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Previous: INSURED MUNICIPALS INCOME TRUST 124TH INSURED MULTI SERIES, 24F-2NT, 2000-08-31 |
Next: MUNICIPAL INVT TR FD MON PYMT SER 528 DEFINED ASSET FDS, 497, 2000-08-31 |
ANNUAL REPORT JUNE 30, 2000
<TABLE>
<S> <C> <C>
CUTLER CORE FUND Cutler & Company, LLC Forum Shareholder Services, LLC
CUTLER VALUE FUND 503 Airport Road 2 Portland Square
Medford, Oregon 97504 Portland, Maine 04101
</TABLE>
To The Cutler Trust Shareholders:
We are pleased to present our Annual Report for the fiscal year ended June 30,
2000. This has been another eventful year, featuring accelerating globalization,
a Y2K problem that wasn't, a continuing stream of astounding inventions and
developments led by the mapping of the human genome, and large expansions and
consolidations in many of our industries.
The expansion of new investors has continued apace, and the mixture of so many
new people, so many new businesses, and so much new money, has contributed to
rather wide swings in the various market segments.
During this period, other forces have been at work that may not be fully
appreciated. The Federal Reserve has been tightening short-term interest rates
and warning banks about credit quality; at the same time the Fed has kept the
money-supply growth at the inflationary and expansionist level around 8%, and
the Treasury has been buying in longer bonds. While the Fed is trying to control
inflation, there are ominous rumblings among economists and common-sense
consumers that the data produced by other departments of government are
understating the true pace of inflation.
We are pleased with the grasp of events and response by our portfolio managers
and look forward to a constructive year ahead. As always, if you have any
questions, please let us help.
Sincerely,
/s/ Kenneth R. Cutler
Kenneth R. Cutler
Chairman of the Board
The Cutler Trust
/S/ BROOKE R. ASHLAND
Brooke R. Ashland
Chief Executive Officer
Cutler & Company, LLC
1
<PAGE>
THE CUTLER TRUST
INVESTMENT ADVISER'S REPORT JUNE 30, 2000
Outlook
The U.S. economy continues to mark quarter after quarter of strong growth while
maintaining low levels of both unemployment and inflation. All of this despite
six Federal Reserve interest rate increases. These increases, however, are
starting to show up in the first hints of moderation in the economy. The goal of
the Federal Reserve is to extend our economic expansion by moderating growth to
ensure inflation doesn't spark a contraction of the economy. Our expectations
are for the Federal Reserve to ease their tightening stance in the future to
ensure moderate growth and orchestrate what is known as a soft landing. This
would be the best case scenario for the stock market, alleviating fears of a
slowdown in corporate profits yet removing the risk of rising inflation and the
stock market multiple contraction it brings.
There are, of course, other uncertainties that can possibly derail the economy
and the stock market that bear careful attention. Some of these include the ever
increasing U.S. trade imbalance, the low domestic savings rate, and the
continued large government surplus. Additionally, the presidential election will
cause additional uncertainty as the capital markets sort out whether the next
administration will increase government involvement in the economy, generally
viewed as unfavorable, or decrease it. This election will prove to be extremely
important to the outcome of certain issues like the government surplus, true
social security reform, and the restructuring of our stifling tax system.
Value Fund
The total return for the Cutler Value Fund was -1.7% for the quarter ended June
30, 2000 compared to -1.5% for the Lipper Multi-Cap Value Funds average. For the
year ended June 30, 2000, the Value Fund's total return was -9.3% compared to
-3.8% for the Lipper Multi-Cap Value Funds average.
The past year's performance was driven by three key economic sectors. The first
was technology. Based on the Russell 1000 Value Index, this sector was one of
only two that returned strong positive performance. In addition to maintaining a
favorable overweight allocation to technology during the past year, our stock
picks in the group were particularly strong. The technology names in the Russell
1000 Value Index returned 17.9% while our investments returned 57.6%.
Particularly strong stocks in this area were Apple Computer which had a return
of 126.2% and Hewlett Packard which had a return of 51.2%.
Offsetting some of the exceptional performance we had on the technology side of
the portfolio were unfavorable results in the consumer discretionary and
financial services sectors. Although our sector positioning was reasonable, we
had disappointing moves in some of our individual investment ideas. The key
negative in consumer discretionary was Mattel. This stock had a -48.2% return
over the past year. We still own it and believe the investment community is
dramatically undervaluing the tremendous assets held by this company. We
anticipate strong performance from this stock as recent difficulties are sorted
out by their new management team.
Key negatives in the financial services area were Bank of America and Bank One.
These stocks had returns of -39.2% and -52.9%, respectively. Notwithstanding the
difficult environment for banks at the current time, we anticipate Bank of
America to improve performance as recent acquisitions are digested and new
management at Bank One forms and subsequently executes on a new strategic vision
for the bank.
2
<PAGE>
THE CUTLER TRUST
INVESTMENT ADVISER'S REPORT JUNE 30, 2000 (concluded)
Core Fund
The total return for the Cutler Core Fund was -1.7% for the quarter ended June
30, 2000 compared to -2.4% for the Lipper Large-Cap Value Funds average. For the
year ended June 30, 2000, the Core Fund's total return was 8.6% compared to
-0.9% for the Lipper Large-Cap Value Funds average.
