N-Q/A 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)

 

Corporate Trust Center

1209 Orange Street, Wilmington, DE 19801

(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: 12/31/19

 

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, 2019
 Shares   Security        Market Value
             
    COMMON STOCK - 73.70 %    
    CANADA - 1.83 %    
                 142,563   TC Energy Corp.        $                                               7,592,821
             
    CHILE - 1.68 %        
                 316,306   Cia Cervecerias Unidas SA                                                         6,000,325
          102,546,552   Vina San Pedro Tarapaca SA                                                            978,484
                                                              6,978,809
    DENMARK - 1.43 %    
                 247,714   ISS A/S                                                         5,943,857
             
    FINLAND - 2.15 %    
                 809,592   Wartsila OYJ Adp                                                         8,944,980
             
    FRANCE - 5.91 %    
                   56,962   Air Liquide SA                                                           8,063,462
                   41,184   Eiffage SA                                                           4,712,004
                 164,509   Cie Plastic Omnium SA                                                         4,594,793
                   40,140   Schneider Electric SE                                                           4,119,793
                   26,080   Sodexo SA                                                           3,090,680
                                                            24,580,732
    GERMANY - 8.35 %    
                 138,249   Brenntag AG                                                           7,517,987
                 155,529   Norma Group SE                                                           6,629,365
                 203,169   Hamburger Hafen und Logistik AG                                                           5,592,538
                   59,177   Fraport AG Frankfurt Airport Services Worldwide                                                           5,030,191
                   56,107   Bayerische Motoren Werke AG                                                           4,603,085
                   62,696   Hornbach Holding AG & Co. KGaA                                                           4,536,036
                   31,679   Hornbach Baumarkt AG                                                              835,057
                                                            34,744,259
    HONG KONG - 4.94 %    
              5,851,165   Kerry Logistics Network Ltd.                                                       10,046,917
              1,096,655   Hongkong Land Holdings Ltd.                                                         6,305,766
              1,071,900   Hysan Development Co. Ltd.                                                         4,202,423
                                                            20,555,106
    INDONESIA - 1.51 %        
              1,076,835   Gudang Garam Tbk PT                                                           4,111,093
              1,577,262   Indocement Tunggal Prakarsa Tbk PT                                                           2,161,528
                                                              6,272,621
    IRELAND - 1.75 %        
                 140,551   Perrigo Co. PLC                                                         7,260,865
             
    ISRAEL - 0.64 %        
                 565,400   Israel Chemicals Ltd.                                                         2,660,571
             
    JAPAN - 5.62 %        
                 229,275   Mitsubishi Estate Co. Ltd.                                                         4,409,094
                 165,051   Nagaileben Co. Ltd. *                                                         3,645,690
                 100,334   Aica Kogyo Co. Ltd. *                                                         3,347,391
                   20,152   Shimano, Inc.                                                         3,295,762
                 555,723   Ichiyoshi Securities Co. Ltd.                                                         3,293,780
                   14,896   FANUC Corp.                                                         2,787,131
                 121,905   Sekisui Jushi Corp. *                                                         2,599,547
                                                            23,378,395
    MALAYSIA - 1.02 %        
              2,869,000   Genting Bhd.                                                         4,243,357
             
    NETHERLANDS - 1.99 %        
                 152,951   Koninklijke Vopak NV                                                         8,291,747
             
    SINGAPORE - 0.84 %        
                 427,369   Oversea-Chinese Banking Corp. Ltd.                                                         3,488,986
             
    SPAIN - 0.67 %        
              1,822,550   Prosegur Cash SA                                                         2,776,235
             
    SWEDEN - 3.88 %        
                 159,934   Loomis AB                                                         6,621,833
                 664,479   Mekonomen AB *                                                         6,601,266
                   62,629   ICA Gruppen AB                                                         2,923,380
                                                            16,146,479
Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2019
 Shares   Security        Market Value
             
    COMMON STOCK - 73.70 % (continued)    
    SWITZERLAND - 5.00 %        
                   13,999   Roche Holding AG          $                                               4,541,936
                   46,810   Novartis AG                                                           4,444,967
                   56,284   Cie Financiere Richemont SA                                                           4,423,394
                   15,263   Swatch Group AG                                                         4,258,121
                   28,731   Nestle SA                                                           3,110,595
                                                            20,779,013
    THAILAND - 3.26 %        
              1,496,400   Bangkok Bank PCL                                                           7,968,144
                   65,350   Bangkok Bank PCL (NVDR)                                                              349,071
                 825,160   Siam City Cement PCL                                                           5,234,083
                                                            13,551,298
    UNITED KINGDOM - 0.99 %        
              4,982,903   Lloyds Banking Group PLC                                                           4,125,226
             
