GAM Holding AG
Annual Report 2016

Plain-text annual report

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 6 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. 2016 2015 $1,022,534,692 8,172,289 91,570,557 (15,321,337) (11,311,972) $1,068,028,205 13,728,242 34,130,660 (76,268,833) (11,311,972) $37.56 $31.18 -17.0% $37.74 $31.94 -15.4% 27,221,115 $33.25-$26.88 15,584,306 28,296,697 $35.98-$30.46 16,381,264 DIVIDEND SUMMARY (per share) (unaudited) Record Date Payment Date Ordinary Income Long-Term Capital Gain Total Common Stock Nov. 14, 2016 Jan. 30, 2017 Total from 2016 earnings Dec. 30, 2016 Feb. 10, 2017 Nov. 16, 2015 Feb. 1, 2016 Total from 2015 earnings Dec. 30, 2015 Feb. 12, 2016 $0.282605 — $0.282605 $0.340000 0.051500 $0.391500 $2.797395 0.200000 $2.997395 $0.810000 0.048500 $0.858500 $3.080000 0.200000 $3.280000 $1.150000 0.100000 $1.250000 Preferred Stock Mar. 7, 2016 Jun. 7 2016 Sept. 7, 2016 Dec. 7, 2016 Total for 2016 Mar. 9, 2015 Jun. 8 2015 Sept. 7, 2015 Dec. 7, 2015 Total for 2015 Mar. 24, 2016 Jun. 24, 2016 Sept. 26, 2016 Dec. 27, 2016 Mar. 24, 2015 Jun. 24, 2015 Sept. 24, 2015 Dec. 24, 2015 $.034185 .034185 .034185 .034185 $.136740 $.109946 .109946 .109946 .109946 $.439784 $.337690 .337690 .337690 .337690 $1.350760 $.261929 .261929 .261929 .261929 $1.047716 $.371875 .371875 .371875 .371875 $1.487500 $.371875 .371875 .371875 .371875 $1.487500 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 re- investment of all dividends) increased 9.7% for the year ended December 31, 2016. The U.S. stock market was up 12.0% for the year, as measured by our benchmark, the Standard & Poor’s 500 Stock Index (including income). The return to our Common Stockholders in- creased by 7.6% and the discount at which our shares traded to their NAV continued to fluctu- ate and on December 31, 2016, it was 17.0%. The table that follows provides a compre- hensive presentation of our performance and compares our returns on an annualized basis with the S&P 500. Years Stockholder Return (Market Value) NAV Return S&P 500 3 5 10 20 30 40 50 3.7% 4.7% 8.9% 12.4 4.3 10.1 11.4 13.6 11.8 12.2 5.0 9.8 11.7 13.3 12.0 14.7 6.9 7.7 10.1 11.1 10.1 The sectors that contributed to our perfor- mance during the year relative to our benchmark included materials, technology, energy, financials, and consumer discretion- ary. Detractors from our relative performance included telecommunications, healthcare, and consumer staples. Our lack of holdings in utilities and real estate also detracted from total return performance. Momentum in the U.S. economy improved during the second half of 2016. The inventory reduction that had restrained the economy for nearly 2 years appears to have run its course, oil prices have stabilized and rebounded mod- estly, employment data appear to be advancing further, with more conversions of part time to full time workers and wages have improved. U.S. consumer spending continues to grow at nearly 4% with surveys suggesting contin- ued high consumer and business confidence. China remains a wildcard regarding its long term economic stability, but recent data con- firm a rebound in growth, albeit funded in large part with debt. U.S. housing markets continue their advance thanks to rising house- hold formations. The election results surprised many and were an elixir for domestic equity markets as prospects for pro-business policies of lower taxes, infrastructure spending and reduced regulation encouraged investors to imagine a significantly enhanced political and economic environment for U.S. equities. Though sentiment has changed, there remain obstacles for the economy and the markets overall. The Federal Reserve is a potential constraint on markets with a determined path for in- terest rates that appears to be higher, which may limit the price to earnings multiple inves- tors are willing to pay. The U.S. Dollar since the election has rallied significantly with as- sociated potential negative consequences for earnings on foreign sales for U.S. businesses. And though policies of economic stimulation are anticipated, the specifics have not yet been detailed. Election ambiguity in the U.S. may have ended, but it begins anew in the European Union as Germany, France, the Netherlands and, potentially Italy, are all slated for elec- tions with rising candidates from politically populist and nationalist parties. The combina- tion of these elections and the effects of the Brexit could exacerbate currency, bond, and stock market volatility and other economic ills which may reverberate to our markets and economy. In addition, much of the improve- ment in sentiment in the U.S. is based on the potential changes anticipated from the Republican controlled Congress and White House. Were significant deviations from ex- pectations of regulation and tax relief to occur, it is possible that the markets would react swiftly and negatively. On the whole, improvements in economic growth over the prior six months have proved to be more substantive than many expected. The earnings recession experienced by compa- nies in the U.S. for the past two years appears to have ended with the third quarter’s earnings reports. As yet unreported, fourth quarter S&P 500 earnings are anticipated by Wall Street analysts to have increased more than 3%, year over year. For 2017, those same analysts are projecting mid to high single digit growth. Likewise, with political uncertainty in the European Union increasing this year, it would seem unlikely that its central bank would reduce the ongoing Quantitative Easing sub- stantively. Thus, liquidity in markets should remain high, economic growth may acceler- ate and earnings increases appear to have the upper hand over multiple contraction to yield better equity performance especially for securi- ties of companies with strong balance sheets, high cash flow yields and disciplined capital al- location. Despite the shorter term caveats and the potential for elevated volatility, we remain optimistic on the long term performance of equities. 