N-Q 1 fp0042090_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 25 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  
     
Date of reporting period: March 31, 2019  

 

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 the 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, 2019 (Unaudited)

 

COMMON STOCKS - 97.6%  Shares   Value 
Communication Services - 8.2%          
Diversified Telecommunication Services - 4.7%          
AT&T, Inc.   96,903   $3,038,878 
Verizon Communications, Inc.   70,786    4,185,576 
         7,224,454 
Entertainment - 3.5%          
Walt Disney Company (The)   48,992    5,439,582 
           
Consumer Discretionary - 8.6%          
Hotels, Restaurants & Leisure - 4.3%          
McDonald's Corporation   34,655    6,580,984 
           
Specialty Retail - 4.3%          
Home Depot, Inc. (The)   34,575    6,634,597 
           
Consumer Staples - 10.7%          
Beverages - 2.7%          
PepsiCo, Inc.   33,995    4,166,087 
           
Food & Staples Retailing - 5.1%          
Kroger Company (The)   117,971    2,902,086 
Walmart, Inc.   51,677    5,040,058 
         7,942,144 
Household Products - 2.9%          
Procter & Gamble Company (The)   42,630    4,435,652 
           
Energy - 6.6%          
Energy Equipment & Services - 0.7%          
Schlumberger Ltd.   25,000    1,089,250 
           
Oil, Gas & Consumable Fuels - 5.9%          
Chevron Corporation   41,320    5,089,798 
Exxon Mobil Corporation   49,563    4,004,690 
         9,094,488 
Financials - 15.6%          
Banks - 5.3%          
M&T Bank Corporation   28,340    4,449,947 
PNC Financial Services Group, Inc. (The)   30,000    3,679,800 
         8,129,747 
Capital Markets - 5.7%          
BlackRock, Inc.   13,284    5,677,183 

 

 

 

CUTLER EQUITY FUND

SCHEDULE OF INVESTMENTS (Continued)

 

COMMON STOCKS - 97.6% (Continued)  Shares   Value 
Financials - 15.6% (Continued)          
Capital Markets - 5.7% (Continued)          
Northern Trust Corporation   34,000   $3,073,940 
         8,751,123 
Insurance - 4.6%          
Marsh & McLennan Companies, Inc.   41,500    3,896,850 
Prudential Financial, Inc.   35,500    3,261,740 
         7,158,590 
Health Care - 15.8%          
Health Care Equipment & Supplies - 7.2%          
Becton, Dickinson and Company   27,525    6,873,818 
Medtronic plc   46,000    4,189,680 
         11,063,498 
Pharmaceuticals - 8.6%          
Bristol-Myers Squibb Company   71,490    3,410,788 
Johnson & Johnson   34,670    4,846,519 
Merck & Company, Inc.   60,290    5,014,320 
         13,271,627 
Industrials - 15.6%          
Aerospace & Defense - 2.7%          
United Technologies Corporation   32,010    4,125,769 
           
Commercial Services & Supplies - 2.5%          
Republic Services, Inc.   48,000    3,858,240 
           
Machinery - 8.1%          
Caterpillar, Inc.   41,780    5,660,772 
Deere & Company   43,444    6,944,089 
         12,604,861 
Road & Rail - 2.3%          
Union Pacific Corporation   21,000    3,511,200 
           
Information Technology - 11.6%          
Semiconductors & Semiconductor Equipment - 7.2%          
Intel Corporation   102,465    5,502,370 
Texas Instruments, Inc.   53,365    5,660,426 
         11,162,796 
Software - 4.4%          
Microsoft Corporation   56,925    6,713,735 

 

 

 

CUTLER EQUITY FUND

SCHEDULE OF INVESTMENTS (Continued)

 

COMMON STOCKS - 97.6% (Continued)  Shares   Value 
Materials - 2.4%          
Chemicals - 2.4%          
DowDuPont, Inc.   69,875   $3,725,036 
           
Utilities - 2.5%          
Multi-Utilities - 2.5%          
Dominion Energy, Inc.   50,743    3,889,958 
           
Total Common Stocks (Cost $95,465,826)       $150,573,418 

 

MONEY MARKET FUNDS - 2.5%  Shares   Value 

Invesco STIT Government & Agency Portfolio - Institutional Class, 2.31% (a) (Cost $3,874,012)

   3,874,012   $3,874,012 
           
Total Investments at Value - 100.1% (Cost $99,339,838)       $154,447,430 
           
Liabilities in Excess of Other Assets - (0.1%)        (146,439)
           
Net Assets - 100.0%       $154,300,991 

 

(a)The rate shown is the 7-day effective yield as of March 31, 2019.

