The cost basis of investments for federal income tax purposes at October 31, 2016 was as follows:

Cost of investments**

$

86,915,873

Gross unrealized appreciation

7,185,650

Gross unrealized depreciation

(1,584,962

)

Net unrealized appreciation

$

5,600,688

**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 of the Fund's most recent annual report.      

Significant accounting policies are as follows:

Portfolio Valuation:  Investments are stated at value. Listed equity securities are valued at the closing price on the exchange or market on which the security is primarily traded (the “Primary Market”) at the valuation time. If the security did not trade on the Primary Market, it shall be valued at the closing price on another comparable exchange where it trades at the valuation time. If there are no such closing prices,  the security shall be valued at the mean between the most recent highest bid and lowest ask prices at the valuation time.  Investments in short-term debt securities having a maturity of 60 days or less are valued at amortized cost if their term to maturity from the date of purchase was less than 60 days, or by amortizing their value on the 61st day prior to maturity if their term to maturity from the date of purchase when acquired by the Fund was more than 60 days. Other assets and securities for which no quotations are readily available will be valued in good faith at fair value using methods determined by the Board of Directors. These methods include, but are not limited to, the fundamental analytical data relating to the investment; the nature and duration of restrictions in the market in which they are traded (including the time needed to dispose of the security, methods of soliciting offers and mechanics of transfer); the evaluation of the forces which influence the market in which these securities may be purchased or sold, including the economic outlook and the condition of the industry in which the issuer participates. The Fund has a Valuation Committee comprised of independent directors which oversees the valuation of portfolio securities.     

The Valuation Committee of the Fund shall meet to consider any fair valuations.  This consideration includes reviewing various factors set forth in the pricing procedures adopted by the Board of Directors and other factors as warranted. In considering a fair value determination, factors that may be considered, among others include; the type and structure of the security; unusual events or circumstances relating to the security's issuer; general market conditions; prior day's valuation; fundamental analytical data; size of the holding; cost of the security on the date of purchase;  trading activity and prices of similar securities or financial instruments.  

FAIR VALUE MEASUREMENTS

The Fund follows the FASB ASC Topic 820 hierarchy, under which various inputs are used in determining the value of the Fund’s investments.  

The basis of the hierarchy is dependent upon various “inputs” used to determine the value of the Fund’s investments. 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 directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for 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 risks, 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 company'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 the 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 on the lowest level input that is significant to the fair value measurement in its entirety. 

 

The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities.    

The following is a summary of the inputs used to value the Fund's investments carried at fair value as of October 31, 2016:

Level 1*

Level 2*

Level 3**

Total

Equity

Airlines

$

2,336,423

$

-

$

-

$

2,336,423

Airports

3,711,748

-

-

3,711,748

Auto Parts and Equipment

3,520,436

-

-

3,520,436

Banking Service Groups

1,755,095

1,755,095

Beverages

6,079,852

-

-

6,079,852

Building Materials

4,484,904

-

-

4,484,904

Capital Development Certificates

-

-

2,261,794

2,261,794

Cable and Satellite

3,072,370

-

-

3,072,370

Chemical Products

4,399,191

-

-

4,399,191

Construction and Infrastructure

4,275,973

-

-

4,275,973

Consumer Financing Services

931,257

931,257

Consumer Products

928,414

-

-

928,414

Energy

3,242,096

3,242,096

Financial Groups

14,117,259

-

-

14,117,259

Food

4,067,370

-

-

4,067,370

Holding Companies

3,452,835

-

-

3,452,835

Home Builders

421,264

-

-

421,264

Hotels, Restaurants, and Recreation

2,347,376

2,176,976

-

4,524,352

Mining

6,108,702

-

-

6,108,702

Real Estate Services

1,382,303

-

-

1,382,303

Retail

6,028,487

-

6,028,487

Telecommunications

9,229,562

-

-

9,229,562

Total Equity

$

85,892,917

$

2,176,976

$

2,261,794

$

90,331,687

Foreign Government Agency Issues

$

-

$

990,000

$

-

$

990,000

Short-Term Investments

$

-

$

1,194,874

$

-

$

1,194,874

Total Investments in Securities

$

85,892,917

$

4,361,850

$

2,261,794

$

92,516,561

* 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 reporting period.

Disclosures about Derivative Instruments and Hedging Activities

The Fund did not invest in derivative securities or engage in hedging activities during the period ended October 31, 2016. 

Level 3 Reconciliation Disclosure

Following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value. 

Investments in Securities

Balance as of July 31, 2016

$

2,494,332

Acquisition/Purchase

-

Sales

-

Realized gain

-

Change in unrealized appreciation (depreciation)

(232,538

)

Balance as of October 31, 2016

$

2,261,794

The following table presents additional information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level 3 as of October 31, 2016:   

Fair Value October 31, 2016

Valuation

Methodologies

Unobservable

 Input ⁽¹⁾

Impact to Valuation from

an Increase in Input ⁽²⁾

Capital Development

Certificates

$

2,261,794

Market

Comparables/ Sum

of the Parts

Valuation

Liquidity

Discount

Decrease

In determining certain of these inputs, management evaluates a variety of factors including economic conditions, foreign exchange rates, industry and market developments, market valuations of comparable companies and company specific developments.

This column represents the directional change in the fair value of the Level 3 investment that would result from increases to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect.