Quarterly Schedule of Portfolio Holdings of Registered Management Investment Company (n-q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-22077

Prospector Funds, Inc.

(Exact name of registrant as specified in charter)

370 Church Street

Guilford, CT 06437

(Address of principal executive offices) (Zip code)

Peter N. Perugini, Jr.

Prospector Partners Asset Management, LLC

370 Church Street

Guilford, CT 06437

(Name and address of agent for service)

(203) 458-1500

Registrant's telephone number, including area code

Date of fiscal year end: December 31, 2013

Date of reporting period: March 31, 2013

Item 1. Schedule of Investments.

Schedule of Investments March 31, 2013 (unaudited)

Prospector Capital Appreciation Fund

Description	Shares		Value
COMMON STOCKS - 79.1%
Banks - 0.0%
Waterstone Financial *		200	$	1,654

Chemicals - 3.3%
E.I. Du Pont de Nemours		27,700		1,361,732

Consumer Discretionary - 1.7%
Cablevision Systems, Class A		25,300		378,488
DreamWorks Animation SKG, Class A *		16,000		303,360
				681,848
Consumer Staples - 13.7%
Beam		10,200		648,108
Campbell Soup		15,600		707,616
Coca Cola Enterprises		13,900		513,188
Dole Food Company *		10,800		117,720
Energizer Holdings		5,000		498,650
Hillshire Brands		8,980		315,647
Sysco		10,400		365,768
Tootsie Roll Industries		25,797		771,578
Walgreen		19,100		910,688
Wal-Mart Stores		10,400		778,232
				5,627,195
Diversified Financial Services - 0.2%
CIT Group *		1,800		78,264

Energy - 10.6%
Clayton Williams Energy *		9,200		402,316
ConocoPhillips		16,700		1,003,670
Hess		22,600		1,618,386
Murphy Oil		11,800		752,014
Repsol YPF - ADR		11,848		241,581
Talisman Energy		16,600		203,350
WPX Energy *		8,400		134,568
				4,355,885
Healthcare - 8.5%
Abbott Laboratories		15,200		536,864
AbbVie		5,100		207,978
Hospira *		7,200		236,376
Johnson & Johnson		15,500		1,263,715
Pfizer		42,600		1,229,436
				3,474,369
Industrials - 1.5%
Curtiss-Wright		12,400		430,280
Fortune Brands Home & Security *		4,400		164,692
				594,972
Information Technology - 6.3%
Automatic Data Processing		22,900		1,488,958
Corning		46,900		625,177
Microsoft		5,300		151,633
Paychex		1,600		56,112
Xerox		31,500		270,900
				2,592,780
Insurance - 13.9%
Alterra Capital Holdings		5,600		176,400
American International Group *		7,200		279,504
Arch Capital Group *		4,000		210,280
Aspen Insurance Holdings		7,800		300,924
Berkshire Hathaway, Class B *		5,800		604,360
CNA Financial		8,600		281,134
Donegal Group, Class A		7,900		120,633
First American Financial		12,300		314,511
Loews		22,700		1,000,389
Montpelier Re Holdings		16,400		427,220
Platinum Underwriters Holdings		25,600		1,428,736
State Auto Financial		32,700		569,634
				5,713,725
Metals & Mining - 6.4%
AngloGold Ashanti - ADR		12,100		284,955
AuRico Gold		2,420		15,222
Barrick Gold		23,300		685,020
Gold Fields - ADR		92,300		715,325
Newmont Mining		18,300		766,587
Sibanye Gold - ADR *		24,325		137,436
				2,604,545
Paper & Forest Products - 3.0%
Domtar		14,301		1,110,044
Neenah Paper		3,700		113,812
				1,223,856
Real Estate - 3.1%
Forestar Group *		21,100		461,246
Post Properties		16,800		791,280
				1,252,526
Telecommunication Services - 1.4%
Telephone & Data Systems		27,800		585,746

Utilities - 5.5%
FirstEnergy		9,754		411,618
NRG Energy		25,701		680,819
Public Service Enterprise Group		16,200		556,309
TECO Energy		14,000		249,480
UNS Energy		7,658		374,783
				2,273,009
Total Common Stocks
(Cost $28,442,533)				32,422,106

CONVERTIBLE BONDS - 16.0%	Par
Consumer Staples - 2.7%
Archer Daniels
0.875%, 02/15/2014	$	725,000		732,250
Chiquita Brands
4.250%, 08/15/2016		150,000		136,875
Molson Coors Brewing
2.500%, 07/30/2013		75,000		77,391
Smithfield Foods
4.000%, 06/30/2013		150,000		176,438
				1,122,954
Diversified Financial Services - 2.6%
Janus Capital Group
3.250%, 07/15/2014		425,000		445,719
PHH
4.000%, 09/01/2014		550,000		604,656
				1,050,375
Energy - 2.0%
InterOil
2.750%, 11/15/2015		25,000		24,406
USEC
3.000%, 10/01/2014		2,375,000		807,500
				831,906
Healthcare - 2.7%
Charles River Laboratories International
2.250%, 06/15/2013		575,000		579,672
Chemed
1.875%, 05/15/2014		275,000		301,984
Endo Health Solutions
1.750%, 04/15/2015		25,000		29,797
Hologic
2.000%, 12/15/2037		150,000		181,125
				1,092,578
Industrials - 2.5%
Alliant Techsystems
3.000%, 08/15/2024		175,000		189,875
L-3 Communications
3.000%, 08/01/2035		125,000		126,406
Trinity Industries
3.875%, 06/01/2036		600,000		719,625
				1,035,906
Information Technology - 1.0%
Comtech Telecommunications
3.000%, 05/01/2029		400,000		409,500

Metals & Mining - 1.8%
Horsehead Holding
3.800%, 07/01/2017		50,000		50,188
Newmont Mining
1.250%, 07/15/2014		225,000		252,141
Northgate Minerals
3.500%, 10/01/2016		50,000		51,469
RTI International
3.000%, 12/01/2015		325,000		375,983
				729,781
Real Estate - 0.7%
Forestar Group
3.750%, 03/01/2020		250,000		292,031

Total Convertible Bonds
(Cost $7,529,691)				6,565,031

CORPORATE BONDS - 1.5%
Utilities - 1.5%
Edison Mission Energy
7.750%, 06/15/2016 (a)		200,000		106,250
7.000%, 05/15/2017 (a)		925,000		494,875

Total Corporate Bonds
(Cost $928,378)				601,125

SHORT-TERM INVESTMENT - 3.8%	Shares
Invesco Treasury Portfolio, 0.020% ^
(Cost $1,558,959)		1,558,959		1,558,959

Total Investments - 100.4%
(Cost $38,459,561)				41,147,221
Other Assets and Liabilities, Net - (0.4%)				(146,034	)
Total Net Assets - 100.0%			$	41,001,187

*		Non-income producing security
(a)		Security in default
ADR		American Depository Receipt
^		Variable Rate Security - the rate shown is the annualized seven-day effective yield as of March 31, 2013.

Summary of Fair Value Exposure

The Fund has adopted fair value accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value, a discussion in changes in valuation techniques and related inputs during the period and expanded disclosure of valuation levels for major security types. These 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 inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

As of March 31, 2013, the Fund's investments in securities were classified as follows:
			Level 1		Level 2	Level 3		Total
	Common Stocks		$32,422,106	$	-	$	-	$	32,422,106
	Convertible Bonds		-		6,565,031		-		6,565,031
	Corporate Bonds		-		601,125		-		601,125
	Short-Term Investment		1,558,959		-		-		1,558,959
	Total Investments	$	33,981,065	$	7,166,156	$	-	$	41,147,221

Transfers between levels are recognized at the beginning of the reporting period. During the period ended March 31, 2013, the Fund recognized no transfers between levels. The Fund did not invest in any Level 3 investments during the period.

