 (52) 2010 Anang Majmudar (40) President of the Company since 2012 and Chief Executive 2012 Officer since 2014, Managing Member and President, Amajac Capital Management, LLC (1999-2010) Michael Robinson (42) 2006 Andrew V. Vindigni (55) 1988 Senior Vice-President of the Company since 2006, Vice-President 1995-2006 securities analyst (financial services and consumer non-durables industries) Diane G. Radosti (62) 1980 Vice-President of the Company effective 2015, securities analyst (general industries) Vice-President of the Company since 2010, securities analyst (general industries) Treasurer of the Company since 1990, Principal Accounting Officer since 2003 Eugene S. Stark (56) 2005 Craig A. Grassi (46) 1991 Sally A. Lynch, Ph.D. (55) 1997 Vice-President, Administration Maureen E. LoBello (64) of the Company and Principal Financial Officer since 2005, Chief Compliance Officer since 2006 1992 Corporate Secretary of the Company since 2013, Assistant Corporate Secretary 2005-2012 benefits administration Linda J. Genid (56) 1983 Assistant Corporate Secretary of Company since 2014, network administrator Vice-President of the Company since 2013, Assistant Vice- President 2005-2012 securities analyst and information technology Vice-President of the Company since 2006, securities analyst (biotechnology industry) 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, 2015. 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, 2014 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 16, 2014, 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. (50) 1995 Rodney B. Berens (69) 2007 PRINCIPAL OCCUPATION DURING PAST 5 YEARS Co-Founder and Chairman Kolltan Pharmaceuticals, Inc. Managing Member Diaz & Altschul Capital Management, LLC (private investment company) Chairman Overbrook Management Corporation (investment advisory firm) Founding Partner Berens Capital Management, LLC (investment management) Lewis B. Cullman (96) 1961 Philanthropist Spencer Davidson (72) 1995 John D. Gordan, III (69) 1986 Chairman of the Board General American Investors Company, Inc. President and Chief Executive Officer (1995-2012) Attorney Beazley USA Services, Inc. (2014) (insurance) Senior Counsel (2010-2011) Partner (1994-2010) (Retired) Morgan, Lewis & Bockius LLP Betsy F. Gotbaum (76) 2010 Consultant CURRENT DIRECTORSHIPS AND AFFILIATIONS Child Mind Institute, Director Delta Opportunity Fund, Ltd., Director Neurosciences Research Foundation, Trustee Alfred P. Sloan Foundation, Member of Investment Committee Svarog Capital Advisers, Member of Investment Committee The Morgan Library and Museum, Trustee, Chairman of Investment Sub-Committee, and Member of Finance, Compensation and Nomination Committees 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 The New York Botanical Garden, Senior Vice Chairman, Board of Managers The New York Public Library, Trustee Neurosciences Research Foundation, Trustee Chess-in-the-Schools, Trustee 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 (84) 1994 Lead Independent Director IGENE Biotechnology, Inc., Director Managing Partner SRK Management Company (private investment company) Daniel M. Neidich (65) 2007 Chief Executive Officer Dune Real Estate Partners LP Child Mind Institute, Director Prep for Prep, Director Real Estate Roundtable, Director (formerly Chairman) Raymond S. Troubh (88) 1989 Financial Consultant Diamond Offshore Drilling, Inc., Director Gentiva Health Services, Inc., Director INTERESTED DIRECTOR Jeffrey W. Priest (52) 2013 President of the Company since 2012 and Chief Executive Officer since 2013 The Company is a stand-alone fund. 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 6, 2015.

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