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, 2021 amounted to $226,816,870 and $225,757,851, on long transactions, respectively.
4. Options – The level of activity in purchased and written options varies from year-to-year based upon market conditions. Transactions in purchased call and put options, as well as written covered call options and collateralized put options during the nine months ended September 30, 2021 were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
Purchased Options
|
|
Calls
|
|
Puts
|
|
|
|
|
Contracts
|
|
Cost Basis
|
|
Contracts
|
|
Cost Basis
|
|
|
Outstanding, December 31, 2020
|
|
—
|
|
—
|
|
200
|
|
$484,675
|
|
|
Purchased
|
|
5,805
|
|
$717,732
|
|
600
|
|
712,174
|
|
|
Exercised
|
|
(1,623
|
)
|
(315,029
|
)
|
(425
|
)
|
(340,739
|
)
|
|
Expired
|
|
(1,182
|
)
|
(83,303
|
)
|
(200
|
)
|
(484,675
|
)
|
|
Outstanding, September 30, 2021
|
|
3,000
|
|
$319,400
|
|
175
|
|
$371,435
|
|
|
|
|
|
|
|
|
|
Written Options
|
|
Covered Calls
|
|
Collateralized Puts
|
|
|
|
|
Contracts
|
|
Premiums
|
|
Contracts
|
|
Premiums
|
|
|
Outstanding, December 31, 2020
|
|
200
|
|
$273,548
|
|
263
|
|
$48,156
|
|
|
Written
|
|
8,700
|
|
1,910,952
|
|
13,405
|
|
2,797,217
|
|
|
Terminated in closing purchase transaction
|
|
(7,100
|
)
|
(1,390,826
|
)
|
(12,038
|
)
|
(2,415,321
|
)
|
|
Assigned
|
|
(200
|
)
|
(273,548
|
)
|
(1,630
|
)
|
(430,052
|
)
|
|
Expired
|
|
(1,400
|
)
|
(208,261
|
)
|
—
|
|
—
|
|
|
Outstanding, September 30, 2021
|
|
200
|
|
$311,865
|
|
—
|
|
$—
|
|
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, 23,914,322 shares were issued and outstanding; 8,000,000 Preferred Shares were originally issued and 7,604,687 were outstanding on September 30, 2021.
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 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 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.