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.generalamericanin- vestors.com. By Order of the Board of Directors, Jeffrey W. Priest President and Chief Executive Officer January 19, 2017 2 T H E C O M P A N Y (cid:0) (cid:7) (cid:6) (cid:2) (cid:4) (cid:4) (cid:2) (cid:1) (cid:1) (cid:1) (cid:9) (cid:3) (cid:3) (cid:5) (cid:8) (cid:10) (cid:2) (cid:11) (cid:1) (cid:12) (cid:13) (cid:14) (cid:3) (cid:12) 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 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 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. ommon Stock “GAM” Common Stock As a closed-end investment company, the Company does not offer its shares continu- ously. The Common Stock is listed on The New York Stock Exchange (symbol, GAM) and can be bought or sold in the same manner as all listed stocks. Net asset value is computed and published on the Company’s website daily (on an unaudited basis) and is also furnished upon request. It is also available on most electronic quotation services using the symbol “XGAMX.” Net asset value per share (NAV), market price, and the discount or premium from NAV as of the close of each week, is pub- lished in Barron’s and The Wall Street Journal, Monday edition. While shares of the Company usually sell at a discount to NAV, as do the shares of most other domestic equity closed-end investment companies, they occasionally sell at a pre- mium over NAV. 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 NAV of at least 8%. To date, 24,325,088 shares have been repurchased. “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 authorized the repur- chase of up to 1 million Preferred Shares in the open market at prices below $25 per share. To date, 395,313 shares have been repurchased. 3 T H E C O M P A N Y (cid:15) (cid:22) (cid:21) (cid:17) (cid:19) (cid:19) (cid:17) (cid:16) (cid:16) (cid:16) (cid:24) (cid:18) (cid:18) (cid:20) (cid:23) (cid:25) (cid:17) (cid:26) (cid:16) (cid:27) (cid:28) (cid:29) (cid:18) (cid:27) 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 1943-2016 (except for the year 1974). (A table listing dividends and distributions paid during the 20-year period 1997-2016 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, 2016 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, 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 payment, they will receive a state- ment 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, including the ability of share- holders 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.generalameri- caninvestors.com - click on Distributions & Reports, then Report Downloads. Privacy Policy and Practices The Company collects non- public personal information about its direct stockhold- ers with respect to their transactions in shares of the Company’s securities (those stockholders whose shares are registered directly in their names). This infor- mation 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 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 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 to comply with federal standards to secure our stockholders’ informa- tion. 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cid:30) % $ " " , (cid:31) (cid:31) (cid:31) ’ ) (cid:31) ! ! * ! * ( # & + T he investment return for a Common Stockholder of General American Investors (GAM) over the 20 years ended December 31, 2016 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 1997. 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 and distributions at the 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 total rate of return on this widely-recognized, 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 $14,258 42.58% $13,205 32.05% $13,333 33.33% 18,722 26,065 31,043 32,388 23,575 29,943 32,574 38,242 44,660 48,554 25,151 34,422 40,012 37,895 45,387 60,918 66,596 63,040 67,824 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 7.59 17,845 24,341 28,635 28,291 21,778 27,746 30,623 35,584 39,939 43,138 24,580 32,466 37,436 36,362 42,656 56,873 60,547 59,603 65,372 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 9.68 17,140 20,732 18,847 16,607 12,930 16,623 18,416 19,306 22,329 23,537 14,812 18,730 21,550 22,009 25,528 33,802 38,430 38,972 43,640 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 11.98 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 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 7 - 2 0 1 6 ) ( U N A U D I T E D ) EARNINGS SOURCE SHORT-TERM LONG-TERM YEAR INCOME CAPITAL GAINS CAPITAL GAINS 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 $2.950 4.400 4.050 6.160 1.370 .330 .590 .957 1.398 2.666 — — $.620 1.550 .640 — — — .041 — $.210 .470 .420 .480 .370 .030 .020 .217 .547 .334 EARNINGS SOURCE SHORT-TERM LONG-TERM RETURN OF YEAR INCOME CAPITAL GAINS CAPITAL GAINS CAPITAL 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 $.706 .186 .103 .081 .147 .215 .184 .321 .392 .283 $.009 — .051 .033 .011 .015 — .254 — — $5.250 .254 .186 .316 .342 1.770 1.916 2.925 .858 2.997 — — $.