<PAGE>
SEMI-ANNUAL REPORT DECEMBER 31, 1997
- ------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CUTLER EQUITY INCOME FUND Cutler & Company LLC Forum Financial Corp.
CUTLER APPROVED LIST EQUITY FUND 503 Airport Road Two Portland Square
Medford, OR 97504 Portland, ME 04101
</TABLE>
- --------------------------------------------------------------------------------
To the Cutler Trust Shareholders:
We are pleased to present this semi-annual report, and our thoughts on the
performance of the portfolios of The Cutler Trust, for the six months ending
December 31, 1997.
Our Equity Income Fund had good results for the second half of 1997, with a
total return of +8.80%. Our Approved List Equity Fund had excellent results,
with a total return of +10.61% for the period.
With continued solid performance and an influx of new investors, the Cutler
Trust surpassed the $100 Million in assets level. While we are pleased with the
great returns of both Funds, we would like to caution you about expectations.
When the market races forward, as it has over the past few years, investors may
come to expect unrealistic gains. While we are pleased with the short-term
results, we remain focused on providing sustainable, long-term, consistent total
return.
While we are keeping our eyes focused on global issues and how they may effect
the domestic market, we continue to believe that positive economic conditions
will prevail, and that high quality, income producing stocks will continue to
reward their investors.
On behalf of everyone at the Cutler Trust, we wish to thank you for selecting
our Funds.
Sincerely,
<TABLE>
<S> <C>
/s/ Ken Cutler /s/ Brooke Cutler Ashland
Kenneth R. Cutler Brooke Cutler Ashland
Chairman of the Board Chief Executive Officer
The Cutler Trust Cutler & Company, LLC
</TABLE>
1
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK (85.2%)
BANKS (3.2%)
58,700 Norwest Corp. $ 2,267,288
-----------
BUSINESS SERVICES (2.2%)
25,700 Automatic Data Processing, Inc. 1,577,337
-----------
CHEMICALS (4.6%)
40,800 Clorox Co. 3,225,750
-----------
COMPUTER & OFFICE EQUIPMENT (4.5%)
35,400 Pitney Bowes, Inc. 3,183,787
-----------
DRUGS & PHARMACEUTICALS (10.9%)
29,300 Bristol-Myers Squibb Co. 2,772,512
39,200 Eli Lilly & Co. 2,729,299
34,200 Schering-Plough Corp. 2,124,674
-----------
7,626,485
-----------
DRUGSTORES (2.4%)
53,400 Walgreen Co. 1,675,424
-----------
ELECTRIC MACHINERY (3.9%)
37,800 General Electric Co. 2,773,574
-----------
FABRICATED METAL PRODUCTS (3.0%)
35,300 Illinois Tool Works, Inc. 2,122,412
-----------
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
FINANCIAL SERVICES (2.9%)
27,400 Marsh & McLennan Cos., Inc. $ 2,043,015
-----------
FOOD & SOFT DRINKS (9.6%)
33,500 Campbell Soup Co. 1,947,187
59,150 H.J. Heinz Co. 3,005,560
32,100 Sara Lee Corp. 1,807,631
-----------
6,760,378
-----------
GENERAL MERCHANDISE TRADE (2.5%)
44,900 Wal-Mart Stores, Inc. 1,770,744
-----------
GROCERY STORES (2.7%)
39,900 Albertson's, Inc. 1,890,262
-----------
INSTRUMENTS & RELATED PRODUCTS (1.8%)
16,700 Xerox Corp. 1,232,668
-----------
LIFE INSURANCE (7.6%)
24,600 Allstate Corp. 2,235,524
39,500 Lincoln National Corp. 3,085,946
-----------
5,321,470
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (2.4%)
13,300 Household International, Inc. 1,696,580
-----------
PRINTING & PUBLISHING (7.8%)
53,400 Gannett Co., Inc. 3,300,788
35,300 Tribune Co. 2,197,424
-----------
5,498,212
-----------
</TABLE>
3
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
SOAPS (3.2%)
28,600 Procter & Gamble Co. $ 2,282,637
-----------
VOICE & DATA TRANSMISSION (7.1%)
51,200 BellSouth Corp. 2,883,200
28,900 SBC Communications, Inc. 2,116,923
-----------
5,000,123
-----------
WHOLESALE TRADE-NONDURABLE GOODS (2.9%)
43,800 Sysco Corp. 1,995,639
-----------
TOTAL COMMON STOCK (COST $43,444,312) 59,943,785
-----------
SHORT-TERM HOLDINGS (14.8%)
419,705 Forum Daily Assets Treasury Fund 419,705
10,000,000 U.S. Treasury Bills, 4.91% yield, 1/8/98 9,991,825
-----------