This past year's performance was driven by two key economic sectors. The first
was technology. Based on the Russell 1000 Value Index, this sector was the
second strongest performer. The Core Fund not only had a substantial overweight
in this sector but our stock picks in the group were quite strong. The
technology names in the Russell 1000 Value Index returned 17.9% while our
investments in the sector returned 53.3%. Particularly strong stocks in this
area were Corning Inc., which had a return of 287%, and Texas Instruments Inc.,
which had a return of 91%.
The second area, which was a key driver to performance, was the healthcare
sector. Based on the Russell 1000 Value Index, this sector returned 3.5% while
the Core Fund's healthcare sector stock picks returned 19.7%. This
outperformance was driven by Alza Corp. with a 60.9% return and Eli Lilly & Co.
with a 41.5% return.
Going forward we see three key sectors playing a big role in the performance of
the portfolios. Energy related areas are showing exceptional fundamental
outlooks which we believe are not fully reflected in share prices. Consumer
staples companies demonstrate strong performance in periods of slowing economic
growth, which we are currently experiencing. In addition, consolidation activity
in this area is heating up and should cause investors to focus more intensely on
what are some of the best values in the equity markets. Finally, financial
services companies have had a great deal of difficulty dealing with issues from
merger integration, to Federal Reserve tightening, to increased concern over
credit quality and risk. It is these kinds of issues, which are short term in
nature, that provide superb entry points as stocks are taken to dramatically
oversold levels. Although we are currently underweight in the area, we
anticipate our exposure to increase as we are starting to see light at the end
of the tunnel.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. The views in this report
were those of the Fund manager as of June 30, 2000, and may not reflect the
views of the manager on the date this report is first published or any time
thereafter. These views are intended to assist shareholders of the Fund in
understanding their investment in the Fund and do not constitute investment
advice.
Lipper, Inc., an independent mutual fund rating service, calculates the Lipper
Multi-Cap Value Funds and Lipper Large-Cap Value Funds average by taking an
arithmetic average of the returns of the funds in each classification. The
Russell 1000 Value Index consists of stocks in the Russell 1000 Index with lower
price-to-book ratios and lower forecasted growth values. Individuals cannot
invest in an index.
3
<PAGE>
THE CUTLER TRUST
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
JUNE 30, 2000
These charts reflect a comparison of changes in value of a $10,000 investment in
the Cutler Core Fund and Cutler Value Fund since inception, including
reinvestment of all dividends and distributions, and the performance of the
Standard & Poor's 500 Index ("S&P 500 Index"). The S&P 500 Index is a market
weighted index composed of 500 large capitalization companies and reflects the
reinvestment of dividends. The S&P 500 Index does not reflect expenses, which
have been deducted from each Fund's return. Individuals cannot invest in an
index.
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. Investment return and
principal value of an investment in each Fund will fluctuate so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total return for each Fund would have been lower had certain fees and
expenses not been voluntarily waived and/or reimbursed.
<TABLE>
<CAPTION>
CUTLER CORE FUND S&P 500 INDEX
---------------- -------------
<S> <C> <C>
Dec 30|1992 10000 10000
9770 10034
9920 10170
10110 10385
9869 10134
9979 10404
Jun|1993 10045 10434
10135 10392
10549 10786
10585 10700
10838 10921
10534 10818
10509 10949
10733 11320
10315 11013
9896 10534
9999 10669
10164 10843
Jun|1994 9907 10578
10114 10925
10487 11373
10259 11095
10395 11343
10071 10931
10205 11093
10744 11380
11019 11824
11146 12172
11390 12530
11837 13030
Jun|1995 11752 13332
11892 13774
11967 13808
12653 14391
12599 14339
13151 14968
13718 15256
13960 15775
13938 15921
14136 16074
14103 16311
14336 16731
Jun|1996 14447 16795
14046 16054
14180 16393
15016 17315
15824 17792
16745 19135
16226 18756
17234 19928
17739 20084
17147 19260
18061 20409
18900 21651
Jun|1997 19888 22621
20829 24420
19603 23053
20730 24315
20096 23504
21028 24591
21637 25013
21774 25289
22745 27112
23766 28499
23546 28785
23245 28292
Jun|1998 24182 29440
24265 29127
21489 24921
22305 26518
23835 28673
24648 30410
26284 32162
26621 33506
26142 32465
26493 33763
26777 35071
25996 34244
Jun|1999 27925 36142
27143 35014
26539 34842
26318 33888
27778 36032
28793 36764
30277 38928
28707 36973
28498 36273
30843 39819
30351 38622
30275 37829
Jun|2000 30329 38762
</TABLE>
<TABLE>
<CAPTION>
CUTLER VALUE FUND S&P 500 INDEX
----------------- -------------
<S> <C> <C>
Dec 30|1992 10000 10000
9770 10034
9950 10170
10100 10385
9989 10134
10150 10404
Jun|1993 10165 10434
10055 10392
10478 10786
10352 10700
10544 10921
10392 10818
10499 10949
10661 11320
10356 11013
9995 10534
10108 10669
10271 10843
Jun|1994 10056 10578
10313 10925
10797 11373
10540 11095
10674 11343
10364 10931
10584 11093
10906 11380
11291 11824
11510 12172
11740 12530
12148 13030
Jun|1995 12302 13332
12533 13774
12596 13808
13150 14391
13087 14339
13773 14968
14097 15256
14511 15775
14574 15921
14662 16074
14768 16311
15055 16731
Jun|1996 15132 16795
14481 16054
14727 16393
15551 17315
15883 17792
16869 19135
16478 18756
17254 19928
17653 20084
17074 19260
17982 20409
18879 21651
Jun|1997 19851 22621
21162 24420
19786 23053
20837 24315
20381 23504
21401 24591
21957 25013
22051 25289
23333 27112
24634 28499
24563 28785
24033 28292
Jun|1998 24794 29440
24369 29127
21397 24921
22444 26518
24063 28673
25149 30410
25901 32162
25717 33506
25578 32465
26060 33763
28607 35071
28129 34244
Jun|1999 29282 36142
28586 35014
27766 34842
26547 33888
27788 36032
27214 36764
26752 38928
25509 36973
23671 36273
27029 39819
26541 38622
27978 37829
Jun|2000 26572 38762
</TABLE>
4
<PAGE>
THE CUTLER TRUST
CUTLER CORE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK (96.8%)
BANKS (3.5%)
31,100 Bank of America Corp. $ 1,337,300
25,750 Suntrust Banks, Inc. 1,176,453
-----------
2,513,753
-----------
BUSINESS SERVICES (2.8%)
5,200 3Com Corp.+ 299,650
13,200 Microsoft Corp.+ 1,056,000
19,200 Sungard Data Systems, Inc.+ 595,200
-----------
1,950,850
-----------
CHEMICALS (3.4%)
37,600 Dow Chemical Co. 1,135,050
29,400 E.I. du Pont de Nemours & Co. 1,286,250
-----------
2,421,300
-----------
COMMUNICATIONS EQUIPMENT (7.9%)
10,900 Lucent Technologies, Inc. 645,825
102,750 Motorola, Inc. 2,986,172
28,500 Tellabs, Inc.+ 1,950,469
-----------
5,582,466
-----------
COMPUTER & OFFICE EQUIPMENT (2.0%)
11,400 Hewlett-Packard Co. 1,423,575
-----------
DRUGS & PHARMACEUTICALS (9.3%)
30,900 ALZA Corp.+ 1,826,962
41,150 Bristol-Myers Squibb Co. 2,396,987
12,700 Eli Lilly & Co. 1,268,413
14,500 Merck & Co., Inc. 1,111,063
-----------
6,603,425
-----------
</TABLE>
See Notes to Financial Statements.
5
<PAGE>
THE CUTLER TRUST
CUTLER CORE FUND
SCHEDULE OF INVESTMENTS (continued)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
ELECTRIC MACHINERY (6.8%)
34,000 Emerson Electric Co. $ 2,052,750
21,800 General Electric Co. 1,155,400
23,500 Texas Instruments, Inc. 1,614,156
-----------
4,822,306
-----------
ELECTRIC, GAS & UTILITY COMPANIES (1.3%)
44,800 Northern States Power Co. 904,400
-----------
ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS,
EXCEPT COMPUTER EQUIPMENT (5.8%)
7,600 Intel Corp. 1,016,025
32,000 National Semiconductor Corp.+ 1,816,000
17,550 Vitesse Semiconductor Corp.+ 1,291,022
-----------
4,123,047
-----------
FABRICATED METAL PRODUCTS (0.8%)
9,900 Illinois Tool Works, Inc. 564,300
-----------
FOOD & SOFT DRINKS (2.2%)
25,200 Albertson's, Inc. 837,900
38,300 Sara Lee Corp. 739,669
-----------
1,577,569
-----------
FOREST PRODUCTS (3.0%)
20,400 Kimberly-Clark Corp. 1,170,450
21,600 Weyerhaeuser Co. 928,800
-----------
2,099,250
-----------
GENERAL MERCHANDISE TRADE (2.6%)
32,300 Wal-Mart Stores, Inc. 1,861,288
-----------
</TABLE>
See Notes to Financial Statements.
6
<PAGE>
THE CUTLER TRUST
CUTLER CORE FUND
SCHEDULE OF INVESTMENTS (continued)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT
(5.2%)
2,700 Cisco Systems, Inc.+ $ 171,619
22,800 Dell Computer Corp.+ 1,124,325
11,650 IBM Corp. 1,276,403
19,950 Symbol Technologies, Inc. 1,077,300
-----------
3,649,647
-----------
INSTRUMENTS & RELATED PRODUCTS (1.8%)
4,347 Agilent Technologies, Inc.+ 320,591
29,200 Honeywell International, Inc. 983,675
-----------
1,304,266
-----------
MISCELLANEOUS RETAIL (1.8%)
13,750 Costco Wholesale Corp.+ 453,750
51,200 Staples, Inc.+ 787,200
-----------
1,240,950
-----------
MOTION PICTURES (1.1%)
32,200 AT&T Corp-Liberty Media Corp.+ 780,849
-----------
OIL & GAS EXTRACTION (0.7%)
13,150 Burlington Resources, Inc. 502,988
-----------
PETROLEUM PRODUCTS (10.3%)
32,300 BP Amoco plc ADR 1,826,969
83,800 Conoco, Inc. Class B 2,058,338
36,400 Phillips Petroleum Co. 1,845,025
29,400 Texaco, Inc. 1,565,550
-----------
7,295,882
-----------
PRIMARY METAL INDUSTRIES (1.0%)
24,200 Alcoa, Inc. 701,800
-----------
PRINTING & PUBLISHING (1.3%)
15,900 Gannett Co., Inc. 951,019
-----------
</TABLE>
See Notes to Financial Statements.
