THE
CUTLER
TRUST
=========
PROSPECTUS
OCTOBER 30, 1998
INVESTMENT ADVISER: ADMINISTRATOR:
Cutler & Company, LLC Forum Administrative
503 Airport Road Services, LLCSM
Medford, Oregon 97504 Two Portland Square
(541) 770-9000 Portland, Maine 04101
(800) 228-8537 (800) 237-3113
DISTRIBUTOR: SHAREHOLDER ACCOUNT
Forum Financial Services, INFORMATION:
Inc. (R) Forum Shareholder Services, LLCSM
Two Portland Square Two Portland Square
Portland, Maine 04101 Portland, Maine 04101
(800) 237-3113 Toll free (888) CUTLER4
This Prospectus relates to
CUTLER EQUITY INCOME FUND
CUTLER APPROVED LIST EQUITY FUND
The Cutler Trust (the "Trust") is an open-end, management investment
company (a mutual fund). The Cutler Equity Income Fund and Cutler Approved List
Equity Fund (individually a "Fund" and collectively the "Funds") are each
diversified no-load portfolios of the Trust.
The CUTLER EQUITY INCOME FUND seeks as generous a current income as is
consistent with diversification and long-term capital appreciation by investing
selectively within the Cutler & Company Approved List. The CUTLER APPROVED LIST
EQUITY FUND seeks current income and long-term capital appreciation by investing
in at least 90% of the common stocks within the Cutler & Company Approved List.
As the future is unknown, obviously there can be no assurance that either Fund
will achieve its investment objectives.
This Prospectus sets forth concisely the information concerning the Trust
and the Funds that a prospective investor should know before investing. The
Trust has filed with the Securities and Exchange Commission a Statement of
Additional Information dated October 30, 1998. It contains more detailed
information about the Trust and the Funds and is incorporated into this
Prospectus by reference. The Statement of Additional Information is available
without charge by contacting Cutler & Company or the Trust's Distributor at the
addresses or numbers listed above.
<PAGE>
CONTENTS
Page
Expenses of Investing in the Trust........................................ 3
Financial Highlights...................................................... 4
Investment Objectives and Policies........................................ 6
Risk Considerations....................................................... 7
Management of the Trust................................................... 7
Purchases and Redemptions of Shares....................................... 9
Dividends and Tax Matters................................................. 13
Performance Information................................................... 14
The Trust and Its Shares.................................................. 14
- --------------------------------------------------------------------------------
PLEASE READ THIS PROSPECTUS BEFORE INVESTING IN EITHER
OF THE FUNDS, AND RETAIN IT FOR FUTURE REFERENCE.
It contains important information about the Funds, their
investments and the services available to shareholders.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------
<PAGE>
(This Page Intentionally Left Blank)
2
<PAGE>
EXPENSES OF INVESTING IN THE TRUST
================================================================================
The purpose of the following table is to assist investors in understanding
the various expenses that an investor in a Fund will bear directly or
indirectly. There are no transaction charges associated with purchases or
redemptions of Fund shares.
<TABLE>
<S> <C> <C>
Cutler Cutler
Equity Approved List
Income Equity
Fund Fund
---- ----
ANNUAL FUND OPERATING EXPENSES
(as a percentage of average net assets)
Investment Advisory Fee 0.75% 0.75%
Other Expenses 0.35% 0.49%
----- -----
Total Annual Fund Operating Expenses 1.10% 1.24%
</TABLE>
For a further description of the various expenses incurred in the operation
of the Fund, see "Management of the Trust - Expenses."
EXAMPLE
You would pay the following expenses on a $1,000 investment in a Fund,
assuming a 5% annual return and redemption at the end of each period:
<TABLE>
<S> <C> <C> <C> <C>
One Year Three Years Five Years Ten Years
-------- ----------- ---------- ---------
Cutler Equity Income Fund $11 $35 $61 $134
Cutler Approved List Equity Fund $13 $39 $68 $150
</TABLE>
The example is based on the expenses listed in the table above and assumes
the reinvestment of all dividends. The 5% annual return is not a prediction of
and does not represent the Funds' projected returns; rather, the assumed 5%
annual return is required by government regulation. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURN. ACTUAL
EXPENSES AND RETURN MAY BE GREATER OR LESS THAN INDICATED.
3
<PAGE>
FINANCIAL HIGHLIGHTS
================================================================================
The following tables represent selected data for a single outstanding share
of each Fund for the periods shown. Information for the periods was audited by
Deloitte & Touche LLP, independent auditors. The Funds' financial statements for
the fiscal year ended June 30, 1998 and independent auditors' report thereon are
contained in the Annual Report of the Funds and are incorporated by reference
into the Statement of Additional Information. Further information about each
Fund's performance is contained in the Funds' Annual Report to shareholders,
which may be obtained from the Trust without charge.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CUTLER
EQUITY
INCOME
FUND
---------------------------------------------------------------------
Year Ended June 30,
1998 1997 1996 1995 1994 1993(a)
--------- ------------- ---------- --------- --------- ----------
NET ASSET VALUE, BEGINNING OF PERIOD $16.06 $12.95 $10.96 $9.56 $9.95 $10.00
------------------- ------------- ---------- --------- ----------
Investment Operations:
Net Investment Income 0.19 0.24 0.35 0.36(b) 0.27 0.10
Net Realized and Unrealized
Gain (Loss) on Investments 3.05 4.30 2.13 1.40 (0.40) (0.05)
------------------- ------------- ---------- --------- ----------
Total from Investment Operations 3.24 4.54 2.48 1.76 (0.13) 0.05
------------------- ------------- ---------- --------- ----------
Distributions
From:
Net Investment Income (0.19) (0.24) (0.35) (0.34) (0.26) (0.10)
Net Realized Gain on Investments (1.51) (1.19) (0.14) (0.02) 0.00 0.00
--------- ------------- ---------- --------- --------- ----------
Total (1.70) (1.43) (0.49) (0.36) (0.26) (0.10)
Distributions
--------- ------------- ---------- --------- --------- ----------
NET ASSET VALUE, END OF PERIOD $17.60 $16.06 $12.95 $10.96 $9.56 $9.95
========= ============= ========== ========= ========= ==========
TOTAL RETURN 21.60% 37.65% 22.93% 18.63% (1.37%) 0.90%(c)
Ratio/Supplementary Data:
Net Assets at End of Period (000's omitted) $77,482 $62,523 $46,285 $41,470 $19,706 $2,583
Ratios to Average Net Assets:
Expenses Including Reimbursement/Waiver 1.10% 1.17% 0.98% 0.97% 1.00% 0.98%(c)
Expenses Excluding Reimbursement/Waiver 1.10% 1.17% 0.98% 0.97% 1.45% 3.69%(c)
Net Investment Income
Including Reimbursement/Waiver 1.14% 1.67% 2.81% 3.49% 3.49% 2.23%(c)
Portfolio Turnover Rate 118.59% 23.22% 57.08% 43.37% 42.83% 32.04%
Average Commission Rate(d) $0.0532 $0.0509 $0.0525 - - -
</TABLE>
(a) The Fund commenced operations on December 30, 1992.
(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.
4
<PAGE>
FINANCIAL HIGHLIGHTS (Continued)
================================================================================
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
CUTLER
APPROVED LIST
EQUITY FUND
--------------------------------------------------------------------------
Year Ended
June 30,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994 1993(a)
--------------------- --------------- ------------ ---------- -----------
NET ASSET VALUE, BEGINNING OF PERIOD $18.33 $14.18 $11.71 $9.78 $10.09 $10.00
--------------------- --------------- ------------ ---------- -----------
Investment Operations:
Net Investment Income 0.13 0.18 0.21 0.24(b) 0.21 0.08
Net Realized and Unrealized
Gain (Loss) on Investments 4.19 4.20 2.47 1.92 (0.31) 0.09
--------------------- --------------- ------------ ---------- -----------
Total from Investment Operations 4.32 4.38 2.68 2.16 (0.10) 0.17
--------------------- -------------- ------------ ---------- -----------
Distributions From:
Net Investment Income (0.13) (0.18) (0.21) (0.23) (0.21) (0.08)
Net Realized Gain on Investments (1.50) (0.05) 0.00 0.00 0.00 0.00
--------------------- -------------- ------------ ---------- -----------
Total Distributions (1.63) (0.23) (0.21) (0.23) (0.21) (0.08)
----------- -------------- ------------ ---------- --------- ----------
NET ASSET VALUE, END OF PERIOD $21.02 $18.33 $14.18 $11.71 $9.78 $10.09
=========== ============== ============ ========== ========= ==========
TOTAL RETURN 24.90% 31.18% 23.01% 22.33% (1.07%) 3.31%(c)
Ratio/Supplementary Data:
Net Assets at End of Period (000's omitted) $41,085 $35,277 $30,248 $21,890 $12,620 $3,618
Ratios to Average Net Assets:
Expenses Including Reimbursement/Waiver 1.24% 1.25% 1.05% 1.00% 1.00% 0.98%(c)
Expenses Excluding Reimbursement/Waiver 1.24% 1.25% 1.13% 1.23% 1.78% 4.53%(c)
Net Investment Income
Including Reimbursement/Waiver 0.65% 1.15% 1.65% 2.20% 2.43% 2.27%(c)
Portfolio Turnover Rate 49.61% 3.86% 8.97% 23.42% 22.27% 10.88%
Average Commission Rate(d) $0.0565 $0.0600 $0.0569 - - -
</TABLE>
(a) The Fund commenced operations on December 30, 1992.
(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.
5
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
================================================================================
INVESTMENT OBJECTIVES
The investment objective of the CUTLER EQUITY INCOME FUND is to seek as
generous a current income as is consistent with diversification and long-term
capital appreciation by investing within the Cutler & Company Approved List (the
"Approved List").