TOTAL SHORT-TERM HOLDINGS (COST $10,411,530) 10,411,530
-----------
TOTAL INVESTMENTS (100.0%) (COST $53,855,842) $70,355,315
-----------
-----------
</TABLE>
4
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK (97.6%)
ALCOHOLIC BEVERAGES (0.4%)
3,000 Anheuser-Busch Cos. $ 132,000
-----------
BANKS (7.4%)
7,000 Banc One Corp 380,186
4,000 Bankers Trust New York Co. 449,750
7,900 First Union Corp. 404,875
2,000 J.P. Morgan & Co., Inc. 225,750
4,000 NationsBank Corp. 243,250
14,000 Norwest Corp. 540,750
5,500 Wachovia Corp. 446,188
-----------
2,690,749
-----------
BUSINESS SERVICES (1.3%)
7,500 Automatic Data Processing, Inc. 460,313
-----------
CHEMICALS (4.1%)
2,000 Air Products & Chemicals, Inc. 164,500
6,500 Clorox Co. 513,906
3,000 Dow Chemical Co. 304,500
4,000 E.I. Du Pont de Nemours & Co. 240,250
2,500 Rohm & Haas Co. 239,375
-----------
1,462,531
-----------
COMMUNICATIONS EQUIPMENT (1.9%)
6,500 Lucent Technologies, Inc. 519,188
2,800 Motorola, Inc. 159,775
-----------
678,963
-----------
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
COMPUTER & OFFICE EQUIPMENT (2.8%)
5,000 Hewlett-Packard Co. $ 312,500
6,000 Pitney Bowes, Inc. 539,625
3,000 Rockwell International 156,750
-----------
1,008,875
-----------
DRUGS & PHARMACEUTICALS (11.0%)
4,000 Abbott Laboratories 262,250
2,000 American Home Products 153,000
6,000 Bristol-Myers Squibb Co. 567,750
9,000 Eli Lilly & Co. 626,625
6,000 Johnson & Johnson 395,250
2,000 Merck & Co., Inc. 212,500
4,000 Morton International 137,500
7,000 Pfizer, Inc. 521,938
9,000 Schering-Plough Corp. 559,125
4,000 Warner Lambert Co. 496,000
-----------
3,931,938
-----------
DRUGSTORES (1.4%)
16,000 Walgreen Co. 502,000
-----------
DURABLE GOODS-WHOLESALE (0.9%)
3,500 Grainger (W.W.), Inc. 340,156
-----------
ELECTRIC, GAS & UTILITY COMPANIES (2.0%)
7,000 Baltimore Gas and Electric Co. 238,438
4,000 Consolidated Natural Gas Co. 242,000
4,000 Duke Energy Corp. 221,500
-----------
701,938
-----------
</TABLE>
6
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
ELECTRIC MACHINERY (3.1%)
3,000 AMP, Inc. $ 126,000
2,000 Emerson Electric Co. 112,875
7,200 General Electric Co. 528,300
8,000 Texas Instruments, Inc. 360,000
-----------
1,127,175
-----------
FABRICATED METAL PRODUCTS (4.1%)
4,200 Gillette Co. 421,836
8,700 Illinois Tool Works 523,088
11,000 Stanley Works 519,063
-----------
1,463,987
-----------
FINANCIAL SERVICES (1.2%)
5,700 Marsh & McLennan Cos., Inc. 425,006
-----------
FOOD & SOFT DRINKS (10.6%)
10,000 Archer Daniels Midland Co. 216,873
3,800 CPC International, Inc. 409,450
8,000 Campbell Soup Co. 465,000
5,000 Coca-Cola Co. 333,125
4,000 General Mills, Inc. 286,500
9,000 H.J. Heinz Co. 457,313
7,000 Hershey Foods Corp. 433,563
10,000 Kellogg Co. 496,250
6,000 PepsiCo, Inc. 218,625
9,000 Sara Lee Corp. 506,813
-----------
3,823,512
-----------
FOREST PRODUCTS (1.3%)
3,000 Kimberly-Clark Corp. 147,936
7,000 Westvaco Corp. 220,063
2,000 Weyerhaeuser Co. 98,125
-----------
466,124
-----------
</TABLE>
7
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
GENERAL MERCHANDISE TRADE (2.6%)
4,000 J.C. Penney Co., Inc. $ 241,250
3,000 May Department Stores Co. 158,063
13,500 Wal-Mart Stores, Inc. 532,406
-----------
931,719
-----------
GLASS, OTHER BUILDING MATERIALS (0.7%)
4,000 Corning, Inc. 148,500
2,000 PPG Industries, Inc. 114,250
-----------
262,750
-----------
GROCERY STORES (2.7%)
12,000 Albertson's, Inc. 568,500
9,000 Winn-Dixie Stores, Inc. 393,188
-----------
961,688
-----------
INDUSTRIAL & COMMERCIAL MACHINERY (1.2%)
11,800 Dover Corp. 426,275
-----------
INSTRUMENTS & RELATED PRODUCTS (1.9%)
4,000 Becton, Dickinson & Co. 200,000
1,000 Eastman Kodak Co. 60,813
5,500 Xerox Corp. 405,968
-----------
666,781
-----------
LIFE INSURANCE (2.6%)
7,000 Aon Corp. 410,375
6,500 Lincoln National Corp. 507,813
-----------
918,188
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (1.5%)
4,200 Household International, Inc. 535,763
-----------
</TABLE>
8
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
OIL & GAS EXTRACTION (0.7%)
