N-Q 1 centerstonenq.htm 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 811-231128

 

Centerstone Investors Trust

(Exact name of registrant as specified in charter)

 

135 5th Avenue, New York, NY 10010

(Address of principal executive offices) (Zip code)

 

Philip Santopadre, Gemini Fund Services, LLC

80 Arkay Drive, Hauppauge, NY 11788

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 212-503-5789

 

Date of fiscal year end: 3/31

 

Date of reporting period: 12/31/17

 

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.

 

 

Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited)
December 31, 2017
Shares   Security       Market Value
             
    COMMON STOCK - 66.92 %    
    CANADA - 2.77 %    
78,464   TransCanada Corp.        $3,818,956
87,021   Metro, Inc.       2,786,472
            6,605,428
    CHILE - 1.62 %        
87,765   Cia Cervecerias Unidas SA       2,596,089
101,556,552   Vina San Pedro Tarapaca SA       1,278,946
            3,875,035
    DENMARK - 3.08 %    
285,244   Matas A/S        3,608,821
57,846   ISS A/S       2,240,301
34,617   Topdanmark A/S *       1,495,772
            7,344,894
    FINLAND - 0.94 %    
104,600   Tikkurila Oyj       2,235,233
             
    FRANCE - 5.53 %    
32,571   Air Liquide SA       4,105,390
31,417   Schneider Electric SE        2,671,118
11,165   Sodexo SA       1,501,059
15,830   Danone SA       1,328,605
11,966   Eiffage SA       1,311,406
15,303   Valeo SA       1,143,359
3,882   LVMH Moet Hennessy Louis Vuitton SE       1,143,029
            13,203,966
    GERMANY - 4.51 %    
22,646   Bayerische Motoren Werke AG       2,359,329
35,457   Brenntag AG       2,245,000
76,451   Hamburger Hafen und Logistik AG       2,171,244
16,450   Fraport AG Frankfurt Airport Services Worldwide       1,813,091
17,044   Hornbach Holding AG & Co. KGaA       1,513,728
17,696   Hornbach Baumarkt AG       656,829
            10,759,221
    HONG KONG - 3.23 %    
2,529,726   Kerry Logistics Network Ltd.        3,587,598
208,000   Hongkong Land Holdings Ltd.        1,464,320
671,517   Mandarin Oriental International Ltd.        1,356,464
246,900   Hysan Development Co. Ltd.       1,309,894
             7,718,276
    INDONESIA - 1.23 %        
1,811,562   Indocement Tunggal Prakarsa Tbk PT       2,930,812
             
    JAPAN - 5.14 %        
101,551   Nagaileben Co. Ltd.       2,552,407
132,275   Mitsubishi Estate Co. Ltd.       2,300,945
199,995   Ichiyoshi Securities Co. Ltd.       2,282,614
34,573   Aica Kogyo Co. Ltd.       1,284,118
87,000   Astellas Pharma, Inc.       1,109,554
50,330   Sekisui Jushi Corp.       1,026,477
7,252   Shimano, Inc.       1,020,139
2,896   FANUC Corp.       695,503
            12,271,757
    MEXICO - 1.28 %        
615,056   Grupo Televisa SAB       2,303,821
39,040   Fresnillo PLC       753,224
            3,057,045
    NETHERLANDS - 2.71 %        
91,703   Koninklijke Vopak NV       4,023,794
111,031   Koninklijke Ahold Delhaize NV       2,442,600
            6,466,394
    PERU - 0.53 %        
26,684   Southern Copper Corp.       1,266,156
             
    SINGAPORE - 1.07 %        
167,369   Oversea-Chinese Banking Corp. Ltd.       1,550,489
675,366   ComfortDelGro Corp. Ltd.       999,831
            2,550,320
Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
Shares   Security       Market Value
             
    COMMON STOCK - 66.92 % (continued)    
    SOUTH KOREA - 0.47 %        
10,400   KT&G Corp.        $1,122,040
             