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 ) R Y X T V V T T ‘ S S S [ ] S U U ^ U ^ \ _ W Z 20-YEAR INVESTMENT RESULTS ASSUMING AN INITIAL INVESTMENT OF $10,000 COMPARATIVE ANNUALIZED INVESTMENT RESULTS YEARS ENDED DECEMBER 31, 2016 STOCKHOLDER RETURN GAM NET ASSET VALUE S&P 500 STOCK INDEX 1 year 5 years 10 years 15 years 20 years 7.6% 9.7% 12.4 4.3 5.1 10.1 12.2 5.0 5.7 9.8 12.0% 14.7 6.9 6.7 7.7 CUMULATIVE VALUE OF INVESTMENT $100,000 $75,000 $50,000 $25,000 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 6 1 0 2 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 ) GAM Stockholder Return GAM Net Asset Value S&P 500 Stock Index $0 a b c d e f c g h e i e j k l e m n m i l b c o m p q k n r s h n c l k h h c l h k q q t e j k u t c l m e l h m p p m n o v l m j w u r e n d x h l g r y g m x q k h m i z c j c p u c g { | } ~ (cid:127) | (cid:128) e h h b m (cid:129) n e n l b c l k u t c (cid:130) 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 Media Retailing Industrials Capital Goods Commercial & Professional Services DECEMBER 31, 2016 COST(000) VALUE(000) % COMMON NET ASSETS $1,676 18,221 43,648 63,545 10,591 52,159 42,907 105,657 70,878 23,645 94,523 16,175 6,057 19,154 40,128 81,514 48,563 11,168 59,731 $18,772 55,520 165,150 239,442 32,658 77,438 76,573 186,669 117,431 42,591 160,022 15,333 5,282 20,028 105,248 145,891 61,957 44,944 106,901 1.8% 5.4 16.2 23.4 3.2 7.5 7.5 18.2 11.5 4.1 15.6 1.5 0.5 2.0 10.3 14.3 6.1 4.4 10.5 10.1 Health Care Pharmaceuticals, Biotechnology & Life Sciences 55,507 102,783 Energy Miscellaneous* Materials Telecommunication Services Short-Term Securities Total Investments Other Assets and Liabilities - Net Preferred Stock Net Assets Applicable to Common Stock 44,618 34,234 10,039 14,740 564,108 141,106 $705,214 77,802 35,693 11,952 10,670 1,077,825 141,106 1,218,931 (6,279) (190,117) $1,022,535 7.6 3.5 1.2 1.0 105.4 13.8 119.2 (0.6) (18.6) 100.0% * Securities which have been held for less than one year, not previously disclosed and not restricted. (see notes to unaudited financial statements) 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 6 ( U N A U D I T E D ) (cid:131) (cid:138) (cid:137) (cid:135) (cid:133) (cid:133) (cid:145) (cid:133) (cid:135) (cid:132) (cid:132) (cid:132) (cid:140) (cid:132) (cid:142) (cid:134) (cid:134) (cid:143) (cid:143) (cid:134) (cid:141) (cid:136) (cid:144) (cid:139) 6 INCREASES: NEW POSITIONS Alphabet Inc. Amazon.com, Inc. eBay Inc. IMAX Corporation Regal Entertainment Group ADDITIONS CVS Health Corporation Danone Diageo plc ADR Gilead Sciences, Inc. Intra-Cellular Therapies, Inc. Liberty Interactive Corporation, Series A Universal Display Corporation DECREASES: ELIMINATIONS REDUCTIONS Hertz Global Holdings, Inc. Keysight Technologies, Inc. Synchronoss Technologies, Inc. American Express Company Arch Capital Group Ltd. Ariad Pharmaceuticals, Inc. ASML Holding N.V. Cameco Corporation Celgene Corporation Cempra, Inc. Chipotle Mexican Grill, Inc. Ensco plc - Class A Halliburton Company Helix Energy Solutions Group, Inc. Huntsman Corporation Intel Corporation JPMorgan Chase & Co. M&T Bank Corporation Macy's, Inc. Merck & Co., Inc. MetLife, Inc. Nelnet, Inc. Paratek Pharmaceuticals, Inc. QUALCOMM Incorporated Repros Therapeutics Inc. Vodafone Group plc ADR Willis Towers Watson plc NET SHARES TRANSACTED SHARES HELD 23,000 20,000 285,000 105,300 53,900 55,000 18,826 27,464 45,000 55,000 29,534 45,100 104,012 127,900 378,034 20,000 115,000 43,300 15,000 672,000 25,000 350,000 7,000 210,000 15,000 8,841 400,000 65,000 70,000 20,000 133,700 132,000 20,000 100,000 277,076 50,000 121,355 255,500 95,300 23,000 20,000 580,000 (b) 349,496 (b) 439,500 (b) 197,280 220,000 209,864 483,600 284,942 339,199 283,309 ----- ----- ----- 225,000 495,000 714,100 185,850 800,819 165,000 164,409 14,000 440,000 520,000 1,721,159 626,422 325,500 215,000 120,000 241,326 265,191 380,000 400,000 263,176 341,200 589,768 428,352 147,998 (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. (see notes to financial statement) 7 ¡ ¢ £ ⁄ ¥ ƒ ¥ £ § £ ¤ ¥ ' “ « ¤ ‹ £ ⁄ ¥ § £ ¤ ¥ ⁄ ƒ ⁄ ' “ › £ fi £ § fl £ (cid:176) – † ‡ · (cid:181) † ¶ ‡ ⁄ ¢ ' • ¤ ' ¤ ‚ ƒ „ £ ⁄ ” » † (cid:181) « « ¤ fi … ‰ (cid:190) £ ⁄ ¿ (cid:192) ⁄ £ fi ‰ (cid:176) ¥ ` « « ⁄ ⁄ ‰ £ ⁄ ´ ˆ ⁄ ¥ £ (cid:190) ¢ £ (cid:176) £ ƒ (cid:176) £ ¥ ¢ £ ¥ £ ¤ … ƒ (cid:176) „ £ ⁄ ¥ ¢ ' … (cid:190) ¤ „ ⁄ ' ¤ « ¥ ¢ ƒ ¥ (cid:190) ƒ ¥ £ ´ 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 ) (cid:146) (cid:153) (cid:152) (cid:148) (cid:150) (cid:150) (cid:148) (cid:148) (cid:160) (cid:147) (cid:147) (cid:147) (cid:155) (cid:157) (cid:147) (cid:149) (cid:149) (cid:158) (cid:149) (cid:158) (cid:156) (cid:151) (cid:154) (cid:159) 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. 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. 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. 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. SHARES VALUE % COMMON NET ASSETS 919,768 $69,102,170 6.8% 787,800 44,943,990 4.4 495,000 42,713,550 4.2 680,686 42,297,828 4.1 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, oncology and other related areas. NESTLÉ S.A. Nestlé is a well-managed, global food company with a favorably-positioned product portfolio and an excellent AA rated balance sheet. High market share, solid volume growth, strong pricing power, expense control and steady capital management yield durable, above-average, long-term total return potential. 