The Company utilizes the beginning of reporting period method for determining transfers between levels.  During the period ended August 31, 2017, Rice Midstream Partners LP common units held by the Company, in the amount of $37,261,802 were transferred from Level 2 to Level 1 when they converted into registered and unrestricted common units of Rice Midstream Partners LP.  There were no other transfers between levels for the Company during the period ended August 31, 2017.

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.

 

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.

 

The following table presents the Company’s assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3) for the period ended August 31, 2017.

 

		Preferred Stock				Warrants				Private Investment
Balance – beginning of period		$	22,478,411			$	14,662,641			$	-
Purchases			-				-				12,928,743
Return of capital			-				-				-
Sales			-				(15,779,244	)			-
Total related gains			-				12,633,897				-
Change in unrealized gains			1,196,579				(11,517,294	)			-
Balance – end of period		$	23,674,990			$	-			$	12,928,743

 

$1,196,579 of unrealized gains relate to investments that are still held at the end of the reporting period.

 

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

 

Investment Security	Investment Type		Shares			Acquisition Date(s)		Acquisition Cost				Fair Value				Fair Value as Percent of Net Assets
Targa Resources Corp., 9.500%	Preferred Stock			21,758		03/16/16		$	19,265,393			$	23,674,990				1.8	%
Tortoise HoldCo II, LLC	Private Investment			N/A		08/18/17-08/23/17			12,928,743				12,928,743				1.0
								$	32,194,136			$	36,603,733				2.8	%

 

As of August 31, 2017, the aggregate cost of securities for federal income tax purposes was $1,336,490,729. The aggregate gross unrealized appreciation for all securities in which there was an excess of fair value over tax cost was $1,106,778,855, the aggregate gross unrealized depreciation for all securities in which there was an excess of tax cost over fair value was $8,705,148 and the net unrealized appreciation was $1,098,073,707.

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