    SWEDEN - 2.71 %        
95,268   ICA Gruppen AB       3,459,709
71,643   Loomis AB       3,009,616
            6,469,325
    SWITZERLAND - 4.68 %        
28,519   Novartis AG       2,411,581
9,082   Roche Holding AG       2,297,412
5,444   Swatch Group AG       2,220,171
25,043   Nestle SA       2,153,629
23,117   Cie Financiere Richemont SA       2,094,752
            11,177,545
    THAILAND - 2.93 %        
3,778,000   Krung Thai Bank PCL       2,225,763
264,260   Siam City Cement PCL       2,132,568
264,400   Bangkok Bank PCL       1,776,729
662,100   Thai Beverage PCL       455,443
65,350   Bangkok Bank PCL (NVDR)       405,054
            6,995,557
    UNITED KINGDOM - 0.97 %        
344,242   Rotork PLC       1,240,494
32,330   Spectris PLC       1,085,585
            2,326,079
    UNITED STATES - 20.79 %    
79,339   Target Corp.       5,176,870
20,669   WW Grainger, Inc.       4,883,051
163,022   Mosaic Co.       4,183,145
54,837   Colgate-Palmolive Co.       4,137,452
91,643   Tapestry, Inc.       4,053,370
11,690   3M Co.       2,751,475
38,534   EnerSys       2,683,122
241,855   NOW, Inc. *       2,667,661
36,300   Emerson Electric Co.       2,529,747
33,003   Omnicom Group, Inc.       2,403,608
9,215   O'Reilly Automotive, Inc. *       2,216,576
28,253   TJX Cos, Inc.       2,160,224
38,995   Sonoco Products Co.       2,072,194
24,042   CVS Health Corp.       1,743,045
9,836   McDonald's Corp.       1,692,972
15,508   Scotts Miracle-Gro Co.       1,659,201
11,852   United Technologies Corp.       1,511,960
17,458   CarMax, Inc. *       1,119,582
            49,645,255
             
    TOTAL COMMON STOCK (Cost - $142,523,430)       158,020,338
             
Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
Principal   Security   Coupon Maturity Market Value
             
    BONDS & NOTES - 7.55 %    
    LUXEMBOURG - 0.25 %        
 $600,000   Actavis Funding SCS   2.35% 3/12/2018  $600,475
             
    NETHERLANDS - 0.30 %        
 701,000   LyondellBasell Industries NV   5.00% 4/15/2019 719,735
             
    SWITZERLAND - 0.30 %        
 700,000   UBS Group Funding Switzerland AG, Quarterly US LIBOR +1.7800 # 3.14% 4/14/2021 726,407
             
    UNITED KINGDOM - 0.12 %        
 276,000   Vodafone Group PLC   4.63% 7/15/2018 279,802
             
    UNITED STATES - 6.58 %        
 2,000,000   Apple, Inc., Quarterly US LIBOR +0.5000   1.90% 2/9/2022 2,027,529
 1,500,000   Xilinx, Inc.   2.13% 3/15/2019 1,495,210
 1,000,000   Newell Brands, Inc.   2.88% 12/1/2019 1,008,034
 1,000,000   Synchrony Financial   2.60% 1/15/2019 1,001,892
 1,000,000   SUPERVALU, Inc.   6.75% 6/1/2021 996,250
 961,000   Kraft Heinz Foods Co.   2.00% 7/2/2018 960,971
 939,000   Bank of America Corp.   5.65% 5/1/2018 950,205
 881,000   Men's Wearhouse, Inc.   7.00% 7/1/2022 884,348
 812,000   Ford Motor Credit Co. LLC   2.55% 10/5/2018 814,359
 800,000   Mondelez International, Inc., Quarterly US LIBOR +0.5200 1.90% 2/1/2019 801,952
 750,000   United Technologies Corp.   1.78% 5/4/2018 748,853
 700,000   Goldman Sachs Group, Inc., Quarterly US LIBOR +1.6000 3.08% 11/29/2023 728,581
 550,000   PHI, Inc.   5.25% 3/15/2019 547,910
 500,000   Talen Energy Supply LLC   6.50% 5/1/2018 507,500
 500,000   Wells Fargo & Co. Quarterly US LIBOR +0.6800   2.06% 1/30/2020 504,136
 420,000   Kindred Healthcare, Inc.   8.00% 1/15/2020 455,049
 350,000   Clear Channel Worldwide Holdings, Inc.   7.63% 3/15/2020 343,000
 1,300,000   Commonwealth of Puerto Rico +   8.00% 7/1/2035 308,750
 245,000   Verizon Communications, Inc., Quarterly US LIBOR +1.7500 3.32% 9/14/2018 247,689
 146,000   Wells Fargo & Co., Quarterly US LIBOR +1.3400   2.83% 3/4/2021 150,035
 140,000   HRG Group, Inc.   7.88% 7/15/2019 140,280
 80,000   Spectra Energy Partners LP   2.95% 9/25/2018 80,481
            15,703,014
             
