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As filed with the Securities and Exchange Commission on March 31, 2000
File Nos. 33-52850 and 811-7242
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
Post-Effective Amendment No. 11
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
Amendment No. 13
THE CUTLER TRUST
Two Portland Square
Portland, Maine 04101
(207) 879-1900
D. Blaine Riggle, Esquire
Two Portland Square
Portland, Maine 04101
Copies to:
Joseph R. Fleming, Esquire
Dechert Price & Rhoads
Ten Post Office Square-South
Boston, MA 02109
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective:
[ ] immediately upon filing pursuant to Rule 485, paragraph (b)
[x] on April 1, 2000 pursuant to Rule 485, paragraph (b)
[ ] 60 days after filing pursuant to Rule 485, paragraph (a)(1)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(1)
[ ] 75 days after filing pursuant to Rule 485, paragraph (a)(2)
[ ] on _________________ pursuant to Rule 485, paragraph (a)(2)
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Title of Securities Being Registered: Cutler Core Fund and Cutler Value Fund.
<PAGE>
THE PROSPECTUS
CUTLER
TRUST APRIL 1, 2000
THE FUNDS SEEK CURRENT
INCOME AND LONG-TERM
CAPITAL APPRECIATION.
SHARES OF THE FUNDS
ARE OFFERED TO INVESTORS
WITHOUT ANY SALES CHARGE OR
RULE 12B-1 (DISTRIBUTION) FEES.
THE SECURITIES AND EXCHANGE COMMISSION
HAS NOT APPROVED OR DISAPPROVED ANY
FUND'S SHARES OR DETERMINED WHETHER THIS
PROSPECTUS IS ACCURATE OR COMPLETE.
ANY REPRESENTATION TO THE CONTRAY
IS A CRIMINAL OFFENSE.
[Picture Representation of Crater Lake]
<PAGE>
TABLE OF CONTENTS
RISK/RETURN SUMMARY 2
PERFORMANCE 4
FEE TABLES 6
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISKS 7
MANAGEMENT 11
YOUR ACCOUNT 14
HOW TO CONTACT THE FUNDS 14
GENERAL INFORMATION 14
BUYING SHARES 15
SELLING SHARES 19
EXCHANGE PRIVILEGES 21
RETIREMENT ACCOUNTS 22
OTHER INFORMATION 23
FINANCIAL HIGHLIGHTS 25
<PAGE>
RISK/RETURN SUMMARY
<PAGE>
[Margin Callout: CONCEPTS TO UNDERSTAND]
VALUE INVESTING means to invest in stocks whose market valuations are low
relative to their historic valuations and/or comparable companies
PRICE/EARNINGS RATIO means the ratio of a company's current market price divided
by the previous 12 months' earnings per share
CASH FLOW means the measurement of cash gained or lost during an accounting
period adjusted for any previous non-cash transactions
INVESTMENT GOAL The investment goal of both Funds, as managed by their
investment adviser, Cutler & Company, LLC (the "Adviser"), is current income and
long-term capital appreciation.
CUTLER CORE FUND
PRINCIPAL INVESTMENT STRATEGY The Fund invests in stocks of U.S. companies, with
a market value of at least $1 billion, that the Adviser considers undervalued
with respect to the stock's growth prospects relative to the general market.
CUTLER VALUE FUND
PRINCIPAL INVESTMENT STRATEGY The Fund uses a value investing style by investing
primarily in the stocks of U.S. companies, with annual sales, assets and market
value of at least $1 billion, that the Adviser considers under-priced relative
to comparable securities determined by price/earnings ratios, cash flows or
other measures.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
You could lose money on your investment in the Funds, or the Funds could
under-perform other investments, if any of the following occurs:
o The stock market goes down
o The stock market continues to undervalue the stocks in the Funds'
portfolios
o The Adviser's judgment as to the value of a stock proves to be wrong
An investment in the Funds is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.
2
<PAGE>
WHO MAY WANT TO INVEST IN THE FUNDS
You may want to purchase shares of the Funds if:
o You are willing to tolerate significant changes in the value
of your investment
o You are pursuing a long-term goal
o You are willing to accept higher short-term risk for potential
long-term returns
The Funds may NOT be appropriate for you if:
o You want an investment that pursues market trends or focuses
only on particular sectors or industries
o You need regular income or stability of principal
o You are pursuing a short-term goal or investing emergency reserves
3
<PAGE>
PERFORMANCE
The following charts illustrate the variability of the Funds' returns. These
charts and the following tables provide some indication of the risks of
investing in the Funds by showing changes in the Funds' performance from year to
year and how the Funds' returns compare to a broad measure of market
performance. PERFORMANCE INFORMATION REPRESENTS ONLY PAST PERFORMANCE AND DOES
NOT NECESSARILY INDICATE FUTURE RESULTS.
The following charts show the annual total returns of the Funds for each full
calendar year the Funds have operated.
CUTLER CORE FUND
[EDGAR Representation of Bar Chart]
1993 6.15%
1994 -2.89%
1995 34.42%
1996 18.28%
1997 33.35%
1998 21.47%
1999 15.19%
During the periods shown in the chart, the highest quarterly return was 17.84%
(for the quarter ended December 31, 1998) and the lowest quarterly return was
- -7.76% (for the quarter ended September 30, 1998).
4
<PAGE>
CUTLER VALUE FUND
[EDGAR Representation of Bar Chart]
1993 5.94%
1994 0.81%
1995 33.20%
1996 16.89%
1997 33.25%
1998 17.97%
1999 3.28%
During the periods shown in the chart, the highest quarterly return was 16.27%
(for the quarter ended June 30, 1997) and the lowest quarterly return was -9.48%
(for the quarter ended September 30, 1998).
The following table compares the Funds' average annual total returns as of
December 31, 1999 to the S&P 500 Index.
CUTLER CUTLER S&P 500
YEAR(S) CORE FUND VALUE FUND INDEX
1 Year 15.19% 3.28% 21.04%
5 Years 24.30% 20.38% 28.54%
Since Inception (12/30/92) 17.14% 15.09% 21.52%
The S&P 500(R) Index is the Standard & Poor's 500 Index, a widely recognized,
unmanaged index of common stock. The index figures assume reinvestment of all
dividends paid by stocks included in the index.
5
<PAGE>
Fee Tables
The following tables describe the various fees and expenses that you will bear
if you invest in the Funds.
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum Sales Charge (Load) Imposed on Purchases None
Maximum Deferred Sales Charge (Load) None
Maximum Sales Charge (Load) Imposed on Reinvested Distributions None
Redemption Fee None
Exchange Fee None
ANNUAL FUND OPERATING EXPENSES(1)
(expenses that are deducted from Fund assets)
CUTLER CORE FUND
Advisory Fees 0.75%
Other Expenses 0.32%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.07%
CUTLER VALUE FUND
Advisory Fees 0.75%
Other Expenses 0.45%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.20%
(1) Based on amounts incurred during the Funds' last fiscal year stated as a
percentage of net assets.
EXAMPLE
The following is a hypothetical example intended to help you compare the cost of
investing in each Fund to the cost of investing in other mutual funds. This
example assumes a $10,000 investment in each Fund, a 5% annual return, the
Fund's operating expenses remain the same as stated in the table above,
reinvestment of all distributions and redemption at the end of each period.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CUTLER CORE FUND $109 $340 $590 $1,306
CUTLER VALUE FUND $122 $381 $660 $1,455
6
<PAGE>
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISKS
CUTLER CORE FUND
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income and long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
In seeking to meet its investment objective, the Fund invests in stocks that the
Adviser considers undervalued with respect to their growth prospects relative to
the general market. In order to facilitate this selection process, the Fund will
only purchase U.S. exchange-traded companies that, in the Adviser's opinion, are
leaders in their industry, have wide ownership among major institutional
investors and very liquid markets, and have a market value of at least $1
billion. The Fund will also only invest in companies that have senior debt rated
"investment grade. " Investment grade is generally defined as a bond rating of
at least Baa or BBB- by the relevant rating organizations. The Fund's portfolio
will, under normal conditions, be comprised of at least 25 stocks, of which at
least 75% will be dividend-paying.
CUTLER VALUE FUND
INVESTMENT OBJECTIVE
The investment objective of the Fund is current income and long-term capital
appreciation.
PRINCIPAL INVESTMENT STRATEGIES
In seeking to meet its investment objective, the Fund expects that for most
periods substantially all of its total assets will be invested according to the
Adviser's value investing style in a diversified portfolio of
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<PAGE>
stocks judged by the Adviser to have favorable value to price characteristics
relative to their historic valuations and/or comparable companies.
Factors deemed particularly relevant in determining fundamental value include
price/earnings ratios, earnings and price histories, balance sheet
characteristics and perceived management skills. Changes in economic and
political outlooks, as well as individual corporate developments, can influence
specific security prices. The Adviser chooses investments in stocks of companies
that have annual sales, assets and market value of at least $1 billion and, in
the Adviser's opinion, have wide ownership among major institutional investors
and very liquid markets.
INVESTMENT POLICIES FOR BOTH FUNDS
The Adviser uses "top-down" and "bottom-up" approaches and investment selections
are made using a rigorous fundamental approach. Top-down research involves the
study of economic trends in the domestic and global economy, such as the
fluctuation in interest or unemployment rates. These factors help to identify
industries and sectors with the potential to outperform as a result of major
economic developments. Bottom-up research involves detailed analysis of specific
companies. Important factors include industry characteristics, profitability,
growth dynamics, industry positioning, strength of management, valuation and
expected return on a three to five year holding period.
The Adviser will sell securities for any one of three possible reasons. A stock
may be sold:
o when it exceeds the Adviser's price target. Active price targets are
maintained on all portfolio holdings.
o when a similar company is found by the Adviser to have better
potential for price appreciation.
o if the industry moves in an unforeseen direction which negatively
impacts the positioning of a particular investment or if the company
itself develops a deterioration
8
<PAGE>
in its strategy, execution or industry positioning. The Adviser
develops specific views on how industries are likely to evolve and
how individual companies will participate in industry growth and
change.
TEMPORARY DEFENSIVE MEASURES
A Fund may assume a temporary defensive position and invest without limit in
cash or prime cash equivalents in order to respond to adverse market, economic
or other conditions. As a result of taking a temporary defensive position, a
Fund may not achieve its investment objective.
PRINCIPAL INVESTMENT RISKS
There is no assurance that either Fund will achieve its investment objective,
and a Fund's net asset value and total return will fluctuate based upon changes
in the value of its portfolio securities. Upon redemption, an investment in a
Fund may be worth more or less than its original value. No Fund, by itself,
provides a complete investment program.
All investments made by the Funds have some risk. Among other things, the market
value of any security in which the Funds may invest is based upon the market's
perception of value and not necessarily the book value of an issuer or other
objective measures of the issuer's worth.
The Funds may be appropriate investments if you are seeking long-term growth in
your investment and are willing to tolerate significant fluctuations in the
value of your investment in response to changes in the market value of the
stocks the Funds hold. This type of market movement may affect the price of the
securities of a single issuer, a segment of the domestic stock market or the
entire market. The investment style for either or both Funds could fall out of
favor with the market. For the most part, the portfolio of Cutler Core Fund is
comprised of larger companies. Therefore, if smaller companies outperform larger
companies, Cutler Core Fund could under-perform broader equity indexes.
9
<PAGE>
Likewise, if value stocks decrease in value, there could be a corresponding drop
in the net asset value of Cutler Value Fund.
It is not the Funds' intent, nor has it been their practice, to engage in active
and frequent trading of its securities. This type of trading could increase the
amount of capital gains realized by the Funds and total securities transactions
costs. The Funds may hold cash or cash equivalents such as high quality,
short-term money market instruments pending investment to retain flexibility in
meeting redemptions and paying expenses.
10
<PAGE>
MANAGEMENT
The business of the Funds is managed under the direction of the Board of
Trustees (the "Board") of The Cutler Trust. The Board formulates the general
policies of the Funds and meets periodically to review the Funds' performance,
monitor investment activities and practices and to discuss other matters
affecting the Funds. Additional information regarding the Board, as well as
executive officers, may be found in the Statement of Additional Information
("SAI").
THE ADVISER
Cutler & Company, LLC, 503 Airport Road, Medford, Oregon 97504 serves as
investment adviser to the Funds. The Adviser makes investment decisions for the
Funds subject to the general control of the Board. The Adviser received an
advisory fee at an annual rate of 0.75% of the average daily net assets of the
Funds during its most recent fiscal year.
The Adviser (and its predecessors-in-interest) has provided investment
management services since 1977. As of March 1, 2000, the Adviser had over $1.6
billion in assets under management.
PORTFOLIO MANAGERS
The portfolio managers of the Funds are responsible for the day-to-day
investment policy, portfolio management and investment research for the Funds.
Their business experience and educational backgrounds are as follows:
JOHN A. NYHEIM, the Co-Portfolio Manager for Cutler Core Fund, received his B.A.
from U.C. Berkeley and his M.A. in Economics from Yale University. From 1969 to
1993, he was a partner and portfolio manager for Wellington Investment Advisors.
In 1994, he formed Nyheim & Associates, an investment firm. Mr. Nyheim has been
a senior portfolio manager with the Adviser since 1996.
11
<PAGE>
MICHAEL A. KIJESKY, CFA, the Co-Portfolio Manager for Cutler Core Fund, received
his B.S. and M.B.A. in Finance from Lehigh University in 1997. From 1992 to
1996, he was a chemical engineer for the Rohm and Haas Company. From 1996 to
1998, Mr. Kijesky was a financial analyst in the Industrial Gases and Chemical
Division of Air Products and Chemicals, Inc. Mr. Kijesky joined the Adviser as a
senior equity analyst in June 1998.
ROBERT W. LAMBERTI, CFA, the Portfolio Manager for Cutler Value Fund, received
his B.S. from Purdue University and M.B.A. in Finance from Temple University in
1995. From 1993 to 1995, he 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 of Air Products and Chemicals, Inc.
From 1997 to April 1998, he was a senior analyst for Valuation Research
Corporation. Mr. Lamberti joined the Adviser as an assistant portfolio manager
in April 1998.
OTHER SERVICE PROVIDERS
The Forum Financial Group of companies ("Forum") provide various services to the
Funds. As of December 31, 1999, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $71 billion.
12
<PAGE>
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of the Funds' shares. The distributor acts as the agent of the
Funds in connection with the offering of shares of the Funds. The distributor
may enter into arrangements with banks, broker-dealers or other financial
institutions through which investors may purchase or redeem shares and may, at
its own expense, compensate persons who provide services in connection with the
sale or expected sale of shares of the Funds.
Forum Shareholder Services, LLC (the "Transfer Agent") is the Funds' transfer
agent.
13
<PAGE>
YOUR ACCOUNT
[Margin Callout: HOW TO CONTACT THE FUNDS]
WRITE TO US AT:
The Cutler Trust
P.O. Box 446
Portland, ME 04112
OVERNIGHT ADDRESS:
The Cutler Trust
Two Portland Square
Portland, Maine 04101
TELEPHONE US TOLL-FREE AT:
(888) CUTLER4
(888) 288-5374
WIRE INVESTMENTS (OR ACH
PAYMENTS) TO US AT:
Bankers Trust Company
New York, New York
ABA #021001033
FOR CREDIT TO:
Forum Shareholder Services, LLC
Account #01-465-547
The Cutler Trust: (Name of Fund)
(Your Name)
(Your Account Number)
GENERAL INFORMATION
You pay no sales charge to purchase or sell (redeem) shares of the Funds. The
Funds purchase or sell shares at the net asset value per share, or NAV, next
calculated after the Transfer Agent receives your request in proper form. For
instance, if the Transfer Agent receives your purchase request in proper form
prior to 4 p.m. eastern time, your transaction will be priced at that day's NAV.
If the Transfer Agent receives your purchase request after 4 p.m., your
transaction will be priced at the next business day's NAV. The Funds will not
accept orders that request a particular day or price for the transaction or any
other special conditions.
The Funds do not issue share certificates.
You will receive monthly statements and a confirmation of each transaction. You
should verify the accuracy of all transactions in your account as soon as you
receive your confirmation.
The Funds may temporarily suspend (during unusual market conditions) or
discontinue any service or privilege.
WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of the close of
the New York Stock Exchange (normally 4:00 p.m., eastern time) on each weekday
except days when the New York Stock Exchange is closed. The time at which NAV is
calculated may be changed in case of an emergency or if the New York Stock
Exchange closes early. Each Fund's NAV is determined by taking the market value
of all securities owned by the Fund (plus all other assets such as cash),
subtracting all liabilities and then dividing the result (net assets) by the
number of shares outstanding. Each Fund values securities for which market
quotations are readily available at current market value. If market quotations
are not readily available, securities are valued at fair value as determined by
the Board.
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TRANSACTIONS THROUGH THIRD PARTIES If you invest through a broker or other
financial institution, the policies and fees charged by that institution may be
different than those of the Funds. Banks, brokers, retirement plans and
financial advisers may charge transaction fees and may set different minimum
investments or limitations on buying or selling shares. Consult a representative
of your financial institution or retirement plan for further information.
BUYING SHARES
HOW TO MAKE PAYMENTS All investments must be in U.S. dollars and checks must be
drawn on U.S. banks.
CHECKS For individual, Uniform Gift to Minors Act ("UGMA") or Uniform
Transfers to Minors Act ("UTMA") accounts, the check must be made
payable to "The Cutler Trust" or to one or more owners of the account
and endorsed to "The Cutler Trust." For all other accounts, the check
must be made payable on its face to "The Cutler Trust". No other method
of check payment is acceptable (for instance, you may not pay by
travelers' check).
PURCHASES BY AUTOMATED CLEARING HOUSE ("ACH") This service allows the
purchase of additional shares through an electronic transfer of money
from a checking or savings account. When an additional purchase is made
by telephone, the Transfer Agent will automatically debit your
pre-designated bank account for the desired amount. You may call (888)
CUTLER4 to request an ACH transaction.
WIRES Instruct your financial institution to make a Federal Funds wire
payment to us. Your financial institution may charge you a fee for this
service.
15
<PAGE>
MINIMUM INVESTMENTS The Funds accept payments in the following minimum amounts:
<TABLE>
<S> <C> <C>
MINIMUM INITIAL INVESTMENT MINIMUM ADDITIONAL INVESTMENT
Standard Account $25,000 None
Traditional and Roth IRA Accounts $2,000 None
Systematic Investment Plans $25,000 $100
Exchange Privileges $2,500 None
</TABLE>
The Adviser or the Funds' administrator may, at its discretion, waive the above
investment minimums.
ACCOUNT REQUIREMENTS
<TABLE>
<S> <C>
TYPE OF ACCOUNT REQUIREMENTS
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all persons
Individual accounts are owned by one person, as required to sign (you choose who must sign)
are sole proprietorship accounts. Joint accounts exactly as their names appear on the account
can have two or more owners (tenants)
GIFTS OR TRANSFERS TO A MINOR (UGMA, UTMA) o Depending on state laws, you can set up a
These custodial accounts provide a way to give custodial account under the UGMA or the UTMA
money to a child and obtain tax benefits. You can o The trustee must sign instructions in a
give up to $10,000 a year per child without paying manner indicating trustee capacity
Federal gift tax
BUSINESS ENTITIES o For entities with officers, provide an
original or certified copy of a resolution that
identifies the authorized signers for the
account
o For entities with partners or other interested
parties, provide a certified partnership
agreement or organizational document, or
certified pages from the partnership agreement
or organizational document, that identify the
partners or interested parties
TRUSTS o The trust must be established before an
account can be opened
o Provide a certification for trust, or the
pages from the trust document that identify the
trustees
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<PAGE>
INVESTMENT PROCEDURES
TO OPEN AN ACCOUNT TO ADD TO YOUR ACCOUNT
BY CHECK BY CHECK
o Call or write us for an account application o Fill out an investment slip from a
o Complete the application confirmation statement OR
o Mail us your application and a check o Write a letter to us
o Mail us the slip (or your letter) and a
check
o Write your account number on your check
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
o Complete the application o Instruct your bank to wire your money to
o Call us and you will be assigned an account us
number
o Mail us your application
o Instruct your bank to wire your money to us
BY ACH PAYMENT BY SYSTEMATIC INVESTMENT
o Call or write us for an account application o Complete the Systematic Investment
o Complete the application section of the application
o Call us and you will be assigned an account o Attach a voided check to your application
number o Mail us the completed application and the
o Mail us your application voided check
o Make an ACH payment
</TABLE>
SYSTEMATIC INVESTMENTS You may invest a specified amount of money in a Fund once
or twice a month on specified dates. These payments are taken from your bank
account by ACH payment. Systematic investments must be for at least $100.
