GAM Holding AG
Annual Report 2015

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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 5 A N N U A L R E P O R T GENERAL AMERICAN INVESTORS COMPANY, INC. Established in 1927, the Company is a closed-end investment company listed on the New York Stock Exchange. Its objective is long-term capital appreciation through investment in companies with above average growth potential. FINANCIAL SUMMARY (unaudited) Net assets applicable to Common Stock - December 31 Net investment income Net realized gain Net decrease in unrealized appreciation Distributions to Preferred Stockholders Per Common Share-December 31 Net asset value Market price Discount from net asset value Common Shares outstanding-Dec. 31 Market price range* (high-low) Market volume-shares *Unadjusted for dividend payments. 2015 2014 $1,068,028,205 13,728,242 34,130,660 (76,268,833) (11,311,972) $1,227,899,705 9,735,291 102,101,749 (27,988,358) (11,311,972) $37.74 $31.94 -15.4% $39.77 $35.00 -12.0% 28,296,697 $35.98-$30.46 16,381,264 30,871,844 $38.27-$32.31 9,864,111 DIVIDEND SUMMARY (per share) (unaudited) Record Date Payment Date Ordinary Income Long-Term Capital Gain Total Common Stock Nov. 16, 2015 Feb. 1, 2016 Total from 2015 earnings Dec. 30, 2015 Feb. 12, 2016 $0.340000 0.051500 $0.391500 $0.810000 0.048500 $0.858500 $1.150000 0.100000 $1.250000 Nov. 17, 2014 Total from 2014 earnings Dec. 30, 2014 $0.574766 (a) $2.925234 $3.500000 (a) Includes short-term gains in the amount of $.253614. Preferred Stock Mar. 9, 2015 Jun. 8 2015 Sept. 7, 2015 Dec. 7, 2015 Total for 2015 Mar. 7, 2014 Jun. 9, 2014 Sept. 8, 2014 Dec. 8, 2014 Total for 2014 Mar. 24, 2015 Jun. 24, 2015 Sept. 24, 2015 Dec. 24, 2015 Mar. 24, 2014 Jun. 24, 2014 Sept. 24, 2014 Dec. 24, 2014 $.109946 .109946 .109946 .109946 $.439784 $.061069 .061069 .061069 .061069 $.244276 (b) $.261929 .261929 .261929 .261929 $1.047716 $.310806 .310806 .310806 .310806 $1.243224 $.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). T O T H E S T O C K H O L D E R S G e n e r a l A m e r i c a n I n v e s t o r s General American Investors Company, Inc. 100 Park Avenue, New York, NY 10017 (212) 916-8400 (800) 436-8401 E-mail: InvestorRelations@gainv.com www.generalamericaninvestors.com 1 T O T H E S T O C K H O L D E R S G e n e r a l A m e r i c a n I n v e s t o r s General American Investors’ net asset value (NAV) per Common Share (assuming reinvestment of all dividends) decreased 1.6% for the year ended December 31, 2015. The U.S. stock market was up 1.4% for the year, as measured by our benchmark, the Standard & Poor’s 500 Stock Index (including income). The return to our Common Stockholders decreased by 5.3% and the discount at which our shares traded to their NAV continued to fluctuate and on December 31, 2015, it was 15.4%. 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 11.6% 11.5% 9.6 5.2 10.6 11.5 14.2 11.3 9.5 5.2 10.3 11.7 13.6 11.6 15.1% 12.6 7.3 8.2 10.3 11.3 9.7 Over the past three years, we have commented on the de- viation between the U.S. economy’s modest growth and the equity market’s strong performance, with expansion in the price-to-earnings multiple accounting for nearly 56% of those gains. With the Fed recently raising interest rates, a period of convergence may have begun. The near zero return of the S&P 500 during 2015 masked a market characterized by divergences between growth and value investing, large and small capitalized equity performance, and large disparities in performance between sectors, especially the surprisingly strong performance of a few internet stocks. For 2015, 56% of the stocks in the Russell 2000 were down more than 20% from their highs. We fared comparatively well due in part to shares of companies in the bio-technology, select technology and consumer discretionary sectors. We also en- joyed positive performance of companies that were acquired, namely: Platinum Underwriters, PartnerRe Insurance, EMC, and Towers Watson. Detracting were shares of energy, select industrials and a few financial companies. The U.S. economy has maintained a modest advance for the past year with GDP rising 2.1%, a deceleration from the prior year. For the consumer, low inflation due to falling com- modity and food prices and strong employment growth have improved income levels, savings rates and balance sheets. Home and auto sales continue to improve, the latter reaching a level on par with 2007 albeit on elevated sub-prime loans. The average age of a car in the U.S. remains high at 11+ years, suggesting the improvement may last longer than prior cycles. Unfortunately, inventories throughout the economy have been elevated for the past two quarters and industrial produc- tion has slowed demonstrably as the strong dollar and related impacts from commodity markets has muted exports in dollar terms. Changing consumer behavior may have also contrib- uted to an increase in the household savings rate, reducing consumption from its pace earlier in the year amidst higher than expected health insurance costs, rent, and concerns over geo-politics. Weakness in energy prices has challenged all U.S. energy-relat- ed companies leading to credit quality concerns. Historically, widening credit spreads due to credit deterioration portend future economic difficulty. With the Federal Reserve initiat- ing its first interest rate increase since 2006 amidst weakening growth, it would seem unlikely that rates will increase much over the next several quarters. Europe continues to improve, but recent turmoil in the Middle East and the related refugee crisis has taxed the EU, both financially and politically, pos- sibly leading to slower growth over the near term. China, though accounting