 

See accompanying notes to Schedules of Investments.

 

 

 

CUTLER FIXED INCOME FUND

SCHEDULE OF INVESTMENTS

March 31, 2019 (Unaudited)

 

U.S. TREASURY OBLIGATIONS - 30.8%  Coupon     Maturity   Par Value   Value 
U.S. Treasury Notes   1.750%      11/30/19   $250,000   $248,867 
U.S. Treasury Notes   1.875%      12/15/20    250,000    248,096 
U.S. Treasury Notes   2.375%      03/15/21    250,000    250,420 
U.S. Treasury Notes   2.125%      06/30/22    1,000,000    996,602 
U.S. Treasury Notes   1.625%      02/15/26    700,000    668,855 
U.S. Treasury Notes   1.625%      05/15/26    650,000    620,014 
U.S. Treasury Notes   2.000%      11/15/26    500,000    487,832 
Total U.S. Treasury Obligations (Cost $3,521,683)                   $3,520,686 

 

U.S. GOVERNMENT AGENCY OBLIGATIONS - 48.9%  Coupon   Maturity   Par Value   Value 
Federal Farm Credit Bank - 22.3%                    
Federal Farm Credit Bank   2.750%    06/26/23   $500,000   $508,346 
Federal Farm Credit Bank   2.040%    02/10/25    100,000    97,953 
Federal Farm Credit Bank   2.370%    05/01/25    300,000    298,654 
Federal Farm Credit Bank   2.360%    06/16/25    310,000    302,719 
Federal Farm Credit Bank   2.240%    07/06/27    1,150,000    1,094,491 
Federal Farm Credit Bank   2.500%    07/12/27    250,000    241,878 
                   2,544,041 
Federal Home Loan Bank - 20.7%                    
Federal Home Loan Bank   1.750%    03/29/22    250,000    248,201 
Federal Home Loan Bank   1.500%    10/27/22    500,000    496,960 
Federal Home Loan Bank   2.125%    03/10/23    350,000    347,518 
Federal Home Loan Bank   1.500%    07/27/28    1,000,000    948,255 
Federal Home Loan Bank   2.570%    10/06/31    345,000    327,021 
                   2,367,955 
Federal Home Loan Mortgage Corporation - 1.3%                    
Federal Home Loan Mortgage Corporation   1.500%    10/27/23    150,000    147,907 
                     
Private Export Funding Corporation - 3.2%                    
Private Export Funding Corporation   4.300%    12/15/21    350,000    365,856 

 

 

 

CUTLER FIXED INCOME FUND

SCHEDULE OF INVESTMENTS (Continued)

 

U.S. GOVERNMENT AGENCY OBLIGATIONS - 48.9% (Continued)  Coupon   Maturity   Par Value   Value 
U.S. Department of Housing and Urban Development - 1.4%                    
U.S. Department of Housing and Urban Development   4.130%    08/01/25   $150,000   $153,686 
                     
Total U.S. Government Agency Obligations (Cost $5,628,606)             $5,579,445 

 

MORTGAGE-BACKED SECURITIES - 1.8%  Coupon   Maturity   Par Value   Value 
Commercial - 0.0% (a)                    
Banc of America Commercial Mortgage Trust, IO, Series 2004-4   0.486%(b)    07/01/42   $267,799   $5 
Bear Stearns Commercial Mortgage Securities Trust, Series 2005-T20   5.252%(b)    10/12/42    200,000    8 
Wachovia Bank Commercial Mortgage Trust, IO, Series 2005-C21   0.000%(b)    10/01/44    105,109,973    3,069 
                   3,082 
Federal Home Loan Mortgage Corporation - 0.3%                    
FHLMC, Pool #J13584   3.500%    11/01/25    19,815    20,331 
FHLMC, Series 1963   7.500%    01/01/27    12,093    13,554 
                   33,885 
Federal National Mortgage Association - 0.2%                    
FNMA, Pool #899237   5.000%    03/01/22    1,911    1,956 
FNMA, Series 2002-93   6.500%    03/01/32    15,244    17,260 
                   19,216 
Government National Mortgage Association - 1.3%                    
GNMA, IO, Series 2012-114   0.766%(b)    01/16/53    3,234,521    148,526 
                     