3,000 Atlantic Richfield Co. $ 240,375
-----------
PETROLEUM PRODUCTS (2.4%)
2,000 Amoco Corp. 170,250
2,500 Chevron Corp. 192,500
5,000 Exxon Corp. 305,938
2,500 Mobil Corp. 180,468
-----------
849,156
-----------
PRINTING & PUBLISHING (6.9%)
9,500 Dow Jones & Co., Inc. 510,031
8,400 Gannett Co., Inc. 519,225
7,500 Knight-Ridder, Inc. 390,000
7,000 McGraw-Hill Cos., Inc. 518,000
8,500 Tribune Co. 529,125
-----------
2,466,381
-----------
PROPERY & CASUALTY INSURANCE (6.3%)
6,000 Allstate Corp. 545,250
4,000 American International Group, Inc. 435,000
6,000 Chubb Corp. 453,750
2,000 General Re Corp. 424,000
5,000 St. Paul Cos., Inc. 410,313
-----------
2,268,313
-----------
SECURITIES, BROKERS, DEALERS & ADVISORS (1.5%)
7,500 Merrill Lynch & Co. Inc 547,031
-----------
SOAPS (2.9%)
7,000 Colgate-Palmolive Co. 514,500
6,400 Procter & Gamble Co. 510,800
-----------
1,025,300
-----------
</TABLE>
9
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
SPECIALTY CHEMICAL PRODUCTS (1.0%)
4,000 International Flavors & Fragrance $ 206,000
2,000 Minnesota Mining and Manufacturing Co. 164,125
-----------
370,125
-----------
TRANSPORTATION EQUIPMENT (1.3%)
3,000 Boeing Co. 146,813
4,000 Johnson Controls, Inc. 191,000
2,000 United Technologies Corp. 145,625
-----------
483,438
-----------
VOICE & DATA TRANSMISSION (6.6%)
5,000 Ameritech 402,500
9,000 AT&T Corp. 551,250
5,500 Bell Atlantic Corp. 500,500
8,000 BellSouth Corp. 450,500
6,500 SBC Communications, Inc. 476,125
-----------
2,380,875
-----------
WHOLESALE TRADE-NONDURABLE GOODS (1.3%)
10,000 Sysco Corp. 455,626
-----------
TOTAL COMMON STOCK (COST $20,088,446) 35,005,051
-----------
SHORT-TERM HOLDINGS (2.4%)
875,691 Forum Daily Assets Treasury Fund (cost $875,691) 875,691
-----------
TOTAL INVESTMENTS (100.0%) (COST $20,964,137) $35,880,742
-----------
-----------
</TABLE>
10
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUTLER CUTLER
EQUITY APPROVED
INCOME LIST EQUITY
FUND FUND
---------------- ----------------
<S> <C> <C>
ASSETS:
Investments (Note 2)
Investments at cost $53,855,842 $20,964,137
Net unrealized appreciation (depreciation) 16,499,473 14,916,605
---------------- ----------------
Total investments at value 70,355,315 35,880,742
Interest, dividends and other receivables 90,485 61,200
Receivable for securities sold -- 144,207
Receivable for Fund shares sold 4,441,365 2,832
---------------- ----------------
Total Assets 74,887,165 36,088,981
---------------- ----------------
LIABILITIES:
Dividends payable 6,026 6,988
Payable for securities purchased 4,276,572 319,432
Payable to administrator 5,460 2,986
Payable for Fund shares redeemed 100 --
Payable to investment adviser 40,953 22,393
Accrued expenses and other liabilities 74,116 17,841
---------------- ----------------
Total Liabilities 4,403,227 369,640
---------------- ----------------
NET ASSETS $70,483,938 $35,719,341
---------------- ----------------
---------------- ----------------
COMPONENTS OF NET ASSETS:
Paid-in capital $48,640,763 $19,182,079
Undistributed net investment income (loss) (2,407) 169
Net unrealized appreciation (depreciation) on
investments 16,499,473 14,916,605
Accumulated net realized gain (loss) on investments 5,346,109 1,620,488
---------------- ----------------
NET ASSETS $70,483,938 $35,719,341
---------------- ----------------
---------------- ----------------
Shares of Beneficial Interest, No Par Value 4,456,825 1,914,399
NET ASSET VALUE, offering price and redemption
price per share $15.81 $18.66
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUTLER CUTLER
EQUITY APPROVED
INCOME LIST EQUITY
FUND FUND
---------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $581,816 $334,227
Interest income 235,058 34,891
---------------- ----------------
Total Investment Income 816,874 369,118
---------------- ----------------
EXPENSES:
Advisory fees (Note 3) 241,109 134,714
Management fees (Note 3) 32,148 17,962
Transfer agent fees (Note 3) 8,195 7,288
Shareholder services fees (Note 3) 960 238
Custodian fees 10,461 5,926
