N-Q 1 fp0010573_nq.htm THE CUTLER TRUST - FORM N-Q fp0010573_nq.htm
 
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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     811-07242         
 
The Cutler Trust
(Exact name of registrant as specified in charter)
 
525 Bigham Knoll       Jacksonville, Oregon
97530
(Address of principal executive offices)
(Zip code)
 
Erich M. Patten
 
 Cutler Investment Counsel, LLC      525 Bigham Knoll        Jacksonville, Oregon 97530
(Name and address of agent for service)
 
Registrant's telephone number, including area code:  (541) 770-9000      
 
Date of fiscal year end:         June 30, 2014                                     
 
Date of reporting period:       March 31, 2014                                  
 
Form N-Q is to be used by management investment companies other than small business investment companies registered on Form N-5 (§§ 239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to Rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.
 
A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
 
 
 
 
 
Item 1.  Schedule of Investments.
 
CUTLER EQUITY FUND
  
SCHEDULE OF INVESTMENTS
  
March 31, 2014 (Unaudited)
  
             
COMMON STOCKS - 96.6%
  
Shares
    
Value
  
Consumer Discretionary - 14.3%
            
Hotels, Restaurants & Leisure - 2.6%
            
McDonald's Corporation
     30,655     $ 3,005,110  
                 
Media - 3.4%
                
Walt Disney Company (The)
     48,992       3,922,789  
                 
Multiline Retail - 5.2%
                
Nordstrom, Inc.
     54,385       3,396,343  
Target Corporation
     44,650       2,701,772  
              6,098,115  
Specialty Retail - 3.1%
                
Home Depot, Inc. (The)
     46,200       3,655,806  
                 
Consumer Staples - 9.2%
                
Beverages - 2.5%
                
PepsiCo, Inc.
     35,495       2,963,833  
                 
Food & Staples Retailing - 1.9%
                
Sysco Corporation
     60,595       2,189,297  
                 
Food Products - 2.3%
                
Archer-Daniels-Midland Company
     62,135       2,696,038  
                 
Household Products - 2.5%
                
Procter & Gamble Company (The)
     36,130       2,912,078  
                 
Energy - 8.4%
                
Oil, Gas & Consumable Fuels - 8.4%
                
Chevron Corporation
     29,820       3,545,896  
ConocoPhillips
     41,830       2,942,741  
Exxon Mobil Corporation
     33,881       3,309,496  
              9,798,133  
Financials - 14.9%
                
Capital Markets - 5.3%
                
BlackRock, Inc. - Class A
     7,184       2,259,224  
Charles Schwab Corporation (The)
     145,095       3,965,447  
              6,224,671  
 
 
 
 
 
CUTLER EQUITY FUND
  
SCHEDULE OF INVESTMENTS (Continued)
  
             
COMMON STOCKS - 96.6% (Continued)
  
Shares
    
Value
  
Financials - 14.9% (Continued)
            
Commercial Banks - 3.0%
            
M&T Bank Corporation
     28,340     $ 3,437,642  
                 
Consumer Finance - 3.7%
                
American Express Company
     47,395       4,266,972  
                 
Insurance - 2.9%
                
Chubb Corporation (The)
     37,670       3,363,931  
                 
Health Care - 12.2%
                
Health Care Equipment & Supplies - 2.8%
                
Becton, Dickinson & Company
     27,525       3,222,627  
                 
Pharmaceuticals - 9.4%
                
Bristol-Myers Squibb Company
     72,240       3,752,868  
Johnson & Johnson
     37,170       3,651,209  
Merck & Company, Inc.
     62,790       3,564,588  
              10,968,665  
Industrials - 10.5%
                
Aerospace & Defense - 3.2%
                
United Technologies Corporation
     32,010       3,740,048  
                 
Electrical Equipment - 2.3%
                
Emerson Electric Company
     38,735       2,587,498  
                 
Machinery - 5.0%
                
Caterpillar, Inc.
     30,280       3,008,924  
Deere & Company
     31,244       2,836,955  
              5,845,879  
Information Technology - 13.8%
                