for less than 2% of U.S. exports has ac- counted for nearly 46% of global growth over the past 5 years and may have reached a near term peak in its contribution to world GDP. This has negatively impacted emerging economies that rely heavily on the production of base materials. In sum, the post crisis world economy remains constrained by excess capacity, leverage and geopolitical turmoil. These head- winds are countered by low interest rates, low inflation and GDP growth in the U.S. and Europe. U.S. companies, particu- larly multi-nationals, have been buffeted by currency effects, slowing worldwide growth and reduced trade as measured in U.S. dollars. These risks appear to be discounted in valuations assuming no exogenous shocks. Low prices for energy will do their part in removing excess capacity over time and it re- mains unclear if Saudi Arabia’s strategy of flooding the world with oil and gaining market share will result in more power or weakness as the country faces the potential for massive bud- get deficits. Despite short term pain for producers, it seems reasonable to assume lower prices for fuel are a net positive to global GDP over time. In the interim, given geopolitical uncertainties and a slowing worldwide expansion, the U.S. may experience a period of decelerating growth and as a result equity markets may expe- rience higher volatility. Over the longer term, U.S. equities, remain the better alternative to fixed income securities as many of them have dividend yields that compare favorably to bonds and possess a growth rate linked to global GDP. Companies paying dividends with room to grow them will garner more attention this year as growth appears modest globally. For the longer term, few assets will provide investors with a greater return than equities. Reinvested dividends form the cornerstone of equity returns. Since 1935 approximately 44% of the total return of the S&P 500 is due to reinvested dividends. We are pleased to report that, on October 14, 2015, Mr. Henry R. Schirmer was appointed to the Board of Directors of the Company. Mr. Schirmer is the Chief Financial Officer and Senior Vice President, Finance for Unilever North America. Mr. Schirmer’s extensive experience in finance, informa- tion technology, mergers and acquisitions, supply chain operations, marketing and sales will be of great value to the Company in the future. As announced on December 16, 2015, Maureen E. LoBello, an employee of the Company for the last twenty-three years and Corporate Secretary since January 1, 2013, retired effective December 31, 2015. Effective January 1, 2016, Linda J. Genid, who has been an employee of the Company since 1983 and Assistant Corporate Secretary since January 1, 2014, was ap- pointed Corporate Secretary. Information about the Company, including our investment objectives, operating policies and procedures, investment re- sults, 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 20, 2016 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 organization that is internally managed. For reg- ulatory purposes, the Company is classified as a diversified, closed-end management invest- ment company; it is registered under and sub- ject 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 current income. In seeking to achieve its pri- mary objective, the Company invests prin- cipally 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 continuous 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 responsible 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 30-year busi- ness 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 re- mains 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 2015, the stock sold at discounts to NAV which ranged from 12.7% (March 10) to 18.0% (September 8). At December 31, the price of the stock was at a discount of 15.4%. 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%. To date, 22,175,848 shares have been repur- chased. “GAM Pr B” Preferred Stock On September 24, 2003, the Company issued and sold in a n u n d e r w r i t t e n o f f e r i n g 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 1943-2015 (except for the year 1974). (A table listing dividends and distributions paid during the 20-year period 1996-2015 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, 2015 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 administered by our transfer agent, is a system that allows for book-entry ownership and electronic trans- fer 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 balanc- es. A brochure which describes the features and benefits of the Investors Choice Plan, in- cluding 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 Distributions & 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 identifi- cation 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 securi- ties 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 in- vestment for 20 years ended December 31, 2015 This table shows dividends 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 pay- ments made after year-end are attributable to income and gains earned in the prior year. T he investment return for a Common Stockholder of General American Investors (GAM) over the 20 years ended December 31, 2015 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 1996. 