    TOTAL BONDS & NOTES (Cost - $17,891,737)       18,029,433
             
Shares            
    EXCHANGE TRADED FUND - COMMODITY - 4.86 %    
93,741   SPDR Gold Shares *       11,591,075
             
    TOTAL EXCHANGE TRADED FUND - COMMODITY (Cost - $11,268,450)   11,591,075
             
    REAL ESTATE INVESTMENT TRUSTS - 1.76 %    
10,742   Unibail-Rodamco SE       2,706,647
84,252   Monmouth Real Estate Investment Corp.       1,499,686
             
    TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost - $3,782,976)     4,206,333
             
Principal            
             
    US GOVERNMENT & AGENCY OBLIGATIONS - 13.05 %      
    US TREASURY NOTES - 13.05 %        
 $25,700,000   United States Treasury Note   1.38% 7/31/2019 25,506,246
 3,000,000   United States Treasury Note   1.25% 8/31/2019 2,969,414
 2,700,000   United States Treasury Note   1.38% 9/30/2019 2,676,691
             
    TOTAL US GOVERNMENT & AGENCY OBLIGATIONS (Cost - $31,406,621)   31,152,351
             
             
Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
Shares   Security       Market Value
    SHORT-TERM INVESTMENTS - 6.65 %    
    MONEY MARKET FUND - 6.65 %    
15,892,439   State Street Institutional Treasury Plus Money Market Fund, Trust Class, 1.13% ^    $15,892,439
    TOTAL SHORT-TERM INVESTMENTS (Cost - $15,892,439)     15,892,439
             
    TOTAL INVESTMENTS - 100.06 % (Cost - $222,765,652) (a)      $238,891,969
    LIABILITIES LESS OTHER ASSETS - (0.06) %        (147,193)
    NET ASSETS - 100.00 %        $238,744,776
             
NVDR-Non-Voting Depository Receipt        
PCL-Public Company Limited        
PLC-Public Limited Company        
* Non-income producing security        
# 144A - Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in transactions exempt from registration, normally to qualified
institutional buyers. The aggregate value of such securities is $726,407 or 0.30% of net assets      
+ Security in default            
^ Interest rate reflects seven-day effective yield on December 31, 2017        
 (a) Represents cost for financial reporting purposes and is substantially identical for both book and federal income tax purposes. Net unrealized appreciation consisted of:
             
        Gross unrealized appreciation:    $18,594,316
        Gross unrealized depreciation:   (2,467,999)
        Net unrealized appreciation:    $16,126,317
             

 

 

 

Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
               
As of December 31, 2017 the following Forward Foreign Currency Contracts were open:    
               
FORWARD FOREIGN CURRENCY CONTRACTS        
              Unrealized
  Settlement       Local Currency Amount US $ US $ Appreciation/
Foreign Currency Date   Counterparty Purchased/Sold Equivalent Value at December 31, 2017 (Depreciation) *
To Buy:              
Euro 1/2/2018   State Street Bank  313,138  $375,490  $375,782  $292
           $375,490  $375,782  $292
               
