<PAGE>
SEMI-ANNUAL REPORT DECEMBER 31, 1998
- ------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
CUTLER EQUITY INCOME FUND Cutler & Company, LLC Forum Shareholder
CUTLER APPROVED LIST EQUITY FUND 503 Airport Road Services, LLC
Medford, Oregon 97504 Two Portland Square
Portland, Maine 04101
</TABLE>
- --------------------------------------------------------------------------------
To the Cutler Trust Shareholders:
We are pleased to present this semi-annual report, and our thoughts on the
performance of The Cutler Trust, for the six months ending December 31, 1998.
During the September quarter the general markets declined very sharply and in
the December quarter gained it all back. For the whole period the Equity Income
Fund gained 8.69% and the Approved List Equity Fund gained 4.47%. Our strong
performance in the Equity Income Fund came from our concentration in sectors,
which generally outperformed the market as a whole.*
The dynamic markets we are witnessing are creating several profound changes in
the investment landscape. The many European markets now are consolidated into a
single Euro currency denomination. A wave of substantial mergers internationally
is altering both trade and financial structures in major ways. Technology is
accelerating in myriad and pervasive ways, some glaringly public and others
hidden from view.
Last June we told you that Robert Lamberti, CFA, Senior Portfolio Manager in our
Pennsylvania office, would co-manage the "Approved List Equity Fund". During the
December quarter he took over as principal manager. Mr. Lamberti specializes in
Value analysis -- seeking those companies that represent the best current buys
available in the markets. Today, searching for undervalued companies requires
the use of technology and skilled technical analysis. To that end, we are
pleased to announce the addition of Michael Kijesky, Senior Investment Analyst.
Mike brings a strong academic background and great analytical muscle to the
portfolio team. We are excited about these additions and look forward to seeking
continued outstanding performance of your Funds.
On behalf of everyone at The Cutler Trust, we wish to thank you for your
continued loyalty and support.
<TABLE>
<S> <C>
/s/ Kenneth R. Cutler /s/ Brooke R. Ashland
Kenneth R. Cutler Brooke R. Ashland
Chairman of the Board Chief Executive Officer
The Cutler Trust Cutler & Company, LLC
</TABLE>
* Past performance is no guarantee of future results.
1
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK (78.5%)
BUSINESS SERVICES (4.6%)
34,000 Automatic Data Processing, Inc. $ 2,726,375
20,000 Electronic Data Systems Corp. 1,005,000
------------
3,731,375
------------
CHEMICALS (2.3%)
16,000 Clorox Co. 1,869,000
------------
COMMUNICATIONS EQUIPMENT (5.2%)
30,000 Lucent Technologies, Inc. 3,300,000
15,000 Motorola, Inc. 915,937
------------
4,215,937
------------
COMPUTER & OFFICE EQUIPMENT (1.2%)
15,000 Pitney Bowes, Inc. 990,937
------------
DRUGS & PHARMACEUTICALS (13.4%)
17,000 Bristol-Myers Squibb Co. 2,274,812
26,000 Pfizer, Inc. 3,261,375
66,000 Schering-Plough Corp. 3,646,500
23,000 Warner-Lambert Co. 1,729,312
------------
10,911,999
------------
DRUGSTORES (4.8%)
67,000 Walgreen Co. 3,923,688
------------
</TABLE>
See Notes to Financial Statements.
2
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
ELECTRIC MACHINERY (4.5%)
15,000 General Electric Co. $ 1,530,938
25,000 Texas Instruments, Inc. 2,139,063
------------
3,670,001
------------
GENERAL MERCHANDISE TRADE (5.0%)
50,000 Wal-Mart Stores, Inc. 4,071,875
------------
GLASS, OTHER BUILDING MATERIALS (1.9%)
35,000 Corning, Inc. 1,575,000
------------
GROCERY STORES (3.1%)
40,000 Albertson's, Inc. 2,547,500
------------
INSTRUMENTS & RELATED PRODUCTS (8.4%)
80,000 Becton, Dickinson & Co. 3,415,000
15,000 Eastman Kodak Co. 1,080,000
20,000 Xerox Corp. 2,360,000
------------
6,855,000
------------
PETROLEUM PRODUCTS (1.4%)
15,000 Exxon Corp. 1,096,875
------------
PROPERTY & CASUALTY INSURANCE (1.8%)
15,000 American International Group, Inc. 1,449,375
------------
RESTAURANTS (3.3%)
35,000 McDonald's Corp. 2,681,875
------------
</TABLE>
See Notes to Financial Statements.
