THE PROSPECTUS
CUTLER
TRUST October 30, 2000
CUTLER CORE FUND
CUTLER VALUE FUND
Each Fund seeks current
income and long-term
capital appreciation.
Shares of each Fund 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
CONTRARY IS A CRIMINAL
OFFENSE.
[Crater Lake Image]
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TABLE OF CONTENTS
RISK/RETURN SUMMARY...........................................................2
PERFORMANCE...................................................................3
FEE TABLES....................................................................4
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES AND PRINCIPAL RISKS....5
MANAGEMENT....................................................................8
YOUR ACCOUNT.................................................................10
How To Contact The Funds..................................................10
General Information.......................................................10
Buying Shares.............................................................11
Selling Shares............................................................13
Exchange Privileges.......................................................15
Retirement Accounts.......................................................16
OTHER INFORMATION............................................................17
FINANCIAL HIGHLIGHTS.........................................................19
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RISK/RETURN SUMMARY
INVESTMENT GOAL The investment goal of both Cutler Core Fund and Cutler Value
Fund (each a "Fund" and collectively the "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 a 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.
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.
PRINCIPAL RISKS OF INVESTING IN THE FUNDS
You could lose money on your investment in a Fund, or a Fund 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
mistaken
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 stability of principal
o You are pursuing a short-term goal or investing emergency reserves
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PERFORMANCE
The following charts illustrate the variability of a Fund's returns. These
charts and the following tables provide some indication of the risks of
investing in the Funds by showing changes in each Fund's performance from year
to year and how the Fund's 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%
The calendar year-to-date return as of September 30, 2000 was -6.18%.
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).
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%
The calendar year-to-date return as of September 30, 2000 was 1.42%.
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 each Fund's average annual total returns as of
December 31, 1999 to the S&P 500 Index and the Russell 1000 Value Index.
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CUTLER CUTLER S&P 500 RUSSELL 1000
YEAR(S) CORE FUND VALUE FUND INDEX(1) VALUE INDEX(2)
1 Year 15.19% 3.28% 21.04% 7.35%
5 Years 24.30% 20.38% 28.54% 23.08%
Since Inception (12/30/92) 17.14% 15.09% 21.42% 18.40%
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(1) The S&P 500(R) Index is the Standard & Poor's 500 Index, a commonly
recognized, unmanaged index of 500 widely held U.S. common stocks. The index
figures assume reinvestment of all dividends paid by stocks included in the
index. One cannot invest directly in the index.
(2) The Russell 1000 Value Index tracks stocks in the Russell 1000 Index with
lower price-to-book ratios and lower forecasted growth values. The index figures
assume reinvestment of all dividends paid by stocks included in the index. One
cannot invest directly in the index. While both the S&P 500 Index and the
Russell 1000 Value Index are shown, the Adviser believes the Russell 1000 Value
Index more accurately represents Cutler Value Fund's industry diversification,
capitalization range and risk characteristics.
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FEE TABLES
The following tables describe the various fees and expenses that you will bear
if you buy and hold shares of each Fund.
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 0.36%
Shareholder Services Fees 0.03%
Miscellaneous 0.33%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.11%
CUTLER VALUE FUND
Advisory Fees 0.75%
Other Expenses 0.53%
Shareholder Services Fees 0.03%
Miscellaneous 0.50%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.28%
Fee Waiver(2) 0.03%
Net Expenses 1.25%
(1) Based on amounts incurred during the Funds' last fiscal year as of June 30,
2000 stated as a percentage of net assets.
(2) The Adviser has contractually obligated itself through October 31, 2001
to waive a portion of its fee if total expenses of a Fund exceed 1.25%.
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 that you invest $10,000 in each Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes a 5% return each year and that each Fund's operating
expenses remain the same. Although your actual costs may be higher or lower,
based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
CUTLER CORE FUND $113 $352 $610 $1,348
CUTLER VALUE FUND $127 $397 $687 $1,511
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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'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 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 a market value of at least $1 billion and, in the Adviser's opinion,
have wide ownership among major institutional investors and very liquid markets.
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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 that negatively
impacts the positioning of a particular investment or if the company's
strategy, execution or industry positioning itself deteriorates.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 a 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 a Fund have some risk. Among other things, the market
value of any security in which a Fund 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.
A Fund may be an appropriate investment if you are seeking long-term growth in
your investment and are willing to tolerate significant fluctuations in the
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value of your investment in response to changes in the market value of the
stocks the Fund holds. 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.
Likewise, if value stocks decrease in value, there could be a corresponding drop
in the net asset value of each Fund.
It is not the Funds' intent, nor has it been their practice, to engage in active
and frequent trading of their portfolio securities. This type of trading could
increase the amount of capital gains realized by a Fund and total securities
transactions costs. A Fund 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.
