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Valuation of investments—The Fund calculates its net asset value based on the current market value for its portfolio securities. The Fund normally obtains market values for its securities from independent pricing sources and broker-dealers. Independent pricing sources may use last reported sale prices or if not available the most recent bid price, current market quotations or valuations from computerized “matrix” systems that derive values based on comparable securities. A matrix system incorporates parameters such as security quality, maturity and coupon, and/or research and evaluations by its staff, including review of broker-dealer market price quotations, if available, in determining the valuation of the portfolio securities. If a market value is not available from an independent pricing source or a broker-dealer for a particular security, that security is valued at fair value as determined in good faith by or under the direction of the Fund’s Board of Directors (the “Board”). Various factors may be reviewed in order to make a good faith determination of a security’s fair value. The auction rate preferred securities are valued at cost, unless other observable market events occur. The purchase price, or cost, of these securities is arrived at through an arms length transaction between a willing buyer and seller in the secondary market and is indicative of the value on the secondary market. Current transactions in similar securities in the marketplace are evaluated. Factors for other securities may include, but are not limited to, the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; and changes in overall market conditions. If events occur that materially affect the value of securities between the close of trading in those securities and the close of regular trading on the New York Stock Exchange, the securities may be fair valued. U.S. and foreign debt securities including short-term debt instruments having a maturity of 60 days or less shall be valued in accordance with the price supplied by a Pricing Service using the evaluated bid price. Money market mutual funds, demand notes and repurchase agreements are valued at cost, unless the Board or its delegate determines that this does not represent fair value.

The Fund has adopted fair valuation accounting standards that establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various input and valuation techniques used in measuring fair value. Fair value inputs are summarized in the three broad levels listed below:

Level 1—Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

Level 2—Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

Level 3—Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

The Fund adopted Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-04 (“ASU 2011-04”), Fair Value Measurement: Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP and IFRS, which, among other things, clarifies existing disclosure requirements provided by ASC 820 regarding the level of disaggregation and the inputs and valuation techniques used to measure fair value.

The significant unobservable inputs used in fair value measurement of the Fund’s investment companies, corporate bonds, promissory notes, liquidation claims and warrants are (1) cost and (2) indicative bids or price ranges from dealers, brokers, or market makers. Significant changes in any of these inputs in isolation may result in a change in higher fair value measurement.

In accordance with procedures established by the Fund’s Board of Directors, the Adviser shall initially value non-publicly-traded securities (for which a current market value is not readily available) at their acquisition cost less related expenses, where identifiable, unless and until the Adviser determines that such value does not represent fair value.

The Adviser sends a memorandum to the Chairman of the Valuation Committee with respect to any non-publicly-traded securities that are valued using a method other than cost detailing the reason, factors considered, and impact on the Fund’s NAV. If the Chairman determines that such fair valuation(s) require the involvement of the Valuation Committee, a special meeting of the Valuation Committee is called as soon as practicable to discuss such fair valuation(s). The Valuation Committee of the Board consists of at least two non-interested Directors, as defined by the Investment Company Act of 1940.

At each regular quarterly Board meeting, the Adviser delivers a written report (the “Quarterly Report”) to the Board regarding any recommendations of fair valuation during the past quarter, including fair valuations which have not changed. The Board reviews the Quarterly Report and discusses the valuation of the fair valued securities.

The Valuation Committee reviews all Quarterly Reports and any other interim reports, and reviews and approves the valuation of all fair valued securities. This review includes a review and discussion of an updated fair valuation summary with appropriate levels of representatives of the Adviser’s management.

 

 

The following is a summary of the fair valuations according to the inputs used as of March 31, 2017 in valuing the Fund's investments:

		Quoted Prices in Active Markets for Identical Investments (Level 1)*				Significant Other Observable Inputs (Level 2)*				Unobservable Inputs (Level 3)**				Total
Investment Companies		$	106,716,826			$	-			$	8,084,678			$	114,801,504
Preferred Stocks
Real Estate Investment Trusts			-				-				5,997,838				5,997,838
Common Stocks
Construction Materials			100,297				-				-				100,297
Consumer Finance			330,361				-				-				330,361
Health Care Equipment & Supplies			62				-				-				62
Independent Power & Renewable Electricity Producers			82,368				-				-				82,368
Insurance			13,273,439				-				-				13,273,439
Professional Services			4,072,416				-				-				4,072,416
Real Estate Investments Trusts			10,646,587				-				-				10,646,587
Special Purpose Acquisition Vehicles			2,713,503				6,825,368				9,635				9,548,506
Liquidating Trusts			-				-				2,341,241				2,341,241
Convertible Bonds			-				1,233,290				-				1,233,290
Corporate Bonds			-				-				15,000				15,000
Corporate Notes			25,490				-				-				25,490
Promissory Notes			-				-				770,000				770,000
Warrants			277,611				19,049				0				296,660
Rights			9,828				72,963				-				82,791
Money Market Funds			29,816,304				-				-				29,816,304
Total		$	168,065,092			$	8,150,670			$	17,218,392			$	193,434,154

