HIGH INCOME SECURITIES FUND High Income Securities Fund (PCF)
Semi-Annual Report
For the six months ended
February 29, 2024
Table of Contents
Letter to Stockholders | 1 |
Portfolio Composition | 4 |
Portfolio of Investments | 5 |
Statement of Assets and Liabilities | 11 |
Statement of Operations | 12 |
Statements of Changes | 13 |
Financial Highlights | 14 |
Notes to Financial Statements | 16 |
Privacy Policy | 44 |
High Income Securities Fund
April ___, 2024
Dear Fellow Stockholders:
The Fund currently pays monthly distributions at an annualized rate of at least 10% (or 0.8333% per month) of its per share net asset value (NAV) as of the last business day of the previous calendar year. Each of the first two monthly distributions in calendar year 2024 have been $0.0622 per share. Please note that in some calendar years, adhering to the Fund's managed distribution policy may require some capital to be returned to shareholders. The Fund will not know what percentage, if any, of its distributions will be characterized as a return of capital until after the end of the calendar year in which they are made.
During the first half of fiscal year 2024 ending February 29, 2024, the Fund's NAV per share rose a penny from $7.43 to $7.44. After accounting for distributions of $0.3660 cents per share, the return based upon the Fund's NAV was 5.25%. As of February 29, 2024, the Fund's shares were trading at $6.77, a discount of 9.01% to their then-current NAV per share.
As discussed previously, we believe the Fund's investment parameters are unduly restrictive and should be expanded. For example, we would like the flexibility to increase the Fund's exposure to special purpose acquisition companies ("SPACs") (a/k/a blank check companies), which can provide a higher return than a money market fund with minimal risk of incurring a realized loss of principal, provided that the common stock is sold or redeemed before a transaction with an operating company is completed. (Shares of SPACs held after a completed transaction can be very volatile.) Another restriction we would like to relax (and which makes little sense to us) is the limitation on purchasing investment grade bonds. Lastly, we think the Fund should have the ability to prudently use leverage to enhance its returns. To this end, and subject to shareholder approval, a special committee of the Board comprised only of the independent Trustees has recommended that the full Board approve (1) the Fund entering into an investment advisory agreement with Bulldog Investors, LLP, and (2) changes to the Fund's investment strategies and fundamental policies in order to expand the types of investments the Fund can make. Bulldog Investors has more than 25 years of experience in employing activist measures to enhance the value of its clients' investments and is an affiliate of the members of a committee of the Board of Trustees that has been responsible for investing the Fund's assets since 2019.
Unfortunately, the Fund's shareholder base has become increasingly inactive with respect to participation in shareholder meetings. Indeed, less than 22% of the outstanding shares were represented at the annual meeting of shareholders in 2023, well short of a quorum. (Notably, with respect to one proposal to be considered at the meeting, holders of only 5% of the Fund's outstanding shares voted to convert the Fund to an open-end investment company.) With the intent to increase the proportion of shareholders that will actively participate in
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High Income Securities Fund
shareholder meetings, the Board (1) has authorized the Fund to conduct a rights offering, and (2) intends to authorize a self-tender offer by the Fund to commence shortly after a special meeting to be held to consider the above changes. On April 16, 2024, a press release detailing these measures was issued and is available on the Fund's website.
A primary focus of the Fund's investment strategy has been to acquire discounted shares of closed-end investment companies ("CEFs") and business development companies ("BDCs") that make regular distributions, as well as the senior securities, e.g., notes or preferred shares, of CEFs and BDCs (which we think have a negligible risk of defaulting) and of certain operating companies when they are attractively priced. In addition, units or common shares issued by SPACs may comprise up to 20% of the Fund's portfolio.
In 2019, after the Fund liquidated its entire portfolio prior to conducting a large tender offer, it adopted the ICE BofA Merrill Lynch 6 Month U.S. Treasury Bill Index (which was up 2.78% in the first half of fiscal year 2024) as a "place marker" benchmark. In light of the contemplated expansion of the Fund's investment parameters, the Board will determine whether another available benchmark is more suitable going forward.
The Fund's investments in BDCs have continued to perform well. Since many of their loans have floating interest rates, most BDCs have been raising their dividends as interest rates have increased. Moreover, they have not reported a significant increase in non-accrual loans. The Fund's shares of BDCs generally trade at a significant discount to their NAV and most of them have accretive share repurchase plans in place.