The investment objective of the CUTLER APPROVED LIST EQUITY FUND is to seek
current income and long-term capital appreciation by investing in at least 90%
of the common stocks within the Approved List.
As the future is unknown, obviously there can be no assurance that any of
these objectives will be achieved.
INVESTMENT POLICIES
CUTLER EQUITY INCOME FUND AND CUTLER APPROVED LIST EQUITY FUND. The Funds
will invest only in the equity securities of the companies on Cutler & Company's
Approved List. Each company on the Approved List is listed on the New York Stock
Exchange and meets the following specific criteria. Each of the companies or its
predecessor (1) paid dividends continuously for at least 20 years, without any
reduction in the rate; (2) has commercial paper rated Prime-1 and senior debt
rated at least A by Moody's Investors Service, Inc. or similarly rated by
another rating agency, or if no ratings are published, determined to be of
similar quality by Cutler & Company; (3) has annual sales, assets and market
value of at least $1 billion; and (4) in Cutler & Company's opinion has wide
ownership among major institutional investors and very liquid markets. In
addition, each company is subjected to such other analysis as may appear prudent
including but not limited to the company's historical yield patterns, payout
ratios and debt coverage ratios. The current Approved List and its entire
history are available to any shareholder by contacting Cutler & Company or the
Trust.
Trades by the Funds normally are made by Cutler & Company primarily to
maintain quality (adhering to the Approved List) and to rebalance the portfolio;
the Cutler Equity Income Fund will also trade within the Approved List to
improve its yield. The Funds normally will remain as fully invested as possible,
considering cash flow and possible transactional delays, and may invest their
cash holdings in high-quality, short-term money market instruments as described
below. The Funds will be rebalanced periodically to maintain holdings weighted
to reflect the anticipated total return of each Fund's portfolio securities.
Such rebalancing may result in substantial "tilts" (a heavier weighting on some
issues). Whereas the Cutler Approved List Equity Fund holds at least 90% of
common stocks within the Approved List, the Cutler Equity Income Fund will hold
approximately 20 to 30 of those stocks. Under normal conditions, each Fund will
invest at least 65% of its total assets in the income producing equity
securities in the Approved List.
OTHER POLICIES. Unless approved by the holders of a majority of a Fund's
outstanding voting securities, a Fund may not change its investment objective,
borrow money, invest in the securities of foreign issuers or purchase securities
through a foreign market, invest in options or futures contracts, sell
securities short, lend its securities, invest in repurchase agreements or engage
in certain other activities, as more fully described in the Funds' Statement of
Additional Information. Except as otherwise indicated, investment policies of a
Fund may be changed by the Trust's Board of Trustees (the "Board") without
shareholder approval. Each Fund's net asset value will fluctuate.
For temporary defensive purposes, each Fund may invest in cash or in the
following types of high quality, short-term money market instruments: (1)
certificates of deposit and interest-bearing savings deposits of domestic
commercial banks, (2) money market mutual funds and (3) short-term U.S.
Government Securities.
The frequency of each Fund's portfolio transactions will vary from year to
year and is driven by the investment policies of each Fund as described above.
An annual portfolio turnover rate of 100% would occur if all of the securities
in a Fund were replaced once in a period of one year. Higher portfolio turnover
rates may result in increased brokerage costs to a Fund and a possible increase
in short-term capital gains or losses. For more details about the portfolio
turnover rate of each Fund, see "Financial Highlights".
6
<PAGE>
RISK CONSIDERATIONS
================================================================================
Cutler Equity Income Fund and Cutler Approved List Equity Fund invest only
in the equity securities of the companies on the Approved List. Over time,
stocks have shown greater growth potential than other types of securities.
Although the companies on the Approved List meet specific criteria for
stability, credit quality and the prospect of good earnings, their stock prices
can fluctuate dramatically in response to company, market, or economic news.
These Funds alone do not constitute a balanced investment plan. When you sell
your Fund shares, they may be worth more or less than you paid for them.
MANAGEMENT OF THE TRUST
================================================================================
The business of the Trust is managed under the direction of the Board of
Trustees. The Board formulates the general policies of the Funds and generally
meets quarterly to review the results of the Funds, monitor investment
activities and practices and discuss other matters affecting the Funds and the
Trust.
INVESTMENT ADVISER
Cutler & Company serves as investment adviser to each Fund pursuant to an
Investment Advisory Agreement with the Trust. Subject to the general control of
the Board, Cutler & Company makes and executes investment decisions for each
Fund. For its services, Cutler & Company receives an advisory fee from each Fund
at an annual rate of 0.75% of each Fund's average daily net assets. Cutler &
Company has voluntarily agreed to waive its fees or reimburse expenses of the
Funds to the extent the Approved List or Equity Income Fund's expenses exceed
1.25% of its annual average daily net until June 30, 1999.
Cutler & Company is a registered investment adviser and provides investment
management services to various individual and institutional clients, including
financial institutions, public and private pension funds, profit-sharing plans,
charitable corporations and private trust funds. As of the date of this
Prospectus, Cutler & Company provided investment management services with
respect to assets of approximately $1.3 billion, including the Funds.
Mr. Kenneth R. Cutler, the Portfolio Manager for the Cutler Equity Income
Fund and co-Portfolio Manager for the Cutler Approved List Fund, entered the
investment business in 1945; between 1953 and 1962 he was principal operating
and investment officer of two mutual funds; between 1962 and 1977 he held
various investment positions; in 1977 he founded Cutler & Company, Inc. Mr.
Cutler is the Chairman and Vice President of the Trust.
Mr. Robert W. Lamberti, CFA, co-Portfolio Manager for the Cutler Approved
List Fund, received his B.S. from Purdue University and his M.B.A. in Finance
from Temple University in 1995. From 1993 to 1995, Mr. Lamberti was an Economic
Analyst and Treasury Analyst for the Rohm and Haas Company. From 1995 to 1997,
Mr. Lamberti was a Senior Financial Analyst in the Emulsion Polymers Division at
Air Products and Chemicals, Inc. From 1997 to April, 1998, he was a Senior
Analyst at Value Research Corporation. In April, 1998, Mr. Lamberti joined
Cutler & Company as an assistant Portfolio Manager and was promoted to
co-Portfolio Manager for the Cutler Approved List Fund in August, 1998.
Effective December 31, 1995, Cutler & Company, Inc. reorganized as a
California limited liability company, Cutler & Company, LLC. The firm is now
100% employee-owned, with the Chief Executive Officer, the Chief Operating
Officer, two Senior Portfolio Managers and the Director of Marketing all owners.
YEAR 2000. Like other mutual funds, financial and other business
organizations and individuals around the world, the Funds could be adversely
affected if the computer systems used by Cutler & Company and other service
providers to the Funds do not properly process and calculate date-related
information and data from and after January 2000. Cutler & Company and the
administrator are taking steps to address the Year 2000 issue with respect to
the computer systems that they use and to
7
<PAGE>
MANAGEMENT OF THE TRUST (Continued)
================================================================================
obtain reasonable assurances that comparable steps are being taken by the Funds'
other major service providers. There can be no assurance, however, that these
steps will be sufficient to avoid any adverse impact on the Funds from this
problem.
ADMINISTRATION AND DISTRIBUTION
ADMINISTRATOR. Pursuant to a management agreement with the Trust, Forum
Administrative Services, LLC ("FAdS") located at Two Portland Square, Portland,
Maine 04101, supervises the overall management of the Trust, including
overseeing the Trust's receipt of services, advising the Trust and the Trustees
on matters concerning the Trust and its affairs, and, at the Board's request,
providing the Trust with general office facilities and certain persons to serve
as officers. For its administrative services, FAdS receives a fee from the Trust
with respect to each Fund at an annual rate of 0.10% of the Fund's average daily
net assets.
DISTRIBUTOR. Forum Financial Services, Inc. ("FFSI"), serves as the Trust's
distributor and, as agent of the Trust, offers for sale shares of the Funds.
FFSI, whose address is Two Portland Square, Portland, Maine 04101, is a
registered broker-dealer and a member of the National Association of Securities
Dealers, Inc.
SHAREHOLDER SERVICES
TRANSFER AGENT. Shareholder inquiries and communications concerning a Fund
may be directed to Forum Shareholder Services, LLC ("FSS"), Two Portland Square,
Portland, Maine 04101, which acts as the Funds' transfer agent and dividend
disbursing agent. FSS maintains for each shareholder of record, an account
(unless such accounts are maintained by sub-transfer agents or processing
agents) to which all shares purchased are credited, together with any
distributions that are reinvested in additional shares. FSS also performs other
transfer agency and shareholder-related functions.
The Trust has adopted a shareholder services plan providing that the Trust
may obtain the services of Cutler & Company and other qualified financial
institutions to act as shareholder servicing agents for their customers. Under
this plan, the Trust has authorized FAdS to enter into agreements pursuant to
which the shareholder servicing agents perform certain shareholder services not
otherwise provided by FAdS. For these services, the Trust may pay the
shareholder servicing agent a fee of up to 0.25% of the average daily net assets
of the shares of a Fund owned by investors for which the shareholder servicing
agent maintains a servicing relationship.
Among the services that may be provided by FAdS or by shareholder servicing
agents are: answering customer inquiries regarding account matters; assisting
shareholders in designating and changing various account options; aggregating
and processing purchase and redemption orders and transmitting and receiving
funds for shareholder orders; transmitting, on behalf of the Trust, proxy
statements, prospectuses and shareholder reports to shareholders and tabulating
proxies; processing dividend payments and providing subaccounting services for
Fund shares held beneficially; and providing such other services as the Trust or
a shareholder may request.
ACCOUNTING SERVICES. Forum Accounting Services, LLCSM ("FAcS"), performs
portfolio accounting services for the Funds, including determination of each
Fund's net asset value per share.