Total Mortgage-Backed Securities (Cost $400,429)                 $204,709 

 

CORPORATE BONDS - 15.6%  Coupon   Maturity   Par Value   Value 
Consumer Discretionary - 4.0%                    
Dollar General Corporation   4.125%    05/01/28   $150,000   $153,741 
Dollar Tree, Inc.   4.000%    05/15/25    150,000    151,628 
NVR, Inc.   3.950%    09/15/22    150,000    154,007 
                   459,376 

 

 

 

CUTLER FIXED INCOME FUND

SCHEDULE OF INVESTMENTS (Continued)

 

CORPORATE BONDS - 15.6% (Continued)  Coupon   Maturity   Par Value   Value 
Financials - 5.0%                    
Citigroup, Inc.   2.700%    10/27/22   $150,000   $148,604 
Finial Holdings, Inc.   7.125%    10/15/23    250,000    286,864 
First American Financial Advisors, Inc.   4.300%    02/01/23    125,000    127,141 
                   562,609 
Health Care - 1.3%                    
Cigna Corporation   3.250%    04/15/25    150,000    148,677 
                     
Industrials - 2.6%                    
Mueller Industries, Inc.   6.000%    03/01/27    150,000    147,000 
Textron, Inc. (3MO LIBOR +55)   3.247%(b)    11/10/20    150,000    149,345 
                   296,345 
Information Technology - 1.4%                    
S&P Global, Inc.   4.400%    02/15/26    150,000    161,288 
                     
Materials - 1.3%                    
Mosaic Company   3.250%    11/15/22    150,000    150,396 
                     
Total Corporate Bonds (Cost $1,760,402)                 $1,778,691 

 

 

 

CUTLER FIXED INCOME FUND

SCHEDULE OF INVESTMENTS (Continued)

 

MONEY MARKET FUNDS - 2.5%  Shares   Value 

Invesco STIT Government & Agency Portfolio - Institutional Class, 2.31% (c) (Cost $281,634)

   281,634   $281,634 
           
Total Investments at Value - 99.6% (Cost $11,592,754)       $11,365,165 
           
Other Assets in Excess of Liabilities - 0.4%        49,116 
           
Net Assets - 100.0%       $11,414,281 

 

IO - Interest only strip. Par value shown is the notional value, not a true par value.

LIBOR - London Interbank Offered Rate.

(a)Percentage rounds to less than 0.1%.
(b)Variable rate security. The rate shown is the effective interest rate as of March 31, 2019. For securities based on a published reference rate and spread, the reference rate and spread (in basis points) are indicated parenthetically. Certain variable rate securities are not based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities, therefore, do not indicate a reference rate and spread.
(c)The rate shown is the 7-day effective yield as of March 31, 2019.

 

See accompanying notes to Schedules of Investments.

 

 

 

CUTLER EMERGING MARKETS FUND

SCHEDULE OF INVESTMENTS

March 31, 2019 (Unaudited)

 

COMMON STOCKS - 72.0%  Shares   Value 
Brazil - 3.1%          
Ambev S.A. - ADR   32,010   $137,643 
Banco Bradesco S.A. - ADR   17,319    188,950 
TIM Participacoes S.A. - ADR   7,700    116,116 
         442,709 
Chile - 2.5%          
Empresa Nacional de Telecomunicaciones S.A.   17,614    183,411 
Viña Concha y Toro S.A.   79,500    165,598 
         349,009 
China - 4.1%          
China Petroleum & Chemical Corporation - ADR   1,600    127,200 
PetroChina Company Ltd. - ADR   4,176    273,236 
Sinopec Shanghai Petrochemical Company Ltd. - ADR   3,704    176,792 
         577,228 
Colombia - 1.2%          
Grupo de Inversiones Suramericana S.A.   14,983    172,201 
           
Hong Kong - 18.7%          
Beijing Enterprises Holdings Ltd. (a)   41,000    232,815 
BOC Hong Kong Holdings Ltd. (a)   60,000    248,996 
China Overseas Land & Investment Ltd. (a)   59,000    224,525 
China Overseas Property Holdings Ltd. (a)   15,666    7,542 
China Resources Beer Holdings Company Ltd. (a)   104,000    438,656 
China Resources Land Ltd. (a)   68,000    305,586 
CITIC Ltd. (a)   107,000    159,957 
COSCO SHIPPING Ports Ltd. (a)   12,754    13,791 
Hengan International Group Company Ltd. (a)   39,000    341,920 
Lenovo Group Ltd. - ADR   8,206    147,585 
Shanghai Industrial Holdings Ltd. (a)   69,000    162,620 
Sino Biopharmaceutical Ltd. (a)   148,500    135,714 
Tingyi (Cayman Islands) Holding Corporation (a)   148,000    244,303 
         2,664,010 
India - 1.5%          
HDFC Bank Ltd. - ADR   1,887    218,722 
           
Indonesia - 3.9%          
Indofood Sukses Makmur Tbk. (a)   277,700    124,361 
Semen Indonesia Persero Tbk. (a)   263,100    258,271 
Telekomunikasi Indonesia Persero Tbk. - ADR   6,514    178,874 
         561,506 

 

 

 

CUTLER EMERGING MARKETS FUND

SCHEDULE OF INVESTMENTS (Continued)

 

COMMON STOCKS - 72.0% (Continued)  Shares   Value 
Korea (Republic of) - 9.2%          
AmorePacific Group (a)   710   $43,549 
Dongbu Insurance Company Ltd.   2,159    130,431 
Korea Gas Corporation (a)   3,880    154,085 
KT Corporation - ADR   11,956    148,733 
LG Corporation (a)   3,275    223,306 
POSCO - ADR   2,676    147,742 
Samsung Electronics Company Ltd. (a)   9,400    370,085 
Samsung Fire & Marine Insurance Company Ltd.   370    97,935 
         1,315,866 
Malaysia - 4.9%          
CIMB Group Holdings Berhad (a)   233,288    294,834 
Genting Berhad (a)   84,200    137,144 
Malayan Banking Berhad (a)   117,176    266,294 
         698,272 
Mexico - 2.7%          
América Móvil S.A.B. de C.V. - Series L - ADR   15,817    225,867 
Coca-Cola Femsa S.A.B. de C.V. - Series L   23,837    157,526 
         383,393 
Philippines - 2.4%          
Aboitiz Equity Ventures, Inc. (a)   87,350    97,616 
Robinsons Land Corporation (a)   228,364    106,074 
Universal Robina Corporation (a)   45,370    130,612 
         334,302 
South Africa - 5.4%          
Liberty Holdings Ltd.   16,865    118,100 
MultiChoice Group Ltd. (b)   1,257    10,471 
Naspers Ltd. - Class N - ADR   6,285    291,812 
Sasol Ltd. - ADR   4,502    139,292 
Shoprite Holdings Ltd. (a)   10,000    110,181 
Shoprite Holdings Ltd. - ADR   8,803    97,581 
         767,437 
Taiwan Province of China - 9.3%          
Cheng Shin Rubber Industry Company Ltd. (a)   54,000    73,484 
Compal Electronics, Inc. (a)   238,000    147,903 
CTCI Corporation (a)   156,000    242,721 
Delta Electronics, Inc. (a)   39,100    201,739 
Giant Manufacturing Company Ltd. (a)   21,000    149,965 
President Chain Store Corporation (a)   29,000    285,478 
Taiwan Semiconductor Manufacturing Company Ltd. - ADR   5,575    228,352 
         1,329,642 

 

 

 

CUTLER EMERGING MARKETS FUND

SCHEDULE OF INVESTMENTS (Continued)

 

COMMON STOCKS - 72.0% (Continued)  Shares   Value 
Thailand - 1.7%          
Charoen Pokphand Foods plc (a)   309,000   $248,406 
           
United States - 1.4%          
Southern Copper Corporation   4,890    194,035 
           
Total Common Stocks (Cost $9,156,271)       $10,256,738 

 