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 STOCKHOLDER RETURN CUMULATIVE INVESTMENT ANNUAL RETURN NET ASSET VALUE RETURN ANNUAL RETURN CUMULATIVE INVESTMENT STANDARD & POOR’S 500 RETURN CUMULATIVE INVESTMENT ANNUAL RETURN $11,948 19.48% $11,997 19.97% $12,291 22.91% 17,035 22,369 31,142 37,091 38,697 28,167 35,775 38,920 45,692 53,359 58,012 30,050 41,127 47,806 45,277 54,228 72,785 79,569 75,320 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 34.22 9.32 -5.34 15,842 21,409 29,202 34,353 33,941 26,128 33,287 36,738 42,690 47,915 51,753 29,489 38,949 44,912 43,623 51,174 68,231 72,638 71,505 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 -1.56 16,388 21,066 25,482 23,165 20,411 15,892 20,431 22,635 23,729 27,445 28,929 18,205 23,020 26,487 27,052 31,377 41,546 47,234 47,900 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 1.41 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 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 6 - 2 0 1 5 ) ( U N A U D I T E D ) EARNINGS SOURCE SHORT-TERM LONG-TERM YEAR INCOME CAPITAL GAINS CAPITAL GAINS $.050 1996 — 1997 — 1998 .620 1999 1.550 2000 .640 2001 2002 — — 2003 — 2004 .041 2005 $2.710 2.950 4.400 4.050 6.160 1.370 .330 .590 .957 1.398 $.200 .210 .470 .420 .480 .370 .030 .020 .217 .547 EARNINGS SOURCE SHORT-TERM LONG-TERM RETURN OF YEAR INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 $.334 .706 .186 .103 .081 .147 .215 .184 .321 .392 — $.009 — .051 .033 .011 .015 — .254 — $2.666 5.250 .254 .186 .316 .342 1.770 1.916 2.925 .858 — — — $.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, 2015 STOCKHOLDER RETURN GAM NET ASSET VALUE S&P 500 STOCK INDEX -5.3% -1.6% 1.4% 1 year 5 years 10 years 15 years 9.6 5.2 4.9 9.5 5.2 5.0 12.6 7.3 5.0 8.2 20 years 10.6 10.3 $100,000 $75,000 $50,000 $25,000 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 4 1 0 2 5 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 5 ( 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: NEW POSITIONS Applied DNA Sciences, Inc. - Warrants Cempra, Inc. NET SHARES TRANSACTED 578,591 324,409 SHARES HELD 281,409 (b) 494,409 (b) ADDITIONS Anadarko Petroleum Corporation Hertz Global Holdings, Inc. M&T Bank Corporation Nelnet, Inc. Synchronoss Technologies, Inc. DECREASES: ELIMINATIONS Ciena Corporation Target Corporation REDUCTIONS Apple Inc. Costco Wholesale Corporation EMC Corporation Ensco plc - Class A FCB Financial Holdings, Inc. Intel Corporation Intra-Cellular Therapies Inc. Occidental Petroleum Corporation QUALCOMM Incorporated Repros Therapeutics Inc. Republic Services, Inc. Ultra Petroleum Corp. Verint Systems Inc. 8,000 50,000 28,493 (c) 31,500 25,000 496,000 216,300 50,000 64,019 55,000 230,000 85,000 328,200 62,700 45,500 75,000 112,937 64,300 652,900 60,400 218,000 795,064 153,493 520,000 425,534 ----- ----- 344,000 243,781 560,000 385,000 300,000 505,500 182,442 154,500 461,200 396,123 972,800 150,903 130,886 (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. (c) Shares received in a merger with Hudson City Bancorp, Inc. 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 ) DECEMBER 31, 2015 COST(000) VALUE(000) % COMMON NET ASSETS The diversification of the Company’s net assets applicable to its Common Stock by industry group as of December 31, 2015 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 Industrials Capital Goods Commercial & Professional Services Transportation $9,918 25,490 41,708 77,116 15,210 38,968 57,965 112,143 69,831 7,370 77,201 61,692 27,451 14,793 103,936 $29,337 55,296 170,754 255,387 35,244 58,065 101,271 194,580 123,172 39,371 162,543 71,842 74,047 11,314 157,203 Health Care Pharmaceuticals, Biotechnology & Life Sciences 75,945 146,498 Consumer Discretionary Automobiles & Components Retailing Energy Miscellaneous* Telecommunication Services Materials Short-Term Securities Total Investments Other Assets and Liabilities - Net Preferred Stock Net Assets Applicable to Common Stock 16,175 5,255 21,430 86,758 37,900 23,341 17,928 633,698 106,006 $739,704 17,811 88,259 106,070 76,923 32,485 22,061 9,112 1,162,862 106,006 1,268,868 (10,723) (190,117) $1,068,028 * Securities which have been held for less than one year, not previously disclosed and not restricted. 2.7% 5.2 16.0 23.9 3.3 5.5 9.5 18.3 11.5 3.7 15.2 6.7 6.9 1.1 14.7 13.7 1.6 8.3 9.9 7.2 3.0 2.1 0.9 108.9 9.9 118.8 (1.0) (17.8) 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, 2015, shown on pages 8 - 10 includes 56 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. SHARES VALUE % COMMON NET ASSETS 1,244,668 $88,259,408 8.3% ARCH CAPITAL GROUP LTD. Arch Capital, a Bermuda-based insurer/reinsurer, generates premiums of approximately $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. 700,000 438,600 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 and other related areas. 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. 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. 243,781 972,800 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. 680,686 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. 344,000 48,825,000 4.6 44,381,934 4.1 42,793,472 4.0 39,370,631 3.7 37,764,459 3.5 36,209,440 3.4 PARTNERRE LTD. PartnerRe, a Bermuda-based global reinsurer, generates annual premiums of approximately $6 billion, has a quality investment portfolio and a conservative, well-reserved A+ rated balance sheet. This well-managed organization exercises prudent underwriting discipline and superior capital management resulting in above earnings and book value growth. NESTLÉ S.A. Nestlé is a well-managed 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. 253,361 35,404,666 3.3 450,000 33,497,253 3.1 GENERAL ELECTRIC COMPANY General Electric is a global industrial and technology company. The company aims to generate 75% of its earnings from industrial businesses upon completion of the exit from most of its financial businesses. The company’s diverse mix of infrastructure businesses, many with leading market positions, forms the foundation of management’s focus upon shareholder value via earnings growth, optimization of profitability, and returning capital through dividends and share repurchases. 