Item 1.  Report to Shareholders

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.

 

 

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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General American Investors’ net asset value (NAV) per Common Share (assuming reinvestment 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 increased by 7.6% and the discount at which our shares traded to their NAV continued to fluctuate and on December 31, 2016, it was 17.0%.

The table that follows provides a comprehensive presentation of our performance and compares our returns on an annualized basis with the S&P 500.

 

The sectors that contributed to our performance during the year relative to our benchmark included materials, technology, energy, financials, and consumer discretionary. 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 modestly, 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 continued high consumer and business confidence. China remains a wildcard regarding its long term economic stability, but recent data confirm a rebound in growth, albeit funded in large part with debt. U.S. housing markets continue their advance thanks to rising household 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 interest rates that appears to be higher, which may limit the price to earnings multiple investors are willing to pay. The U.S. Dollar since the election has rallied significantly with associated 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 elections with rising candidates from politically populist and nationalist parties. The combination 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 improvement 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 expectations 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 companies 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 substantively. Thus, liquidity in markets should remain high, economic growth may accelerate and earnings increases appear to have the upper hand over multiple contraction to yield better equity performance especially for securities of companies with strong balance sheets, high cash flow yields and disciplined capital allocation. 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

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     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 regulatory purposes, the Company is classified as a diversified, closed-end management investment company; it is registered under and subject to the Investment Company Act of 1940 and Sub-Chapter M of the Internal Revenue Code.

     The primary objective of the Company is long-term capital appreciation. Lesser emphasis is placed on current income. In seeking to achieve its primary objective, the Company invests principally in common stocks believed by its management to have better than average growth potential.

The Company’s investment approach focuses on the selection of individual stocks, each of which is expected to meet a clearly defined portfolio objective. A 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.

     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 business career on Wall Street. Mr. Priest succeeds Mr. Spencer Davidson who served as Chief Executive Officer and Portfolio Manager from 1995 through 2012.

     As a closed-end investment company, the Company does not offer its shares continuously. 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 published in Barron’s and The Wall Street Journal, Monday edition.

While shares of the Company usually sell at a discount to NAV, as do the shares of most other domestic equity closed-end investment companies, they occasionally sell at a premium over NAV.

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.

     On September 24, 2003, the Company issued and sold in an underwritten offering 8,000,000 shares of its 5.95% Cumulative Preferred Stock, Series B with a liquidation preference of $25 per share ($200,000,000 in the aggregate). The Preferred Shares are rated “A1” by Moody’s Investors Service, Inc. and are listed and traded on The New York Stock Exchange (symbol, GAM Pr B). The Preferred Shares are available to leverage the investment performance of the Common Stockholders; higher market volatility for the Common Stockholders may result.

The Board of Directors authorized the repurchase 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.

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     The Company’s dividend and distribution policy is to distribute to stockholders before year-end substantially all ordinary income estimated for the full year and capital gains realized during the ten-month period ended October 31 of that year. If any additional capital 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 distributions 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 continuously 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 stockholder specifically requests payment in cash.

     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 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.generalamericaninvestors.com and (3) on the Securities and Exchange Commission’s website at www.sec. gov.

     The Company makes available direct registration for its Common Shareholders. Direct registration, an element of the Investors Choice Plan administered 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 statement showing the credit of the new shares as well as their Plan account and certificated share balances. A brochure which describes the features and benefits of the Investors Choice Plan, including 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.generalameri-caninvestors.com - click on Distributions & Reports, then Report Downloads.

     The Company collects non-public personal information about its direct stockholders with respect to their transactions in shares of the Company’s securities (those stockholders whose shares are registered directly in their names). This information includes the stockholder’s address, tax identification or Social Security number and dividend elections. We do not have knowledge of, nor do we collect personal information about, stockholders who hold the Company’s securities in “street name” registration.

We do not disclose any nonpublic personal information about our current or former stockholders 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 information to perform their responsibilities. We maintain safeguards to comply with federal standards to secure our stockholders’ information.

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Total return on $10,000 in-
vestment for 20 years ended
December 31, 2016

The 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
accompanying 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 Stockholder 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.

 

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.