Schedule of Investments March 31, 2013 (unaudited)

Prospector Opportunity Fund

Description	Shares		Value
COMMON STOCKS - 91.7%
Banks - 14.0%
AJS Bancorp* (a)		8,958	$	90,476
Cape Bancorp		3,700		33,892
Central Pacific Financial *		31,800		499,260
Chicopee Bancorp		26,200		440,160
City National		6,500		382,915
Clifton Savings Bancorp		27,200		338,912
Fifth Third Bancorp		50,600		825,286
First Connecticut Bancorp		22,300		328,479
First Defiance Financial		29,000		676,280
Fox Chase Bancorp		24,702		417,217
Greenhill & Co.		5,300		282,914
HomeTrust Bancshares *		68,800		1,087,040
Metro Bancorp *		18,780		310,621
Ocean Shore Holding		25,072		376,080
OceanFirst Financial		76,600		1,104,571
OmniAmerican Bancorp *		9,500		240,160
Oritani Financial		66,750		1,033,958
PacWest Bancorp		18,100		526,891
Peoples Federal Bancshares		14,980		286,118
United Financial Bancorp		37,100		563,920
Virginia Commerce Bancorp *		29,800		418,690
Washington Trust Bancorp		26,300		720,094
Westfield Financial		97,900		761,662
				11,745,596
Chemicals - 1.8%
H.B. Fuller		19,000		742,520
RPM International		24,500		773,710
				1,516,230
Consumer Discretionary - 3.5%
Gentex		18,100		362,181
Home Depot		10,800		753,624
Hyatt Hotels, Class A *		18,300		791,109
Jack in the Box *		12,700		439,293
Matthews International, Class A		17,700		617,553
				2,963,760
Consumer Staples - 10.9%
Church & Dwight		12,400		801,412
Crimson Wine Group *		5,970		55,521
De Master Blenders *		49,800		769,228
Harris Teeter Supermarkets		9,700		414,287
Hillshire Brands		42,260		1,485,439
J & J Snack Foods		13,400		1,030,326
Lancaster Colony		18,000		1,386,000
Monster Beverage *		8,400		401,016
PepsiCo		11,800		933,498
Post Holdings *		20,400		875,772
Wal-Mart Stores		13,800		1,032,654
				9,185,153
Containers & Packaging - 1.4%
Silgan Holdings		25,700		1,214,325

Diversified Financial Services - 9.3%
Citigroup		13,070		578,217
Franklin Resources		18,100		2,729,661
IntercontinentalExchange *		1,600		260,912
Invesco		58,900		1,705,744
Legg Mason		7,900		253,985
Leucadia National		59,700		1,637,571
PICO Holdings *		28,600		634,920
				7,801,010
Energy - 5.7%
Clayton Williams Energy *		8,900		389,197
Hess		35,700		2,556,477
Murphy Oil		29,600		1,886,408
				4,832,082
Healthcare - 5.4%
Haemonetics *		7,800		324,948
Johnson & Johnson		9,000		733,770
Merck & Co.		18,948		838,070
Molina Healthcare *		10,850		334,940
Patterson Companies		22,100		840,684
Pfizer		23,200		669,552
WellPoint		12,300		814,629
				4,556,593
Industrials - 4.7%
Alliant Techsystems		7,600		550,468
Celadon Group		54,300		1,132,698
CIRCOR International		21,240		902,700
Northrop Grumman		6,000		420,900
Tyco International		29,300		937,600
				3,944,366
Information Technology - 10.2%
BMC Software *		21,300		986,829
Cisco Systems		17,700		370,107
EMC *		17,400		415,686
Global Cash Access Holdings *		79,500		560,475
Maxim Integrated Products		28,500		930,525
Microsoft		17,100		489,231
NetApp *		28,900		987,224
Paychex		28,700		1,006,509
Symantec *		59,500		1,468,460
VeriSign *		9,700		458,616
Xilinx		23,800		908,446
				8,582,108
Insurance - 16.1%
Arthur J. Gallagher		27,200		1,123,632
Aspen Insurance Holdings		33,600		1,296,288
Axis Capital Holdings		36,800		1,531,616
Catlin Group		29,427		232,955
Chubb		12,800		1,120,384
CNA Financial		51,900		1,696,611
Endurance Specialty Holdings		11,700		559,377
Infinity Property & Casualty		7,300		410,260
MetLife		12,500		475,250
Montpelier Re Holdings		16,200		422,010
Platinum Underwriters Holdings		38,700		2,159,847
Progressive		48,400		1,223,068
W.R. Berkley		11,500		510,255
XL Group		25,500		772,650
				13,534,203
Metals & Mining - 3.0%
Gold Fields - ADR		39,800		308,450
Kinross Gold		54,600		432,978
Newmont Mining		40,300		1,688,167
Sibanye Gold - ADR *		9,950		56,218
Victoria Gold *		96,500		17,109
				2,502,922
Paper & Forest Products - 0.7%
Domtar		7,200		558,864