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MANAGEMENT
The business of each Fund is managed under the direction of the Board of
Trustees (the "Board") of The Cutler Trust. The Board formulates the general
policies of each Fund and meets periodically to review the Fund's performance,
monitor investment activities and practices and discuss other matters affecting
each Fund. Additional information regarding the Board, as well as the executive
officers of The Cutler Trust, 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 both Funds. The Adviser makes investment decisions for
each Fund subject to the general control of the Board. The Adviser received an
advisory fee at an annual rate of 0.75% and 0.72% (after waivers) of the average
daily net assets of Cutler Core Fund and Cutler Value Fund, respectively, during
its most recent fiscal year.
The Adviser (and its predecessors-in-interest) has provided investment
management services since 1977. As of October 1, 2000, the Adviser had over $1.8
billion in assets under management.
PORTFOLIO MANAGERS
The portfolio managers of each Fund are responsible for the day-to-day
investment policy, portfolio management and investment research for the Fund.
Their business experience and educational backgrounds are as follows:
ROBERT W. LAMBERTI, CFA, Portfolio Manager for Cutler Value Fund and
Co-Portfolio Manager for Cutler Core 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.
MICHAEL A. KIJESKY, CFA, 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.
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OTHER SERVICE PROVIDERS
The Forum Financial Group of companies ("Forum") provides various services to
each Fund. As of October 1, 2000, Forum provided administration and distribution
services to investment companies and collective investment funds with assets of
approximately $122 billion.
SHAREHOLDER SERVICES PLAN
The Trust has adopted a shareholder services plan permitting the Trust to
compensate financial institutions for acting as shareholder servicing agents for
their customers.
FUND EXPENSES
Each Fund pays for all of its expenses. Each Fund's expenses are comprised of
expenses attributable to the particular Fund as well as expenses not
attributable to any particular Fund that are allocated between the Funds. The
Adviser pursuant to a contractual obligation, or other service providers may
waive all or any portion of their fees, which are accrued daily and paid
monthly. Any waiver would have the effect of increasing a Fund's performance for
the period during which the waiver was in effect.
Forum Fund Services, LLC, a registered broker-dealer and member of the National
Association of Securities Dealers, Inc., is the distributor (principal
underwriter) of each Fund's shares. The distributor acts as the agent of each
Fund in connection with the offering of shares of the Fund. 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 each Fund.
Forum Shareholder Services, LLC (the "Transfer Agent") is each Fund's transfer
agent.
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YOUR ACCOUNT
GENERAL INFORMATION
HOW TO CONTACT THE FUNDS
You pay no sales charge to purchase or sell (redeem) shares of a Fund. Each Fund
WRITE TO US AT: purchases or sells shares at the net asset value per share, or NAV, next
The Cutler Trust calculated after the Transfer Agent receives your request in proper form. For
P.O. Box 446 instance, if the Transfer Agent receives your purchase request in proper form
Portland, Maine 04112 prior to 4:00 p.m. eastern time, your transaction will be priced at that day's
NAV. If the Transfer Agent receives your purchase request after 4:00 p.m., your
OVERNIGHT ADDRESS: transaction will be priced at the next business day's NAV. A Fund will not
The Cutler Trust accept orders that request a particular day or price for the transaction or any
Two Portland Square other special conditions.
Portland, Maine 04101
The Funds do not issue share certificates.
TELEPHONE US TOLL-FREE AT:
(888) CUTLER4 You will receive monthly statements and a confirmation of each transaction. You
(888) 288-5374 should verify the accuracy of all transactions in your account as soon as you
receive your confirmation.
WIRE INVESTMENTS (OR ACH PAYMENTS) TO:
Bankers Trust Company Each Fund, through the Adviser or Transfer Agent, may temporarily suspend
New York, New York (during unusual market conditions) or discontinue any service or privilege.
ABA #021001033
FOR CREDIT TO: WHEN AND HOW NAV IS DETERMINED Each Fund calculates its NAV as of the close of
Forum Shareholder Services, LLC the New York Stock Exchange (normally 4:00 p.m., eastern time) on each weekday
Account #01-465-547 except days when the New York Stock Exchange is closed. The time at which NAV is
The Cutler Trust: (Name of Fund) calculated may be changed in case of an emergency or if the New York Stock
(Your Name) Exchange
(Your Account Number)
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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.
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 a Fund. 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, sole proprietorship and joint accounts as well
as 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 you
to purchase shares through an electronic transfer of money from a
checking or savings account. When you make an additional payment by
telephone, the Transfer Agent will automatically debit your
pre-designated bank account for the desired amount. Your financial
institution may charge you a fee for this service. 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.
MINIMUM INVESTMENTS Each Fund accepts payments in the following minimum amounts:
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MINIMUM INITIAL INVESTMENT MINIMUM ADDITIONAL INVESTMENT
Standard Account $25,000 None
Traditional and Roth IRA Accounts $2,000 None
Accounts with Systematic Investment $25,000 $100
Plans
Exchanges $2,500 None
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The Adviser or the Funds' administrator may, at its discretion, waive the above
investment minimums.
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ACCOUNT REQUIREMENTS
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TYPE OF ACCOUNT REQUIREMENTS
INDIVIDUAL, SOLE PROPRIETORSHIP AND JOINT ACCOUNTS o Instructions must be signed by all
Individual accounts are owned by one person, as are persons required to sign (you choose who must
sole proprietorship accounts. Joint accounts have sign) exactly as their names appear on the
two or more owners (tenants) account
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 money custodial account under the UGMA or the UTMA
to a child and obtain tax benefits o The custodian must sign instructions in a
manner indicating custodial capacity
BUSINESS ENTITIES Submit a Corporate/Organization Resolution form or
similar document
TRUSTS o The trust must be established before an
account can be opened
o Provide a certified trust document, or
the pages from the trust document that
identify the trustees
INVESTMENT PROCEDURES
HOW TO OPEN AN ACCOUNT HOW 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
(and Corporate/Organization Resolution form, confirmation or write us a letter
if applicable) o Write your account number on your check
o Complete the application (and resolution o Mail us the slip (or your letter) and a
form) check
o Mail us your application (and resolution
form) and a check
BY WIRE BY WIRE
o Call or write us for an account application o Call to notify us of your incoming wire
(and Corporate/Organization Resolution form, o Instruct your bank to wire your money to
if applicable) us
o Complete the application (and resolution
form)
o Call us to fax the completed application
(and resolution form) and we will assign you
an account number
o Mail us your application (and resolution
form)
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
(and Corporate/Organization Resolution form, section of the application
if applicable) o Attach a voided check to your application
o Complete the application (and resolution o Mail us the completed application and the
form) voided check
o Call us to fax the completed application
(and resolution form) and we will assign you
an account number
o Mail us your application (and resolution
form)
o Make an ACH payment
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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 Automated Clearing House ("ACH") payment. Systematic investments must
be for at least $100.
LIMITATIONS ON PURCHASES Each Fund reserves the right to refuse any purchase
(including exchange) request, particularly requests that could adversely affect
the Fund or its operations. This includes those from any individual or group
who, in a Fund's view, is likely to engage in excessive trading (including two
or more substantial redemptions or exchanges out of a Fund followed by
substantial repurchases into a Fund within a calendar year).
CANCELED OR FAILED PAYMENTS Each Fund accepts checks and ACH transfers at full
value subject to collection. If a Fund does not receive your payment for shares
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 (or another identically registered account that you maintain with the
Transfer Agent) as reimbursement. Each Fund and its agents have the right to
reject or cancel any purchase, exchange or redemption due to nonpayment.
SELLING SHARES
Each Fund processes 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, it may delay
sending redemption proceeds for up to 15 calendar days.
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HOW 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 redemptions are only available if your redemption is for $10,000
or more and you did not decline wire redemption privileges on your
account application
o Call us with your request (unless you declined telephone redemption
privileges on your account application) (See "By Telephone") OR
o Mail us your request (See "By Mail")
BY TELEPHONE
o Call us with your request (unless you declined telephone authorization
privileges on your account application)
o Provide the following information:
o Your account number
o Exact name(s) in which the account is registered
o Additional forms of identification
o Redemption proceeds will be:
o Mailed to you OR
o Wired to you (unless you declined wire redemption privileges on
your account application) (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
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.
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.
SYSTEMATIC WITHDRAWALS If you own shares of a 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 withdrawals
must be for at least $100.
SIGNATURE GUARANTEE REQUIREMENTS To protect you and each Fund 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
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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
o Changes to systematic investment or withdrawal, distribution,
telephone 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 Each Fund reserves 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 Fund shares. 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, although each Fund reserves the right
to limit exchanges.
REQUIREMENTS You may make exchanges only between identically registered accounts
(name(s), address and taxpayer ID number). You may
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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 each fund you are exchanging
o The dollar amount or number of shares you want to sell (and exchange)
o Open a new account and 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
Each Fund offers IRA accounts, including traditional and Roth IRAs. Fund shares
may also be an appropriate investment for other retirement plans. Before
investing in any IRA or other retirement plan, you should consult your tax
adviser. Whenever making an investment in an IRA, be sure to indicate the year
for which the contribution is made.
16
<PAGE>
OTHER INFORMATION
DISTRIBUTIONS
Each Fund distributes its net investment income quarterly. Any 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.
Your Fund will mail reports containing information about the 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
17
<PAGE>
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. This is also known as a master-feeder structure.
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<PAGE>
FINANCIAL HIGHLIGHTS
The following tables are intended to help you understand each Fund's financial
performance for the past five 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 has 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.
CUTLER CORE FUND YEAR ENDED
JUNE 30,
<TABLE>
<S> <C> <C> <C> <C> <C>
2000 1999 1998 1997 1996
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value $15.71 $17.60 $16.06 $12.95 $10.96
Income From Investment Operations
Net investment income 0.08 0.12 0.19 0.24 0.35
Net gain (loss) on securities 1.24
(realized and unrealized) 2.06 3.05 4.30 2.13
Total From Investment Operations 1.32 2.18 3.24 4.54 2.48
Less Distributions
From net investment income (0.08) (0.12) (0.19) (0.24) (0.35)
From capital gain (0.96) (3.95) (1.51) (1.19) (0.14)
Total Distributions (1.04) (4.07) (1.70) (1.43) (0.49)
Ending Net Asset Value $15.99 $15.71 $17.60 $16.06 $12.95
OTHER INFORMATION
Ratios to Average Net Assets
Expenses 1.11% 1.07% 1.10% 1.17% 0.98%
Net investment income 0.51% 0.76% 1.14% 1.67% 2.81%
Total Return 8.61% 15.48% 21.60% 37.65% 22.93%
Portfolio Turnover Rate 79% 59% 119% 23% 57%
Net Assets at End of Period (in $70,095 $74,499 $77,482 $62,523 $46,285
thousands)
19
<PAGE>
CUTLER VALUE FUND YEAR ENDED
JUNE 30,
2000 1999 1998 1997 1996
SELECTED DATA FOR A SINGLE SHARE
Beginning Net Asset Value $18.93 $21.02 $18.33 $14.18 $11.71
Income From Investment Operations
Net investment income 0.12 0.14 0.13 0.18 0.21
Net gain (loss) on securities
(realized and unrealized) (1.97) 2.73 4.19 4.20 2.47
Total From Investment Operations (1.85) 2.87 4.32 4.38 2.68
Less Distributions
From net investment income (0.12) (0.14) (0.13) (0.18) (0.21)
In excess of net investment - - (1) - - -
From capital gain (7.18) (4.82) (1.50) (0.05) -
Total Distributions (7.30) (4.96) (1.63) (0.23) (0.21)
Ending Net Asset Value $9.78 $18.93 $21.02 $18.33 $14.18
OTHER INFORMATION
Ratios to Average Net Assets
Expenses 1.25%(2) 1.20% 1.24% 1.25% 1.05%(2)
Net investment income 1.01% 0.80% 0.65% 1.15% 1.65%
Total Return (9.25%) 18.10% 24.90% 31.18% 23.01%
Portfolio Turnover Rate 66% 110% 50% 4% 9%
Net Assets at End of Period (in $27,615 $40,125 $41,085 $35,277 $30,248
thousands)
(1) Per share data was less than $0.01.
(2) In the absence of expense reimbursements and fee waivers, the ratios
would have been 1.28% in 2000 and 1.13% in 1996.
</TABLE>
20
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<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 each Fund's investments is available in the
Funds' annual and semi-annual reports to shareholders. In each Fund's
annual report, you will find a discussion of the market conditions and
investment strategies that significantly affected the Fund's performance
during its last fiscal year.
STATEMENT OF ADDITIONAL INFORMATION ("SAI")
The SAI provides more detailed information about each Fund 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 each Fund by contacting your
broker or the Funds at: THE CUTLER TRUST
P.O. Box 446
Forum Shareholder Services, LLC Portland, Maine 04112
P. O. Box 446 (888) CUTLER4
Portland, Maine 04112 (888) 288-5374
(888) CUTLER4
(888) 288-5374
INVESTMENT ADVISER
SECURITIES AND EXCHANGE COMMISSION INFORMATION Cutler & Company, LLC
You can also review each Fund's reports and SAIs at the Public Reference 503 Airport Road
Room of the Securities and Exchange Commission. You can get copies, for a Medford, Oregon 97504
fee, by writing to the following: (541) 770-9000
(800) 228-8537
Public Reference Room
Securities and Exchange Commission
Washington, D.C. 20549-6009 Web Site:
E-mail address: [email protected] http://www.cutler.com
Information on the hours of operation of the Public Reference Room may be
obtained by calling the Commission at (202) 942-8090. Free copies of the
reports and SAIs are available from the Commission's Internet web site at
http://www.sec.gov.
Investment Company Act File No. 811-7242
</TABLE>
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
October 30, 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, LLC[SM]
Two Portland Square
Portland, Maine 04101
Toll free (888) CUTLER4
This Statement of Additional Information, or SAI, supplements the
Prospectus dated October 30, 2000, as may be amended from time to time, offering
shares of Cutler Core Fund and 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 or telephone number listed
above.
Financial Statements for each Fund for the year ended June 30, 2000
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-1
APPENDIX C PERFORMANCE DATA C-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.
"Fund" means each of Cutler Core Fund and 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 each Fund's investment techniques, strategies and risks. Each Fund is
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). Each Fund expects 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
Each Fund may invest in fixed income securities. Each Fund's investments in
fixed income securities are subject to credit risk relating to the financial
condition of the issuers of the securities that the Fund holds. Each Fund 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 Fund 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 issuer 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. Each Fund may only invest in money market mutual funds to the extent
permitted by the 1940 Act.
The money market instruments in which each Fund 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
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<PAGE>
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 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
Each Fund 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.
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<PAGE>
2. INVESTMENT LIMITATIONS
For purposes of all investment policies of each Fund: (1) the term 1940 Act
includes the rules thereunder, SEC interpretations and any exemptive order upon
which the Fund may rely; and (2) the term Code includes the rules thereunder,
IRS interpretations and any private letter ruling or similar authority upon
which the Fund 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
applicable Fund's 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 non-fundamental policy of a Fund 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 Funds. 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 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
Fund.
B. NON-FUNDAMENTAL LIMITATIONS
Each Fund has adopted the following non-fundamental 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
Each Fund 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.
Each Fund may compare any of its 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 either Fund but rather are standards
by which the Adviser and shareholders may compare the performance of a Fund to
an unmanaged composite of securities with similar, but not identical,
characteristics as the Fund.
Each Fund 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.
Each Fund's performance will fluctuate in response to market conditions and
other factors.
B. PERFORMANCE CALCULATIONS
Each Fund's performance may be quoted in terms of yield or total return.
1. SEC YIELD
Standardized SEC yields for each Fund used in advertising are computed by
dividing the 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 a Fund's yield differs from
income as determined for other accounting purposes. Because of the different
accounting methods used, and because of the compounding assumed in yield
calculations, the yield quoted for a Fund may differ from the rate of
distribution of income from the Fund over the same period or the rate of income
reported in the Fund's financial statements.
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Although published yield information is useful to investors in reviewing a
Fund's performance, investors should be aware that the Fund's yield fluctuates
from day to day and that the Fund's yield for any given period is not an
indication or representation by the Fund of future yields or rates of return on
the Fund's shares. Financial intermediaries may charge their customers that
invest in the Fund's fees in connection with that investment. This will have the
effect of reducing the Fund's after-fee yield to those shareholders.
The yield of each Fund is not fixed or guaranteed, and investments in each Fund
are not insured or guaranteed. Accordingly, yield information should not be used
to compare shares of a Fund with investment alternatives, which, like money
market instruments or bank accounts, may provide a fixed rate of interest. Also,
it may not be appropriate to compare a Fund's yield information directly to
similar information regarding investment alternatives 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. Neither
Fund imposes a sales charge.
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
Each Fund's total return shows its overall change in value, including change in
share price and assuming all of the Fund's 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 Fund.
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 a Fund's
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.
Each Fund may quote unaveraged or cumulative total return, which
reflect the Fund's performance over a stated period of time.
Total return may be stated in its 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, 2000 is contained in
Appendix C -- Performance Data.
C. OTHER MATTERS
Each Fund may also include various information in its 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 Fund's portfolio manager(s) and
the portfolio management staff of the Fund's 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 the 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 Fund or investing in a tax-deferred account, such as an individual
retirement account or Section 401(k) pension plan; (9) the NAV, net assets or
number of shareholders of the Fund as of one or more dates; and (10) a
comparison of the Fund's 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 a Fund's performance.
9
<PAGE>
Each Fund may advertise information regarding the effects of automatic
investment and systematic withdrawal plans, including the principal of dollar
cost averaging. In a dollarcost averaging program, an investor invests a fixed
dollar amount in a Fund at periodic 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, a Fund may provide "shareholder's
letters" which serve to provide shareholders or investors an introduction into
the Fund or any of the Fund's 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 each Fund's service providers. This
management also includes a periodic review of the service providers' agreements
and fees charged to each Fund. 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 EACH FUND 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 Cutler Core Fund and
503 Airport Road Chairman Cutler Value Fund
Medford, Oregon 97504 Vice President Investment Committee Member, Cutler & Company, LLC
Born: March 1920
.......................................... .................... .....................................................
.......................................... .................... .....................................................
John Y. Keffer* Trustee President and Director, Forum Fund Services, LLC
Two Portland Square President Director and sole shareholder (directly and
Portland, Maine 04101 indirectly) Forum Financial Group LLC, which owns
Born: July 1942 (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
.......................................... .................... .....................................................
.......................................... .................... .....................................................
11
<PAGE>
NAME, ADDRESS AND POSITION(S) PRINCIPAL OCCUPATION(S)
DATE OF BIRTH WITH EACH FUND DURING THE PAST FIVE YEARS
.......................................... .................... .....................................................
.......................................... .................... .....................................................
