As filed with the Securities and Exchange Commission
on February 7, 2003
Securities Act File No. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. /_____/
Post-Effective Amendment No. /_____/
THE CUTLER TRUST
(Exact Name of Registrant as Specified in Charter)
Two Portland Square, Portland, Maine 04101
(Address of Principal Executive Offices) (Zip Code)
(207) 879-1900
(Registrant's Area Code and Telephone Number)
Cheryl O. Tumlin, Esq.
Forum Fund Services, LLC
Two Portland Square
Portland, ME 04101
Copies of Communications to:
John V. O'Hanlon, Esq.
Dechert
Ten Post Office Square, South
Boston, MA 02109
Approximate Date of Proposed Public Offering:
As soon as practicable after this
Registration Statement becomes effective.
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It is proposed that this filing will become effective on March 10, 2003 pursuant
to Rule 488 under the Securities Act of 1933.
Title of securities being registered: Shares of Beneficial Interest (no par
value) of Cutler Value Fund, a Series of the Registrant.
Pursuant to Rule 429, a filing fee is required because the Registrant has
previously registered an indefinite number of its Shares under the Securities
Act of 1933, as amended, pursuant to Rule 24f-2 under the Investment Company Act
of 1940, as amended.
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IMPORTANT NOTICE: PLEASE COMPLETE THE
ENCLOSED PROXY BALLOT AND RETURN IT AS SOON AS POSSIBLE.
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THE CUTLER TRUST
Two Portland Square
Portland, Maine 04101
March __, 2003
Dear Valued Shareholder:
Enclosed is a Notice of Special Meeting of Shareholders of Cutler Core Fund
(the "Core Fund") to be held at 1:00 p.m. on April 10, 2003 at Forum Financial
Group, LLC, Two Portland Square, 4th Floor Conference Room, Portland, Maine
04101. At the meeting, we are asking Core Fund shareholders to approve the
reorganization of the Core Fund into the Cutler Value Fund (the "Value Fund,"
and with the Core Fund, the "Funds"), each a series of The Cutler Trust, a
registered investment company (the "Reorganization").
The Board of Trustees of the Core Fund (the "Board") has unanimously
approved the Reorganization and believes that it is in the best interests of the
Core Fund's shareholders. Under the Reorganization, Core Fund shareholders will
exchange their Core Fund shares for an equal value of shares of the Value Fund
as of the date of the Reorganization. As a result, Core Fund shareholders
holding Shares will receive Shares of the Value Fund. Enclosed is further
information about the Reorganization including a Combined Proxy
Statement/Prospectus and a proxy card.
In considering the Reorganization, please note that:
o The Core Fund and the Value Fund have the same investment objectives
and similar investment strategies and investment policies.
o The Core Fund and the Value Fund have similar portfolio holdings, the
same investment adviser and the same portfolio managers.
o The Core Fund and the Value Fund have the same net operating expenses
as a result of being subject to same contractual fee waiver by the
Funds' investment adviser.
The Board believes that the Reorganization is important and recommends that
you read the enclosed materials carefully and then vote FOR the proposal. Please
choose one of the following options to vote:
o By Mail: Complete the enclosed proxy card and return it in the
postage-paid envelope provided
o By Telephone: Call the Toll-Free number on your proxy card.
o Attend the Special Meeting (details enclosed).
Cutler & Company, LLC, the Core Fund and Value Fund's investment adviser,
has agreed to pay all of the expenses of the Reorganization so that shareholders
will not bear these costs.
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WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES (UNLESS YOU ARE VOTING BY
TELEPHONE OR THROUGH THE INTERNET). NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD
IS MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS
USE.
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IF YOU HAVE ANY QUESTIONS CONCERNING THE PROXY STATEMENT/PROSPECTUS OR THE
PROCEDURES TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE CONTACT FORUM
SHAREHOLDER SERVICES, LLC AT 1-888 288-5374.
Very truly yours,
/s/ KENNETH R. CUTLER
---------------------
Kenneth R. Cutler
Chairman of the Board
The Cutler Trust
2
CUTLER CORE FUND
Two Portland Square
Portland, Maine 04101
March __, 2003
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
APRIL 10, 2003
To the Shareholders of Cutler Core Fund:
A special meeting of shareholders of Cutler Core Fund (the "Core Fund")
will be held on April 10, 2003 at 1:00 p.m. (Eastern Time) at Forum Financial
Group, LLC, Two Portland Square, 4th Floor Conference Room, Portland, Maine
04101 to consider the following:
1. A proposal to approve the Agreement and Plan of Reorganization (the "Plan")
between Cutler Core Fund (the "Core Fund") and Cutler Value Fund (the
"Value Fund"). Under the Plan, the Core Fund will transfer all of its
assets and liabilities to the Value Fund, each a series of The Cutler Trust
(the "Trust"), in exchange solely for shares of the Value Fund. The Core
Fund will then distribute the shares received from the Value Fund
proportionately to its shareholders and then terminate; and
2. Any other business that properly comes before the meeting.
Enclosed with this notice is a Proxy Statement/Prospectus which includes
information relevant to the proposed transaction. A form of the Plan is attached
as Exhibit A to the Proxy Statement/Prospectus.
Shareholders of record of the Core Fund as of the close of business on
February 7, 2003 are entitled to vote at the meeting and any related follow-up
meetings. This notice and related Proxy Statement/Prospectus are first being
mailed to shareholders of the Core Fund on or about March __, 2003. This Proxy
is being solicited by the Board of Trustees of the Core Fund.
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WHETHER OR NOT YOU EXPECT TO ATTEND THE SPECIAL MEETING, PLEASE COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND MAIL IT PROMPTLY IN THE ENCLOSED ENVELOPE
IN ORDER TO ASSURE REPRESENTATION OF YOUR SHARES (UNLESS YOU ARE VOTING BY
TELEPHONE OR THROUGH THE INTERNET). NO POSTAGE NEED BE AFFIXED IF THE PROXY CARD
IS MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AT ANY TIME PRIOR TO ITS
USE.
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IF YOU HAVE ANY QUESTIONS CONCERNING THE PROXY STATEMENT/PROSPECTUS OR THE
PROCEDURES TO BE FOLLOWED TO EXECUTE AND DELIVER A PROXY, PLEASE CONTACT FORUM
SHAREHOLDER SERVICES, LLC AT 1-888 288-5374.
By Order of the Board of Trustees,
/s/ D. BLAINE RIGGLE
--------------------
D. Blaine Riggle
Secretary
Cutler Core Fund
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE
NUMBER OF SHARES THAT YOU OWNED ON THE RECORD DATE.
2
PROXY STATEMENT/PROSPECTUS
MARCH __, 2003
Acquisition of the Assets of
CUTLER CORE FUND
a series of
THE CUTLER TRUST
Two Portland Square
Portland, Maine 04101
(888) 288-5374
By and In Exchange for shares of beneficial
interest of
CUTLER VALUE FUND
a series of
THE CUTLER TRUST
Two Portland Square
Portland, Maine 04101
(888) 288-5374
On February 3, 2003, the Board of Trustees of Cutler Core Fund (the
"Board") approved the reorganization of the Cutler Core Fund (the "Core Fund")
into Cutler Value Fund (the "Value Fund"), each a series of The Cutler Trust
(the "Trust"), subject to approval by the Core Fund's shareholders. The Trust is
an open-end management investment company.
The reorganization contemplates that the Core Fund will transfer all of its
assets and liabilities to the Value Fund in exchange, on a tax-free basis, for
Shares of the Value Fund. The Core Fund will then distribute the shares received
to its shareholders on a tax-free basis. As a result, Core Fund shareholders
holding Shares will receive Shares of the Value Fund. After the reorganization
is completed, the Core Fund will terminate.
Please read the Proxy Statement/Prospectus carefully and retain it for
future reference. This document sets forth concisely the information about the
Value Fund that you should know before investing. A Statement of Additional
Information dated March __, 2003 containing additional information about the
reorganization has been filed with the Securities and Exchange Commission
("SEC") and is incorporated into this Proxy Statement/Prospectus by reference.
The Statement of Additional Information to this Proxy Statement/Prospectus is
available upon request without charge by writing or calling:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04101
(888) 288-5374
1
A copy of the Prospectus for the Core Fund and the Value Fund, dated
October 30, 2002, accompanies this Proxy Statement/Prospectus and is
incorporated by reference into this Proxy Statement/Prospectus. The Statement of
Additional Information for the Core Fund and the Value Fund, dated October 30,
2002, is also incorporated by reference into this Proxy Statement/Prospectus. A
copy of the Core Fund's and the Value Fund's Statement of Additional
Information, dated October 30, 2002, is available upon request without charge by
writing or calling:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(888) 288-5374
Shareholders may also view or obtain copies of this Proxy
Statement/Prospectus, the materials incorporated by reference herein or
additional information regarding the Core Fund or the Value Fund from the
Securities and Exchange Commission's ("SEC") Website, HTTP://WWW.SEC.GOV.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR PASSED UPON THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
AN INVESTMENT IN THE CORE FUND AND THE VALUE FUND IS NOT A DEPOSIT OR OBLIGATION
OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND IS NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, AND ANY OTHER U.S.
GOVERNMENT AGENCY. AN INVESTMENT IN THE CORE FUND AND THE VALUE FUND INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
2
TABLE OF CONTENTS
SUMMARY......................................................................4
The Proposed Reorganization................................................4
Comparison of Fees.........................................................5
Comparison of Investment Objectives and Principal Investment Strategies....6
Comparison of Investment Advisory Services and Fees........................7
Comparison of Other Service Providers......................................7
Comparison of Purchase, Redemption and Exchange Privileges.................7
Comparison of Minimum/Subsequent Investment Requirements...................8
Comparison of Distribution Policies........................................9
Comparison of Distribution and Shareholder Service Fees....................9
Comparison of Net Asset Value Calculation Procedures.......................9
Tax Matters Relating to the Reorganization.................................9
INVESTMENT RISKS.............................................................9
INFORMATION ABOUT THE REORGANIZATION.........................................10
General Description of the Reorganization and Plan.........................10
Securities to be Issued....................................................11
Reasons for the Reorganization.............................................11
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND CERTAIN OTHER POLICIES..................................................12
Investment Objectives......................................................12
Principal Investment Strategies............................................13
COMPARISON OF INVESTMENT ADVISORY SERVICES AND FEES..........................14
TAXATION.....................................................................14
Tax Consequences of Distributions..........................................15
Tax Consequence of the Reorganization......................................15
PERFORMANCE..................................................................17
CAPITALIZATION...............................................................19
VOTING INFORMATION...........................................................19
ADDITIONAL INFORMATION.......................................................22
Legal Matters..............................................................22
Experts....................................................................22
Information Filed with the Securities and Exchange Commission..............22
EXHIBIT A: Form of Agreement and Plan of Reorganization.....................A-1
EXHIBIT B: Management's Discussion of Performance - Cutler
Value Fund and Cutler Core Fund................................B-1
EXHIBIT C: Financial Highlights.............................................C-1
3
SUMMARY
This section summarizes the important terms of the proposed reorganization
as well as certain information regarding the Cutler Core Fund (the "Core Fund")
and the Cutler Value Fund (the "Value Fund") (collectively the "Funds"), each a
series of The Cutler Trust (the "Trust"). The Trust, which was organized on
October 2, 1992, is an open-end management investment company under the
Investment Company Act of 1940. The Funds commenced operations on December 30,
1992.
The business of each Fund is managed under the direction of the Board of
Trustees (the "Board") of the Trust. The Board formulates the general policies
of each Fund and meets periodically to review each Fund's performance, monitor
investment activities and practices and discuss other matters affecting each
Fund.
The information set forth in this section is only a summary of and is
qualified in its entirety by the information contained elsewhere in this Proxy
Statement/Prospectus or in the documents incorporated by reference herein.
For a detailed discussion of the topics discussed in this Summary, see the
Funds' Prospectus and Statement of Additional Information, each dated October
30, 2002, and the Statement of Additional Information dated March __, 2003 to
this Proxy Statement/Prospectus.
THE PROPOSED REORGANIZATION
On February 3, 2003, the Board unanimously voted to approve the
reorganization of the Core Fund into the Value Fund (the "Reorganization")
pursuant to an Agreement and Plan of Reorganization (the "Plan") between the two
Funds.
For the reasons set forth in the section entitled "Information About the
Reorganization - Reasons for the Reorganization," the Board, including the
Trustees who are not "interested persons" as defined in the Investment Company
Act of 1940, as amended ("Disinterested Trustees"), unanimously concluded that
the Reorganization is in the best interests of the Core Fund's shareholders and
recommend that you approve the Plan. The Board also concluded that the economic
interests of the Core Fund's shareholders would not be diluted as a result of
the Reorganization. The Board considered a variety of different factors prior to
forming these conclusions including, but not limited to: (1) the similarities of
the investment objectives and policies of the Funds; (2) the expenses of the
Funds; (3) the tax-free nature of the Reorganization; and (4) the fact that
Cutler & Company, LLC (the "Adviser") has agreed to pay the costs associated
with the Reorganization.