Real Estate - 1.3%
Forestar Group *		21,300		465,618
Howard Hughes *		3,300		276,573
Thomas Properties Group		74,700		383,211
				1,125,402
Utilities - 3.7%
Empire District Electric		23,500		526,400
NV Energy		14,900		298,447
Public Service Enterprise Group		25,000		858,500
TECO Energy		52,600		937,332
UIL Holdings		11,800		467,162
				3,087,841
Total Common Stocks
(Cost $62,816,303)				77,150,455

CONVERTIBLE BONDS - 0.7%	Par
Industrials - 0.4%
Alliant Techsystems
3.000%, 08/15/2024	$	325,000		352,625
Real Estate - 0.3%
Forestar Group
3.750%, 03/01/2020		200,000		233,625
Total Convertible Bonds
(Cost $538,309)				586,250

SHORT-TERM INVESTMENT - 7.9%	Shares
Invesco Treasury Portfolio, 0.020% ^
(Cost $6,622,384)		6,622,384		6,622,384

Total Investments - 100.3%
(Cost $69,976,996)				84,359,089
Other Assets and Liabilities, Net - (0.3%)				(258,665	)
Total Net Assets - 100.0%			$	84,100,424

*		Non-income producing security
(a)		Illiquid Security - A security is considered illiquid if it may not be sold or disposed of in the ordinary course of business within seven days at approximately the price at which it is valued. As of March 31, 2013, the fair value of this investment was $90,476 or 0.1% of total net assets. Information concerning the illiquid security is as follows:

		Security	Shares	Dates Acquired		Cost Basis
		AJS Bancorp	8,958	08/08-01/11	$	119,698

ADR		American Depository Receipt
^		Variable Rate Security - the rate shown is the annualized seven-day effective yield as of March 31, 2013.

Summary of Fair Value Exposure

The Fund has adopted fair value accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value, a discussion in changes in valuation techniques and related inputs during the period and expanded disclosure of valuation levels for major security types. These 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 inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.

As of March 31, 2013, the Fund's investments in securities were classified as follows:
			Level 1		Level 2		Level 3		Total
	Common Stocks	$	77,059,979	$	90,476	$	-	$	77,150,455
	Convertible Bonds		-		586,250		-		586,250
	Short-Term Investment		6,622,384		-		-		6,622,384
	Total Investments	$	83,682,363	$	676,726	$	-	$	84,359,089

Transfers between levels are recognized at the beginning of the reporting period. During the period ended March 31, 2013, the Fund recognized no transfers between levels. The Fund did not invest in any Level 3 investments during the period.

The cost basis of investments for federal income tax purposes at March 31, 2013 was as follows*:


	Capital Appreciation Fund			Opportunity Fund
Cost of investments	$	38,459,561		$	69,976,996

Gross unrealized appreciation		6,422,242			15,873,712
Gross unrealized depreciation		(3,734,582	)		(1,491,619	)
Net unrealized appreciation	$	2,687,660		$	14,382,093

*Because tax adjustments are calculated annually, the above table does not reflect tax adjustments. 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 semi-annual or annual report.

Item 2. Controls and Procedures.

(a)

The Registrant’s President and Treasurer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “1940 Act”)) are effective as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 15d-15(b) under the Securities Exchange Act of 1934, as amended.

(b)

There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the Registrant's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.

Item 3. Exhibits.

Separate certifications for each President and Treasurer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)) are filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

(Registrant) Prospector Funds, Inc.

By (Signature and Title) /s/ John D. Gillespie

John D. Gillespie, President

Date 5/20/2013

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

By (Signature and Title) /s/ John D. Gillespie

John D. Gillespie, President

Date 5/20/2013

By (Signature and Title) /s/ Peter N. Perugini

Peter N. Perugini, Treasurer

Date 5/20/2013

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