3
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER EQUITY INCOME FUND
SCHEDULE OF INVESTMENTS (concluded)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
SECURITIES, BROKERS, DEALERS & ADVISORS (1.2%)
15,000 Merrill Lynch & Co., Inc. $ 1,001,250
------------
SOAPS (3.2%)
28,000 Colgate-Palmolive Co. 2,600,500
------------
TRANSPORTATION EQUIPMENT (1.5%)
11,000 United Technologies Corp. 1,196,250
------------
VOICE & DATA TRANSMISSION (11.7%)
30,000 AT&T Corp. 2,257,500
84,000 BellSouth Corp. 4,189,500
57,800 SBC Communications, Inc. 3,099,525
------------
9,546,525
------------
TOTAL COMMON STOCK (COST $45,891,950) 63,934,962
------------
U.S. GOVERNMENT OBLIGATIONS (14.7%)
12,000,000 U.S. Treasury Bill, 4.42% yield, 1/21/99 (cost
$11,970,284) 11,970,284
------------
SHORT TERM HOLDINGS (6.8%)
2,700,203 Dreyfus Government Cash Management Fund 2,700,203
1,817,670 Forum Daily Assets Cash Institutional Fund 1,817,670
1,062,510 Forum Daily Assets Government Fund 1,062,510
------------
TOTAL SHORT TERM HOLDINGS (COST $5,580,383) 5,580,383
------------
TOTAL INVESTMENTS (100.0%) (COST $63,442,617) $ 81,485,629
------------
------------
</TABLE>
See Notes to Financial Statements.
4
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK (93.4%)
BANKS (9.9%)
5,000 Banc One Corp. $ 255,312
29,400 BankAmerica Corp. 1,767,675
4,000 First Union Corp. 243,250
1,700 J.P. Morgan & Co., Inc. 178,606
3,100 State Street Corp. 215,644
5,500 Wachovia Corp. 480,906
22,500 Wells Fargo Co. 898,594
-----------
4,039,987
-----------
BUSINESS SERVICES (2.2%)
9,000 Automatic Data Processing, Inc. 721,687
4,000 Electronic Data Systems Corp. 201,000
-----------
922,687
-----------
CHEMICALS (6.6%)
5,500 Clorox Co. 642,469
3,000 Dow Chemical Co. 272,813
29,800 E.I. du Pont de Nemours & Co. 1,581,262
7,000 Rohm & Haas Co. 210,875
-----------
2,707,419
-----------
COMMUNICATIONS EQUIPMENT (4.2%)
12,000 Lucent Technologies, Inc. 1,320,000
6,500 Motorola, Inc. 396,906
-----------
1,716,906
-----------
COMPUTER & OFFICE EQUIPMENT (5.6%)
23,700 Hewlett-Packard Co. 1,619,006
10,000 Pitney Bowes, Inc. 660,625
-----------
2,279,631
-----------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
DRUGS & PHARMACEUTICALS (5.8%)
1,000 Abbott Laboratories $ 49,000
20,500 American Home Products Corp. 1,154,406
500 Bristol-Myers Squibb Co. 66,906
500 Eli Lilly & Co. 44,438
500 Johnson & Johnson 41,938
500 Merck & Co., Inc. 73,844
500 Pfizer, Inc. 62,719
1,000 Schering-Plough Corp. 55,250
11,000 Warner-Lambert Co. 827,062
-----------
2,375,563
-----------
DRUGSTORES (2.3%)
16,500 Walgreen Co. 966,281
-----------