To Sell:              
Canadian Dollar 4/20/2018   State Street Bank  1,500,000  $1,202,906  $1,194,916  $7,990
Chilean Peso 6/14/2018   State Street Bank  800,000,000  1,219,680  1,297,106  (77,426)
Danish Krone 1/24/2018   State Street Bank  8,600,000  1,370,396  1,388,245  (17,849)
Euro 1/24/2018   State Street Bank  5,375,000  6,339,895  6,459,010  (119,115)
Japanese Yen 1/24/2018   State Street Bank  206,500,000  1,868,546  1,834,927  33,619
Singapore Dollar 1/24/2018   State Street Bank  815,000  597,734  609,613  (11,879)
Swedish Krona 1/24/2018   State Street Bank  9,200,000  1,123,716  1,123,270  446
Swiss Franc 4/20/2018   State Street Bank  1,200,000  1,238,734  1,241,615  (2,881)
           $14,961,607  $15,148,702  $(187,095)
               
* The amount represents fair value derivative instruments subject to foreign currency risk exposure as of December 31, 2017
Sector Allocation (based on total value of investments as of December 31, 2017) ^  
Consumer Discretionary         20.34%  
Consumer Staples           16.25%  
US Government & Agency Obligations     13.17%  
Industrial           12.88%  
Financial           7.90%  
Basic Materials           7.46%  
Gold           4.85%  
Energy           4.66%  
Communications           2.34%  
Real Estate Investment Trusts         1.76%  
Technology           1.47%  
Utilities           0.21%  
Diversified           0.06%  
Short-Term Investments         6.65%  
Total           100.00%  
               
^ Percentages may differ from Portfolio of Investments which are based on Fund net assets    
               
               
               

 

Centerstone International Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
Shares   Security       Market  Value
    SHORT-TERM INVESTMENTS - 5.87 %    
    US TREASURY BILL - 1.04 %        
1,340,000   United States Treasury Bill   0.75% 4/30/2018  $1,337,069
             
Shares            
    MONEY MARKET FUND - 4.83 %    
6,215,137   State Street Institutional Treasury Plus Money Market Fund, Trust Class, 1.13% ^     6,215,137
             
    TOTAL SHORT-TERM INVESTMENTS (Cost - $7,554,913)       7,552,206
             
    TOTAL INVESTMENTS - 100.27 % (Cost - $119,195,994) (a)      $129,003,079
    LIABILITIES LESS OTHER ASSETS - (0.27) %        (344,130)
    NET ASSETS - 100.00 %        $128,658,949
             
NVDR-Non-Voting Depository Receipt        
PCL-Public Company Limited        
PLC-Public Limited Company        
* Non-income producing security        
+ Security in default        
^ Interest rate reflects seven-day effective yield on December 31, 2017        
 (a) Represents cost for financial reporting purposes and is substantially identical for both book and federal income tax purposes. Net unrealized appreciation consisted of:
             
        Gross unrealized appreciation:    $10,837,142
        Gross unrealized depreciation:   (1,030,057)
        Net unrealized appreciation:    $9,807,085
       

 

 

 

 

 

    

 

 

 

 

Centerstone International Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
               
As of December 31, 2017 the following Forward Foreign Currency Contracts were open:    
               
FORWARD FOREIGN CURRENCY CONTRACTS        
              Unrealized
  Settlement       Local Currency Amount US $ US $ Appreciation/
Foreign Currency Date   Counterparty Purchased/Sold Equivalent Value at December 31, 2017 (Depreciation) *
To Buy:              
Euro 1/2/2018   State Street Bank  325,932  $390,911  $391,139  $228
           $390,911  $391,139  $228
               