    UNITED STATES - 20.24 %    
                   67,391   Mohawk Industries, Inc. *                                                         9,190,785
                 130,063   Henry Schein, Inc. *                                                         8,677,803
                 379,304   Mosaic Co,                                                         8,208,139
                   92,626   Colgate-Palmolive Co.                                                         6,376,374
                   15,150   WW Grainger, Inc.                                                         5,128,578
                 455,000   General Electric Co.                                                         5,077,800
                   80,400   Dentsply Sirona, Inc.                                                           4,549,836
                   56,000   State Street Corp.                                                         4,429,600
                   24,101   3M Co.                                                         4,251,898
                 311,217   Covetrus, Inc. *                                                         4,108,064
                   53,785   Emerson Electric Co.                                                         4,101,644
                   27,740   Scotts Miracle-Gro Co.                                                         2,945,433
                 270,940   PHI, Inc. *#+                                                         2,851,999
                   12,293   McDonald's Corp.                                                           2,429,220
                   12,811   Carlisle Cos., Inc.                                                         2,073,332
                   33,692   TJX Cos., Inc.                                                           2,057,234
                     4,596   O'Reilly Automotive, Inc. *                                                         2,014,243
                   32,743   Brunswick Corp.                                                           1,963,925
                   31,326   Sonoco Products Co.                                                         1,933,441
                   20,639   CarMax, Inc. *                                                            1,809,421
                                                            84,178,769
             
    TOTAL COMMON STOCK (Cost - $295,835,621)                                                     306,494,126
             
 Principal       Coupon Maturity  
             
    BONDS & NOTES - 3.73 %    
    SWITZERLAND - 0.17 %        
 $              700,000   UBS Group Funding Switzerland AG, Quarterly US LIBOR +1.7800 144A** 3.77% 4/14/2021                                                      713,136
             
    UNITED STATES - 3.56 %        
              2,352,000   TJX Cos., Inc.   2.75% 6/15/2021                                                   2,380,955
              2,083,000   American Electric Power Co., Inc.   2.15% 11/13/2020                                                   2,087,077
              2,000,000   Apple, Inc., Quarterly US LIBOR +0.5000 **   2.40% 2/9/2022                                                   2,016,498
              1,700,000   Goldman Sachs Group, Inc., Quarterly US LIBOR +1.6000 ** 3.51% 11/29/2023                                                   1,760,860
              1,500,000   JM Smucker Co.   2.50% 3/15/2020                                                   1,501,199
              1,500,000   Ford Moror Credit Co. LLC   2.68% 1/9/2020                                                   1,500,116
              1,146,000   Wells Fargo & Co., Quarterly US LIBOR +1.3400 **   3.24% 3/4/2021                                                   1,160,074
              1,000,000   United Technologies Corp.   1.90% 5/4/2020                                                      999,513
                 713,000   O'Reilly Automotive, Inc.   4.88% 1/14/2021                                                      729,261
                 500,000   Wells Fargo & Co., Quarterly US LIBOR +0.6800 **   2.62% 1/30/2020                                                      500,278
                 150,000   CVS Health Corp., Quarterly US LIBOR +0.6300 **   2.52% 3/9/2020                                                      150,118
                                                            14,785,949
             
    TOTAL BONDS & NOTES (Cost - $15,448,855)                                                       15,499,085
             
 Shares            
    EXCHANGE TRADED FUND - COMMODITY - 4.42 %    
                 128,609   SPDR Gold Shares *                                                       18,378,226
    TOTAL EXCHANGE TRADED FUND - COMMODITY (Cost - $15,427,724)    
             
Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2019
 Shares   Security   Coupon Maturity  Market Value
             
    PREFERRED STOCK - 2.14 %        
                 196,003   Goldman Sachs Group, Quarterly US LIBOR +0.7500 **   4.00% Perpetual  $                                               4,492,389
                 185,458   Bank of America Corp., Quarterly US LIBOR +0.5000 **   4.00% Perpetual                                                   4,463,974
    TOTAL PREFERRED STOCK - (Cost - $8,599,375)                                                         8,956,363
             