Accounting fee (Note 3) 19,000 21,000
Legal fees (Note 3) 4,548 1,267
Audit fee 7,285 7,046
Trustees fee 9,133 4,586
Miscellaneous 53,532 24,730
---------------- ----------------
Total Expenses 386,371 224,757
---------------- ----------------
NET INVESTMENT INCOME (LOSS) 430,503 144,361
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments sold 9,290,595 3,516,958
Net change in unrealized appreciation (depreciation) on
investments (4,310,631) (78,504)
---------------- ----------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,979,964 3,438,454
---------------- ----------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $5,410,467 $3,582,815
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUTLER CUTLER
EQUITY APPROVED
INCOME LIST EQUITY
FUND FUND
--------------------------------- ---------------------------------
Six Months Year Six Months Year
Ended (unaudited) Ended Ended (unaudited) Ended
December 31, 1997 June 30, 1997 December 31, 1997 June 30, 1997
----------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS -- BEGINNING OF PERIOD $62,522,934 $46,285,366 $35,277,381 $30,247,807
----------------- ------------- ----------------- -------------
OPERATIONS:
Net investment income (loss) 430,503 858,359 144,361 352,960
Net realized gain (loss) on investments sold 9,290,595 2,878,813 3,516,958 817,421
Net change in unrealized appreciation
(depreciation) on investments (4,310,631) 13,036,026 (78,504) 7,342,804
----------------- ------------- ----------------- -------------
Net increase (decrease) in net assets resulting
from operations 5,410,467 16,773,198 3,582,815 8,513,185
----------------- ------------- ----------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
FROM:
Net investment income (447,888) (869,845) (146,941) (361,715)
Net realized capital gain on investments (5,707,467) (4,115,498) (2,695,053) (94,208)
----------------- ------------- ----------------- -------------
Total distributions to shareholders (6,155,355) (4,985,343) (2,841,994) (455,923)
----------------- ------------- ----------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 8,195,298 5,928,772 1,287,048 2,668,009
Reinvestment of distributions 6,049,582 4,927,163 2,766,660 448,402
Redemption of shares (5,538,988) (6,406,222) (4,352,569) (6,144,099)
----------------- ------------- ----------------- -------------
Net increase (decrease) from capital share
transactions 8,705,892 4,449,713 (298,861) (3,027,688)
----------------- ------------- ----------------- -------------
Net increase (decrease) in net assets 7,961,004 16,237,568 441,960 5,029,574
----------------- ------------- ----------------- -------------
NET ASSETS -- END OF PERIOD
(Including line (A)) $70,483,938 $62,522,934 $35,719,341 $35,277,381
----------------- ------------- ----------------- -------------
----------------- ------------- ----------------- -------------
(A) Accumulated undistributed net
investment income (loss) $ (2,407) $ 14,978 $ 169 $ 2,749
----------------- ------------- ----------------- -------------
----------------- ------------- ----------------- -------------
SHARE ACTIVITY
Sale of shares 510,256 409,218 68,101 163,153
Reinvestment of distributions 399,485 373,516 151,393 28,801
Redemption of shares (346,779) (462,361) (229,669) (399,951)
----------------- ------------- ----------------- -------------
Net increase (decrease) in shares 562,962 320,373 (10,175) (207,997)
----------------- ------------- ----------------- -------------
----------------- ------------- ----------------- -------------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
NOTE 1 ORGANIZATION
The Cutler Trust (the "Trust") was organized on October 2, 1992, as an
open-end, management investment company under the Investment Company Act of
1940. The Trust currently has two diversified investment portfolios
(individually a "Fund" and collectively the "Funds"). The Cutler Equity Income
Fund and Cutler Approved List Equity Fund each commenced operations on
December 30, 1992. On December 27, 1996, the Cutler Government Securities Fund