Under the Plan, the Core Fund will transfer all of its assets and
liabilities to the Value Fund. In exchange for the transfer of assets and
liabilities, the Value Fund will issue a number of full and fractional shares to
the Core Fund equal in value to the net assets transferred to the Value Fund in
connection with the Reorganization. The Core Fund will then distribute to its
shareholders of record all shares of the Value Fund received by the Core Fund
and terminate. You will receive, on a tax-free basis, shares of the Value Fund
equal in value to your share of the
4
net assets of the Core Fund you hold as of 4:00 P.M., Eastern time, on the
Closing Date (as defined in the Plan).
COMPARISON OF FEES
The following tables depict the various fees and expenses that you will
bear from an investment in the Core Fund and Value Fund prior to the
Reorganization and the Pro Forma expenses of the Value Fund after the
Reorganization.
FEE TABLES FOR SHAREHOLDERS OF THE CORE FUND AND VALUE FUND AND PRO FORMA FEE
TABLE FOR THE VALUE FUND POST REORGANIZATION
CORE FUND VALUE FUND VALUE FUND -PRO
FORMA (POST
REORGANIZATION)
SHAREHOLDER FEES (FEES PAID DIRECTLY FROM
SHAREHOLDER INVESTMENT)
Maximum Sales Charge (Load) Imposed
on Purchases None None None
Maximum Deferred Sales Charge (Load) None None None
Maximum Sales Charge (Load) Imposed
on Reinvested Distributions None None None
Redemption Fee None None None
Exchange Fee None None None
CORE FUND VALUE FUND VALUE FUND -PRO
FORMA (POST
REORGANIZATION)(3)
ANNUAL FUND OPERATING EXPENSES(1) (EXPENSES
DEDUCTED FROM FUND ASSETS)
Advisory Fees 0.75% 0.75% 0.75%
Other Expenses
Shareholder Service Fees 0.02% 0.04% 0.03%
Miscellaneous 0.65% 0.80% 0.56%
TOTAL ANNUAL FUND OPERATING EXPENSES 1.42% 1.59% 1.34%
Fee Waiver and Expense Reimbursement(2) 0.15% 0.34% 0.09%
NET ANNUAL FUND OPERATING EXPENSES 1.27%(4) 1.25% 1.25%
(1) Based on amounts incurred during the Funds' 12 month period ended December
31, 2002 stated as a percentage of total assets.
(2) The Adviser has contractually obligated itself through October 31, 2003 to
waive a portion of its fee if total expenses of the Fund exceed 1.25%.
(3) Pro Forma amounts reflect estimated expenses based on combined net assets
of the Core Fund and the Value Fund as if the Reorganization had occurred
on December 31, 2002.
(4) The Adviser's contractual obligation to waive a portion of its fee if the
total expenses of the Fund exceed 1.25% is calculated over the course of
the Fund's fiscal year. Because the period presented in this table includes
the latter six months of the fiscal year ended June 30, 2002 and the first
six months of the fiscal year ending June 30, 2003, the actual net
operating expenses during the period reflect minor monthly variations that
are reconciled during the fiscal year.
5
EXAMPLE
The following is a hypothetical example intended to help you compare the
cost of investing in each Fund prior to the Reorganization and in the Value Fund
after the Reorganization. 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 that your investment has a 5%
annual rate of return, that each Fund's operating expenses remain the same as
stated in the above tables and that all dividends and distributions are
reinvested. Although your actual costs may be higher or lower, under these
assumptions your costs would be:
1 YEAR(1) 3 YEARS 5 YEARS 10 YEARS
-------------- --------------- --------------- --------------
Core Fund $129 $435 $762 $1,689
Value Fund 127 469 834 1,861
Value Fund-Pro Forma 127 416 725 1,605
(Post Reorganization)(2)
(1) The costs for 1 Year takes into account fee waivers and/or expense
reimbursements.
(2) Estimated.
As a result of the Adviser's contractual agreement to waive fees and
reimburse expenses for the Funds through October 31, 2003, it is expected that
the expense ratio for Value Fund following the Reorganization will be the same
as the current ratio for the Core Fund. There is no assurance, however, that
these contractual agreements will be continued after that date. If the Adviser's
contractual obligation is not continued, the total expense ratio for Value Fund
following the Reorganization would be lower than the current total expense ratio
for the Core Fund.
COMPARISON OF INVESTMENT OBJECTIVES AND PRINCIPAL INVESTMENT STRATEGIES
The investment objectives of the Core Fund and the Value Fund are the same.
The investment objective of both Funds is to provide current income and
long-term capital appreciation.
The Adviser is responsible for the day-to-day management of both Funds in
its capacity as investment adviser. Each Fund is managed similarly. The
principal investment strategies of both Funds are similar in that each invests
in stocks of companies that have a market value of a least $1 billion and, in
the Adviser's opinion, have wide ownership among major institutional investors
and very liquid markets. The Core Fund, however, consists primarily of larger
companies that the Adviser considers undervalued relative to their growth
prospects relative to the general market. Also, the Core Fund invests only in
U.S. exchange-traded companies.
The Value Fund is comprised of stocks whose current values the Adviser
judges to be greater than their price based on historic valuations and/or
comparable companies.
6
Because of the similarity in the Funds' principal investment strategies,
the Adviser anticipates adjusting only a limited number of holdings as a result
of the Reorganization. To the extent the Core Fund and Value Fund have invested
in the same securities, the Adviser intends generally to maintain such holdings.
The Adviser does not anticipate having to sell any significant portion of such
investments although some purchases and sales in those securities will be made
to rebalance the Value Fund portfolio.
COMPARISON OF INVESTMENT ADVISORY SERVICES AND FEES
Cutler & Company, LLC (the "Adviser"), 3555 Lear Way, 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
receives an advisory fee at an annual rate of 0.75% of the average daily net
assets of the Core Fund and the Value Fund.
COMPARISON OF OTHER SERVICE PROVIDERS
Forum Financial Group, LLC and its affiliates (collectively "Forum")
provide services to both Funds. Forum Fund Services, LLC ("FFS"), a registered
broker-dealer and member of the National Association of Securities Dealers,
Inc., is the distributor (principal underwriter) of each Fund's shares pursuant
to a single agreement between the Trust and FFS. Forum Administrative Services,
LLC provides administrative services to the both Funds; Forum Accounting
Services, LLC is the fund accountant for both Funds; Forum Shareholder Services,
LLC is each Fund's transfer agent; and Forum Trust, LLC is each Fund's
custodian. Each of the foregoing Forum affiliates has entered into an agreement
with the Trust, pursuant to which each provides its respective services to both
Funds.
COMPARISON OF PURCHASE, REDEMPTION AND EXCHANGE PRIVILEGES
PURCHASE PROCEDURES. The Core Fund and the Value Fund have the same
purchase procedures. Each Fund continuously offers its shares through its
distributor. All investments must be made by check, ACH, or wire. All checks
must be made payable in U.S. dollars and drawn on U.S. financial institutions.