    PRIVATE INVESTMENT FUND - 3.17 %        
              8,389,676   Coast Capital Mercury Fund LP *#^                                                       13,188,570
    TOTAL PRIVATE INVESTMENT FUND (Cost - $11,100,000)      
             
    REAL ESTATE INVESTMENT TRUSTS - 2.48 %    
                   69,746   Ventas, Inc.                                                         4,027,134
                   21,008   Unibail-Rodamco SE                                                         3,314,373
                 204,068   Monmouth Real Estate Investment Corp.                                                         2,954,905
    TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost - $11,503,341)                                                     10,296,412
             
    SHORT-TERM INVESTMENT - 10.50 %    
    MONEY MARKET FUND - 10.50 %    
            43,651,262   State Street Institutional Treasury Plus Money Market Fund, Trust Class, 1.48% ^^                                                   43,651,262
    TOTAL SHORT-TERM INVESTMENT (Cost - $43,651,262)      
             
    TOTAL INVESTMENTS - 100.14 % (Cost - $401,566,178)      $                                           416,464,044
    LIABILITES IN EXCESS OF OTHER ASSETS - (0.14) %                                                        (585,305)
    NET ASSETS - 100.00 %        $                                           415,878,739
             
 LLC: Limited Liability Company        
 LP: Limited Partnership        
 NVDR: Non-Voting Depository Receipt        
 PCL: Public Company Limited        
 PLC: Public Limited Company        
 * Non-income producing security        
 # Security fair valued as of December 31, 2019 in accordance with procedures approved by the Board of Trustees. Total value of all such securities as of December 31, 2019 amounted to  
 to $16,040,569, which represents approximately 3.86% of the net assets of the Fund. FirstGroup PLC (a security traded on the London Stock Exchange) is the only underlying holding of  
 Coast Capital Mercury Fund LP.        
 + All or a portion is a restricted 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 $713,136 or 0.17% of the net assets.      
 ** Floating rate security        
 ^ Withdrawals are not permitted within 12 months of their contribution date and subject to an early redemption fee of 3% on redemptions made within 12 months to
24 months of their contribution date.
 ^^ Interest rate reflects seven-day effective yield on December 31, 2019.        

 

 

Centerstone Investors Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2019
               
As of December 31, 2019 the following Forward Foreign Currency Contracts were open:    
               
FORWARD FOREIGN CURRENCY CONTRACTS        
  Settlement       Local Currency Amount US $ US $ Unrealized
Foreign Currency Date   Counterparty Purchased/Sold Equivalent Value at December 31, 2019 Depreciation *
To Buy:              
Hong Kong Dollar 1/2/2020   State Street Bank                       1,749,119  $              224,601  $                             224,468  $                    (133)
Hong Kong Dollar 1/3/2020   State Street Bank                       2,655,947                  341,104                                 340,843                        (261)
           $              565,705  $                             565,311  $                    (394)
* The amount represents fair value derivative instruments subject to foreign currency risk exposure as of December 31, 2019.
Sector Allocation (based on total value of investments as of December 31, 2019) ^  
Industrial     20.15%  
Consumer Discretionary     18.32%  
Consumer Staples     18.14%  
Financial     14.88%  
Short-Term Investment     10.48%  
Materials     7.15%  
Energy     4.50%  
Gold           4.41%  
Technology           1.47%  
Utilities           0.50%  
Total           100.00%  
               
^ Percentages may differ from Portfolio of Investments which are based on Fund net assets.    

 

 

Centerstone International Fund
PORTFOLIO OF INVESTMENTS (Unaudited)
December 31, 2019
 Shares   Security        Market Value
    COMMON STOCK - 84.71 %    
    CANADA - 2.71 %        
            99,564   TC Energy Corp.        $                           5,302,719
             
    CHILE - 2.60 %        
          225,627   Cia Cervecerias Unidas SA                                     4,280,144
     84,677,397   Vina San Pedro Tarapaca SA                                        807,980
                                          5,088,124
    DENMARK - 2.05 %        
          167,043   ISS A/S                                     4,008,169
             
    FINLAND - 3.22 %        
          569,058   Wartsila OYJ Adp                                     6,287,380
             