7
<PAGE>
THE CUTLER TRUST
CUTLER CORE FUND
SCHEDULE OF INVESTMENTS (concluded)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
PROPERTY & CASUALTY INSURANCE (3.6%)
14,300 Ace, Ltd.+ $ 400,400
18,250 American International Group, Inc. 2,144,375
-----------
2,544,775
-----------
STONE, CLAY, GLASS & CONCRETE PRODUCTS (3.2%)
8,300 Corning, Inc. 2,239,963
-----------
TRANSPORTATION EQUIPMENT (2.6%)
11,000 Daimler Chrysler AG+ 572,689
21,000 United Technologies Corp. 1,236,375
-----------
1,809,064
-----------
VOICE & DATA TRANSMISSION (12.8%)
42,700 AT&T Corp. 1,350,387
49,450 BellSouth Corp. 2,107,806
29,150 GTE Corp. 1,814,587
50,800 SBC Communications, Inc. 2,197,100
1,100 Tele Sudeste Celular Participacoes S.A. ADR 33,550
5,500 Telecomunicacoes Brasileiras S.A. ADR 534,188
5,500 Telecomunicacoes de Sao Paulo S.A. ADR 101,750
19,700 WorldCom, Inc.+ 903,738
-----------
9,043,106
-----------
TOTAL COMMON STOCK (COST $60,696,618) 68,511,838
-----------
SHORT-TERM HOLDINGS (3.2%)
2,300,759 Daily Assets Cash Fund (cost $2,300,759) 2,300,759
-----------
TOTAL INVESTMENTS (100.0%) (COST $62,997,377) $70,812,597
===========
</TABLE>
------------------------------
+Non-income producing security.
ADR--American Depository Receipt
See Notes to Financial Statements.
8
<PAGE>
THE CUTLER TRUST
CUTLER VALUE FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
COMMON STOCK (98.5%)
BANKS (14.7%)
18,700 Bank of America Corp. $ 804,100
18,100 Bank One Corp. 480,781
10,350 Chase Manhattan Corp. 476,747
16,600 Citigroup, Inc. 1,000,150
9,700 First Union Corp. 240,682
4,700 Suntrust Banks, Inc. 214,731
22,000 Wells Fargo Co. 852,500
-----------
4,069,691
-----------
BUSINESS SERVICES (0.8%)
6,800 Sungard Data Systems, Inc.+ 210,800
-----------
CHEMICALS (3.5%)
9,500 E.I. du Pont de Nemours & Co. 415,625
15,600 Rohm & Haas Co. 538,200
-----------
953,825
-----------
COMPUTER & OFFICE EQUIPMENT (6.6%)
35,000 Apple Computer, Inc.+ 1,833,125
-----------
DRUGS & PHARMACEUTICALS (3.6%)
16,900 ALZA Corp.+ 999,212
-----------
ELECTRIC MACHINERY (1.5%)
7,000 Emerson Electric Co. 422,625
-----------
ELECTRIC, GAS & UTILITY COMPANIES (3.7%)
25,000 PECO Energy Co. 1,007,814
-----------
FABRICATED METAL PRODUCTS (1.3%)
6,200 Illinois Tool Works, Inc. 353,400
-----------
</TABLE>
See Notes to Financial Statements.
9
<PAGE>
THE CUTLER TRUST
CUTLER VALUE FUND
SCHEDULE OF INVESTMENTS (continued)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
FOOD & SOFT DRINKS (15.0%)
12,100 Bestfoods, Inc. $ 837,925
58,500 ConAgra, Inc. 1,115,156
23,600 General Mills, Inc. 902,700
7,400 H.J. Heinz Co. 323,750
49,300 Sara Lee Corp. 952,106
-----------
4,131,637
-----------
FOREST PRODUCTS (1.9%)
11,900 Weyerhaeuser Co. 511,700
-----------
GAMES & TOYS (3.9%)
81,700 Mattel, Inc. 1,077,419
-----------
GENERAL MERCHANDISE STORES (4.2%)
61,500 TJX Cos., Inc. 1,153,125
-----------
GROCERY STORES (3.9%)
22,000 Albertson's, Inc. 731,500
15,900 Kroger Co.+ 350,794
-----------
1,082,294
-----------
INDUSTRIAL & COMMERCIAL MACHINERY (0.7%)
5,100 Dover Corp. 206,869
-----------
INSTRUMENTS & RELATED PRODUCTS (2.1%)
1,487 Agilent Technologies, Inc.+ 109,666
14,100 Honeywell International, Inc. 474,994
-----------
584,660
-----------
</TABLE>
See Notes to Financial Statements.