The Funds do not accept purchases made by cash or cash equivalents (for
instance, you may not pay by money order, cashier's check, bank draft or
traveler's check). The Funds do not accept purchases made by credit card check.
The Funds do not issue share certificates.
If you purchase shares directly from the Funds, you will receive monthly
account statements and a confirmation of every transaction. If you purchase
shares of either Fund through a financial institution, the policies and fees
charged by that institution may be different from those charged by the Funds.
Purchases of shares of the Funds may be made on any day that the New York
Stock Exchange is open ("Business Day").
EXCHANGE PROCEDURES. The Core Fund and the Value Fund have the same
exchange procedures. Shareholders may sell their Fund shares and buy shares of
the other Fund, also known as an exchange, by telephone or in writing.
Shareholders may exchange either Funds' shares for Investors Bond Fund or Daily
Assets Government Fund (series of Forum Funds). The
7
minimum amount that is required to open an account in a Fund through an exchange
with another fund is $2,500. An exchange is treated as a sale and purchase of
shares, and may have tax consequences. There is no charge for the exchange.
REDEMPTION PROCEDURES. The Core Fund and the Value Fund have the same
redemption procedures. Each Fund processes redemption orders promptly. Under
normal circumstances, a Fund will send 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.
Shareholders may redeem a Funds' shares by mail, wire, telephone or through
a systematic withdrawal plan (discussed below). Each Fund has also reserved the
right to make redemption payments in securities rather than cash.
Each Fund may pay redemption proceeds via check or via wire, if requested.
SYSTEMATIC INVESTMENT/WITHDRAWAL PLANS. Each Fund offers systematic
investment and withdrawal plans. Under the Funds' systematic investment plan,
you may make a regular semi-monthly or monthly investment in either Fund.
Under the Funds' systematic withdrawal plan, if a shareholder owns shares
having a value of at least $10,000, the shareholder may request a specified
amount of money from his or her account once a month or once a quarter on a
specified date. Systematic withdrawals must be for at least $100.
COMPARISON OF MINIMUM INITIAL/SUBSEQUENT INVESTMENT REQUIREMENTS
The following tables summarize the minimum initial and subsequent
investment requirements of the Core Fund and the Value Fund.
MINIMUM INITIAL AND SUBSEQUENT INVESTMENT REQUIREMENTS
CORE FUND VALUE FUND
--------------------------------------
INITIAL INVESTMENT
Standard Accounts $25,000 $25,000
Traditional and Roth IRA Accounts $2,000 $2,000
Accounts with Systematic Investment Plans
$25,000 $25,000
Exchanges $2,500 $2,500
SUBSEQUENT INVESTMENTS
Standard Accounts None None
Traditional and Roth IRA Accounts None None
Accounts with Systematic Investment Plans
None None
Exchanges None None
8
COMPARISON OF DISTRIBUTION POLICIES
Both Funds distribute their net investment income quarterly and net capital
gain at least annually.
Normally, each Fund reinvests distributions in additional fund shares
unless a shareholder elects to receive distributions in cash.
COMPARISON OF DISTRIBUTION AND SHAREHOLDER SERVICING FEES
The Trust has adopted, for each Fund, a shareholder services plan
permitting the Trust to compensate financial institutions for acting as
shareholder servicing agents for their customers.
COMPARISON OF NET ASSET VALUE CALCULATION PROCEDURES
Each Fund calculates its NAV as of the close of the New York Stock Exchange
(normally 4:00 p.m., Eastern time) on each weekday except days when the New York
Stock Exchange is closed, but under unusual circumstances, may accept orders
when the New York Stock Exchange is closed if deemed appropriate by the Trust's
officers. The time at which NAV is calculated may be changed in case of an
emergency or if the New York Stock Exchange closes early. Each Fund's NAV is
determined by taking the market value of all securities owned by the Fund (plus
all other assets such as cash), subtracting all liabilities and then dividing
the result (net assets) by the number of shares outstanding. Each Fund values
securities for which market quotations are readily available at current market
value. If market quotations are not readily available, securities are valued at
fair value as determined by the Board.
TAX MATTERS RELATING TO THE REORGANIZATION
The completion of the Reorganization is subject to the condition that the
Funds and the Trust receive an opinion from Dechert LLP substantially to the
effect that, based on certain facts, assumptions and representations, the
Reorganization will constitute a tax-free reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
Consequently, no gain or loss will be recognized for federal income tax purposes
by the Core Fund or its shareholders. There is additional information about the
federal income tax consequences of the Reorganization under "Taxation."
INVESTMENT RISKS
The investment risks applicable to the Core Fund and the Value Fund are
substantially similar. 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 for shareholders who are seeking
long-term growth in their investment and willing to tolerate significant
fluctuations in the value of their investment in response to changes in the
market value of the stocks a Fund holds. This type of
9
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 the Core Fund is comprised of larger companies.
Therefore, if smaller companies outperform larger companies, the 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.
INFORMATION ABOUT THE REORGANIZATION
This section summarizes the material terms of the Reorganization. This
section is qualified in its entirety by the terms and conditions contained in
the Plan, a form of which is attached as Exhibit A to this Proxy
Statement/Prospectus.
GENERAL DESCRIPTION OF THE REORGANIZATION AND PLAN
Under the Plan, the Core Fund will transfer all of its assets and
liabilities to the Value Fund. In exchange for the transfer of the Core Fund's
assets and liabilities, the Value Fund will issue a number of full and
fractional shares of the Value Fund to the Core Fund equal in value to the net
assets transferred to the Value Fund in connection with the Reorganization. The
Core Fund will then distribute to its shareholders of record all shares of the
Value Fund received by the Core Fund. You will receive shares the Value Fund
equal in value to your share of the net assets of the Core Fund in which you
invest as of 4:00P.M. Eastern time, on the Closing Date (as defined in the
Plan).
After distributing the shares it received from the Value Fund to its
shareholders under the Reorganization, the Core Fund will then be terminated
under Delaware law.
The Plan contains customary representations, warranties, and conditions
designed to ensure that the Reorganization is fair to the Core Fund and its
shareholders. The Plan provides that the consummation of the Reorganization is
contingent upon, among other things: (i) approval of the Plan by the Core Fund's
shareholders; and (ii) the receipt by the Trust on behalf of the Core Fund and
on behalf of the Value Fund of a tax opinion substantially to the effect that,
based on certain facts, assumptions and representations, the Reorganization will
be tax-free to the Fund and its respective shareholders. The Plan may be
terminated if, on the Closing Date, any of the applicable conditions have not
been met or if the representations and warranties are not true, or if the Board
determines that consummation of the Reorganization is not in the best interest
of the Fund. The Plan provides that the costs of the Reorganization will be
borne by the Adviser.