483,600 450,000 34,630,596 3.4 32,297,603 3.2 UNILEVER N.V. Unilever N.V. is a well-managed, primarily emerging market-based, global consumer goods manufacturer focusing on personal care, home care, food and refreshment products and operates with a solid A+ rated balance sheet. Advantaged geographies coupled with above average volume growth, pricing power and management execution generates above average long-term shareholder returns. 704,378 28,984,436 2.8 GENERAL ELECTRIC COMPANY General Electric is a global industrial and technology company. The company's diverse mix of infrastructure, transportation, energy and healthcare 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. 900,000 HALLIBURTON COMPANY Halliburton offers a broad suite of services and products to customers worldwide for the exploration, development and production of oil and gas. The company has the scale, product depth and technology to provide value-added customer service and produce an attractive long- term return on invested capital and strong shareholder appreciation. 520,000 EVEREST RE GROUP, LTD. Everest Re is one of the largest independent U.S. property and casualty reinsurers, generates annual premiums of approximately $5 billion, has a high quality investment portfolio, and a well-reserved A+ balance sheet. This Bermuda domiciled company has a strong management team that exercises prudent underwriting discipline and efficient expense control, resulting in above-average earnings and book value growth. 125,000 28,440,000 2.8 28,126,800 2.7 27,050,000 2.6 $378,586,973 37.0% 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 6 ˜ ¸ ˚ ˘ ¨ ¨ ˘ ˘ (cid:210) ¯ ¯ ¯ ˝ ˇ ¯ ˙ ˙ — ˙ — ˛ (cid:201) (cid:204) (cid:209) CONSUMER DISCRETIONARY (14.3%) SHARES COMMON STOCKS AUTOMOBILES AND COMPONENTS (1.5%) 1,264,063 Ford Motor Company CONSUMER SERVICES (0.5%) VALUE (NOTE 1a) (COST $16,174,723) $15,333,084 14,000 Chipotle Mexican Grill, Inc. (a) (COST $6,056,957) 5,282,480 MEDIA (2.0%) 349,496 439,500 Regal Entertainment Group IMAX Corporation (a) RETAILING (10.3%) 20,000 Amazon.com, Inc. (a) 339,199 Liberty Interactive Corporation, Series A (a) 241,326 Macy's, Inc. 919,768 The TJX Companies, Inc. CONSUMER STAPLES (15.6%) FOOD, BEVERAGE AND TOBACCO (11.5%) 220,000 Danone 209,864 Diageo plc ADR 450,000 Nestlé S.A. 195,000 PepsiCo, Inc. 704,378 Unilever N.V. FOOD AND STAPLES RETAILING (4.1%) 168,781 Costco Wholesale Corporation 197,280 CVS Health Corporation ENERGY (7.3%) 113,000 Anadarko Petroleum Corporation 160,900 Apache Corporation 800,819 Cameco Corporation 440,000 Ensco plc - Class A 3,830,440 Gulf Coast Ultra Deep Royalty Trust (a) 520,000 Halliburton Company 1,721,159 Helix Energy Solutions Group, Inc. (a) (COST $19,154,133) (COST $40,128,215) (COST $81,514,028) (COST $70,877,764) (COST $23,645,176) (COST $94,522,940) (COST $43,436,744) 10,974,174 9,053,700 20,027,874 14,997,400 12,506,267 8,641,884 69,102,170 105,247,721 145,891,159 13,932,688 21,813,264 32,297,603 20,402,850 28,984,436 117,430,841 27,023,526 15,567,365 42,590,891 160,021,732 7,879,490 10,212,323 8,384,575 4,276,800 555,414 28,126,800 15,180,622 74,616,024 FINANCIALS (23.4%) BANKS (1.8%) 120,000 M&T Bank Corporation (COST $1,676,067) 18,771,600 DIVERSIFIED FINANCIALS (5.4%) 225,000 American Express Company 215,000 400,000 Nelnet, Inc. JPMorgan Chase & Co. INSURANCE (16.2%) 158,877 Aon plc 495,000 Arch Capital Group Ltd. (a) 187,500 Axis Capital Holdings Limited 110 Berkshire Hathaway Inc. Class A (a) (b) 125,000 Everest Re Group, Ltd. 380,000 MetLife, Inc. 147,998 Willis Towers Watson plc (COST $18,221,288) (COST $43,647,656) (COST $63,545,011) 16,668,000 18,552,350 20,300,000 55,520,350 17,719,552 42,713,550 12,238,125 26,853,310 27,050,000 20,478,200 18,097,195 165,149,932 239,441,882 9 HEALTH CARE (10.1%) 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 6 - c o n t i n u e d (cid:211) (cid:218) (cid:217) (cid:213) (cid:215) (cid:215) (cid:213) (cid:213) Æ (cid:212) (cid:212) (cid:212) (cid:220) (cid:222) (cid:212) (cid:214) (cid:214) (cid:223) (cid:214) (cid:223) (cid:221) (cid:216) (cid:219) (cid:224) SHARES COMMON STOCKS (Continued) VALUE (NOTE 1a) Ariad Pharmaceuticals, Inc. (a) Celgene Corporation (a) Cempra, Inc. (a) Gilead Sciences, Inc. Intra-Cellular Therapies, Inc. (a) PHARMACEUTICALS, BIOTECHNOLOGY AND LIFE SCIENCES 714,100 165,000 164,409 483,600 284,942 265,191 Merck & Co., Inc. 263,176 460,808 589,768 Paratek Pharmaceuticals, Inc. (a) Pfizer Inc. Repros Therapeutics Inc. (a) INDUSTRIALS (10.5%) CAPITAL GOODS (6.1%) 189,131 900,000 190,000 Eaton Corporation PLC General Electric Company United Technologies Corporation COMMERCIAL AND PROFESSIONAL SERVICES (4.4%) Republic Services, Inc. 787,800 $8,883,404 19,098,750 460,345 34,630,596 4,299,775 15,611,794 4,052,910 14,967,044 778,494 102,783,112 12,688,799 28,440,000 20,827,800 61,956,599 (COST $55,506,985) (COST $48,563,291) (COST $11,167,520) (COST $59,730,811) 44,943,990 106,900,589 INFORMATION TECHNOLOGY (18.2%) SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT (3.2%) 185,850 325,500 ASML Holding N.V. Intel Corporation SOFTWARE AND SERVICES (7.5%) 23,000 580,000 680,686 Alphabet Inc. (a) eBay Inc. (a) Microsoft Corporation TECHNOLOGY HARDWARE AND