10
<PAGE>
THE CUTLER TRUST
CUTLER VALUE FUND
SCHEDULE OF INVESTMENTS (continued)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
PETROLEUM PRODUCTS (11.3%)
8,936 BP Amoco plc ADR $ 505,442
2,700 Chevron Corp. 228,994
42,001 Conoco Inc., Class B 1,031,650
6,900 Exxon Mobil Corp. 541,650
6,800 Tosco Corp. 192,525
18,300 Unocal Corp. 606,187
-----------
3,106,448
-----------
PRINTING & PUBLISHING (3.3%)
3,900 Gannett Co., Inc. 233,269
13,000 Knight-Ridder, Inc. 691,437
-----------
924,706
-----------
PROPERTY & CASUALTY INSURANCE (2.1%)
20,900 Ace, Ltd.+ 585,200
-----------
TECHNOLOGY (2.1%)
5,400 IBM Corp. 591,637
-----------
TRANSPORTATION (1.9%)
14,000 Union Pacific Corp. 520,625
-----------
TRANSPORTATION EQUIPMENT (0.4%)
2,700 Boeing Co. 112,893
-----------
</TABLE>
See Notes to Financial Statements.
11
<PAGE>
THE CUTLER TRUST
CUTLER VALUE FUND
SCHEDULE OF INVESTMENTS (concluded)
JUNE 30, 2000
<TABLE>
<CAPTION>
SHARES SECURITY DESCRIPTION VALUE
<C> <S> <C>
VOICE & DATA TRANSMISSION (10.0%)
17,500 AT&T Corp. $ 553,437
20,800 GTE Corp. 1,294,800
10,100 SBC Communications, Inc. 436,825
780 Tele Sudeste Celular Participacoes S.A. ADR 23,790
3,900 Telecomunicacoes Brasileiras S.A. ADR 378,788
3,900 Telecomunicacoes de Sao Paulo S.A. ADR 72,150
-----------
2,759,790
-----------
TOTAL COMMON STOCK (COST $28,207,240) 27,199,495
-----------
SHORT-TERM HOLDINGS (1.5%)
405,755 Daily Assets Cash Fund (cost $405,755) 405,755
-----------
TOTAL INVESTMENTS (100.0%) (COST $28,612,995) $27,605,250
===========
</TABLE>
------------------------------
+Non-income producing security.
ADR -- American Depository Receipt
See Notes to Financial Statements.
12
<PAGE>
THE CUTLER TRUST
STATEMENTS OF ASSETS & LIABILITIES
JUNE 30, 2000
<TABLE>
<CAPTION>
CUTLER CUTLER
CORE VALUE
FUND FUND
----------- -----------
<S> <C> <C>
ASSETS
Investments (Note 2)
Investments at cost $62,997,377 $28,612,995
Net unrealized appreciation (depreciation) 7,815,220 (1,007,745)
----------- -----------
Total investments at value 70,812,597 27,605,250
Interest, dividends and other receivables 57,297 64,270
Receivable for securities sold 1,129,207 --
Receivable for Fund shares sold 20,894 14,586
----------- -----------
Total Assets 72,019,995 27,684,106
----------- -----------
LIABILITIES
Dividends payable 1,344 4,188
Payable for securities purchased 1,692,269 --
Payable for Fund shares redeemed 132,752 10,300
Payable to administrator (Note 3) 5,917 2,380
Payable to investment adviser (Note 3) 44,379 17,851
Payable to custodian (Note 3) 3,055 2,544
Payable to other related parties (Note 3) 20,766 10,660
Accrued expenses and other liabilities 24,227 21,089
----------- -----------
Total Liabilities 1,924,709 69,012
----------- -----------
NET ASSETS $70,095,286 $27,615,094
=========== ===========
COMPONENTS OF NET ASSETS
Paid-in capital $46,617,219 $28,263,647
Undistributed net investment income 82 176
Net unrealized appreciation (depreciation) on
investments 7,815,220 (1,007,745)
Accumulated net realized gain on investments 15,662,765 359,016
----------- -----------
NET ASSETS $70,095,286 $27,615,094
=========== ===========
Shares of Beneficial Interest, No Par Value 4,383,029 2,822,596
NET ASSET VALUE, offering price and redemption price per
share $15.99 $9.78
</TABLE>
See Notes to Financial Statements.
13
<PAGE>
THE CUTLER TRUST
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 2000
<TABLE>
<CAPTION>
CUTLER CUTLER
CORE VALUE
FUND FUND
----------- -----------
<S> <C> <C>
INVESTMENT INCOME
Dividend income $ 830,357 $ 695,277
Interest income 344,656 29,712
----------- -----------
Total Investment Income 1,175,013 724,989
----------- -----------
EXPENSES
Investment advisory (Note 3) 545,524 240,622
Management (Note 3) 72,737 32,083
Transfer agent (Note 3) 16,356 14,818
Shareholder services 18,310 10,051
Custodian (Note 3) 12,079 10,839
Accounting (Note 3) 42,000 40,000
Legal 21,524 8,929
Audit 16,226 16,309
Reporting 12,367 5,624
Compliance 15,009 13,850
Miscellaneous 33,174 18,397
----------- -----------
Total Expenses 805,306 411,522
Fees waived (Note 4) -- (10,000)
----------- -----------
Net Expenses 805,306 401,522
----------- -----------
NET INVESTMENT INCOME 369,707 323,467
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Net realized gain from investments 15,785,136 1,297,860
Net change in unrealized depreciation of investments (11,162,815) (5,897,976)
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,622,321 (4,600,116)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS $ 4,992,028 $(4,276,649)
=========== ===========
</TABLE>
See Notes to Financial Statements.