PREFERRED STOCKS - 6.4%  Shares   Value 
Brazil - 4.7%          
Companhia Brasileira de Distribuição - ADR (c)   7,000   $162,960 
Companhia Paranaense de Energia-Copel - ADR (c)   15,000    139,200 
Itau Unibanco Holding S.A. - ADR (c)   28,905    254,653 
Telefonica Brasil S.A. - ADR (c)   8,850    106,819 
         663,632 
Colombia - 0.0% (d)          
Grupo de Inversiones Suramericana S.A. (c)   183    1,975 
           
Russian Federation - 1.7%          
Surgutneftegaz OJSC - ADR (c)   39,980    245,877 
           
Total Preferred Stocks (Cost $753,993)       $911,484 

 

EXCHANGE-TRADED FUNDS - 17.4%  Shares   Value 
Columbia India Consumer ETF   11,000   $464,609 
iShares China Large-Cap ETF   7,500    332,025 
iShares MSCI India ETF   26,800    944,700 
iShares MSCI Japan ETF   2,750    150,480 
iShares MSCI Taiwan ETF   4,429    153,155 
VanEck Vectors India Small-Cap Index ETF   1,890    82,933 
VanEck Vectors Vietnam ETF   20,900    346,104 
Total Exchange-Traded Funds (Cost $2,349,451)       $2,474,006 

 

 

 

CUTLER EMERGING MARKETS FUND

SCHEDULE OF INVESTMENTS (Continued)

 

MONEY MARKET FUNDS - 4.0%  Shares   Value 

Invesco STIT Government & Agency Portfolio - Institutional Class, 2.31% (e) (Cost $574,031)

   574,031   $574,031 
           
Total Investments at Value - 99.8% (Cost $12,833,746)       $14,216,259 
           
Other Assets in Excess of Liabilities - 0.2%        22,475 
           
Net Assets - 100.0%       $14,238,734 

 

ADR - American Depositary Receipt.

(a)Level 2 security (Note 1).
(b)Non-income producing security.
(c)Security has a perpetual maturity date.
(d)Percentage rounds to less than 0.1%.
(e)The rate shown is the 7-day effective yield as of March 31, 2019.

 

See accompanying notes to Schedules of Investments.

 

 

 

CUTLER EMERGING MARKETS FUND

SUMMARY OF COMMON STOCKS BY SECTOR AND INDUSTRY

March 31, 2019 (Unaudited)

 

Sector/Industry % of Net Assets
Communication Services – 8.9%  
Diversified Telecommunication Services 3.1%
Media 2.1%
Wireless Telecommunication Services 3.7%
Consumer Discretionary - 2.5%  
Auto Components 0.5%
Hotels, Restaurants & Leisure 1.0%
Leisure Products 1.0%
Consumer Staples – 18.8%  
Beverages 3.2%
Food & Staples Retailing 7.6%
Food Products 5.3%
Personal Products 2.7%
Energy – 5.5%  
Oil, Gas & Consumable Fuels 5.5%
Financials – 14.0%  
Banks 10.4%
Diversified Financial Services 1.2%
Insurance 2.4%
Health Care - 0.9%  
Pharmaceuticals 0.9%
Industrials - 8.0%  
Construction & Engineering 1.7%
Industrial Conglomerates 6.2%
Transportation Infrastructure 0.1%
Information Technology - 7.7%  
Electronic Equipment, Instruments & Components 1.4%
Semiconductors & Semiconductor Equipment 1.6%
Technology Hardware, Storage & Peripherals 4.7%
Materials - 5.5%  
Chemicals 1.3%
Construction Materials 1.8%
Metals & Mining 2.4%
Real Estate - 4.5%  
Real Estate Management & Development 4.5%

 

 

 

CUTLER EMERGING MARKETS FUND

SUMMARY OF COMMON STOCKS BY SECTOR AND INDUSTRY (continued)

 

Sector/Industry % of Net Assets
Utilities - 2.1%  
Gas Utilities 2.1%
  78.4%

 

See accompanying notes to Schedules of Investments.