1,015,000 31,617,250 3.0 $438,123,513 41.0% 8 S T A T E M E N T O F I N V E S T M E N T S D E C E M B E R 3 1 , 2 0 1 5 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 (9.9%) CONSUMER STAPLES (15.2%) SHARES COMMON STOCKS AUTOMOBILES AND COMPONENTS (1.6%) 1,264,063 Ford Motor Company RETAILING (8.3%) 1,244,668 The TJX Companies, Inc. FOOD, BEVERAGE AND TOBACCO (11.5%) 201,174 Danone 237,400 Diageo plc ADR 450,000 Nestlé S.A. 195,000 PepsiCo, Inc. 704,378 Unilever N.V. ENERGY (7.2%) FOOD AND STAPLES RETAILING (3.7%) 243,781 Costco Wholesale Corporation 218,000 Anadarko Petroleum Corporation 230,900 Apache Corporation 1,572,819 Cameco Corporation 385,000 Ensco plc - Class A 585,000 Halliburton Company 154,500 Occidental Petroleum Corporation 150,903 Ultra Petroleum Corp. (a) FINANCIALS (23.9%) BANKS (2.7%) 300,000 FCB Financial Holdings, Inc. (a) 153,493 M&T Bank Corporation DIVERSIFIED FINANCIALS (5.2%) 245,000 American Express Company 315,000 JPMorgan Chase & Co. 520,000 Nelnet, Inc. INSURANCE (16.0%) 243,492 Aon plc 700,000 Arch Capital Group Ltd. (a) 110 Berkshire Hathaway Inc. Class A (a) 135,000 Everest Re Group, Ltd. 365,000 MetLife, Inc. 253,361 PartnerRe Ltd. PHARMACEUTICALS, BIOTECHNOLOGY AND LIFE SCIENCES 1,200,000 Ariad Pharmaceuticals, Inc. (a) 180,000 Celgene Corporation (a) 494,409 Cempra, Inc. (a) 438,600 Gilead Sciences, Inc. 182,442 Intra-Cellular Therapies Inc. (a) 427,191 Merck & Co., Inc. 277,076 Paratek Pharmaceuticals Inc. (a) 605,808 Pfizer Inc. 396,123 Repros Therapeutics Inc. (a) HEALTH CARE (13.7%) VALUE (NOTE 1a) (COST $16,174,723) $17,810,648 (COST $5,254,725) (COST $21,429,448) 88,259,408 106,070,056 13,610,379 25,893,218 33,497,253 19,484,400 30,686,974 123,172,224 (COST $69,831,143) (COST $7,369,695) (COST $77,200,838) 39,370,631 162,542,855 10,590,440 10,268,123 19,392,858 5,925,150 19,913,400 10,445,745 377,258 76,912,974 10,737,000 18,600,282 29,337,282 17,039,750 20,799,450 17,456,400 55,295,600 22,452,397 48,825,000 21,758,000 24,717,150 17,596,650 35,404,666 170,753,863 255,386,745 7,500,000 21,556,800 15,390,952 44,381,934 9,813,555 22,564,229 5,256,132 19,555,482 479,309 146,498,393 (COST $86,314,371) (COST $9,918,278) (COST $25,489,288) (COST $41,708,047) (COST $77,115,613) (COST $75,945,208) 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 5 - 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 INDUSTRIALS (14.7%) SHARES COMMON STOCKS (Continued) CAPITAL GOODS (6.7%) 219,131 Eaton Corporation PLC 1,015,000 General Electric Company 300,000 United Technologies Corporation COMMERCIAL AND PROFESSIONAL SERVICES (6.9%) 972,800 Republic Services, Inc. 243,298 Towers Watson & Co. Class A (b) TRANSPORTATION (1.1%) 795,064 Hertz Global Holdings, Inc. (a) VALUE (NOTE 1a) $11,403,577 31,617,250 28,821,000 71,841,827 42,793,472 31,254,061 74,047,533 (COST $61,692,252) (COST $27,450,601) (COST $14,793,585) (COST $103,936,438) 11,313,761 157,203,121 INFORMATION TECHNOLOGY (18.2%) SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT (3.3%) 200,850 ASML Holding N.V. 505,500 Intel Corporation SOFTWARE AND SERVICES (5.5%) 680,686 Microsoft Corporation 425,534 Synchronoss Technologies, Inc. (a) 130,886 Verint Systems Inc. (a) TECHNOLOGY HARDWARE AND EQUIPMENT (9.4%) 344,000 Apple Inc. 1,000,000 Cisco Systems, Inc. 560,000 EMC Corporation 461,200 QUALCOMM Incorporated (COST $15,210,099) (COST $38,967,624) (COST $57,961,936) (COST $112,139,659) 17,829,454 17,414,475 35,243,929 37,764,459 14,991,563 5,308,736 58,064,758 36,209,440 27,155,000 14,380,800 23,053,082 100,798,322 194,107,009 MATERIALS (0.9%) MISCELLANEOUS (3.0%) TELECOMMUNICATION SERVICES (2.1%) TECHNOLOGY HARDWARE AND EQUIPMENT (0.1%) 801,422 Huntsman Corporation (COST $17,928,463) 9,112,168 Other (c) (COST $37,899,832) 32,485,029 683,852 Vodafone Group plc ADR (COST $23,341,422) 22,061,066 TOTAL COMMON STOCKS (108.8%) (COST $633,251,292) 1,162,379,416 WARRANTS WARRANT 281,409 Applied DNA Sciences, Inc. (a) (COST $2,814) 472,486 CONTRACTS CALL OPTIONS (100 SHARES EACH) COMPANY/EXPIRATION DATE/EXERCISE PRICE ENERGY 1,000 Ensco plc/January 15, 2016/$17 (a) 1,500 Ensco plc/January 15, 2016/$19 (a) (COST $443,582) 10,000 0 10,000 1 0 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 5 - 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 106,006,567 SHORT-TERM SECURITIES AND OTHER ASSETS SSgA U.S. Treasury Money Market Fund (9.9%) (COST $106,006,567) TOTAL INVESTMENTS (d) (118.8%) Liabilities in excess of receivables and other assets (-1.0%) (COST $739,704,255) PREFERRED STOCK (-17.8%) NET ASSETS APPLICABLE TO COMMON STOCK (100%) VALUE (NOTE 1a) $106,006,567 1,268,868,469 (10,723,089) 1,258,145,380 (190,117,175) $1,068,028,205 ADR - American Depository Receipt (a) Non-income producing security. (b) Name changed to Willis Towers Watson PLC upon merger on January 5, 2016. (c) Securities which have been held for less than one year, not previously disclosed, and not restricted. (d) At December 31, 2015, the cost of investments for Federal income tax purposes was $739,704,255; aggregate gross unrealized appreciation was $586,393,098; aggregate gross unrealized depreciation was $57,228,885; and net unrealized ap- preciation was $529,164,213. (see notes to financial statements) 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 CALL OPTIONS CONSUMER STAPLES CONTRACTS (100 SHARES EACH) COMPANY/EXPIRATION DATE/EXERCISE PRICE VALUE (NOTE 1a) FOOD & STAPLES RETAILING HEALTH CARE INFORMATION TECHNOLOGY SEMICONDUCTORS AND 250 Costco Wholesale Corporation/January 15, 2016/$145 500 Costco Wholesale Corporation/January 15, 2016/$150 1,000 Cempra, Inc./January 16, 2016/$25 $450,000 665,000 680,000 SEMICONDUCTOR EQUIPMENT 500 Intel Corporation/January 15, 2016/$32 (PREMIUMS