The "off balance sheet" item that we mentioned in our last letter representing a settlement payment of about $170,000 (based upon a legal claim related to one of the Fund's former SPAC holdings, FAST Acquisition Corp.), is now expected to be received by the end of June.
Lastly, we remind you that from time to time the Fund seeks instructions from its stockholders for voting its proxies for certain closed-end funds whose shares the Fund owns. The instruction forms are available at http://highincomesecuritiesfund.com. If you would like to receive an email notification when the Fund seeks proxy voting instructions for a closed-end fund whose shares it owns, please email us at proxyinfo@highincomesecuritiesfund.com.
Sincerely yours,
Phillip Goldstein
Chairman
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High Income Securities Fund
$20,000 | J | J | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
$17,500 | J | J | J | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
$15,000 | J | J | J | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
$12,500 | J | J | B | B | B | B | |||||||||||||||||||||||||||||||||||||||||||||||||||
$10,000 | JB | B | B | B | B | B | |||||||||||||||||||||||||||||||||||||||||||||||||||
B | B | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
J | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
$7,500 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
8 | / 1 | 4 | 1 | / 1 | 4 | 1 | / 1 | 5 | 1 | / 1 | 6 | 1 | / 1 | 7 | 1 | / 1 | 8 | 1 | / 1 | 9 | 1 | / 2 | 0 | 1 | / 2 | 1 | 1 | / 2 | 2 | 1 | / 2 | 3 | 9 | / 2 | 4 | ||||||||||||||||||||||
/ 2 | 3 | / 3 | / 3 | / 3 | / 3 | / 3 | / 3 | / 3 | / 3 | / 3 | 2 | ||||||||||||||||||||||||||||||||||||||||||||||
2 | 8 | / | 8 | 8 | 8 | 8 | 8 | 8 | 8 | 8 | 8 | 2 | / | ||||||||||||||||||||||||||||||||||||||||||||
$15,939 (High Income Securities Fund)
$11,574
(ICE BofA Merrill Lynch 6 Month Treasury Bill Index)
This chart assumes an initial gross investment of $10,000 made on 2/28/2014.
Effective after the close of business on July 23, 2018, the Fund became internally managed and did not pay any management fees for the year ended August 31, 2023. Accordingly, the information presented in this report with respect to the actions and results of the Fund before July 23, 2018 are not material in making any conclusions as to the future performance of the Fund.
Past Performance at a glance (unaudited)
Average annual total returns for the periods ended 2/29/2024
6 month | ||||
Net assets value returns | (not annualized) | 1 year | 5 years | 10 years |
High Income Securities Fund | 5.25% | 8.78% | 5.03% | 4.77% |
Market price returns | ||||
High Income Securities Fund | 6.06% | 12.06% | 4.33% | 5.44% |
Index returns | ||||
ICE BofA Merrill Lynch 6 Month Treasury Bill Index | 2.78% | 5.37% | 2.12% | 1.48% |
Share Price as of 2/29/2024 | ||||
Net asset value | $7.44 | |||
Market price | $6.77 |
The graph and table do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the sale of fund shares.
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High Income Securities Fund
Generally, the Fund invests in securities of discounted shares of income-orientedclosed-end investment companies, business development companies and Special Purpose Acquisition Vehicles.
Past performance does not predict future performance. The return and value of an investment will fluctuate so that an investor's share, when sold, may be worth more or less than their original cost. The Fund's common stock net asset value ("NAV") return assumes, for illustration only, that dividends and other distributions, if any, were reinvested at the NAV on the ex-dividend date for dividends and other distributions. The Fund's common stock market price returns assume that all dividends and other distributions, if any, were reinvested at prices obtained under the Fund's Dividend Reinvestment Plan (which was terminated on September 12, 2018) for dividends and other distributions payable through September 11, 2018 and reinvested at the lower of the NAV or the closing market price on the ex-dividend date for dividends and other distributions payable after September 11, 2018, and does not account for taxes.