LIMITATIONS ON PURCHASES The Funds reserve the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Funds or their operations. This includes those from any individual or group
who, in the Funds' view, is likely to engage in excessive trading (usually
defined as more than four exchanges out of the Funds within a calendar year).
17
<PAGE>
CANCELED OR FAILED PAYMENTS The Funds accept checks and ACH transfers at full
value subject to collection. If your payment for shares is not received or you
pay with a check or ACH transfer that does not clear, your purchase will be
canceled. You will be responsible for any losses or expenses incurred by a Fund
or the Transfer Agent, and the Fund may redeem other shares you own in the
account as reimbursement. The Funds and their agents have the right to reject or
cancel any purchase, exchange or redemption due to nonpayment.
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<PAGE>
SELLING SHARES
The Funds process redemption orders promptly. You will generally receive
redemption proceeds within a week. Delays may occur in cases of very large
redemptions, excessive trading or during unusual market conditions. If a Fund
has not yet collected payment for the shares you are selling, however, it may
delay sending redemption proceeds for up to 15 calendar days.
TO SELL SHARES FROM YOUR ACCOUNT
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The Fund name
o The dollar amount or number of shares you want to sell
o How and where to send your proceeds
o Obtain a signature guarantee (if required)
o Obtain other documentation (if required)
o Mail us your request and documentation
BY WIRE
o Wire requests are only available if:
o You have not declined wire redemption privileges on your account
application AND
o Your request is for $10,000 or more
o Call us with your request (if you have not declined telephone redemption
privileges) (See "By Telephone") OR
o Mail us your request (See "By Mail")
BY TELEPHONE
o Telephone requests are only available if you have not declined telephone
redemption privileges
o Call us with your request
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional forms of identification
o Your proceeds will be:
o Mailed to you OR
o Wired to you (if you have not declined wire redemption privileges) (See "By
Wire")
SYSTEMATICALLY
o Complete the systematic withdrawal section of the application
o Attach a voided check to your application
o Mail us your completed application
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TELEPHONE REDEMPTION PRIVILEGES You may redeem your shares by telephone unless
you declined telephone redemption privileges on your account application. You
may be responsible for any fraudulent telephone order as long as the Transfer
Agent takes reasonable measures to verify the order.
WIRE REDEMPTION PRIVILEGES You may redeem your shares by wire unless you
declined wire redemption privileges on your account application. The minimum
amount you may redeem by wire is $10,000. If you wish to make your wire request
by telephone, you must also have telephone redemption privileges.
SYSTEMATIC REDEMPTION If you own shares of the Fund with an aggregate value of
at least $10,000, you may request a specified amount of money from your account
once a month or once a quarter on a specified date. These payments are sent from
your account to a designated bank account by ACH payment. Systematic redemptions
must be for at least $100.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and the Funds against fraud,
signatures on certain requests must have a "signature guarantee." A signature
guarantee verifies the authenticity of your signature. You can obtain one from
most banking institutions or securities brokers, but not from a notary public.
For requests made in writing a signature guarantee is required for any of the
following:
o Sales of over $50,000 worth of shares
o Changes to a shareholder's record name
o Redemption from an account for which the address or account
registration has changed within the last 30 days
o Sending redemption proceeds to any person, address, brokerage firm or
bank account not on record
o Sending redemption proceeds to an account with a different
registration (name or ownership) from yours
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o Changes to systematic investment or withdrawal, distribution,
telephone redemption or exchange option or any other election in
connection with your account
SMALL ACCOUNTS If the value of your Fund account falls below $10,000 (not
including IRAs), the Fund may ask you to increase your balance. If the account
value is still below $10,000 after 60 days, the Fund may close your account and
send you the proceeds. The Fund will not close your account if it falls below
$10,000 solely as a result of a reduction in your account's market value.
REDEMPTION IN KIND The Funds reserve the right to pay redemption proceeds in
portfolio securities rather than cash. These redemptions "in kind" usually occur
if the amount to be redeemed is large enough to affect Fund operations (for
example, if it represents more than 1% of the Fund's assets).
LOST ACCOUNTS The Transfer Agent will consider your account lost if
correspondence to your address of record is returned as undeliverable, unless
the Transfer Agent determines your new address. When an account is lost, all
distributions on the account will be reinvested in additional shares of the
Funds. 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.
EXCHANGE PRIVILEGES
You may sell your Fund shares and buy shares of the other Fund, also known as an
exchange, by telephone or in writing. You may exchange Fund shares for Investors
Bond Fund or Daily Assets Government Fund (series of Forum Funds). The minimum
amount that is required to open an account in the Fund through an exchange with
another fund is $2,500. Because exchanges are treated as a sale and purchase,
they may have tax consequences. There is no charge for the exchange privilege or
limitation as to frequency of exchanges.
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REQUIREMENTS You may make exchanges only between identically registered accounts
(name(s), address and taxpayer ID number). There is currently no limit on
exchanges, but the Funds reserve the right to limit exchanges. You may exchange
your shares by mail or telephone, unless you declined telephone redemption
privileges on your account application. You may be responsible for any
fraudulent telephone order as long as the Transfer Agent takes reasonable
measures to verify the order.
HOW TO EXCHANGE
BY MAIL
o Prepare a written request including:
o Your name(s) and signature(s)
o Your account number
o The names of the funds out of and into which you are exchanging
o The dollar amount or number of shares you want to exchange
o If opening a new account, complete an account application if you are
requesting different shareholder privileges
o Mail us your request and documentation
BY TELEPHONE
o Call us with your request (unless you declined telephone redemption
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which account is registered
o Additional form of identification
RETIREMENT ACCOUNTS
The Funds offer IRA accounts, including traditional and Roth IRAs. Fund shares
may also be an appropriate investment for other retirement plans. Before
investing IRA or other retirement plan assets in Fund shares, you should consult
your tax adviser. Whenever making an investment with IRA assets, be sure to
indicate the year for which the contribution is made.
22
<PAGE>
Other Information
DISTRIBUTIONS
Each Fund distributes its net investment income quarterly. Any net capital gain
realized by a Fund will be distributed at least annually.
All distributions are reinvested in additional shares, unless you elect to
receive distributions in cash. For Federal income tax purposes, distributions
are treated the same whether they are received in cash or reinvested. Shares
become entitled to receive distributions on the day after the shares are issued.
TAXES
Distributions of net investment income or short-term capital gain are taxable to
you as ordinary income. A portion of the dividends paid by a Fund may be
eligible for the dividends-received deduction for corporate shareholders.
Distributions of long-term capital gain are taxable to you as long-term capital
gain, regardless of how long you have held your shares. Distributions may also
be subject to state and local taxes.
All distributions reduce the net asset value of a Fund's shares by the amount of
the distribution. If you purchase shares prior to these distributions, you are
taxed on the distribution even though the distribution represents a return of
your investment. The sale or exchange of Fund shares is a taxable transaction
for Federal income tax purposes.
Each Fund may be required to withhold U.S. Federal income tax at the rate of 31%
of all taxable distributions payable to you if you fail to provide the Fund with
your correct taxpayer identification number or to make required certifications,
or if you have been notified by the IRS that you are subject to backup
withholding. Backup withholding is not an additional tax. Any amounts withheld
may be credited against your U.S. Federal income tax liability.
23
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The Funds will mail reports containing information about a Fund's distributions
during the year to you after December 31 of each year. Consult your tax adviser
about the Federal, state and local tax consequences in your particular
circumstances.
ORGANIZATION
The Cutler Trust is a Delaware business trust registered with the U.S.
Securities and Exchange Commission as an open-end, management investment company
(a "mutual fund"). The Funds are the only two series of The Cutler Trust. It is
not intended that meetings of shareholders be held except when required by
Federal or Delaware law and all shareholders of each Fund are entitled to vote
at shareholders' meetings unless a matter is determined to affect only a
specific Fund (such as approval of an advisory agreement for a Fund). From time
to time, large shareholders may control a Fund.
CORE AND GATEWAY(R)
Each Fund may seek to achieve its investment objective by investing all of its
assets in shares of another diversified, open-end management investment company
that have corresponding investment objectives and investment policies to those
of the Fund.
24
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FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand each Fund's financial
performance for the past five and a half years. Certain information reflects
financial results for a single share of a Fund. Total return in the tables
represents the rate an investor would have earned (or lost) on an investment in
the applicable Fund (assuming the reinvestment of all distributions). The
information for the fiscal years ended June 30 from 1995 to 1999 have been
audited by Deloitte & Touche LLP. The information for the six months ended
December 31, 1999 has not been audited by Deloitte & Touche LLP. The Funds'
financial statements and the auditor's report are included in the Annual Report,
which is available upon request, without charge.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
SIX MONTH
CUTLER CORE FUND PERIOD ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
1999
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value $15.71 $17.60 $16.06 $12.95 $10.96 $9.56
Income From Investment Operations
Net investment income 0.04 0.12 0.19 0.24 0.35 0.36(a)
Net gain (loss) on securities 1.25
(realized and unrealized) 2.06 3.05 4.30 2.13 1.40
Total From Investment Operations 1.29 2.18 3.24 4.54 2.48 1.76
Less Distributions
From net investment income (0.04) (0.12) (0.19) (0.24) (0.35) (0.34)
From capital gain (0.96) (3.95) (1.51) (1.19) (0.14) (0.02)
Total Distributions (1.00) (4.07) (1.70) (1.43) (0.49) (0.36)
Ending Net Asset Value $16.00 $15.71 $17.60 $16.06 $12.95 $10.96
OTHER INFORMATION
Ratios to Average Net Assets
Expenses 1.11% 1.07% 1.10% 1.17% 0.98% 0.97%
Net investment income 0.56% 0.76% 1.14% 1.67% 2.81% 3.49%
Total Return 8.42% 15.48% 21.60% 37.65% 22.93% 18.63%
Portfolio Turnover Rate 17% 59% 119% 23% 57% 43%
Net Assets at End of Period $75,567 $74,499 $77,482 $62,523 $46,285 $41,470
(in thousands)
(a) Calculated using the weighted average number of shares outstanding.
25
<PAGE>
SIX MONTH
CUTLER VALUE FUND PERIOD ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
1999
(UNAUDITED) 1999 1998 1997 1996 1995
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value $18.93 $21.02 $18.33 $14.18 $11.71 $9.78
Income From Investment Operations
Net investment income 0.07 0.14 0.13 0.18 0.21 0.24(a)
Net gain (loss) on securities
(realized and unrealized) (1.85) 2.73 4.19 4.20 2.47 1.92
Total From Investment Operations (1.78) 2.87 4.32 4.38 2.68 2.16
Less Distributions
From net investment income (0.07) (0.14) (0.13) (0.18) (0.21) (0.23)
From capital gain (7.18) (4.82) (1.50) (0.05) 0.00 0.00
Total Distributions (7.25) (4.96) (1.63) (0.23) (0.21) (0.23)
Ending Net Asset Value $9.90 $18.93 $21.02 $18.33 $14.18 $11.71
OTHER INFORMATION
Ratios to Average Net Assets
Expenses 1.24% 1.20% 1.24% 1.25% 1.05%(b) 1.00%(b)
Net investment income 0.95% 0.80% 0.65% 1.15% 1.65% 2.20%
Total Return (8.64%) 18.10% 24.90% 31.18% 23.01% 22.33%
Portfolio Turnover Rate 29% 110% 50% 4% 9% 23%
Net Assets at End of Period $32,027 $40,125 $41,085 $35,277 $30,248 $21,890
(in thousands)
(a) Calculated using the weighted average number of shares outstanding.
(b) In the absence of expense reimbursements and fee waivers, the ratios would
have been 1.13% in 1996 and 1.23% in 1995.
</TABLE>
26
<PAGE>
<TABLE>
<S> <C>
FOR MORE INFORMATION THE
CUTLER TRUST
The following documents are available free upon request:
Cutler Core Fund
ANNUAL/SEMI-ANNUAL REPORTS Cutler Value Fund
Additional information about the Funds' investments is available in the
Funds' annual and semi-annual reports to shareholders. In the Funds'
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Funds' performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION
("SAI") The SAI provides more detailed information about the Funds and is
incorporated by reference into this Prospectus.
CONTACTING THE FUNDS
You can get free copies of both reports and the SAI, request other
information and discuss your questions about the Funds by contacting your
broker or the Funds at:
Forum Shareholder Services, LLC
P. O. Box 446
Portland, Maine 04112 THE CUTLER TRUST
(888) CUTLER4 P.O. Box 446
(888) 288-5374 Portland, ME 04112
(888) CUTLER4
SECURITIES AND EXCHANGE COMMISSION INFORMATION (888) 288-5374
You can also review the Funds' reports and SAIs at the Public Reference
Room of the Securities and Exchange Commission. You can get copies, for a
fee, by writing to the following: INVESTMENT ADVISER
Cutler & Company, LLC
Public Reference Room 503 Airport Road
Securities and Exchange Commission Medford, Oregon 97504
Washington, D.C. 20549-6009 (504) 770-9000
E-mail address: [email protected] (800) 228-8537
Web Site:
Information on the hours of operation of the Public Reference Room may http://www.cutler.com
be obtained by calling the Commission at (202) 942-8090.
Free copies of the reports and SAIs are available from
the Commission's Internet website at http://www.sec.gov.
</TABLE>
Investment Company Act File No. 811-7242.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 1, 2000
FUND INFORMATION: CUTLER CORE FUND
The Cutler Trust CUTLER VALUE FUND
P.O. Box 446
Portland, ME 04112
(888) CUTLER4
http://www.cutler.com
INVESTMENT ADVISER:
Cutler & Company, LLC
503 Airport Road
Medford, Oregon 97504
(541) 770-9000
(800) 228-8537
ACCOUNT INFORMATION
AND SHAREHOLDER SERVICES:
Forum Shareholder Services, LLCSM
Two Portland Square
Portland, Maine 04101
Toll free (888) CUTLER4
This Statement of Additional Information, or SAI, supplements the
Prospectus dated October 31, 1999, as may be amended from time to time, offering
shares of the Cutler Core Fund and the Cutler Value Fund (each a "Fund" and
collectively the "Funds"), two portfolios of The Cutler Trust (the "Trust").
This SAI is not a prospectus and should only be read in conjunction with the
prospectus. The Prospectus may be obtained by an investor without charge by
contacting the Trust's Shareholder Servicing Agent at the address listed above.
Financial Statements for the Funds for the year ended June 30, 1999
included in the Annual Report to shareholders, are incorporated into this SAI by
reference. Copies of the Annual Report may be obtained, without charge, upon
request by contacting shareholder services at the address or telephone number
listed above.
<PAGE>
TABLE OF CONTENTS
1. INVESTMENT POLICIES AND RISKS 3
2. INVESTMENT LIMITATIONS 5
3. PERFORMANCE DATA AND ADVERTISING 7
4. MANAGEMENT 11
5. PORTFOLIO TRANSACTIONS 17
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION 20
7. TAXATION 22
8. OTHER MATTERS 26
APPENDIX A DESCRIPTION OF SECURITIES RATINGS A-1
APPENDIX B MISCELLANEOUS TABLES B-2
APPENDIX C PERFORMANCE DATA C-1
1
<PAGE>
GLOSSARY
"Adviser" means Cutler & Company, LLC
"Board" means the Board of Trustees of the Trust.
"Code" means the Internal Revenue Code of 1986, as amended.
"Custodian" means Forum Trust, LLC, custodian of the Funds' assets.
"FAdS" means Forum Administrative Services, LLC, administrator of the
Funds.
"Fitch" means Fitch IBCA, Inc.
"FAcS" means Forum Accounting Services, LLC, fund accountant of the
Funds.
"FFS" means Forum Fund Services, LLC, distributor of the Funds' shares.
"Funds" means the Cutler Core Fund and the Cutler Value Fund
"Moody's" means Moody's Investors Service, Inc.
"NAV" means net asset value.
"NRSRO" means a nationally recognized statistical rating organization.
"SEC" means the U.S. Securities and Exchange Commission.
"S&P" means Standard & Poor's Corporation.
"Transfer Agent" means Forum Shareholder Services, LLC, the transfer
agent and distribution disbursing agent of the Funds.
"Trust" means The Cutler Trust.
"U.S. Government Securities" means obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
"U.S. Treasury Securities" means obligations issued or guaranteed by
the U.S. Treasury.
"1933 Act" means the Securities Act of 1933, as amended.
"1940 Act" means the Investment Company Act of 1940, as amended.
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<PAGE>
1. INVESTMENT POLICIES AND RISKS
The following discussion supplements the disclosure in the Prospectus
about the Funds' investment techniques, strategies and risks. The Funds are
designed for investment of that portion of an investor's assets that can
appropriately bear the special risks associated with certain types of
investments (e.g., investments in equity securities). The Funds expect that for
most periods, a substantial portion, if not all, of their assets will be
invested in diversified portfolios of common stocks judged by the Adviser to
have favorable value to price characteristics.
A. SECURITY RATINGS INFORMATION
The Funds may invest in fixed income securities. The Funds' investments in fixed
income securities are subject to credit risk relating to the financial condition
of the issuers of the securities that each Fund holds. The Funds will invest
primarily in "investment grade" securities. "Investment grade" means rated in
the top four long-term rating categories or top two short-term rating categories
by an NRSRO, or unrated and determined by the Adviser to be of comparable
quality. The lowest long-term ratings that are investment grade for corporate
bonds, including convertible bonds, are "Baa" in the case of Moody's and "BBB"
in the case of S&P and Fitch; for preferred stock are "Baa" in the case of
Moody's and "BBB" in the case of S&P and Fitch; and for short-term debt,
including commercial paper, are Prime-2 (P-2) in the case of Moody's, "A-2" in
the case of S&P and "F-2" in the case of Fitch.
Unrated securities may not be as actively traded as rated securities. A Fund may
retain securities whose rating has been lowered below the lowest permissible
rating category (or that are unrated and determined by the Adviser to be of
comparable quality to securities whose rating has been lowered below the lowest
permissible rating category) if the Adviser determines that retaining such
security is in the best interests of the Fund. Because a downgrade often results
in a reduction in the market price of the security, the sale of a downgraded
security may result in a loss.
Moody's, S&P and other NRSROs are private services that provide ratings of the
credit quality of debt obligations, including convertible securities. A
description of the range of ratings assigned to various types of bonds and other
securities by several NRSROs is included in Appendix A to this SAI. The Funds
may use these ratings to determine whether to purchase, sell or hold a security.
Ratings are general and are not absolute standards of quality. Securities with
the same maturity, interest rate and rating may have different market prices. If
an issue of securities ceases to be rated or if its rating is reduced after it
is purchased by a Fund (neither event requiring the sale of such security by a
Fund), the Adviser will determine whether the Fund should continue to hold the
obligation. To the extent that the ratings given by a NRSRO may change as a
result of changes in such organizations or their rating systems, the Adviser
will attempt to substitute comparable ratings. Credit ratings attempt to
evaluate the safety of principal and interest payments and do not evaluate the
risks of fluctuations in market value. Also, rating agencies may fail to make
timely changes in credit ratings. An issuer's current financial condition may be
better or worse than a rating indicates.
B. TEMPORARY DEFENSIVE POSITION
Each Fund may assume a temporary defensive position and may invest without limit
in commercial paper and other money market instruments that are of prime
quality. Prime quality instruments are those instruments that are rated in one
of the two highest rating categories by an NRSRO or, if not rated, determined by
the Adviser to be of comparable quality.
Money market instruments usually have maturities of one year or less and fixed
rates of return. The money market instruments in which a Fund may invest include
short-term U.S. Government Securities ,interest-bearing savings deposits and
certificates of deposit of domestic commercial banks and money market mutual
funds. The Funds may only invest in money market mutual funds to the extent
permitted by the 1940 Act.
The money market instruments in which the Funds may invest may have variable or
floating rates of interest. These obligations include master demand notes that
permit investment of fluctuating amounts at varying rates of interest pursuant
to direct arrangement with the issuer of the instrument. The issuer of these
obligations often has the right, after a given period, to prepay the outstanding
principal amount of the obligations upon a specified number of days' notice.
