-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VpyEkh1IWI88C3dtNKwV6dmfYw3+preenhOrydFeT+O37XgTGvH1EpHudM7ppnDZ pirHMEWt/iFxSzt/0pHdpA== 0001004402-01-500204.txt : 20010907 0001004402-01-500204.hdr.sgml : 20010907 ACCESSION NUMBER: 0001004402-01-500204 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010630 FILED AS OF DATE: 20010906 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CUTLER TRUST CENTRAL INDEX KEY: 0000892568 STANDARD INDUSTRIAL CLASSIFICATION: [] STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-07242 FILM NUMBER: 1732285 BUSINESS ADDRESS: STREET 1: TWO PORTLAND SQUARE STREET 2: C/O FORUM FINANCIAL SERVICES INC CITY: PORTLAND STATE: ME ZIP: 04101 BUSINESS PHONE: 2078791900 MAIL ADDRESS: STREET 1: TWO PORTLAND SQUARE CITY: PORTLAND STATE: ME ZIP: 04101 N-30D 1 cu01-115.txt CUTLER TRUST ANNUAL REPORT THE CUTLER TRUST - -------------------------------------------------------------------------------- TABLE OF CONTENTS JUNE 30, 2001 --------------------------------------------------------------- PAGE ---- Chairman's Letter to the Shareholders .... 1 Investment Advisor's Report .............. 2 Comparison of Change in Value of $10,000 Investment ....................... 4 Cutler Core Fund Cutler Core Fund Portfolio ............... 5 Cutler Value Fund Portfolio .............. 10 Cutler Value Fund Statements of Assets and Liabilities ..... 14 Statements of Operations ................. 15 Statements of Changes in Net Assets ...... 16 Finacial Highlights (Per Share Data) ..... 17 Notes to Financial Statements ............ 19 Supplementary Information Auditors ....... 22 Report of Independent Auditors ........... 23 Trustees of the Cutler Trust ............. 24 Distributor Forum Fund Services, LLC CUTLER & COMPANY, LLC INVESTMENT MANAGEMENT INVESTMENT ADVISER TO THE TRUST 503 Airport Road, Medford, OR 97504 ANNUAL REPORT (800) 228-8537 (541) 770-9000 ------------- Fax: (541) 779-0006 info@cutler.com JUNE 30, 2001 - ------------------------------------------------------ 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 propectus, which includes information regarding the Funds' objectives and policies, management experience, and other information. - ------------------------------------------------------ ANNUAL REPORT JUNE 30, 2001 - -------------------------------------------------------------------------------- CUTLER CORE FUND Cutler & Company, LLC Forum Shareholder Services, LLC CUTLER VALUE FUND 503 Airport Road Two Portland Square Medford, Oregon 97504 Portland, Maine 04101 - -------------------------------------------------------------------------------- To The Cutler Trust Shareholders: We are pleased to present our Annual Report for the fiscal year ended June 30, 2001. This has been another eventful year, featuring some moderation of exuberance at home, emergence of both muscle-flexing and impending currency conversion in the European Union, and delicate financial and political balancing in much of the rest of the world. The spot light in all this has fallen on Alan Greenspan and our Federal Reserve Board, who somehow are expected to work immediate miracles. The dollar continues to be so strong that two of every three new dollars created by the Fed are gobbled up by oversees holders. While this dollarization of the world is flattering, it does complicate the Fed's efforts to influence our domestic economy. We believe that the Fed has done a very creditable job in responding appropriately to both the global and domestic stresses on our economy, and this should serve us well in the ongoing future. We continue to be impressed with the performance and progress of our portfolio management team and look forward to a constructive year ahead. As always, if you have any questions, please let us help. /s/ Ken Cutler /s/ Brooke Ashland Kenneth R. Cutler Brooke R. Ashland Chairman of the Board Chief Executive Officer The Cutler Trust Cutler & Company, LLC 1 - -------------------------------------------------------------------------------- THE CUTLER TRUST INVESTMENT ADVISER'S REPORT JUNE 30, 2001 - -------------------------------------------------------------------------------- OUTLOOK It seems that the combined effects of interest rate cuts and tax rebates will result in the avoidance of a recession. The consumer appears to believe this and other market participants likewise appear to be signaling a similar sentiment. The Federal Reserve's most recent cut of 0.25%, while less than the 0.50% many hoped for, was accompanied by language that indicates it remains watchful for further signs of economic weakness. We believe that the corporate profit cycle will continue to be challenged for another quarter or two. Industry analysts cite an "earnings recession"; adapting to corporate earnings the classic definition of an economic recession of two consecutive quarters of contraction. However several factors support the potential for both profit and economic recovery as the second half progresses. First, the number of negative earnings pre-announcements is lower than this point in