 

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The diversification of the
Company’s net assets
applicable to its Common
Stock by industry group as
of December 31, 2016 is
shown in the table.

 

* Securities which have been held for less than one year, not previously disclosed and not restricted.
(see notes to unaudited financial statements)

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(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)

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The statement of
investments as of
December 31, 2016,
shown on pages 8 - 10
includes 59 security
issues. Listed here are the
ten largest holdings on
that date.

 

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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)

 

*The maximum cash outlay if all put options are exercised is $10,410,000.

(see notes to financial statements)

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(see notes to financial statements)

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(see notes to financial statements)

 

 

(see notes to financial statements)

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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, 2016.
This information has
been derived from infor-
mation contained in the
financial statements and
market price data for the
Company’s shares.

 

(see notes to financial statements)

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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.

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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:

 

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:

 

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.

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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:

 

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.

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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.

 

 

 

 

*NHCE - Non-Highly Compensated Employee; HCE - Hightly Compensated Employee.

**Determined based upon a discount to the long-term average historical performance of the plan.

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7. BENEFIT PLANS - (Continued from previous page.)

 

 

 

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.

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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 statements and financial highlights are the responsibility of the Company’s management.
Our responsibility is to express an opinion on these financial statements 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, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included confirma-
tion of securities owned as of December 31, 2016, by correspondence 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

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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.

 

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.

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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.

 

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ITEM 2. CODE OF ETHICS.

 

On July 9, 2003, the Board of Directors adopted a code of ethics that applies to

registrant's  principal  executive and senior  financial  officers.  The code of

ethics    is    available     on     registrant's     Internet     website    at

http://www.generalamericaninvestors.com/governance/codeofethics.php.
Since the code of  ethics was adopted there have been no amendments to the code
nor have there been granted any waivers from any provisions of the code of ethics.

 

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

 

The Board of Directors has determined  that none of the members of  registrant's

audit committee meets the definition of "audit  committee  financial  expert" as

the term has been defined by the U.S.  Securities and Exchange  Commission  (the

"Commission").  In addition,  the Board of  Directors  has  determined  that the

members  of  the  audit  committee  have  sufficient   financial  expertise  and

experience to perform the duties and responsibilities of the audit committee.

 

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

(a)  AUDIT FEES  The aggregate  fees paid and  accrued  by the  registrant  for

professional services rendered by its independent  auditors,  Ernst & Young LLP,

for the audit of the registrant's annual financial  statements and the review of

the registrant's semi-annual financial statements for 2016 and 2015 were $163,000

and $135,500, respectively.

 

(b) AUDIT RELATED FEES  The aggregate fees paid or accrued by the registrant for

audit-related professional services rendered by Ernst & Young LLP for 2016 and

2015 were $32,000 and $29,500, respectively.  Such services and related fees for

2016 and 2015 included:  review of  quarterly  employee  security  transactions  and
  issuance  of report thereon ($30,000 and $27,500,  respectively)  and other
  audit-related  services ($2,000  and $2,000, respectively).

 

(c)  TAX  FEES  The  aggregate  fees  paid  or  accrued  by the  registrant  for

professional  services  rendered  by  Ernst & Young  LLP for the  review  of the

registrant's  federal,  state  and  city  income  tax  returns  and  excise  tax

calculations for 2016 and 2015 were $21,000 and $20,300, respectively.

 

(d)  ALL OTHER FEES  No such fees were billed to the registrant by Ernst & Young

LLP for 2016 or 2015.

 

(e)(1) AUDIT COMMITTEE PRE-APPROVAL POLICY All services to be performed
 for the  registrant by Ernst & Young LLP must be pre-approved by the audit committee.
 All  services performed during 2016 and 2015 were pre-approved by the committee.

 

   (2) Not applicable.

 

(f) Not applicable.

 

(g)  The  aggregate  fees  paid  or  accrued  by the  registrant  for  non-audit

professional  services  rendered by Ernst & Young LLP to the registrant for 2016

and 2015 were $53,000 and $49,800, respectively.

 

(h) Not applicable.   

 

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

(a)  The  registrant  has  a  separately-designated   standing  audit  committee

established in accordance  with Section  3(a)(58)(A) of the Securities  Exchange

Act of 1934. The members of the audit committee are: John D. Gordan, III, Chairman,
Arthur G. Altschul, Jr.,Rodney B. Berens, Lewis B. Cullman, and Henry R. Schirmer.