These obligations generally are not traded, nor generally is there an
established secondary market for these obligations. To the extent a demand note
3
<PAGE>
does not have a 7-day or shorter demand feature and there is no readily
available market for the obligation, it is treated as an illiquid security.
C. CONVERTIBLE SECURITIES
The Funds may invest in convertible securities.
1. IN GENERAL
Convertible securities, which include convertible debt, convertible preferred
stock and other securities exchangeable under certain circumstances for shares
of common stock, are fixed income securities or preferred stock which generally
may be converted at a stated price within a specific amount of time into a
specified number of shares of common stock. A convertible security entitles the
holder to receive interest paid or accrued on debt or the dividend paid on
preferred stock until the convertible security matures or is redeemed,
converted, or exchanged. Before conversion, convertible securities have
characteristics similar to nonconvertible debt securities or preferred equity in
that they ordinarily provide a stream of income with generally higher yields
than do those of common stocks of the same or similar issuers. These securities
are usually senior to common stock in a company's capital structure, but usually
are subordinated to non-convertible debt securities.
Convertible securities have unique investment characteristics in that they
generally have higher yields than common stocks, but lower yields than
comparable non-convertible securities. Convertible securities are less subject
to fluctuation in value than the underlying stock since they have fixed income
characteristics; and they provide the potential for capital appreciation if the
market price of the underlying common stock increases.
A convertible security may be subject to redemption at the option of the issuer
at a price established in the convertible security's governing instrument. If a
convertible security held by a Fund is called for redemption, the Fund will be
required to permit the issuer to redeem the security, convert it into the
underlying common stock or sell it to a third party.
2. RISKS
Investment in convertible securities generally entails less risk than investment
in the issuer's common stock. The extent to which such risk is reduced, however,
depends in large measure upon the degree to which the convertible security sells
above its value as a fixed income security.
3. VALUE OF CONVERTIBLE SECURITIES
The value of a convertible security is a function of its "investment value" and
its "conversion value". The investment value of a convertible security is
determined by comparing its yield with the yields of other securities of
comparable maturity and quality that do not have a conversion privilege. The
conversion value is the security's worth, at market value, if converted into the
underlying common stock. The investment value of a convertible security is
influenced by changes in interest rates, with investment value declining as
interest rates increase and increasing as interest rates decline. The credit
standing of the issuer and other factors also may affect the convertible
security's investment value. The conversion value of a convertible security is
determined by the market price of the underlying common stock. If the conversion
value is low relative to the investment value, the price of the convertible
security is governed principally by its investment value and generally the
conversion value decreases as the convertible security approaches maturity. To
the extent the market price of the underlying common stock approaches or exceeds
the conversion price, the price of the convertible security will be increasingly
influenced by its conversion value. In addition, a convertible security
generally will sell at a premium over its conversion value determined by the
extent to which investors place value on the right to acquire the underlying
common stock while holding a fixed income security.
4
<PAGE>
2. INVESTMENT LIMITATIONS
For purposes of all investment policies of the Funds: (1) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Funds may rely; and (2) the term Code includes the rules thereunder,
IRS interpretations and any private letter ruling or similar authority upon
which the Funds may rely.
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 Funds'
assets, the change in status of a security or purchases and redemptions of Fund
shares will not be considered a violation of the limitation.
A fundamental policy of a Fund cannot be changed without the affirmative vote of
the lesser of: (1) 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. The Board may change a nonfundamental policy of the Funds without
shareholder approval.
A. FUNDAMENTAL LIMITATIONS
Each Fund's investment objective is considered fundamental. In addition, each
Fund has adopted the following investment limitations, which are fundamental
policies of the Fund. Each Fund may not:
1. DIVERSIFICATION
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. CONCENTRATION
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. UNDERWRITING ACTIVITIES
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. PURCHASES AND SALES OF REAL ESTATE
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. PURCHASES AND SALES OF COMMODITIES AND OPTIONS; BORROWING; FOREIGN SECURITIES
AND MARKETS; MARGIN PURCHASES AND SHORT SALES
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 (applicable to Cutler Core Fund
only); 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.
5
<PAGE>
6. ISSUANCE OF SENIOR SECURITIES
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 ("Board") may establish.
7. REPURCHASE AGREEMENTS, MAKING LOANS
Enter into repurchase agreements, lend securities or otherwise make loans;
except through the purchase of debt securities that may be purchased by the
Funds.
B. NONFUNDAMENTAL LIMITATIONS
Each Fund has adopted the following nonfundamental investment limitations that
may be changed by the Board without shareholder approval. Each Fund may not:
1. 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.
2. 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.
3. 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.
4. 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.
6
<PAGE>
3. PERFORMANCE DATA AND ADVERTISING
A. PERFORMANCE DATA
The Funds may quote performance in various ways. All performance information
supplied in advertising, sales literature, shareholder reports or other
materials is historical and is not intended to indicate future returns.
The Funds may compare any of their performance information with:
o Data published by independent evaluators such as Morningstar, Inc.,
Lipper, Inc., IBC Financial Data, Inc., CDA/Wiesenberger or other
companies which track the investment performance of investment
companies ("Fund Tracking Companies").
o The performance of other mutual funds.
o The performance of recognized stock, bond and other indices,
including, but not limited to, the Standard & Poor's 500(R) Index, the
Russell 2000(R) Index, the Russell MidcapTM Index, the Russell 1000(R)
Value Index, the Russell 2500(R) Index, the Dow Jones Industrial
Average, the Salomon Brothers Bond Index, the Shearson Lehman Bond
Index, U.S. Treasury bonds, bills or notes and changes in the Consumer
Price Index as published by the U.S. Department of Commerce.
Performance information may be presented numerically or in a table, graph, or
similar illustration.
Indices are not used in the management of the Funds but rather are standards by
which the Funds' Adviser and shareholders may compare the performance of the
Funds to an unmanaged composite of securities with similar, but not identical,
characteristics as the Funds.
The Funds may refer to: (1) general market performances over past time periods
such as those published by Ibbotson Associates (for instance, its "Stocks,
Bonds, Bills and Inflation Yearbook"); (2) mutual fund performance rankings and
other data published by Fund Tracking Companies; and (3) material and
comparative mutual fund data and ratings reported in independent periodicals,
such as newspapers and financial magazines.
The Funds' performance will fluctuate in response to market conditions and other
factors.
B. PERFORMANCE CALCULATIONS
The Funds' performance may be quoted in terms of yield or total return.
1. SEC YIELD
Standardized SEC yields for the Funds used in advertising are computed by
dividing a Fund's interest income (in accordance with specific standardized
rules) for a given 30 day or one month period, net of expenses, by the average
number of shares entitled to receive income distributions 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 accordance
with specific standardized rules) in order to arrive at an annual percentage
rate.
Capital gains and losses generally are excluded from these calculations.
Income calculated for the purpose of determining the Funds' yields 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 of income from the Fund over the same period or the rate of income
reported in the Funds' financial statements.
7
<PAGE>
Although published yield information is useful to investors in reviewing the
Funds' performance, investors should be aware that the Funds' yields fluctuate
from day to day and that the Funds' yields for any given period are not an
indication or representation by the Funds of future yields or rates of return on
the Funds' shares. Financial intermediaries may charge their customers that
invest in the Funds fees in connection with that investment. This will have the
effect of reducing the Funds' after-fee yields to those shareholders.
The yields of the Funds are not fixed or guaranteed, and investments in the
Funds are not insured or guaranteed. Accordingly, yield information should not
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 the Funds' yields information
directly to similar information regarding investment alternatives which are
insured or guaranteed.
Yield quotations are based on amounts invested in a Fund net of any applicable
sales charges that may be paid by an investor. A computation of yield that does
not take into account sales charges paid by an investor would be higher than a
similar computation that takes into account payment of sales charges. The Funds
impose no sales charges.
Yield is calculated according to the following formula:
a - b
Yield = 2[(------ + 1)6 - 1]
cd
Where:
a = dividends and interest earned during the
period
b = expenses accrued for the period (net of
reimbursements)
c = the average daily number of shares
outstanding during the period that were
entitled to receive dividends
d = the maximum offering price per share on the
last day of the period
2. TOTAL RETURN CALCULATIONS
The Funds' total returns show their overall changes in value, including changes
in share price and assuming all of the Funds' distributions are reinvested.
AVERAGE ANNUAL TOTAL RETURN. Average annual total return is calculated using a
formula prescribed by the SEC. To calculate standard average annual total
returns, a Fund: (1) determines the growth or decline in value of a hypothetical
historical investment in the Fund over a stated period; and (2) calculates 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. For
example, a cumulative return of 100% over ten years would produce an average
annual total return of 7.18%. While average annual returns are a convenient
means of comparing investment alternatives, investors should realize that
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 the Funds.
Average annual total return is calculated 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
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
Because average annual returns tend to smooth out variations in the Funds'
returns, shareholders should recognize that they are not the same as actual
year-by-year results.
8
<PAGE>
OTHER MEASURES OF TOTAL RETURN. Standardized total return quotes may be
accompanied by non-standardized total return figures calculated by alternative
methods.
The Funds may quote unaveraged or cumulative total returns, which
reflect the Funds' performance over a stated period of time.
Total returns may be stated in their components of income and capital
(including capital gains and changes in share price) in order to
illustrate the relationship of these factors and their contributions to
total return.
Any total return may be quoted as a percentage or as a dollar amount, and may be
calculated for a single investment, a series of investments and/or a series of
redemptions over any time period.
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
A listing of certain performance data as of June 30, 1999 is contained in
Appendix C -- Performance Data.
C. OTHER MATTERS
The Funds may also include various information in their advertising, sales
literature, shareholder reports or other materials including, but not limited
to: (1) portfolio holdings and portfolio allocation as of certain dates, such as
portfolio diversification by instrument type, by instrument, by location of
issuer or by maturity; (2) statements or illustrations relating to the
appropriateness of types of securities and/or mutual funds that may be employed
by an investor to meet specific financial goals, such as funding retirement,
paying for children's education and financially supporting aging parents; (3)
information (including charts and illustrations) showing the effects of
compounding interest (compounding is the process of earning interest on
principal plus interest that was earned earlier; interest can be compounded at
different intervals, such as annually, quarterly or daily); (4) information
relating to inflation and its effects on the dollar; (for example, after ten
years the purchasing power of $25,000 would shrink to $16,621, $14,968, $13,465
and $12,100, respectively, if the annual rates of inflation were 4%, 5%, 6% and
7%, respectively); (5) information regarding the effects of automatic investment
and systematic withdrawal plans, including the principal of dollar-cost
averaging; (6) biographical descriptions of the Funds' portfolio managers and
the portfolio management staff of the Funds' Adviser, summaries of the views of
the portfolio managers with respect to the financial markets, or descriptions of
the nature of the Adviser's and its staff's management techniques; (7) the
results of a hypothetical investment in a Fund over a given number of years,
including the amount that the investment would be at the end of the period; (8)
the effects of earning Federally and, if applicable, state tax-exempt income
from the Funds or investing in a tax-deferred account, such as an individual
retirement account or Section 401(k) pension plan; (9) the net asset value, net
assets or number of shareholders of the Funds as of one or more dates; and (10)
a comparison of the Funds' operations to the operations of other funds or
similar investment products, such as a comparison of the nature and scope of
regulation of the products and the products' weighted average maturity,
liquidity, investment policies, and the manner of calculating and reporting
performance.
As an example of compounding, $1,000 compounded annually at 9.00% will grow to
$1,090 at the end of the first year (an increase in $90) and $1,118 at the end
of the second year (an increase in $98). The extra $8 that was earned on the $90
interest from the first year is the compound interest. One thousand dollars
compounded annually at 9.00% will grow to $2,367 at the end of ten years and
$5,604 at the end of 20 years. Other examples of compounding are as follows: at
7% and 12% annually, $1,000 will grow to $1,967 and $3,106, respectively, at the
end of ten years and $3,870 and $9,646, respectively, at the end of twenty
years. These examples are for illustrative purposes only and are not indicative
of the Funds' performance.
9
<PAGE>
The Funds may advertise information regarding the effects of automatic
investment and systematic withdrawal plans, including the principal of dollar
cost averaging. In a dollar-cost averaging program, an investor invests a fixed
dollar amount in a Fund at period intervals, thereby purchasing fewer shares
when prices are high and more shares when prices are low. While such a strategy
does not insure a profit or guard against a loss in a declining market, the
investor's average cost per share can be lower than if fixed numbers of shares
had been purchased at those intervals. In evaluating such a plan, investors
should consider their ability to continue purchasing shares through periods of
low price levels. For example, if an investor invests $100 a month for a period
of six months in a Fund, the following will be the relationship between average
cost per share ($14.35 in the example given) and average price per share:
<TABLE>
<S> <C> <C> <C>
PERIOD SYSTEMATIC INVESTMENT SHARE PRICE SHARES PURCHASED
............ ................................. .................................. ..................................
1 $100 $10 10.00
2 $100 $12 8.33
3 $100 $15 6.67
4 $100 $20 5.00
5 $100 $18 5.56
6 $100 $16 6.25
............ ................................. .................................. ..................................
Total Invested $600 Average Price $15.17 Total Shares 41.81
</TABLE>
In connection with its advertisements, the Funds may provide "shareholder's
letters" which serve to provide shareholders or investors an introduction into
the Funds or any of the Funds' service provider's policies or business
practices. For instance, advertisements may provide for a message from the
Adviser that it has for more than twenty years been committed to quality
products and outstanding service to assist its customers in meeting their
financial goals and setting forth the reasons that the Adviser believes that it
has been successful as a portfolio manager.
10
<PAGE>
4. MANAGEMENT
A. TRUSTEES AND OFFICERS
TRUSTEES AND OFFICERS OF THE TRUST. The business and affairs of the Trust are
managed under the direction of the Board in compliance with the laws of the
state of Delaware. Among its duties, the Board generally meets and reviews on a
quarterly basis the acts of all of the Funds' service providers. This management
also includes a periodic review of the service providers' agreements and fees
charged to the Funds. The names of the Trustees and officers of the Trust, their
position with the Trust, address, age and principal occupations during the past
five years are set forth below. Each Trustee who is an "interested person" (as
defined by the 1940 Act) of the Trust is indicated by an asterisk.
<TABLE>
<S> <C> <C>
NAME, ADDRESS AND POSITION(S) PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH FUNDS DURING THE PAST FIVE YEARS
.......................................... .................... .....................................................
Brooke C. Ashland* Trustee Chief Executive Officer and Manager, Cutler &
503 Airport Road Company, LLC
Medford, Oregon 97504
Born: December 1951
.......................................... .................... .....................................................
Kenneth R. Cutler* Trustee Former Portfolio Manager of the Cutler Core Fund,
503 Airport Road Chairman Investment Committee Member, Cutler & Company, LLC
Medford, Oregon 97504 Vice President
Born: March 1920
.......................................... .................... .....................................................
John Y. Keffer* Trustee President and Director, Forum Fund Services, LLC
Two Portland Square President for more than five years
Portland, Maine 04101 Director and sole shareholder (directly and
Born: July 1942 indirectly) Forum Financial Group LLC, which owns
(directly or indirectly) Forum Administrative
Services, LLC, Forum Shareholder Services, LLC
and Forum Investment Advisers, LLC Officer,
Director or Trustee, various funds managed and
distributed by Forum Fund Service, LLC and Forum
Administrative Services, LLC
.......................................... .................... .....................................................
Dr. Hatten S. Yoder, Jr. Trustee Director Emeritus, Geophysical Laboratory, Carnegie
6709 Melody Lane Institution of Washington
Bethesda, MD 20817-3152 Consultant, Los Alamos National Laboratory
Born: March 1921
.......................................... .................... .....................................................
Robert B. Watts, Jr. Trustee Counsel, Northhaven Associates
2230 Brownsboro Highway
Eagle Point, Oregon 97524
Born: December 1930
.......................................... .................... .....................................................
Carol S. Fischer Vice President Chief Operating Officer, Cutler & Company, LLC
503 Airport Road Asst Secretary
Medford, Oregon 97504 Asst Treasurer
Born: December 1955
.......................................... .................... .....................................................
Stephen J. Barrett Vice President Manager of Client Services, Forum Financial Group,
Two Portland Square LLC since 1996
Portland, Maine 04101 Senior Product Manager, Fidelity Investments, 1994
Born: November 1968 - 1996
Officer, various funds managed and distributed by
Forum Administrative Services, LLC and Forum Fund
Services, LLC
11
<PAGE>
.......................................... .................... .....................................................
NAME, ADDRESS AND POSITION(S) PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH FUNDS DURING THE PAST FIVE YEARS
.......................................... .................... .....................................................
Ronald H. Hirsch Treasurer
Two Portland Square 9/99 - Present. Managing Director of Operations and
Portland, Maine 04101 Finance, Forum Financial Group
Born: October 1943 1991-1998 Member of the Board, Citibank Germany
.......................................... .................... .....................................................
.......................................... .................... .....................................................
D. Blaine Riggle Secretary 1/98 - Present. Counsel, Forum Financial Group, LLC
Two Portland Square 3/97 - 1/98. Associate Counsel, Wright Express
Portland, Maine 04101 Corporation
Born: November 1966 1994 - 3/97. Associate at the law firm of
Friedman, Babcock & Gaythwaite
Officer, various funds managed and distributed by
Forum Fund Services, LLC and Forum Administrative
Services, LLC
.......................................... .................... .....................................................
Dawn L. Taylor Assistant Treasurer 10/97 - Present. Tax Manager, Forum Financial
Two Portland Square Group, LLC
Portland, Maine 04101 1/97 - 10/97. Senior Tax Accountant, Purdy,
Born: May 1964 Bingham & Burrell, LLC
9/94 - 10/97. Senior Fund Accountant, Forum
Financial Group, LLC
Officer, various funds managed and distributed by
Forum Fund Services, LLC and Forum Administrative
Services, LLC
.......................................... .................... .....................................................
Marcella A. Cote Assistant Secretary 6/98 - Present. Senior Fund Specialist, Forum
Two Portland Square Administrative Services, LLC
Portland, Maine 04101 1/97 - 12/97. Budget Analyst, Maine Department of
Born: January 1947 Human Services
1991 - 1997. Project Assistant, Maine
Inter-departmental Committee on Transition
Officer, various funds managed and distributed by
Forum Fund Services, LLC and Forum Administrative Services, LLC
</TABLE>
B. COMPENSATION OF DIRECTORS AND OFFICERS
Each Trustee receives monthly fees of $833.33.
Trustees are also reimbursed for travel and related expenses incurred in
attending meetings of the Board.
Messrs. Cutler and Keffer and Ms. Ashland receive no compensation for their
services or reimbursement for their associated expenses. No officer of the Trust
is compensated by the Trust.
12
<PAGE>
The following table sets forth the fees paid to each Trustee by the Trust for
the fiscal year ended June 30, 1999.
<TABLE>
<S> <C> <C> <C> <C>
ESTIMATED ANNUAL
AGGREGATE PENSION OR RETIREMENT BENEFITS UPON TOTAL
COMPENSATION FROM BENEFITS ACCRUED AS PART OF RETIREMENT COMPENSATION FROM
NAME, POSITION TRUST TRUST EXPENSES TRUST
............................. ................... ............................. .................. ...................
Dr. Hatton S. Yoder, Jr.,
Trustee $10,000 $0 $0 $10,000
............................. ................... ............................. .................. ...................
Robert B. Watts, Jr.,
Trustee $10,000 $0 $0 $10,000
............................. ................... ............................. .................. ...................
</TABLE>
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as investment adviser to the Funds pursuant to an investment
advisory agreement with the Trust. Under that agreement, the Adviser furnishes
at its own expense all services, facilities and personnel necessary in
connection with managing the Funds' investments and effecting portfolio
transactions for the Funds.
2. OWNERSHIP OF ADVISER/AFFILIATIONS
Trustee Brooke C. Ashland has a majority ownership interest in the Adviser and
is therefore deemed to control the Adviser. The Adviser is registered as an
investment adviser with the SEC under the Investment Advisors Act of 1940, as
amended.
The Trustees or officers of the Funds that are employed by the Adviser (or
affiliates of the Adviser) are Kenneth R. Cutler, Brooke C. Ashland and Carol S.
Fischer.
3. FEES
The Adviser's fee is calculated as a percentage of the applicable Fund's average
net assets. The fee is accrued daily by the Funds and is paid monthly, equal to
0.75% per annum based on average daily net assets of the applicable Fund for the
previous month.
In addition to receiving its advisory fee from the Funds, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets that are invested in the Funds. If an investor in the Funds also has a
separately managed account with the Adviser with assets invested in the Funds,
the Adviser will credit an amount equal to all or a portion of the fees received
by the Adviser against any investment management fee received from a client.
Table 1 in Appendix B shows the dollar amount of the fees from the Funds for the
last three fiscal years received by the Adviser.
4. OTHER PROVISIONS OF ADVISER'S AGREEMENT
The Adviser's agreement must be 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.
The Adviser's agreement is terminable without penalty by the Funds with respect
to the Funds on 60 days' written notice when authorized either by vote of the
holders of a majority of the Funds' securities or by a vote of a majority of the
Board on 60 days' written notice to the Adviser, or by the Adviser on 60 days'
written notice to the Funds.
Under its agreement, the Adviser is not liable for any mistake of judgment,
except for lack of good faith in the performance of its duties to the Funds. The
agreement does not protect the Adviser against any liability by reason of
13
<PAGE>
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.
D. DISTRIBUTOR
1. DISTRIBUTOR; SERVICES AND COMPENSATION OF DISTRIBUTOR
FFS, the distributor (also known as principal underwriter) of the shares of the
Funds, is located at Two Portland Square, Portland, Maine 04101. FFS is a
registered broker-dealer and is a member of the National Association of
Securities Dealers, Inc.
FFS, FAdS, FAcS, the Transfer Agent, and the Custodian are each controlled
indirectly by Forum Financial Group, LLC. John Y. Keffer controls Forum
Financial Group, LLC.
Under its agreement with the Trust, FFS acts as the agent of the Funds in
connection with the offering of shares of the Funds. FFS continually distributes
shares of the Funds on a best efforts basis. FFS has no obligation to sell any
specific quantity of the Funds' shares.
FFS receives no compensation for its distribution services. Shares are sold with
no sales commission; accordingly, FFS receives no sales commissions. FFS may
enter into arrangements with various financial institutions through which
investors may purchase or redeem shares. FFS may, at its own expense and from
its own resources, compensate certain persons who provide services in connection
with the sale or expected sale of shares of the Funds. Prior to October 31,
1999, Forum Financial Services, Inc. served as the distributor of the Funds'
shares.
2. OTHER PROVISIONS OF DISTRIBUTOR'S AGREEMENT
FFS's distribution agreement must be 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.
FFS's agreement is terminable without penalty by the Funds with respect to the
Funds on 60 days' written notice when authorized either by vote of a majority of
the Funds' outstanding shareholders or by a vote of a majority of the Board, or
by FFS on 60 days' written notice to the Funds.
Under its agreement, FFS is not liable for any error of judgment or mistake of
law or for any act or omission in the performance of its duties to the Funds.
The agreement does not protect FFS against any liability by reason of 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.
Under its agreement, FFS and certain related parties (such as FFS's officers and
persons that control FFS) are indemnified by the Funds against any and all
claims and expenses in any way related to FFS's actions (or failures to act)
that are consistent with FFS's contractual standard of care. This means that as
long as FFS satisfies its contractual duties, the Funds are responsible for the
costs of: (1) defending FFS against claims that FFS breached a duty it owed to
the Funds; and (2) paying judgments against FFS. The Funds are not required to
indemnify FFS if the Funds do not receive written notice of and reasonable
opportunity to defend against a claim against FFS in the Funds' own name or in
the name of FFS.
14
<PAGE>
E. OTHER SERVICE PROVIDERS TO THE FUNDS
1. ADMINISTRATOR
As administrator, pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of the Funds, providing the Funds
with general office facilities and providing persons satisfactory to the Board
to serve as officers of the Funds.
For its services, FAdS receives a fee from the Funds equal to 0.10% of the
average daily net assets of the Funds. The fees are accrued daily by the Funds
and are paid monthly for services performed under the agreement during the prior
calendar month.
Table 2 in Appendix B shows the dollar amount of the fees paid by the Funds to
FAdS for the Funds' last three fiscal years.
FAdS's agreement is terminable without penalty by the Board or by FAdS on 60
days' written notice. Under the agreement, FAdS is not liable for any act or
omission in the performance of its duties to the Funds. The agreement does not
protect FAdS from any liability by reason of willful misconduct, bad faith or
gross negligence in the performance of its obligations and duties under the
agreement.
2. FUND ACCOUNTANT
As fund accountant, pursuant to an agreement with the Trust, FAcS provides fund
accounting services to the Funds. These services include calculating the NAV per
share of the Funds and preparing the Funds' financial statements and tax
returns.
For its services, FAcS receives a fee from each Fund at an annual rate of
$36,000, subject to adjustments for the number and type of portfolio
transactions. The fees are paid monthly for services performed during the prior
calendar month.
Table 3 in Appendix B shows the dollar amount of the fees paid by the Funds to
FAcS for the Funds' last three fiscal years.
FAcS's agreement is terminable without penalty by the Board or by FAcS on 60
days' written notice. Under the agreement, FAcS is not liable for any act or
omission in the performance of its duties to the Funds. The agreement does not
protect FAcS from any liability by reason of willful misconduct, bad faith or
gross negligence in the performance of its obligations and duties under the
agreement.
3. TRANSFER AGENT
As transfer agent and distribution paying agent, pursuant to an agreement with
the Trust, the Transfer Agent maintains an account for each shareholder of
record of the Funds and is responsible for processing purchase and redemption
requests and paying distributions to shareholders of record. The Transfer Agent
is located at Two Portland Square, Portland, Maine 04101 and is registered as a
transfer agent with the SEC.
For its services, the Transfer Agent receives a fee from each Fund 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. Such fees shall be paid
monthly for services performed during the prior calendar month. Table 4 in
Appendix B shows the dollar amount of the fees paid by the Funds to the Transfer
Agent for the Funds' last three fiscal years.
The Transfer Agent's agreement is terminable without penalty by the Board or by
the Transfer Agent on 60 days' written notice. Under the agreement, the Transfer
Agent is liable only for loss or damage due to errors caused by bad faith,
negligence or willful misconduct in the performance of its obligations and
duties under the agreement.
15
<PAGE>
4. CUSTODIAN
As custodian, pursuant to an agreement with the Trust, Forum Trust, LLC
safeguards and controls the Funds' cash and securities, determines income and
collects interest on Funds' investments. The Custodian may employ subcustodians.
The Custodian is located at Two Portland Square, Portland, Maine 04101. The
Custodian has hired Bankers Trust Company, 130 Liberty Street, New York, New
York, 10006, to serve as subcustodian for the Funds.
For its services, the Custodian receives a fee from the Funds at an annual rate
as follows: (1) 0.01% for the first $1 billion in Fund assets; (2) 0.0075% for
Fund assets between $1-$2 billion; (3) 0.005% for Fund assets between $2-$6
billion; and (4) .0025% for Fund assets greater than $6 billion. The Custodian
receives account maintenance fees of $3,600 per account per year. The Custodian
is also paid certain transaction fees. These fees are accrued daily by the Funds
and are paid monthly based on average net assets and transactions for the
previous month.
5. LEGAL COUNSEL
Legal matters in connection with the issuance of shares of the Funds are passed
upon by Dechert Price & Rhoads, Ten Post Office Square - South, Boston,
Massachusetts 02109-4603.
6. INDEPENDENT AUDITORS
Deloitte & Touche LLP, 200 Berkeley Street, 14th Floor, Boston, Massachusetts
02116-5022, independent auditors, have been selected as auditors for the Funds.
The auditors audit the annual financial statements of the Funds and provide the
Funds with an audit opinion. The auditors also review certain regulatory filings
of the Funds as well as prepare the Funds' tax returns.
16
<PAGE>
5. PORTFOLIO TRANSACTIONS
A. HOW SECURITIES ARE PURCHASED AND SOLD
Purchases and sales of portfolio securities that are fixed income securities
(for instance, money market instruments and bonds, notes and bills) usually are
principal transactions. In a principal transaction, the party from whom the
Funds purchase or to whom the Funds sell is acting on its own behalf (and not as
the agent of some other party such as its customers). These securities normally
are purchased directly from the issuer or from an underwriter or market maker
for the securities. There usually are no brokerage commissions paid for these
securities.
Purchases and sales of portfolio securities that are equity securities (for
instance common stock and preferred stock) are generally effected; (1) if the
security is traded on an exchange, through brokers who charge commissions; and
(2) if the security is traded in the "over-the-counter" markets, in a principal
transaction directly from a market maker. In transactions on stock exchanges,
commissions are negotiated. When transactions are executed in an
over-the-counter market, the Adviser will seek to deal with the primary market
makers; but when necessary in order to obtain best execution, the Adviser will
utilize the services of others.
Purchases of securities from underwriters of the securities include a disclosed
fixed commission or concession paid by the issuer to the underwriter, and
purchases from dealers serving as market makers include the spread between the
bid and asked price.
In the case of fixed income and equity securities traded in the over-the-counter
markets, there is generally no stated commission, but the price usually includes
an undisclosed commission or markup.
B. COMMISSIONS PAID
Table 5 in Appendix B shows the aggregate brokerage commissions with respect to
the Funds. The data presented are for the past three fiscal years.
C. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser of the Funds places orders for the purchase and sale of securities
with brokers and dealers selected by and in the discretion of the Adviser. No
Fund has any obligation to deal with any specific broker or dealer in the
execution of portfolio transactions. Allocations of transactions to brokers and
dealers and the frequency of transactions are determined by the Adviser in its
best judgment and in a manner deemed to be in the best interest of the Funds
rather than by any formula.
The Adviser of the Funds seeks "best execution" for all portfolio transactions.
This means that the Adviser seeks the most favorable price and execution
available. The Adviser's primary consideration in placing trades for the Funds
is prompt execution of orders in an effective manner and at the most favorable
price available.
1. CHOOSING BROKER-DEALERS
The Funds may not always pay the lowest commission or spread available. Rather,
in determining the amount of commissions (including certain dealer spreads) paid
in connection with securities transactions, the Adviser of the Funds takes into
account factors such as size of the order, difficulty of execution, efficiency
of the executing broker's facilities (including the research services described
below) and any risk assumed by the executing broker.
Consistent with applicable rules and the Adviser's duties, the Adviser may: (1)
consider sales of shares of the Funds as a factor in the selection of
broker-dealers to execute portfolio transactions for the Funds; and (2) take
into account payments made by brokers effecting transactions for the Funds
(these payments may be made to the Funds or to other persons on behalf of the
Funds for services provided to the Funds for which those other persons would be
obligated to pay.
17
<PAGE>
2. OBTAINING RESEARCH FROM BROKERS
The Adviser of the Funds may give consideration to research services furnished
by brokers to the Adviser for its use and may cause the Funds to pay these
brokers a higher amount of commission than may be charged by other brokers. This
research is designed to augment the Adviser's own internal research and
investment strategy capabilities. This research may be used by the Adviser in
connection with services to clients other than the Funds, and not all research
services may be used by the Adviser in connection with the Funds. The Adviser's
fees are not reduced by reason of the Adviser's receipt of research services.
The Adviser of the Funds has full brokerage discretion. It evaluates the range
of quality of a broker's services in placing trades including securing best
price, confidentiality, clearance and settlement capabilities, promptness of
execution and the financial stability of the broker-dealer. Under certain
circumstances, the value of research provided by a broker-dealer may be a factor
in the selection of a broker. This research would include reports that are
common in the industry. Typically, the research will be used to service all of
the Adviser's accounts although a particular client may not benefit from all the
research received on each occasion. The nature of the services purchased for
clients include industry research reports and periodicals, quotation systems and
formal databases.
Occasionally, the Adviser may place an order with a broker and pay a slightly
higher commission than another broker might charge. If this is done it will be
because of the Adviser's need for specific research, for specific expertise a
firm may have in a particular type of transaction (due to factors such as size
or difficulty), or for speed/efficiency in execution. Since most of the
Adviser's brokerage commissions for research are for economic research on
specific companies or industries, and since the Adviser is involved with a
limited number of securities, most of the commission dollars spent for industry
and stock research directly benefit the clients.
There are occasions on which portfolio transactions may be executed as part of
concurrent authorizations to purchase or sell the same securities for more than
one account served by the Adviser, some of which accounts may have similar
investment objectives. Although such concurrent authorizations potentially could
be either advantageous or disadvantageous to any one or more particular
accounts, they will be effected only when the Adviser believes that to do so
will be in the best interest of the affected accounts. When such concurrent
authorizations occur, the objective will be to allocate the execution in a
manner which is deemed equitable to the accounts involved. Clients are typically
allocated securities with prices averaged on a per-share or per-bond basis.
In some cases, the client may direct the Adviser to use a broker or dealer of
the client's choice. If the client directs the Adviser to use a particular
broker, the Adviser may not be authorized to negotiate commissions and may be
unable to obtain volume discounts or best execution. In these cases, there could
be some disparity in commission charges among these clients.
3. TRANSACTIONS THROUGH AFFILIATES
The Adviser of the Funds may not effect brokerage transactions through
affiliates of the Adviser (or affiliates of those persons). The Board has not
adopted respective procedures.
4. OTHER ACCOUNTS OF THE ADVISER
Investment decisions for the Funds are made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser of the Funds or its affiliates. Investment decisions are the
product of many factors, including basic suitability for the particular client
involved. Thus, a particular security may be bought or sold for certain clients
even though it could have been bought or sold for other clients at the same
time. Likewise, a particular security may be bought for one or more clients when
one or more clients are selling the security. In some instances, one client may
sell a particular security to another client. It also sometimes happens that two
or more clients simultaneously purchase or sell the same security. In that
event, each day's transactions in such security are, insofar as is possible,
averaged as to price and allocated between such clients in a manner which, in
the respective Adviser's opinion, is equitable to each and in accordance with
the amount being purchased or sold by each. There may be circumstances when
purchases or sales of a portfolio security for one client could have an adverse
effect on another client that has a position in that security. In addition, when
purchases or sales of the same security for the Funds and other client accounts
managed by the Adviser occurs contemporaneously, the purchase or sale orders may
18
<PAGE>
be aggregated in order to obtain any price advantages available to large
denomination purchases or sales.
5. PORTFOLIO TURNOVER
The frequency of portfolio transactions of the Funds (the portfolio turnover
rate) will vary from year to year depending on many factors. Portfolio turnover
rate is reported in the Prospectus. From time to time the Fund may engage in
active short-term trading to take advantage of price movements affecting
individual issues, groups of issues or markets. The Funds expects normal
turnover in the range of 50-75%, although there can be periods of greater or
lesser action based upon market and corporate earnings activity. 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 the Fund and a possible increase in
short-term capital gains or losses. The Funds' commission costs are usually done
at rates far under those in the retail market.
D. SECURITIES OF REGULAR BROKER-DEALERS
From time to time the Funds may acquire and hold securities issued by its
"regular brokers and dealers" or the parents of those brokers and dealers. For
this purpose, regular brokers and dealers means the 10 brokers or dealers that:
(1) received the greatest amount of brokerage commissions during the Funds' last
fiscal year; (2) engaged in the largest amount of principal transactions for
portfolio transactions of the Funds during the Funds' last fiscal year; or (3)
sold the largest amount of the Funds' shares during the Funds' last fiscal year.
Following is a list of the regular brokers and dealers of the Funds whose
securities (or the securities of the parent company) were acquired or held
during the past fiscal year and the aggregate value of the Funds' holdings of
those securities as of the Funds' most recent fiscal year.
<TABLE>
<S> <C>
REGULAR BROKER OR DEALER VALUE OF SECURITIES HELD
............................................................ .........................................................
CUTLER CORE FUND
Merrill Lynch & Co., Inc. $1,670,000
</TABLE>
19
<PAGE>
6. ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
A. GENERAL INFORMATION
Shareholders may effect purchases or redemptions or request any shareholder
privilege in person at the Transfer Agent's offices located at Two Portland
Square, Portland, Maine 04101.
The Funds accept orders for the purchase or redemption of shares on any weekday
except days when the New York Stock Exchange is closed.
B. ADDITIONAL PURCHASE INFORMATION
Shares of the Funds are sold on a continuous basis by the distributor at net
asset value ("NAV") per share without any sales charge. Accordingly, the
offering price per share is the same as the NAV per share. Historical
information relating to each Fund's NAV per share is contained in the Funds'
financial statements (specifically in the statements of assets and liabilities).
The Funds reserve the right to refuse any purchase request in excess of 1% of
the Funds' total assets.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, the Funds may accept portfolio securities that meet the investment
objective and policies of the Funds as payment for Fund shares. The Funds will
only accept securities that: (1) are not restricted as to transfer by law and
are not illiquid; and (2) have a value that is readily ascertainable (and not
established only by valuation procedures).
1. IRAS
All contributions into an IRA through the automatic investing service are
treated as IRA contributions made during the year the investment is received.
2. UGMAS/UTMAS
If the trustee's name is not in the account registration of a gift or transfer
to minor ("UGMA/UTMA") account, the investor must provide a copy of the trust
document.
3. PURCHASES THROUGH FINANCIAL INSTITUTIONS
You may purchase and redeem shares through certain broker-dealers, banks and
other financial institutions. Financial institutions may charge their customers
a fee for their services and are responsible for promptly transmitting purchase,
redemption and other requests to the Funds.
If you purchase shares through a financial institution, you will be subject to
the institution's procedures, which may include charges, limitations, investment
minimums, cutoff times and restrictions in addition to, or different from, those
applicable when you invest in the Funds directly. When you purchase the Funds'
shares through a financial institution, you may or may not be the shareholder of
record and, subject to your institution's procedures, you may have Fund shares
transferred into your name. There is typically a three-day settlement period for
purchases and redemptions through broker-dealers. Certain financial institutions
may also enter purchase orders with payment to follow.
You may not be eligible for certain shareholder services when you purchase
shares through a financial institution. Contact your institution for further
information. If you hold shares through a financial institution, the Fund may
confirm purchases and redemptions to the financial institution, which will
provide you with confirmations and periodic statements. The Funds are not
responsible for the failure of any financial institution to carry out its
obligations.
20
<PAGE>
Investors purchasing shares of the Funds through a financial institution should
read any materials and information provided by the financial institution to
acquaint themselves with its procedures and any fees that the institution may
charge.
C. ADDITIONAL REDEMPTION INFORMATION
A Fund may redeem shares involuntarily to reimburse the 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.
1. SUSPENSION OF RIGHT OF REDEMPTION
The right of redemption may not be suspended, except for any period during
which: (1) the New York Stock Exchange, Inc. is closed (other than customary
weekend and holiday closings) or during which the SEC determines that trading
thereon is restricted; (2) an emergency (as determined by the SEC) exists as a
result of which disposal by the Funds of their securities is not reasonably
practicable or as a result of which it is not reasonably practicable for the
Funds fairly to determine the value of their net assets; or (3) the SEC may by
order permit for the protection of the shareholders of the Funds.
2. REDEMPTION IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if the Funds' management determines
conditions exist which would make payment in cash detrimental to the best
interests of the Funds. If redemption proceeds are paid wholly or partly in
portfolio securities, brokerage costs may be incurred by the shareholder in
converting the securities to cash. In addition, the shareholder will bear the
risk of any market fluctuation in the price of a security from the time of
valuation by the Fund(s) to the time of transfer to the shareholder.
Accordingly, the redeeming shareholder, when selling a security received in
kind, may receive cash equal to a lesser or greater amount than the total value
of the portfolio securities received in redemption of Fund shares. The Fund(s)
will endeavor to transfer the security to the shareholder as quickly as
practicable, subject to the shareholder's timely provision of information
pertaining to the custodial account to which such securities will be
transferred. The shareholder will bear all costs associated with the in-kind
distribution of portfolio securities. The Funds have filed an election with the
SEC pursuant to which a 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
the opinion of the Funds' management, however, the amount of a redemption
request would have to be significantly greater than $250,000 or 1% of total net
assets before a redemption wholly or partly in portfolio securities would be
made. In connection with a redemption in kind, the shareholder has the option to
receive in cash the lesser of $250,000 or 1% of the Fund's total net assets. The
shareholder may waive this right.
D. NAV DETERMINATION
The price of a Fund's shares on any given day is its NAV per share. NAV is
calculated for each Fund on each day that the New York Stock Exchange is open
for trading. Currently, the Exchange is closed on weekends and New Year's Day,
Dr. Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. In determining
the Funds' NAV per share, securities for which market quotations are readily
available are valued at current market value using the last reported sales
price. If no sale price is reported, the average of the last bid and ask price
is used. If no average price is available, the last bid price is used. If market
quotations are not readily available, then securities are valued at fair value
as determined by the Board (or its delegate).
E. DISTRIBUTIONS
Unless a shareholder has elected to receive distributions in cash, distributions
of net investment income will be reinvested at the applicable Fund's NAV per
share as of the last day of the period with respect to which the distribution is
paid. Distributions of capital gain will be reinvested at the NAV per share of
the Fund on the payment date for the distribution. Cash payments may be made
21
<PAGE>
more than seven days following the date on which distributions would otherwise
be reinvested.
A distribution will be treated as paid to you on December 31 of the current
calendar year if it is declared by a Fund in October, November or December with
a record date in such a month and paid by the Fund during January of the
following calendar year.
7. TAXATION
The tax information set forth in the Prospectus and the information in this
section relates solely to U.S. federal income tax law and assumes that each Fund
qualifies as a regulated investment company (as discussed below). Such
information is only a summary of certain key federal income tax considerations
affecting the Funds and their shareholders that are not described in the
prospectus. No attempt has been made to present a complete explanation of the
federal tax treatment of the Funds or the implications to shareholders. The
discussions here and in the prospectus are not intended as substitutes for
careful tax planning.
This "Taxation" section is based on the Code and applicable regulations in
effect on the date hereof. Future legislative or administrative changes or court
decisions may significantly change the tax rules applicable to the Funds and
their shareholders. Any of these changes or court decisions may have a
retroactive effect.
ALL INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISOR AS TO THE FEDERAL, STATE,
LOCAL AND FOREIGN TAX PROVISIONS APPLICABLE TO THEM.
A. QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Funds intend for each tax year to qualify as a "regulated investment
company" under the Code. This qualification does not involve governmental
supervision of management or investment practices or policies of the Funds.
The tax year-end of the Funds is December 31.
1. MEANING OF QUALIFICATION
As a regulated investment company, a Fund will not be subject to federal income
tax on the portion of its investment company taxable income (i.e., taxable
interest, dividends and other taxable ordinary income, net of expenses, and the
exces of short-term capital gains over long-term capital losses) and net capital
gain (i.e., the excess of long-term capital gains over short-term capital
losses) that it distributes to shareholders. In order to qualify as a regulated
investment company each Fund must satisfy the following requirements:
o The Fund must distribute at least 90% of its investment company
taxable income for the tax year. (Certain distributions made by a Fund
after the close of its tax year are considered distributions
attributable to the previous tax year for purposes of satisfying this
requirement.)
o The Fund must derive at least 90% of its gross income from certain
types of income derived with respect to its business of investing.
o The Fund must satisfy the following asset diversification test at the
close of each quarter of the Fund's tax year: (1) at least 50% of the
value of the Fund's assets must consist of cash and cash items, U.S.
government securities, securities of other regulated investment
companies, and securities of other issuers (as to which the Fund has
not invested more than 5% of the value of the Fund's total assets in
securities of the issuer and as to which the Fund does not hold more
than 10% of the outstanding voting securities of the issuer); and (2)
no more than 25% of the value of the Fund's total assets may be
invested in the securities of any one issuer (other than U.S.
Government securities and securities of other regulated investment
companies), or in two or more issuers which the Fund controls and
which are engaged in the same or similar trades or businesses.
22
<PAGE>
2. FAILURE TO QUALIFY
If for any tax year a Fund does not qualify as a regulated investment company,
all of its taxable income (including its net capital gain) will be subject to
tax at regular corporate rates without any deduction for dividends to
shareholders, and the dividends will be taxable to the shareholders as ordinary
income to the extent of the Fund's current and accumulated earnings and profits.
A portion of these distributions generally may be eligible for the
dividends-received deduction in the case of corporate shareholders.
Failure to qualify as a regulated investment company would thus have a negative
impact on a Fund's income and performance. It is possible that a Fund will not
qualify as a regulated investment company in any given tax year.
B. FUND DISTRIBUTIONS
Each Fund anticipates distributing substantially all of its investment company
taxable income for each tax year. A portion of these distributions are taxable
to shareholders as ordinary income. These distributions may qualify for the 70%
dividends-received deduction for corporate shareholders.
Each Fund anticipates distributing substantially all of its net capital gain for
each tax year. These distributions generally are made only once a year, usually
in December, but the Funds may make additional distributions of net capital gain
at any time during the year. These distributions are taxable to shareholders as
long-term capital gain, regardless of how long a shareholder has held shares.
The Funds may have capital loss carryovers (unutilized capital losses from prior
years). These capital loss carryovers (which can be used for up to eight years)
may be used to offset any current capital gain (whether short- or long-term).
All capital loss carryovers are listed in the Funds' financial statements. Any
such losses may not be carried back.
Distributions by the Funds that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital. Return of capital
distributions reduce the shareholder's tax basis in the shares and are treated
as gain from the sale of the shares to the extent the shareholder's basis would
be reduced below zero.
All distributions by the Funds will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Funds (or of another Fund). Shareholders receiving a
distribution in the form of additional shares will be treated as receiving a
distribution in an amount equal to the fair market value of the shares received,
determined as of the reinvestment date.
A shareholder may purchase shares whose net asset value at the time reflects
undistributed net investment income or recognized capital gain, or unrealized
appreciation in the value of the assets of the Funds. Distributions of these
amounts are taxable to the shareholder in the manner described above, although
the distribution economically constitutes a return of capital to the
shareholder.
Shareholders purchasing shares of the Funds just prior to the ex-dividend date
of a distribution will be taxed on the entire amount of the distribution
received, even though the net asset value per share on the date of the purchase
reflected the amount of the distribution.
If a shareholder holds shares for six months or less and redeems shares at a
loss after receiving a capital gain distribution, the loss will be treated as a
long-term capital loss to the extent of the distribution.
Ordinarily, shareholders are required to take distributions by the Funds into
account in the year in which they are made. A distribution declared in October,
November or December of any year and payable to shareholders of record on a
specified date in those months, however, is deemed to be received by the
shareholders (and made by the Funds) on December 31 of that calendar year if the
distribution is actually paid in January of the following year.
Shareholders will be advised annually as to the U.S. federal income tax
consequences of distributions made (or deemed made) to them during the year.
23
<PAGE>
C. FEDERAL EXCISE TAX
A 4% non-deductible excise tax is imposed on a regulated investment company that
fails to distribute in each calendar year an amount equal to: (1) 98% of its
ordinary taxable income for the calendar year; and (2) 98% of its capital gain
net income for the one-year period ended on October 31 of the calendar year. If
a Fund changes its tax year-end to November 30 or December 31, it may elect to
use that date instead of the October 31 date in making this calculation. The
balance of the Funds' income must be distributed during the next calendar year.
The Funds will be treated as having distributed any amount on which they are
subject to income tax for any tax year ending in a calendar year.
For purposes of calculating the excise tax, the Funds: (1) reduce their capital
gain net income (but not below its net capital gain) by the amount of any net
ordinary loss for the calendar year and (2) exclude foreign currency gains and
losses incurred after October 31 of any year (or November 30 or December 31 if
it has made the election described above) in determining the amount of ordinary
taxable income for the current calendar year. The Funds will include foreign
currency gains and losses incurred after October 31 in determining ordinary
taxable income for the succeeding calendar year.
The Funds intend to make sufficient distributions of ordinary taxable income and
capital gain net income prior to the end of each calendar year to avoid
liability for the excise tax. Investors should note, however, that the Funds
might in certain circumstances be required to liquidate portfolio investments to
make sufficient distributions to avoid excise tax liability.
D. SALE OR REDEMPTION OF SHARES
In general, a shareholder will recognize gain or loss on the sale or redemption
of shares of a Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Funds within 30 days before or after the sale or
redemption (a so called "wash sale"). In general, any gain or loss arising from
the sale or redemption of shares of the Funds will be considered capital gain or
loss and will be long-term capital gain or loss if the shares were held for
longer than one year. Any capital loss arising from the sale or redemption of
shares held for six months or less, however, is treated as a long-term capital
loss to the extent of the amount of capital gain distributions received on such
shares. For this purpose, the special holding period rules of Code Section
246(c) (3) and (4) generally will apply in determining the holding period of
shares. Capital losses in any year are deductible only to the extent of capital
gains plus, in the case of a non-corporate taxpayer, $3,000 of ordinary income.
E. WITHHOLDING TAX
The Funds will be required in certain cases to withhold and remit to the U.S.
Treasury 31% of distributions, and the proceeds of redemptions of shares, paid
to any shareholder: (1) who has failed to provide correct taxpayer
identification number; (2) who is subject to backup withholding by the IRS for
failure to report the receipt of interest or dividend income properly; or (3)
who has failed to certify to the Funds that it is not subject to backup
withholding or that it is a corporation or other "exempt recipient."
F. FOREIGN SHAREHOLDERS
Taxation of a shareholder who under the Code is a nonresident alien individual,
foreign trust or estate, foreign corporation, or foreign partnership ("foreign
shareholder"), depends on whether the income from the Funds is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from the Funds is not effectively connected with a U.S. trade or
business carried on by a foreign shareholder, ordinary income distributions paid
to a foreign shareholder will be subject to U.S. withholding tax at the rate of
30% (or lower applicable treaty rate) upon the gross amount of the distribution.
The foreign shareholder generally would be exempt from U.S. federal income tax
on gain realized on the sale of shares of the Funds, capital gain distributions
from the Funds and amounts retained by the Funds that are designated as
undistributed capital gain.
24
<PAGE>
If the income from the Funds is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income
distributions, capital gain distributions, and any gain realized upon the sale
of shares of the Funds will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or U.S. corporations.
In the case of a noncorporate foreign shareholder, the Funds may be required to
withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Funds with proper notification of its foreign
status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty might be different from those described herein.
The tax rules of other countries with respect to distributions from the Funds
can differ from the rules for U.S. federal income taxation described above.
These foreign rules are not discussed herein. Foreign shareholders are urged to
consult their own tax advisers as to the consequences of foreign tax rules with
respect to an investment in the Funds, distributions from the Funds, the
applicability of foreign taxes and related matters.
G. STATE AND LOCAL TAXES
The tax rules of the various states of the U.S. and their local jurisdictions
with respect to distributions from the Funds can differ from the rules for U.S.
federal income taxation described above. These state and local rules are not
discussed herein. Shareholders are urged to consult their tax advisers as to the
consequences of state and local tax rules with respect to an investment in the
Funds, distributions from the Funds, the applicability of state and local taxes
and related matters.
25
<PAGE>
8. OTHER MATTERS
A. GENERAL
1. GENERAL INFORMATION
The Cutler Trust was organized as a business trust under the laws of the State
of Delaware on October 2, 1992. The Trust has operated under that name and as an
investment company since that date.
The Cutler Trust is registered as an open-end, management investment company
under the 1940 Act. The Trust is diversified as that term is defined by the 1940
Act. The Trust offers shares of beneficial interest in its two series. Cutler
Value Fund was formerly known as Cutler Approved List Equity Fund. Cutler Core
Fund was formerly known as Cutler Equity Income Fund.
The Trust has an unlimited number of authorized shares of beneficial interest.
The Board may, without shareholder approval, divide the authorized shares into
an unlimited number of separate series and may divide series into classes of
shares; the costs of doing so will be borne by the Trust.
The Trust will continue indefinitely until terminated.
Not all Funds of the Trust may be available for sale in the state in which you
reside. Please check with your investment professional to determine a Fund's
availability.
The Adviser, FFS and the Trust have adopted codes of ethics under Rule 17j-1 of
the 1940 Act which are designed to eliminate conflicts of interest between the
Funds and the personnel of the Trust, Adviser and FFS. Revised codes for the
Trust and Adviser will be reviewed by the Board to ensure compliance with the
recent amendments to Rule 17j-1 at its next regularly scheduled meeting.
2. SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of the Funds has equal dividend, distribution, liquidation and voting
rights, and fractional shares have those rights proportionately. Delaware law
does not require the Funds to hold annual meetings of shareholders, and it is
anticipated that shareholder meetings will be held only when specifically
required by federal or state law. There are no conversion or preemptive rights
in connection with shares of the Funds.
All shares, when issued in accordance with the terms of the offering, will be
fully paid and nonassessable.
A shareholder in a Fund is entitled to the shareholder's pro rata share of all
distributions arising from the Fund's assets and, upon redeeming shares, will
receive the portion of the Fund's net assets represented by the redeemed shares.
Shareholders representing 25% or more of a Fund's outstanding shares may, as set
forth in the Trust Instrument, call meetings of the Fund for any purpose related
to the Fund, including, in the case of a meeting of the Fund, the purpose of
voting on removal of one or more Trustees.
3. CERTAIN REORGANIZATION TRANSACTIONS
A Fund 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 Fund. The
Trustees may, without prior shareholder approval, change the form of
organization of the Funds by merger, consolidation or incorporation.
26
<PAGE>
B. FUND OWNERSHIP
As of June 30, 1999, the percentage of shares owned by all officers and Trustees
of the Trust as a group was less than 1% of the shares of the Funds.
Also as of that date, certain shareholders of record owned 5% or more of a class
of shares of the Funds. These shareholders and any shareholder known by the
Funds to own beneficially 5% or more of a class of shares of the Funds are
listed in Table 6 in Appendix B.
From time to time, certain shareholders may own a large percentage of the shares
of the Funds. Accordingly, those shareholders may be able to greatly affect (if
not determine) the outcome of a shareholder vote. As of June 30, 1999, the
following persons beneficially owned 25% or more of the shares of the Funds and
may be deemed to control the Funds. For each person listed that is a company,
the jurisdiction under the laws of which the company is organized (if
applicable) and the company's parents are listed.
CONTROLLING PERSON INFORMATION
<TABLE>
<S> <C>
SHAREHOLDER PERCENTAGE OF SHARES OWNED
.......................................................... ........................................................
CUTLER CORE FUND
NONE 0
.......................................................... ........................................................
CUTLER VALUE FUND
NONE 0
</TABLE>
C. LIMITATIONS ON SHAREHOLDERS' AND TRUSTEES' AND OFFICERS' LIABILITY
Delaware law provides that Fund shareholders are entitled to the same
limitations of personal liability extended to stockholders of private
corporations for profit. In the past, the Funds believe that the securities
regulators of some states, however, have indicated that they and the courts in
their state may decline to apply Delaware law on this point.
The By-laws of the Trust provide that the Trustees and officers shall be
indemnified to the fullest extent consistent with applicable laws. However, any
Trustee or officer will not be protected against liability to the Funds or their
shareholders 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.
D. REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in the
Funds' registration statement filed with the SEC under the 1933 Act with respect
to the securities offered hereby. The registration statement, including the
exhibits filed therewith, may be examined at the office of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents are not necessarily complete, and, in each instance,
are qualified by, and reference is made to the copy of such contract or other
documents filed as exhibits to the registration statement.
E. FINANCIAL STATEMENTS
The financial statements of the Funds for the year ended June 30, 1999 included
in the Annual Report to shareholders of the Funds are incorporated herein by
reference. These financial statements only include the schedule of investments,
statement of assets and liabilities, statement of operations, statement of
changes in net assets, financial highlights, notes and independent auditors'
report.
27
<PAGE>
APPENDIX A DESCRIPTION OF SECURITIES RATINGS
A. CORPORATE BONDS (INCLUDING CONVERTIBLE BONDS)
1. MOODY'S INVESTORS SERVICE, INC.
AAA Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a
large or by an exceptionally stable margin and principal is secure.
While the various protective elements are likely to change, such
changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
AA Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are
generally known as high-grade bonds. They are rated lower than the
best bonds because margins of protection may not be as large as in
Aaa securities or fluctuation of protective elements may be of
greater amplitude or there may be other elements present that make
the long-term risk appear somewhat larger than the Aaa securities.
A Bonds that are rated A possess many favorable investment attributes
and are to be considered as upper-medium-grade obligations. Factors
giving security to principal and interest are considered adequate,
but elements may be present which suggest a susceptibility to
impairment some time in the future.
BAA Bonds that are rated Baa are considered as medium-grade obligations
(i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the
present but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such
bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.
BA Bonds that are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the
protection of interest and principal payments may be very moderate,
and thereby not well safeguarded during both good and bad times over
the future. Uncertainty of position characterizes bonds in this
class.
B Bonds that are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments
or of maintenance of other terms of the contract over any long
period of time may be small.
CAA Bonds that are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to
principal or interest. Ca Bonds that are rated Ca represent
obligations that are speculative in a high degree. Such issues are
often in default or have other marked shortcomings.
C Bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects
of ever attaining any real investment standing.
NOTE Moody's applies numerical modifiers 1, 2, and 3 in each generic rating
classification from Aa through Caa. The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the
modifier 2 indicates a mid-range ranking; and the modifier 3 indicates
a ranking in the lower end of that generic rating category.
A-1
<PAGE>
2. STANDARD AND POOR'S CORPORATION
AAA An obligation rated AAA has the highest rating assigned by Standard
& Poor's. The obligor's capacity to meet its financial commitment
on the obligation is extremely strong.
AA An obligation rated AA differs from the highest-rated obligations
only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's
capacity to meet its financial commitment on the obligation is
still strong.
BBB An obligation rated BBB exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet
its financial commitment on the obligation.
NOTE Obligations rated BB, B, CCC, CC, and C are regarded as having
significant speculative characteristics. BB indicates the least
degree of speculation and C the highest. While such obligations
will likely have some quality and protective characteristics, large
uncertainties or major exposures to adverse conditions may outweigh
these.
BB An obligation rated BB is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties
or exposure to adverse business, financial, or economic conditions
that could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
B An obligation rated B is more vulnerable to nonpayment than
obligations rated BB, but the obligor currently has the capacity to
meet its financial commitment on the obligation. Adverse business,
financial, or economic conditions will likely impair the obligor's
capacity or willingness to meet its financial commitment on the
obligation.
CCC An obligation rated CCC is currently vulnerable to nonpayment, and
is dependent upon favorable business, financial, and economic
conditions for the obligor to meet its financial commitment on the
obligation. In the event of adverse business, financial, or
economic conditions, the obligor is not likely to have the capacity
to meet its financial commitment on the obligation.
CC An obligation rated CC is currently highly vulnerable to
nonpayment.
C The C rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but
payments on this obligation are being continued.
D An obligation rated D is in payment default. The D rating category
is used when payments on an obligation are not made on the date due
even if the applicable grace period has not expired, unless
Standard & Poor's believes that such payments will be made during
such grace period. The D rating also will be used upon the filing
of a bankruptcy petition or the taking of a similar action if
payments on an obligation are jeopardized.
NOTE Plus (+) or minus (-). The ratings from AA to CCC may be modified
by the addition of a plus or minus sign to show relative standing
within the major rating categories.
The `r' symbol is attached to the ratings of instruments with
significant noncredit risks. It highlights risks to principal or
volatility of expected returns that are not addressed in the credit
rating. Examples include: obligations linked or indexed to
equities, currencies, or commodities; obligations exposed to severe
prepayment risk-such as interest-only or principal-only mortgage
securities; and obligations with unusually risky interest terms,
such as inverse floaters.
A-2
<PAGE>
3. DUFF & PHELPS CREDIT RATING CO.
AAA Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
AA+ High credit quality. Protection factors are strong. Risk is modest
AA but may vary slightly from time to time because of economic
conditions.
A+,A, Protection factors are average but adequate. However, risk factors
A- are more variable in periods of greater economic stress.
BBB+ Below-average protection factors but still considered sufficient
BBB for prudent investment. Considerable variability in risk during
BBB- economic cycles.
BB+ Below investment grade but deemed likely to meet obligations when
BB due. Present or prospective financial protection factors
BB- fluctuate according to industry conditions. Overall quality may
move up or down frequently within this category.
B+ Below investment grade and possessing risk that obligations will
B not be met when due. Financial protection factors will fluctuate
B- widely according to economic cycles, industry conditions and/or
company fortunes. Potential exists for frequent changes in the
rating within this category or into a higher or lower rating
grade.
CCC Well below investment-grade securities. Considerable uncertainty
exists as to timely payment of principal, interest or preferred
dividends. Protection factors are narrow and risk can be
substantial with unfavorable economic/industry conditions, and/or
with unfavorable company developments.
DD Defaulted debt obligations. Issuer failed to meet scheduled
principal and/or interest payments.
DP Preferred stock with dividend arrearages.
4. FITCH IBCA, INC.
INVESTMENT GRADE
AAA Highest credit quality. `AAA' ratings denote the lowest expectation
of credit risk. They are assigned only in case of exceptionally
strong capacity for timely payment of financial commitments. This
capacity is highly unlikely to be adversely affected by foreseeable
events.
AA Very high credit quality. `AA' ratings denote a very low expectation
of credit risk. They indicate very strong capacity for timely payment
of financial commitments. This capacity is not significantly
vulnerable to foreseeable events.
A High credit quality. `A' ratings denote a low expectation of credit
risk. The capacity for timely payment of financial commitments is
considered strong. This capacity may, nevertheless, be more
vulnerable to changes in circumstances or in economic conditions than
is the case for higher ratings.
BBB Good credit quality. `BBB' ratings indicate that there is currently a
low expectation of credit risk. The capacity for timely payment of
financial commitments is considered adequate, but adverse changes in
circumstances and in economic conditions are more likely to impair
this capacity. This is the lowest investment-grade category.
A-3
<PAGE>
SPECULATIVE GRADE
BB Speculative. `BB' ratings indicate that there is a possibility of
credit risk developing, particularly as the result of adverse
economic change over time; however, business or financial
alternatives may be available to allow financial commitments to be
met. Securities rated in this category are not investment grade.
B Highly speculative. `B' ratings indicate that significant credit
risk is present, but a limited margin of safety remains. Financial
commitments are currently being met; however, capacity for continued
payment is contingent upon a sustained, favorable business and
economic environment.
CCC, High default risk. Default is a real possibility. Capacity for
CC, C meeting financial commitments is solely reliant upon sustained,
favorable business or economic developments. A `CC' rating indicates
that default of some kind appears probable. `C' ratings signal
imminent default.
DDD, DD, Default. Securities are not meeting current obligations and are
D extremely speculative. `DDD' designates the highest potential for
recovery of amounts outstanding on any securities involved. For
U.S. corporates, for example, `DD' indicates expected recovery of
50% - 90% of such outstandings and `D' the lowest recovery
potential, i.e. below 50%.
B. PREFERRED STOCK
1. MOODY'S INVESTORS SERVICE
AAA An issue that is rated "aaa" is considered to be a top-quality
preferred stock. This rating indicates good asset protection and
the least risk of dividend impairment within the universe of
preferred stocks.
AA An issue that is rated "aa" is considered a high-grade preferred
stock. This rating indicates that there is a reasonable assurance
the earnings and asset protection will remain relatively well
maintained in the foreseeable future.
A An issue which is rated "a" is considered to be an upper-medium
grade preferred stock. While risks are judged to be somewhat
greater then in the "aaa" and "aa" classification, earnings and
asset protection are, nevertheless, expected to be maintained at
adequate levels.
BAA An issue that is rated "baa" is considered to be a medium-grade
preferred stock, neither highly protected nor poorly secured.
Earnings and asset protection appear adequate at present but may be
questionable over any great length of time.
BA An issue which is rated "ba" is considered to have speculative
elements and its future cannot be considered well assured. Earnings
and asset protection may be very moderate and not well safeguarded
during adverse periods. Uncertainty of position characterizes
preferred stocks in this class.
B An issue that is rated "b" generally lacks the characteristics of a
desirable investment. Assurance of dividend payments and
maintenance of other terms of the issue over any long period of
time may be small.
CAA An issue that is rated "caa" is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the
future status of payments.
CA An issue that is rated "ca" is speculative in a high degree and is
likely to be in arrears on dividends with little likelihood of
eventual payments.
C This is the lowest rated class of preferred or preference stock.
Issues so rated can thus be regarded as having extremely poor
prospects of ever attaining any real investment standing.
A-4
<PAGE>
NOTE Moody's applies numerical modifiers 1, 2, and 3 in each rating
classification: the modifier 1 indicates that the security ranks in
the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking and the modifier 3 indicates that the
issue ranks in the lower end of its generic rating category.
2. STANDARD & POOR'S
AAA This is the highest rating that may be assigned by Standard &
Poor's to a preferred stock issue and indicates an extremely strong
capacity to pay the preferred stock obligations.
AA A preferred stock issue rated AA also qualifies as a high-quality,
fixed-income security. The capacity to pay preferred stock
obligations is very strong, although not as overwhelming as for
issues rated AAA.
A An issue rated A is backed by a sound capacity to pay the preferred
stock obligations, although it is somewhat more susceptible to the
adverse effects of changes in circumstances and economic
conditions.
BBB An issue rated BBB is regarded as backed by an adequate capacity to
pay the preferred stock obligations. Whereas it normally exhibits
adequate protection parameters, adverse economic conditions or
changing circumstances are more likely to lead to a weakened
capacity to make payments for a preferred stock in this category
than for issues in the A category.
BB, B, Preferred stock rated BB, B, and CCC is regarded, on balance, as
CCC predominantly speculative with respect to the issuer's capacity
to pay preferred stock obligations. BB indicates the lowest
degree of speculation and CCC the highest. While such issues will
likely have some quality and protective characteristics, large
uncertainties or major risk exposures to adverse conditions
outweigh these.
CC The rating CC is reserved for a preferred stock issue that is in
arrears on dividends or sinking fund payments, but that is
currently paying.
C A preferred stock rated C is a nonpaying issue.
D A preferred stock rated D is a nonpaying issue with the issuer in
default on debt instruments.
N.R. This indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that
Standard & Poor's does not rate a particular type of obligation as
a matter of policy.
NOTE Plus (+) or minus (-). To provide more detailed indications of
preferred stock quality, ratings from AA to CCC may be modified by
the addition of a plus or minus sign to show relative standing
within the major rating categories.
A-5
<PAGE>
C. SHORT TERM RATINGS
1. MOODY'S INVESTORS SERVICE
Moody's employs the following three designations, all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:
PRIME-1 Issuers rated Prime-1 (or supporting institutions) have a
superior ability for repayment of senior short-term debt
obligations. Prime-1 repayment ability will often be evidenced
by many of the following characteristics:
o Leading market positions in well-established industries.
o High rates of return on funds employed.
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection.
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation.
o Well-established access to a range of financial markets and
assured sources of alternate liquidity.
PRIME-2 Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations.
This will normally be evidenced by many of the characteristics
cited above but to a lesser degree. Earnings trends and coverage
ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity
is maintained.
PRIME-3 Issuers rated Prime-3 (or supporting institutions) have an
acceptable ability for repayment of senior short-term
obligations. The effect of industry characteristics and market
compositions may be more pronounced. Variability in earnings and
profitability may result in changes in the level of debt
protection measurements and may require relatively high
financial leverage. Adequate alternate liquidity is maintained.
NOT
PRIME Issuers rated Not Prime do not fall within any of the Prime
rating categories.
2. STANDARD & POOR'S
A-1 A short-term obligation rated A-1 is rated in the highest
category by Standard & Poor's. The obligor's capacity to meet
its financial commitment on the obligation is strong. Within
this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its
financial commitment on these obligations is extremely strong.
A-2 A short-term obligation rated A-2 is somewhat more susceptible
to the adverse effects of changes in circumstances and economic
conditions than obligations in higher rating categories.
However, the obligor's capacity to meet its financial commitment
on the obligation is satisfactory.
A-3 A short-term obligation rated A-3 exhibits adequate protection
parameters. However, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity of
the obligor to meet its financial commitment on the obligation.
B A short-term obligation rated B is regarded as having
significant speculative characteristics. The obligor currently
has the capacity to meet its financial commitment on the
obligation; however, it faces major ongoing uncertainties that
could lead to the obligor's inadequate capacity to meet its
financial commitment on the obligation.
C A short-term obligation rated C is currently vulnerable to
nonpayment and is dependent upon favorable business, financial,
and economic conditions for the obligor to meet its financial
commitment on the obligation.
D A short-term obligation rated D is in payment default. The D
rating category is used when payments on an obligation are not
made on the date due even if the applicable grace period has not
expired, unless Standard & Poor's believes that such payments
will be made during such grace period. The D rating also will be
used upon the filing of a bankruptcy petition or the taking of a
similar action if payments on an obligation are jeopardized.
A-6
<PAGE>
3. FITCH IBCA, INC.
F1 Obligations assigned this rating have the highest capacity for
timely repayment under Fitch IBCA's national rating scale for that
country, relative to other obligations in the same country. This
rating is automatically assigned to all obligations issued or
guaranteed by the sovereign state. Where issues possess a
particularly strong credit feature, a "+" is added to the assigned
rating.
F2 Obligations supported by a strong capacity for timely repayment
relative to other obligors in the same country. However, the
relative degree of risk is slightly higher than for issues
classified as `A1' and capacity for timely repayment may be
susceptible to adverse change sin business, economic, or financial
conditions.
F3 Obligations supported by an adequate capacity for timely repayment
relative to other obligors in the same country. Such capacity is
more susceptible to adverse changes in business, economic, or
financial conditions than for obligations in higher categories.
B Obligations for which the capacity for timely repayment is
uncertain relative to other obligors in the same country. The
capacity for timely repayment is susceptible to adverse changes in
business, economic, or financial conditions.
C Obligations for which there is a high risk of default to other
obligors in the same country or which are in default.
A-7
<PAGE>
APPENDIX B MISCELLANEOUS TABLES
TABLE 1 - INVESTMENT ADVISORY FEES
The following Table shows the dollar amount of fees paid to the Adviser.
ADVISORY FEE PAID
............................................. .......................
CUTLER CORE FUND
Year Ended June 30, 1999 $560,854
Year Ended June 30, 1998 520,630
Year Ended June 30, 1997 385,655
CUTLER VALUE FUND
Year Ended June 30, 1999 $285,783
Year Ended June 30, 1998 279,760
Year Ended June 30, 1997 230,877
TABLE 2 - ADMINISTRATION FEES
The following Table shows the dollar amount of fees paid to FAdS.
ADMINISTRATION FEE
PAID
............................................. .......................
CUTLER CORE FUND
Year Ended June 30, 1999 $74,781
Year Ended June 30, 1998 69,417
Year Ended June 30, 1997 51,421
CUTLER VALUE FUND
Year Ended June 30, 1999 $38,104
Year Ended June 30, 1998 37,301
Year Ended June 30, 1997 30,783
TABLE 3 - ACCOUNTING FEES
The following Table shows the dollar amount of fees paid to FAcS.
ACCOUNTING FEE PAID
............................................. .......................
CUTLER CORE FUND
Year Ended June 30, 1999 $38,000
Year Ended June 30, 1998 39,000
Year Ended June 30, 1997 37,000
CUTLER VALUE FUND
Year Ended June 30, 1999 $40,000
Year Ended June 30, 1998 39,000
Year Ended June 30, 1997 44,000
B-2
<PAGE>
TABLE 4 - TRANSFER AGENCY FEES
The following table shows the dollar amount of shareholder service fees paid to
the Transfer Agent.
TRANSFER AGENCY FEE
PAID
............................................. .......................
CUTLER CORE FUND
Year Ended June 30, 1999 $17,138
Year Ended June 30, 1998 16,912
Year Ended June 30, 1997 15,479
CUTLER VALUE FUND
Year Ended June 30, 1999 $15,272
Year Ended June 30, 1998 14,938
Year Ended June 30, 1997 14,317
TABLE 5 - COMMISSIONS
The following table shows the aggregate brokerage commissions with respect to
the Funds.
AGGREGATE COMMISSION
PAID
............................................. ......................
CUTLER CORE FUND
Period Ended December 31, 1999 $57,000
Year Ended June 30, 1999 $ 79,706
Year Ended June 30, 1998 124,242
Year Ended June 30, 1997 25,417
CUTLER VALUE FUND
Period Ended December 31, 1999 $86,000
Year Ended June 30, 1999 $86,708
Year Ended June 30, 1998 38,272
Year Ended June 30, 1997 9,110
TABLE 6 - 5% SHAREHOLDERS
The following table lists the persons who owned of record 5% or more of the
outstanding shares of the Funds as of June 30, 1999.
NAME AND ADDRESS SHARES % OF FUND
............................................. .............. ..............
CUTLER CORE FUND
Enterprise Trust & Investment Co TTEE 543,132.851 11.28%
For Big Creek Lumber Profit Sharing
Ms. Ellen McCrary
3654 Highway 1
Davenport, CA 95017
B-3
<PAGE>
APPENDIX C PERFORMANCE DATA
TABLE 1 - TOTAL RETURNS
The average annual total returns of the Fund for the periods ended June 30,
1999, were as follows:
TOTAL RETURNS
CUTLER CORE FUND
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION
11.84% 20.66% - 16.06%
CUTLER VALUE FUND
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION
17.04% 22.32% - 17.49%
C-1
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS
(a) Trust Instrument of Registrantdated October 2, 1992 (see Note 1).
(b) By-Laws of Registrant dated October 2, 1992 (see Note 1).
(c) None.
(d) Investment Advisory Agreement between Registrant and Cutler & Company,
LLC dated December 31, 1992, and restated May 1, 1996 (see Note 2).
(e) Distribution Agreement between Registrant and Forum Fund Services, LLC.
dated November 1, 1999 (see Note 3).
(f) None.
(g) Custodian Agreement between Registrant and Forum Trust, LLC dated
as of April 20, 1999 (see Note 4).
(h)(1) Management Agreement between Registrant and Forum Administrative
Services, LLC dated September 11, 1996 (see Note 2).
(2) Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, LLC dated September 28, 1998 (see Note 2).
(3) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC dated October 1, 1997 (see Note 2).
(4) Shareholder Service Plan adopted by Registrant dated January 3, 1996 as
amended November 25, 1997 (see Note 2).
(5) Shareholder Service Agreement between Forum Administrative Services,
LLC and Bidwell & Co. dated December 17, 1997 (see Note 2).
(i) (1) Opinion of counsel (see Note 1).
(2) Consent of Dechert Price & Rhoads (see Note 3).
(j) Consent of independent auditor (filed herewith).
(k) None.
(l) Investment Representation letter (see Note 1).
(m) None.
(n) None.
(p) (1) Code of Ethics adopted by The Cutler Trust (filed herewith).
(2) Code of Ethics adopted by Cutler & Company, LLC (filed herewith).
(3) Code of Ethics adopted by Forum Fund Services, LLC (filed herewith).
Other Exhibits
Power of attorney, Kenneth R. Cutler, Trustee (see Note 4).
Power of attorney, Brooke Ashland, Trustee (see Note 4).
Power of attorney, Hatten S. Yoder, Jr., Trustee (see Note 4).
Power of attorney, Robert B. Watts, Jr., Trustee (see Note 4).
- --------------------------------------------------------------------------------
Notes:
1. Exhibit incorporated by reference as filed in Post-Effective Amendment
No. 4 via EDGAR on March 8, 1996, accession number 0000912057-96-004156.
2. Exhibit incorporated by reference as filed in Post-Effective Amendment
No. 8 via EDGAR on October 29, 1998, accession number
0001004402-98-000574.
3. Exhibit incorporated by reference as filed in Post-Effective Amendment
No. 10 via EDGAR on October 29, 1999, accession number
0001004402-99-000421.
<PAGE>
4. Exhibit incorporated by reference as filed in Post-Effective Amendment
No. 9 via EDGAR on August 31, 1999, accession number
0001004402-99-000370.
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None
ITEM 25. INDEMNIFICATION
The general effect of Section 10.02 of the Registrant's Trust
Instrument is to indemnify existing or former trustees and officers of
the Trust to the fullest extent permitted by law against liability and
expenses. There is no indemnification if, among other things, any such
person is adjudicated liable to the Registrant or its shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. This
description is modified in its entirety by the provisions of Section
10.02 of the Registrant's Trust Instrument.
Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to trustees, officers and controlling
persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the Registrant of expenses incurred or paid
by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by
such trustee, officer or controlling person in connection with the
securities being registered, the Registrant will, unless in the opinion
of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act
and will be governed by the final adjudication of such issue.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
The description of Cutler & Company, LLC under the caption "Management
of the Trust" in both the Prospectus and the Statement of Additional
Information, constituting Parts A and B, respectively, of this
Registration Statement, is incorporated by reference herein.
The following are the managing members of Cutler & Company, LLC,
including their business connections that are of a substantial nature.
The address of Cutler & Company, LLC is 503 Airport Road, Medford,
Oregon 97504.
<TABLE>
<S> <C> <C>
Name Title Business Connection
..................................... .................................. ...................................
Brooke Cutler Ashland Chief Executive Officer Cutler & Company, LLC
..................................... .................................. ...................................
..................................... .................................. ...................................
Stephen F. Brennan Director of Marketing Cutler & Company, LLC
..................................... .................................. ...................................
William G. Gossard Director of Fixed Income, Cutler & Company, LLC
Investment Committee Member
..................................... .................................. ...................................
Carol S. Fischer Chief Operating Officer Cutler & Company, LLC
</TABLE>
ITEM 27. PRINCIPAL UNDERWRITERS
(a) Forum Fund Services, LLC, Registrant's underwriter, serves as underwriter
for the following investment companies registered under the Investment
Company Act of 1940, as amended:
Forum Funds Sound Shore Fund, Inc.
Memorial Funds TrueCrossing Funds
Monarch Funds
(b) The following officer of Forum Fund Services, LLC holds the following
positions with Registrant. His business address is Two Portland Square,
Portland, Maine
<TABLE>
<S> <C> <C>
NAME POSITION WITH UNDERWRITER POSITION WITH REGISTRANT
------------------------------------- ---------------------------------- -----------------------------------
John Y. Keffer Director President and Trustee
------------------------------------- ---------------------------------- -----------------------------------
</TABLE>
<PAGE>
(c) Not Applicable.
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS
Accounts and records required to be maintained by Section 31(a) of the
1940 Act and the Rules thereunder, are maintained at the offices of
Forum Administrative Services, LLC, Two Portland Square, Portland,
Maine 04101, and Forum Shareholder Services, LLC, Two Portland Square,
Portland, Maine 04101. Accounts and records required to be maintained
under Rule 31a-1(b)(1) with respect to journals of receipts and
deliveries of securities and receipts and disbursements of cash are
maintained at the offices of the Registrant's custodian. Accounts and
records required to be maintained under Rule 31a-1(b)(5), (6) and (9)
are maintained at the offices of the Registrant's adviser, as listed in
Item 26 hereof.
ITEM 29. MANAGEMENT SERVICES
Not Applicable.
ITEM 30. UNDERTAKINGS
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, the Registrant certifies that it
meets all of the requirements for effectiveness of this registration statement
under rule 485(b) under the Securities Act of 1933, as amended, and has duly
caused this amendment to Registrant's registration statement to be signed on its
behalf by the undersigned, duly authorized in the City of Portland, State of
Maine on March 31, 2000.
THE CUTLER TRUST
By: /s/ John Y. Keffer
-------------------
John Y. Keffer, President
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed below by the following persons on March
31, 2000.
Principal Executive Officer
/s/ John Y. Keffer
John Y. Keffer, President
Principal Financial Officer
/s/ Dawn Taylor
Dawn Taylor, Assistant Treasurer
(c) All of the Trustees
/s/ John Y. Keffer
John Y. Keffer, Trustee
Brooke R. Ashland*, Trustee
Kenneth R. Cutler*, Trustee
Hatten S. Yoder, Jr.*, Trustee
Robert B. Watts, Jr.*, Trustee
By: /s/ David I. Goldstein
-----------------------
David I. Goldstein, Attorney in fact*
Pursuant to powers of attorney filed as Other Exhibits (a), (b), (c) and (d) to
this Registration Statement.
<PAGE>
INDEX TO EXHIBITS
(j) Consent of Independent Auditors
(p)(1) Code of Ethics adopted by the Cutler Trust
(p)(2) Code of Ethics adopted by Cutler & Company, LLC.
(p)(3) Code of Ethics adopted by Forum Fund Services, LLC
<PAGE>
Exhibit (j)
Independent Auditors' Consent
We consent to the use of our report dated August 6, 1999 for the Cutler Trust
incorporated herein by reference into the statement of additional information
and to the references to us under the headings, "Financial Highlights" in the
prospectus and "Independent Auditors" in the statement of additional
information.
/s/ Deloitte & Touche, LLP
Boston, Massachusetts
March 31, 2000
<PAGE>
Exhibit (p)(1)
THE CUTLER TRUST
CODE OF ETHICS
December, 1995
INTRODUCTION
This Code of Ethics has been adopted by The Cutler Trust (the "Trust")
with respect to each of its investment portfolios (each a "Portfolio") to
establish standards and procedures for the detection and prevention of
activities by which persons having knowledge of the investments and investment
intentions of a Portfolio may abuse their fiduciary duties to the Portfolio and
to deal with other types of conflict of interest situations.
No access person (as defined below) shall use any information
concerning the investments or investment intentions of a Portfolio, or his or
her ability to influence such investment intentions, for personal gain or in a
manner detrimental to the interests of a Portfolio. In addition, no access
person shall, directly or indirectly in connection with the purchase or sale of
a security held or being considered for purchase or sale by a Portfolio:
(i) employ any device, scheme or artifice to defraud the Portfolio;
(ii) make to the Portfolio, or the Portfolio's investment adviser or
distributor, any untrue statement of a material fact or omit to state
to any of the foregoing a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
(iii) engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Portfolio; or
(iv) engage in any manipulative practice with respect to the
Portfolio.
SECTION 1. DEFINITIONS
(a) "access person" means: any trustee, officer or advisory person
of the Trust.
(b) "access person account" means any securities account in which
an access person has a direct or indirect beneficial interest.
(c) "Act" means the Investment Company Act of 1940, as amended.
(d) "advisory person" means, with respect to Trust:
(i) any employee of the Trust or of any company in a control
relationship with the Trust who, in connection with the employee's
regular functions or duties, makes, participates in or obtains
<PAGE>
information regarding the purchase or sale of a security by the Trust,
or whose functions relate to the making of any recommendations with
respect to such purchases or sales; and
(ii) any natural person in a control relationship to the Trust that
obtains information concerning recommendations made to the Trust with
regard to the purchase or sale of a security.
(e) "being considered for purchase or sale" means, with respect to a
security, when a recommendation to purchase or sell that security has been
communicated and, with respect to the person making the recommendation, when
that person seriously considers making the recommendation.
(f) "beneficial owner" shall have the same meaning as that set forth in
Rule 16a-1(a) under the Securities Exchange Act of 1934, as amended, except that
the determination of direct or indirect beneficial ownership shall apply to all
securities which an access person has or acquires. A beneficial owner of a
security is any person who, directly or indirectly,
(i) through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (including the power to direct
voting) or investment power (including the power to direct a
disposition) in the security or
(ii) through any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary interest (the
opportunity, directly or indirectly, to profit or share in any profit
derived from a transaction in the subject securities) in a security.
(g) "control" shall mean the power to exercise a controlling influence
over the management or policies of a company, unless such power is solely the
result of an official position with such company.
(h) "security" shall mean a "security" as defined in Section 2(a)(36)
of the Act; provided, however, that the term security shall not include:
(i) obligations issued or guaranteed by the U.S. Treasury or any other
"Government security" as defined in Section 2(a)(16) of the Act with a
remaining maturity of 12 months or less;
(ii) bankers' acceptances and bank certificates of deposit;
(iii) commercial paper;
(iv) repurchase agreements covering any of the foregoing;
<PAGE>
(v) other money market instruments as determined by the Trust's Board
of Trustees; and
(vi) shares of registered open-end investment companies.
SECTION 2. PROHIBITED TRANSACTIONS
(a) Access Person Account Prohibitions. No access person account may
purchase or sell any security if, to the knowledge of any access person having
any beneficial ownership in the access person account, that security (i) is
being considered for purchase or sale by any Portfolio, (ii) is being purchased
or sold by any Portfolio, or (iii) has been purchased or sold by any Portfolio
within the preceding 5 business days. These prohibitions shall not apply if the
access person obtains advance clearance of the transaction in accordance with
the procedures in Section 3(b).
(b) Clearance of Transactions. The prohibitions of Section 3(a)
shall not apply to:
(i) purchases or sales affected in any account over which an access
person has no direct or indirect influence or control;
(ii) purchases which are part of an automatic dividend reinvestment
plan;
(iii) purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to the
extent such rights were acquired from such issuer; or
(iv) purchases or sales that are determined to be unlikely to have any
economic impact on the Trust or on a Portfolio's ability to purchase or
sell securities of the same type or other securities of the same
issuer. Any such determination shall be made by an appropriate officer
of the investment adviser to the subject Portfolio (such officer to
have no personal interest in the subject transaction) and must be
obtained in writing no more than 10 business days prior to the purchase
or sale of a security. Among other things, the following factors should
be considered in determining whether or not a proposed transaction
should be allowed:
(A) whether the amount or nature of the transaction or
person making it is likely to affect the price or market for
the security;
(B) whether the individual making the proposed purchase
or sale is likely to benefit from purchases or sales being
made or being considered by the Portfolio;
(C) whether the security proposed to be purchased or sold
is one that would qualify for purchase or sale by the
Portfolio;
<PAGE>
(c) Undue Influence; Disclosure of Personal Interest. No access person
shall cause or attempt to cause any Portfolio to purchase, sell or hold any
security in a manner calculated to create any personal benefit to the access
person or any access person account. No access person shall recommend any
securities transactions for a Portfolio without having disclosed his or her
interest, if any, in such securities or the issuer thereof, including, without
limitation, (i) his or her direct or indirect beneficial ownership of any
securities of such issuer, (ii) any position with such issuer or its affiliates
and (iii) any present or proposed business relationship between such issuer or
its affiliates, on the one hand, and such person or any party in which such
person has a significant interest, on the other hand.
(d) Corporate Opportunities. All access persons are expressly
prohibited from taking personal advantage of any opportunity properly belonging
to a Portfolio.
(e) Confidentiality. Except as required in the normal course of
carrying out an access person's business responsibilities, access persons are
prohibited from revealing information relating to the investment intentions or
activities of any Portfolio, or securities that are being considered for
purchase or sale on behalf of any Portfolio.
SECTION 3. REPORTING REQUIREMENTS
(a) Access Person Reporting. All access persons must report the
information described in Section 3(b) with respect to transactions in any
security in which the access person has, or by reason of such transaction
acquires, any direct or indirect beneficial ownership. All access persons of the
Trust must report to the Secretary of the Trust unless they are otherwise
required to report to the distributor or an investment adviser of the Trust
pursuant to a Code of Ethics adopted by those entities. No person is required to
make a report with respect to transactions effected for any account over which
such person does not have any direct or indirect influence or control.
(b) Trustee Reporting. A trustee of the Trust who is not an interested
person of the Trust as defined in Section 2(a)(19) of the Act need only report a
transaction if at the time of the transaction the trustee knew or, in the
ordinary course of fulfilling his or her official duties as a trustee should
have known, that, during the 15 day period immediately preceding or after the
date of the transaction in a security by the trustee, such security is or was
purchased or sold by a Portfolio or such purchase or sale is or was being
considered for purchase or sale by a Portfolio or an investment adviser to a
Portfolio.
(c) Report Contents. Every report shall be made no later than 10 days
after the end of the calendar quarter in which the transaction to which the
report relates was effected, and shall contain the following information:
(i) the date of the transaction, the title and number of shares,
and the principal amount of each security involved;
<PAGE>
(ii) the nature of the transaction (i.e., purchase, sale or other
type of acquisition or disposition);
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom
the transaction was effected.
(d) Report Qualification. Any report may contain a statement that the
report shall not be construed as an admission by the person making the report
that he or she has any direct or indirect beneficial ownership in the securities
to which the report relates.
SECTION 4. MISCELLANEOUS
(a) Notification Of Access Persons. The Secretary of each Trust shall
identify all access persons of the Trust and inform them of this Code of Ethics
and shall inform those access persons who are required to make reports to the
Secretary of their reporting requirements. Appendix A, as it may be amended from
time to time by the Secretary of the Trust is a list of access persons who must
report to the Secretary pursuant to Section 3 hereof.
(b) Sanctions. Upon discovering a violation of this Code of Ethics the
Board of Trustees of the Trust may impose such sanctions as it deems
appropriate, including, among other things, a letter of censure or suspension or
termination of the employment of the violator.
(c) Required Records. The Trust shall maintain and cause to be
maintained in an easily accessible place a copy of any Code of Ethics adopted by
a Portfolio pursuant to Rule 17j-1 under the Act which has been in effect during
the previous five (5) years. With respect to those access persons reporting to
the Secretary, the Trust shall maintain and cause to be maintained:
(i) a record of any violation of any Code of Ethics adopted by the
Trust pursuant to Rule 17j-1 under the Act and of any action taken as a
result of such violation, each for a period of not less than six years
in an easily accessible place;
(ii) a copy of each report made a period of not less than six years,
the first three years in an easily accessible place; and
(iii) a list of all persons who are, or within the past five years have
been, required to make reports pursuant to any Code of Ethics adopted
by a Portfolio pursuant to Rule 17j-1 under the Act, in an easily
accessible place.
(d) Reporting. At least annually the Secretary shall report to the
Board of Trustees of the Trust on all matters relating to the operation of this
Code.
<PAGE>
THE CUTLER TRUST
CODE OF ETHICS
APPENDIX A
ACCESS PERSONS REQUIRED TO REPORT TO THE SECRETARY
Dr. Hatten S. Yoder, Jr.
<PAGE>
Exhibit (p)(2)
CUTLER & COMPANY, INC.
CODE OF ETHICS
DECEMBER, 1995
INTRODUCTION
This Code of Ethics has been adopted by Cutler & Company, Inc.,
("Cutler") with respect to its investment advisory services to each investment
portfolio of The Cutler Trust (the "Trust"), the registered management
investment company for which it serves in that capacity (the "Funds") and with
respect to its investment advisory services to other clients (collectively with
the Funds "Clients") to establish standards and procedures for the detection and
prevention of activities by which persons having knowledge of the investments
and investment intentions of a Client may abuse their fiduciary duties to the
Client and to deal with other types of conflict of interest situations.
No access person (as defined below) shall use any information
concerning the investments or investment intentions of a Client, or his or her
ability to influence such investment intentions, for personal gain or in a
manner detrimental to the interests of a Client. In addition, no access person
shall, directly or indirectly:
(i) employ any device, scheme or artifice to defraud a Client or
engage in any manipulative practice with respect to a Client;
(ii) make to a Client any untrue statement of a material fact or omit
to state to a Client a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading; or
(iii) engage in any act, practice, or course of business which operates
or would operate as a fraud or deceit upon a Client.
SECTION 1. DEFINITIONS
(a) advisory representative means:
(i) each partner, director or officer of Cutler;
(ii) any employee of Cutler who makes any recommendation, who
participates in the determination of which recommendation shall be
made, or whose functions or duties relate to the determination of which
recommendation shall be made;
(iii) any employee of Cutler who, in connection with the employee's
duties, obtains any information concerning which securities are being
recommended prior to the effective dissemination of such
<PAGE>
recommendations or of the information concerning such recommendations;
and
(iv) any of the following persons who obtain information concerning
securities recommendations being made by Cutler prior to the effective
dissemination of such recommendations or of the information concerning
such recommendations: (A) persons controlling Cutler, (B) affiliates of
persons controlling Cutler and (C) and any affiliates of the persons
listed in clause (B).
(b) access person means each general partner, director, officer and
advisory person of Cutler and each employee of Cutler who acts as an officer of
the Trust.
(c) Account means any securities account in which an advisory
representative or access person has a direct or indirect beneficial interest.
(d) Act means the Investment Company Act of 1940, as amended.
(e) advisory person means any employee of Cutler who, in connection
with the person's regular functions or duties, makes, participates in or obtains
information regarding the purchase or sale of a security by a Fund, or whose
functions relate to the making of any recommendations with respect to such
purchases or sales; and any natural person who controls Cutler and who obtains
information concerning recommendations made to a Fund with regard to the
purchase or sale of a security.
(f) being considered for purchase or sale means, with respect to a
security, when a recommendation to purchase or sell that security has been
communicated and, with respect to the person making the recommendation, when
that person seriously considers making the recommendation.
(g) beneficial owner shall have the same meaning as that set forth in
Rule 16a-1(a) under the Securities Exchange Act of 1934, as amended, except that
the determination of direct or indirect beneficial ownership shall apply to all
securities which an access person has or acquires. A beneficial owner of a
security is any person who, directly or indirectly,
(i) through any contract, arrangement, understanding, relationship or
otherwise, has or shares voting power (including the power to direct
voting) or investment power (including the power to direct a
disposition) in the security or
(ii) through any contract, arrangement, understanding, relationship or
otherwise, has or shares a direct or indirect pecuniary interest (the
opportunity, directly or indirectly, to profit or share in any profit
derived from a transaction in the subject securities) in a security.
(h) security shall mean a "security" as defined in Section 2(a)(36) of
the Act; provided, however, that the term security shall not include:
<PAGE>
(i) obligations issued or guaranteed by the U.S. Treasury;
[CARVEOUTS UNDER 17J-1; DO THEY APPLY IN 204-2(12)
(II) BANKERS' ACCEPTANCES AND BANK CERTIFICATES OF DEPOSIT;
(III) COMMERCIAL PAPER;
(IV) REPURCHASE AGREEMENTS COVERING ANY OF THE FOREGOING; AND
(V) SHARES OF REGISTERED OPEN-END INVESTMENT COMPANIES.]
SECTION 2. PROHIBITED TRANSACTIONS
(a) Prohibitions. No Account may purchase or sell any security if, to
the knowledge of any access person or advisory representative having any
beneficial ownership in the Account, that security (i) is being considered for
purchase or sale by a Client, (ii) is being purchased or sold by a Client, or
(iii) has been purchased or sold by a Client within the preceding 5 business
days. These prohibitions shall not apply if the person obtains advance clearance
of the transaction in accordance with the procedures in Section 2(b).
(b) Clearance of Transactions. The prohibitions of Section 2(a)
shall not apply to:
(i) purchases or sales effected in any account over which the access
person or advisory representative has no direct or indirect influence
or control, including purchases which are part of an automatic dividend
reinvestment plan and purchases effected upon the exercise of rights
issued by an issuer pro rata to all holders of a class of its
securities, to the extent such rights were acquired from such issuer;
or
(ii) purchases or sales that are determined to be unlikely to have any
economic impact on a Fund's ability to purchase or sell securities of
the same type or other securities of the same issuer. Any such
determination shall be made by the chief compliance officer or his
designee (such person to have no personal interest in the subject
transaction) and must be obtained in writing no more than 10 business
days prior to the purchase or sale of a security. Among other things,
the following factors should be considered in determining whether or
not a proposed transaction should be allowed:
(A) whether the amount or nature of the transaction or
person making it is likely to affect the price or market for
the security;
(B) whether the individual making the proposed purchase or
sale is likely to benefit from purchases or sales being made
or being considered by the Fund;
<PAGE>
(C) whether the security proposed to be purchased or sold
is one that would qualify for purchase or sale by the Fund;
and
(D) the effect on all Clients.
(c) Undue Influence; Disclosure of Personal Interest. No access person
or advisory representative shall cause or attempt to cause any Client to
purchase, sell or hold any security in a manner calculated to create any
personal benefit to the access person or any Account. No access person or
advisory representative shall recommend any securities transactions for a Client
without having disclosed his or her interest, if any, in such securities or the
issuer thereof, including, without limitation, (i) his or her direct or indirect
beneficial ownership of any securities of such issuer, (ii) any position with
such issuer or its affiliates and (iii) any present or proposed business
relationship between such issuer or its affiliates, on the one hand, and such
person or any party in which such person has a significant interest, on the
other hand.
(d) Corporate Opportunities. All access persons or advisory
representatives are expressly prohibited from taking personal advantage of any
opportunity properly belonging to a Client.
(e) Confidentiality. Except as required in the normal course of
carrying out an access person's or advisory representative's business
responsibilities, access persons and advisory representatives are prohibited
from revealing information relating to the investment intentions or activities
of any Client, or securities that are being considered for purchase or sale on
behalf of any Client.
SECTION 3. REPORTING REQUIREMENTS
(a) Reporting. All access persons and advisory representatives must
report the information described in Section 3(b) with respect to transactions in
any security in which the person has, or by reason of such transaction acquires,
any direct or indirect beneficial ownership. No person is required to make a
report with respect to transactions effected for any account over which such
person does not have any direct or indirect influence or control. The filing of
duplicate confirms and statements on all securities transactions shall be deemed
to satisfy these reporting requirements.
(b) Report Contents. Every report shall be made by submitting a
duplicate confirmation to the chief compliance officer, which shall be submitted
no later than 10 days after the end of the calendar quarter in which the
transaction to which the report relates was effected, and shall contain, at a
minimum, the following information:
(i) the date of the transaction, the title and number of shares,
and the principal amount of each security involved;
(ii) the nature of the transaction (i.e., purchase, sale or other
type of acquisition or disposition);
<PAGE>
(iii) the price at which the transaction was effected; and
(iv) the name of the broker, dealer or bank with or through whom
the transaction was effected.
(c) Report Qualification. Any report may contain a statement that
the report shall not be construed as an admission by the person making the
report that he or she has any direct or indirect beneficial ownership in the
securities to which the report relates.
(d) Other Policies and Related Procedures. The reports required
herein are in addition to any reports that may be required under other policies
and procedures of Cutler.
SECTION 4. MISCELLANEOUS
(a) Notification. The chief compliance officer shall inform each
access person and advisory representative of the requirements of this Code of
Ethics.
(b) Sanctions. Upon discovering a violation of this Code, Cutler may
impose such sanctions as it deems appropriate, including, among other things, a
letter of censure or suspension or termination of the employment of the
violator. At least annually, Cutler shall notify the board of trustees of the
Trust of each violation of this Code with respect to the Funds by any of its
access persons and of any sanctions applied with respect thereto.
(c) Required Records. The chief compliance officer shall maintain
and cause to be maintained:
(i) a record of any violation of any Code of Ethics adopted by
Cutler and of any action taken as a result of such violation,
each for a period of not less than six years in an easily accessible
place;
(ii) a copy of each report made for a period of not less than six
years, the first three years in an easily accessible place;
(iii) a list of all persons who are, or within the past five years
have been, required to make reports pursuant to any Code of Ethics
adopted by Cutler, in an easily accessible place; and
(iv) a signed acknowledgment by each person who is then an
access person or advisory representative, in the form of Attachment A.
<PAGE>
CUTLER & COMPANY, INC.
CODE OF ETHICS
ATTACHMENT A
ACKNOWLEDGMENT
I have read and I understand the Cutler & Company, Inc. Code of Ethics, dated
December, 1995 and will comply with it in all respects.
Signature Date
Printed Name
THIS FORM MUST BE COMPLETED AND RETURNED TO THE CHIEF COMPLIANCE OFFICER.
<PAGE>
CUTLER & COMPANY, INC.
CODE OF ETHICS
ATTACHMENT B
LIST OF ACCESS PERSONS/ADVISORY REPRESENTATIVES
As of [date]:
[full name]
[full name]
[full name](ending [date])
[full name]
[full name](ending [date])
[full name](ending [date])
As of [date]:
[full name](ending [date])
As of [date]:
[full name]
etc.
<PAGE>
Exhibit (p)(3)
FORUM INVESTMENT ADVISORS, LLC
FORUM FUND SERVICES, LLC
CODE OF ETHICS
AS AMENDED JANUARY 17, 2000
INTRODUCTION
This Code of Ethics (the "Code") has been adopted by Forum Fund
Services, LLC ("FFS") and Forum Investment Advisors, LLC ("FIA" and collectively
with FFS, "Forum"). This Code pertains to Forum's investment advisory and
distribution services to registered management investment companies or series
thereof (each a "Fund"). In addition, this Code applies to employees of Forum's
commonly controlled companies who serve as officers of a Fund. This Code
establishes standards and procedures for the detection and prevention of
activities by which persons having knowledge of the investments and investment
intentions of a Fund may abuse their fiduciary duties to the Fund and addresses
other types of conflict of interest situations. Definitions of underlined terms
are included in Appendix A.
1. POLICY STATEMENT
Forum forbids any Access Person, Investment Personnel or Fund Officer
from engaging in any conduct which is contrary to this Code. In addition, due to
their positions, Forum also forbids any Access Person or Investment Personnel
from engaging in any conduct which is contrary to Forum's Insider Trading Policy
and Related Procedures. In addition, many persons subject to the Code are also
subject to the other restrictions or requirements which affect their ability to
open securities accounts, effect securities transactions, report securities
transactions, maintain information and documents in a confidential manner and
other matters relating to the proper discharge of your obligations to Forum.
These include contractual arrangements with Forum, policies adopted by Forum
concerning confidential information and documents and FFS' Compliance and
Supervisory Procedures Manual.
Forum has always held itself and its employees to the highest ethical
standards. While this Code is only one manifestation of those standards,
compliance with its provisions is essential. Failure to comply with this Code is
a very serious matter and may result in disciplinary action being taken. Such
action can include among other things, monetary fines, disgorgement of profits,
suspension or even termination of employment.
2. WHO IS COVERED BY THIS CODE
(a) All Access Persons and Investment Personnel, in each case only
with respect to those Funds as listed on Appendix B.
(b) Fund Officers, but only with respect to those Funds for which
they serve as Fund Officers as listed in Appendix B.
<PAGE>
3. PROHIBITED TRANSACTIONS
(A) PROHIBITION AGAINST FRAUDULENT CONDUCT. It is unlawful for Access
Persons, Investment Personnel and Fund Officers to use any information
concerning a security held or to be acquired by a Fund, or their ability to
influence any investment decisions, for personal gain or in a manner detrimental
to the interests of a Fund. In addition, they shall not, directly or indirectly:
(i) employ any device, scheme or artifice to defraud a Fund or
engage in any manipulative practice with respect to a Fund;
(ii) make to a Fund, any untrue statement of a material fact or
omit to state to a Fund a material fact necessary in order to
make the statements made, in light of the circumstances under
which they are made, not misleading; or
(iii) engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon a Fund.
(B) BLACKOUT PERIOD. Access Persons and Investment Personnel shall not
purchase or sell a Covered Security in an account over which they have direct or
indirect influence or control on a day during which they know or should have
known a Fund has a pending "buy" or "sell" order in that same security until
that order is executed or withdrawn.
(C) ADDITIONAL INVESTMENT PERSONNEL BLACKOUT PERIOD. No Investment
Personnel shall purchase or sell a Covered Security within five calendar days
before or two calendar days after a Fund for which the Investment Personnel
makes or participates in making a recommendation trades in that security. Any
profits realized on trades within this proscribed period shall be disgorged.
This blackout period does not apply to money market mutual funds which are
advised by FIA.
(D) FUND OFFICER PROHIBITION. No Fund Officer shall directly or
indirectly seek to obtain information (other than that necessary to accomplish
the functions of the office) from any Fund portfolio manager regarding (i) the
status of any pending securities transaction for a Fund or (ii) the merits of
any securities transaction contemplated by the Fund Officer.
(E) BLACKOUT PERIOD EXCLUSIONS AND DEFINITIONS. The following
transactions shall not be prohibited by this Code and are not subject to the
limitations of Sections 3(b) and (c):
(i) purchases or sales over which you have no direct or indirect
influence or control (for this purpose, you are deemed to have
direct or indirect influence or control over the accounts of a
spouse, minor children and relatives residing in your home);
(ii) purchases which are part of an automatic dividend reinvestment
plan;
(iii) purchases or sales which are non-volitional on your part; and
<PAGE>
(iv) purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer.
Your trading shall be exempt from the limitations of Sections 3(b) and
(c) provided that (i) the market capitalization of a particular security exceeds
$1 billion and (ii) pending orders of FIA do not exceed two percent of the daily
average trading volume of the security for the prior 15 days.
For purposes of Sections 3(b) and (c), and subject to Section 3(g)
below, the (i) common stock and any fixed income security of an issuer shall not
be deemed to be the same security and (ii) non-convertible preferred stock of an
issuer shall be deemed to be the same security as the fixed income securities of
that issuer; and (iii) convertible preferred stock shall be deemed to be the
same security as both the common stock and fixed income securities of that
issuer.
(F) REQUIREMENT FOR PRECLEARANCE. Investment Personnel must obtain
prior written approval from the designated Review Officer before:
(i) directly or indirectly acquiring securities in an initial public
offering for which no public market in the same or similar
securities of the issue has previously existed; and
(ii) directly or indirectly acquiring securities in a private
placement. In determining whether to preclear the transaction,
the Review Officer designated under Section 5 shall consider,
among other factors, whether the investment opportunity should be
reserved for a Fund, and whether such opportunity is being
offered to the Investment Personnel by virtue of their position
with the Fund.
Any Investment Personnel of a Fund who has taken a personal position
through a private placement will be under an affirmative obligation to disclose
that position in writing to the Review Officer if they play a material role in
the Fund's subsequent investment decision regarding the same issuer; this
separate disclosure must be made even though the Investment Personnel has
previously disclosed the ownership of the privately placed security in
compliance with the preclearance requirements of this section. Once disclosure
is given, an independent review of the Fund's investment decision will be made.
(G) OTHER PROHIBITED TRANSACTIONS. Access Persons, Investment Personnel
and Fund Officers shall not:
(i) induce or cause a Fund to take action or to fail to take action,
for personal benefit rather than for the benefit of the Fund;
(ii) accept anything other than of DE MINIMIS value or any other
preferential treatment from any broker-dealer or other entity
with which a Fund does business;
(iii)establish or maintain an account at a broker-dealer, bank or
other entity through which securities transactions may be
effected without written notice to the designated Review Officer
prior to establishing such an account;
<PAGE>
(iv) use knowledge of portfolio transactions of a Fund for your
personal benefit or the personal benefit of others;
(v) violate the anti-fraud provisions of the federal or state
securities laws;
(vi) serve on the boards of directors of publicly traded companies,
absent prior authorization based upon a determination by the
Review Officer that the board service would be consistent with
the interests of the Fund and its shareholders.
(H) UNDUE INFLUENCE. Access Persons, Investment Personnel and Fund
Officers shall not cause or attempt to cause any Fund to purchase, sell or hold
any security in a manner calculated to create any personal benefit to you. You
shall not recommend any securities transactions for a Fund without having
disclosed (through reports in accordance with Section 4, preclearance in
accordance with Section 3(f), or otherwise) your interest, if any, in such
securities or the issuer thereof, including, without limitation, (i) your
beneficial ownership of any securities of such issuer, (ii) any position with
such issuer or its affiliates and (iii) any present or proposed business
relationship between you (or any party in which you have a significant interest)
and such issuer or its affiliates.
(I) CORPORATE OPPORTUNITIES. Access Persons, Investment Personnel and
Fund Officers shall not take personal advantage of any opportunity properly
belonging to a Fund.
(J) CONFIDENTIALITY. Except as required in the normal course of
carrying out their business responsibilities, Access Persons, Investment
Personnel and Fund Officers shall not reveal information relating to the
investment intentions or activities of any Fund, or securities that are being
considered for purchase or sale on behalf of any Fund.
4. REPORTING REQUIREMENTS
(A) REPORTING. Access Persons, Investment Personnel and Fund Officers
must report the information described in this Section with respect to
transactions in any Covered Security in which they have, or by reason of such
transaction acquire, any direct or indirect beneficial ownership. They must
report to the designated Review Officer unless they are otherwise required by a
Fund, pursuant to a Code of Ethics adopted by the Fund, to report to the Fund or
another person.
(B) EXCLUSIONS FROM REPORTING. Purchases or sales in Covered Securities
in an account in which you have no direct or indirect influence or control are
not subject to the reporting requirements of this Section.
(C) INITIAL HOLDING REPORTS. No later than ten (10) days after you
become subject to this Code as set forth in Section 2, you must report the
following information:
(i) the title, number of shares and principal amount of each
Covered Security (whether or not publicly traded) in which you
have any direct or indirect beneficial ownership as of the
date you became subject to this Code;
<PAGE>
(ii) the name of any broker, dealer or bank with whom you
maintained an account in which any securities were held for
your direct or indirect benefit as of the date you became
subject to this Code; and
(iii) the date that the report is submitted.
(D) QUARTERLY TRANSACTION REPORTS. No later than ten (10) days after
the end of a calendar quarter, you must report the following information:
(i) with respect to any transaction during the quarter in a Covered
Security (whether or not publicly traded) in which you have, or
by reason of such transaction acquired, any direct or indirect
beneficial ownership:
(1) the date of the transaction, the title, the interest rate
and maturity date (if applicable), the number of shares and
the principal amount of each Covered Security involved;
(2) the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
(3) the price of the Covered Security at which the transaction
was effected;
(4) the name of the broker, dealer or bank with or through which
the transaction was effected; and
(5) the date that the report is submitted.
(ii) with respect to any account established by you in which any
Covered Securities (whether or not publicly traded) were held
during the quarter for your direct or indirect benefit:
(1) the name of the broker, dealer or bank with whom you
established the account;
(2) the date the account was established; and
(3) the date that the report is submitted.
(E) ANNUAL HOLDINGS REPORTS. Annually, you must report the following
information (which information must be current as of a date no more than thirty
(30) days before the report is submitted):
(i) the title, number of shares and principal amount of each Covered
Security (whether or not publicly traded) in which you had any
direct or indirect beneficial ownership;
(ii) the name of any broker, dealer or bank with whom you maintain an
account in which any securities are held for your direct or
indirect benefit; and
(iii) the date that the report is submitted.
(F) CERTIFICATION OF COMPLIANCE. You are required to certify annually
(in the form of Attachment A) that you have read and understood the Code and
recognize that you are subject to the Code. Further, you are required to certify
annually that you have complied with all the requirements of the Code and you
<PAGE>
have disclosed or reported all personal securities transactions pursuant to the
requirements of the Code.
(G) ALTERNATIVE REPORTING. The submission to the Review Officer of
duplicate broker trade confirmations and statements on all securities
transactions shall satisfy the reporting requirements of Section 4. The annual
holdings report may be satisfied by confirming annually, in writing, the
accuracy of the records maintained by the Review Officer and recording the date
of the confirmation.
(H) REPORT QUALIFICATION. Any report may contain a statement that the
report shall not be construed as an admission by the person making the report
that he or she has any direct or indirect beneficial ownership in the Covered
Securities to which the report relates.
(I) ACCOUNT OPENING PROCEDURES. You shall provide written notice to
the Review Officer prior to opening any account with any entity through which a
Covered Securities transaction may be effected. In addition,you will promptly:
(i) provide full access to a Fund, its agents and attorneys to any
and all records and documents which a Fund considers relevant
to any securities transactions or other matters subject to the
Code;
(ii) cooperate with a Fund, or its agents and attorneys, in
investigating any securities transactions or other matter
subject to the Code;
(iii) provide a Fund, its agents and attorneys with an explanation
(in writing if requested) of the facts and circumstances
surrounding any securities transaction or other matter subject
to the Code; and
(iv) promptly notify the Review Officer or such other individual as
a Fund may direct, in writing, from time to time, of any
incident of noncompliance with the Code by anyone subject to
this Code.
5. REVIEW OFFICER
(A) DUTIES OF REVIEW OFFICER. The Chief Compliance Officer of
Forum has been appointed by the Director of FIA and FFS as the Review Officer
to:
(i) review all securities transaction and holdings reports and
shall maintain the names of persons responsible for reviewing
these reports;
(ii) identify all persons subject to this Code who are required to
make these reports and promptly inform each person of the
requirements of this Code;
(iii) compare, on a quarterly basis, all Covered Securities
transactions with each Fund's completed portfolio transactions
to determine whether a Code violation may have occurred;
(iv) maintain a signed acknowledgment by each person who is then
subject to this Code, in the form of Attachment A; and
(v) identify persons who are Investment Personnel of the Fund and
inform those persons of their requirements to obtain prior
written approval from the Review Officer prior to directly or
<PAGE>
indirectly acquiring ownership of a security in any private
placement or initial public offering.
(vi) exempt any Fund Officer from provisions of this Code if the
person is subject to similar requirements of a Fund's Code of
Ethics.
(B) POTENTIAL TRADE CONFLICT. When there appears to be a transaction
that conflicts with the Code, the Review Officer shall request a written
explanation of the person's transaction. If after post-trade review, it is
determined that there has been a violation of the Code, a report will be made by
the designated Review Officer with a recommendation of appropriate action to the
Director of FIA and FFS and a Fund's Board of Trustees (or Directors).
(C) REQUIRED RECORDS. The Review Officer shall maintain and cause to
be maintained:
(i) a copy of any code of ethics adopted by Forum which has been
in effect during the previous five (5) years in an easily
accessible place;
(ii) a record of any violation of any code of ethics, and of any
action taken as a result of such violation, in an easily
accessible place for at least five (5) years after the end of
the fiscal year in which the violation occurs;
(iii) a copy of each report made by anyone subject to this Code as
required by Section 4 for at least five (5) years after the
end of the fiscal year in which the report is made, the first
two (2) years in an easily accessible place;
(iv) a list of all persons who are, or within the past five years
have been, required to make reports or who were responsible
for reviewing these reports pursuant to any code of ethics
adopted by Forum, in an easily accessible place;
(v) a copy of each written report and certification required
pursuant to Section 5(e) of this Code for at least five (5)
years after the end of the fiscal year in which it is made,
the first two (2) years in an easily accessible place; and
(vi) a record of any decision, and the reasons supporting the
decision, approving the acquisition by Investment Personnel of
securities under Section 3(f) of this Code, for at least five
(5) years after the end of the fiscal year in which the
approval is granted.
(D) POST-TRADE REVIEW PROCESS. Following receipt of trade confirms and
statements, transactions will be screened for the following:
(i) SAME DAY TRADES: transactions by Access Persons and
Investment Personnel occurring on the same day as the
purchase or sale of the same security by a Fund for which
they are an Access Person or Investment Personnel.
(ii) PORTFOLIO MANAGER TRADES: transactions by Investment Personnel
within five calendar days before and two calendar days after a
Fund, for which the Investment Personnel makes or participates
in making a recommendation, trades in that security.
<PAGE>
(iii) FRAUDULENT CONDUCT: transaction by Access Persons, Investment
Personnel and Fund Officers which, within the most recent 15
days, is or has been held by a Fund or is being or has been
considered by a Fund or FIA for purchase by a Fund.
(iv) OTHER ACTIVITIES: transactions which may give the appearance
that an Access Person, Investment Personnel or Fund Officer
has executed transactions not in accordance with this Code.
(E) SUBMISSION TO FUND BOARD. The Review Officer shall annually prepare
a written report to the Board of Trustees (or Directors) of a Fund listed in
Appendix B that
(i) describes any issues under this Code or its procedures since
the last report to the Trustees, including, but not limited
to, information about material violations of the code or
procedures and sanctions imposed in response to the material
violations; and
(ii) certifies that the Fund has adopted procedures reasonably
necessary to prevent Access Persons, Investment Personnel and
Fund Officers from violating this code.
<PAGE>
FORUM CODE OF ETHICS
APPENDIX A
DEFINITIONS
(a) Access Person:
(i)(1) of FIA means each director or officer of FIA, any employee or
agent of FIA, or any company in a control relationship to FIA
who, in connection with the person's regular functions or
duties, makes, participates in or obtains information
regarding the purchase or sale of Covered Securities by a Fund
advised by FIA, or whose functions relate to the making of any
recommendations with respect to such purchases or sales; and
(i)(2) any natural person in a control relationship to FIA who
obtains information concerning recommendations made to a Fund
by FIA with regard to the purchase or sale of Covered
Securities by the Fund;
(ii) of FFS means each director or officer of FFS who in the
ordinary course of business makes, participates in or obtains
information regarding the purchase or sale of Covered
Securities for a Fund or whose functions or duties as part of
the ordinary course of business relate to the making of any
recommendation to a Fund regarding the purchase or sale of
Covered Securities.
(b) Act means the Investment Company Act of 1940, as amended.
(c) Beneficial Owner shall have the meaning as that set forth in Rule
16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, except that
the determination of direct or indirect beneficial ownership shall apply to all
Covered Securities which an Access Person owns or acquires. A beneficial owner
of a security is any person who, directly or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or shares a direct or
indirect pecuniary interest (the opportunity, directly or indirectly, to profit
or share in any profit derived from a transaction in the subject securities) in
a security.
Indirect pecuniary interest in a security includes securities held by a
person's immediate family sharing the same household. Immediate family means any
child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling,
mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or
sister-in-law (including adoptive relationships).
(d) Control means the power to exercise a controlling influence over the
management or policies of a company, unless this power is solely the result of
an official position with the company. Ownership of 25% or more of a company's
outstanding voting securities is presumed to give the holder thereof control
over the company. This presumption may be rebutted by the Review Officer based
upon the facts and circumstances of a given situation.
<PAGE>
(e) Covered Security means any security except:
(i) direct obligations of the Government of the United States;
(ii) bankers' acceptances and bank certificates of deposits;
(iii) commercial paper and debt instruments with a maturity at
issuance of less than 366 days and that are rated in one of
the two highest rating categories by a nationally recognized
statistical rating organization;
(iv) repurchase agreements covering any of the foregoing; and
(v) shares of registered open-end investment companies.
(f) Fund Officer means any employee of Forum or of a company commonly
controlled with Forum who is an officer or director/trustee of a Fund.
(h) Investment Personnel means
(i) any employee of FIA who, in connection with his or her regular
functions or duties, makes or participates in making
recommendations regarding the purchase or sale of securities
by a Fund managed by FIA; and
(ii) any individual who controls FIA or a Fund for which FIA is an
investment adviser and who obtains information concerning
recommendations made to the Fund regarding the purchase or
sale of securities by the Fund.
(i) Purchase or sale includes, among other things, the writing of an option
to purchase or sell.
(j) Security held or to be acquired by the Fund means
(i) any Covered Security which, within the most recent 15 days (x)
is or has been held by the applicable Fund or (y) is being or
has been considered by the applicable Fund or its investment
adviser for purchase by the applicable Fund; and
(ii) and any option to purchase or sell, and any security
convertible into or exchangeable for, a Covered Security.
<PAGE>
FORUM CODE OF ETHICS
APPENDIX B
LIST OF ACCESS PERSONS
(as amended March 20, 2000)
<TABLE>
<S> <C> <C> <C> <C> <C>
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
FIA AP IP AS OF DATE FUND END DATE
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Berthy, Les C. X X September 1, 1989 FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Burns, John X X July 1, 1999 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Fischer, Anthony R. X X January 1, 1998 CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Goldstein, David I. X June 1, 1997 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Kaplan, Mark D. X X March 20, 1996 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Keffer, John Y. X September 1, 1989 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Stillings, Dawn Marie X X January 1, 1998 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hirsch, Ron X November 1, 1999 FF/CTD
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
FFS AP IP AS OF DATE FUND END DATE
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Goldstein, David I. X September 1, 1991 All
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Keffer, John Y. X June 9, 1986 All
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hirsch, Ron X November 1, 1999 All
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
FUND OFFICERS AP IP AS OF DATE OFFICER OR TRUSTEE OF END DATE
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Barrett, Stephen J. September 28, 1998 CT, TC, ML, SS
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Goldstein, David I. October 16, 1992 CT, FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hirsch, Ron October 28, 1999 SS, TC, CT, ML
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Hong, Stacey E. May 19, 1998 CT, FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Kaplan, Mark D. June 14, 1996 FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Keffer, John Y. October 16, 1992 CT, FF, SS, TC
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Klenk, Leslie K. May 19, 1998 FF
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Riggle, D. Blaine March 9, 1998 CT, ML, SS, TC
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Sheehan, Thomas G. July 26, 1994 CT, ML
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
Taylor, Dawn January 28, 1999 SS
- ------------------------------ --------- -------- ----------------------------- ------------------------ --------------------
</TABLE>
AP = Access Person; IP = Investment Personnel
FF = Forum Funds; CTD = Core Trust (Delaware); CT = Cutler Trust; TC = True
Crossing; Memorial = ML; SS = Sound Shore
<PAGE>
FORUM
CODE OF ETHICS
ATTACHMENT A
ACKNOWLEDGMENT
I understand that I am subject to Forum's Code of Ethics. I have read and I
understand the Forum Code of Ethics, as adopted by Forum Investment Advisors,
LLC and Forum Fund Services, LLC as amended January 17, 2000 and will comply
with it in all respects. In addition, I certify that I have complied with the
requirements of the Code of Ethics and I have disclosed or reported all personal
securities transactions required to be disclosed or reported pursuant to the
requirements of the Code.
Signature Date
Printed Name
THIS FORM MUST BE COMPLETED AND RETURNED TO FORUM'S COMPLIANCE
DEPARTMENT:
COMPLIANCE MANAGER
FORUM FINANCIAL GROUP
TWO PORTLAND SQUARE
PORTLAND, ME 04101
<PAGE>