the first quarter. Second, the effects of this year's interest rate cuts are likely to become apparent in both the industrial and consumer portions of the economy. Third, the consumer-driven economy has the potential to be further strengthened as tax refunds are spent. Fourth, there are likely to be beneficial effects from renewed inventory discipline and the working off of excess inventory. Lastly, energy prices have eased versus a year ago. We believe that these effects will begin to show themselves in improved profitability and increased business capital spending, which may pull the business cycle from its trough. VALUE FUND The total return for the Cutler Value Fund was 9.0% for the year ended June 30, 2001 compared to -14.8% for the S&P 500 Index, the Fund's style benchmark, and 3.8% for the comparable Lipper Large Cap Value average. The past year's performance was driven by strong stock picks in the Financial Services, Energy, and Consumer Discretionary sectors. Stocks worthy of mention in these areas included, Sungard Data Systems (up 93%), M&T Bank (up 70%), Ace Limited (up 42%), Tosco (up 57%), and Mattel (up 45%). During the year we were also helped by pushing into Integrated Oils and Basic Materials companies while avoiding Health Care. Although we were pleased with our Fund's performance during a difficult year, we had our share of ideas that did not go our way. Most notably, we recognized the need at the start of the fiscal year to move into Financial Services but did not do so aggressively enough, therefore losing opportunity. In addition, we began to add to selective Technology names a bit too early during the past few months. Admittedly we avoided a great deal of pain in this sector but we could have stayed on the sidelines a bit longer. Going forward our major investment themes include a positive economic and/or fundamental investment environment for energy related companies, capital market sensitive financials, and selective areas of technology. We also intend to avoid defensive areas which have held up well over the past year but in our view offer little upside potential and poor downside protection in an economy we believe will improve over the next 12 to 18 months. CORE FUND The total return for the Cutler Core Fund was -14.4% for the year ending June 30, 2001 compared to -14.8% for the S&P 500 Index, the Fund's style benchmark, and -15.9% for the comparable Lipper Large Cap Core average. 2 - -------------------------------------------------------------------------------- THE CUTLER TRUST INVESTMENT ADVISER'S REPORT JUNE 30, 2001 (concluded) - -------------------------------------------------------------------------------- The market's weak return was driven primarily by the technology sector, which was off more than 50% for the year. The Core Fund was essentially equal weighted in the sector relative to the S&P 500 Index. The Cutler Core Fund's relative performance was driven primarily by two sectors. First, in the Consumer Discretionary sector, the Fund's stocks rose 16.7% while the stocks in the S&P 500 Index returned -5.5%. Strong stocks in that sector were Mattel Inc, up 45%, and Costco Wholesale Corp, up over 24%. The second key sector was Financial Services, which returned over 22% for the year. The stocks held by the Fund in this sector returned over 30%; however, the Fund had a lower weighting in the sector than the S&P 500 Index. Strong stocks in that sector included Sungard Data Systems, up over 93%, and M&T Bank Corp, up over 70%. Going forward we see an eventual recovery in the economy and are positioning the Fund with that expectation. Most notably we have moved to an overweight in the Technology and Energy sectors while underweighting the more defensive areas like Consumer Staples. Barring unforeseen circumstances, this strategy will be an ongoing theme throughout the coming year as we look to add to selective economically sensitive areas on short-term weakness and move out of defensive areas when valuations appear full. PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT TERM PERFORMANCE. RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE FUND'S HISTORICAL PERFORMANCE. PLEASE SEE THE NEXT PAGE FOR ADDITIONAL FUND PERFORMANCE INFORMATION. THE VIEWS IN THIS REPORT WERE THOSE OF THE FUND MANAGER AS OF JUNE 30, 2001, 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 PERFORMANCE BY TAKING AN ARITHMETIC AVERAGE OF THE RETURNS OF THE FUNDS IN EACH CLASSIFICATION. THE STANDARD AND POOR'S 500 INDEX (S&P 500) IS A GROUP OF UNMANAGED SECURITIES WIDELY REGARDED TO BE REPRESENTATIVE OF THE STOCK MARKET AS A WHOLE. YOU CANNOT INVEST DIRECTLY IN ANY INDEX. 