DURABLE GOODS-WHOLESALE (0.3%)
3,000 W.W. Grainger, Inc. 124,875
-----------
ELECTRIC, GAS & UTILITY COMPANIES (2.1%)
6,500 Consolidated Natural Gas Co. 351,000
8,000 Duke Energy Corp. 512,500
-----------
863,500
-----------
ELECTRIC MACHINERY (4.4%)
12,300 Emerson Electric Co. 769,519
500 General Electric Co. 51,031
4,000 Rockwell International Corp. 194,250
9,000 Texas Instruments, Inc. 770,062
-----------
1,784,862
-----------
FABRICATED METAL PRODUCTS (1.3%)
5,000 Gillette Co. 241,562
5,000 Illinois Tool Works, Inc. 290,000
-----------
531,562
-----------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
FOOD & SOFT DRINKS (7.1%)
9,000 Archer Daniels Midland Co. $ 154,687
6,000 Bestfoods, Inc. 319,500
4,000 Campbell Soup Co. 220,000
4,000 Coca-Cola Co. 267,500
4,000 General Mills, Inc. 311,000
7,000 H.J. Heinz Co. 396,375
5,000 Hershey Foods Corp. 310,938
5,000 Kellogg Co. 170,625
8,000 PepsiCo, Inc. 327,500
14,600 Sara Lee Corp. 411,537
-----------
2,889,662
-----------
FOREST PRODUCTS (0.7%)
5,000 Kimberly-Clark Corp. 272,500
-----------
GENERAL MERCHANDISE TRADE (0.8%)
2,000 J.C. Penney Co., Inc. 93,750
3,000 May Department Stores Co. 181,125
500 Wal-Mart Stores, Inc. 40,719
-----------
315,594
-----------
GLASS, OTHER BUILDING MATERIALS (2.0%)
15,000 Corning, Inc. 675,000
2,500 PPG Industries, Inc. 145,625
-----------
820,625
-----------
GROCERY STORES (1.7%)
11,000 Albertson's, Inc. 700,563
-----------
HOLDING & OTHER INVESTMENTS (0.5%)
84 Berkshire Hathaway, Inc. - Class B(a) 197,400
-----------
INDUSTRIAL & COMMERCIAL MACHINERY (0.6%)
7,000 Dover Corp. 256,375
-----------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
INSTRUMENTS & RELATED PRODUCTS (5.3%)
20,000 Becton, Dickinson & Co. $ 853,750
7,000 Eastman Kodak Co. 504,000
2,000 Honeywell, Inc. 150,625
5,500 Xerox Corp. 649,000
-----------
2,157,375
-----------
INSURANCE AGENTS, BROKERS & SERVICES (0.4%)
3,000 Marsh & McLennan Cos., Inc 175,313
-----------
LIFE INSURANCE (0.3%)
2,000 Aon Corp. 110,750
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (0.4%)
4,000 Household International, Inc. 158,500
-----------
OIL & GAS EXTRACTION (4.1%)
25,600 Atlantic Richfield Co. 1,670,400
-----------
PETROLEUM PRODUCTS (4.5%)
21,200 Chevron Corp. 1,758,275
500 Exxon Corp. 36,563
500 Mobil Corp. 43,562
-----------
1,838,400
-----------
PRINTING & PUBLISHING (3.5%)
2,000 Dow Jones & Co., Inc. 96,250
3,000 Gannett Co., Inc. 198,563
3,000 Knight-Ridder, Inc. 153,375
5,500 McGraw-Hill Cos., Inc. 560,312
5,000 R.R. Donnelley & Sons Co. 219,063
3,000 Tribune Co. 198,000
-----------
1,425,563
-----------
</TABLE>
See Notes to Financial Statements.