Ronald H. Hirsch Treasurer 9/99 - Present. Managing Director of Operations and
Two Portland Square Finance, Forum Financial Group
Portland, Maine 04101 1991-1998 Member of the Board, Citibank Germany
Born: October 1943
.......................................... .................... .....................................................
.......................................... .................... .....................................................
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
.......................................... .................... .....................................................
.......................................... .................... .....................................................
Thomas G. Sheehan Assistant Secretary Managing Director and Counsel, Forum Financial
Two Portland Square Group, LLC since 1993
Portland, Maine 04101 Special Counsel, Division of Investment Management,
Born: November 1954 SEC
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 as Trustees 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, 2000.
<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 $10,405 $0 $0 $10,405
............................. ................... ............................. .................. ...................
</TABLE>
C. INVESTMENT ADVISER
1. SERVICES OF ADVISER
The Adviser serves as investment adviser to each Fund 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 each Fund's investments and effecting portfolio
transactions for the Fund.
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 Advisers Act of 1940, as
amended.
The Trustees or officers of the Trust 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 each Fund 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 each Fund, the Adviser may also
act and be compensated as investment manager for its clients with respect to
assets that are invested in either Fund. If an investor in a Fund also has a
separately managed account with the Adviser with assets invested in the Fund,
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 the client.
The Adviser has contractually obligated itself to waive a portion of its fees if
total expenses for a Fund exceed 1.25%. This obligation may end after October
31, 2001.
Table 1 in Appendix B shows the dollar amount of the fees from each Fund 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 each Fund with respect
to the Fund on 60 days' written notice when authorized either by vote of the
holders of a majority of the Fund's 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 Fund.
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 each Fund. 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 each
Fund, 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 each Fund in
connection with the offering of shares of the Fund. FFS continually distributes
shares of each Fund on a best efforts basis. FFS has no obligation to sell any
specific quantity of a Fund's 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 each Fund. Prior to October 31,
1999, Forum Financial Services, Inc. served as the distributor of each Fund's
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 each Fund with respect to the
Fund on 60 days' written notice when authorized either by vote of a majority of
the Fund's outstanding shareholders or by a vote of a majority of the Board, or
by FFS on 60 days' written notice to the Fund.
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 each Fund.
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 each Fund 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, each Fund is responsible for the
costs of: (1) defending FFS against claims that FFS breached a duty it owed to
the Fund; and (2) paying judgments against FFS. Neither Fund is required to
indemnify FFS if the Fund does not receive written notice of and reasonable
opportunity to defend against a claim against FFS in the Fund's own name or in
the name of FFS.
14
<PAGE>
E. OTHER SERVICE PROVIDERS TO EACH FUND
1. ADMINISTRATOR
As administrator, pursuant to an agreement with the Trust, FAdS is responsible
for the supervision of the overall management of each Fund, providing each Fund
with general office facilities and providing persons satisfactory to the Board
to serve as officers of each Fund.
For its services, FAdS receives a fee from each Fund equal to 0.10% of the
average daily net assets of the applicable Fund. The fees are accrued daily by
each Fund 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 each Fund's 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 each Fund. 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 each Fund. These services include calculating the NAV per
share of the Funds and preparing each Fund's 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 each Fund's 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 each Fund. 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 each Fund 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 each Fund. 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 each Fund to the Transfer
Agent for each Fund's 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 each Fund's cash and securities, determines income and
collects interest on each Fund's 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 each Fund 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 each Fund are passed
upon by Dechert, 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 each Fund.
The auditors audit the annual financial statements of each Fund and provide each
Fund with an audit opinion. The auditors also review certain regulatory filings
of the Funds as well as prepare each Fund's 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 a Fund
purchases or to whom the Fund sells 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
each Fund. The data presented are for the past three fiscal years.
C. ADVISER RESPONSIBILITY FOR PURCHASES AND SALES
The Adviser 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 Fund rather than by any
formula.
The Adviser 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 a Fund is prompt execution
of orders in an effective manner and at the most favorable price available.
1. CHOOSING BROKER-DEALERS
A Fund 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 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 a Fund as a factor in the selection of
broker-dealers to execute portfolio transactions for the Fund; and (2) take into
account payments made by brokers effecting transactions for the Fund (these
payments may be made to the Fund or to other persons on behalf of the Fund for
services provided to the Fund for which those other persons would be obligated
to pay.
17
<PAGE>
2. OBTAINING RESEARCH FROM BROKERS
The Adviser may give consideration to research services furnished by brokers to
the Adviser for its use and may cause a Fund 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 a Fund, and not all research services may be used
by the Adviser in connection with the Fund. The Adviser's fees are not reduced
by reason of the Adviser's receipt of research services.