3 - -------------------------------------------------------------------------------- THE CUTLER TRUST COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT JUNE 30, 2001 - -------------------------------------------------------------------------------- These charts reflect a comparison of changes in value of a hypothetical $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 performance of 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. Cutler Core Fund Cutler Value Fund vs. S&P 500 Index vs. S&P 500 Index Average Annual Total Return Average Annual Total Return SINCE SINCE INCEPTION VALUE INCEPTION VALUE ONE YEAR FIVE YEAR ON 12/30/92 6/30/01 ONE YEAR FIVE YEAR ON 12/30/92 6/30/01 -------- --------- ----------- ------- -------- --------- ----------- ------- Cutler Core Fund (14.44%) 12.43% 11.87% $25,949 Cutler Value Fund 8.97% 13.86% 13.33% $28,956 S&P 500 Index (14.82%) 14.47% 15.09% $33,018 S&P 500 Index (14.82%) 14.47% 15.09% $33,018 [EDGAR Representation of Graph Chart: CORE FUND VALUE FUND DATE Cutler Core Fund S&P 500 Index DATE Cutler Value Fund S&P 500 Index 12/30/92 10,000 10,000 12/30/92 10,000 10,000 01/31/93 9,770 10,033 01/31/93 9,770 10,033 02/28/93 9,920 10,170 02/28/93 9,950 10,170 03/31/93 10,110 10,385 03/31/93 10,100 10,385 04/30/93 9,869 10,134 04/30/93 9,989 10,134 05/31/93 9,979 10,404 05/31/93 10,150 10,404 06/30/93 10,045 10,434 06/30/93 10,165 10,434 07/31/93 10,135 10,392 07/31/93 10,055 10,392 08/31/93 10,549 10,786 08/31/93 10,478 10,786 09/30/93 10,585 10,701 09/30/93 10,352 10,701 10/31/93 10,838 10,922 10/31/93 10,544 10,922 11/30/93 10,534 10,818 11/30/93 10,392 10,818 12/31/93 10,509 10,949 12/31/93 10,499 10,949 01/31/94 10,733 11,321 01/31/94 10,661 11,321 02/28/94 10,315 11,014 02/28/94 10,356 11,014 03/31/94 9,896 10,535 03/31/94 9,995 10,535 04/30/94 9,999 10,670 04/30/94 10,108 10,670 05/31/94 10,164 10,844 05/31/94 10,271 10,844 06/30/94 9,907 10,579 06/30/94 10,056 10,579 07/31/94 10,114 10,926 07/31/94 10,313 10,926 08/31/94 10,487 11,373 08/31/94 10,797 11,373 09/30/94 10,259 11,095 09/30/94 10,540 11,095 10/31/94 10,395 11,344 10/31/94 10,674 11,344 11/30/94 10,071 10,931 11/30/94 10,364 10,931 12/31/94 10,205 11,093 12/31/94 10,584 11,093 01/31/95 10,744 11,381 01/31/95 10,906 11,381 02/28/95 11,019 11,824 02/28/95 11,291 11,824 03/31/95 11,146 12,172 03/31/95 11,510 12,172 04/30/95 11,390 12,530 04/30/95 11,740 12,530 05/31/95 11,837 13,030 05/31/95 12,148 13,030 06/30/95 11,752 13,333 06/30/95 12,302 13,333 07/31/95 11,892 13,774 07/31/95 12,533 13,774 08/31/95 11,967 13,809 08/31/95 12,596 13,809 09/30/95 12,653 14,391 09/30/95 13,150 14,391 10/31/95 12,599 14,340 10/31/95 13,087 14,340 11/30/95 13,151 14,969 11/30/95 13,773 14,969 12/31/95 13,718 15,257 12/31/95 14,097 15,257 01/31/96 13,960 15,776 01/31/96 14,511 15,776 02/29/96 13,938 15,923 02/29/96 14,574 15,923 03/31/96 14,136 16,076 03/31/96 14,662 16,076 04/30/96 14,103 16,313 04/30/96 14,768 16,313 05/31/96 14,336 16,733 05/31/96 15,055 16,733 06/30/96 14,447 16,796 06/30/96 15,132 16,796 07/31/96 14,046 16,055 07/31/96 14,481 16,055 08/31/96 14,180 16,394 08/31/96 14,727 16,394 09/30/96 15,016 17,316 09/30/96 15,551 17,316 10/31/96 15,824 17,793 10/31/96 15,883 17,793 11/30/96 16,745 19,137 11/30/96 16,869 19,137 12/31/96 16,226 18,758 12/31/96 16,478 18,758 01/31/97 17,234 19,929 01/31/97 17,254 19,929 02/28/97 17,739 20,086 02/28/97 17,653 20,086 03/31/97 17,147 19,262 03/31/97 17,074 19,262 04/30/97 18,061 20,411 04/30/97 17,982 20,411 05/31/97 18,900 21,653 05/31/97 18,879 21,653 06/30/97 19,888 22,622 06/30/97 19,851 22,622 07/31/97 20,829 24,422 07/31/97 21,162 24,422 08/31/97 19,603 23,055 08/31/97 19,786 23,055 09/30/97 20,730 24,316 09/30/97 20,837 24,316 10/31/97 20,096 23,505 10/31/97 20,381 23,505 11/30/97 21,028 24,592 11/30/97 21,401 24,592 12/31/97 21,637 25,014 12/31/97 21,957 25,014 01/31/98 21,774 25,291 01/31/98 22,051 25,291 02/28/98 22,745 27,114 02/28/98 23,333 27,114 03/31/98 23,766 28,501 03/31/98 24,634 28,501 04/30/98 23,546 28,788 04/30/98 24,563 28,788 05/31/98 23,245 28,294 05/31/98 24,033 28,294 06/30/98 24,182 29,442 06/30/98 24,794 29,442 07/31/98 24,265 29,129 07/31/98 24,369 29,129 08/31/98 21,489 24,922 08/31/98 21,397 24,922 09/30/98 22,305 26,519 09/30/98 22,444 26,519 10/31/98 23,835 28,674 10/31/98 24,063 28,674 11/30/98 24,648 30,411 11/30/98 25,149 30,411 12/31/98 26,284 32,163 12/31/98 25,901 32,163 01/31/99 26,621 33,507 01/31/99 25,717 33,507 02/28/99 26,142 32,466 02/28/99 25,578 32,466 03/31/99 26,493 33,765 03/31/99 26,060 33,765 04/30/99 26,777 35,072 04/30/99 28,607 35,072 05/31/99 25,996 34,245 05/31/99 28,129 34,245 06/30/99 27,925 36,144 06/30/99 29,282 36,144 07/31/99 27,143 35,017 07/31/99 28,586 35,017 08/31/99 26,539 34,844 08/31/99 27,766 34,844 09/30/99 26,318 33,889 09/30/99 26,547 33,889 10/31/99 27,778 36,033 10/31/99 27,788 36,033 11/30/99 28,793 36,766 11/30/99 27,214 36,766 12/31/99 30,277 38,930 12/31/99 26,752 38,930 01/31/00 28,707 36,974 01/31/00 25,509 36,974 02/29/00 28,498 36,275 02/29/00 23,671 36,275 03/31/00 30,843 39,821 03/31/00 27,029 39,821 04/30/00 30,351 38,624 04/30/00 26,541 38,624 05/31/00 30,275 37,831 05/31/00 27,978 37,831 06/30/00 30,329 38,763 06/30/00 26,572 38,763 07/31/00 28,774 38,158 07/31/00 26,599 38,158 08/31/00 30,234 40,527 08/31/00 27,686 40,527 09/30/00 28,407 38,388 09/30/00 27,131 38,388 10/31/00 28,445 38,225 10/31/00 28,056 38,225 11/30/00 26,774 35,213 11/30/00 27,485 35,213 12/31/00 27,843 35,386 12/31/00 29,069 35,386 01/31/01 29,459 36,641 01/31/01 29,929 36,641 02/28/01 26,767 33,302 02/28/01 28,792 33,302 03/31/01 25,672 31,193 03/31/01 27,964 31,193 04/30/01 27,445 33,616 04/30/01 29,496 33,616 05/31/01 27,239 33,841 05/31/01 30,026 33,841 06/30/01 25,949 33,018 06/30/01 28,956 33,018