8
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
PROPERTY & CASUALTY INSURANCE (2.8%)
20,300 Allstate Corp. $ 784,087
500 American International Group, Inc. 48,313
2,000 Chubb Corp. 129,750
6,000 St. Paul Cos., Inc. 208,500
-----------
1,170,650
-----------
RESTAURANTS (1.7%)
9,000 McDonald's Corp. 689,625
-----------
SECURITIES, BROKERS, DEALERS & ADVISORS (1.0%)
6,000 Merrill Lynch & Co., Inc. 400,500
-----------
SOAPS (1.8%)
5,000 Colgate-Palmolive Co. 464,375
3,000 Procter & Gamble Co. 273,938
-----------
738,313
-----------
SPECIALTY CHEMICAL PRODUCTS (0.4%)
2,500 Minnesota Mining & Manufacturing Co. 177,813
-----------
TRANSPORTATION EQUIPMENT (0.4%)
4,000 Boeing Co. 130,500
500 United Technologies Corp. 54,375
-----------
184,875
-----------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
CUTLER APPROVED LIST EQUITY FUND
SCHEDULE OF INVESTMENTS (concluded)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
VOICE & DATA TRANSMISSION (7.5%)
10,500 AT&T Corp. $ 790,125
12,600 Ameritech Corp. 798,525
1,000 Bell Atlantic Corp. 56,813
1,000 BellSouth Corp. 49,875
9,000 GTE Corp. 606,937
14,000 SBC Communications, Inc. 750,750
-----------
3,053,025
-----------
WHOLESALE TRADE-NONDURABLE GOODS (1.2%)
17,500 Sysco Corp. 480,156
-----------
TOTAL COMMON STOCK (COST $29,814,223) 38,197,250
-----------
SHORT TERM HOLDINGS (6.6%)
1,728,226 Forum Daily Assets Cash Institutional Fund 1,728,226
965,510 Forum Daily Assets Government Obligations Fund 965,510
-----------
TOTAL SHORT TERM HOLDINGS (COST $2,693,736) 2,693,736
-----------
TOTAL INVESTMENTS (100.0%) (COST $32,507,959) $40,890,986
-----------
-----------
</TABLE>
- ------------------------
(a) Non-income producing security.
See Notes to Financial Statements.
10
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
STATEMENTS OF ASSETS & LIABILITIES
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUTLER CUTLER
EQUITY APPROVED
INCOME LIST EQUITY
FUND FUND
---------------- ----------------
<S> <C> <C>
ASSETS:
Investments (Note 2)
Investments at cost $63,442,617 $32,507,959
Net unrealized appreciation 18,043,012 8,383,027
---------------- ----------------
Total investments at value 81,485,629 40,890,986
Interest, dividends and other receivables 73,889 55,216
Receivable for Fund shares sold 2,437 7,870
---------------- ----------------
Total Assets 81,561,955 40,954,072
---------------- ----------------
LIABILITIES:
Payable to administrator 6,615 3,393
Payable for Fund shares redeemed 1,039 2,827
Payable to investment adviser 49,612 25,451
Payable to other related parties 636 123
Accrued expenses and other liabilities 41,507 28,121
---------------- ----------------
Total Liabilities 99,409 59,915
---------------- ----------------
NET ASSETS $81,462,546 $40,894,157
---------------- ----------------
---------------- ----------------
COMPONENTS OF NET ASSETS:
Paid-in capital $62,334,732 $27,327,081
Undistributed net investment income 14,245 3,652
Net unrealized appreciation on investments 18,043,012 8,383,027
Accumulated net realized gain on investments 1,070,557 5,180,397
---------------- ----------------
NET ASSETS $81,462,546 $40,894,157
---------------- ----------------
---------------- ----------------
Shares of Beneficial Interest, No Par Value 5,487,856 2,429,212
NET ASSET VALUE, offering price and redemption
price per share $14.84 $16.83
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUTLER CUTLER
EQUITY APPROVED
INCOME LIST EQUITY
FUND FUND
---------------- ----------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income $347,331 $304,075
Interest income 363,005 50,981
---------------- ----------------
Total Investment Income 710,336 355,056
---------------- ----------------
EXPENSES:
Advisory fees (Note 3) 282,040 145,844
Management fees (Note 3) 37,605 19,446
Transfer agent fees (Note 3) 8,669 7,696
Shareholder services fees (Note 3) 2,487 394
Custodian fees 9,355 8,592
Accounting fee (Note 3) 20,000 19,000
Legal fees (Note 3) 3,090 1,585
Audit fee 8,796 8,304
Trustees fee 9,652 4,989
Miscellaneous 12,486 20,844
---------------- ----------------
Total Expenses 394,180 236,694
---------------- ----------------
NET INVESTMENT INCOME 316,156 118,362
---------------- ----------------
REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain on investments sold 2,140,561 7,506,222
Net change in unrealized appreciation (depreciation) on
investments 3,977,887 (5,937,533)
---------------- ----------------
NET GAIN ON INVESTMENTS 6,118,448 1,568,689
---------------- ----------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,434,604 $1,687,051
---------------- ----------------
---------------- ----------------
</TABLE>
See Notes to Financial Statements.