Communications Equipment - 2.2%
                
QUALCOMM, Inc.
     32,639       2,573,911  
                 
IT Services - 3.1%
                
International Business Machines Corporation
     18,565       3,573,577  
                 
Semiconductors & Semiconductor Equipment - 5.7%
                
Intel Corporation
     104,965       2,709,147  
Texas Instruments, Inc.
     83,900       3,955,885  
              6,665,032  
 
 
 
 
 
CUTLER EQUITY FUND
  
SCHEDULE OF INVESTMENTS (Continued)
  
             
COMMON STOCKS - 96.6% (Continued)
  
Shares
    
Value
  
Information Technology - 13.8% (Continued)
            
Software - 2.8%
            
Microsoft Corporation
     80,425     $ 3,296,621  
                 
Materials - 5.4%
                
Chemicals - 5.4%
                
E.I. du Pont de Nemours and Company
     55,905       3,751,225  
Monsanto Company
     21,715       2,470,516  
              6,221,741  
Telecommunication Services - 4.8%
                
Diversified Telecommunication Services - 4.8%
                
AT&T, Inc.
     80,461       2,821,767  
Verizon Communications, Inc.
     58,960       2,804,727  
              5,626,494  
Utilities - 3.1%
                
Gas Utilities - 3.1%
                
National Fuel Gas Company
     52,145       3,652,236  
                 
Total Common Stocks (Cost $77,402,775)
     $ 112,508,744  
 
MONEY MARKET FUNDS - 4.2%
  
Shares
    
Value
  
Invesco STIT-STIC Prime Portfolio (The) - Institutional Class, 0.03% (a) (Cost $4,927,152)
     4,927,152     $ 4,927,152  
                 
Total Investments at Value - 100.8% (Cost $82,329,927)
     $ 117,435,896  
                 
Liabilities in Excess of Other Assets - (0.8%)
       (925,779 )
                 
Net Assets - 100.0%
     $ 116,510,117  
 
(a)
The rate shown is the 7-day effective yield as of March 31, 2014.

See accompanying notes to Schedules of Investments.
 
 
 
 

CUTLER FIXED INCOME FUND
  
SCHEDULE OF INVESTMENTS
  
March 31, 2014 (Unaudited)
  
             
U.S. TREASURY OBLIGATIONS - 14.2%
  
Coupon
Maturity
  
Par Value
    
Value
  
U.S. Treasury Notes
     1.500 % 
02/28/19
   $ 700,000     $ 693,000  
U.S. Treasury Notes
     1.375 % 
05/31/20
     1,000,000       957,812  
U.S. Treasury Notes
     2.750 % 
02/15/24
     400,000       400,875  
Total U.S. Treasury Obligations (Cost $2,063,669)
     $ 2,051,687  
 
U.S. GOVERNMENT AGENCY OBLIGATIONS - 57.7%
  
Coupon
Maturity
  
Par Value
    
Value
  
Federal Agricultural Mortgage Corporation - 10.6%
                
Federal Agricultural Mortgage Corporation
     2.800 %  
09/09/20
   $ 1,500,000     $ 1,525,305  
                           
Federal Farm Credit Bank - 3.8%
                
Federal Farm Credit Bank
     1.550 %  
01/24/20
     500,000       483,039  
Federal Farm Credit Bank
     2.250 %  
08/15/22
     65,000       61,409  
                        544,448  
Federal Home Loan Bank - 20.4%
                
Federal Home Loan Bank
     1.460 %  
12/13/19
     500,000       477,992  
Federal Home Loan Bank
     1.000 %(a)
05/28/20
     400,000       386,770  
Federal Home Loan Bank
     1.250 %(a)
02/14/23
     500,000       485,720  
Federal Home Loan Bank
     1.125 %(a)
03/27/23
     500,000       489,695  
Federal Home Loan Bank
     1.000 %(a)
06/20/23
     550,000       545,162  
Federal Home Loan Bank
     1.250 %(a)
08/28/24
     500,000       468,454  
Federal Home Loan Bank
     1.750 %(a)
08/28/24
     100,000       94,471  
                        2,948,264  
Federal Home Loan Mortgage Corporation - 3.7%
                