RECEIVED $1,473,462) PUT OPTIONS ENERGY 1,000 Ensco plc/January 15, 2016/$14 1,500 Ensco plc/January 15, 2016/$15 TOTAL OPTIONS WRITTEN (PREMIUMS RECEIVED $404,556*) (PREMIUMS RECEIVED $1,878,018) 141,000 1,936,000 40,000 90,000 130,000 $2,066,000 *The maximum cash outlay if all put options are exercised is $3,650,000. (see notes to financial statements) 1 1 S T A T E M E N T O F A S S E T S A N D L I A B I L I T I E S G e n e r a l A m e r i c a n I n v e s t o r s ASSETS DECEMBER 31, 2015 INVESTMENTS, AT VALUE (NOTE 1a) Common stocks (cost $633,251,292) Warrant (cost $2,814) Purchased options (cost $443,582) Money market fund (cost $106,006,567) Total investments (cost $739,704,255) RECEIVABLES AND OTHER ASSETS Cash, including that held by custodian in segregated account* 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 $1,878,018) 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 - 28,296,697 (note 5) NET ASSET VALUE PER COMMON SHARE NET ASSETS APPLICABLE TO COMMON STOCK Common Stock, 28,296,697 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 *Of which $3,832,500 is collateral for options written. (see notes to financial statements) $1,162,379,416 472,486 10,000 106,006,567 1,268,868,469 3,845,114 2,201,436 1,995,511 916,094 1,277,826,624 5,355,964 3,219,500 219,955 2,066,000 5,605,494 2,816,870 397,461 19,681,244 190,117,175 $1,068,028,205 $37.74 $28,296,697 511,036,440 5,015,370 (92,807) (5,247,870) (219,955) 529,240,330 $1,068,028,205 1 2 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 $643,722) EXPENSES Investment research Administration and operations Office space and general Auditing and legal fees Transfer agent, custodian and registrar fees and expenses Directors’ fees and expenses State and local taxes Stockholders’ meeting and reports TOTAL EXPENSES NET INVESTMENT INCOME YEAR ENDED DECEMBER 31, 2015 $27,547,383 6,838,278 3,973,579 1,696,392 487,704 294,173 234,766 173,980 120,269 13,819,141 13,728,242 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, REALIZED GAINS AND DEPRECIATION ON INVESTMENTS DISTRIBUTIONS TO PREFERRED STOCKHOLDERS DECREASE IN NET ASSETS RESULTING FROM OPERATIONS (see notes to financial statements) S T A T E M E N T O F C H A N G E S I N N E T A S S E T S OPERATIONS Net investment income Net realized gain on investments Net decrease in unrealized appreciation Distributions to Preferred Stockholders: From net investment income From net capital gains Decrease in net assets from Preferred distributions INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS OTHER COMPREHENSIVE INCOME (LOSS) Funded status of defined benefit plans (note 7) DISTRIBUTIONS TO COMMON STOCKHOLDERS From net investment income From net capital gains 33,494,870 635,790 34,130,660 (76,268,833) (28,409,931) (11,311,972) ($39,721,903) YEAR ENDED DECEMBER 31, 2015 2014 $13,728,242 34,130,660 (76,268,833) (28,409,931) $9,735,291 102,101,749 (27,988,358) 83,848,682 (3,344,407) (7,967,565) (11,311,972) (1,037,961) (10,274,011) (11,311,972) (39,721,903) 72,536,710 538,384 (3,962,010) (9,622,112) (22,923,266) (9,462,665) (93,663,921) DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (32,545,378) (103,126,586) CAPITAL SHARE TRANSACTIONS (NOTE 5) Value of Common Shares issued in payment of dividends and distributions Cost of Common Shares purchased INCREASE (DECREASE) IN NET ASSETS - CAPITAL TRANSACTIONS NET DECREASE IN NET ASSETS NET ASSETS APPLICABLE TO COMMON STOCK BEGINNING OF YEAR END OF YEAR (including over distributed net investment income of ($92,807) and ($857,611), respectively) (see notes to financial statements) 13,532,276 (101,674,879) (88,142,603) (159,871,500) 51,886,970 (18,905,125) 32,981,845 (1,570,041) 1,227,899,705 1,229,469,746 $1,068,028,205 $1,227,899,705 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, 2015. 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 2015 2014 2013 2012 2011 $39.77 .48 $41.07 .32 $32.68 .17 $29.78 .24 $31.26 .18 (.99) .02 (.49) (.12) (.27) (.39) (.88) 2.39 (.13) 2.58 (.04) (.34) (.38) 2.20 (.34) (.81) (1.15) (.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) Net asset value, end of year Per share market value, end of year $37.74 $31.94 $39.77 $35.00 $41.07 $35.20 $32.68 $27.82 $29.78 $24.91 TOTAL INVESTMENT RETURN - Stockholder Return, based on market price per share RATIOS AND SUPPLEMENTAL DATA Net assets applicable to Common Stock, (5.34%) 9.32% 34.24% 19.77% (5.29%) end of year (000’s omitted) $1,068,028 $1,227,900 $1,229,470 $955,418 $886,537 Ratio of expenses to average net assets applicable to Common Stock 1.17% 1.10% 1.27% 1.67% 1.39% Ratio of net income to average net assets applicable to Common Stock Portfolio turnover rate 1.17% 14.41% 0.78% 14.98% 0.47% 17.12% 0.74% 9.56% 0.56% 11.17% 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) $190,117 662% $190,117 746% $190,117 $190,117 $190,117 566% 747% 603% $25.00 $26.75 $25.00 $26.01 $25.00 $25.30 $25.00 $25.54 $25.00 $25.47 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 accounting principles (“U.S. GAAP”) pursuant to the requirements for reporting; Accounting Standards Codification 946, Financial Services - Investment Companies (“ASC 946"), and Regulation S-X. The preparation of financial statements in accordance with U.S. GAAP requires management to make esti- mates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial state- ments and the reported amounts of income, expenses and gains and losses during the reported period. Changes in the economic environment, financial markets, 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, condi- tions 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 val- ued at fair value determined in good faith pursuant to specific procedures appropriate to each