FORUM FINANCIAL GROUP
FAdS, FFSI, FSS and FAcS are affiliates of Forum Financial Group, LLCSM
("FFG"). FFG, together with its affiliates, provides a full range of services to
the investment company and financial services industry. As of the date of this
Prospectus, FFG provided services to registered investment companies and
collective investment funds with assets of approximately $47 billion. John Y.
Keffer, a Trustee and President of the Trust, is the sole shareholder (directly
and indirectly) and director of FFG, which owns (directly or indirectly) FAdS,
FFSI, FSS, and FAcS.
EXPENSES
The Trust is obligated to pay all of the Trust's expenses. For more details
about the expenses of each Fund, see "Financial Highlights".
8
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES
================================================================================
GENERAL
You may purchase or redeem shares of the Funds without a sales charge at
their net asset value on any weekday except days when the New York Stock
Exchange is closed, normally, New Year's Day, Dr. Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving and Christmas ("Fund Business Day"). The net asset values of the
Funds are calculated at 4:00 p.m., Eastern Time on each Fund Business Day. SEE
"Determination of Net Asset Value."
PURCHASES. Fund shares are issued at a price equal to the net asset value
per share next determined after an order in proper form is accepted by FSS. The
Trust reserves the right to reject any subscription for the purchase of its
shares and may, in Cutler & Company's discretion, accept portfolio securities in
lieu of cash as payment for Fund shares. Shares may not be available for
purchase in every state. Fund shares become entitled to receive dividends on the
same day the shares are issued to an investor.
REDEMPTIONS. There is no redemption charge, no minimum period of
investment, and no restriction on frequency of redemptions. Shares are redeemed
at a price equal to the net asset value per share next determined following
acceptance by FSS of the redemption order in proper form (and any supporting
documentation which FSS may require). Shares redeemed are not entitled to
participate in dividends declared on the day on which a redemption becomes
effective.
The date of payment of redemption proceeds may not be postponed for more
than seven days after shares are tendered to FSS for redemption by a shareholder
of record. The right of redemption may not be suspended except in accordance
with the provisions of the Investment Company Act of 1940.
MINIMUM INVESTMENTS. There is a $25,000 ($2,000 for IRA's) minimum for
initial investments in each Fund. There is no minimum for subsequent investments
made by check or bank wire and a $100 minimum for transfers under the Automatic
Investment Plan. The Trust and the Administrator each reserves the right to
waive the minimum investment requirement.
ACCOUNT STATEMENTS. Shareholders will receive from the Trust periodic
statements listing account activity during the statement period.
SHARE CERTIFICATES. FSS maintains a shareholder account for each
shareholder. The Trust does not issue share certificates.
PURCHASE AND REDEMPTION PROCEDURES
You may obtain the account application necessary to open an account by
calling toll free 888-CUTLER4 or by writing The Cutler Trust at P.O. Box 446,
Portland, Maine 04112.
INITIAL PURCHASE OF SHARES
MAIL. Investors may send a check made payable to "The Cutler Trust" with a
completed account application to:
The Cutler Trust
P.O. Box 446
Portland, Maine 04112
Checks are accepted at full value subject to collection. All checks must be
drawn on a United States bank. If a check is returned unpaid, the purchase will
be canceled, and the investor will be liable for any resulting losses or fees
incurred by a Fund, Cutler & Company or FSS.
For individual or Uniform Gift to Minors Act accounts, the check or money
order used to purchase shares of a Fund must be made payable to "The Cutler
Trust" or to one or more owners of that account and endorsed to The Cutler
Trust. For corporation, partnership, trust, 401(k) plan or other non-individual
type accounts, the check used to purchase shares of a Fund must be made payable
on its face to "The Cutler Trust." No other method of payment by check will be
accepted. All purchases must be paid in U.S. dollars; checks must be drawn on
U.S. banks. Payment by Traveler's Checks is prohibited.
9
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES (Continued)
================================================================================
BANK WIRE. To make an initial investment in a Fund using the fedwire system
for transmittal of money between banks, you should first telephone FSS at
207-879-0001 or toll free at 888-CUTLER4 to obtain an account number. You should
then instruct a member commercial bank to wire your money immediately to:
BankBoston
Boston, Massachusetts
ABA # 011000390
For Credit to: Forum Shareholder Services, LLC
Account # 541-54171
The Cutler Trust: (Name of Fund)
(Investor's Name)
(Investor's Account Number)
You should then promptly complete and mail the account application.
If you plan to wire funds, you should instruct your bank early in the day
so the wire transfer can be accomplished the same day. Your bank may assess
charges for transmitting the money by bank wire and for use of Federal Funds.
The Trust does not charge investors for the receipt of wire transfers. Payment
in the form of a bank wire received prior to 4:00 p.m., Eastern Time on a Fund
Business Day will be treated as a Federal Funds payment received before that
time.
THROUGH FINANCIAL INSTITUTIONS. You may purchase and redeem shares of the
Funds through brokers and other financial institutions that have entered into
sales agreements with FFSI. These institutions may charge a fee for their
services and are responsible for promptly transmitting purchase, redemption and
other requests to the Trust. The Trust is not responsible for the failure of any
institution to promptly forward these requests.
If you purchase shares through a broker-dealer or financial institution,
your purchase will be subject to its procedures, which may include charges,
limitations, investment minimums, cutoff times and restrictions in addition to,
or different from, those applicable to shareholders who invest in a Fund
directly. You should acquaint yourself with the institution's procedures and
read this Prospectus in conjunction with any materials and information provided
by your institution. If you purchase Fund shares in this manner, you may or may
not be the shareholder of record and, subject to your institution's and the
Funds' procedures, may have Fund shares transferred into your name. There is
typically a one to five day settlement period for purchases and redemptions
through broker-dealers.
SUBSEQUENT PURCHASES OF SHARES
You may purchase additional shares of a Fund by mailing a check or sending
a bank wire as indicated above. Shareholders using the wire system for
subsequent purchases should first telephone FSS at 207-879-0001 or toll free at
888-CUTLER4 to notify it of the wire transfer. All payments should clearly
indicate the shareholder's name and account number.
AUTOMATIC INVESTMENT PLAN. Shareholders may also purchase additional Fund
shares at regular, preselected intervals by authorizing the automatic transfer
of funds from a designated bank account maintained with a United States banking
institution which is an Automated Clearing House member. The minimum initial
investment is $25,000 and the minimum subsequent investment is $100. Under the
program, existing shareholders may authorize amounts to be debited from their
bank account and invested in the Fund monthly or quarterly. Shareholders wishing
to participate in this program may obtain the applicable forms from FSS.
Shareholders may terminate their automatic investments or change the amount to
be invested at any time by written notification to FSS.
REDEMPTION OF SHARES
Redemption requests will not be effected unless any check used for
investment has been cleared by the shareholder's bank, which may take up to 15
calendar days. This delay may be avoided by investing in a Fund through wire
transfers. If FSS receives a redemption request by 4:00 p.m. Eastern Time, the
redemption proceeds normally are paid on the next business day, but in no event
later than seven days after redemption, by check mailed to the
10
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES (Continued)
================================================================================
shareholder of record at his or her record address. Shareholders that wish to
redeem shares by telephone or by bank wire must elect these options by properly
completing the appropriate sections of their account application. These
privileges may be modified or terminated by the Trust at any time.
Due to the cost to the Trust of maintaining smaller accounts, the Trust
reserves the right to redeem, upon not less than 60 days' written notice, all
shares in any Fund account with an aggregate net asset value of less than
$10,000 ($2,000 for IRAs). The Fund will not redeem accounts that fall below
these amounts solely as a result of a reduction in net asset value of the Fund's
shares.
REDEMPTION BY MAIL. You may redeem all or any number of your shares by
sending a written request to FSS at the address above. You must sign all written
requests for redemption and provide a signature guarantee. SEE "Other Redemption
Matters."
TELEPHONE REDEMPTIONS. A shareholder that has elected telephone redemption
privileges may make a telephone redemption request by calling FSS at
207-879-0001 or toll free at 888-CUTLER4. In response to the telephone
redemption instruction, a Fund will mail a check to the shareholder's record
address. If the shareholder has elected wire redemption privileges, FSS may wire
the proceeds as set forth below under "Bank Wire Redemptions."
In an effort to prevent unauthorized or fraudulent redemption requests by
telephone, the Trust and FSS will employ reasonable procedures to confirm that
such instructions are genuine. Shareholders must provide FSS with the
shareholder's account number, the exact name in which the shares are registered
and some additional form of identification. The Trust or FSS may employ other
procedures such as recording certain transactions. If such procedures are
followed, neither FSS nor the Trust will be liable for any losses due to
unauthorized or fraudulent redemption requests. Shareholders should verify the
accuracy of telephone instructions immediately upon receipt of confirmation
statements.
During times of drastic economic or market changes, it may be difficult to
make a redemption by telephone. If you cannot reach FSS by telephone, you may
mail or hand-deliver your request to FSS at Two Portland Square, Portland, Maine
04101.
OTHER REDEMPTION MATTERS. A signature guarantee is required for any written
redemption. In addition, a signature guarantee also is required for instructions
to change a shareholder's record name or address, designated bank account for
wire redemptions or automatic investment or redemption, dividend election,
telephone redemption or exchange option election or any other option election in
connection with the shareholder's account. Signature guarantees may be provided
by any eligible institution, including a bank, a broker, a dealer, a national
securities exchange, a credit union, or a savings association that is authorized
to guarantee signatures, acceptable to the Transfer Agent. Whenever a signature
guarantee is required, the signature of each person required to sign for the
account must be guaranteed. Such guarantee must have "Signature Guaranteed"
stamped under each signature and must be signed by the eligible institution.