Federal Home Loan Mortgage Corporation
     1.250 %  
11/30/17
     65,000       64,712  
Federal Home Loan Mortgage Corporation
     1.500 %  
06/24/20
     500,000       474,555  
                        539,267  
Federal National Mortgage Association - 10.9%
                
Federal National Mortgage Association
     1.000 %  
12/27/18
     500,000       479,133  
Federal National Mortgage Association
     1.200 %  
04/25/19
     500,000       484,062  
Federal National Mortgage Association
     1.000 %(a)
01/30/20
     500,000       484,409  
Federal National Mortgage Association
     2.000 %  
03/27/20
     60,000       59,188  
Federal National Mortgage Association
     2.200 %  
10/25/22
     64,000       59,628  
                        1,566,420  
Financing Corporation (FICO) - 4.5%
                
Financing Corporation (FICO)
     9.800 %  
11/30/17
     500,000       651,263  
 
 
 
 
 
CUTLER FIXED INCOME FUND
  
SCHEDULE OF INVESTMENTS (Continued)
  
             
U.S. GOVERNMENT AGENCY OBLIGATIONS - 57.7% (Continued)
  
Coupon
Maturity
  
Par Value
    
Value
  
Private Export Funding Corporation - 2.7%
            
Private Export Funding Corporation
     4.300 %  
12/15/21
   $ 350,000     $ 388,546  
                           
U.S. Department of Housing and Urban Development - 1.1%
                
U.S. Department of Housing and Urban Development
     4.130 %  
08/01/25
     150,000       157,555  
                           
Total U.S. Government Agency Obligations (Cost $8,428,527)
     $ 8,321,068  
 
OTHER GOVERNMENT OBLIGATIONS - 2.4%
  
Coupon
Maturity
  
Par Value
    
Value
  
Province of Manitoba (Cost $355,542)
     1.300 % 
04/03/17
   $ 350,000     $ 352,279  
 
MORTGAGE-BACKED      SECURITIES - 3.5%
  
Coupon
Maturity
  
Par Value
    
Value
  
Federal Home Loan Mortgage Corporation - 0.8%
                
FHLMC, Pool #J13584
     3.500 % 
11/01/25
   $ 68,095     $ 71,458  
FHLMC, Series 1963-Z
     7.500 % 
01/01/27
     31,625       36,440  
                        107,898  
Federal National Mortgage Association - 2.6%
                
FNMA, Series 2003-3-HJ
     5.000 % 
02/01/18
     24,412       25,822  
FNMA, Pool #899237
     5.000 % 
03/01/22
     18,048       19,467  
FNMA, Series 2002-93-A1
     6.500 % 
03/01/32
     59,581       65,715  
Multifamily REMIC Trust, Series 2006-M1-D
     5.385 %(a)
06/01/19
     250,000       270,573  
                        381,577  
Government National Mortgage Association - 0.1%
                
GNMA, Pool #577742
     5.500 % 
09/01/17
     7,794       8,305  
                           
Total Mortgage-Backed Securities (Cost $484,545)
     $ 497,780  
 
 
 
 
 
CUTLER FIXED INCOME FUND
  
SCHEDULE OF INVESTMENTS (Continued)
  
             
ASSET-BACKED SECURITIES - 2.8%
  
Coupon
Maturity
  
Par Value
    
Value
  
Ford Credit Auto Owner Trust,
                    
Series 2012-A-A3
     0.840 % 
04/15/15
   $ 103,083     $ 103,302  
FPL Recovery Funding LLC,
                          
Series 2007-A-A3
     5.127 % 
08/01/17
     152,222       157,396  
RSB Bond Company, LLC,
                          
Series 2007-A-A2
     5.720 % 
04/01/16
     132,596       138,051  
Total Asset-Backed Securities (Cost $406,625)
     $ 398,749  
 