ceased operations.
NOTE 2 SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates.
The following represent significant accounting policies of the Funds:
SECURITY VALUATION -- The Trust determines the net asset value per share of
each Fund as of the close of regular trading on the New York Stock Exchange
(currently 4:00 P.M., Eastern time) on each Fund Business Day, as defined in
the Funds' prospectus. Securities with a maturity of 60 days or less are
valued at amortized cost. Other securities for which market quotations are
readily available are valued using the last reported sales price provided by
independent pricing services. If no sale is reported, the mean of the last bid
and asked price is used. If no mean price is available, the last bid price is
used. In the absence of readily available market quotations, securities are
valued at fair value using procedures approved by the Trust's Board of
Trustees.
INVESTMENT INCOME -- Dividend income is recorded on the ex-dividend date.
Interest income is recorded on an accrual basis.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income, if any,
are declared and paid quarterly on the Funds. Capital gain distributions, if
any, are distributed to shareholders at least annually. Distributions are
based on amounts calculated in accordance with applicable federal income tax
regulations. These differences are due primarily to differing treatments of
income and gain on various investment securities held by a Fund, timing
differences and differing characterizations of distributions made by a Fund.
FEDERAL TAXES -- The Funds intend to qualify and continue to qualify each year
as regulated investment companies and distribute all of their taxable income.
In addition, by distributing in each calendar year
14
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
substantially all of their net investment income, capital gain and certain
other amounts, if any, the Funds will not be subject to a federal excise tax.
Therefore, no federal income or excise tax provision is required.
EXPENSE ALLOCATION -- The Trust accounts separately for the assets and
liabilities and operations of each Fund. Expenses that are directly
attributable to more than one Fund are allocated among the respective Funds.
REALIZED GAIN AND LOSS -- Security transactions are recorded on a trade date
basis. Realized gain and loss on investments sold are recorded on the basis of
identified cost.
NOTE 3 INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER -- The investment adviser to the Funds is Cutler & Company
LLC ("Adviser"). Pursuant to an Investment Advisory Agreement effective May 1,
1996, the Adviser receives an advisory fee at an annual rate of 0.75% of each
Fund's average daily net assets. Prior to May 1, 1996, the advisory fee for
each Fund was 0.50%.
MANAGER -- The Trust has entered into a management agreement with Forum
Administrative Services, LLC ("FAdS"). For its services FAdS is entitled to
compensation of 0.10% of each Fund's average daily net assets. A previous
management agreement in effect with Forum Financial Services, Inc. ("FFSI")
during the period was identical in all material terms including fees.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT -- Forum Financial Corp. ("FFC")
an affiliate of FAdS and FFSI, provides services as the Trust's transfer agent
and dividend disbursing agent to each Fund pursuant to a separate agreement.
OTHER SERVICE PROVIDERS -- Prior to October 1, 1997, FFC acted as the fund
accountant pursuant to a separate Fund Accounting Agreement. Effective October
1, 1997, Forum Accounting Services, LLC ("FAcS") serves as the fund accountant
for the Trust. FAcS is paid a fee for its portfolio accounting services of
$36,000 per year for each Fund, subject to adjustments for the number and type
of portfolio transactions. FFSI, a registered broker-dealer, acts as the
Trust's distributor pursuant to a separate Distribution Agreement with the
Trust for which it receives no compensation.