14
<PAGE>
THE CUTLER TRUST
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
CUTLER CORE CUTLER VALUE
FUND FUND
----------------------------- -----------------------------
Year Year Year Year
Ended Ended Ended Ended
June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS -- BEGINNING OF PERIOD $74,499,099 $77,482,327 $40,124,966 $41,085,239
----------- ----------- ----------- -----------
OPERATIONS
Net investment income 369,707 571,785 323,467 304,518
Net realized gain from investments 15,785,136 5,346,419 1,297,860 15,455,769
Net change in unrealized appreciation
(depreciation) of investments (11,162,815) 4,912,910 (5,897,976) (9,430,329)
----------- ----------- ----------- -----------
Net increase (decrease) in net assets
resulting from operations 4,992,028 10,831,114 (4,276,649) 6,329,958
----------- ----------- ----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income (369,872) (572,269) (322,242) (305,165)
In excess of net investment income -- -- -- (1,049)
Net realized capital gain from
investments (4,398,786) (16,779,472) (14,068,788) (9,097,766)
----------- ----------- ----------- -----------
Total distributions to
shareholders (4,768,658) (17,351,741) (14,391,030) (9,403,980)
----------- ----------- ----------- -----------
CAPITAL SHARE TRANSACTIONS
Sale of shares 9,494,525 9,146,759 5,099,582 5,658,822
Reinvestment of distributions 4,712,363 16,703,765 13,390,836 8,745,547
Redemption of shares (18,834,071) (22,313,125) (12,332,611) (12,290,620)
----------- ----------- ----------- -----------
Net increase (decrease) from capital
share transactions (4,627,183) 3,537,399 6,157,807 2,113,749
----------- ----------- ----------- -----------
Net decrease in net assets (4,403,813) (2,983,228) (12,509,872) (960,273)
----------- ----------- ----------- -----------
NET ASSETS -- END OF PERIOD (Including
line (A)) $70,095,286 $74,499,099 $27,615,094 $40,124,966
=========== =========== =========== ===========
(A) Accumulated undistributed
(distributions in excess of) net
investment income $ 82 $ 247 $ 176 $ (1,049)
=========== =========== =========== ===========
SHARE ACTIVITY
Sale of shares 609,586 587,072 430,728 313,236
Reinvestment of distributions 302,034 1,196,788 1,372,504 544,005
Redemption of shares (1,272,244) (1,441,571) (1,100,106) (692,130)
----------- ----------- ----------- -----------
Net increase (decrease) in shares (360,624) 342,289 703,126 165,111
=========== =========== =========== ===========
</TABLE>
See Notes to Financial Statements.
15
<PAGE>
THE CUTLER TRUST
FINANCIAL HIGHLIGHTS
Selected per share data and
ratios for a share outstanding
throughout each period.
<TABLE>
<CAPTION>
CUTLER CORE FUND
---------------------------------------------------
Year Ended June 30,
---------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 15.71 $ 17.60 $ 16.06 $ 12.95 $ 10.96
------- ------- ------- ------- -------
Investment Operations
Net investment income 0.08 0.12 0.19 0.24 0.35
Net realized and unrealized gain on investments 1.24 2.06 3.05 4.30 2.13
------- ------- ------- ------- -------
Total from Investment Operations 1.32 2.18 3.24 4.54 2.48
------- ------- ------- ------- -------
Distributions From
Net investment income (0.08) (0.12) (0.19) (0.24) (0.35)
Net realized gain on investments (0.96) (3.95) (1.51) (1.19) (0.14)
------- ------- ------- ------- -------
Total Distributions (1.04) (4.07) (1.70) (1.43) (0.49)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 15.99 $ 15.71 $ 17.60 $ 16.06 $ 12.95
======= ======= ======= ======= =======
Total Return 8.61% 15.48% 21.60% 37.65% 22.93%
Ratios/Supplementary Data
Net assets at the end of year (in thousands) $70,095 $74,499 $77,482 $62,523 $46,285
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%
Portfolio Turnover Rate 79% 59% 119% 23% 57%
</TABLE>
See Notes to Financial Statements.
16
<PAGE>
THE CUTLER TRUST
FINANCIAL HIGHLIGHTS (concluded)
Selected per share data and
ratios for a share outstanding
throughout each period.
<TABLE>
<CAPTION>
CUTLER VALUE FUND
---------------------------------------------------
Year Ended June 30,
---------------------------------------------------
2000 1999 1998 1997 1996
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 18.93 $ 21.02 $ 18.33 $ 14.18 $ 11.71
------- ------- ------- ------- -------
Investment Operations
Net investment income 0.12 0.14 0.13 0.18 0.21
Net realized and unrealized gain (loss) on
investments (1.97) 2.73 4.19 4.20 2.47
------- ------- ------- ------- -------
Total from Investment Operations (1.85) 2.87 4.32 4.38 2.68
------- ------- ------- ------- -------
Distributions From
Net investment income (0.12) (0.14) (0.13) (0.18) (0.21)
In excess of net investment income -- * -- -- --
Net realized gain on investments (7.18) (4.82) (1.50) (0.05) --
------- ------- ------- ------- -------
Total Distributions (7.30) (4.96) (1.63) (0.23) (0.21)
------- ------- ------- ------- -------
Net Asset Value, End of Period $ 9.78 $ 18.93 $ 21.02 $ 18.33 $ 14.18
======= ======= ======= ======= =======
Total Return (9.25%) 18.10% 24.90% 31.18% 23.01%
Ratios/Supplementary Data
Net assets at the end of year (in thousands) $27,615 $40,125 $41,085 $35,277 $30,248
Ratios to Average Net Assets
Expenses including reimbursement/waiver of fees 1.25% 1.20% 1.24% 1.25% 1.05%
Expenses excluding reimbursement/waiver of fees 1.28% 1.20% 1.24% 1.25% 1.13%
Net investment income 1.01% 0.80% 0.65% 1.15% 1.65%
Portfolio Turnover Rate 66% 110% 50% 4% 9%
</TABLE>
------------------------------
* Per share data was less than $0.01.