The Adviser 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 that 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 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 each Fund are made independently from those for any
other account or investment company that is or may in the future become managed
by the Adviser 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 a Fund and other client accounts
managed by the Adviser occurs contemporaneously, the purchase or
18
<PAGE>
sale orders may 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 each Fund (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 a Fund may engage in
active short-term trading to take advantage of price movements affecting
individual issues, groups of issues or markets. Each Fund 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. On April 26, 1999 shareholders
approved certain changes to the investment policies of Cutler Value Fund. The
contrast in portfolio turnover rates (110% in fiscal year 1999 to 66% in fiscal
year 2000) reflects an adjustment of portfolio securities in 1999 to comply with
the revised investment policies. Higher portfolio turnover rates may result in
increased brokerage costs to the Fund and a possible increase in short-term
capital gains or losses. A Fund's commission costs are usually done at rates far
under those in the retail market.
D. SECURITIES OF REGULAR BROKER-DEALERS
From time to time a Fund 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 a Fund's last
fiscal year; (2) engaged in the largest amount of principal transactions for
portfolio transactions of the Fund during the Fund's last fiscal year; or (3)
sold the largest amount of the Fund's shares during the Fund's last fiscal year.
Following is a list of the regular brokers and dealers of the Fund whose
securities (or the securities of the parent company) were acquired or held
during the past fiscal year and the aggregate value of the Fund's holdings of
those securities as of the Fund's 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.
Each Fund accepts 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 each Fund are sold on a continuous basis by the distributor at 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
statement of assets and liabilities).
Each Fund reserves the right to refuse any purchase request in excess of 1% of
the Fund's total assets.
Fund shares are normally issued for cash only. In the Adviser's discretion,
however, a Fund may accept portfolio securities that meet the investment
objective and policies of the Fund as payment for Fund shares. A Fund 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 a Fund.
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 a Fund directly. When you purchase a Fund's 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, a Fund may
confirm purchases and redemptions to the financial institution, which will
provide you with confirmations and periodic statements. A Fund is not
responsible for the failure of any financial institution to carry out its
obligations.
Each Fund may authorize one or more brokers to receive on its behalf purchase
and redemption orders. Such brokers, including Charles Schwab & Co, Inc., are
authorized to designate other intermediaries to receive purchase
20
<PAGE>
and redemption orders on a Fund's behalf. A Fund will be deemed to have received
a purchase or redemption order when an authorized broker or, if applicable, a
broker's authorized designee, receives the order. Customer orders will be priced
at a Fund's Net Asset Value next computed after they are received by an
authorized broker or the broker's authorized designee and accepted by the Fund.
Investors purchasing shares of a Fund 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 a Fund of its securities is not reasonably
practicable or as a result of which it is not reasonably practicable for the
Fund fairly to determine the value of their net assets; or (3) the SEC may by
order permit for the protection of the shareholders of a Fund.
2. REDEMPTION IN-KIND
Redemption proceeds normally are paid in cash. Payments may be made wholly or
partly in portfolio securities, however, if a Fund's management determines
conditions exist which would make payment in cash detrimental to the best
interests of the Fund. 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 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 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. Each
Fund has filed an election with the SEC pursuant to which the 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 Fund's 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
each Fund's 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 market quotations are not readily available, then securities are
valued at fair value as determined by the Board (or its delegate).
21
<PAGE>
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
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 each Fund and its 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 a Fund and its
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
Each Fund intends 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 Fund.
The tax year-end of each Fund 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
excess 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
22
<PAGE>
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.
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. These distributions are taxable to
shareholders as ordinary income. A portion of 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 Fund 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.
Each Fund 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 a Fund's financial statements. Any
such losses may not be carried back.
Distributions by each Fund 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 a Fund will be treated in the manner described above
regardless of whether the distribution is paid in cash or reinvested in
additional shares of the Fund (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 a Fund. 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.
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 a Fund 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 Fund) on December 31 of that calendar year if the
distribution is actually paid in January of the following year.
23
<PAGE>
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.
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 a Fund's income must be distributed during the next calendar year.
Each Fund will be treated as having distributed any amount on which it is
subject to income tax for any tax year ending in a calendar year.
For purposes of calculating the excise tax, each Fund: (1) reduces its 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) excludes 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. Each Fund will include foreign
currency gains and losses incurred after October 31 in determining ordinary
taxable income for the succeeding calendar year.
Each Fund intends 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 a Fund 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 that Fund 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 a Fund 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
Each Fund 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 its 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 Fund 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 a Fund is "effectively
connected" with a U.S. trade or business carried on by the foreign shareholder.
If the income from a Fund 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
24
<PAGE>
generally would be exempt from U.S. federal income tax on gain realized on the
sale of shares of a Fund, capital gain distributions from the Fund and amounts
retained by the Fund that are designated as undistributed capital gain.
If the income from a Fund 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 Fund
will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or U.S. corporations. A foreign corporate shareholder would also be
subject to a branch profits tax.