4 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER CORE FUND SCHEDULE OF INVESTMENTS JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE COMMON STOCK - 97.9% BANKS - 12.6% 9,300 Bank of New York Co., Inc. $ 446,400 35,050 Citigroup, Inc. 1,852,042 15,200 FleetBoston Financial Corp. 599,641 24,450 J.P. Morgan Chase & Co. 1,090,470 4,800 M & T Bank Corp. 362,400 11,750 Mellon Financial Corp. 540,500 49,092 U.S. Bancorp 1,118,806 21,100 Wells Fargo & Co. 979,673 ----------- 6,989,932 ----------- BUSINESS SERVICES - 4.4% 18,050 Microsoft Corp. + 1,310,430 10,500 Peregrine Systems, Inc. + 304,500 27,300 Sun Microsystems, Inc. + 429,156 13,100 Sungard Data Systems, Inc. + 393,131 ----------- 2,437,217 ----------- CHEMICALS - 1.9% 10,000 E.I. du Pont de Nemours & Co. 482,400 16,600 Rohm & Haas Co. 546,140 ----------- 1,028,540 ----------- COMMUNICATION EQUIPMENT - 2.9% 97,000 Motorola, Inc. 1,606,320 ----------- DRUGS & PHARMECEUTICALS - 9.8% 34,750 Bristol-Myers Squibb Co. 1,817,425 100 Eli Lilly & Co. 7,400 27,850 IMS Health, Inc. 793,725 23,250 Merck & Co., Inc. 1,485,907 33,050 Pfizer, Inc. 1,323,653 ----------- 5,428,110 ----------- See Notes to Financial Statements. 5 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER CORE FUND SCHEDULE OF INVESTMENTS (continued) JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE ELECTRIC MACHINERY - 3.8% 22,900 General Electric Co. $ 1,116,376 32,100 Texas Instruments, Inc. 1,011,150 ----------- 2,127,526 ELECTRIC, GAS & UTILITY COMPANIES - 2.4% 15,700 CMS Energy Corp. 437,245 14,200 Exelon Corp. 910,504 200 Xcel Energy, Inc. 5,690 ----------- 1,353,439 ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT - 7.9% 5,650 Applied Materials, Inc. + 277,415 8,850 CIENA Corp. + 336,300 14,150 Cooper Industries, Inc. 560,199 8,200 Intel Corp. 239,850 31,650 JDS Uniphase Corp. + 403,538 71,400 National Semiconductor Corp. + 2,079,167 23,650 Vitesse Semiconductor Corp. + 497,596 ----------- 4,394,065 FABRICATED METAL PRODUCTS - 1.8% 15,550 Illinois Tool Works, Inc. 984,315 FOOD & SOFT DRINKS - 1.7% 32,750 ConAgra, Inc. 648,778 6,000 General Mills, Inc. 262,680 100 H.J. Heinz Co. 4,089 100 Sara Lee Corp. 1,894 ----------- 917,441 ----------- FOREST PRODUCTS - 1.9% 29,200 International Paper Co. 1,042,439 ----------- See Notes to Financial Statements. 6 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER CORE FUND SCHEDULE OF INVESTMENTS (continued) JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE GAMES & TOYS - 1.2% 34,600 Mattel, Inc. $ 654,632 ----------- GENERAL MERCHANDISE STORES - 1.6% 18,050 Wal-Mart Stores, Inc. 880,840 ----------- GROCERY STORES - 0.9% 20,100 Kroger Co. + 502,500 ----------- INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT - 9.0% 37,250 Cisco Systems, Inc. + 677,950 22,300 Dell Computer Corp. + 578,685 16,500 Dover Corp. 621,225 11,900 EMC Corp. + 345,695 100 Hewlett-Packard Co. 2,860 16,000 IBM Corp. 1,808,000 43,000 Symbol Technologies, Inc. 954,600 ----------- 4,989,015 ----------- INSTRUMENTS & RELATED PRODUCTS - 1.1% 17,275 Honeywell International, Inc. 604,452 ----------- MEDICAL PRODUCTS - 2.0% 17,800 Johnson & Johnson 890,000 5,100 Medtronic, Inc. 234,651 ----------- 1,124,651 ----------- MISCELLANEOUS RETAIL - 3.8% 13,650 Costco Wholesale Corp. + 560,742 14,950 CVS Corp. 577,070 60,650 Staples, Inc. + 969,794 ----------- 2,107,606 ----------- MOTION PICTURES - 1.0% 31,600 AT&T Corp-Liberty Media Corp + 552,684 ----------- See Notes to Financial Statements. 7 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER CORE FUND SCHEDULE OF INVESTMENTS (continued) JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE OIL & GAS EXTRACTION - 1.6% 21,400 Burlington Resources, Inc. $ 854,930 PETROLEUM PRODUCTS - 8.5% 43,700 Conoco, Inc. Class B 1,262,930 15,030 Exxon Mobil Corp. 1,312,872 100 Texaco, Inc. 6,660 32,850 Tosco Corp. 1,447,042 18,850 Unocal Corp. 643,728 ----------- 4,673,232 ----------- PRIMARY METAL INDUSTRIES - 1.7% 23,300 Alcoa, Inc. 918,020 ----------- PRINTING & PUBLISHING - 1.4% 13,400 Knight-Ridder, Inc. 794,620 ----------- PROPERTY & CASUALTY INSURANCE - 1.6% 21,850 Ace, Ltd. 854,117 100 American International Group, Inc. 8,600 ----------- 862,717 ----------- SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES - 1.9% 15,950 Morgan Stanley Dean Witter & Co. 1,024,468 ----------- STONE, CLAY, GLASS & CONCRETE PRODUCTS - 1.0% 34,300 Corning, Inc. 573,153 ----------- TRANSPORTATION - 1.4% 13,800 Union Pacific Corp. 757,758 ----------- TRANSPORTATION EQUIPMENT - 0.0% 100 United Technologies Corp. 7,326 ----------- See Notes to Financial Statements. 