EQUIPMENT (7.5%) 124,000 790,000 341,200 283,309 Apple Inc. Cisco Systems, Inc. QUALCOMM Incorporated Universal Display Corporation (a) (COST $10,590,861) (COST $51,991,043) (COST $42,903,836) (COST $105,485,740) 20,852,370 11,805,885 32,658,255 17,751,860 17,220,200 42,297,828 77,269,888 14,361,680 23,873,800 22,246,240 15,950,297 76,432,017 186,360,160 MATERIALS (1.2%) 626,422 Huntsman Corporation (COST $10,039,342) 11,952,132 MISCELLANEOUS (3.5%) Other (c) (COST $34,234,145) 35,693,482 TELECOMMUNICATION SERVICES (1.0%) 428,352 Vodafone Group plc ADR (COST $14,468,110) 10,464,639 TOTAL COMMON STOCKS (105.1%) (COST $562,483,856) 1,074,124,911 TECHNOLOGY HARDWARE AND EQUIPMENT (0.0%) WARRANTS WARRANT (a) 281,409 Applied DNA Sciences, Inc. (COST $2,814) 140,705 CONTRACTS CALL OPTIONS ENERGY (0.3%) (100 SHARES EACH) COMPANY/EXPIRATION DATE/EXERCISE PRICE 15,000 Cameco Corporation/March 17, 2017/$10 10,000 Ensco plc/January 20, 2017/$8 TELECOMMUNICATION SERVICES (0.0%) 2,500 Vodafone Group plc ADR/July 21, 2017/$26 (COST $271,979) (COST $1,347,996) TOTAL CALL OPTIONS (0.3%) (COST $1,076,017) 1,425,000 1,700,000 3,125,000 205,000 3,330,000 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 6 - c o n t i n u e d (cid:226) Ø Ł (cid:228) (cid:230) (cid:230) (cid:228) (cid:228) (cid:240) ª ª ª º (cid:237) ª (cid:229) (cid:229) (cid:238) (cid:229) (cid:238) (cid:236) (cid:231) Œ (cid:239) CONTRACTS PUT OPTIONS (100 SHARES EACH) COMPANY/EXPIRATION DATE/EXERCISE PRICE ENERGY (0.0%) 500 68 Halliburton Company/February 17, 2017/$50 Helix Energy Solutions Group, Inc./March 17, 2017/$11 (COST $105,142) VALUE (NOTE 1a) $45,000 15,640 60,640 INFORMATION TECHNOLOGY SOFTWARE AND SERVICES 1,500 (0.0%) Microsoft Corporation/January 20, 2017/$62.50 TOTAL PUT OPTIONS (0.0%) (COST $168,061) (COST $273,203) 168,000 228,640 SHARES 141,106,388 SHORT-TERM SECURITIES AND OTHER ASSETS State Street Insitutional Treasury Plus Money Market Fund (13.8%) (COST $141,106,388) TOTAL INVESTMENTS (d) (119.2%) Liabilities in excess of receivables and other assets (-0.6%) (COST $705,214,257) PREFERRED STOCK (-18.6%) NET ASSETS APPLICABLE TO COMMON STOCK (100%) 141,106,388 1,218,930,644 (6,278,777) 1,212,651,867 (190,117,175) $1,022,534,692 ADR - American Depository Receipt (a) Non-income producing security. (b) Security is held as collateral for options written. (c) Securities which have been held for less than one year, not previously disclosed, and not restricted. (d) At December 31, 2016, the cost of investments for Federal income tax purposes was $705,404,791; aggregate gross unrealized appreciation was $531,423,240; aggregate gross unrealized depreciation was $17,897,387; and net unrealized appreciation was $513,525,853. (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 CONTRACTS CALL OPTIONS (100 SHARES EACH) COMPANY/EXPIRATION DATE/EXERCISE PRICE ENERGY 500 Halliburton Company/February 17, 2017/$55 INFORMATION TECHNOLOGY SOFTWARE AND SERVICES 68 Helix Energy Solutions Group, Inc./March 17, 2017/$12 1,500 Microsoft Corporation/February 17, 2017/$67.50 (PREMIUMS RECEIVED $223,189) PUT OPTIONS ENERGY 5,300 Cameco Corporation/March 17, 2017/$7 2,000 Ensco plc - Class A/January 20, 2017/$6 TELECOMMUNICATIONS SERVICES 2,500 Vodafone Group plc ADR/July 21, 2017/$22 TOTAL OPTIONS WRITTEN (PREMIUMS RECEIVED $462,617*) (PREMIUMS RECEIVED $685,806) VALUE (NOTE 1a) $97,500 1,700 58,500 157,700 53,000 10,000 262,500 325,500 $483,200 *The maximum cash outlay if all put options are exercised is $10,410,000. (see notes to financial statements) 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 æ ł (cid:247) (cid:255) (cid:243) (cid:243) ı (cid:243) ı (cid:242) (cid:242) (cid:242) œ (cid:252) (cid:242) (cid:253) (cid:253) (cid:244) (cid:244) (cid:244) ß (cid:254) (cid:246) ø 1 1 ASSETS INVESTMENTS, AT VALUE (NOTE 1a) Common stocks (cost $562,483,856) Warrant (cost $2,814) Purchased options (cost $1,621,199) Money market fund (cost $141,106,388) Total investments (cost $705,214,257) RECEIVABLES AND OTHER ASSETS Receivable for securities sold Dividends, interest and other receivables Qualified pension plan asset, net excess funded (note 7) Prepaid expenses, fixed assets and other assets TOTAL ASSETS LIABILITIES Payable for securities purchased Outstanding options written, at value (premiums received $685,806) Accrued preferred stock dividend not yet declared Accrued compensation payable to officers and employees 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 - 27,221,115 (note 5) NET ASSET VALUE PER COMMON SHARE NET ASSETS APPLICABLE TO COMMON STOCK Common Stock, 27,221,115 shares at par value (note 5) Additional paid-in capital (note 5) Over distributed net investment income (note 5) Undistributed realized gain on securities sold Unallocated distributions on Preferred Stock Unrealized appreciation on investments, options written and other Accumulated other comprehensive loss (note 7) NET ASSETS APPLICABLE TO COMMON STOCK (see notes to financial statements) DECEMBER 31, 2016 $1,074,124,911 140,705 3,558,640 141,106,388 1,218,930,644 4,110,006 2,040,139 2,338,732 597,684 1,228,017,205 2,582,135 483,200 219,955 3,068,000 5,508,944 3,127,159 375,945 15,365,338 190,117,175 $1,022,534,692 $37.56 $27,221,115 477,804,582 (1,947,100) 10,380,508 (219,955) 513,918,993 (4,623,451) $1,022,534,692 1 2 S T A T E M E N T O F O P E R A T I O N S (cid:0) (cid:7) (cid:6) (cid:2) (cid:4) (cid:4) (cid:2) (cid:2) (cid:14) (cid:1) (cid:1) (cid:1) (cid:9) (cid:11) (cid:1) (cid:3) (cid:3) (cid:12) (cid:3) (cid:12) (cid:10) (cid:5) (cid:8) (cid:13) INCOME Dividends (net of foreign withholding taxes of $637,083) Interest 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, 2016 $21,229,092 244,635 21,473,727 6,861,845 3,673,761 1,730,505 281,094 256,237 214,696 168,784 114,516 13,301,438 8,172,289 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 INCREASE 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 90,861,223 709,334 91,570,557 (15,321,337) 76,249,220 (11,311,972) $73,109,537 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 YEAR ENDED DECEMBER 31, 2016 2015 $8,172,289 91,570,557 (15,321,337) (84,421,509) $13,728,242 34,130,660 (76,268,833) (28,409,931) (1,039,878) (10,272,094) (11,311,972) (3,344,407) (7,967,565) (11,311,972) 73,109,537 (39,721,903) Funded status of defined benefit plans (note 7) 624,419 538,384 DISTRIBUTIONS TO COMMON STOCKHOLDERS From net investment income From net capital gains (8,988,445) (75,933,325) (9,622,112) (22,923,266) DECREASE IN NET ASSETS FROM COMMON DISTRIBUTIONS (84,921,770) (32,545,378) CAPITAL SHARE TRANSACTIONS (NOTE 5) Value of Common Shares issued in payment of dividends and distributions Cost of Common Shares purchased DECREASE IN NET ASSETS - CAPITAL TRANSACTIONS NET DECREASE IN NET ASSETS NET ASSETS APPLICABLE TO COMMON STOCK BEGINNING OF YEAR END OF YEAR (including over distributed net investment income of ($1,947,100) and ($92,807), respectively) income of ($1,947,100) and ($92,807), respectively) (see notes to financial statements) 33,686,020 (67,991,719) (34,305,699) (45,493,513) 13,532,276 (101,674,879) (88,142,603) (159,871,500) 1,068,028,205 1,068,028,205 1,227,899,705 $1,022,534,692 $1,022,534,692 $1,068,028,205 $1,068,028,205 F I N A N C I A L H I G H L I G H T S 1 8 7 3 5 5 3 3 ? 2 2 2 : < 2 4 4 = 4 = ; 6 9 > 1 3 (cid:15) (cid:16) (cid:17) (cid:18) (cid:19) (cid:20) (cid:21) (cid:17) (cid:22) (cid:16) (cid:23) (cid:24) (cid:22) (cid:25) (cid:17) (cid:26) (cid:22) (cid:16) (cid:19) (cid:26) (cid:17) (cid:23) (cid:25) (cid:17) (cid:26) (cid:19) (cid:18) (cid:27) (cid:28) (cid:29) (cid:25) (cid:17) (cid:26) (cid:30) (cid:23) (cid:26) (cid:31) (cid:19) (cid:28) (cid:17) ! (cid:19) (cid:18) (cid:19) " (cid:18) (cid:23) (cid:18) (cid:19) (cid:21) (cid:27) (cid:28) # (cid:17) (cid:22) (cid:18) (cid:31) (cid:17) (cid:28) (cid:18) (cid:26) (cid:17) (cid:18) $ (cid:26) (cid:28) " (cid:26) (cid:19) (cid:18) (cid:27) (cid:23) (cid:22) (cid:19) (cid:28) (cid:22) $ (cid:25) (cid:25) (cid:21) (cid:17) % ! (cid:31) (cid:17) (cid:28) (cid:18) (cid:19) (cid:21) (cid:19) (cid:18) (cid:19) (cid:30) (cid:23) (cid:26) (cid:17) (cid:19) (cid:16) & (cid:17) (cid:19) (cid:26) ! (cid:27) (cid:28) (cid:18) (cid:16) (cid:17) (cid:30) (cid:27) # (cid:17) % & (cid:17) (cid:19) (cid:26) (cid:25) (cid:17) (cid:26) (cid:27) (cid:23) ! (cid:17) (cid:28) (cid:17) (cid:17) (cid:17) (cid:31) (cid:20) (cid:17) (cid:26) ( ) " * + ) , - ! ! ’ PER SHARE OPERATING PERFORMANCE Net asset value, beginning of year Net investment income Net gain (loss) on securities - realized (cid:15) (cid:16) (cid:27) (cid:22) (cid:27) (cid:28) (cid:30) (cid:23) (cid:26) (cid:31) (cid:19) (cid:18) (cid:27) (cid:23) (cid:28) (cid:16) (cid:19) (cid:22) and unrealized (cid:20) (cid:17) (cid:17) (cid:28) (cid:17) (cid:26) (cid:27) # (cid:17) (cid:30) (cid:26) (cid:23) (cid:31) (cid:27) (cid:28) (cid:30) (cid:23) (cid:26) % ! ! Other comprehensive income (loss) (cid:31) (cid:19) (cid:18) (cid:27) (cid:23) (cid:28) (cid:23) (cid:28) (cid:18) (cid:19) (cid:27) (cid:28) (cid:17) (cid:27) (cid:28) (cid:18) (cid:16) (cid:17) ! (cid:30) (cid:27) (cid:28) (cid:19) (cid:28) (cid:27) (cid:19) (cid:21) (cid:22) (cid:18) (cid:19) (cid:18) (cid:17) (cid:31) (cid:17) (cid:28) (cid:18) (cid:22) (cid:19) (cid:28) ! (cid:31) (cid:19) (cid:26) . (cid:17) (cid:18) (cid:25) (cid:26) (cid:27) (cid:17) (cid:19) (cid:18) (cid:19) (cid:30) (cid:23) (cid:26) (cid:18) (cid:16) (cid:17) ! / (cid:23) (cid:31) (cid:25) (cid:19) (cid:28) & 0(cid:22) (cid:22) (cid:16) (cid:19) (cid:26) (cid:17) (cid:22) - 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 2016 2015 2014 2013 2012 $37.74 .30 $39.77 .48 $41.07 .32 $32.68 .17 $29.78 .24 3.10 .02 3.42 (.04) (.38) (.42) 3.00 (.99) .02 (.49) (.12) (.27) (.39) (.88) 2.39 (.13) 2.58 (.04) (.34) (.38) 2.20 (.33) (2.85) (3.18) (.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) Net asset value, end of year Per share market value, end of year $37.56 $31.18 $37.74 $31.94 $39.77 $35.00 $41.07 $35.20 $32.68 $27.82 TOTAL INVESTMENT RETURN - Stockholder Return, based on market price per share RATIOS AND SUPPLEMENTAL DATA Net assets applicable to Common Stock, 7.59% (5.34%) 9.32% 34.24% 19.77% end of year (000’s omitted) $1,022,535 $1,068,028 $1,227,900 $1,229,470 $955,418 Ratio of expenses to average net assets applicable to Common Stock 1.27% 1.17% 1.10% 1.27% 1.67% Ratio of net income to average net assets applicable to Common Stock Portfolio turnover rate 0.78% 20.29% 1.17% 14.41% 0.78% 14.98% 0.47% 17.12% 0.74% 9.56% 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) $190,117 638% $190,117 662% $190,117 $190,117 $190,117 603% 746% 747% $25.00 $25.77 $25.00 $26.75 $25.00 $26.01 $25.00 $25.30 $25.00 $25.54 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 F B D D B B N A A A I K A C C L C L J E H M 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 V O U S S Q Q ] Q P P X Z P P R R [ R [ Y T W \ 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, 2016: Assets Common stocks Warrants Purchased options Money market fund Total Liabilities Options written Level 1 $1,074,124,911 140,705 3,558,640 141,106,388 $1,218,930,644 Level 2 — — — — — Level 3 — — — — — Total $1,074,124,911 140,705 3,558,640 141,106,388 $1,218,930,644 ($483,200) — — ($483,200) 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, 2016. 