See Notes to Financial Statements.
17
<PAGE>
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION
The Cutler Trust (the "Trust") was organized on October 2, 1992, as an
open-end management investment company under the Investment Company Act of
1940. The Trust currently has two diversified investment portfolios: Cutler
Core Fund and Cutler Value Fund (individually, a "Fund" and, collectively,
the "Funds"). The Funds commenced operations on December 30, 1992. On
December 20, 1999, Cutler Equity Income Fund was renamed Cutler Core Fund.
NOTE 2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally
accepted accounting principles, which require management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the
financial statements, and the reported amounts of increase and decrease in
net assets from operations during the fiscal period. Actual results could
differ from those estimates.
The following summarizes the significant accounting policies of the Funds:
SECURITY VALUATION -- The Trust determines the net asset value per share of
each Fund as of the close of regular trading on the New York Stock Exchange
(currently 4:00 P.M., Eastern time) on each Fund Business Day, as defined
in the Funds' prospectus. Securities with a maturity of 60 days or less are
valued at amortized cost. Securities for which market quotations are
readily available are valued using the last reported sales price provided
by independent pricing services. If no sale is reported, the mean of the
last bid and ask price is used. In the absence of readily available market
quotations, securities are valued at fair value using procedures approved
by the Trust's Board of Trustees.
SECURITY TRANSACTIONS AND INVESTMENT INCOME -- Dividend income is recorded
on the ex-dividend date. Interest income is recorded as earned. Security
transactions are recorded on a trade date basis. Realized gain and loss on
investments sold is recorded on the basis of identified cost.
DISTRIBUTIONS TO SHAREHOLDERS -- Dividends from net investment income, if
any, are declared and paid quarterly on the Funds. Capital gain
distributions, if any, are distributed to shareholders at least annually.
Distributions are based on amounts calculated in accordance with applicable
federal income tax regulations, which may differ from generally accepted
accounting principles. These differences are due primarily to differing
treatments of income and gain on various investment securities held by the
Fund, timing differences and differing characterizations of distributions
made by the Fund.
18
<PAGE>
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS (continued)
FEDERAL TAXES -- The Funds intend to qualify each year as regulated
investment companies and distribute all their taxable income. In addition,
by distributing in each calendar year substantially all their net
investment income, capital gain and certain other amounts, if any, the
Funds will not be subject to a federal excise tax. Therefore, no federal
income or excise tax provision is required.
EXPENSE ALLOCATION -- The Trust accounts separately for the assets and
liabilities and operations of each Fund. Expenses that are directly
attributable to more than one Fund are allocated among the respective
Funds.
NOTE 3. INVESTMENT ADVISORY AND OTHER SERVICES
The investment adviser to the Funds is Cutler & Company, LLC ("Adviser").
Pursuant to an Investment Advisory Agreement, the Adviser receives an
advisory fee from Cutler Core Fund and Cutler Value Fund at an annual rate
of 0.75% of each Fund's average daily net assets.
On behalf of each Fund, the Trust has entered into a Management Agreement
with Forum Administrative Services, LLC ("FAdS"). For its services, FAdS is
entitled to receive compensation at an annual rate of 0.10% of each Fund's
average daily net assets.
Forum Shareholder Services, LLC ("FSS"), an affiliate of FAdS, serves as
each Fund's transfer agent and dividend disbursing agent, for which it
receives a fee of $12,000 per year, per Fund, plus certain other fees and
expenses.
Forum Accounting Services, LLC ("FAcS"), an affiliate of FAdS, serves as
the fund accountant for each Fund, for which it receives a fee of $36,000
per year, per Fund, subject to adjustments for the number and type of
portfolio transactions.
Forum Fund Services, LLC, a registered broker-dealer and an affiliate of
FAdS, acts as the distributor for each Fund for which it receives no
compensation. Prior to October 31, 1999, Forum Financial Services, Inc.
served as each Fund's distributor.
Forum Trust, LLC ("Forum Trust") serves as each Fund's custodian and may
employ subcustodians to provide custody of a Fund's domestic assets. For
its services, Forum Trust is entitled to receive compensation at an annual
rate of 0.01% of each Fund's average daily net assets (this fee decreases
if the Fund assets exceed $1 billion), plus certain other fees and
expenses.
NOTE 4. WAIVER OF FEES
The Adviser voluntarily waived fees of $10,000 for Cutler Value Fund for
the year ended June 30, 2000.