8 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER CORE FUND SCHEDULE OF INVESTMENTS (concluded) JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE VOICE & DATA TRANSMISSION - 7.1% 20,820 AT&T Wireless Group + 340,407 150 BellSouth Corp. 6,041 12,350 SBC Communications, Inc. 494,741 26,350 Verizon Communications, Inc. 1,409,725 2,754 WorldCom, Inc. - MCI Group 44,339 110,000 WorldCom, Inc. + 1,645,600 ----------- 3,940,853 ----------- Total Common Stock (Cost $56,134,216) 54,132,801 ----------- SHORT-TERM HOLDINGS - 2.6% 1,437,567 Daily Assets Cash Fund (Cost $1,437,567) 1,437,567 ----------- TOTAL INVESTMENTS IN SECURITIES (Cost $57,571,783) - 100.5% $55,570,368 Other Assets and Liabilities, Net - (0.5)% (290,042) ----------- TOTAL NET ASSETS - 100.0% $55,280,326 =========== - -------------------------------- + Non-income producing security. See Notes to Financial Statements. 9 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER VALUE FUND SCHEDULE OF INVESTMENTS JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE COMMON STOCK -98.6% BANKS - 20.9% 7,400 Bank of New York Co., Inc. $ 355,200 24,050 Citigroup, Inc. 1,270,802 12,050 FleetBoston Financial Corp. 475,373 19,550 J.P. Morgan Chase & Co. 871,930 3,850 M & T Bank Corp. 290,674 9,300 Mellon Financial Corp. 427,800 39,350 U.S. Bancorp 896,787 16,950 Wells Fargo & Co. 786,989 ----------- 5,375,555 ----------- CHEMICALS - 3.2% 8,000 E.I. du Pont de Nemours & Co. 385,920 13,250 Rohm & Haas Co. 435,925 ----------- 821,845 ----------- COMMUNICATION EQUIPMENT - 2.0% 31,000 Motorola, Inc. 513,360 ----------- DRUGS & PHARMECEUTICALS - 4.2% 11,650 Bristol-Myers Squibb Co. 609,295 7,500 Merck & Co., Inc. 479,325 ----------- 1,088,620 ----------- ELECTRIC, GAS & UTILITY COMPANIES - 4.2% 12,500 CMS Energy Corp. 348,125 11,350 Exelon Corp. 727,761 ----------- 1,075,886 ----------- See Notes to Financial Statements. 10 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER VALUE FUND SCHEDULE OF INVESTMENTS (continued) JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE ELECTRONIC & OTHER ELECTRICAL EQUIPMENT & COMPONENTS, EXCEPT COMPUTER EQUIPMENT - 3.8% 11,300 Cooper Industries, Inc. 447,367 18,800 National Semiconductor Corp. + 547,456 ----------- 994,823 ----------- FABRICATED METAL PRODUCTS - 1.0% 4,300 Illinois Tool Works, Inc. 272,190 ----------- FOOD & SOFT DRINKS - 2.8% 26,250 ConAgra, Inc. 520,013 4,750 General Mills, Inc. 207,957 ----------- 727,970 ----------- FOREST PRODUCTS - 2.1% 10,100 Weyerhaeuser Co. 555,197 ----------- GAMES & TOYS - 2.0% 27,700 Mattel, Inc. 524,084 ----------- GROCERY STORES - 1.6% 16,050 Kroger Co. + 401,250 ----------- INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER EQUIPMENT - 5.2% 13,250 Dover Corp. 498,863 7,450 IBM Corp. 841,850 ----------- 1,340,713 ----------- INSTRUMENTS & RELATED PRODUCTS - 1.2% 8,950 Honeywell International, Inc. 313,161 ----------- MEDICAL PRODUCTS - 2.8% 14,200 Johnson & Johnson 710,000 ----------- MISCELLANEOUS RETAIL - 1.0% 16,600 Staples, Inc. + 265,434 ----------- See Notes to Financial Statements. 11 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER VALUE FUND SCHEDULE OF INVESTMENTS (continued) JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE PETROLEUM PRODUCTS - 15.6% 5,450 BP Amoco plc ADR $ 271,683 35,051 Conoco, Inc. Class B 1,012,974 12,050 Exxon Mobil Corp. 1,052,568 26,300 Tosco Corp. 1,158,514 15,200 Unocal Corp. 519,080 ----------- 4,014,819 ----------- PRIMARY METAL INDUSTRIES - 2.9% 18,700 Alcoa, Inc. 736,780 ----------- PRINTING & PUBLISHING - 2.5% 10,750 Knight-Ridder, Inc. 637,475 ----------- PROPERTY & CASUALTY INSURANCE - 2.7% 17,500 Ace, Ltd. 684,075 ----------- SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES & SERVICES - 3.2% 12,700 Morgan Stanley Dean Witter & Co. 815,721 ----------- STONE, CLAY, GLASS & CONCRETE PRODUCTS - 1.0% 14,700 Corning, Inc. 245,637 ----------- TRANSPORTATION - 2.4% 11,050 Union Pacific Corp. 606,756 ----------- VOICE & DATA TRANSMISSION - 10.3% 16,702 AT&T Wireless Group + 273,078 9,850 SBC Communications, Inc. 394,591 21,100 Verizon Communications, Inc. 1,128,849 See Notes to Financial Statements. 12 - -------------------------------------------------------------------------------- THE CUTLER TRUST CUTLER VALUE FUND SCHEDULE OF INVESTMENTS (concluded) JUNE 30, 2001 - -------------------------------------------------------------------------------- SHARES SECURITY DESCRIPTION VALUE 2,224 WorldCom, Inc. - MCI Group 35,806 55,600 WorldCom, Inc. + 831,776 ----------- 2,664,100 ----------- Total Common Stock (Cost $23,717,673) 25,385,451 ----------- SHORT-TERM HOLDINGS - 1.5% 386,776 Daily Assets Cash Fund (Cost $386,776) 386,776 TOTAL INVESTMENTS IN SECURITIES (Cost $24,104,449) - 100.1% $25,772,227 Other Assets and Liabilities, Net - (0.1)% (28,703) ----------- TOTAL NET ASSETS - 100.0% $25,743,524 =========== - -------------------------------- + Non-income producing security. See Notes to Financial Statements. 