12
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CUTLER CUTLER
EQUITY APPROVED
INCOME LIST EQUITY
FUND FUND
--------------------------------- ---------------------------------
Six Months Year Six Months Year
Ended (unaudited) Ended Ended (unaudited) Ended
December 31, 1998 June 30, 1998 December 31, 1998 June 30, 1998
----------------- ------------- ----------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS -- BEGINNING OF PERIOD $ 77,482,327 $ 62,522,934 $41,085,239 $35,277,381
----------------- ------------- ----------------- -------------
OPERATIONS:
Net investment income 316,156 788,340 118,362 244,029
Net realized gain on investments sold 2,140,561 19,653,954 7,506,222 8,668,411
Net change in unrealized appreciation (depreciation) on
investments 3,977,887 (6,744,979) (5,937,533) (674,549)
----------------- ------------- ----------------- -------------
Net increase in net assets resulting from operations 6,434,604 13,697,315 1,687,051 8,237,891
----------------- ------------- ----------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (302,642) (802,587) (115,357) (246,131)
Net realized capital gain on investments (16,779,472) (5,707,467) (9,097,766) (2,695,053)
----------------- ------------- ----------------- -------------
Total distributions to shareholders (17,082,114) (6,510,054) (9,213,123) (2,941,184)
----------------- ------------- ----------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 4,635,895 14,469,495 2,091,270 3,823,631
Reinvestment of distributions 16,440,935 6,390,831 8,582,500 2,857,295
Redemption of shares (6,449,101) (13,088,194) (3,338,780) (6,169,775)
----------------- ------------- ----------------- -------------
Net increase from capital share transactions 14,627,729 7,772,132 7,334,990 511,151
----------------- ------------- ----------------- -------------
Net increase (decrease) in net assets 3,980,219 14,959,393 (191,082) 5,807,858
----------------- ------------- ----------------- -------------
NET ASSETS -- END OF PERIOD
(Including line (A)) $ 81,462,546 $ 77,482,327 $40,894,157 $41,085,239
----------------- ------------- ----------------- -------------
----------------- ------------- ----------------- -------------
(A) Accumulated undistributed net investment income $ 14,245 $ 731 $ 3,652 $ 647
----------------- ------------- ----------------- -------------
----------------- ------------- ----------------- -------------
SHARE ACTIVITY
Sale of shares 287,065 882,203 114,016 193,037
Reinvestment of distributions 1,179,601 406,537 534,771 155,031
Redemption of shares (380,174) (781,239) (173,934) (318,283)
----------------- ------------- ----------------- -------------
Net increase in shares 1,086,492 507,501 474,853 29,785
----------------- ------------- ----------------- -------------
----------------- ------------- ----------------- -------------
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
The Cutler Trust (the "Trust") was organized on October 2, 1992, as an
open-end management investment company under the Investment Company Act of
1940. The Trust currently has two diversified investment portfolios
(individually, a "Fund" and, collectively, the "Funds"). The Cutler Equity
Income Fund and Cutler Approved List Equity Fund each commenced operations on
December 30, 1992.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles, which require management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of increase and decrease in net assets
from operations during the fiscal period. Actual results could differ from
those estimates. The following summarizes the significant accounting policies
of the Funds:
SECURITY VALUATION -- The Trust determines the net asset value per share of
each Fund as of the close of regular trading on the New York Stock Exchange
(currently 4:00 P.M., Eastern time) on each Fund Business Day, as defined in
the Funds' prospectus. Securities with a maturity of 60 days or less are
valued at amortized cost. Other securities for which market quotations are
readily available are valued using the last reported sales price provided by
independent pricing services. If no sale is reported, the mean of the last bid
and asked price is used. If no mean price is available, the last bid price is
used. In the absence of readily available market quotations, securities are
valued at fair value using procedures approved by the Trust's Board of
Trustees.