The Closing Date of the Reorganization is April __, 2003. The Closing Date
may be changed by the Board. If the shareholders of the Core Fund do not approve
the Plan, the Reorganization will not take place.
If shareholders of the Core Fund approve the Plan, shares of the Fund will
no longer be offered for sale to existing shareholders, except for the
reinvestment of dividend and capital gain distributions or through established
automatic investment plans. Until the close of business on the Closing Date, you
may continue to add to your existing account only through an established
automatic investment plan or through the reinvestment of dividend and capital
gain distributions.
10
The stock transfer books of the Core Fund will be permanently closed as of
4:00 P.M., Eastern time, on the Closing Date. The Fund will only accept requests
for redemption received in proper form before 4:00 p.m., Eastern time, on the
business day immediately preceding the Closing Date. Requests received after
that time will be considered requests to redeem shares of the Value Fund.
SECURITIES TO BE ISSUED
The Trust is a Delaware business trust and subject to Delaware law. Because
each Fund is a series of the Trust they are subject to the same state laws and
governed by the same Trust Instrument. Accordingly, there are no material
differences in shareholder rights.
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.
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 a Fund for any purpose
related to that Fund, including voting on removal of one or more Trustees.
REASONS FOR THE REORGANIZATION
At a meeting held on February 3, 2002, the Board, including the
Disinterested Trustees, unanimously approved the Plan and determined that the
Reorganization would be in the best interests of the Core Fund's shareholders.
The Board, including the Disinterested Trustees, also determined that the
Reorganization would not dilute the interests of the shareholders of the Core
Fund. In addition, the Board also found (with the advice and assistance of
independent legal counsel) that the Reorganization would provide the following
benefits to the Core Fund's shareholders based on information provided during
the meeting:
1. Savings: The combination of the two Funds will eliminate the marketing
and management overlap arising from operating two different series of
the Trust with the same investment objective and similar investment
strategies and policies. As a result, economies of scale are expected
to benefit shareholders as expenses of the Value Fund after the
Reorganization will be incurred by a larger portfolio.
11
2. Similarity of Investment Objectives: The Core Fund and the Value
Fund's investment objective are the same. Both seek current income and
long-term capital appreciation.
3. Expenses: The Board considered the fact that the gross expenses of the
Value Fund before the Reorganization were slightly higher than the
gross expenses of the Core Fund as of the twelve month period ended
December 31, 2002. The Board noted, however, that the net expenses of
each Fund after the Reorganization will be the same due to the
Adviser's contractual agreement to waive fees and reimburse expenses
through October 31, 2003. There is no assurance that the contractual
agreement will be continued after that date. If the contractual
agreement is not continued, the total expense ratio for Value Fund
following the Reorganization would be lower than the current total
expense ratio for the Core Fund.
4. Portfolio Manager: The Board noted that there would be continuity of
portfolio management before and after the Reorganization because the
Adviser to both Funds will be the investment adviser of the Value Fund
after the Reorganization.
5. Tax-Free Nature of the Reorganization: It is anticipated the
Reorganization will be accomplished without federal tax implications
to the Core Fund or its shareholders. Both the Core Fund's and Value
Fund's distributions made in the normal course of business will still
be subject to federal income tax as described in the sections entitled
"Summary-Comparison of Distribution Policies" and "Taxation" of this
Proxy Statement/Prospectus.
6. Transaction Costs: The costs of the Reorganization will be borne by
the Adviser.
THE BOARD, INCLUDING THE DISINTERESTED TRUSTEES, UNANIMOUSLY RECOMMENDS
APPROVAL OF THE PLAN BY THE CORE FUND'S SHAREHOLDERS.
INVESTMENT OBJECTIVES, PRINCIPAL INVESTMENT STRATEGIES
AND CERTAIN OTHER POLICIES
This section summarizes the key differences between the investment
objectives, principal investment strategies and certain other policies of the
Core Fund and the Value Fund. This summary is qualified in its entirety by the
information contained in the Prospectus and Statement of Additional Information
for the Core Fund and the Value Fund. For a detailed discussion of the
investment objective, principal investment strategies and other policies of the
Funds, see the Funds' Prospectus and Statement of Additional Information each
dated October 30, 2002 and the Statement of Additional Information to this Proxy
Statement/Prospectus dated March __, 2002.
INVESTMENT OBJECTIVES
The investment objectives of the Core Fund and the Value Fund are the same.
The investment objective of both funds is to provide current income and
long-term capital appreciation.
12
The Adviser is responsible for the day-to-day management of both Funds in
its capacity as investment adviser. Each Fund is managed similarly.
The investment objective of each Fund is fundamental and cannot be changed
without shareholder approval.
PRINCIPAL INVESTMENT STRATEGIES
In seeking to meet its investment objective, the Core 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 Core 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 Core Fund's portfolio will, under normal
conditions, be comprised of at least 25 stocks, of which at least 75% will be
dividend-paying.
In seeking to meet its investment objective, the Value 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.
THE INVESTMENT ADVISER'S PROCESS. 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
rates 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
13
deteriorates. The Adviser develops specific views on how industries are
likely to evolve and how individual companies will participate in industry
growth and change
COMPARISON OF INVESTMENT ADVISORY SERVICES AND FEES
Cutler & Company, LLC, 3555 Lear Way, 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 receives an
advisory fee at an annual rate of 0.75% of the average daily net assets of the
Core Fund and the Value Fund.
The Adviser has contractually agreed to waive its investment advisory fee
and reimburse to each Fund expenses to the extent that the total expenses of
either Fund exceeds 1.25% of the average annual daily net assets. For the fiscal
year ended June 30, 2002, the Adviser waived a portion of its investment
advisory fee and only received a fee of 0.71% and 0.50% of the average daily net
assets for the Core Fund and Value Fund, respectively.
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:
Kelly R. Ko, CFA, Co-Portfolio Manager for the Core Fund and the Value
Fund, received his B.S. from the University of Southern California and an M.B.A.
in Finance from Duke University in 1986. From May 2000 to May 2002, he was a
portfolio manager for Nicholas Applegate Capital Management in San Diego,
California. From 1992 to May 2000, he was a portfolio manager and analyst for
Hughes Investment Management Company in Los Angeles, California.
Joseph Gagnon, CFA, Co-Portfolio Manager for the Core Fund and the Value
Fund, received his B.A. from the University of California, Los Angeles in 1985.
From September 2001 to May 2002, he was an investment analyst for Nicholas
Applegate Capital Management in San Diego, California. From June 2000 to
September 2001, he was an independent registered investment adviser. From 1991
to June 2000, he was a portfolio manager for Hughes Investment Management
Company in Los Angeles, California.