To Sell:              
Canadian Dollar 4/20/2018   State Street Bank  1,200,000  $962,324  $955,933  $6,391
Chilean Peso 6/14/2018   State Street Bank  700,000,000  1,067,220  1,134,967  (67,747)
Danish Krone 1/24/2018   State Street Bank  7,100,000  1,131,358  1,146,109  (14,751)
Euro 1/24/2018   State Street Bank  4,800,000  5,663,032  5,768,046  (105,014)
Japanese Yen 1/24/2018   State Street Bank  190,000,000  1,718,507  1,688,310  30,197
Singapore Dollar 1/24/2018   State Street Bank  750,000  550,104  560,993  (10,889)
Swedish Krona 1/24/2018   State Street Bank  7,700,000  947,372  940,128  7,244
Swiss Franc 4/20/2018   State Street Bank  1,050,000  1,083,892  1,086,413  (2,521)
           $13,123,809  $13,280,899  $(157,090)
               
* The amount represents fair value derivative instruments subject to foreign currency risk exposure as of December 31, 2017
Sector Allocation (based on total value of investments as of December 31, 2017) ^  
Consumer Staples     19.79%  
US Government & Agency Obligations         15.62%  
Consumer Discretionary         13.49%  
Industrial           12.01%  
Basic Materials           11.32%  
Financial           9.89%  
Gold           4.94%  
Energy           4.87%  
Real Estate Investment Trusts         4.82%  
Communications           1.68%  
Short-Term Investments         1.57%  
Total           100.00%  
               
^ Percentages may differ from Portfolio of Investments which are based on Fund net assets    
               
               

 

 

Centerstone Funds
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
         
Note 1 - Organization and Significant Accounting Policies
         
The Centerstone Investors Fund and the Centerstone International Fund (each a “Fund” and collectively the “Funds”) are each a series of Centerstone Investors Trust, (the “Trust”) a Delaware statutory trust. The Trust is an open-ended management investment company registered under the Investment Company Act of 1940, as amended (“1940 Act”). The Trust is governed by its Board of Trustees (the “Board” or “Trustees”). Each Fund is a diversified series of the Trust. The Centerstone Investors Fund seeks long-term growth of capital by investing in a range of securities and asset classes from markets around the world, including the U.S. market. The Centerstone International Fund seeks long-term growth of capital by investing in a range of securities and asset classes primarily from foreign (non-U.S.) markets.
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period.  Actual results could differ from those estimates. The Funds are investment companies and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 "Financial Services – Investment Companies" including FASB Accounting Standard Update ASU 2013-08.
 
The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements.
 
Investment Valuation – In determining each Fund’s Net Asset Value (“NAV”) per share, securities traded on one or more securities exchanges for which market quotations are readily available are valued at current market value using the last reported sales price. NASDAQ traded securities are valued using the NASDAQ Official Closing Price (“NOCP”). If no sale price is reported, the mean between the current bid and ask is used. If market quotations are not readily available at a Valuation Time, the Board has approved the use of a fair valuation pricing committee (the “Fair Value Committee”), to which it has delegated certain responsibilities.  Securities not traded or dealt in on any securities exchange and for which over-the-counter market (whether domestic or foreign) quotations are readily available generally shall be valued at the last sale price or, in the absence of a sale, at the current mean price on such over-the-counter market, (and if there is only a bid or only an ask price on such date, valuation will be at such bid or ask price for long or short positions, respectively).    Debt securities, whether listed on an exchange or traded in the over the counter market for which market quotations are readily available, are generally priced at the current bid price.  Debt securities may be valued at prices supplied by the relevant pricing agent(s) based on broker or dealer supplied valuations or matrix pricing, a method of valuing securities by reference to the value of other securities with similar characteristics, such as rating, interest rate and maturity.  Absent special circumstances, valuations for a specific type of instrument will all be made through the same pricing agent.  
 
The value of foreign currencies and of foreign securities whose value is quoted or calculated in a foreign currency shall be converted into U.S. dollars based on foreign exchange rates provided by a major banking institution(s) or currency dealer(s) selected by the pricing agent providing such price at 4:00 p.m. Eastern Time (“ET”).  
 