The Transfer Agent will deem a shareholder's account "lost" if
correspondence to the shareholder's address of record is returned as
undeliverable, unless the Transfer Agent determines the shareholder's new
address. When an account is deemed lost all distributions on the account will be
reinvested in additional shares of the Fund. In addition, the amount of any
outstanding (unpaid for six months or more) checks for distributions that have
been returned to the Transfer Agent will be reinvested and the checks will be
canceled.
BANK WIRE REDEMPTIONS. If you have elected wire redemption privileges, a
Fund will, upon request, transmit the proceeds of any redemption greater than
$10,000 by Federal Funds wire to a bank account designated on your account
application. If you wish to request bank wire redemptions by telephone, you must
also elect telephone redemption privileges.
11
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES (Continued)
================================================================================
EXCHANGE PRIVILEGE
Shareholders of a Fund may exchange their shares for shares of the other
Fund, the Daily Assets Government Fund, a money market fund managed by FAdS and
a separate series of Forum Funds (R) or the Investors Bond Fund, also a separate
series of Forum Funds managed by FAdS. You may receive a copy of the prospectus
for the Daily Assets Government Fund or the Investors Bond Fund by writing FSS
or calling toll free at 888-CUTLER4. No sales charges are imposed on exchanges
between a Fund and the Daily Assets Government Fund. Exchanges into the
Investors Bond Fund are subject to the fees charged by that fund as set forth in
the Investor Bond Fund's prospectus.
EXCHANGE PROCEDURES. You may request an exchange by writing to FSS at Two
Portland Square, Portland, Maine 04101. The minimum amount for an exchange to
open an account in the Daily Assets Government Fund or the Investors Bond Fund
is $2,500. Exchanges may only be made between identically registered accounts.
You do not need to complete a new account application, unless you are requesting
different shareholder privileges for the new account. The Trust reserves the
right to reject any exchange request and may modify or terminate the exchange
privilege at any time. There is no charge for the exchange privilege or
limitation as to frequency of exchanges.
An exchange of shares in a Fund pursuant to the exchange privilege is, in
effect, a redemption of Fund shares (at net asset value) followed by the
purchase of shares of the investment company into which the exchange is made (at
net asset value) and may result in a shareholder realizing a taxable gain or
loss for Federal income tax purposes. The exchange privilege is available to
shareholders residing in any state in which shares of the Daily Assets
Government Fund or the Investors Bond Fund, as applicable, may legally be sold.
TELEPHONE EXCHANGES. If you have elected telephone exchange privileges, you
may request an exchange by calling FSS toll free at 888-CUTLER4. Neither the
Trust nor FSS are responsible for the authenticity of telephone instructions or
losses, if any, resulting from unauthorized telephone exchange requests. The
Trust employs reasonable procedures to insure that telephone orders are genuine
and, if it does not, may be liable for any losses due to unauthorized
transactions. Shareholders should verify the accuracy of telephone instructions
immediately upon receipt of confirmation statements.
RETIREMENT ACCOUNTS
The Funds may be a suitable investment vehicle for part or all of the
assets held in Traditional or Roth individual retirement accounts (collectively
"IRAs"). An IRA account application form may be obtained by contacting the Trust
at 888-CUTLER4. Generally, all contributions and investment earnings in an IRA
will be tax-deferred until withdrawn. In the case of a Roth IRA, if certain
requirements are met, investment earnings will not be taxed even when withdrawn.
Individuals may make IRA contributions of up to a maximum of $2,000 annually.
Only contributions to Traditional IRAs may be tax-deductible. However, the
deduction will be reduced if the individual or, in the case of a married
individual, either the individual or the individual's spouse is an active
participant in an employer-sponsored retirement plan and has adjusted gross
income above certain levels. The ability of an individual to make contributions
to a Roth IRA is restricted if the individual (or, the individual and spouse, if
married) has adjusted gross income above certain levels.
The foregoing discussion regarding IRAs is based on regulations in effect
as of January 1, 1998 and summarizes only some of the important Federal tax
considerations generally affecting IRA contributions made by individuals or
their employers. It is not intended as a substitute for tax planning. Investors
should consult their tax advisors with respect to their specific tax situations
as well as with respect to state and local taxes.
DETERMINATION OF NET ASSET VALUE
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 (normally 4:00 P.M.,
Eastern Time) on each Fund Business Day by dividing the value of
12
<PAGE>
PURCHASES AND REDEMPTIONS OF SHARES (Continued)
================================================================================
the Fund's net assets (the value of its portfolio securities and other assets
less its liabilities) by the number of the Fund's shares outstanding at the time
the determination is made. Securities owned by a Fund for which market
quotations are readily available are valued at current market value, or, in
their absence, at fair value as determined by the Board.
DIVIDENDS AND TAX MATTERS
================================================================================
DIVIDENDS
Dividends of each Fund's net investment income are declared and paid
quarterly. Distributions of capital gain, if any, realized by each Fund are made
annually. Fund shares become entitled to receive dividends and distributions on
the day the shares are issued. Shares redeemed are not entitled to receive
dividends or distributions declared after the day on which the redemption
becomes effective. Shareholders may choose either to have dividends and
distributions reinvested in shares of the Fund or received in cash. All
dividends and distributions are treated in the same manner for Federal income
tax purposes whether received in cash or reinvested in shares of the Fund.
If reinvested, income dividends generally are invested at a Fund's net
asset value as of the last day of the quarter with respect to which the
dividends are paid. Capital gain distributions are reinvested at the net asset
value of a Fund on the payment date for the distribution. Unless a shareholder
elects otherwise, all dividends and distributions are reinvested.
TAXES
Dividends paid by a Fund out of its net investment income and any realized
net short-term capital gain are taxable to shareholders as ordinary income.
Distributions by a Fund of net capital gain which the Fund designates as
"capital gain dividends" are taxable to shareholders as long-term capital gain,
regardless of the length of time the shareholder may have held his shares in the
Fund. If Fund shares are sold at a loss after being held for six months or less,
the loss will be treated as long-term capital loss to the extent of any capital
gain distribution received on those shares.
Any dividend or distribution from a Fund received by a shareholder reduces
the net asset value of the shareholder's shares by the amount of the dividend or
distribution. To the extent that the income or gain comprising a dividend or
distribution was accrued by a Fund before the shareholder purchased the shares,
the dividend or distribution would be in effect a return of capital to that
shareholder. All dividends and distributions (including those that operate as a
return of capital), however, are taxable as described above to the shareholder
receiving them regardless of the length of time the shareholder may have held
the shares prior to the dividend or distribution.
It is expected that a portion of each Fund's dividends to shareholders will
qualify for the dividends received deduction for corporations.
Upon a sale or other disposition of Fund shares, a shareholder may realize
a capital gain or loss which may be long-term or short-term, depending on the
shareholder's holding period for the shares.
Each Fund may be required by Federal law to withhold 31% of reportable
payments (which may include dividends, capital gain distributions and redemption
proceeds) paid to individuals and certain other non-corporate shareholders.
Withholding is not required if a shareholder certifies that the shareholder's
social security or tax identification number provided to a Fund is correct and
that the shareholder is not subject to backup withholding for prior
under-reporting to the Internal Revenue Service.
Reports containing appropriate information with respect to the Federal
income tax status of dividends and
13
<PAGE>
DIVIDENDS AND TAX MATTERS (Continued)
================================================================================
distributions paid during the year by the Funds will be mailed to shareholders
shortly after the close of each year. The foregoing is only a summary of some of
the important Federal tax considerations generally affecting the Funds and their
shareholders. There may be other Federal, state or local tax considerations
applicable to a particular investor. Prospective investors are urged to consult
their tax advisers.
PERFORMANCE INFORMATION
================================================================================
The Funds may quote their performance in advertising in terms of yield or
total return. Both types are based on historical results and are not intended to
indicate future performance. A Fund's yield is a way of showing the rate of
income earned by the Fund as a percentage of the Fund's share price. Yield is
calculated by dividing the net investment income of a Fund for a stated period
by the average number of shares entitled to receive dividends and expressing the
result as an annualized percentage rate based on the Fund's share price at the
end of the period. Total return refers to the average annual compounded rates of
return over some representative period that would equate an initial amount
invested at the beginning of a stated period to the ending redeemable value of
the investment, after giving effect to the reinvestment of all dividends and
distributions and deductions of expenses, if any, during the period. Because
average annual returns tend to smooth out variations in a Fund's returns,
shareholders should recognize that they are not the same as actual year-by-year
results.
The Funds' advertisements may refer to ratings and rankings among similar
funds by independent evaluators such as Lipper Analytical Services, Inc.,
CDA/Wiesenberger or Morningstar. In addition, the performance of a Fund may be
compared to recognized indices of market performance. The comparative material
found in the Funds' advertisements, sales literature or reports to shareholders
may contain performance ratings. These are not to be considered representative
or indicative of future performance.
THE TRUST AND ITS SHARES
================================================================================
The Trust was organized as a Delaware business trust on October 2, 1992.
The trustees of the Trust have the authority to issue an unlimited number of
shares of beneficial interest of separate series, with no par value per share.
Except for the Funds, no other series of shares are currently authorized. The
Board may, without shareholder approval, issue the shares in an unlimited number
of separate series and may in the future divide existing series into two or more
classes.
Shares issued by the Trust have no conversion, subscription or preemptive
rights. Shareholders of a Fund have equal and exclusive rights to dividends and
distributions declared by that Fund and to the net assets of that Fund upon
liquidation or dissolution. Voting rights are not cumulative and the shares of
each series (the Funds) of the Trust will be voted separately except when an
aggregate vote is required by law. The Trust does not hold annual meetings of
shareholders, and it is anticipated that shareholder meetings will be held only
when specifically required by law. Shareholders have available certain
procedures for the removal of trustees. The Trust will call a shareholder
meeting for the purpose of removing a trustee when 10% of the outstanding shares
call for a meeting and will assist in certain shareholder communications.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, THE STATEMENT OF
ADDITIONAL INFORMATION AND THE FUNDS' OFFICIAL SALES LITERATURE IN CONNECTION
WITH THE OFFERING OF THE FUNDS' SHARES, AND IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
TRUST. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER IN ANY STATE IN WHICH, OR TO
ANY PERSON TO WHOM, SUCH OFFER MAY NOT LAWFULLY BE MADE.