The Adviser (and its predecessors-in-interest) has provided investment
management services since 1977. As of December 31, 2002, the Adviser had almost
$356 million in assets under management.
TAXATION
The Core Fund and the Value Fund have similar tax treatment and each
intends to qualify each fiscal year to be treated as a regulated investment
company (a "RIC") under the Code. As a RIC, each Fund generally will not be
liable for federal income taxes on the net investment income and capital gain
distributed to its shareholders. Each Fund intends to distribute all of its net
income and net capital gains each year. Accordingly, neither the Core Fund nor
the Value Fund should be subject to federal income or excise taxes.
14
TAX CONSEQUENCES OF DISTRIBUTIONS
The Core Fund's and the Value Fund's distribution of net income (including
net short-term capital gain but excluding net capital gain, i.e., the excess of
net long-term capital gain over short-term capital loss) is taxable to you as
ordinary dividend income. The Core Fund's and the Value Fund's distribution of
net capital gain is taxable to you as long-term capital gain regardless of how
long you have held your shares. Generally, the Core Fund's and the Value Fund's
distributions will consist primarily of net income. Distributions may also be
subject to certain state and local taxes.
If you buy shares of either Fund just before that Fund makes a
distribution, a portion of the distribution you receive may be taxable to you
even though it represents a portion of the purchase price you paid for the
shares. The sale or exchange of shares of either Fund is a taxable transaction
for income tax purposes.
Shareholders of either Fund that are not U.S. citizens or residents and
that are not considered to be engaged in a U.S. trade or business under the Code
generally will be subject to withholding tax at a 30% rate on distributions of
either Fund's net income, including net short-term capital gains. This rate may
be reduced under an applicable income tax treaty. Net capital gain distributions
by either Fund generally will not be subject to withholding tax for such
shareholders.
TAX CONSEQUENCES OF THE REORGANIZATION
It is anticipated that the Reorganization will be a tax-free reorganization
within the meaning of Section 368(a) of the Code. The Core Fund, the Value Fund
and the Trust will receive an opinion from Dechert LLP substantially to the
effect that, based on certain facts, assumptions and representations, for
federal income tax purposes:
(1) The Reorganization will constitute a "reorganization" within the
meaning of Code Section 368(a).
(2) The Core Fund shareholders will recognize no gain or loss on their
receipt of voting shares of the Value Fund in exchange for their voting
shares of the Core Fund pursuant to the Reorganization.
(3) The Core Fund will not recognize gain or loss on the transfer of all of
its assets to the Value Fund solely in exchange for voting shares of the
Value Fund and the assumption by the Value Fund of the Core Fund's
liabilities pursuant to the Reorganization.
(4) The Core Fund will not recognize gain or loss on its distribution of
voting shares of the Value Fund to its shareholders pursuant to the
liquidation of the Core Fund.
15
(5) The Value Fund will not recognize gain or loss on its acquisition of
all of the assets of the Core Fund solely in exchange for voting shares of
the Value Fund and the assumption by the Value Fund of the Core Fund's
liabilities.
(6) The aggregate tax basis of the voting shares of the Value Fund received
by each of the Core Fund's shareholders pursuant to the Reorganization will
equal the aggregate tax basis of the voting shares of the Core Fund
surrendered in exchange therefor.
(7) The holding period of the voting shares of the Value Fund received by
each of the Core Fund's shareholders pursuant to the Reorganization will
include the period that the shareholder held the voting shares of the Core
Fund exchanged therefor, provided that the shareholder held such shares as
a capital asset on the date of the Reorganization.
(8) The Value Fund's basis in the assets of the Core Fund received pursuant
to the Reorganization will equal the Core Fund's basis in the assets
immediately before the Reorganization.
(9) The Value Fund's holding period in the Core Fund's assets received
pursuant to the Reorganization will include the period during which the
Core Fund held the assets.
No opinion will be expressed by Dechert, however, as to whether any gain or
loss will be recognized (a) by the Core Fund in connection with the transfer
from the Core Fund to the Value Fund of any Section 1256 contracts (as defined
in Section 1256 of the Code) or (b) by the Core Fund or the Value Fund in
connection with any disposition of assets by the Core Fund or the Value Fund
prior to or following the Reorganization.
As of January 31, 2003, the Value Fund had a net capital loss carry forward
of approximately $463,627, net capital losses for the current taxable year of
$179,799, and net unrealized built-in capital losses of $4,429,770.54. If the
Reorganization is carried out, the net capital loss carry forward, net capital
losses and, for the five-year period beginning on the Closing Date, net
unrealized built-in losses of the Value Fund as of the Closing Date that would
otherwise be available for use by the Value Fund for each taxable year ending
after the Closing Date will be limited under the Code. As a result of this
limitation, it is possible that the Value Fund will not be able to use the loss
as rapidly as it might have been able to, and part or all of the loss may not be
useable by the Value Fund at all.
You should consult your tax advisor regarding the effect of the
reorganization in light of your individual circumstances. You should also
consult your tax advisor as to the state and local tax consequences, if any, of
the Reorganization because this discussion only relates to the federal income
tax consequences.
PERFORMANCE
The Adviser's discussion of the factors that materially affected the
performance of the Core Fund and the Value Fund during its most recently
completed fiscal year together with the underlying performance information
contained in the Funds' most recent annual report dated June 30, 2002 follow as
Exhibit B to this Combined Proxy Statement/Prospectus. The financial highlights
tables included in the Funds' semi-annual report dated December 31, 2002 follow
at Exhibit C.
The following charts illustrate the variability of each Funds' 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 (BEFORE AND AFTER TAXES) REPRESENTS ONLY PAST
PERFORMANCE AND DOES NOT NECESSARILY INDICATE FUTURE RESULTS.
CALENDAR YEAR RETURNS
The following chart shows the annual total return for each full calendar year
that each Fund has operated.
Cutler Core Fund Cutler Value Fund
[EDGAR Representation of Bar Charts:
1993 - 6.15% 1993 - 5.94%
1994 - -2.89% 1994 - 0.81%
1995 - 34.42% 1995 - 33.20%
1996 - 18.28% 1996 - 16.89%
1997 - 33.35% 1997 - 33.25%
1998 - 21.47% 1998 - 17.97%
1999 - 15.19% 1999 - 3.28%
2000 - -8.04% 2000 - 8.66%
2001 - -11.20% 2001 - -3.19%
2002 - -26.61% 2002 - -22.60%]
During the periods shown in the chart for Core Fund, the highest quarterly
return for Core Fund was 17.84% (for the quarter ended December 31, 1998) and
the lowest quarterly return was -20.38% (for the quarter ended September 30,
2002).
During the periods shown in the chart for Value Fund, the highest quarterly
return for Value Fund was 16.27% (for the quarter ended June 30, 1997) and the
lowest quarterly return was -21.75% (for the quarter ended September 30, 2002).