NOTE 4 TRANSACTIONS OF SECURITIES
The cost of securities purchased and the proceeds from sales of securities
(excluding short term securities) for the six months ended December 31, 1997
were as follows:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
------------------ -------------------
<S> <C> <C>
Cutler Equity Income Fund $31,533,967 $32,729,294
Cutler Approved List Equity Fund 6,096,566 8,267,891
</TABLE>
15
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1997 (unaudited)
- --------------------------------------------------------------------------------
For federal income tax purposes, the tax basis of investment securities owned,
the aggregate gross unrealized appreciation and the aggregate gross unrealized
depreciation as of December 31, 1997 were as follows:
<TABLE>
<CAPTION>
Unrealized Unrealized Net
Tax Cost Appreciation Depreciation Appreciation
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cutler Equity Income Fund $53,855,842 $16,718,268 $ 218,795 $16,499,473
Cutler Approved List Equity Fund 20,964,137 15,101,252 184,647 14,916,605
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected per share data and
ratios for a share outstanding
throughout each period.
<TABLE>
<CAPTION>
CUTLER EQUITY INCOME FUND
---------------------------------------------------------------------------
Six Months
Ended
December 31,
(unaudited) Year Ended June 30,
------------ ----------------------------------------------------------
1997 1997 1996 1995 1994 1993 (a)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 16.06 $ 12.95 $ 10.96 $ 9.56 $ 9.95 $ 10.00
------------ -------- -------- -------- -------- --------
Investment Operations
Net Investment Income (Loss) 0.16 0.24 0.35 0.36(b) 0.27 0.10
Net Realized and Unrealized Gain
(Loss) on Investments 1.26 4.30 2.13 1.40 (0.40) (0.05)
------------ -------- -------- -------- -------- --------
Total from Investment Operations 1.42 4.54 2.48 1.76 (0.13) 0.05
------------ -------- -------- -------- -------- --------
Distributions From
Net Investment Income (0.16) (0.24) (0.35) (0.34) (0.26) (0.10)
Net Realized Gain on Investments (1.51) (1.19) (0.14) (0.02) -- --
------------ -------- -------- -------- -------- --------
Total Distributions (1.67) (1.43) (0.49) (0.36) (0.26) (0.10)
------------ -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 15.81 $ 16.06 $ 12.95 $ 10.96 $ 9.56 $ 9.95
------------ -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- --------
Total return 8.80%(e) 37.65% 22.93% 18.63% (1.37%) 0.90%(c)
Ratio/Supplementary Data
Net assets at the end of year (in
thousands) $70,484 $ 62,523 $ 46,285 $ 41,470 $ 19,706 $ 2,853
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver of fees 1.20%(c) 1.17% 0.98% 0.97% 1.00% 0.98%(c)
Expenses excluding
reimbursement/waiver of fees 1.20%(c) 1.17% 0.98% 0.97% 1.45% 3.69%(c)
Net investment income 1.34%(c) 1.67% 2.81% 3.49% 3.49% 2.23%(c)
Portfolio turnover rate 58.59% 23.22% 57.08% 43.37% 42.83% 32.04%
Average commission rate per share (d) $0.0564 $0.0509 $0.0525 N/A N/A N/A
</TABLE>
(a) See Note 1 for applicable date of inception.
(b) Calculated using the weighted average number of shares outstanding.
(c) Annualized.
(d) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid to brokers on the
purchase or sale of equity securities on which commissions were paid.
(e) Not annualized.
See Notes to Financial Statements.
17
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected per share data and
ratios for a share outstanding
throughout each period.
