|
Net realized gains amounted to $57,853,036 during the year, while the unrealized appreciation on investments increased from $309,089,749 at December 31, 1995 to $422,449,125 at year end.
Dividends and Distributions
As announced on November 14, 1996, a year-end distribution consisting of investment income of $0.19 and capital gains of $1.17 was made on December 27, 1996, both realized and taxable in 1996. On January 9, 1997 an additional distribution of $0.12 per share was declared payable March 1, 1997, representing the balance of undistributed net investment income and capital gains earned during 1996 and an initial distribution from 1997 net investment income, all taxable to shareholders in 1997.
Outlook For 1997
Economic activity in this country increased slightly in 1996 from the prior year as a result of some monetary stimulus and slightly better exports to the rest of the world. With the absence of either of these influences in 1997, our expectation is that growth will fall back to around 2% and the possibility of a recession occurring is a bit higher. As indicated previously, we do not think corporate profits are likely to grow much in 1997, as most of the benefits of cost-cutting and rationalization have been realized already. With only a few exceptions such as the energy industry, capital spending is not expected to be robust and we are hard pressed to see where much growth is going to come from. The major economies outside of the U.S. seem to be following a similar path, though not necessarily for the same reasons. The more rapidly growing economies, particularly in Asia, are also showing some signs of a slowdown to a more sustainable rate of growth, albeit a higher one than the more developed countries.
Factors that could influence this outlook dramatically are a change in consumer spending to more accurately reflect apparent confidence in the future and activity on the part of the Federal Reserve Board to raise or cut interest rates. The latest survey of consumers has indicated a high level of confidence in the immediate future and some economists have anticipated a surge in spending to reflect that. The markdowns taken by retailers after the holiday season have stimulated some buying, but we believe it reflects the bargain-hunting mentality that has prevailed for some time. Action by the Fed in order to either restrain or stimulate the economy, while not having an immediate effect, would certainly see a rapid response in the financial markets. The sensitivity of the stock market to anticipated Fed action or to remarks by Mr. Greenspan was apparent throughout 1996. Should there be evidence of higher inflation in the economy, quick action is likely in order to bring it back to a low level, whether the economy is growing more rapidly or not. This would have a major negative effect on the market. On the other hand, if growth subsides further and inflation is benign, we might expect some stimulus from the Fed and a better market. We do not expect either of these to occur; the most optimistic scenario would be a year of single digit returns, with a decline in the market a more likely outcome. Whether this would take the form of a sharp correction or a more gradual decline is not of great significance to long-term investors such as ourselves, but our portfolio is in excellent condition to perform well in such an environment.
The proxy statement for the Annual Meeting of Stockholders to be held in San Francisco, California on March 25, 1997 will be mailed on or about February 13, 1997 to holders of record on February 11, 1997.
By order of the Board of Directors,
Douglas G. Ober,
Chairman and Chief Executive Officer
Joseph M. Truta,
President
January 17, 1997
|