14
<PAGE>
INVESTMENT ADVISER:
Cutler & Company, LLC
503 Airport Road
Medford, Oregon 97504
(541) 770-9000
(800) 228-8537
ADMINISTRATOR:
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
(800) 237-3113
DISTRIBUTOR:
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
(800) 237-3113
SHAREHOLDER ACCOUNT INFORMATION:
Forum Financial Corp.
Two Portland Square
Portland, Maine 04101
Toll free (888) CUTLER4
THE
CUTLER
TRUST
PROSPECTUS
October 30,1998
CUTLER EQUITY
INCOME FUND
CUTLER APPROVED
LIST EQUITY FUND
<PAGE>
THE CUTLER TRUST
CUTLER EQUITY INCOME FUND
CUTLER APPROVED LIST EQUITY FUND
<TABLE>
<CAPTION>
<S><C> <C> <C> <C>
INVESTMENT ADVISER: ADMINISTRATOR: DISTRIBUTOR: SHAREHOLDER ACCOUNT
Cutler & Company, LLC Forum Administrative Forum Financial Services, INFORMATION:
503 Airport Road Services, LLCSM Inc.(R) Forum Shareholder Services, LLCSM
Medford, Oregon 97504 Two Portland Square Two Portland Square Two Portland Square
(541) 770-9000 Portland, Maine 04101 Portland, Maine 04101 Portland, Maine 04101
(800) 228-8537 (800) 237-3113 (800) 237-3113 Toll free (888) CUTLER4
</TABLE>
- --------------------------------------------------------------------------------
STATEMENT OF ADDITIONAL INFORMATION
October 30, 1998
This Statement of Additional Information supplements the Prospectus offering
shares of the Cutler Equity Income Fund and the Cutler Approved List Equity Fund
(each a "Fund" and collectively the "Funds"), two portfolios of The Cutler Trust
(the "Trust"), and should be read only in conjunction with the applicable
Prospectus, a copy of which may be obtained by an investor without charge by
contacting the Trust's Shareholder Servicing Agent at the address listed above.
TABLE OF CONTENTS
Page
1. Investment Policies..................................................2
2. Investment Limitations...............................................2
3. Management of the Trust..............................................3
Cutler & Company
Administrator and Distributor
Transfer Agent and Fund Accountant
Custodian and Auditor
Expenses
4. Determination of Net Asset Value.....................................8
5. Portfolio Transactions...............................................8
6. Additional Purchase and Redemption Information.......................9
Exchanges Between Funds
Additional Redemption Matters
7. Taxation.............................................................11
8. The Trust and its Shareholders.......................................11
9. Performance Data.....................................................12
Yield Calculations
Total Return Calculations
10. Financial Statements.................................................14
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY A
CURRENT PROSPECTUS.
<PAGE>
1. INVESTMENT POLICIES
Except for cash balances, the Cutler Equity Income Fund and the Cutler Approved
List Equity Fund invest in securities on the Cutler & Company Approved List (the
"Approved List"). Each Fund may invest in shares of other investment companies
to the extent permitted under the Investment Company Act of 1940 (the "1940
Act"), in which case a Fund would bear its pro rata portion of the other
investment company's expenses.
As a fundamental policy of each Fund, no portfolio transactions may be executed
with Cutler & Company or any of its affiliates. See "Portfolio Transactions."
2. INVESTMENT LIMITATIONS
Each Fund has adopted the following fundamental investment limitations. These
limitations, along with any investment policies deemed to be fundamental, cannot
be changed without the affirmative vote of the lesser of (1) more than 50% of
the outstanding shares of the Fund or (2) 67% of the shares of the Fund present
or represented at a shareholders meeting at which the holders of more than 50%
of the outstanding shares of the Fund are present or represented. Each Fund may
not:
(1) With respect to 75% of its assets, purchase a security other than an
obligation issued or guaranteed as to principal and interest by the United
States Government, its agencies or instrumentalities ("U.S. Government
Securities") if, as a result, more than 5% of the Fund's total assets
would be invested in the securities of a single issuer.
(2) Purchase a security other than a U.S. Government Security if, immediately
after the purchase, more than 25% of the value of the Fund's total assets
would be invested in the securities of issuers having their principal
business activities in the same industry.
(3) Underwrite securities of other issuers, except to the extent that the Fund
may be considered to be acting as an underwriter in connection with the
disposition of portfolio securities.
(4) Purchase or sell real estate or any interest therein, except that the Fund
may invest in debt obligations secured by real estate or interests therein
or issued by companies that invest in real estate or interests therein.
(5) Purchase or sell physical commodities or contracts relating to physical
commodities; borrow money; invest in the securities of foreign issuers or
purchase securities through a foreign market; purchase or write options or
invest in futures contracts; or purchase securities on margin or make
short sales of securities, except for the use of short-term credit
necessary for the clearance of purchases and sales of portfolio
securities.
(6) Issue senior securities except as appropriate to evidence indebtedness
that the Fund may be permitted to incur, and provided that the Fund may
issue shares of series or classes that the Board of Trustees (the "Board")
may establish.
(7) Enter into repurchase agreements, lend securities or otherwise make loans;
except through the purchase of debt securities that may be purchased by
the Fund.
Each Fund has adopted the following nonfundamental investment limitations that
may be changed by the Board without shareholder approval. Each Fund may not:
(a) Invest in securities (other than fully-collateralized debt obligations)
issued by companies that have conducted continuous operations for less
than three years, including the operations of predecessors (unless
guaranteed as to principal and interest by an issuer in whose securities
the Fund could invest) if, as a result, more than 5% of the value of the
Fund's total assets would be so invested.
(b) Invest in or hold securities of any issuer other than the Fund if, to the
Fund's knowledge, those Trustees and officers of the Trust or the Fund's
investment adviser, individually owning beneficially more than 1/2 of 1%
of the securities of the issuer, in the aggregate own more than 5% of the
issuer's securities.
2
<PAGE>
(c) Invest in oil, gas or other mineral exploration or development programs,
or leases, or in real estate limited partnerships; provided that the Fund
may invest in securities issued by companies engaged in such activities.
(d) Acquire securities that are not readily marketable ("illiquid") or are
subject to restrictions on the sale of such securities to the public
without registration under the Securities Act of 1933.
Except as required by the 1940 Act, if a percentage restriction on investment or
utilization of assets is adhered to at the time an investment is made, a later
change in percentage resulting from a change in the market values of the Fund's
assets, the change in status of a security or purchases and redemptions of
shares will not be considered a violation of the limitation.
3. MANAGEMENT OF THE TRUST
The Trustees and officers of the Trust and their principal occupations during
the past five years are set forth below.
* BROOKE C. ASHLAND, Trustee (age 47)
Ms. Ashland is currently Chief Executive Officer and Manager of Cutler
& Company, LLC. Prior thereto she was President, Trustee Investment
Services, Inc. (financial services marketing firm) 1990-1994. Ms.
Ashland has been associated with Cutler & Company since 1977 in
various capacities such as Assistant to the Chairman, CFO and
Secretary. Her address is 503 Airport Road, Medford, Oregon 97504.
* KENNETH R. CUTLER, Trustee, Chairman of the Board and Vice President (age 78)
Principal Portfolio Manager of the Funds and Investment Committee
Member, Cutler & Company, LLC (registered investment adviser). His
address is 503 Airport Road, Medford, Oregon 97504.
* JOHN Y. KEFFER, Trustee and President (age 56)
John Y. Keffer is the sole shareholder (directly and indirectly) and
director of Forum Financial Group, LLC, which owns (directly or
indirectly) Forum Financial Services, Inc. (registered broker-dealer),
Forum Shareholder Services, LLC (registered transfer agent), Forum
Accounting Services, LLC (registered fund accountant), and Forum
Investment Advisors, LLCSM (registered investment adviser). Mr. Keffer
is also a director and/or officer of various registered investment
companies for which Forum Administrative Services, LLC serves as
manager or administrator. His address is Two Portland Square,
Portland, Maine 04101.
DR. HATTEN S. YODER, JR., Trustee (age 77)
Director Emeritus, Geophysical Laboratory, Carnegie Institution of
Washington and consultant to the Los Alamos National Laboratory. Dr.
Yoder has been a director of the Geophysical Laboratory and consultant
to the Los Alamos National Laboratory since 1971. His address is 6709
Melody Lane, Bethesda, Maryland 20817.
ROBERT B. WATTS, JR., Trustee (age 67)
Counsel, Northhaven Associates (private legal practice) since 1990.
His address is 2230 Brownsboro Highway Eagle Point, Oregon 97524.
CAROL FISCHER, Vice President, Assistant Secretary and Assistant Treasurer
(age 42).
Chief Operating Officer of Cutler & Company, LLC (registered
investment adviser). Prior thereto, Ms. Fischer was associated with
Cutler & Company in various capacities. Her address is 503 Airport
Road, Medford, Oregon 97504.
STEPHEN J. BARRETT, Vice President (age 31)
Manager of Client Services, Forum Financial Services, Inc., with which
he has been associated since September 1996. Prior to joining Forum,
3
<PAGE>
Mr. Barrett spent two and a half years at Fidelity Investments where
he served as a Senior Product Manager. Prior to that, he was a
Securities Analyst for two and a half years with Bingham, Dana & Gould
in Boston, Massachusetts. Mr. Barrett also is an officer of various
registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. His address is Two Portland Square,
Portland, Maine 04101.