<TABLE>
<CAPTION>
CUTLER APPROVED LIST FUND
-----------------------------------------------------------------------------
Six Months
Ended
December 31,
(unaudited) Year Ended June 30,
------------ ------------------------------------------------------------
1997 1997 1996 1995 1994 1993 (a)
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.33 $ 14.18 $ 11.71 $ 9.78 $ 10.09 $ 10.00
------------ -------- -------- -------- -------- --------
Investment Operations
Net Investment Income (Loss) 0.12 0.18 0.21 0.24(b) 0.21 0.08
Net Realized and Unrealized Gain
(Loss) on Investments 1.83 4.20 2.47 1.92 (0.31) 0.09
------------ -------- -------- -------- -------- --------
Total from Investment Operations 1.95 4.38 2.68 2.16 (0.10) 0.17
------------ -------- -------- -------- -------- --------
Distributions From
Net Investment Income (0.12) (0.18) (0.21) (0.23) (0.21) (0.08)
Net Realized Gain on Investments (1.50) (0.05) -- -- -- --
------------ -------- -------- -------- -------- --------
Total Distributions (1.62) (0.23) (0.21) (0.23) (0.21) (0.08)
------------ -------- -------- -------- -------- --------
Net Asset Value, End of Period $ 18.66 $ 18.33 $ 14.18 $ 11.71 $ 9.78 $10.09
------------ -------- -------- -------- -------- --------
------------ -------- -------- -------- -------- --------
Total return 10.61%(e) 31.18% 23.01% 22.33% (1.07%) 3.31%(c)
Ratio/Supplementary Data
Net assets at the end of year (in
thousands) $35,719 $ 35,277 $30,248 $21,890 $12,620 $3,618
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver of fees 1.25%(c) 1.25% 1.05% 1.00% 1.00% 0.98%(c)
Expenses excluding
reimbursement/waiver of fees 1.25%(c) 1.25% 1.13% 1.23% 1.78% 4.53%(c)
Net investment income 0.80%(c) 1.15% 1.65% 2.20% 2.43% 2.27%(c)
Portfolio turnover rate 18.02% 3.86% 8.97% 23.42% 22.27% 10.88%
Average commission rate per share (d) $0.0594 $0.0600 $0.0569 N/A N/A N/A
</TABLE>
(a) See Note 1 for applicable date of inception.
(b) Calculated using the weighted average number of shares outstanding.
(c) Annualized.
(d) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid to brokers on the
purchase or sale of equity securities on which commissions were paid.
(e) Not annualized.
See Notes to Financial Statements.
18
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
TRUSTEES OF THE CUTLER TRUST
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
KENNETH R. CUTLER
[PHOTO] Principal portfolio manager of the Equity Income Fund and Approved List Equity
Fund, and of institutional equity portfolios managed separately by Cutler &
Company LLC with objectives similar to the Funds.
JOHN Y. KEFFER
[PHOTO] President, Forum Financial Services, Inc.-Registered Trademark-, distributor
of the Funds.
BROOKE CUTLER ASHLAND
[PHOTO] Chief Executive Officer, Cutler & Company LLC, Investment Adviser to the
trust.
DR. HATTEN S. YODER, JR.
[PHOTO] Chairman Emeritus, Geophysical Laboratory, Carnegie Institute of Washington,
and consultant to the Los Alamos National Laboratory. A member of the National
Academy of Sciences, and many national and international scientific bodies.
ROBERT B. WATTS, JR.
[PHOTO] Attorney in private practice. Formerly a senior level officer, counsel and
corporate secretary with over 25 years of corporate, divisional and board
level experience with two Fortune 100 companies.
</TABLE>
19
<PAGE>
THE CUTLER TRUST
- ------------------------------------------------------------------------
TABLE OF CONTENTS
DECEMBER 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Chairman's Letter to the Shareholders....... 1
Cutler Equity Income Fund Portfolio......... 2
Cutler Approved List Equity Fund
Portfolio................................. 5
Statements of Assets and Liabilities........ 11
Statements of Operations.................... 12
Statements of Changes in Net Assets......... 13
Notes to Financial Statements............... 14
Financial Highlights (Per Share Data)....... 17
Trustees of the Cutler Trust................ 19
</TABLE>
Distributor
Forum Financial Services, Inc.
CUTLER & COMPANY LLC
INVESTMENT MANAGEMENT
INVESTMENT ADVISER TO THE TRUST
503 Airport Road, Medford, OR 97504
(800) 228-8537 - (541) 770-9000
Fax: (541) 779-0006
info @ cutler.com
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors in the Fund
unless preceded or accompanied by an effective prospectus, which includes
information regarding the Fund's objectives and policies, experience of its
management, marketability of shares, and other information.
- --------------------------------------------------------------------------------
CUTLER EQUITY
INCOME FUND
CUTLER APPROVED LIST
EQUITY FUND
SEMI-ANNUAL REPORT
---------------
December 31, 1997
