3. Purchases and Sales of Securities – Purchases and sales of securities (other than short-term securities and options) for the nine months ended September 30, 2023 amounted to $140,858,178 and $182,156,831, on long transactions, respectively.
4. Options – In order to enhance financial statement disclosure for derivative instruments, the following table is intended to enable investors to understand: a) how and why the Company uses purchased and written options on equity securities, b) how purchased and written options on equity securities are accounted for, and c) how purchased and written options on equity securities affect the Company’s financial position and results of operations. As of September 30, 2023, the Company has not offset any of the positions and the positions are presented gross on the Statement of Assets and Liabilities.
The following table presents options contracts by location and as presented on the Statement of Assets and Liabilities as of September 30, 2023 was:
|
|
|
|
|
|
|
|
|
|
|
|
|
Asset Options
|
|
Liability Options
|
|
Underlying Risk
|
|
Statement of
Assets and Liabilities Location
|
|
Fair Value
|
|
Statement of
Assets and Liabilities Location
|
|
Fair Value
|
|
Equity
|
|
Purchased options
|
|
$341,000
|
|
Outstanding
options written,
at value
|
|
$1,092,880
|
The following table presents the effect of options activity on the Statement of Operations for the nine months ended September 30, 2023 was:
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|
|
|
|
|
|
|
|
|
Underlying Risk
|
|
Statement of
Operations
|
|
Realized Gain (Loss)
on Options
|
|
Change in Unrealized Appreciation
(Depreciation) on Options
|
|
Equity
|
|
Purchased options
|
|
$(2,286,898
|
)
|
$(796,363
|
)
|
|
Equity
|
|
Written options
|
|
2,021,873
|
|
(1,307,597
|
)
|
|
|
|
|
|
$(265,025
|
)
|
$(2,103,960
|
)
|
Average monthly options activity during the nine months ended September 30, 2023 was:
|
|
|
|
|
|
|
|
|
Purchased Options
Contracts
|
|
Written Options
Contracts
|
|
Numbers of Contracts
|
|
1,042
|
|
1,547
|
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, 23,523,006 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on September 30, 2023.
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. Cumulatively, the Board of Directors has authorized the repurchase of up to 2 million Preferred Shares in the open market at prices below $25.00 per share. To date, 395,313 shares have been repurchased.
The Company allocates distributions from net capital gains and other types of income proportionately among holders of shares of Common Stock and Preferred Stock. To the extent that dividends on the shares of Preferred Stock are not paid from net capital gains, they will be paid from investment company taxable income, or will represent a return of capital.
Under the Investment Company Act of 1940, the Company is required to maintain an asset coverage level 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 amount of discounted asset coverage for its portfolio that equals or exceeds a Basic Maintenance Amount. If the Company fails to meet these requirements 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 requirements could restrict the Company’s ability to pay dividends on shares of Common Stock and could lead to sales of portfolio securities at inopportune times.
The holders of Preferred Stock have voting rights equivalent to those of the holders of Common Stock (one vote per share) and, 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