 

 

 

THE CUTLER FUNDS

NOTES TO SCHEDULES OF INVESTMENTS

March 31, 2019 (Unaudited)

 

 

1.Securities Valuation

 

Portfolio securities of Cutler Equity Fund, Cutler Fixed Income Fund and Cutler Emerging Markets Fund (each, a “Fund,” and collectively, the “Funds”) are valued as of the close of regular trading on the New York Stock Exchange (“NYSE”) (normally, 4:00 p.m., Eastern time) on each day the NYSE is open. Exchange traded securities are valued using the last reported sales price on the exchanges on which they are primarily traded. When using the last sales price and when the market is considered to be active, the security will be classified within Level 1 of the fair value hierarchy (see below). 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. Securities principally traded in non-U.S. markets that may close at different times than U.S. markets are typically fair valued by an independent pricing service and translated from the local currency into U.S. dollars using currency exchange rates supplied by an independent pricing quotation service. Non-exchange traded securities for which over-the-counter quotations are available are generally valued at the closing bid price. Fixed income securities are generally valued using prices provided by an independent pricing service. The independent pricing service uses information with respect to transactions in bonds, quotations from bond dealers, market transactions in comparable securities, and various relationships between securities in determining the prices. Investments in shares of other open-end investment companies, other than exchange-traded funds, are valued at their net asset value (“NAV”) as reported by such companies.

 

The Funds value securities at fair value pursuant to procedures adopted by the Cutler Investment Trust’s Board of Trustees (the “Board”) 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 NAVs. In instances where the investment adviser believes that the prices received from the independent pricing service are unreliable, proprietary valuation models may be used that consider benchmark yield curves, estimated default rates, coupon rates, anticipated timing of principal repayments and other unique security features to estimate the relevant cash flows, which are discounted to calculate the fair values. Fair valued securities will be classified as Level 2 or 3 within the fair value hierarchy, depending on the inputs used.

 

The Board approves the independent pricing services used by the Funds.

 

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 unadjusted prices for identical instruments in active markets to which the Fund has access at the date of measurement.

 

•Level 2 – quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model derived valuations in which all significant inputs and significant value drivers are observable. Level 2 inputs are those in markets for which there are few transactions, the prices are not current, little public information exists or instances where prices vary substantially over time or among brokered market makers.

 

•Level 3 – model-derived valuations in which one or more significant inputs or significant value drivers are unobservable. Unobservable inputs are those inputs that reflect the Fund’s own assumptions that market participants would use to price the asset or liability based on the best available information.

 

 

 

THE CUTLER FUNDS

NOTES TO SCHEDULE OF INVESTMENTS (Continued)

 

 

Fixed income securities held by Cutler Fixed Income Fund are classified as Level 2 because the values for the fixed income securities are based on prices that utilize various “other significant observable inputs” including bid and ask quotations, prices of similar securities and interest rates, among other factors.

 

Securities of Cutler Emerging Markets Fund traded in foreign markets may be classified as Level 2 despite the availability of closing prices because such securities are typically fair valued by an independent pricing service approved by the Board. These foreign securities may be priced at their fair value because the value of the securities may be materially affected by events occurring before the Fund’s pricing time but after the close of the primary markets or exchanges on which such foreign securities are traded. These intervening events might be country-specific (e.g., natural disaster, economic or political developments, interest rate change); issuer-specific (e.g., earnings report, merger announcement); or U.S. markets-specific (such as a significant movement in the U.S. markets that is deemed to affect the value of foreign securities). The pricing service uses an automated system incorporating a model based on multiple parameters, including a security’s local closing price, relevant general and sector indices, currency fluctuations, trading in depositary receipts and futures, if applicable, and/or research valuations by its staff, in determining what it believes is the fair value of the securities.

 

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 Fund’s investments as of March 31, 2019 by security type:

 

Cutler Equity Fund  Level 1   Level 2   Level 3   Total 
Common Stocks  $150,573,418   $-   $-   $150,573,418 
Money Market Funds   3,874,012    -    -    3,874,012 
Total  $154,447,430   $-   $-   $154,447,430 

 

 

Cutler Fixed Income Fund   Level 1    Level 2    Level 3    Total 
U.S. Treasury Obligations  $-   $3,520,686   $-   $3,520,686 
U.S. Government Agency Obligations   -    5,579,445    -    5,579,445 
Mortgage-Backed Securities   -    204,709    -    204,709 
Corporate Bonds   -    1,778,691    -    1,778,691 
Money Market Funds   281,634    -    -    281,634 
Total  $281,634   $11,083,531   $-   $11,365,165 

 

 

Cutler Emerging Markets Fund   Level 1    Level 2    Level 3    Total 
Common Stocks  $-   $-   $-   $- 
Preferred Stocks   911,484    -    -    911,484 
Exchange-Traded Funds   2,474,006    -    -    2,474,006 
Money Market Funds   574,031    -    -    574,031 
Total  $3,959,521   $-   $-   $3,959,521 

 

 

Refer to each Fund’s Schedule of Investments for a listing of the securities by security type and sector or industry type. There were no Level 3 securities held by the Funds as of March 31, 2019.