CORPORATE BONDS - 17.8%
  
Coupon
Maturity
  
Par Value
    
Value
  
Consumer Discretionary - 2.4%
                
Fortune Brands, Inc.
     5.375 %  
01/15/16
   $ 321,000     $ 343,211  
                           
Energy - 1.4%
                
Buckeye Partners, L.P.
     4.875 %  
02/01/21
     200,000       210,668  
                           
Financials - 6.0%
                
Bank of America Corporation
     5.625 %  
07/01/20
     500,000       568,974  
Finial Holdings, Inc.
     7.125 %  
10/15/23
     250,000       292,698  
                        861,672  
Industrials - 3.5%
                
Domtar Corporation
     10.750 %  
06/01/17
     120,000       150,659  
Iron Mountain, Inc.
     8.375 %  
08/15/21
     83,000       87,980  
Kinross Gold Corporation
     5.125 %  
09/01/21
     100,000       99,089  
Valmont Industries, Inc.
     6.625 %  
04/20/20
     150,000       174,179  
                        511,907  
Telecommunication Services - 3.5%
                
Scripps Networks Interactive, Inc.
     2.700 %  
12/15/16
     300,000       311,348  
Verizon Communications, Inc.
     2.000 %  
11/01/16
     185,000       189,267  
                        500,615  
Utilities - 1.0%
                
Sempra Energy
     6.500 %  
06/01/16
     125,000       139,146  
                           
Total Corporate Bonds (Cost $2,528,665)
     $ 2,567,219  
 
 
 
 

CUTLER FIXED INCOME FUND
  
SCHEDULE OF INVESTMENTS (Continued)
  
             
MONEY MARKET FUNDS - 1.2%
  
Shares
    
Value
  
Invesco STIT-STIC Prime Portfolio (The) - Institutional Class, 0.03% (b) (Cost $178,718)
     178,718     $ 178,718  
                 
Total Investments at Value - 99.6% (Cost $14,446,291)
     $ 14,367,500  
                 
Other Assets in Excess of Liabilities - 0.4%
       54,039  
                 
Net Assets - 100.0%
     $ 14,421,539  
 
(a)
Variable rate security.  The rate shown is the effective interest rate as of March 31, 2014.
(b)
The rate shown is the 7-day effective yield as of March 31, 2014.

See accompanying notes to Schedules of Investments.
 
 
 
 
THE CUTLER FUNDS
NOTES TO SCHEDULES OF INVESTMENTS
March 31, 2014 (Unaudited)
 
1.   Securities Valuation
 
Portfolio securities of Cutler Equity Fund and Cutler Fixed Income Fund (the “Funds”) are valued as of the close of business of the regular session of the principal exchange where the security is traded. Exchange traded securities for which market quotations are readily available are valued using the last reported sales price provided by independent pricing services as of the close of trading on the New York Stock Exchange (normally 4:00 p.m. Eastern time) on each Fund business day.  In the absence of a sale, such securities are valued at the mean of the last bid and asked price.  Securities which are quoted by NASDAQ are valued at the NASDAQ Official Closing Price.  Non-exchange traded securities for which over-the-counter quotations are available are generally valued at the closing bid price.  Investments in shares of other open-end investment companies are valued at net asset value per share.
 
The Funds value securities at fair value pursuant to procedures adopted by the Board of Trustees if (1) market quotations are insufficient or not readily available or (2) the Funds’ investment adviser believes that the prices or values available are unreliable due to, among other things, the occurrence of events after the close of the securities markets on which the Funds’ securities primarily trade but before the time as of which the Funds calculate their net asset values.  Fair valued securities will be classified as Level 2 or 3 within the fair value hierarchy (see below), depending on the inputs used.
 
Accounting principles generally accepted in the United States (“GAAP”) establish a single authoritative definition of fair value, set out a framework for measuring fair value and require additional disclosures about fair value measurements.
 