D. BLAINE RIGGLE, Secretary (age 31)
Assistant Counsel, Forum Financial Services, Inc., with which he has
been associated since 1998. Prior thereto, Mr. Riggle was Associate
Counsel for Wright Express Corporation from 1997 to 1998 and for three
years thereto was an associate with the law firm of Friedman, Babcock
& Gaythwaite in Portland, Maine. Mr. Riggle also is an officer of
various registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. His address is Two Portland Square,
Portland, Maine 04101.
SARA M. MORRIS, Treasurer (age 35)
Managing Director, Forum Financial Services, Inc., with which she has
been associated since 1994. Prior thereto, from 1991 to 1994, Ms.
Morris was Controller of Wright Express Corporation and for six years
prior thereto was employed at Deloitte & Touche LLP as an accountant.
Ms. Morris is also an officer of various registered investment
companies for which Forum Administrative Services, LLC or Forum
Financial Services, Inc. serves as manager, administrator and/or
distributor. Her address is Two Portland Square, Portland, Maine
04101.
DAWN TAYLOR, Assistant Treasurer (age 34)
Tax Manager, Forum Financial Services, Inc., with which she has been
associated since 1994. Prior thereto, from 1986-1994, Ms. Taylor was a
Tax Consultant for The New England Mutual Life Insurance Company,
Boston, Massachusetts. Ms. Taylor is also an officer of various
registered investment companies for which Forum Administrative
Services, LLC or Forum Financial Services, Inc. serves as manager,
administrator and/or distributor. Her address is Two Portland Square,
Portland, Maine 04101.
MARCELLA A. COTE, Assistant Secretary (age 51)
Fund Administrator, Forum Financial Services, Inc., with which she has
been associated since 1998. Prior thereto, from 1997 to 1998, Ms. Cote
was a budget analyst for the Maine Automated Child Welfare Information
System, a federally funded project of the Maine Department of Human
Services. From 1991 to 1997, Ms. Cote acted as staff to the Maine
Inter-departmental Committee on Transition. Ms. Cote is also an
officer of various registered investment companies for which Forum
Administrative Services, LLC or Forum Financial Services, Inc. serves
as manager, administrator and/or distributor. Her address is Two
Portland Square, Portland, Maine 04101.
* John Y. Keffer, Brooke C. Ashland and Kenneth R. Cutler are interested persons
of the Trust as that term is defined in the 1940 Act. Kenneth R. Cutler is
Brooke C. Ashland's father.
For the fiscal year ended June 30, 1998, the aggregate compensation paid to the
Trustees of the Trust by the Funds is as follows: Dr. Hatten S. Yoder, Jr., $10,
684.18; Mr. Robert B. Watts, Jr., $12,897.51. Messrs. Cutler, Keffer and Ms.
Ashland received no compensation for their services as a Trustee for the past
year and no officer of the Trust is compensated by the Trust. Non-interested
Trustees are reimbursed for travel and related expenses incurred in attending
meetings of the Board.
4
<PAGE>
CUTLER & COMPANY
Under an Investment Advisory Agreement with the Trust (the "Agreement"), Cutler
& Company furnishes at its own expense all services, facilities and personnel
necessary in connection with managing each Fund's investments and effecting
portfolio transactions for each Fund.
The Agreement provides for an initial term of twelve months from its effective
date with respect to a Fund and for its continuance in effect for successive
twelve-month periods thereafter, provided the Agreement is specifically approved
at least annually by the Board or by vote of the shareholders, and in either
case, by a majority of the Trustees who are not parties to the Agreement or
interested persons of any such party at a meeting called for the purpose of
voting on the Agreement. The Agreement is terminable without penalty by the
Trust with respect to a Fund on 60 days' written notice when authorized either
by vote of the Fund's shareholders or by a vote of a majority of the Board, or
by Cutler & Company on 60 days' written notice, and will automatically terminate
in the event of its assignment. The Agreement also provides that, with respect
to each Fund, Cutler & Company shall not be liable for any error of judgment or
mistake of law or for any act or omission in the performance of its duties to
the Fund, except for willful misfeasance, bad faith or gross negligence in the
performance of its duties or by reason of reckless disregard of its obligations
and duties under the Agreement.
As compensation for the services rendered and related expenses borne by Cutler &
Company under the Investment Advisory Agreement, the Trust pays Cutler & Company
a fee, computed daily and payable monthly, equal to 0.75% per annum of each
Fund's average daily net assets. The following table shows the dollar amount of
fees payable under the Investment Advisory Agreements between Cutler & Company
and the Trust with respect to each Fund, the amount of fee that was waived by
Cutler & Company, if any, and the actual fee received by Cutler & Company. The
data are for the past three fiscal years.
<TABLE>
<S> <C> <C> <C>
Advisory Fee Advisory Fee Advisory Fee
Payable Waived Retained
------- ------ --------
CUTLER EQUITY INCOME FUND
Year Ended June 30, 1998 $520,630 $0 $520,630
Year Ended June 30, 1997 385,655 0 385,655
Year Ended June 30, 1996 244,542 0 244,542
CUTLER APPROVED LIST EQUITY FUND
Year Ended June 30, 1998 $279,760 $0 $279,760
Year Ended June 30, 1997 230,877 0 230,877
Year Ended June 30, 1996 147,509 4,351 143,158
</TABLE>
ADMINISTRATOR AND DISTRIBUTOR
Forum Administrative Services, LLC ("FAdS") supervises the overall management of
the Trust (which includes, among other responsibilities, monitoring of
performance and billing of the transfer agent and custodian and arranging for
maintenance of books and records of the Trust), and provides the Trust with
general office facilities pursuant to a Management Agreement with the Trust. The
Management Agreement provides for an initial term of twelve months from its
effective date with respect to a Fund and for its automatic renewal each year
thereafter for an additional term of one year.
The Management Agreement terminates automatically if it is assigned and may be
terminated without penalty with respect to any Fund by vote of that Fund's
shareholders or by either party on not more than 60 days'
5
<PAGE>
written notice. The Management Agreement also provides that FAdS shall not be
liable for any error of judgment or mistake of law or for any act or omission in
the administration or management of the Trust, except for willful misfeasance,
bad faith or gross negligence in the performance of FAdS' duties or by reason of
reckless disregard of its obligations and duties under the Management Agreement.
At the request of the Board, FAdS provides persons satisfactory to the Board to
serve as officers of the Trust. Those officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
FAdS, Cutler & Company or their affiliates.
For its services under the Management Agreement, FAdS receives with respect to
each Fund an annual fee, computed daily and payable monthly, equal to 0.10% of
the average daily net assets of each Fund. The following table shows the dollar
amount of fees payable under the Management Agreements between FAdS and the
Trust with respect to each Fund.
Management Fee
Payable
-------
CUTLER EQUITY INCOME FUND
Year Ended June 30, 1998 $69,417
Year Ended June 30, 1997 51,421
Year Ended June 30, 1996 45,027
CUTLER APPROVED LIST EQUITY FUND
Year Ended June 30, 1998 $37,301
Year Ended June 30, 1997 30,783
Year Ended June 30, 1996 26,997
Forum Financial Services, Inc. ("FFSI") is the Trust's distributor and acts as
the agent of the Trust in connection with the offering of shares of the Funds
pursuant to a separate Distribution Agreement. The Distribution Agreement
provides for an initial term of twelve months from its effective date and for
its continuance in effect for successive twelve-month periods thereafter,
provided the agreement is specifically approved at least annually by the Board
or by vote of the shareholders, and in either case, by a majority of the
Trustees who are not parties to the Distribution Agreement or interested persons
of any such party at a meeting called for the purpose of voting on the
Distribution Agreement. All subscriptions for Shares obtained by Forum are
directed to the Trust for acceptance and are not binding on the Trust until
accepted by it. FFSI receives no compensation or reimbursement of expenses for
the distribution services provided pursuant to the Distribution Agreement.
The Distribution Agreement provides that FFSI shall not be liable for any error
of judgment or mistake of law or for any act or omission in the administration
or management of the Trust, except for willful misfeasance, bad faith or gross
negligence in the performance of FFSI's duties or by reason of reckless
disregard of its obligations and duties under the Distribution Agreement. The
Distribution Agreement also provides for certain indemnification of FFSI.
The Distribution Agreement is terminable with respect to a Fund without penalty
by the Trust on 60 days' written notice when authorized either by vote of the
Fund's shareholders or by a vote of a majority of the Board, or by FFSI on 60
days' written notice, and will automatically terminate in the event of its
assignment.
TRANSFER AGENT
Effective September 28, 1998, Forum Shareholder Services, LLC ("FSS") acts as
transfer agent and dividend disbursing agent for the Trust pursuant to a
Transfer Agency and Services Agreement. The Transfer Agency Agreement provides
for an initial term of twelve months from its effective date with respect to a
Fund and for its automatic renewal for successive twelve month periods
thereafter. Cutler & Company may act as a sub-
6
<PAGE>
transfer agent or processing agent. For its services, FSS is paid a fee at an
annual rate of $12,000 per year plus certain account charges and is reimbursed
for certain expenses incurred on behalf of the Funds. Prior to September 28,
1998, Forum Financial Corp. ("FFC") acted as transfer agent for the Trust
pursuant to a Transfer Agency and Services Agreement with the Trust.
The following table shows the dollar amount of fees payable under the Transfer
Agency and Services Agreement between FFC and the Trust with respect to each
Fund.
Transfer Agent Fee
Payable
-------
CUTLER EQUITY INCOME FUND
Year Ended June 30, 1998 $16,912
Year Ended June 30, 1997 15,479
Year Ended June 30, 1996 17,422
CUTLER APPROVED LIST EQUITY FUND
Year Ended June 30, 1998 $14,938
Year Ended June 30, 1997 14,317
Year Ended June 30, 1996 15,471
FUND ACCOUNTANT
Effective September 10, 1997, Forum Accounting Services, LLC ("FAcS") serves as
the fund accountant for the Trust pursuant to a Fund Accounting Agreement. 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.