 

(b) Not applicable.

 

ITEM 6. SCHEDULE OF INVESTMENTS

 

The schedule of investments in securities of unaffiliated issuers is included as

part of the report to stockholders filed under Item 1 of this form.

 

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES
FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

                    General American Investors Company, Inc.

 

           PROXY VOTING POLICIES AND PROCEDURES

 

 

     General American Investors Company, Inc. (the "Company") is uniquely

structured as an internally managed closed-end  investment company. Our research

efforts, including the receipt and analysis of proxy  material,  are focused on

the securities in the Company's  portfolio,  as well as alternative investment

opportunities.  We vote proxies relating to our portfolio securities in the best

long-term interests of the Company.

 

     Our investment approach stresses fundamental security analysis, which

includes an evaluation  of the  integrity,  as  well as the  effectiveness  of

management personnel.  In proxy material, we review management proposals and

management recommendations relating to shareholder proposals in order to, among

other things, gain assurance that management's positions are consistent with its

integrity and the long-term  interests of the company. We generally find this to

be the case and, accordingly, give significant weight to the views of management

when we vote proxies.

 

     Proposals  that may have an  impact  on the  rights  or  privileges  of the

securities held by the Company would be reviewed very carefully. The explanation

for a negative impact could justify the proposal; however, if such justification

were not present, we would vote against a significant reduction in the rights or

privileges associated with any of our holdings.

 

     Proposals  relating  to  corporate  governance  matters  are  reviewed on a

case-by-case  basis.  When they involve  changes in the state of  incorporation,

mergers or other restructuring,  we would, if necessary,  complete our review of

the rationale for the proposal by contacting company  representatives  and, with

few  exceptions,  vote  in  favor  of  management's  recommendations.  Proposals

relating to anti-takeover provisions, such as staggered boards, poison pills and

supermajorities could be more problematic.  They would be considered in light of

our  assessment  of the  capability of current  management,  the duration of the

proposal, the negative impact it might have on the attractiveness of the company

to future "investors," among other factors. We can envision  circumstances under

which we would vote against an anti-takeover provision.

 

     Generally, we would vote with management on proposals  relating to changes

to the company's capital structure, including increases and decreases of capital

and  issuances  of  preferred  stock;  however,  we would  review  the facts and

circumstances associated with each proposal before finalizing our decision.

 

     Well-structured stock option plans and management compensation programs are

essential for companies to attract and retain high caliber management personnel.

We generally vote in favor of proposals relating to these issues; however, there

could be an occasion on which we viewed such a proposal as over  reaching on the

part of management or having the potential for excessive  dilution when we would

vote against the proposal.

 

     Corporations should act in a responsible manner toward their employees, the

communities in which they are located, the customers they serve and the world at

large.  We have  observed  that most  stockholder  proposals  relating to social

issues focus on a narrow issue and the corporate position set forth in the proxy

material  provides a well-considered  response  demonstrating an appropriate and

responsible  action or position.  Accordingly, we generally support management

recommendations on these types of proposals;  however,  we would  consider each

proposal on a case-by-case basis.

 

     We take voting proxies of securities  held in our portfolio very seriously.

As indicated above, it is an integral part of the analytical  process at General

American  Investors.  Each  proposal and any  competing  interests  are reviewed

carefully on a case-by-case basis.  Generally, we support and vote in accordance

with the  recommendations of management;  however,  the overriding basis for the

votes we cast is the best long-term interests of the Company.