INVESTMENT INCOME -- Dividend income is recorded on the ex-dividend date.
Interest income is recorded as earned.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income, if any,
are declared and paid quarterly on the Funds. Capital gain distributions, if
any, are distributed to shareholders at least annually. Distributions are
based on amounts calculated in accordance with applicable federal income tax
regulations, which may differ from generally accepted accounting principles.
These differences are due primarily to differing treatments of income and gain
on various investment securities held by the Fund, timing differences and
differing characterizations of distributions made by the Fund.
14
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
FEDERAL TAXES -- The Funds intend to qualify, and continue to qualify, each
year as regulated investment companies and distribute all their taxable
income. In addition, by distributing in each calendar year substantially all
their net investment income, capital gain and certain other amounts, if any,
the Funds will not be subject to a federal excise tax. Therefore, no federal
income or excise tax provision is required.
EXPENSE ALLOCATION -- The Trust accounts separately for the assets and
liabilities and operations of each Fund. Expenses that are directly
attributable to more than one Fund are allocated among the respective Funds.
REALIZED GAIN AND LOSS -- Security transactions are recorded on a trade date
basis. Realized gain and loss on investments sold is recorded on the basis of
identified cost.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
INVESTMENT ADVISER -- The investment adviser to the Funds is Cutler & Company,
LLC ("Adviser"). Pursuant to an Investment Advisory Agreement, the Adviser
receives an advisory fee from Cutler Equity Income Fund and Cutler Approved
List Equity Fund at an annual rate of 0.75% of each Fund's average daily net
assets.
MANAGER -- The Trust has entered into a Management Agreement with Forum
Administrative Services, LLC ("FAdS"). For its services, FAdS is entitled to
receive compensation at an annual rate of 0.10% of each Fund's average daily
net assets.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT -- Forum Shareholder Services,
LLC ("FSS") provides services as the Funds' transfer agent and dividend
disbursing agent pursuant to a separate agreement. For these services, FSS
receives a fee of $1,000 per month, per Fund, plus certain other fees and
expenses. Prior to September 28, 1998, Forum Financial Corp. served as the
Funds' transfer agent and dividend disbursing agent for which it received the
same compensation as FSS.
OTHER SERVICE PROVIDERS -- Forum Accounting Services, LLC ("FAcS"), an
affiliate of FAdS, serves as the fund accountant for the Trust. FAcS is paid a
fee for its portfolio accounting services of $36,000 per year for each Fund,
subject to adjustments for the number and type of portfolio transactions.
Forum Financial Services, Inc., a registered broker-dealer, acts as the
Trust's distributor pursuant to a separate Distribution Agreement with the
Trust for which it receives no compensation.
