---

 

 

 

 

---

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.

 

 

 

The following is a summary of the fair valuations according to the inputs used as of September 30, 2016 in valuing the Fund's investments:
		Quoted Prices in Active				Significant Other
		Markets for Identical				Observable Inputs				Unobservable Inputs
		Investments (Level 1)*				(Level 2)*				(Level 3)**				Total
Investment Companies		$	93,336,905			$	26,928			$	348,000			$	93,711,833
Commodity Partnerhsips			7,429,251				-				-				7,429,251
Preferred Stocks
Real Estate Investment Trusts			-				-				5,955,257				5,955,257
Common Stocks
Construction Materials			219,008				-				-				219,008
Consumer Finance			3,024,869				-				-				3,024,869
Household Products			8,885				-				-				8,885
Insurance			13,354,558				-				-				13,354,558
IT Services			62,597				-				-				62,597
Professional Services			4,934,120				-				-				4,934,120
Real Estate Investments Trusts			9,018,767				-				-				9,018,767
Software			7,556				-				-				7,556
Special Purpose Acquisition Vehicles			7,374,616				1,109,725				-				8,484,341
Liquidating Trusts			-				-				2,082,500				2,082,500
Convertible Bonds			-				2,571,537				-				2,571,537
Corporate Bonds			-				22,500				-				22,500
Promissory Notes			-				-				780,000				780,000
Unsecured Senior Notes			630,010				-				-				630,010
Warrants			107,644				52,215				-				159,859
Rights			-				77,976				-				77,976
Money Market Funds			61,189,352				-				-				61,189,352
Total		$	200,698,138			$	3,860,881			$	9,165,757			$	213,724,776
* Transfers between Levels are recognized at the end of the reporting period.
**The Fund measures Level 3 activity as of the beginning and end of each financial reporting period.
Transfers between Level 1 and Level 2 securities as of September 30, 2016 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 September 30, 2016 are summarized in the table below:
Transfers into Level 1
Warrants		$	11,247
Transfers out of Level 1
Common Stocks
Special Purpose Acquisition Vehicles			(668,400	)
Warrants			(29,000	)
Rights			(1,874	)
Net transfers in and/or out of Level 1		$	(688,027	)
Transfers into Level 2
Common Stocks
Special Purpose Acquisition Vehicles		$	668,400
Warrants			29,000
Rights			1,874
Transfers out of Level 2
Warrants			(11,247	)
Net transfers in and/or out of Level 2		$	688,027

---

---

---

The cost basis of investments for federal income tax purposes at September 30, 2016 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.

 

---

---