13 - -------------------------------------------------------------------------------- THE CUTLER TRUST STATEMENTS OF ASSETS & LIABILITIES JUNE 30, 2001 - -------------------------------------------------------------------------------- CUTLER CUTLER CORE VALUE FUND FUND --------------------- ----------------------- ASSETS Total investments, at value (Cost $57,571,783 and $24,104,449, respectively) (Note 2) $55,570,368 $25,772,227 Interest, dividends and other receivables 48,719 28,425 Receivable for Fund shares sold 25,798 - --------------------- ----------------------- Total Assets $55,644,885 $25,800,652 --------------------- ----------------------- LIABILITIES Dividends payable 1,570 3,875 Payable for securities purchased 149,458 - Payable for Fund shares redeemed 129,926 12,917 Payable to administrator (Note 3) 4,622 2,145 Payable to investment adviser (Note 3) 34,662 2,156 Payable to other related parties (Note 3) 3,000 3,000 Accrued expenses and other liabilities 41,321 33,035 --------------------- ----------------------- Total Liabilities 364,559 57,128 --------------------- ----------------------- NET ASSETS $55,280,326 $25,743,524 ===================== ======================= COMPONENTS OF NET ASSETS Paid-in capital $57,684,016 $24,633,994 Distributions in excess of net investment income (4,256) (1,746) Net unrealized appreciation (depreciation) on investments (2,001,415) 1,667,778 Accumulated net realized loss on investments (398,019) (556,502) --------------------- ----------------------- NET ASSETS $55,280,326 $25,743,524 ===================== ======================= Shares of Beneficial Interest, No Par Value 5,477,851 2,480,802 NET ASSET VALUE, offering price and redemption price per share $10.09 $10.38
See Notes to Financial Statements. 14 - -------------------------------------------------------------------------------- THE CUTLER TRUST STATEMENTS OF OPERATIONS FOR THE YEAR ENDED JUNE 30, 2001 - -------------------------------------------------------------------------------- CUTLER CUTLER CORE VALUE FUND FUND ------------------------ ----------------------- INVESTMENT INCOME Dividend income $ 813,633 $ 509,696 Interest income 176,691 47,201 ------------------------ ----------------------- Total Investment Income 990,324 556,897 ------------------------ ----------------------- EXPENSES Investment advisory (Note 3) 465,333 208,238 Administration (Note 3) 62,044 27,765 Transfer agent (Note 3) 17,721 15,553 Shareholder services (Note 3) 30,901 33,616 Custodian (Note 3) 15,157 9,104 Accounting (Note 3) 41,000 41,000 Legal 18,572 8,157 Audit 19,682 17,626 Directors fees 15,924 7,038 Reporting 10,784 4,958 Compliance 15,925 13,351 Miscellaneous 30,743 14,905 ------------------------ ----------------------- Total Expenses 743,786 401,311 Fees waived (Note 4) - (54,255) ------------------------ ----------------------- Net Expenses 743,786 347,056 ------------------------ ----------------------- NET INVESTMENT INCOME 246,538 209,841 ------------------------ ----------------------- REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS Net realized loss from investments (352,525) (402,321) Net change in unrealized appreciation (depreciation) of investments (9,816,635) 2,675,523 ------------------------ ----------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (10,169,160) 2,273,202 ------------------------ ----------------------- NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ($9,922,622) $2,483,043 ======================== =======================
See Notes to Financial Statements. 15 - -------------------------------------------------------------------------------- THE CUTLER TRUST STATEMENTS OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------- CUTLER CORE CUTLER VALUE FUND FUND ------------------------------------- ------------------------------------- Year Year Year Year Ended Ended Ended Ended June 30, 2001 June 30, 2000 June 30, 2001 June 30, 2000 ------------------ ----------------- -------------------- --------------- OPERATIONS Net investment income $ 246,538 $ 369,707 $ 209,841 $ 323,467 Net realized gain (loss) from investments (352,525) 15,785,136 (402,321) 1,297,860 Net change in unrealized appreciation (depreciation) of investments (9,816,635) (11,162,815) 2,675,523 (5,897,976) ------------------ ----------------- -------------------- --------------- Net increase (decrease) in net assets resulting from operations (9,922,622) 4,992,028 2,483,043 (4,276,649) ------------------ ----------------- -------------------- --------------- DISTRIBUTIONS TO SHAREHOLDERS FROM Net investment income (250,876) (369,872) (211,763) (322,242) Net realized capital gain from investments (15,708,259) (4,398,786) (513,197) (14,068,788) ------------------ ----------------- -------------------- --------------- Total distributions to shareholders (15,959,135) (4,768,658) (724,960) (14,391,030) ------------------ ----------------- -------------------- --------------- CAPITAL SHARE TRANSACTIONS Sale of shares 3,863,703 9,494,525 1,347,266 5,099,582 Reinvestment of distributions 15,831,161 4,712,363 684,282 13,390,836 Redemption of shares (8,628,067) (18,834,071) (5,661,201) (12,332,611) ------------------ ----------------- -------------------- --------------- Net increase (decrease) from capital share transactions 11,066,797 (4,627,183) (3,629,653) 6,157,807 ------------------ ----------------- -------------------- --------------- Net decrease in net assets (14,814,960) (4,403,813) (1,871,570) (12,509,872) ------------------ ----------------- -------------------- --------------- NET ASSETS Beginning of Period 70,095,286 74,499,099 27,615,094 40,124,966 ------------------ ----------------- -------------------- --------------- End of Period (A) $ 55,280,326 $ 70,095,286 $ 25,743,524 $ 27,615,094 ================== ================= ==================== =============== (A) Accumulated undistributed (distributions in $ (4,256) $ 82 $ (1,746) $ 176 excess of) net investment income ================== ================= ==================== =============== SHARE ACTIVITY Sale of shares 299,135 609,586 130,518 430,728 Reinvestment of distributions 1,478,659 302,034 67,992 1,372,504 Redemption of shares (682,972) (1,272,244) (540,304) (1,100,106) ------------------ ----------------- -------------------- --------------- Net increase (decrease) in shares 1,094,822 (360,624) (341,794) 703,126 ================== ================= ==================== ===============
See Notes to Financial Statements. 16 - -------------------------------------------------------------------------------- THE CUTLER TRUST FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- Selected per share data and ratios for a share outstanding throughout each period. CUTLER CORE FUND -------------------------------------------------------------------- Year Ended June 30, -------------------------------------------------------------------- 2001 2000 1999 1998 1997 Net Asset Value, Beginning of Period $15.99 $ 15.71 $ 17.60 $ 16.06 $ 12.95 ------------ ----------- ------------ ------------- ------------- Investment Operations Net investment income 0.05 0.08 0.12 0.19 0.24 Net realized and unrealized gain (loss) on investments (2.16) 1.24 2.06 3.05 4.30 ------------ ----------- ------------ ------------- ------------- Total from Investment Operations (2.11) 1.32 2.18 3.24 4.54 ------------ ----------- ------------ ------------- ------------- Distributions From Net investment income (0.05) (0.08) (0.12) (0.19) (0.24) Net realized gain on investments (3.74) (0.96) (3.95) (1.51) (1.19) ------------ ----------- ------------ ------------- ------------- Total Distributions (3.79) (1.04) (4.07) (1.70) (1.43) ------------ ----------- ------------ ------------- ------------- Net Asset Value, End of Period $10.09 $15.99 $15.71 $17.60 $16.06 ============ =========== ============ ============= ============= Total Return (14.44%) 8.61% 15.48% 21.60% 37.65% Ratios/Supplementary Data Net assets at the end of year (in thousands) $ 55,280 $ 70,095 $ 74,499 $ 77,482 $ 62,523 Ratios to Average Net Assets Expenses 1.20% 1.11% 1.07% 1.10% 1.17% Net investment income 0.40% 0.51% 0.76% 1.14% 1.67% Portfolio Turnover Rate 93% 79% 59% 119% 23%
See Notes to Financial Statements. 17 - -------------------------------------------------------------------------------- THE CUTLER TRUST FINANCIAL HIGHLIGHTS (concluded) - -------------------------------------------------------------------------------- Selected per share data and ratios for a share outstanding throughout each period. ------------------------------------------------------------ CUTLER VALUE FUND ------------------------------------------------------------ Year Ended June 30, ------------------------------------------------------------ 2001 2000 1999 1998 1997 Net Asset Value, Beginning of Period $ 9.78 $18.93 $21.02 $18.33 $14.18 ------- ------- ------- ------- ------- Investment Operations Net investment income 0.08 0.12 0.14 0.13 0.18 Net realized and unrealized gain (loss) on investments 0.79 (1.97) 2.73 4.19 4.20 ------- ------- ------- ------- ------- Total from Investment Operations 0.87 (1.85) 2.87 4.32 4.38 ------- ------- ------- ------- ------- Distributions From Net investment income (0.08) (0.12) (0.14) (0.13) (0.18) In excess of net investment income - - (a) - - Net realized gain on investments (0.19) (7.18) (4.82) (1.50) (0.05) ------- ------- ------- ------- ------- Total Distributions (0.27) (7.30) (4.96) (1.63) (0.23) ------- ------- ------- ------- ------- Net Asset Value, End of Period $10.38 $9.78 $18.93 $21.02 $18.33 ======= ======= ======= ======= ======= Total Return 8.97% (9.25%) 18.10% 24.90% 31.18% Ratios/Supplementary Data Net assets at the end of year (in thousands) $25,744 $27,615 $40,125 $41,085 $35,277 Ratios to Average Net Assets Expenses including reimbursement/waiver of fees 1.25% 1.25% 1.20% 1.24% 1.25% Expenses excluding reimbursement/waiver of fees 1.45% 1.28% 1.20% 1.24% 1.25% Net investment income 0.56% 1.01% 0.80% 0.65% 1.15% Portfolio Turnover Rate 60% 66% 110% 50% 4%