 

Date: July 9, 2003

 

Item 8. PORTFOLIO MANAGERS OF CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

 

As of December 31, 2016 and the date of this  filing,  Mr. Jeffrey W. Priest, President
and Chief Executive Officer, serves as the Portfolio Manager of the  registrant and is
responsible for its day-to-day management.    Mr. Priest has been employed by the
registrant since October, 2010, becoming its President in February 2012, and its
Chief Executive Officer in January 2013. Mr. Priest does not provide such services for
any other registered investment companies, pooled investment vehicles, or other accounts.
For performing such responsibilities, Mr. Priest receives cash compensation in the form of a
fixed salary and an annual performance bonus. The annual performance bonus is principally
based upon the absolute performance of the registrant and its relative performance to a closed-end
management investment company peer group (comprised of core equity funds) and the
S&P 500 Index. Performance is evaluated in December by the Compensation Committee of the
Board of Directors (the members of which are independent and consult with the full Board of Directors),
based upon the registrant's net asset value return and total  investment  return during the twelve months
ended October 31.  Additional consideration is given to performance  during the subsequent 
intervening period and to  market-based compensation  data.  Mr. Priest beneficially owns in excess
 of $1 million of the registrant's outstanding equity securities.

 

 

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

 

(a) General American Investors Company, Inc. Common Stock (GAM)

 

 

 

(b) General American Investors Company, Inc. Preferred Stock (GAMpB)

 

 

ITEM 10.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

There have been no material changes to the procedures by which  shareholders may

recommmend  nominees to the registrant's  Board of Directors as set forth in the

registrant's Proxy Statement, dated February 22, 2016.

 

ITEM 11. CONTROLS AND PROCEDURES.

 

Conclusions of principal officers concerning controls and procedures

 

(a) As of December 31, 2016, an evaluation was performed  under the  supervision

and with  the  participation  of the  officers  of  General  American  Investors

Company,  Inc. (the  "Registrant"),  including the principal  executive  officer

("PEO") and principal  financial officer ("PFO"), to assess the effectiveness of

the Registrant's  disclosure controls and procedures.  Based on that evaluation,

the  Registrant's  officers,  including the PEO and PFO,  concluded  that, as of

December 31, 2016, the  Registrant's  disclosure  controls and  procedures  were

reasonably  designed  so as to  ensure:  (1)  that  information  required  to be

disclosed  by the  Registrant  on  Form  N-CSR  and  on  Form  N-Q is  recorded,

processed,  summarized  and reported  within the time  periods  specified by the

rules and forms of the Securities and Exchange Commission; and (2) that material

information  relating  to the  Registrant  is made  known  to the PEO and PFO as

appropriate to allow timely decisions regarding required disclosure.

 

(b) There have been no significant changes in the Registrant's  internal control

over  financial  reporting  (as defined in Rule  30a-3(d)  under the  Investment

Company Act of 1940 (17 CFR 270.30a-3(d))  that occurred during the Registrant's

last fiscal quarter that has  materially  affected,  or is reasonably  likely to

materially affect, the Registrant's internal control over financial reporting.

 

ITEM 12. EXHIBITS

 

(a)(1) As indicated in Item 2., the code of ethics is posted on the registrant's

       Internet website.

 

(a)(2) The certifications of the principal executive officer and the principal

       financial officer pursuant to Rule 30a-2(a)under the Investment Company

       Act of 1940 are attached hereto as Exhibit 99 CERT.

 

(a)(3) There were no written  solicitations  to  purchase  securities under

       the Rule 23c-1  under the  Investment Company Act of 1940 during the

       period covered by the report.

      

(b)    The certifications of the principal executive officer and the principal

       financial officer pursuant to Rule 30a-2(b) under the Investment Company

       Act of 1940 are attached hereto as Exhibit 99.906 CERT.

 

 

 

                                        SIGNATURES

 

  Pursuant to the requirements of the Securities Exchange Act of 1934 and

the Investment Company Act of 1940, the registrant has duly caused this report

to be signed on its behalf by the undersigned, thereunto duly authorized.

 

General American Investors Company, Inc.

 

By:       /s/Eugene S. Stark

Eugene S. Stark

Vice-President, Administration

 

Date: February 13, 2017

 

  Pursuant to the requirements of the Securities Exchange Act of 1934 and

the Investment Company Act of 1940, this report has been signed below by the

following persons on behalf of the registrant and in the capacities and on the

dates indicated.

 

By:       /s/Jeffrey W. Priest

            Jeffrey W. Priest

President and Chief Executive Officer

(Principal Executive Officer)

 

Date: February 13, 2017

 

By:       /s/Eugene S. Stark

Eugene S. Stark

Vice-President, Administration

(Principal Financial Officer)

 

Date: February 13, 2017