In the case of a non-corporate foreign shareholder, a Fund 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 Fund 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 a Fund 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 Fund, distributions from the Fund, 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 a Fund 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 a
Fund, distributions from the Fund, 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.
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. All three codes were
reviewed by the Board to ensure compliance with the recent amendments to Rule
17j-1. Codes permit personnel subject to codes to invest in securities,
including securities that may be purchased or held by the Funds.
2. SHAREHOLDER VOTING AND OTHER RIGHTS
Each share of a Fund 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 a Fund.
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 Fund by merger, consolidation or incorporation.
B. FUND OWNERSHIP
As of June 30, 2000, the percentage of shares owned by all officers and Trustees
of the Trust as a group was less than 1% of the shares of each Fund.
26
<PAGE>
Also as of that date, certain shareholders of record owned 5% or more of a class
of shares of a Fund. These shareholders and any shareholder known by the Fund to
own beneficially 5% or more of a class of shares of the Fund are listed in Table
6 in Appendix B.
From time to time, certain shareholders may own a large percentage of the shares
of a Fund. Accordingly, those shareholders may be able to greatly affect (if not
determine) the outcome of a shareholder vote. As of June 30, 2000, the following
persons beneficially owned 25% or more of the shares of a Fund and may be deemed
to control the Fund. 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. Each Fund believes that the securities regulators of
some states, however, have in the past 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 a Fund or its
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 each Fund for the year ended June 30, 2000 included
in the Annual Report to shareholders of each Fund 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.
A-2
<PAGE>
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.
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
A- factors are more variable in periods of greater economic stress.
BBB+ Below-average protection factors but still considered
BBB sufficient for prudent investment. Considerable variability in
BBB- risk during 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.
A-3
<PAGE>
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.
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, CC, C High default risk. Default is a real possibility. Capacity for
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.
A-4
<PAGE>
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.
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, CCC Preferred stock rated BB, B, and CCC is regarded, on
balance, as 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
A-6
<PAGE>
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.
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.
<TABLE>
<S> <C> <C> <C>
ADVISORY FEE ADVISORY FEE ADVISORY FEE
PAYABLE WAIVED RETAINED
CUTLER CORE FUND
Year Ended June 30, 2000 $545,524 $0 $545,524
Year Ended June 30, 1999 560,854 0 560,854
Year Ended June 30, 1998 520,630 0 520,630
CUTLER VALUE FUND
Year Ended June 30, 2000 $240,622 $10,000 $230,622
Year Ended June 30, 1999 285,783 0 285,783
Year Ended June 30, 1998 279,760 0 279,760
</TABLE>
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, 2000 $72,737
Year Ended June 30, 1999 74,781
Year Ended June 30, 1998 69,417
CUTLER VALUE FUND
Year Ended June 30, 2000 $32,083
Year Ended June 30, 1999 38,104
Year Ended June 30, 1998 37,301
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, 2000 $42,000
Year Ended June 30, 1999 38,000
Year Ended June 30, 1998 39,000
CUTLER VALUE FUND
Year Ended June 30, 2000 $40,000
Year Ended June 30, 1999 40,000
Year Ended June 30, 1998 39,000
B-1
<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, 2000 $16,356
Year Ended June 30, 1999 17,138
Year Ended June 30, 1998 16,912
CUTLER VALUE FUND
Year Ended June 30, 2000 $14,818
Year Ended June 30, 1999 15,272
Year Ended June 30, 1998 14,938
TABLE 5 - COMMISSIONS
The following table shows the aggregate brokerage commissions paid by the Funds.
CUTLER CORE FUND
Year Ended June 30, 2000 $87,467.40
Year Ended June 30, 1999 79,706
Year Ended June 30, 1998 124,242
CUTLER VALUE FUND
Year Ended June 30, 2000 $59,340.32
Year Ended June 30, 1999 86,708
Year Ended June 30, 1998 38,272
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, 2000.
NAME AND ADDRESS SHARES % OF FUND
............................................. .............. ..............
............................................. .............. ..............
CUTLER CORE FUND
Enterprise Trust & Investment Co TTEE 524,627.588 11.95%
For Big Creek Lumber Profit Sharing
Ms. Ellen McCrary
3654 Highway 1
Davenport, CA 95017
B-2
<PAGE>
APPENDIX C PERFORMANCE DATA
TABLE 1 - TOTAL RETURNS
The average annual total returns of the Funds for the periods ended June 30,
2000, were as follows:
TOTAL RETURNS
CUTLER CORE FUND
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION
8.61% 20.88% 15.95%
CUTLER VALUE FUND
ONE YEAR FIVE YEARS TEN YEARS SINCE INCEPTION
(9.25)% 16.65% 13.92%
30-DAY SEC YIELD
CUTLER CORE FUND 0.14%
CUTLER VALUE FUND 0.57%
C-1