19
<PAGE>
THE CUTLER TRUST
NOTES TO FINANCIAL STATEMENTS (concluded)
NOTE 5. SECURITIES TRANSACTIONS
The cost of securities purchased and the proceeds from sales of securities
(excluding short-term securities) for the year ended June 30, 2000, were as
follows:
<TABLE>
<CAPTION>
Cost of Purchases Proceeds from Sales
----------------- -------------------
<S> <C> <C>
Cutler Core Fund $54,240,657 $51,580,071
Cutler Value Fund 20,739,269 28,110,551
</TABLE>
For federal income tax purposes, the tax basis of investment securities
owned, the aggregate gross unrealized appreciation and the aggregate gross
unrealized depreciation as of June 30, 2000, were as follows:
<TABLE>
<CAPTION>
Net
Unrealized Unrealized Appreciation
Tax Cost Appreciation Depreciation (Depreciation)
----------- ------------ ------------ --------------
<S> <C> <C> <C> <C>
Cutler Core Fund $63,042,870 $12,833,042 $(5,063,315) $ 7,769,727
Cutler Value Fund 28,767,176 2,070,039 (3,231,965) (1,161,926)
</TABLE>
20
<PAGE>
THE CUTLER TRUST
SUPPLEMENTARY INFORMATION (unaudited)
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
Income Dividends -- All the income and any short-term capital gain dividends
paid by each Fund were ordinary income for federal income tax purposes. The
percentage of income dividends that were qualifying dividends for the corporate
dividends received deduction in Cutler Core Fund and Cutler Value Fund were
88.84% and 100.00%, respectively.
Capital Gain Dividends -- Cutler Core Fund and Cutler Value Fund declared long
term capital gain dividends of $4,398,786 and $12,269,553, respectively, for the
fiscal year ended June 30, 2000.
21
<PAGE>
THE CUTLER TRUST
REPORT OF INDEPENDENT AUDITORS
The Board of Trustees and Shareholders,
The Cutler Trust:
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments, of The Cutler Trust (the "Trust"), consisting of
the Cutler Core Fund (formerly Cutler Equity Income Fund) and the Cutler Value
Fund, as of June 30, 2000, the related statements of operations for the year
then ended and the statements of changes in net assets for the years ended June
30, 2000 and June 30, 1999 and the financial highlights for each of the five
years in the period ending June 30, 2000. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of June 30, 2000 by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Trust as of June
30, 2000, and the results of their operations, the changes in net assets and
their financial highlights for the respective stated periods, in conformity with
accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
August 4, 2000
22
<PAGE>
THE CUTLER TRUST
TRUSTEES OF THE CUTLER TRUST
JUNE 30, 2000
<TABLE>
<S> <C>
Kenneth R. Cutler KENNETH R. CUTLER
Photo Chairman of The Cutler Trust and member of Investment
Committee of Cutler & Company, LLC, Investment Adviser to
both Funds.
John Y. Keffer Photo JOHN Y. KEFFER
Sole shareholder and director of Forum Financial Group, LLC,
which owns Forum Shareholder Services, LLC, Transfer Agent,
Forum Fund Services, LLC, Distributor and Forum
Administrative Services, LLC, Manager for both Funds.
Brooke R. Ashland BROOKE R. ASHLAND
Photo Chief Executive Officer, Cutler & Company, LLC, Investment
Adviser to both Funds.
Dr. Hatten S. Yoder, DR. HATTEN S. YODER, JR.
Jr. Photo Chairman Emeritus, Geophysical Laboratory, Carnegie
Institute of Washington, and consultant to the Los Alamos
National Laboratory. A member of the National Academy of
Sciences, and many national and international scientific
bodies.
Robert B. Watts, Jr. ROBERT B. WATTS, JR.
Photo Attorney in private practice. Formerly a senior level
officer, counsel and corporate secretary with over 25 years
of corporate, divisional and board level experience with two
Fortune 100 companies.
</TABLE>
23
<PAGE>
THE CUTLER TRUST
TABLE OF CONTENTS
JUNE 30, 2000
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Chairman's Letter to the Shareholders.... 1
Investment Adviser's Report.............. 2
Comparison of Change in Value of $10,000
Investment............................. 4
Cutler Core Fund Portfolio............... 5
Cutler Value Fund Portfolio.............. 9
Statements of Assets and Liabilities..... 13
Statements of Operations................. 14
Statements of Changes in Net Assets...... 15
Financial Highlights (Per Share Data).... 16
Notes to Financial Statements............ 18
Supplementary Information (unaudited).... 21
Report of Independent Auditors........... 22
Trustees of The Cutler Trust............. 23
</TABLE>
Distributor
Forum Fund Services, LLC
CUTLER & COMPANY, LLC
INVESTMENT MANAGEMENT
INVESTMENT ADVISER TO THE TRUST
503 Airport Road, Medford, OR 97504
(800) 228-8537 - (541) 770-9000
Fax: (541) 779-0006
[email protected]
-------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Funds. It is not authorized for distribution to prospective investors in the
Funds unless preceded or accompanied by an effective prospectus, which includes
information regarding the Funds' objectives and policies, management experience,
and other information.
-------------------------------------------------------
CUTLER CORE FUND
CUTLER VALUE FUND
ANNUAL REPORT
JUNE 30, 2000
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