Portfolio composition as of 2/29/2024 (unaudited)(1)
% of | |||
Value | Cost | Net Assets | |
Closed-End Funds | $ 64,059,296 | $ 64,368,969 | 49.10% |
Business Development Companies | 21,174,614 | 22,114,862 | 16.23 |
Special Purpose Acquisition Vehicles | 19,905,753 | 19,510,373 | 15.26 |
Money Markets | 10,438,076 | 10,438,076 | 8.00 |
Preferred Stocks | 11,090,487 | 15,729,983 | 8.50 |
Other Common Stocks | 915,565 | 2,122,360 | 0.70 |
Liquidating Trust | 850,682 | 904,767 | 0.65 |
Corporate Obligations | 592,705 | 1,006,474 | 0.45 |
Exchange Traded Funds | 456,863 | 441,587 | 0.35 |
Warrants | 41,049 | 122,158 | 0.03 |
Rights | 20,274 | 25,868 | 0.02 |
Total Investments | $129,545,364 | $136,785,477 | 99.30% |
Assets in Excess of Other Liabilities | 910,545 | 0.70 | |
Total Net Assets | $130,455,909 | 100.00% |
(1) As a percentage of net assets.
The following table represents the Fund's investments categorized by country of risk as of February 29, 2024:
Country | % of Net Assets |
United States | 88.23% |
Cayman Islands | 10.62% |
Ireland | 0.45% |
99.30% | |
Liabilities in Excess of Other Assets | 0.70% |
100.00% |
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High Income Securities Fund
Portfolio of investments-February 29, 2024 (unaudited)
Shares | Value | |
INVESTMENT COMPANIES-65.33% | ||
Business Development Companies-16.23% | ||
Barings BDC, Inc. | 192,889 | $ 1,890,312 |
CION Investment Corp. | 617,720 | 6,659,022 |
FS KKR Capital Corp. | 374,220 | 7,065,274 |
Logan Ridge Finance Corp. | 81,300 | 1,808,925 |
PhenixFIN Corp. (a) | 19,193 | 860,109 |
Portman Ridge Finance Corp. | 157,289 | 2,890,972 |
21,174,614 | ||
Closed-EndFunds-49.10% | ||
AllianceBernstein National Municipal Income Fund, Inc. | 64,176 | 698,876 |
Bancroft Fund Ltd. | 13,721 | 212,264 |
BlackRock California Municipal Income Trust | 144,271 | 1,695,184 |
Blackstone Strategic Credit Fund | 60,774 | 714,095 |
BNY Mellon Municipal Income, Inc. | 622,204 | 4,115,879 |
BNY Mellon Strategic Municipal Bond Fund, Inc. | 291,157 | 1,685,799 |
BNY Mellon Alcentra Global Credit Income 2024 Target Term Fund, Inc. | 67,021 | 568,338 |
Carlyle Credit Income Fund | 111,472 | 886,202 |
ClearBridge Energy Midstream Opportunity Fund, Inc. | 87,663 | 3,260,186 |
ClearBridge MLP & Midstream Fund, Inc. | 68,796 | 2,899,751 |
ClearBridge MLP & Midstream Total Return Fund, Inc. | 41,239 | 1,583,578 |
Destra Multi-Alternative Fund | 161,097 | 1,272,666 |
DWS Municipal Income Trust | 1,174,528 | 10,500,281 |
DWS Strategic Municipal Income Trust | 171,491 | 1,509,121 |
Eaton Vance New York Municipal Bond Fund | 281,569 | 2,787,533 |
Ellsworth Growth and Income Fund Ltd. | 65,128 | 524,280 |
Federated Hermes Premier Municipal Income Fund | 2,970 | 32,878 |
First Trust High Yield Opportunities 2027 Term Fund | 54,916 | 804,519 |
First Trust MLP and Energy Income Fund | 9,498 | 82,538 |
Herzfeld Caribbean Basin Fund, Inc. | 1,232 | 3,216 |
Highland Income Fund | 332,526 | 2,101,564 |
Invesco High Income 2024 Target Term Fund | 123,227 | 931,596 |
MFS High Yield Municipal Trust | 764,756 | 2,500,752 |
MFS Investment Grade Municipal Trust | 245,951 | 1,844,633 |
MFS Special Value Trust | 358 | 1,547 |
Miller/Howard High Dividend Fund | 46,070 | 488,803 |
Morgan Stanley Emerging Markets Debt Fund, Inc. | 41,607 | 298,738 |
The accompanying notes are an integral part of these financial statements.
