Quarterly report pursuant to Section 13 or 15(d)

INVESTMENTS AND INVESTMENT VALUATION

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INVESTMENTS AND INVESTMENT VALUATION
6 Months Ended
Jun. 30, 2012
Notes to Financial Statements  
INVESTMENTS AND INVESTMENT VALUATION

NOTE 9 -INVESTMENTS AND INVESTMENT VALUATION

 

On September 15, 1998, the Company filed with the Securities and Exchange Commission to become a Business Development Corporation (BDC) as defined under the Investment Act of 1940 in order to invest in real estate and eligible portfolio companies. This resulted in the Company becoming a specialized type of Investment Company. Due to the administrative burdens the Company rescinded its Business Development license during 2005 and for comparative purposes all information presented here including the year ended December 31, 2010 and December 31, 2009 is presented as an Investment company and not a BDC. adopted in 2008 FASB Accounting Standards Codification (ASC) 820 “ Fair Value Measurements and Disclosures ” (ASC 820) for valuation purposes. Previously, as required by ASR 118, the investment committee of the company is required to assign a fair value to all investments. To comply with Section 2(a)(41) of the Investment Company Act and Rule 2a-4 under the Investment Company Act, it is incumbent upon the board of directors to satisfy themselves that all appropriate factors relevant to the value of investments for which market quotations are not readily available have been considered and to determine the method of arriving at the fair value of each such security. To the extent considered necessary, when determining fair value, the Company will consider whether factors exist that indicate a significant decrease in the volume and level of activity for an asset or liability by comparing those levels to normal levels of market activity. Those factors may include, but are not limited to whether:

 

• There are few recent transactions.

• Price quotations are not based on current information.

• Price quotations vary substantially either over time or among market makers (for example, some brokered markets).

• Indexes that previously were highly correlated with the fair values of the asset or liability are demonstrably uncorrelated with recent indications of fair value for that asset or liability.

• There is a significant increase in implied liquidity risk premiums, yields, or performance indicators (such as delinquency rates or loss

severities) for observed transactions or quoted prices when compared with the reporting fund’s estimate of expected cash flows, considering all available market data about credit and other nonperformance risk for the asset or liability.

• There is a wide bid-ask spread or significant increase in the bid-ask spread.

• There is a significant decline or absence of a market for new issuances (that is, a primary market) for the asset or liability or similar assets or liabilities.

• Little information is released publicly (for example, a principal to- principal market).

 

Significant judgment may be required from time to time to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability based on the weight of the evidence. When the market has become less active or is no longer active, there is an increased likelihood of distressed or forced transactions underlying market transactions. Therefore, quoted prices become less reliable indicators of fair value. In circumstances where there has been a significant decrease in the volume and level of activity for an asset or a

liability in relation to normal market activity, additional steps should be taken by the Company to determine whether other valuation techniques and inputs are needed to meet the objective of a fair value measurement. However, in many cases, our availability of relevant

observable inputs to determine the fair value of a liability may be limited or unavailable. In such cases the Company will employ any valuation method which provides a suitable market value as determined by the Company which may include;

 

a. Cost - The cost method is based on the original cost to the Company, adjusted for amortization of original issue discounts and accrued interest for certain capitalized expenditures of the corporation. Such method is to be applied in the early stages of an investee's development until significant positive or adverse events subsequent to the date of the original investment require a change to another method.

 

b. Private market - The private market method uses actual or proposed third party transactions in the investee's securities as a basis for valuation, utilizing actual firm offers as well as historical transactions, provided that any offer used is seriously considered and well documented by the investee.

 

b. Appraisal - The appraisal method is used to value an investment position after analysis of the best available outside information where there is no established public or private market method which have restrictions as to their resale as denoted in the schedule of investments are also considered to be restricted securities.

 

The Company currently is no longer holding any investments at June 30, 2012.