3. PURCHASES AND SALES OF SECURITIES Purchases and sales of securities (other than short-term securities and options) during 2016 amounted to $220,131,850 and $380,582,892, 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, 2016 were as fol- lows: COLLATERALIZED PUTS COVERED CALLS CONTRACTS 2,250 Options outstanding, December 31, 2015 Options written 8,068 Options terminated in closing purchase transaction (4,500) (500) Options expired (3,250) Options assigned 2,068 Options outstanding, December 31, 2016 PREMIUMS $1,473,462 1,789,719 (1,672,355) (129,998) (1,237,639) $223,189 CONTRACTS 2,500 27,500 (19,200) 0 (1,000) 9,800 PREMIUMS $404,556 1,038,184 (823,435) 0 (156,688) $462,617 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, 27,221,115 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on December 31, 2016. 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 ^ e d ‘ b b ‘ ‘ l _ _ _ g i _ a a j a j h c f k 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 2016 and 2015 were as follows: SHARES AMOUNT 2016 2015 2016 2015 Par Value of Shares issued in payment of dividends and distributions (includes 1,073,658 and 439,217 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 17.7% and 15.5%, respectively) Decrease in paid-in capital Total decrease Net decrease 1,073,658 439,217 $1,073,658 32,612,362 33,686,020 $439,217 13,093,059 13,532,276 (2,149,240) (3,014,364) (1,075,582) (2,575,147) (2,149,240) (65,842,479) (67,991,719) ($34,305,699) (3,014,364) (98,660,515) (101,674,879) ($88,142,603) At December 31, 2016, the Company held in its treasury 4,759,757 shares of Common Stock with an aggregate cost of $155,663,978. The tax basis distributions during the year ended December 31, 2016 are as follows: ordinary distributions of $10,028,323 and net capital gains distributions of $86,205,419. As of December 31, 2016, distributable earnings on a tax basis included $10,571,042 from undistributed net capital gains and $513,728,459 from net unrealized appreciation on investments if realized in future years. Reclassifications arising from permanent “book/tax” difference reflect non- tax deductible expenses during the year ended December 31, 2016. As a result, additional paid-in capital was decreased by $1,741 and over-distributed net investment income was decreased by $1,741. 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, 2016 to its offi- cers (identified on page 20) amounted to $6,684,000 of which $2,944,000 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 m t s o q q o o { n n n v x n y p p y p w r u z 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 2016 was $560,078. The qualified thrift plan acquired 76,611 shares and distributed 35,643 shares of the Company’s Common Stock during the year ended December 31, 2016. It held 617,905 shares of the Company’s Common Stock at December 31, 2016. 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, 2016 (MEASUREMENT DATE) CHANGE IN BENEFIT OBLIGATION: Benefit obligation at beginning of year Service cost Interest cost Benefits paid Actuarial (gain)/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 $16,345,940 402,507 701,608 (847,857) 214,912 16,817,110 $5,605,494 155,095 236,627 (320,320) (167,952) 5,508,944 $21,951,434 557,602 938,235 (1,168,177) 46,960 22,326,054 18,341,451 1,726,829 — (847,857) 19,220,423 $2,403,313 — — 320,320 (320,320) — ($5,508,944) 18,341,451 1,726,829 320,320 (1,168,177) 19,220,423 ($3,105,631) Accumulated benefit obligation at end of year $15,962,685 $5,208,726 $21,171,411 WEIGHTED-AVERAGE ASSUMPTIONS USED TO DETERMINE OBLIGATION AT YEAR END: Discount rate Salary scale assumption Mortality CHANGE IN FUNDED STATUS: Noncurrent benefit asset - qualified plan LIABILITIES: Current benefit liability - supplemental plan Noncurrent benefit liability - supplemental plan 4.00% 4.00% 4.50% for NHCE* and 2.75% for HCE* RP-2014 Mortality Table scaled back through 2006/ MP-2016 Projection Scale without collar adjustment BEFORE ADJUSTMENTS AFTER $1,995,511 $407,802 $2,403,313 ($311,579) (5,293,915) $4,034 92,516 ($307,545) (5,201,399) AMOUNTS RECOGNIZED IN ACCUMULATED OTHER COMPREHENSIVE INCOME CONSIST OF: Net actuarial (gain)/loss Prior service cost ACCUMULATED OTHER COMPREHENSIVE INCOME $5,228,243 19,627 $5,247,870 ($606,615) (17,804) ($624,419) $4,621,628 1,823 $4,623,451 WEIGHTED-AVERAGE ASSUMPTIONS TO DETERMINE NET PERIODIC BENEFIT COST DURING YEAR: Discount rate Expected return on plan assets** 4.25% 7.50% 4.25% 4.25% N/A 4.25% Salary scale assumption Mortality RP-2014 Mortality Table scaled back through 2006/ MP-2015 Projection Scale without collar adjustment *NHCE - Non-Highly Compensated Employee; HCE - Hightly Compensated Employee. **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 | (cid:131) (cid:130) (cid:128) (cid:138) ~ (cid:128) ~ ~ } } } (cid:133) } (cid:135) (cid:127) (cid:127) (cid:136) (cid:127) (cid:136) (cid:134) (cid:137) (cid:129) (cid:132) 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 $402,507 701,608 (1,359,683) 17,161 274,828 $36,421 $155,095 236,627 — 643 76,182 $468,547 $557,602 938,235 (1,359,683) 17,804 351,010 $504,968 PLAN ASSETS The Company’s qualified pension plan asset allocation by asset class at December 31, 2016, is as follows: ASSET CATEGORY Equity securities Limited partnership interest Money market fund Total LEVEL 2 — $2,847,927 — $2,847,927 LEVEL 3 — — — — LEVEL 1 $14,883,401 — 1,489,095 $16,372,496 TOTAL $14,883,401 2,847,927 1,489,095 $19,220,423 EXPECTED CASH FLOWS Expected Company contributions for 2016 Expected benefit payments: 2017 2018 2019 2020 2021 2022-2026 QUALIFIED PLAN — $881,639 906,441 923,816 935,619 942,530 5,070,408 SUPPLEMENTAL PLAN $307,545 $307,545 302,594 296,755 285,221 273,537 1,520,358 TOTAL $307,545 $1,189,184 1,209,035 1,220,571 1,220,840 1,216,067 6,590,766 The estimated amount that will be amortized from accumulated other comprehensive income into net periodic benefit cost in 2017 is $201,184 which is comprised of $200,227 of actuarial loss and $957 of service cost. 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 $1,166,000 for the year ended December 31, 2016. Minimum rental commitments under the operating lease are approximately $1,183,000 per annum in 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 (cid:146) (cid:139) (cid:145) (cid:143) (cid:141) (cid:143) (cid:141) (cid:153) (cid:141) (cid:140) (cid:150) (cid:148) (cid:140) (cid:140) (cid:140) (cid:142) (cid:151) (cid:142) (cid:151) (cid:142) (cid:149) (cid:147) (cid:152) (cid:144) 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, 2016, 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, 2016, 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, 2016, 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 13, 2017 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 (54) 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. (57) 1997 Andrew V. Vindigni (57) 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 (58) 2005 Craig A. Grassi (48) 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 (42) 2012 Diane G. Radosti (64) 1980 Linda J. Genid (58) 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) 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 meeting in April. The address for each officer is the Company’s office. All information is as of December 31, 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, 2016 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 15, 2016, 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 (cid:154) ¡ (cid:160) (cid:156) (cid:158) (cid:155) (cid:155) (cid:155) (cid:157) (cid:157) (cid:159) ¢ £ (cid:158) (cid:156) ⁄ (cid:156) ¥ (cid:155) ƒ § ¤ (cid:157) ƒ NAME (AGE) DIRECTOR SINCE PRINCIPAL OCCUPATION DURING PAST 5 YEARS INDEPENDENT DIRECTORS Arthur G. Altschul, Jr. (52) 1995 Founder and Managing Member Diaz & Altschul Capital Management, LLC (private investment company) Chairman Overbrook Management Corporation (investment advisory firm) Co-Founder and Chairman Kolltan Pharmaceuticals, Inc. (pharmaceuticals) (until Nov 2016) CURRENT DIRECTORSHIPS AND AFFILIATIONS Child Mind Institute, Director Delta Opportunity Fund, Ltd., Director Neurosciences Research Foundation, Trustee Overbrook Foundation, Director Rodney B. Berens (71) 2007 Founder, Chairman and Senior Investment Svarog Capital Advisors, Member of Investment Committee Strategist Berens Capital Management, LLC (investment advisory firm) The Morgan Library and Museum, Life 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 Lewis B. Cullman (98) Philanthropist 1961 Spencer Davidson (74) 1995 John D. Gordan, III (71) 1986 Chairman of the Board President and Chief Executive Officer (1995-2012) of Company Attorney Beazley USA Services, Inc. (insurance) Senior Counsel (2010-2011) Partner (1994-2010) (Retired) Morgan, Lewis & Bockius LLP (law firm) Betsy F. Gotbaum (78) 2010 Consultant Sidney R. Knafel (86) 1994 Daniel M. Neidich (67) 2007 Henry R. Schirmer (52) 2015 Lead Independent Director of Company Managing Partner SRK Management Company (private investment company) Chief Executive Officer Dune Real Estate Partners LP (real estate investment firm) Chief Financial Officer/Executive Vice-President Unilever Europe (April 2016) Chief Financial Officer/Senior Vice-President Finance Unilever North America (2012-2016) Chief Financial Officer/Senior Vice-President Finance Unilever Germany/Austria/ Switzerland (2008-2012) (consumer products) Chess-in-the-Schools, Chairman Emeritus 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 Trustees The New York Public Library, Trustee Neurosciences Research Foundation, Trustee Chess-in-the-Schools, Board of Advisors Community Service Society, Trustee Coro Leadership, Director Fisher Center for Alzheimer’s Research Foundation, Trustee Learning Leaders, Trustee Visiting Nurse Service of New York, Director Child Mind Institute, Director Prep for Prep, Director Real Estate Roundtable, Member (formerly Chairman) Urban Land Institute, Trustee Results for Development Institute, Director Raymond S. Troubh (90) Financial Consultant Diamond Offshore Drilling, Inc., Director 1989 INTERESTED DIRECTOR Jeffrey W. Priest (54) 2013 President (2012) and Chief Executive Officer (2013) of Company 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 December 31, 2016. 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 

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