- --------------------------------------- (a) Per share data was less than $0.01. See Notes to Financial Statements. 18 - -------------------------------------------------------------------------------- THE CUTLER TRUST NOTES TO FINANCIAL STATEMENTS (concluded) - -------------------------------------------------------------------------------- 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. 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. Investments in other open end investment companies are valued at net asset value. 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. 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. 19 - -------------------------------------------------------------------------------- THE CUTLER TRUST NOTES TO FINANCIAL STATEMENTS (continued) - -------------------------------------------------------------------------------- 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 Fund based on net assets. 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 each Fund at an annual rate of 0.75% of each Fund's average daily net assets. Forum Administrative Services, LLC ("FAdS") serves as each Fund's administrator for which it receives 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. Forum Trust, LLC ("Forum Trust"), an affiliate of FAdS, serves as each Fund's custodian and may employ subcustodians to provide custody of a Fund's 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 $54,255 for the Cutler Value Fund for the year ended June 30, 2001. 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, 2001, were as follows: COST OF PURCHASES PROCEEDS FROM SALES ----------------- ------------------- Cutler Core Fund ........... $55,095,717 $59,305,595 Cutler Value Fund .......... 16,204,020 20,291,269 20 - -------------------------------------------------------------------------------- THE CUTLER TRUST NOTES TO FINANCIAL STATEMENTS (concluded) - -------------------------------------------------------------------------------- For federal income tax cost purposes, the tax basis of investment securities owned, the aggregate gross unrealized appreciation and the aggregate gross unrealized depreciation as of June 30, 2001, were as follows: NET UNREALIZED UNREALIZED APPRECIATION TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ---------- ------------ ------------ ------------- Cutler Core Fund ... $58,046,337 $5,245,772 $(7,721,741) $(2,475,969) Cutler Value Fund .. 24,220,603 3,095,998 (1,544,375) 1,551,624 Cutler Value Fund has a capital loss carryover of $406,598 as of June 30, 2001 which will expire in June 2009 and that is available to offset future capital gains. Cutler Value Fund has a current year deferred post-October capital loss of $33,750. This loss will be realized for tax purposes on the first day of the following tax year. 21 - -------------------------------------------------------------------------------- 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 eligible for the corporate dividends received deduction in Cutler Core Fund and Cutler Value Fund was 100.00%. Capital Gain Dividends - The Cutler Core Fund and the Cutler Value Fund declared long term capital gain dividends of $15,155,924 and $513,197, respectively, for the fiscal year ended June 30, 2001. 22 - -------------------------------------------------------------------------------- THE CUTLER TRUST REPORT OF INDEPENDENT AUDITORS - -------------------------------------------------------------------------------- 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 and the Cutler Value Fund, as of June 30, 2001, the related statements of operations for the year then ended, the statements of changes in net assets for the two years ended June 30, 2001 and 2000, and the financial highlights for each of the five years ended June 30, 2001. 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 securities owned at June 30, 2001 by correspondence with the custodian and brokers; where replies were not received from brokers, we performed alternative 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, 2001, the results of their operations, the changes in their net assets, and their financial highlights for the periods then ended in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP Boston, Massachusetts August 3, 2001 23 - -------------------------------------------------------------------------------- THE CUTLER TRUST TRUSTEES OF THE CUTLER TRUST JUNE 30, 2001 - -------------------------------------------------------------------------------- [PICTURE] KENNETH R. CUTLER Chairman of the The Cutler Trust and member of Investment Committee of Cutler & Compnay, LLC, Investment Adviser to both Funds [PICTURE] JOHN Y. KEFFER Sole shareholder and director of Forum Financial Group, LLC, which owns Forum Administrative Services, LLC, Forum Shareholder Services, LLC, Forum Accounting Services, LLC, Forum Fund Services, LLC and Forum Trust, LLC. [PICTURE] BROOKE R. ASHLAND Chief Executive Officer, Cutler & Company, LLC, Investment Adviser to both Funds. [PICTURE] DR. HATTEN S. YODER, JR. 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. [PICTURE] ROBERT B. WATTS, JR. 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. 24 This Page Intentionally Left Blank This Page Intentionally Left Blank This Page Intentionally Left Blank -----END PRIVACY-ENHANCED MESSAGE-----