    FRANCE - 9.41 %        
            44,026   Air Liquide SA                                     6,232,260
            29,867   Eiffage SA                                     3,417,187
          119,302   Cie Plastic Omnium SA                                     3,332,146
            28,665   Schneider Electric SE                                     2,942,050
            20,728   Sodexo SA                                     2,456,427
                                        18,380,070
    GERMANY - 12.90 %        
            98,734   Brenntag AG                                     5,369,159
          112,447   Norma Group SE                                     4,793,011
          149,212   Hamburger Hafen und Logistik AG                                     4,107,289
            43,461   Fraport AG Frankfurt Airport Services Worldwide                                     3,694,292
            45,915   Hornbach Holding AG & Co. KGaA                                     3,321,936
            40,339   Bayerische Motoren Werke AG                                     3,309,459
            22,938   Hornbach Baumarkt AG                                        604,645
                                        25,199,791
    HONG KONG - 7.55 %        
       4,212,638   Kerry Logistics Network Ltd.                                     7,233,435
          783,416   Hongkong Land Holdings Ltd.                                     4,504,642
          766,900   Hysan Development Co. Ltd.                                     3,006,660
                                        14,744,737
    INDONESIA - 2.29 %        
          757,965   Gudang Garam Tbk PT                                       2,893,726
       1,153,313   Indocement Tunggal Prakarsa Tbk PT                                     1,580,535
                                          4,474,261
    IRELAND - 2.57 %        
            97,064   Perrigo Co. PLC                                     5,014,326
             
    ISRAEL - 0.99 %        
          409,127   Israel Chemicals Ltd.                                     1,925,206
             
    JAPAN - 8.48 %    
          145,525   Mitsubishi Estate Co. Ltd.                                     2,798,532
          111,024   Nagaileben Co. Ltd. *                                     2,452,327
          409,077   Ichiyoshi Securities Co. Ltd.                                       2,424,606
            71,181   Aica Kogyo Co. Ltd. *                                     2,374,775
          104,945   Sekisui Jushi Corp. *                                     2,237,887
            11,514   FANUC Corp.                                     2,154,338
            12,938   Shimano, Inc.                                     2,115,947
                                        16,558,412
    MALAYSIA - 1.55 %        
       2,044,000   Genting Bhd.                                     3,023,151
             
    NETHERLANDS - 3.02 %        
          108,821   Koninklijke Vopak NV                                     5,899,381
             
    SINGAPORE - 1.27 %    
          303,901   Oversea-Chinese Banking Corp. Ltd.                                     2,481,009
             
    SPAIN - 1.01 %        
       1,301,337   Prosegur Cash SA                                     1,982,287
             
    SWEDEN - 6.23 %        
          539,882   Mekonomen AB *                                     5,363,458
          113,479   Loomis AB                                     4,698,432
            45,365   ICA Gruppen AB                                     2,117,535
                                        12,179,425
Centerstone International Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2019
 Shares   Security        Market  Value
    COMMON STOCK - 84.71 % (continued)    
    SWITZERLAND - 7.59 %        
              9,963   Roche Holding AG        $                           3,232,467
            40,695   Cie Financiere Richemont SA                                     3,198,245
            32,952   Novartis AG                                     3,129,044
            11,069   Swatch Group AG                                     3,088,066
            20,080   Nestle SA                                     2,173,985
                                        14,821,807
    THAILAND - 4.80 %        
       1,115,300   Bangkok Bank PCL                                     5,938,834
          541,804   Siam City Cement PCL                                     3,436,724
                                          9,375,558
    UNITED KINGDOM - 1.51 %        
       3,553,598   Lloyds Banking Group PLC                                       2,941,938
             
    UNITED STATES - 2.96 %        
          267,087   Mosaic, Co.                                     5,779,763
             
    TOTAL COMMON STOCK (Cost - $164,259,265)                                 165,467,514
             
    EXCHANGE TRADED FUND - COMMODITY - 2.34 %    
            32,052   SPDR Gold Shares *                                     4,580,231
    TOTAL EXCHANGE TRADED FUND - COMMODITY (Cost - $3,985,620)    
             
    PRIVATE INVESTMENT FUND - 3.57 %        
       4,435,630   Coast Capital Mercury Fund LP *#^                                     6,972,810
    TOTAL PRIVATE INVESTMENT FUND (Cost - $5,900,000)        
             
    REAL ESTATE INVESTMENT TRUSTS - 1.42 %    
            17,609   Unibail-Rodamco SE                                     2,778,122
    TOTAL REAL ESTATE INVESTMENT TRUSTS (Cost - $3,935,278)      
             
    SHORT-TERM INVESTMENT - 8.16 %    
    MONEY MARKET FUND - 8.16 %    
     15,949,837   State Street Institutional Treasury Plus Money Market Fund, Trust Class, 1.48% ^^                                 15,949,837
    TOTAL SHORT-TERM INVESTMENT (Cost - $15,949,837)        
             