 

 

 

THE CUTLER FUNDS

NOTES TO SCHEDULE OF INVESTMENTS (Continued)

 

 

2.Investment Transactions

 

Investment transactions are accounted for on trade date. Realized gains and losses on investments 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, 2019:

 

           Cutler 
   Cutler   Cutler   Emerging 
   Equity   Fixed Income   Markets 
   Fund   Fund   Fund 
Cost of portfolio investments  $99,354,014   $11,700,008   $12,889,131 
                
Gross unrealized appreciation  $58,955,196   $83,868   $1,931,412 
Gross unrealized depreciation   (3,861,780)   (418,711)   (604,284)
                
Net unrealized appreciation (depreciation)  $55,093,416   $(334,843)  $1,327,128 

 

The difference between the federal income tax cost of portfolio investments and the Schedule of Investments cost for each 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 related to losses deferred due to wash sales for Cutler Equity Fund and Cutler Fixed Income Fund and losses deferred due to wash sales and holdings classified as passive foreign investment companies (PFICs) for Cutler Emerging Markets Fund.

 

4.Risks Associated with Emerging Markets

 

In seeking to meet its investment objective, under normal conditions, at least 80% of Cutler Emerging Markets Fund’s assets will be invested in a diversified portfolio of securities of issuers whose principal activities are in, or economically tied to, emerging markets countries selected in accordance with the investment adviser’s long standing dividend focused investment philosophy. Accordingly, Cutler Emerging Markets Fund is subject to the following investment risks:

 

Foreign Investment Risk — Investments in foreign securities involve different risks than U.S. investments, including fluctuations in currency exchange rates, potentially unstable political and economic structures, less efficient trade settlement practices, reduced availability of public information, and lack of uniform financial reporting and regulatory practices similar to those that apply to U.S. issuers. Foreign stock markets may also be less liquid and more volatile than U.S. stock markets.

 

 

 

THE CUTLER FUNDS

NOTES TO SCHEDULE OF INVESTMENTS (Continued)

 

 

Emerging Markets Risk — The economies of emerging market countries may be more dependent on relatively few industries that may be highly vulnerable to local and global changes. The governments of emerging market countries may be less stable than the governments of more developed countries. Countries in the emerging markets generally have less developed securities markets or exchanges, and less developed legal and accounting systems, reduced availability of public information, and lack of uniform financial reporting and regulatory practices, which in turn may adversely impact Cutler Emerging Markets Fund’s ability to calculate accurately the intrinsic value of the securities. Securities of emerging market companies may be less liquid and more volatile than securities in countries with more mature markets. The value of emerging market currencies may fluctuate more than the currencies of countries with more mature markets. Investments in emerging market countries may be subject to greater risks of government restrictions, including confiscatory taxation, expropriation or nationalization of a company’s assets, restrictions on foreign ownership of local companies and restrictions on withdrawing assets from the country. Investments in securities of issuers in emerging market countries may be considered speculative and higher risk.

 

Currency Risk — Because Cutler Emerging Markets Fund holds securities valued in foreign currencies and holds foreign currencies when it purchases and sells foreign securities, changes in exchange rates will impact the value of the Fund’s assets. Thus, investments in foreign securities involve currency risk, which is the risk that the values of the foreign securities and other assets denominated in foreign currencies will decrease due to adverse changes in the value of the U.S. dollar relative to the value of foreign currencies.

 

 

 

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 15, 2019    
       
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 15, 2019    
       
By (Signature and Title)* /s/ Matthew C. Patten  
    Matthew C. Patten, Treasurer and Principal Financial Officer
       
Date May 15, 2019    

 

*Print the name and title of each signing officer under his or her signature.