AVERAGE ANNUAL TOTAL RETURN
The following tables compare (1) the Core Fund's average annual total return,
average annual total return after taxes on distributions, and average annual
total return after taxes on distributions and sale of Fund shares as of December
31, 2002 to the S&P 500(R) Index and (2) the Value Fund's average annual total
return, average annual total return after taxes on distributions
17
and average annual total return after taxes on distributions and sale of Fund
shares as of December 31, 2002 to the Russell 1000(R) Value Index.
CUTLER CORE FUND 1 YEAR 5 YEARS 10 YEARS
Return Before Taxes -26.61% -3.46% 6.25%
Return After Taxes on Distributions -26.81% -5.82% 3.92%
Return After Taxes on Distribution and Sale of Fund Shares -16.34% -2.13% 5.13%
- --------------------------------------------------------------- ----------------- ---------------- -------------------
S & P 500 INDEX -22.10% -0.58% 9.34%
CUTLER VALUE FUND 1YEAR 5 YEARS 10 YEARS
Return Before Taxes -22.60% -0.16% 8.19%
Return After Taxes on Distributions -22.94% -3.54% 5.82%
Return After Taxes on Distribution and Sale of Fund Shares -13.87% -0.15% 6.68%
- --------------------------------------------------------------- ----------------- ---------------- -------------------
RUSSELL 1000 VALUE INDEX -15.52% 1.16% 10.80%
After-tax returns are calculated using the historical highest individual
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Actual after-tax returns depend on an investor's tax situation and
may differ from those shown. After-tax returns shown are not relevant to
investors who hold their Fund shares through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts.
In some cases the return after taxes may exceed the return before taxes due
to an assumed tax benefit from any losses on a sale of Fund shares at the end of
the measurement period.
The S&P 500 Index is a market index of common stock. The S&P 500 Index is
unmanaged and reflects reinvestment of dividends. Unlike the performance figures
of the Fund, the S&P 500 Index's performance does not reflect the effect of
expenses. One cannot invest directly in the index.
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.
Unlike the performance figures of the Fund, the Russell 1000 Value Index's
performance does not reflect the effect of expenses. One cannot invest directly
in the index.
18
CAPITALIZATION
The following table sets forth the capitalization of the Core Fund and
Value Fund as of December 31, 2002 and the pro forma capitalization of the Value
Fund as of that date assuming that the Plan is approved and the Reorganization
is consummated.
CORE FUND VALUE FUND PRO FORMA-VALUE FUND
- ------------------------------------- ------------------------- ------------------------- --------------------------
Net Assets $21,122,244 $17,932,038 $39,054,282
Net Asset Value Per Share $6.99 $7.69 $7.69
Shares Outstanding 3,023,183 2,332,939 5,079,655
VOTING INFORMATION
This Proxy Statement/Prospectus is being furnished by the Board in
connection with the solicitation of proxies for the special meeting of
shareholders. Solicitation of proxies will be primarily by mail. Officers of the
Core Fund may also solicit proxies by telephone, facsimile, Internet, or in
person. The costs of solicitation will be borne by the Adviser and are estimated
to be under $500.
Each share of the Core Fund is entitled to one vote. To approve the
Reorganization of the Core Fund, a majority of the shares of the Core Fund
outstanding and entitled to vote must be voted in favor of the Plan.
Shareholders holding one third of the outstanding shares of the Core Fund as of
the Record Date present in person or by proxy will constitute a quorum for the
transaction of business at the Special Meeting.
For purposes of determining the presence of a quorum and counting votes on
the matters presented, shares represented by abstentions and "broker non-votes"
will be counted as present, but not votes cast at the Special Meeting and
therefore will have the effect of voting "AGAINST" the proposal. Broker
non-votes are shares held in street name for which the broker indicates that
instructions have not been received from the beneficial owners and other persons
entitled to vote for which the broker lacks discretionary voting authority.
You may vote on the Reorganization by utilizing one of the following
options:
By Mail: Complete the enclosed proxy card enclosed with the Proxy
Statement/Prospectus ("Proxy Card") and return it in the postage paid
envelope provided.
By Telephone: Call the Toll-Free number on your proxy card.
19
Attend the special meeting of shareholders of the Core Fund in person at
1:00 p.m. on April 10, 2003 at Forum Financial Group, LLC, Two Portland Square,
2nd Floor Conference Room, Portland, Maine 04101.
If you plan to vote by mail, you should complete the Proxy Card by:
(1) Indicating whether you vote "FOR", "AGAINST", or "ABSTAIN" from voting
on the Reorganization by checking the appropriate box on the Proxy
Card;
(2) Signing and dating the Proxy Card; and
(3) Returning it to Forum Financial Group in the enclosed postage-paid
envelope.
Any shareholder may revoke his or her proxy at any time before it is voted
by giving written notice of revocation or by executing and delivering a later
dated proxy to Forum Shareholder Services, LLC, the Trust's transfer agent, at
Two Portland Square, Portland, Maine, 04101, or by personally casting a vote at
the Meeting. To change a vote by written notice of revocation, you must provide
Forum Financial Group with a "Revocation Letter" that:
(1) Identifies yourself;
(2) States that as shareholder of the Core Fund, you revoke your prior
decisions as set forth in the previously returned Proxy Card; and
(3) Indicates your approval, disapproval or abstention from voting on the
Reorganization.
If you do not specify a choice on a proxy card that is properly executed
and returned in time to be voted at the Special Meeting, it will be voted "FOR"
the approval of the Plan.
If you do not plan to attend the Special Meeting of Shareholders of the
Fund on April 10, 2003, Forum Financial Group must receive your vote by mail or
telephone on or before April __, 2003. If you do not return your Proxy Card by
that date or you abstain from voting, you will be treated as having voted
"AGAINST" the Reorganization.
It is not anticipated that any matters other than the approval of the Plan
will be brought before the meeting. Should other business be brought before the
meeting, it is intended that all proxies will be voted in accordance with the
judgment of the persons named as proxies. If sufficient votes in favor of
approving the Plan are not received by the time scheduled for the meeting, the
persons named as proxies may propose one or more adjournments of the meeting for
a reasonable period of time to permit further solicitation of proxies. Any
adjournment will require the affirmative vote of a majority of the votes cast on
the question in person or by proxy at the session of the meeting to be
adjourned. The persons named as proxies will vote "FOR" adjournment those
proxies required to be voted "FOR" the approval of the proposal. The persons
named as proxies will vote "AGAINST" adjournment those proxies required to be
voted "AGAINST" the proposal. The costs of any additional solicitation and of
any adjourned session will be paid by the Adviser.