    TOTAL INVESTMENTS - 100.20 % (Cost - $194,030,000)      $                       195,748,514
    LIABILITES IN EXCESS OF OTHER ASSETS - (0.20) %                                      (384,587)
    NET ASSETS - 100.00 %        $                       195,363,927
             
 LP: Limited Partnership        
 PCL: Public Company Limited        
 PLC: Public Limited Company        
 * Non-income producing security        
 # Security fair valued as of December 31, 2019 in accordance with procedures approved by the Board of Trustees. Total value of all such securities as of December 31, 2019 amounted to  
 amounted to $6,972,810, which represents approximately 3.57% of the net assets of the Fund. FirstGroup PLC (a security traded on the London Stock Exchange) is the only underlying  
 holding of Coast Capital Mercury Fund LP.        
^ Withdrawals are not permitted within 12 months of their contribution date and subject to an early redemption fee of 3% on redemptions made within 12 months to
24 months of their contribution date.
 ^^ Interest rate reflects seven-day effective yield on December 31, 2019.        

 

 

Centerstone International Fund
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2019
               
As of December 31, 2019 the following Forward Foreign Currency Contracts were open:    
               
FORWARD FOREIGN CURRENCY CONTRACTS        
  Settlement       Local Currency Amount US $ US $ Unrealized
Foreign Currency Date   Counterparty Purchased/Sold Equivalent Value at December 31, 2019 Depreciation *
To Buy:              
Hong Kong Dollar 1/2/2020   State Street Bank                       1,254,103  $                      161,037  $                                160,941  $                         (96)
Hong Kong Dollar 1/3/2020   State Street Bank                       1,904,253                          244,563                                    244,376                           (187)
           $                      405,600  $                                405,317  $                       (283)
* The amount represents fair value derivative instruments subject to foreign currency risk exposure as of December 31, 2019
Sector Allocation (based on total value of investments as of December 31, 2019) ^  
Industrial     22.86%  
Consumer Staples     19.64%  
Consumer Discretionary     16.48%  
Financial     13.73%  
Materials     11.08%  
Short-Term Investment     8.15%  
Energy     5.72%  
Gold           2.34%  
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, 2019
           
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 US 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-US) markets. Centerstone Investors, LLC (the “Advisor”), manages the Funds. The Funds’ inception date was May 3, 2016.
           
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 Standards Codification Topic 946 “Financial Services — Investment Companies” including FASB Accounting Standards Update ASU 2013-08.

 
The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements.
           

a. Investment Valuation – In determining each Fund’s Net Asset Value (“NAV”) per share as of the close of the New York Stock Exchange (“NYSE”), currently 4:00 pm Eastern Time (“ET”) (the “Valuation Time”), 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 US 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, or by the Fair Value Committee in the case of securities for which the Fair Value Committee provides a fair value determination, at 4:00 pm ET or the nearest time prior to the Valuation Time, at which such foreign currency quotations are available.

 

Money market-type instruments that 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.

Forward currency contracts shall be valued at the forward currency contract rates, determined at 4:00 pm ET 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 the Valuation Time. Normally, developments that occur between the close of the foreign markets and the Valuation Time 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 the Valuation Time. The Trustees have authorized the use of an independent fair valuation service. If the movement in the S&P 500 Index, after foreign markets close, is greater than predetermined levels, the Funds may use a systematic valuation model to fair value its foreign securities. The values assigned to a Fund’s foreign securities therefore may differ on occasion from reported market values.

 

The Trustees and the Advisor believe relying on the procedures as just described will result in prices that are more reflective of the actual market value of portfolio securities held by the Funds as of the Valuation Time.
 
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 in accordance with procedures approved by the Board and evaluated by the Board as to the reliability of the fair value method used. The Fair Value Committee is composed of (a) the following standing members: (i) the Trust’s Treasurer or Assistant Treasurer, and (ii) a representative of the Administrator, and (b) on an ad hoc basis, a representative of the Advisor. The Fair Value Committee, at its discretion, may also include the Trust’s Chief Compliance Officer. 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 Fair Value Committee may enlist such third party consultants or advisers (such as an accounting firm or Fair Value pricing specialist) as it determines may be desirable, 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.
            