security as estab- lished 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 associ- ated with purchasing an option is that the Company pays a premium whether or not the option is exercised. Additionally, the Company bears the risk of loss of the premium and a change in market value should the coun- terparty 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 real- ized 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 transac- tion, as a realized loss on written option transactions in the Statement of Operations. If a written 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 written put option is exercised, the premium reduces the cost basis for the securities purchased by the Company and is parentheti- cally 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 discount and premium on investments, is earned from settlement date and is recog- nized 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 denomi- nated 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 valuation. 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 exchange 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 separately 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 real- ized 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 ac- tually 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. 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.) Foreign security and currency transactions may involve certain considerations and risks not typically associ- ated with those of U.S. companies as a result of, among other factors, the possibility of political or economic instability or the level of governmental supervision and regulation of foreign securities markets. e. DIVIDENDS AND DISTRIBUTIONS The Company expects to pay dividends of net investment income and distribu- tions of net realized 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 accor- dance with Federal income tax regulations 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 appli- cable to regulated 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 regard- ing 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 indemnifications. The Company’s maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these indemnification provisions and expects the risk of loss thereunder to be remote. 2. FAIR VALUE MEASUREMENTS Various data inputs are used in determining the value of the Company’s investments. These inputs are summa- rized in a hierarchy consisting of the three broad levels listed below: Level 1 - quoted prices in active markets for identical securities (including money market funds which are valued using amortized cost and which transact at net asset value, typically $1 per share), Level 2 - other significant observable inputs (including quoted prices for similar securities, interest rates, credit risk, etc.), and Level 3 - significant unobservable inputs (including the Company’s own assumptions in determining the fair value of investments). The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Company’s net assets as of December 31, 2015: Assets Common stocks Warrants Purchased options Money market fund Total Liabilities Options written Level 1 $1,162,379,416 472,486 10,000 106,006,567 $1,268,868,469 Level 2 — — — — — Level 3 — — — — — Total $1,162,379,416 472,486 10,000 106,006,567 $1,268,868,469 ($2,066,000) — — ($2,066,000) Transfers of Level 3 Securities, if any, are reported as of the actual date of reclassification. No such transfers occurred during the year ended December 31, 2015. 3. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (other than short-term securities and options) during 2015 amounted to $181,750,203 and $297,520,251, 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 covered call options and collateralized put options during the year ended December 31, 2015 were as fol- lows: COLLATERALIZED PUTS COVERED CALLS CONTRACTS 2,100 Options outstanding, December 31, 2014 Options written 2,250 Options terminated in closing purchase transaction (1,900) (200) Options expired 2,250 Options outstanding, December 31, 2015 PREMIUMS $245,504 1,473,462 (200,966) (44,538) $1,473,462 CONTRACTS 0 4,762 (2,262) 0 2,500 PREMIUMS $0 952,916 (548,360) 0 $404,556 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, 28,296,697 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on December 31, 2015. 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 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. This authorization has been renewed annually thereafter. To date, 395,313 shares have been repurchased. The Company allocates distributions from net capital gains and other types of income proportionately among hold- ers 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 foregoing asset coverage require- ments 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, generally, 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 addition, the Investment Company Act of 1940 requires that approval of the holders of a majority of any outstanding Preferred Shares, voting separately as a class, would be required to (a) adopt any plan of reorganization that would adversely affect the Preferred Stock and (b) take any action requiring a vote of security holders, including, among other things, changes in the Company’s subclassification as a closed-end investment company or changes in its fundamental investment policies. The Company 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 2015 and 2014 were as follows: SHARES AMOUNT 2015 2014 2015 2014 Par Value of Shares issued in payment of dividends and distributions (includes 439,217 and 1,473,643 shares issued from treasury, respectively) Increase in paid-in capital Total increase Par Value of Shares purchased (at