* Transfers between Levels are recognized at the end of the reporting period.
**The Fund measures Level 3 activity as of the end of each financial reporting period.
Transfers between Level 1 and Level 2 securities as of March 31, 2017 resulted from securities priced previously with an official close price (Level 1 securities) or on days where there is not an official close price the bid price is used (Level 2 securities). Transfers as of March 31, 2017 are summarized in the table below:

Transfers into Level 1
Investment Companies		$	24,790
Common Stocks
Special Purpose Acquisition Vehicles		$	1,765,038
Transfers out of Level 1
Common Stocks
Special Purpose Acquisition Vehicles			(3,582,411	)
Warrants			(19,049	)
Rights			(72,963	)
Net transfers in and/or out of Level 1		$	(1,884,595	)
Transfers into Level 2
Common Stocks
Special Purpose Acquisition Vehicles		$	3,582,411
Warrants			19,049
Rights			72,963
Transfers out of Level 2
Investment Companies			(24,790	)
Common Stocks
Special Purpose Acquisition Vehicles			(1,765,038	)
Net transfers in and/or out of Level 2		$	1,884,595

Level 3 Reconciliation Disclosure
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:

Category		Balance as of 12/31/2016				Acquisitions				Dispositions				Return of Capital				Realized Gain (Loss)				Change in unrealized appreciation (depreciation)				Balance as of 3/31/2017
Closed End Funds		$	31,339			$	-			$	-			$	(31,690	)		$	576			$	78			$	303
Auction Rate Preferred Securities			348,000				7,718,750				-				-				-				17,625				8,084,375
Commodity Partnerships			11,736,382				-				(11,736,382	)			-				(1,126,211	)			1,126,211				-
Preferred Stocks			5,976,547				-				-				-				-				21,291				5,997,838
Special Purpose    Acquisition Vehicles			-				9,644				-				-				-				(9	)			9,635
Liquidating Trusts			1,957,500				342,128				-				-				-				41,613				2,341,241
Corporate Bonds			22,500				-				-				-				-				(7,500	)			15,000
Promissory Notes			780,000				-				-				-				-				(10,000	)			770,000
Warrants			0				-				-				-				-				-				0
		$	20,852,268			$	8,070,522			$	(11,736,382	)		$	(31,690	)		$	(1,125,635	)		$	1,189,309			$	17,218,392

The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level 3 as of March 31, 2017:
		Fair Value March 31, 2017			Valuation Methodologies		Unobservable Input(1)		Impact to Valuation from an  increase in Input(2)
Closed End Funds		$	303		Market Assessment and Company-Specfic Information		Liquidation Value		Increase
Auction Rate Preferred Securities			8,084,375		Market Comparables/ Cost		Discount to Par		Decrease
Preferred Stocks			5,997,838		Cost		Market Assessments/ Financial Assessements		Increase
Special Purpose Acquisition Vehicles			9,635		Market Transactions Approach		Liquidation Value		Increase
Liquidating Trusts			2,341,241		Last Traded Price		Financial Assessements/ Company Announcements		Increase
Corporate Bonds			15,000		Market Transactions Approach		Single Broker Quote		Increase
Promissory Notes			770,000		Cost		Terms of the Note/ Financial Assessements/ Company Announcements		Increase
Warrants			0		Market Transactions Approach		Discount to Market Price for Share Restrictions		Decrease

(1)	In determining certain inputs, management evaluates a variety of factors including economic conditions, foreign exchange rates, industry and market developments, market valuations of comparable companies and company specific developments including exit strategies and realization opportunities. Management has determined that market participants would take these inputs into account when valuing the investments.
(2)	This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect.

 

The cost basis of investments for federal income tax purposes at March 31, 2017 was as follows*:

 

 

*Because tax adjustments are calculated annually at the end of the Fund’s fiscal year, the above table does not reflect tax adjustments for the current fiscal year.  For the previous fiscal year’s federal income tax information, please refer to the Notes to Financial Statements section in the Fund’s most recent annual report.

 

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