Fair  value  determinations  are  required  for  the  following  securities: (i) securities for which market quotations are 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; 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 subsequent to the determination of the closing prices reported 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 Fair Value Committee may determine the fair value of a 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 as well as any estimation of the cost of registration or otherwise qualifying the security for public sale, including commissions; (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.

 

Centerstone Funds
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2019

The Funds utilize various methods to measure the fair value of most of their 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.

 

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, 2019, for the Funds’ assets and liabilities measured at fair value:
           
Centerstone Investors Fund          
Assets *   Level 1 Level 2 Level 3 Total
Common Stock  $                           303,642,127  $                                           -     $                               2,851,999  $                           306,494,126
Bonds & Notes                                               -                                    15,499,085                                               -                                    15,499,085
Exchange Traded Fund - Commodity                                 18,378,226                                               -                                                  -                                    18,378,226
Preferred Stock                                     8,956,363                                               -                                                  -                                      8,956,363
Private Investment Fund                                                 -                                    13,188,570                                               -                                    13,188,570
Real Estate Investment Trusts                                 10,296,412                                               -                                                  -                                    10,296,412
Short-Term Investment                                 43,651,262                                               -                                                  -                                    43,651,262
Total Assets  $                           384,924,390  $                             28,687,655  $                               2,851,999  $                           416,464,044
           
Liabilities - Derivatives          
Forward Foreign Currency Contracts **  $                                           -     $                                         394  $                                           -     $                                         394
           
           
Centerstone International Fund      
Assets *   Level 1 Level 2 Level 3 Total
Common Stock  $                           165,467,514  $                                           -     $                                           -     $                           165,467,514
Exchange Traded Fund - Commodity                                   4,580,231                                               -                                                  -                                      4,580,231
Private Investment Fund                                                 -                                      6,972,810                                               -                                      6,972,810
Real Estate Investment Trusts                                   2,778,122                                               -                                                  -                                      2,778,122
Short-Term Investment                                 15,949,837                                               -                                                  -                                    15,949,837
Total Assets  $                           188,775,704  $                               6,972,810  $                                           -     $                           195,748,514
           
Liabilities - Derivatives          
Forward Foreign Currency Contracts **  $                                           -     $                                         283  $                                           -     $                                         283
           
* Refer to the Portfolio of Investments for country classification.
** Forward Foreign Currency Contracts are valued at gross unrealized depreciation on the investment.  
           
The following is a reconciliation of assets in which level 3 inputs were used in determining value of the security PHI, Inc.:
           
  Common Stock      
Beginning Balance 3/31/19 #  $                                             -      
Total realized gain (loss) #                                                 -      
Unrealized appreciation (depreciation) #                                 (2,077,085)      
Cost of Purchases #                                   4,929,084      
Proceeds from Sales #                                                 -      
Amortization #                                                 -      
Net transfers in/out of level 3 #                                                 -      
Ending Balance 12/31/19 #  $                               2,851,999      
           
Quantitative disclosures of unobservable inputs and assumptions used by the Centerstone Investors Fund are below.
           
Investment Type   Fair Value Valuation Methodology Unobservable Input Type Market Value impact if input increases
Common Stock   $2,851,999 Ch. 11 Bankruptcy Plan Equity Value Equity Value Increase
           
Centerstone Funds
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued)
December 31, 2019
           

b. 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 effect 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

 

c. Forward Foreign 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.

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.

 

Forward foreign currency contracts outstanding, as of December 31, 2019, are listed after each Fund’s Portfolio of Investments. For the period ended December 31, 2019, the average monthly outstanding currency purchased or sold in U.S. dollars for forward foreign currency contracts totaled $28,884,174 and $22,966,107 for the Centerstone Investors Fund and Centerstone International Fund, respectively.
           

Aggregate Unrealized  Appreciation and Depreciation - Tax Basis

 

Represents cost for financial reporting purposes and is substantially identical for both book and federal income tax purposes.  Net unrealized appreciation (depreciation) consisted of:
           
Centerstone Investors Fund      
Gross unrealized appreciation:   $36,792,337      
Gross unrealized depreciation:   (21,894,471)      
Net unrealized appreciation:   $14,897,866      
           
Centerstone International Fund      
Gross unrealized appreciation:   $14,265,236      
Gross unrealized depreciation:   (12,546,722)      
Net unrealized appreciation:   $1,718,514      
           

 

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 2/28/2020

 

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 2/28/2020

 

By

/s/ Philip Santopadre

Philip Santopadre, Principal Financial Officer/Treasurer

 

Date 2/28/2020