an average discount from net asset value of 15.5% and 14.4%, respectively) Decrease in paid-in capital Total decrease Net increase (decrease) 439,217 1,473,643 $439,217 13,093,059 13,532,276 $1,473,643 50,413,327 51,886,970 (3,014,364) (541,367) (2,575,147) 932,276 (3,014,364) (98,660,515) (101,674,879) ($88,142,603) (541,367) (18,363,758) (18,905,125) $32,981,845 At December 31, 2015, the Company held in its treasury 3,684,175 shares of Common Stock with an aggregate cost of $125,050,953. The tax basis distributions during the year ended December 31, 2015 are as follows: ordinary distributions of $12,966,519 and net capital gains distributions of $30,890,831. As of December 31, 2015, distributable earnings on a tax basis included $1,442,060 from ordinary distributions and $5,268,234 from undistributed net capital gains and $529,240,330 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, 2015. As a result, additional paid-in capital was decreased by $3,081 and net investment income increased by $3,081. As of December 31, 2015 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, 2015 to its offi- cers (identified on page 20) amounted to $7,036,500 of which $3,164,000 was payable as of year end. 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 The Company has funded (qualified) and unfunded (supplemental) defined contribution thrift plans that are avail- able to its employees. The aggregate cost of such plans for 2015 was $275,860. The qualified thrift plan acquired 38,349 shares of the Company’s Common Stock during the year ended December 31, 2015. It held 576,937 shares of the Company’s Common Stock at December 31, 2015. The Company also has both funded (qualified) and unfunded (supplemental) noncontributory defined benefit pen- sion plans that cover its employees. The pension plans provide a defined benefit based on years of service and final aver- age 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 val- ued 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 comprehensive income. OBLIGATIONS AND FUNDED STATUS OF DEFINED BENEFIT PLANS: DECEMBER 31, 2015 (MEASUREMENT DATE) 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 QUALIFIED SUPPLEMENTAL PLAN PLAN TOTAL $16,878,901 435,566 669,462 (769,505) (868,484) 16,345,940 $5,997,210 167,367 230,177 (314,277) (474,983) 5,605,494 $22,876,111 602,933 899,639 (1,083,782) (1,343,467) 21,951,434 19,467,227 (356,271) — (769,505) 18,341,451 $1,995,511 — — 314,277 (314,277) — ($5,605,494) 19,467,227 (356,271) 314,277 (1,083,782) 18,341,451 ($3,609,983) Accumulated benefit obligation at end of year $15,185,972 $5,019,013 $20,204,985 WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE OBLIGATION AT YEAR END: Discount rate Salary scale assumption Mortality 4.25% 4.25% 4.25% 4.25% RP-2014 Mortality Table/ MP-2015 Mortality Improvement Scale without collar adjustment CHANGE IN FUNDED STATUS: Noncurrent benefit asset - qualified plan LIABILITIES: Current benefit liability - supplemental plan Noncurrent benefit liability - supplemental plan BEFORE ADJUSTMENTS AFTER $2,588,326 ($592,815) $1,995,511 ($305,970) (5,691,240) ($5,609) 397,325 ($311,579) (5,293,915) AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME CONSIST OF: Net actuarial loss Prior service cost ACCUMULATED OTHER COMPREHENSIVE INCOME $5,725,662 60,592 $5,786,254 ($497,419) (40,965) ($538,384) $5,228,243 19,627 $5,247,870 WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET PERIODIC BENEFIT COST DURING YEAR: Discount rate Expected return on plan assets* Salary scale assumption Mortality 3.90% 7.50% 4.25% 3.90% N/A 4.25% RP-2014 Mortality Table pro- jected generationally with MP-2014 Mortality Improvement Scale without collar adjustment *Determined based upon a discount to the long-term average historical performance of the plan. 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 7. BENEFIT PLANS - (Continued from previous page.) 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 QUALIFIED SUPPLEMENTAL PLAN PLAN TOTAL $435,566 669,462 (1,243,845) 40,208 615,006 $516,397 $167,367 230,177 — 757 139,062 $537,363 $602,933 899,639 (1,243,845) 40,965 754,068 $1,053,760 PLAN ASSETS The Company’s qualified pension plan asset allocation by asset class at December 31, 2015, is as follows: ASSET CATEGORY Equity securities Limited partnership interest Money market fund Total LEVEL 2 — $2,841,744 — $2,841,744 LEVEL 3 — — — — LEVEL 1 $13,887,306 — 1,612,401 $15,499,707 TOTAL $13,887,306 2,841,744 1,612,401 $18,341,451 EXPECTED CASH FLOWS Expected Company contributions for 2016 Expected benefit payments: 2016 2017 2018 2019 2020 2021-2025 QUALIFIED PLAN — $834,092 859,992 883,983 903,576 917,773 4,908,100 SUPPLEMENTAL PLAN $311,579 $311,579 302,746 298,283 293,206 282,604 1,475,115 TOTAL $311,579 $1,145,671 1,162,738 1,182,266 1,196,782 1,200,377 6,381,215 The estimated amount that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2016 is $370,158 which is comprised of $352,354 of actuarial loss and $17,804 of service. 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 contains clauses whereby the Company receives free rent for a specified number of months and credit towards construction of office improvements, and incurs escalations annually relating to operating costs and real property taxes and to annual rent charges beginning in February 2013. The Company has the option to renew the lease after February 2018 for five years at market rates. Rental expense approximated $1,164,300 for the year ended December 31, 2015. Minimum rental commitments under the operating lease are approximately $1,183,000 per annum in 2016 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, 2015, 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 finan- cial state ments and financial highlights are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial state ments and financial high- lights 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 per- form 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 con- sideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectivness 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 confirma- tion of securities owned as of December 31, 2015, by correspon dence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant esti- mates made by management, as well as evaluating the overall financial statement presenta- tion. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of General American Investors Company, Inc. at December 31, 2015, the results of its operations 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 conformity with U.S. generally accepted accounting principles. New York, New York February 8, 2016 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 Jeffrey W. Priest (53) 2010 PRINCIPAL OCCUPATION DURING PAST 5 YEARS President of the Company since 2012 and Chief Executive Officer since 2013 NAME (AGE) EMPLOYEE SINCE Sally A. Lynch, Ph.D. (56) 1997 Andrew V. Vindigni (56) Senior Vice-President of the 1988 Company since 2006, Vice-President 1995-2006 securities analyst (financial services and consumer non-durables industries) Eugene S. Stark (57) 2005 Craig A. Grassi (47) 1991 Vice-President, Administration of the Company and Principal Financial Officer since 2005, Chief Compliance Officer since 2006 Vice-President of the Company since 2013, Assistant Vice- President 2005-2012 securities analyst and information technology Anang K. Majmudar (41) 2012 Michael W. Robinson (43) 2006 Diane G. Radosti (63) 1980 Linda J. Genid (57) 1983 PRINCIPAL OCCUPATION DURING PAST 5 YEARS Vice-President of the Company since 2006, securities analyst (biotechnology industry) Vice-President of the Company since 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 Corporate Secretary of the Company effective 2016, Assistant Corporate Secretary 2014-2015, network administrator 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 6, 2016. 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 purchases of Common and Preferred Stock may be made at such times, at such prices, in such amounts and in such manner as the Board of Directors may deem advisable. The policies and procedures used by the Company to determine how to vote proxies relating to portfolio securities and the Company’s proxy voting record for the twelve-month period ended June 30, 2015 are available: (1) without charge, upon request, by calling us at our toll-free telephone number (1-800-436-8401), (2) on the Company’s website at www.generalamericaninvestors.com and (3) on the Securities and Exchange Commission’s website at www.sec.gov. In addition to distributing financial statements as of the end of each quarter, General American Investors files a Quarterly Schedule of Portfolio Holdings (Form N-Q) with the Securities and Exchange Commission (“SEC”) as of the end of the first and third calendar quarters. The Company’s Forms N-Q are available at www.generalamerican- investors.com and on the SEC’s website: www.sec.gov. Copies of Forms N-Q may also be obtained and reviewed at the SEC’s Public Reference Room in Washington, DC. or through the Company by calling us at 1-800-436-8401. Information on the operation of the SEC’s Public Reference Room may be obtained by calling 1-800-SEC-0330. On April 22, 2015, 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 related SEC rules, the Company’s principal executive and principal financial officer made quarterly certifications, included in filings with the SEC on Forms N-CSR and N-Q relating to, among other things, the Company’s disclosure controls and procedures and internal control over financial reporting, as applicable. D I R E C T O R S G e n e r a l A m e r i c a n I n v e s t o r s NAME (AGE) DIRECTOR SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS INDEPENDENT DIRECTORS Arthur G. Altschul, Jr. (51) 1995 Rodney B. Berens (70) 2007 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 (97) Philanthropist 1961 Spencer Davidson (73) 1995 John D. Gordan, III (70) 1986 Chairman of the Board General American Investors Company, Inc. President and Chief Executive Officer (1995-2012) Attorney Beazley USA Services, Inc. (2013) (insurance) Senior Counsel (2010-2011) Partner (1994-2010) (Retired) Morgan, Lewis & Bockius LLP Betsy F. Gotbaum (77) Consultant 2010 Sidney R. Knafel (85) 1994 Lead Independent Director Managing Partner SRK Management Company (private investment company) Daniel M. Neidich (66) 2007 Chief Executive Officer Dune Real Estate Partners LP CURRENT DIRECTORSHIPS AND AFFILIATIONS Child Mind Institute, Director Delta Opportunity Fund, Ltd., Director Neurosciences Research Foundation, Trustee Overbrook Foundation, Director Alfred P. Sloan Foundation, Member of Investment Committee Svarog Capital Advisors, 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 IGENE Biotechnology, Inc., Director Child Mind Institute, Director Prep for Prep, Director Real Estate Roundtable, Member (formerly Chairman) Urban Land Institute, Trustee Henry R. Schirmer (51) 2015 Results for Development Institute, Director Chief Financial Officer/Senior Vice-President Finance Unilever North America (2012) Chief Financial Officer/Senior Vice-President Finance Unilever Germany/Australia/Switzerland (2008-2012) Raymond S. Troubh (89) Financial Consultant Diamond Offshore Drilling, Inc., Director 1989 INTERESTED DIRECTOR Jeffrey W. Priest (53) 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, 2016.

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