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High Income Securities Fund
Portfolio of investments-February 29, 2024 (unaudited)
Shares | Value | ||
INVESTMENT COMPANIES-(continued) | |||
Closed-EndFunds-(continued) | |||
Morgan Stanley Emerging Markets Domestic Debt Fund, Inc. | 100,365 | $ | 469,708 |
Neuberger Berman Municipal Fund, Inc. | 68,397 | 708,935 | |
Neuberger Berman Next Generation Connectivity Fund, Inc. | 397,605 | 4,715,596 | |
New America High Income Fund, Inc. | 150,875 | 1,096,861 | |
Nuveen Multi-Asset Income Fund | 20,588 | 248,909 | |
Nuveen Preferred & Income Term Fund | 19,447 | 368,910 | |
NXG NextGen Infrastructure Income Fund | 41,521 | 1,469,843 | |
PGIM Global High Yield Fund, Inc. | 88,779 | 1,033,388 | |
PGIM Short Duration High Yield Opportunities Fund | 11,503 | 174,846 | |
Principal Real Estate Income Fund | 197,931 | 1,993,165 | |
Saba Capital Income & Opportunities Fund | 231,408 | 1,691,592 | |
Tortoise Energy Independence Fund, Inc. | 49,741 | 1,532,520 | |
Tortoise Power and Energy Infrastructure Fund, Inc. | 92,081 | 1,340,699 | |
Virtus Convertible & Income 2024 Target Term Fund | 39,523 | 347,802 | |
Virtus Total Return Fund, Inc. | 518,376 | 2,742,209 | |
Western Asset Global Corporate Defined Opportunity Fund, Inc. | 174 | 2,203 | |
Western Asset Intermediate Muni Fund, Inc. | 14,866 | 117,293 | |
64,059,296 | |||
Total Investment Companies (Cost $86,483,831) | 85,233,910 | ||
Shares/Units | |||
EXCHANGE TRADED FUNDS-0.35% | |||
Horizon Kinetics Spac Active ETF | 4,700 | 456,863 | |
Total Exchange Traded Funds (Cost $441,587) | 456,863 | ||
SPECIAL PURPOSE ACQUISITION VEHICLES-15.26% | |||
99 Acquisition Group, Inc. (a) | 151,650 | 1,557,446 | |
Ai Transportation Acquisition Corp. (a)(e) | 10,000 | 102,800 | |
Ai Transportation Acquisition Corp. (a)(e) | 35,269 | 361,155 | |
AP Acquisition Corp. (a)(e) | 82,500 | 924,825 | |
Ares Acquisition Corp. II (a)(e) | 60,015 | 631,958 | |
Bowen Acquisition Corp. (a)(e) | 14,216 | 147,387 | |
Cartesian Growth Corp. II (a)(e) | 50,000 | 552,000 | |
Colombier Acquisition Corp. II (a)(e) | 1 | 10 | |
Colombier Acquisition Corp. II (a)(e) | 12,667 | 4,813 |
The accompanying notes are an integral part of these financial statements.