15
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS (concluded)
DECEMBER 31, 1998 (unaudited)
- --------------------------------------------------------------------------------
NOTE 4. TRANSACTIONS OF SECURITIES
The cost of securities purchased and the proceeds from sales of securities
(excluding short term securities) for the six months ended December 31, 1998,
were as follows:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
------------------ -------------------
<S> <C> <C>
Cutler Equity Income Fund $21,297,330 $30,814,481
Cutler Approved List Equity Fund 15,980,912 18,805,564
</TABLE>
For federal income tax purposes, the tax basis of investment securities owned,
the aggregate gross unrealized appreciation and the aggregate gross unrealized
depreciation as of December 31, 1998, were as follows:
<TABLE>
<CAPTION>
Unrealized Unrealized Net
Tax Cost Appreciation Depreciation Appreciation
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Cutler Equity Income Fund $63,442,617 $18,429,866 $ 386,854 $18,043,012
Cutler Approved List Equity Fund 32,507,959 9,419,179 1,036,152 8,383,027
</TABLE>
16
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected per share data and
ratios for a share outstanding
throughout each period.
<TABLE>
<CAPTION>
CUTLER EQUITY INCOME FUND
-----------------------------------------------------------------
Six Months
Ended
December 31,
(unaudited) Year Ended June 30,
------------ ----------------------------------------------
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $17.60 $16.06 $12.95 $10.96 $ 9.56 $ 9.95
------------ ------- ------- ------- ------- -------
Investment Operations
Net Investment Income 0.07 0.19 0.24 0.35 0.36(a) 0.27
Net Realized and Unrealized Gain
(Loss) on Investments 1.18 3.05 4.30 2.13 1.40 (0.40)
------------ ------- ------- ------- ------- -------
Total from Investment Operations 1.25 3.24 4.54 2.48 1.76 (0.13)
------------ ------- ------- ------- ------- -------
Distributions From
Net Investment Income (0.06) (0.19) (0.24) (0.35) (0.34) (0.26)
Net Realized Gain on Investments (3.95) (1.51) (1.19) (0.14) (0.02) --
------------ ------- ------- ------- ------- -------
Total Distributions (4.01) (1.70) (1.43) (0.49) (0.36) (0.26)
------------ ------- ------- ------- ------- -------
Net Asset Value, End of Period $14.84 $17.60 $16.06 $12.95 $10.96 $ 9.56
------------ ------- ------- ------- ------- -------
------------ ------- ------- ------- ------- -------
Total Return 8.69% 21.60% 37.65% 22.93% 18.63% (1.37%)
Ratio/Supplementary Data
Net assets at the end of period (in
thousands) $81,463 $77,482 $62,523 $46,285 $41,470 $19,706
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver of fees 1.05%(b) 1.10% 1.17% 0.98% 0.97% 1.00%
Expenses excluding
reimbursement/waiver of fees 1.05%(b) 1.10% 1.17% 0.98% 0.97% 1.45%
Net investment income 0.84%(b) 1.14% 1.67% 2.81% 3.49% 3.49%
Portfolio Turnover Rate 34.94% 118.59% 23.22% 57.08% 43.37% 42.83%
</TABLE>
(a) Calculated using the weighted average number of shares outstanding.
(b) Annualized.
17
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
FINANCIAL HIGHLIGHTS (concluded)
- --------------------------------------------------------------------------------
Selected per share data and
ratios for a share outstanding
throughout each period.