Prior to September 10, 1997, FFC acted as fund accountant for the Trust pursuant
to a Fund Accounting Agreement with the Trust.
The following table shows the dollar amount of fees payable under the Fund
Accounting Agreements between FAcS, FFC and the Trust with respect to each Fund,
the amount of fee that was waived by FAcS and FCC, if any, and the actual fee
received by FAcS and FFC. The data are for the past three fiscal years.
<TABLE>
<S> <C> <C> <C>
Accounting Fee Accounting Fee Accounting Fee
Payable Waived Retained
------- ------ --------
CUTLER EQUITY INCOME FUND
Year Ended June 30, 1998 $39,000 $0 $39,000
Year Ended June 30, 1997 37,000 0 37,000
Year Ended June 30, 1996 37,000 0 37,000
CUTLER APPROVED LIST EQUITY FUND
Year Ended June 30, 1998 $39,000 $0 $39,000
Year Ended June 30, 1997 44,000 0 44,000
Year Ended June 30, 1996 48,000 12,000 36,000
</TABLE>
CUSTODIAN AND AUDITOR
Pursuant to a Custodian Agreement with the Trust, Investors Bank & Trust
Company, 200 Clarendon Street, Boston, Massachusetts 02116, acts as the
custodian of the Trust's assets. The custodian's responsibilities include
safeguarding and controlling the Funds' cash and securities, determining income
and collecting
7
<PAGE>
interest on the Funds' investments. Prior to October 1, 1998, BankBoston, 100
Federal Street, Boston, Massachusetts 02106 acted as custodian of the Trust's
assets.
Deloitte & Touche LLP, 125 Summer Street, Boston, Massachusetts 02110,
independent auditors, has been chosen by the Board to act as auditor for the
Trust.
EXPENSES
Each Fund's expenses comprise Trust expenses attributable to the Fund that are
allocated to the Fund, and those not attributable to a particular Fund that are
allocated among the Funds in proportion to their average net assets. Cutler &
Company voluntarily agreed to waive its fees or reimburse each Fund to the
extent a Fund's total expenses exceed the amounts indicated in the Prospectus
until June 30, 1999. This voluntary limit may be discontinued at any time after
that date. Any waivers or reimbursements have the effect of increasing the
Funds' yield and may not be recouped at a later date.
Subject to any fee waiver or expense reimbursement arrangements, the Trust pays
all of its expenses, including: interest charges, taxes, brokerage fees and
commissions; expenses of issue, repurchase and redemption of shares; premiums of
insurance for the Trust, its Trustees and officers and fidelity bond premiums;
applicable fees, interest charges and expenses of third parties, including
Cutler & Company, Forum, FFC, FSS, the Trust's custodian and shareholder
servicing agents; fees of pricing, interest, dividend, credit and other
reporting services; costs of membership in trade associations;
telecommunications expenses; funds transmission expenses; auditing, legal and
compliance expenses; costs of forming the Trust and maintaining its existence;
costs of preparing and printing the Trust's prospectuses, statements of
additional information and shareholder reports and delivering them to existing
shareholders; expenses of meetings of shareholders and proxy solicitations
therefor; costs of maintaining books and accounts and preparing tax returns;
costs of reproduction, stationery and supplies; fees and expenses of the Trust's
Trustees; compensation of the Trust's officers and employees who are not
officers of Cutler & Company, Forum or their respective affiliates; costs of
other personnel who may be employees of Cutler & Company, Forum or their
respective affiliates performing services for the Trust; costs of Trustee
meetings; Securities and Exchange Commission registration fees and related
expenses; and state or foreign securities laws registration fees and related
expenses.
4. DETERMINATION OF NET ASSET VALUE
The Trust does not determine net asset value on the following holidays: New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving and Christmas. Purchases and
redemptions are effected as of the next determined net asset value following the
receipt of any purchase or redemption order.
In determining the approximate market value of portfolio investments, the Funds
may employ outside organizations, which may use a matrix or formula method that
takes into consideration market indices, matrices, yield curves and other
specific adjustments. This may result in the securities being valued at a price
different from the price that would have been determined had the matrix or
formula method not been used. All cash, receivables and current payables are
carried at their face value.
5. PORTFOLIO TRANSACTIONS
The Funds will effect purchases and sales through brokers who charge
commissions. Allocations of transactions to brokers and the frequency of
transactions are determined by Cutler & Company in its best judgment and in a
manner deemed to be in the best interest of shareholders of the Funds rather
than by any formula. The primary consideration is prompt execution of orders in
an effective manner and at the most favorable price available to the Funds. No
portfolio transactions are executed with Cutler & Company or any of its
affiliates.
Any Fund may not always pay the lowest commission or spread available. Rather,
in determining the amount of commission, including certain dealer spreads, paid
in connection with Fund transactions, Cutler &
8
<PAGE>
Company takes into account such factors as size of the order, difficulty of
execution, efficiency of the executing broker's facilities (including the
services described below) and any risk assumed by the executing broker. Cutler &
Company may also take into account payments made by brokers effecting
transactions for the Fund (1) to the Fund or (2) to other persons on behalf of
the Fund for services provided to it for which it would be obligated to pay.
Consistent with section 28(e) of the Securities and Exchange Act of 1934, the
exercise of Cutler & Company's fiduciary duties under its Investment Advisory
agreement with the Trust, and any other applicable law, Cutler & Company may
allocate brokerage on behalf of the Trust to brokers who provide research
services and may cause the Fund to pay these brokers a higher amount of
commission than may be charged by other brokers. Such research and analysis may
be used by Cutler & Company in connection with services to clients other than
the Fund, and Cutler & Company's fee is not reduced by reason of Cutler &
Company's receipt of the research services.
Investment decisions for each Fund will be made independently from those for any
other account (including another Fund) that is or may in the future become
managed by Cutler & Company or its affiliates. When a Fund and other accounts
managed by Cutler & Company are contemporaneously engaged in the purchase or
sale of the same security, however, the transactions may be averaged as to price
and allocated equitably to each account. In some cases, this policy might
adversely affect the price paid or received by a Fund or the size of the
position obtainable for the Fund. In addition, when purchases or sales of the
same security for a Fund and for other accounts managed by Cutler & Company
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantages available to large denomination purchases or
sales.
The following table shows the aggregate brokerage commissions with respect to
each Fund. The data are for the past three fiscal years.
Aggregate
Commissions Paid
----------------
CUTLER EQUITY INCOME FUND
Year Ended June 30, 1998 $124,242
Year Ended June 30, 1997 25,417
Year Ended June 30, 1996 47,307
CUTLER APPROVED LIST EQUITY FUND
Year Ended June 30, 1998 $38,272
Year Ended June 30, 1997 9,110
Year Ended June 30, 1996 7,501
The increase in the aggregate brokerage commissions paid during the fiscal year
ended June 30, 1998 was based upon the increase in the portfolio turnover rate
for both Funds. During the fiscal year ended June 30, 1998, the Cutler Approved
List Equity Fund and Cutler Equity Income Fund acquired securities of its
regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or
their parents; the value of the aggregate holdings were as follows: $774,900 and
$2,767,500, respectively, in Merrill Lynch & Company, Inc.
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Shares of each Fund are sold on a continuous basis by the distributor at net
asset value without any sales charge. Shareholders may effect purchases or
redemptions or request any shareholder privilege in person at FSS's offices
located at Two Portland Square, Portland, Maine 04101.
9
<PAGE>
EXCHANGES BETWEEN FUNDS
Shareholders of a Fund may exchange their shares for shares of the other Fund or
for shares of the Daily Assets Government Fund, a money market fund managed by
FAdS and a separate series of Forum Funds(R), or the Investors Bond Fund, also a
separate series of Forum Funds managed by FAdS. Exchange transactions will be
made on the basis of relative net asset value per share at the time of the
exchange transaction. For Federal tax purposes, exchange transactions are
treated as sales on which a purchaser will realize a capital gain or loss
depending on whether the value of the shares redeemed is more or less than his
basis in such shares at the time of the transaction.
Proceeds of an exchange transaction may be invested only in another Fund account
for which the share registration is the same as the account from which the
exchange is made. The terms of the exchange privilege are subject to change, and
the privilege may be terminated by any Fund or the Trust. However, the privilege
will not be terminated, and no material change that restricts the availability
of the privilege to shareholders will be implemented, without 60 days' notice to
shareholders, to the extent required by applicable regulation.
ADDITIONAL REDEMPTION MATTERS
Proceeds of redemptions normally are paid in cash. However, payments may be made
wholly or partly in portfolio securities if the Board of Trustees determines
economic conditions exist which would make payment in cash detrimental to the
best interests of the Fund. If payment for shares redeemed is made wholly or
partly in portfolio securities, brokerage costs may be incurred by the
shareholder in converting the securities to cash. The Trust has filed an
election with the Securities and Exchange Commission pursuant to which each Fund
may only effect a redemption in portfolio securities if the particular
shareholder is redeeming more than $250,000 or 1% of the Fund's total net
assets, whichever is less, during any 90-day period.
In addition to the situations described in the Prospectus under "Purchases and
Redemptions of Shares," the Trust may redeem shares involuntarily to reimburse
each Fund for any loss sustained by reason of the failure of a shareholder to
make full payment for shares purchased by the shareholder or to collect any
charge relating to transactions effected for the benefit of a shareholder which
is applicable to the Fund's shares as provided in the Prospectus from time to
time.
Shareholders' rights of redemption may not be suspended, except (1) for any
period during which the New York Stock Exchange, Inc. is closed (other than
customary weekend and holiday closings) or during which the Securities and
Exchange Commission determines that trading thereon is restricted, (2) for any
period during which an emergency (as determined by the Securities and Exchange
Commission) exists as a result of which disposal by a Fund of its securities is
not reasonably practicable or as a result of which it is not reasonably
practicable for the Fund fairly to determine the value of its net assets, or (3)
for such other period as the Securities and Exchange Commission may by order
permit for the protection of the shareholders of the Fund.