Money market-type instruments that at a Valuation Time have a remaining maturity of 60 days or less are valued at bid prices from a pricing vendor, unless the Fair Value Committee believes another valuation is more appropriate. Municipal daily or weekly variable rate demand instruments may be priced at par plus accrued interest.
 
Forward currency contracts shall be valued at the forward currency contract rates, determined at 4:00 p.m. Eastern Time or the nearest time prior to the Valuation Time, provided by a bank or dealer that the pricing agent or, if applicable, the Fair Value Committee believes to be reliable.
 
Securities in which the Funds invest may be traded in markets that close before 4:00 pm ET. Normally, developments that occur between the close of the foreign markets and 4:00 pm ET will not be reflected in a Fund’s NAV. However, the Funds may determine that such developments are significant that they will affect the value of a Fund’s securities, and the Fund may adjust the previous local closing prices to reflect fair value for these securities as of 4:00 pm ET.
 
Valuation of Fund of Funds - The Funds may invest in portfolios of open-end or closed-end investment companies (the “Underlying Funds”). The Underlying Funds value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value to the methods established by the board of trustees of the Underlying Funds.
 
Fair Valuation Process - If market quotations are not readily available, or if, in the opinion of the Advisor, the prices or values available do not represent fair value, securities will be valued at their fair market value as determined in good faith by the Trust’s Fair Value Committee (the “Committee”) in accordance with procedures approved by the Board and evaluated by the Board as to the reliability of the fair value method used. The Committee is composed of one or more representatives from each of the (i) Trust, (ii) Administrator, and (iii) Advisor. The procedures consider, among others, the following factors to determine a security’s fair value: the nature and pricing history (if any) of the security; whether any dealer quotations for the security are available; and possible valuation methodologies that could be used to determine the fair value of the security. The Committee may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant, or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value.  The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure the process produces reliable results.                
 
As noted, the Committee is composed of one or more representatives from each of the (i) Trust, (ii) Administrator, and (iii) Advisor.  The applicable investments are valued collectively via inputs from each of these groups.  For example, fair value determinations are required for the following securities:  (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source); (ii) securities for which, in the opinion of the Advisor, the prices or values available do not represent the fair value of the instrument based upon factors that may include, but are not limited to, the following: only a bid price or an ask price is available; the spread between bid and ask prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets or regulators, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred since the closing prices were established on the principal exchange on which they are traded, but prior to the Funds’ calculation of its net asset value;  (v) stale prices- securities whose prices have been stale for 20 or more consecutive business days; (vi) mutual funds that do not provide timely NAV information; (vii) interests in a commodity pool or a managed futures pool; and (viii) restricted securities, such as private investments or non-traded securities.  The Committee may determine the fair value of such restricted security using the following factors: (a) the type of security; (b) the cost at date of purchase; (c) the size and nature of the Funds’ holdings; (d) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (e) information as to any transactions or offers with respect to the security; (f) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (g) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (h) the level of recent trades of similar or comparable securities; (i) the liquidity characteristics of the security; (j) current market conditions; (k) the market value of any securities into which the security is convertible or exchangeable; (l) the security’s embedded option values; and (m) information about the financial condition of the issuer and it’s prospects.                                                               
 
The Funds utilize various methods to measure the fair value of most of its investments on a recurring basis.  GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities.
 