6
High Income Securities Fund
Portfolio of investments-February 29, 2024 (unaudited)
Shares/Units | Value | ||
SPECIAL PURPOSE ACQUISITION VEHICLES-(continued) | |||
Colombier Acquisition Corp. II (a)(e) | 38,001 | $ | 387,230 |
EVe Mobility Acquisition Corp. (a)(e) | 40,963 | 445,272 | |
Feutune Light Acquisition Corp. (a) | 50,000 | 545,500 | |
Four Leaf Acquisition Corp. (a) | 41,431 | 439,997 | |
Global Lights Acquisition Corp. (a)(e) | 192,000 | 1,948,799 | |
Haymaker Acquisition Corp. 4 (a)(e) | 129,016 | 1,336,607 | |
Inflection Point Acquisition Corp. II (a)(e) | 217,023 | 2,265,720 | |
Investcorp Europe Acquisition Corp. I (a)(e) | 95,068 | 1,059,058 | |
Legato Merger Corp. III (a)(e) | 40,197 | 405,588 | |
Nabors Energy Transition Corp. II (a)(e) | 58,563 | 611,983 | |
Patria Latin American Opportunity Acquisition Corp. (a)(e) | 12,631 | 142,351 | |
Quetta Acquisition Corp. (a) | 102,660 | 1,045,079 | |
Screaming Eagle Acquisition Corp. (a)(e) | 233,798 | 2,492,286 | |
TG Venture Acquisition Corp. (a)(b) | 190,793 | 2,113,986 | |
Trailblazer Merger Corp. I (a) | 36,458 | 383,903 | |
Total Special Purpose Acquisition Vehicles (Cost $19,510,373) | 19,905,753 | ||
Shares | |||
OTHER COMMON STOCKS-0.70% | |||
Real Estate Investment Trusts-0.70% | |||
NexPoint Diversified Real Estate Trust | 144,639 | 915,565 | |
Total Other Common Stocks (Cost $2,122,360) | 915,565 | ||
PREFERRED STOCKS-8.50% | |||
Business Development Companies-4.74% | |||
OFS Credit Co., Inc. | 60,000 | 1,380,000 | |
SuRo Capital Corp. | 200,000 | 4,806,000 | |
6,186,000 | |||
Closed-EndFunds-1.51% | |||
XAI Octagon Floating Rate Alternative Income Term Trust | 80,000 | 1,972,624 | |
Real Estate Investment Trusts-2.19% | |||
Brookfield DTLA Fund Office Trust Investor, Inc., 7.625% (a) | 1,615 | 129 | |
Cedar Realty Trust, Inc.- Series C, 6.500% | 101,456 | 1,412,268 | |
NexPoint Diversified Real Estate Trust-Series A, 5.500% | 94,082 | 1,439,455 | |
2,851,852 | |||
The accompanying notes are an integral part of these financial statements.
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High Income Securities Fund
Portfolio of investments-February 29, 2024 (unaudited)
Shares | Value | ||
PREFERRED STOCKS-(continued) | |||
Real Estate Operations and Development-0.06% | |||
Harbor Custom Development, Inc-Series A, 8.000% (a) | 131,166 | $ | 80,011 |
Retail-CatalogShopping-0.00% | |||
iMedia Brands, Inc. (b) | 27,802 | 0 | |
Total Preferred Stocks (Cost $15,729,983) | 11,090,487 | ||
LIQUIDATING TRUSTS-0.65% | |||
Copper Property CTL Pass Through Trust | 83,811 | 850,682 | |
Total Liquidating Trusts (Cost $904,767) | 850,682 | ||
Principal Amount | |||
CORPORATE OBLIGATIONS-0.46% | |||
Lamington Road DAC | |||
8.000%, 2121-04-07 (b)(c)(d)(e) | 8,072,998 | 322,920 | |
14.000%, 2121-04-07 (b)(c)(d)(e) | 519,816 | 269,785 | |
Total Corporate Obligations (Cost $1,006,474) | 592,705 | ||
Shares | |||
RIGHTS-0.02% (a) | |||
Lakeshore Acquisition II Corp. (a)(e) | 59,500 | 15,470 | |
Nocturne Acquisition Corp. (a)(e) | 40,000 | 4,804 | |
Total Rights (Cost $25,868) | 20,274 | ||
WARRANTS-0.03% (a) | |||
Andretti Acquisition Corp. (a)(e) | |||
Expiration: March 2028 | |||
Exercise Price: $11.50 | 25,000 | 5,753 | |
AtlasClear Holdings, Inc. (a) | |||
Expiration: October 2028 | |||
Exercise Price: $11.50 | 33,000 | 1,320 | |
Ault Disruptive Technologies Corp. (a) | |||
Expiration: June 2028 | |||
Exercise Price: $11.50 | 48,000 | 389 | |
Cartesian Growth Corp. II (a)(e) | |||
Expiration: July 2028 | |||
Exercise Price: $11.50 | 33,333 | 4,500 | |
Churchill Capital Corp. VII (a) | |||
Expiration: February 2028 | |||
Exercise Price: $11.50 | 11,761 | 3,999 |
The accompanying notes are an integral part of these financial statements.
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High Income Securities Fund published this content on 25 April 2024 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 April 2024 19:29:39 UTC.