<TABLE>
<CAPTION>
CUTLER APPROVED LIST FUND
-----------------------------------------------------------------
Six Months
Ended
December 31,
(unaudited) Year Ended June 30,
------------ ----------------------------------------------
1998 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $21.02 $18.33 $14.18 $11.71 $ 9.78 $10.09
------------ ------- ------- ------- ------- -------
Investment Operations
Net Investment Income 0.06 0.13 0.18 0.21 0.24(a) 0.21
Net Realized and Unrealized Gain
(Loss) on Investments 0.62 4.19 4.20 2.47 1.92 (0.31)
------------ ------- ------- ------- ------- -------
Total from Investment Operations 0.68 4.32 4.38 2.68 2.16 (0.10)
------------ ------- ------- ------- ------- -------
Distributions From
Net Investment Income (0.05) (0.13) (0.18) (0.21) (0.23) (0.21)
Net Realized Gain on Investments (4.82) (1.50) (0.05) -- -- --
------------ ------- ------- ------- ------- -------
Total Distributions (4.87) (1.63) (0.23) (0.21) (0.23) (0.21)
------------ ------- ------- ------- ------- -------
Net Asset Value, End of Period $16.83 $21.02 $18.33 $14.18 $11.71 $ 9.78
------------ ------- ------- ------- ------- -------
------------ ------- ------- ------- ------- -------
Total Return 4.47% 24.90% 31.18% 23.01% 22.33% (1.07%)
Ratio/Supplementary Data
Net assets at the end of period (in
thousands) $40,894 $41,085 $35,277 $30,248 $21,890 $12,620
Ratios to Average Net Assets:
Expenses including
reimbursement/waiver of fees 1.22%(b) 1.24% 1.25% 1.05% 1.00% 1.00%
Expenses excluding
reimbursement/waiver of fees 1.22%(b) 1.24% 1.25% 1.13% 1.23% 1.78%
Net investment income 0.61%(b) 0.65% 1.15% 1.65% 2.20% 2.43%
Portfolio Turnover Rate 43.99% 49.61% 3.86% 8.97% 23.42% 22.27%
</TABLE>
(a) Calculated using the weighted average number of shares outstanding.
(b) Annualized.
18
<PAGE>
- --------------------------------------------------------------------------------
THE CUTLER TRUST
TRUSTEES OF THE CUTLER TRUST
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<C> <S>
KENNETH R. CUTLER
[PHOTO] Principal portfolio manager of the Equity Income Fund and of institutional
equity portfolios managed separately by Cutler & Company, LLC with objectives
similar to the Funds.
JOHN Y. KEFFER
[PHOTO] Sole shareholder and director of Forum Financial Group, LLC which owns Forum
Shareholder Services, LLC, Transfer Agent, Forum Financial Services, Inc.,
Distributor and Forum Administrative Services, LLC, Manager for both Funds.
BROOKE R. ASHLAND
[PHOTO] Chief Executive Officer, Cutler & Company, LLC, Investment Adviser to the
Trust.
DR. HATTEN S. YODER, JR.
[PHOTO] Chairman Emeritus, Geophysical Laboratory, Carnegie Institute of Washington,
and consultant to the Los Alamos National Laboratory. A member of the National
Academy of Sciences, and many national and international scientific bodies.
ROBERT B. WATTS, JR.
[PHOTO] Attorney in private practice. Formerly a senior level officer, counsel and
corporate secretary with over 25 years of corporate, divisional and board
level experience with two Fortune 100 companies.
</TABLE>
19
<PAGE>
THE CUTLER TRUST
- ------------------------------------------------------------------------
TABLE OF CONTENTS
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Chairman's Letter to the Shareholders....... 1
Cutler Equity Income Fund Portfolio......... 2
Cutler Approved List Equity Fund
Portfolio................................. 5
Statements of Assets and Liabilities........ 11
Statements of Operations.................... 12
Statements of Changes in Net Assets......... 13
Notes to Financial Statements............... 14
Financial Highlights (Per Share Data)....... 17
Trustees of the Cutler Trust................ 19
</TABLE>
Distributor
Forum Financial Services, Inc.
CUTLER & COMPANY, LLC
INVESTMENT MANAGEMENT
INVESTMENT ADVISER TO THE TRUST
503 Airport Road, Medford, OR 97504
(800) 228-8537 - (541) 770-9000
Fax: (541) 779-0006
[email protected]
- ------------------------------------------------
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective prospectus, which includes
information regarding the Funds' objectives and policies, experience of its
management, marketability of shares, and other information.
- -------------------------------------------
CUTLER EQUITY
INCOME FUND
CUTLER APPROVED LIST
EQUITY FUND
SEMI-ANNUAL REPORT
---------------
December 31, 1998