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 Funds' 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.
Centerstone Funds
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2017
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 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 to the fair value measurement in its entirety. The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.  
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.  The following tables summarize the inputs used for the period ended as of December 31, 2017, for the Funds’ assets and liabilities measured at fair value:
         
Centerstone Investors Fund        
Assets Level 1 Level 2 Level 3 Total
Common Stock  $158,020,338  $-     $-     $158,020,338
Bonds & Notes  -     18,029,433  -     18,029,433
Exchange Traded Fund - Commodity  11,591,075  -     -     11,591,075
Real Estate Investment Trusts  4,206,333  -     -     4,206,333
US Government & Agency Obligations  -     31,152,351  -     31,152,351
Short-Term Investments  $15,892,439  -     -     15,892,439
Forward Foreign Currency Contracts  *  -     42,347  -     42,347
Total  $189,710,185  $49,224,131  -     $238,934,316
Liabilities - Derivatives        
Forward Foreign Currency Contracts  *  $-     $229,150  $-     $229,150
         
         
Centerstone International Fund      
Assets Level 1 Level 2 Level 3 Total
Common Stock  $93,982,594  $-     $-     $93,982,594
Bonds & Notes  -     291,958  -     291,958
Exchange Traded Fund - Commodity  6,367,357  -     -     6,367,357
Real Estate Investment Trusts  2,165,167  -     -     2,165,167
US Government & Agency Obligations  -     18,643,797  -     18,643,797
Short-Term Investments  6,215,137  1,337,069  -     7,552,206
Forward Foreign Currency Contracts  *  -     44,060  -     44,060
Total  $108,730,255  $20,316,884  $-     $129,047,139
Liabilities - Derivatives        
Forward Foreign Currency Contracts  *  $-     $200,922  $-     $200,922
         
* Forward Foreign Currency Contracts are valued at gross unrealized appreciation (depreciation) on the investment.  
The Funds did not hold any level 3 securities during the period.
There were no transfers into or out of Level 1, Level 2, and Level 3 during the period.    
It is the Funds' policy to recognize transfers into or out of any Level at the end of the reporting period.    
     
Foreign Currency Translations – The books and records of the Funds are maintained in US dollars. The market values of securities which are not traded in US currency are recorded in the financial statements after translation to US dollars based on the applicable exchange rates at the end of the period. The costs of such securities are translated at exchange rates prevailing when acquired. Related interest, dividends and withholding taxes are accrued at the rates of exchange prevailing on the respective dates of such transactions.
 
Net realized gains and losses on foreign currency transactions represent net gains and losses from currency realized between the trade and settlement dates on securities transactions and the difference between income accrued versus income received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities.
 
Forward Currency Contracts - As foreign securities are purchased and sold, the Funds may enter into forward currency exchange contracts in order to hedge against foreign currency exchange rate risks. The market value of the contracts fluctuate with changes in currency exchange rates. The contract is marked-to-market daily and the change in market value is recorded by the Funds as an unrealized gain or loss. As foreign securities are sold, a portion of the contract is generally closed and the Funds record a realized gain or loss equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. The Funds may also enter into forward currency contracts as an investment strategy consistent with the Fund’s investment objective. As of December 31, 2017, the amount of unrealized loss on forward foreign currency exchange contracts subject to currency price risk amounted to $186,803 and $156,090 for the Centerstone Investors Fund and the Centerstone International Fund, respectively.
 
Funds investing in foreign exchange contracts are exposed to risk if the value of the currency changes unfavorably, if the counterparties to the contracts are unable to meet the terms of their contracts or if the Fund is unable to enter into a closing position.
 
The notional value of the derivative instruments outstanding as of December 31, 2017, as disclosed in the Portfolio of Investments serve as indicators of the volume of derivative activity for the Funds.
 

 

 

 

Item 2. Controls and Procedures.

 

(a)       The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended.

 

(b)       There were no significant changes in the registrant’s internal control over financial reporting 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.

 

Certifications required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) (and Item 3 of Form N-Q) 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.

 

Centerstone Investors Trust

 

By

/s/ Abhay Deshpande

Abhay Deshpande, Principal Executive Officer/President

 

Date 2/28/2018

 

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

/s/ Abhay Deshpande

Abhay Deshpande, Principal Executive Officer/President

 

Date 2/28/2018

 

By

/s/ Philip Santopadre

Philip Santopadre, Principal Financial Officer/Treasurer

 

Date 2/28/2018