Various inputs are used in determining the value of the Funds’ investments.  These inputs are summarized in the three broad levels listed below:
 
 
·
Level 1 – quoted prices in active markets for identical securities
 
·
Level 2 – other significant observable inputs
 
·
Level 3 – significant unobservable inputs

Fixed income securities held by Cutler Fixed Income Fund are classified as Level 2 since the values for the fixed income securities are based on prices provided by an independent pricing service that utilizes various “other significant observable inputs” including bid and ask quotations, prices of similar securities and interest rates, among other factors.
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities.  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 to the fair value measurement.
 
The following is a summary of the inputs used to value each Funds’ investments as of March 31, 2014 by security type:
 
Cutler Equity Fund
  
Level 1
    
Level 2
    
Level 3
    
Total
  
Common Stocks
   $ 112,508,744     $ -     $ -     $ 112,508,744  
Money Market Funds
     4,927,152       -       -       4,927,152  
Total
   $ 117,435,896     $ -     $ -     $ 117,435,896  

 
 
 
 
THE CUTLER FUNDS
NOTES TO SCHEDULE OF INVESTMENTS (Continued)
 
Cutler Fixed Income Fund
  
Level 1
    
Level 2
    
Level 3
    
Total
  
U.S. Treasury Obligations
   $ -     $ 2,051,687     $ -     $ 2,051,687  
U.S. Government Agency Obligations
     -       8,321,068       -       8,321,068  
Other Government Obligations
     -       352,279       -       352,279  
Mortgage-Backed Securities
     -       497,780       -       497,780  
Asset-Backed Securities
     -       398,749       -       398,749  
Corporate Bonds
     -       2,567,219       -       2,567,219  
Money Market Funds
     178,718       -       -       178,718  
Total
   $ 178,718     $ 14,188,782     $ -     $ 14,367,500  
 
Refer to each Fund’s Schedule of Investments for a listing of the securities by security type and sector or industry type.  As of March 31, 2014, the Funds did not have any transfers in and out of any Level.  There were no Level 3 securities or derivative instruments held by the Funds as of March 31, 2014.  It is the Funds’ policy to recognize transfers into and out of any Level at the end of the reporting period.
 
2.   Investment Transactions
 
Investment transactions are accounted for on trade date.  Gains and losses on securities sold are determined on a specific identification basis.
 
3.   Federal Income Tax
 
The following information is computed on a tax basis for each item as of March 31, 2014:
 
   
Cutler
    
Cutler
  
   
Equity
    
Fixed Income
  
   
Fund
    
Fund
  
             
Cost of portfolio investments
   $ 82,349,626     $ 14,446,291  
                 
Gross unrealized appreciation
   $ 35,379,388     $ 121,412  
Gross unrealized depreciation
     (293,118 )     (200,203 )
                 
Net unrealized appreciation (depreciation)
   $ 35,086,270     $ (78,791 )
 
The difference between the federal income tax cost of portfolio investments and the Schedule of Investments cost for Cutler Equity Fund is due to certain timing differences in the recognition of capital gains and losses under income tax regulations and GAAP.  These “book/tax” differences are temporary in nature and are due to the tax deferral of losses on wash sales.
 
 
 
 
 
Item 2. Controls and Procedures.
 
(a)  Based on their evaluation of the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) as of a date within 90 days of the filing date of this report, the registrant’s principal executive officer and principal financial officer have concluded that such disclosure controls and procedures are reasonably designed and are operating effectively to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to them by others within those entities, particularly during the period in which this report is being prepared, and that such information is recorded, processed, summarized, and reported on a timely basis.
 
(b)  There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
 
Item 3. Exhibits.
 
File as exhibits as part of this Form a separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)):  Attached hereto
 
 
 
 
 
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)   The Cutler Trust         
 
 
By (Signature and Title)*
/s/ Erich M. Patten
  
   
Erich M. Patten, President
  
       
Date
May 21, 2014
    
 
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/ Erich M. Patten
  
   
Erich M. Patten, President
  
       
Date
May 21, 2014
    
       
By (Signature and Title)*
/s/ Matthew C. Patten
  
   
Matthew C. Patten, Treasurer
  
       
Date
May 21, 2014
    
 
*
Print the name and title of each signing officer under his or her signature.