Fund shares are normally issued for cash only. In Cutler & Company's discretion,
however, each Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. The Fund will
only accept securities that (1) are not restricted as to transfer either by law
or liquidity of market and (2) have a value which is readily ascertainable (and
not established only by valuation procedures).
10
<PAGE>
7. TAXATION
Qualification as a regulated investment company under the Internal Revenue Code
of 1986 does not involve governmental supervision of management or investment
practices or policies. Investors should consult their own counsel for a complete
understanding of the requirements the Funds must meet to qualify for such
treatment. The information set forth in the Prospectus and the following
discussion relate solely to Federal income taxes on dividends and distributions
by the Funds. Investors should consult their own counsel for further details and
for the application of state and local tax laws to the investor's particular
situation.
In order to qualify for treatment as a regulated investment company under the
Internal Revenue Code, each Fund must distribute to its shareholders for each
taxable year at least 90% of its investment company taxable income (which
includes dividends, interest and the excess of net short-term capital gain over
net long-term capital losses) and must meet several additional requirements.
Among these requirements are the following: (1) each Fund must derive at least
90% of its gross income each taxable year from dividends, interest, gains from
the sale or other disposition of securities and certain other income; (2) at the
close of each quarter of the Fund's taxable year, at least 50% of the value of
its total assets must be represented by cash and cash items, U.S. Government
Securities, securities of other regulated investment companies and other
securities, with these other securities limited, in respect of any one issuer,
to an amount that does not exceed 5% of the value of the Fund's total assets or
10% of the outstanding voting securities of the issuer; and (3) at the close of
each quarter of the Fund's taxable year, not more than 25% of the value of its
total assets may be invested in securities (other than U.S. Government
Securities or securities of other regulated investment companies) of any one
issuer.
8. THE TRUST AND ITS SHAREHOLDERS
The Trust is a business trust organized under Delaware law. Delaware law
provides that shareholders shall be entitled to the same limitations of personal
liability extended to stockholders of private corporations for profit. The
courts of some states, however, may decline to apply Delaware law on this point.
The Trust Instrument contains an express disclaimer of shareholder liability for
the debts, liabilities, obligations and expenses of the Trust and requires that
a disclaimer be given in each contract entered into or executed by the Trust or
the Trustees. The Trust Instrument provides for indemnification out of each
series' property of any shareholder or former shareholder held personally liable
for the obligations of the series. The Trust Instrument also provides that each
series shall, upon request, assume the defense of any claim made against any
shareholder for any act or obligation of the series and satisfy any judgment
thereon. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which Delaware law does not
apply, no contractual limitation of liability was in effect, and the portfolio
is unable to meet its obligations. The Trust believes that, in view of the
above, the risk of personal liability to shareholders is remote.
The Trust Instrument further provides that the Trustees shall not be liable to
any person other than the Trust or its shareholders; moreover, the Trustees
shall not be liable for any conduct whatsoever, provided that a Trustee is not
protected against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office.
Each series' capital consists of shares of beneficial interest. Shares are fully
paid and nonassessable, except as set forth above with respect to Trustee and
shareholder liability. Shareholders representing 10% or more of the Trust or a
series may, as set forth in the Trust Instrument, call meetings of the Trust or
series for any purpose related to the Trust or series, as the case may be,
including, in the case of a meeting of the entire Trust, the purpose of voting
on removal of one or more Trustees. The Trust or any series may be terminated
upon the sale of its assets to, or merger with, another open-end management
investment company or series thereof, or upon liquidation and distribution of
its assets. Generally such terminations must be approved by the vote of the
holders of a majority of the outstanding shares of the Trust or the series;
however, the Trustees may, without prior shareholder approval, change the form
of organization of the Trust by merger, consolidation or incorporation. If not
so terminated or reorganized, the Trust and its series will continue
indefinitely. Under the Trust, the Trustees may, without shareholder vote, cause
the Trust to merge or consolidate into one or more trusts, partnerships or
corporations or cause the Trust to be incorporated under
11
<PAGE>
Delaware law, so long as the surviving entity is an open-end management
investment company that will succeed to or assume the Trust's registration
statement.
Although each Fund is offering only its own shares, it is possible that a Fund
might become liable for any misstatement in the Prospectus of another Fund. The
Board has considered this factor in approving the use of a single combined
Prospectus.
As of October 1, 1998, the officers and trustees of the Trust owned as a group
less than 1% of the outstanding shares of each Fund. Also as of that date, the
following persons owned of record 5% or more of the outstanding shares of each
Fund:
<TABLE>
<CAPTION>
<S><C> <C>
CUTLER EQUITY INCOME FUND
- -------------------------
ENTERPRISE TRUST & INVESTMENT CO. TTEE THE KARL KIRCHGESSNER FOUNDATION
FBO BIG CREEK LUMBER PROFIT SHARING 1278 Glenneyre, Suite 311
3654 Highway 1 Laguna Beach, CA 92651
Davenport, CA 95014 6.46%
9.45%
CUTLER APPROVED LIST EQUITY FUND
- --------------------------------
THE KARL KIRCHGESSNER FOUNDATION LORRAINE Y. PERRIN TESTAMENTARY TRUST
1278 Glenneyre, Suite 311 500 Eastgate Lane
Laguna Beach, CA 92651 Santa Barbara, CA 93108
6.53% 6.39%
</TABLE>
9. PERFORMANCE DATA
Each Fund may quote performance in various ways. All performance information
supplied by a Fund in advertising is historical and is not intended to indicate
future returns. A Fund's net asset value, yield and total return fluctuate in
response to market conditions and other factors, and the value of Fund shares
when redeemed may be more or less than their original cost.
In performance advertising a Fund may compare any of its performance information
with data published by independent evaluators such as Lipper Analytical
Services, Inc., CDA/Wiesenberger or other companies that track the investment
performance of investment companies ("Fund Tracking Companies"). A Fund may also
compare any of its performance information with the performance of recognized
stock, bond and other indexes, including but not limited to the Standard &
Poor's 500 Composite Stock Price Index, the Dow Jones Industrial Average, U.S.
Treasury bonds, bills or notes, the Salomon Brothers Bond Index, the Shearson
Lehman Bond Index, and changes in the Consumer Price Index as published by the
U.S. Department of Commerce. A Fund may refer to general market performances
over past time periods such as those published by Ibbotson Associates. A Fund
may also refer in such materials to mutual fund performance rankings and other
data published by Fund Tracking Companies. Performance advertising may also
refer to discussions of a Fund and comparative mutual fund data and ratings
reported in independent periodicals, such as newspapers and financial magazines.
For the one year period ended June 30, 1998, the average annual total returns of
the Cutler Equity Income Fund and Cutler Approved List Equity Fund were 21.60%
and 24.90%, respectively. Since commencement of operations on December 30, 1992,
the average annual total returns of the Cutler Equity Income Fund and Cutler
Approved List Equity Fund were 17.40% and 17.94%, respectively.
YIELD CALCULATIONS
Yields for a Fund used in advertising are computed by dividing the Fund's
interest income for a given 30 days or one-month period, net of expenses, if
any, by the average number of shares entitled to receive distributions
12
<PAGE>
during the period, dividing this figure by the Fund's net asset value per share
at the end of the period and annualizing the result (assuming compounding of
income) in order to arrive at an annual percentage rate. Capital gain and loss
generally are excluded from these calculations.
Income calculated for the purpose of determining a Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a Fund may differ from the rate of
distribution the Fund paid over the same period or the rate of income reported
in the Fund's financial statements.
Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that a Fund's yield for any given
period is not an indication or representation by the Fund of future yields or
rates of return on the Fund's shares. The yields of the Funds are not fixed or
guaranteed, and an investment in the Funds is not insured or guaranteed.
Accordingly, yield information may not necessarily be used to compare shares of
the Funds with investment alternatives which, like money market instruments or
bank accounts, may provide a fixed rate of interest. Also, it may not be
appropriate to compare a Fund's yield information directly to similar
information regarding investment alternatives that are insured or guaranteed.
TOTAL RETURN CALCULATIONS
Each Fund may advertise its total return. Total returns quoted in advertising
reflect all aspects of a Fund's return, including the effect of reinvesting
dividends and capital gain distributions, and any change in the Fund's net asset
value per share over the period. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical historical
investment in a Fund over a stated period, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline in value had been constant over the period. Whereas average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that the performance is not constant over time but
changes from year to year, and that average annual returns represent averaged
figures as opposed to the actual year-to-year performance of a Fund. Average
annual total return is calculated by finding the average annual compounded rates
of return of a hypothetical investment over a given period according to the
following formula:
P(1+T)n = ERV, where:
P = a hypothetical initial payment of $1,000;
T = average annual total return;
n = number of years; and
ERV = ending redeemable value (ERV is the value, at the end of the
applicable period, of a hypothetical $1,000 payment made at the beginning
of the applicable period).
In addition to average annual returns, the Funds may quote unaveraged or
cumulative total returns reflecting the simple change in value of an investment
over a stated period. Total returns may be broken down into their components of
income and capital (including capital gain and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return.
Period total return is calculated according to the following formula:
PT = (ERV/P-1), where:
PT = period total return.
The other definitions are the same as in average annual total return above.
13
<PAGE>
10. FINANCIAL STATEMENTS
The financial statements of the Trust for its fiscal year ended June 30, 1998
(which include statements of assets and liabilities, statements of operations,
statements of changes in net assets, notes to financial statements, financial
highlights, statements of investments and the auditors' report thereon) are
included in the Annual Report to Shareholders of the Trust delivered along with
this Statement of Additional Information, and are incorporated herein by
reference.
14
