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Level 2 – other significant observable inputs (including quoted prices for similar investments, market corroborated inputs, etc.)

Level 3 – significant unobservable inputs (including the Company's own assumptions in determining the fair value of investments)

In general, and where applicable, the Company uses readily available market quotations based upon the last updated sales price from the principal market to determine fair value. The Company primarily owns securities that are listed on a securities exchange or are traded in the over-the-counter market. The Company values those securities at their last sale price on that exchange or over-the-counter market on the valuation date. If the security is listed on more than one exchange, the Company uses the price from the exchange that it considers to be the principal exchange on which the security is traded. Securities listed on the NASDAQ are valued at the NASDAQ Official Closing Price, which may not necessarily represent the last sale price. If there has been no sale on such exchange or over-the-counter market on such day, the security is valued at the mean between the last bid price and last ask price on such day. These securities are categorized as Level 1 in the fair value hierarchy.

 

Restricted securities are subject to statutory or contractual restrictions on their public resale, which may make it more difficult to obtain a valuation and may limit the Company's ability to dispose of them. Investments in private placement securities and other securities for which market quotations are not readily available are valued in good faith by using certain fair value procedures. Such fair value procedures consider factors such as discounts to publicly traded issues, time until conversion date, securities with similar yields, quality, type of issue, coupon, duration and rating. If events occur that affect the value of the Company's portfolio securities before the net asset value has been calculated (a “significant event”), the portfolio securities so affected are generally priced using fair value procedures.

An equity security of a publicly traded company acquired in a private placement transaction without registration under the Securities Act of 1933, as amended (the “1933 Act”), is subject to restrictions on resale that can affect the security's liquidity and fair value. If such a security is convertible into publicly-traded common shares, the security generally will be valued at the common share market price adjusted by a percentage discount due to the restrictions and categorized as Level 2 in the fair value hierarchy. To the extent that such securities are convertible or otherwise become freely tradable within a time frame that may be reasonably determined, an amortization schedule may be used to determine the discount. If the security has characteristics that are dissimilar to the class of security that trades on the open market, the security will generally be valued and categorized as Level 3 in the fair value hierarchy.

 

Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity.  Unobservable inputs shall reflect the Company’s own beliefs about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk). Unobservable inputs shall be developed based on the best information available in the circumstances, which might include the Company’s own data. The Company’s own data shall be adjusted if information is reasonably available without undue cost and effort that indicates that market participants would use different assumptions.  Due to the inherent uncertaintly of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed.

 

The Company generally values debt securities at evaluated bid prices obtained from an independent third-party valuation service that utilizes a pricing matrix based upon yield data for securities with similar characteristics, or based on a direct written broker-dealer quotation from a dealer who has made a market in the security. Debt securities with 60 days or less to maturity at time of purchase are valued on the basis of amortized cost, which approximates market value.

Interest rate swap contracts are valued by using industry-accepted models, which discount the estimated future cash flows based on a forward rate curve and the stated terms of the interest rate swap agreement by using interest rates currently available in the market, or based on dealer quotations, if available, and are categorized as Level 2 in the fair value hierarchy.

 

Certain of the Company’s investments are restricted and are valued as determined in accordance with fair value procedures.  The following table shows the principal amount or shares, acquisition date(s), acquisition cost, fair value and the percent of net assets which the securities comprise at August 31, 2017.

 

Investment Security	Investment Type		Principal Amount/Shares			Acquisition Date(s)		Acquisition Cost				Fair Value				Fair Value as Percent of Net Assets
Blue Racer Midstream, LLC, 6.125%, 11/15/2022*	Corporate Bond		$	4,000,000		06/23/16-07/29/16		$	3,810,000			$	4,110,000				2.6	%
DCP Midstream LLC, 9.750%, 03/15/2019*	Corporate Bond		$	4,000,000		08/07/09-08/16/12			3,674,870				4,395,000				2.8
Duquesne Light Holdings, Inc., 6.400%, 09/15/2020*	Corporate Bond		$	3,000,000		11/30/11			3,180,330				3,362,238				2.2
Duquesne Light Holdings, Inc., 5.900%, 12/01/2021*	Corporate Bond		$	2,000,000		11/18/11-12/05/11			2,074,420				2,268,144				1.4
Florida Gas Transmission Co., LLC, 5.450%, 07/15/2020*	Corporate Bond		$	1,500,000		07/08/10-01/04/11			1,551,220				1,622,430				1.0
Gibson Energy Inc., 6.750%, 07/15/2021*	Corporate Bond		$	4,500,000		06/26/13-07/01/13			4,459,760				4,657,500				3.0
Midcontinent Express Pipeline, LLC, 6.700%, 09/15/2019*	Corporate Bond		$	2,000,000		09/09/09-03/02/10			2,061,010				2,142,500				1.4
Pattern Energy Group Inc., 5.875%, 02/01/2024*	Corporate Bond		$	1,000,000		01/20/17-01/24/17			1,011,875				1,047,500				0.7
Rockies Express Pipeline, LLC, 6.000%, 01/15/2019*	Corporate Bond		$	4,000,000		08/03/15			4,130,000				4,135,000				2.7
Ruby Pipeline, LLC, 6.000%, 04/01/2022*	Corporate Bond		$	1,500,000		09/17/12			1,616,250				1,605,782				1.0
SemGroup Corp., 6.375%, 03/15/2025*	Corporate Bond		$	6,000,000		03/08/17			5,939,010				5,910,000				3.8
Southern Star Central Corp., 5.125%, 07/15/2022*	Corporate Bond		$	3,000,000		06/17/14			3,041,250				3,075,000				2.0
Targa Resources Corp., 9.500%	Preferred Stock			1,685		03/16/16			1,491,965				1,833,457				1.2
								$	38,041,960			$	40,164,551				25.8	%

*Security is eligible for resale under Rule 144A under the 1933 Act.

As of August 31, 2017, the aggregate cost of securities for federal income tax purposes was $178,667,467. The aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over tax cost was $30,384,576, the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over fair value was $5,502,687 and the net unrealized appreciation was $24,881,889.

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