INSTRUCTIONS FOR SIGNING PROXY CARDS The following general rules for
signing proxy cards may be of assistance to you and avoid the time and expense
to the Core Fund involved in validating your vote if you fail to sign your proxy
card properly.
1. Individual Accounts: Sign your name exactly as it appears in the
registration on the proxy card.
20
2. Joint Accounts: Either party may sign, but the name of the party signing
should conform exactly to the name shown in the registration on the proxy
card.
3. All Other Accounts: The capacity of the individual signing the proxy
card should be indicated unless it is reflected in the form of
registration. For example:
REGISTRATION VALID SIGNATURE
CORPORATE ACCOUNTS
------------------
(1) ABC Corp.............................................................. ABC Corp.
John Doe, Treasurer
(2) ABC Corp.............................................................. John Doe, Treasurer
(3) ABC Corp. c/o John Doe, Treasurer..................................... John Doe
(4) ABC Corp. Profit Sharing Plan......................................... John Doe, Director
PARTNERSHIP ACCOUNTS
--------------------
(1) The XYZ Partnership................................................... Jane B. Smith, Partner
(2) Smith and Jones, Limited Partnership.................................. Jane B. Smith,
General Partner
TRUST ACCOUNTS
--------------
(1) ABC Trust Account..................................................... Jane B. Doe, Director
(2) Jane B. Doe, Director u/t/d 12/28/78.................................. Jane B. Doe
CUSTODIAL OR ESTATE ACCOUNTS
----------------------------
(1) John B. Smith, Cust. f/b/o John B. Smith, Jr.
UGM/UTMA.............................................................. John B. Smith
(2) Estate of John B. Smith............................................... John B. Smith,
Executor
OUTSTANDING SHARES THE CORE FUND
Only shareholders of the Core Fund on February 7, 2003 (the "Record Date")
are entitled to notice of and to vote at the Special Meeting. As of January 31,
2003, there were 3,030,420 shares outstanding of the Core Fund.
As of January 31, 2003, officers and Trustees of the Core Fund as a group
owned less than 1% of Core Fund. As of January 31 2003, and to the best of the
Core Fund's knowledge and belief, the following persons owned beneficially or of
record 5% or more of the Core Fund:
NAME NUMBER OF SHARES PERCENTAGE OF FUND
ADDRESS OWNED SHARES OWNED
- ------------------------------ ----------------------- -------------------------
Forum Trust LLC IRA RO CUST 193,433.626 shares 6.38%
FBO
Thomas G Sawyer
9405 Portada Drive
Whittier, CA 90603
21
ADDITIONAL INFORMATION
LEGAL MATTERS
Dechert LLP serves as counsel for the Core Fund, the Value Fund, and the
Trust. Dechert LLP does not represent the Adviser or Forum Funds Services, LLC
regarding the Reorganization or any related transaction.
EXPERTS
The audited financial statements of the Core Fund and the Value Fund are
incorporated by reference into this Proxy Statement/Prospectus and the Statement
of Additional Information to this Proxy Statement/Prospectus. The financial
statements have been audited by Deloitte & Touche, LLP, whose report therein is
also included in the Funds' Annual Report dated June 30, 2002. Deloitte &
Touche, LLP is considered an expert due to its experience in auditing and
accounting.
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
This Proxy Statement/Prospectus and the related Statement of Additional
Information does not contain all of the information set forth in the
registration statements and exhibits of the Core Fund and the Value Fund filed
with the SEC under the Securities Act of 1933 and the 1940 Act. The Prospectus
and Statement of Additional Information for the Core Fund and the Value Fund are
incorporated by reference into this Combined Proxy Statement/Prospectus.
The Trust is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended, and the 1940 Act, and in accordance therewith,
files proxy materials, reports and other information about the Core Fund and
Value Fund with the SEC. These materials can be inspected and copied at the
SEC's Public Reference Room at 450 Fifth Street NW, Washington, DC 20549, and at
the SEC's regional and district offices located at 73 Tremont Street, Suite 600,
Boston, MA 02108-3912, 601 Walnut Street, Suite 1120E, Philadelphia, PA 19106
3475 Lenox Road, N.E., Suite 1000, Atlanta, GA 30326 and 175 Jackson Boulevard,
Suite 900, Chicago, IL 60604. Copies of such materials can also be obtained by
mail from the Public Reference Branch, Office of Consumer Affairs and
Information Services, SEC, Washington, D.C. 20549 at prescribed rates.
22
EXHIBIT A
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "PLAN") is made as of this
_____ day of February, 2003, by and between The Cutler Trust (the "Trust"), a
Delaware business trust, on behalf of its series, the Cutler Value Fund (the
"Acquiring Fund") and the Trust, on behalf of its series, the Cutler Core Fund
(the "Target Fund").
WHEREAS, the Acquiring Funds and the Target Fund are separate series of the
Trust, which is an open-end management investment company registered with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
of 1940, as amended (the "1940 ACT");
WHEREAS, the parties desire that the Acquiring Fund acquire the assets and
assume the liabilities of the Target Fund in exchange solely for voting shares
of equal value of the Acquiring Fund and the distribution of the voting shares
of the Acquiring Fund to the shareholders of the Target Fund in connection with
the dissolution and liquidation of the Target Fund (the "Reorganization"); and
WHEREAS, the parties intend that the Reorganization qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE"), and that the Acquiring Fund and the
Target Fund each be a "party to a reorganization," within the meaning of Section
368(b) of the Code, with respect to the Reorganization;
NOW, THEREFORE, in accordance with the mutual promises described herein,
the parties agree as follows:
1. DEFINITIONS.
The following terms shall have the following meanings:
1933 ACT The Securities Act of 1933, as amended.
1934 ACT The Securities Exchange Act of 1934, as amended.
ASSETS All property and assets of any kind and all
interests, rights, privileges and powers of or
attributable to the Target Fund whether or not
determinable at the Effective Time and wherever
located. Assets include all cash, cash
equivalents, securities, claims (whether
absolute or contingent, Known or unknown,
accrued or unaccrued or conditional or
unmatured), contract rights and receivables
(including dividend and interest receivables)
owned by or attributed to the Target Fund and
any deferred or prepaid expense shown as an
asset on the Target Fund's books.
ASSETS LIST A list of securities and other Assets and Known
Liabilities of or attributable to the Target
Fund as of the date provided to the Trust.
CLOSING DATE _________ , 2003 or such other date as the
parties may agree to in writing.
EFFECTIVE TIME 9:00 a.m. Eastern time on the business day
following the Closing Date, or such other time
as the parties may agree to in writing.
FUND The Acquiring Fund or the Target Fund as the
context may require.
1
KNOW, KNOWN OR KNOWLEDGE Known after reasonable inquiry.
LIABILITIES All liabilities of, allocated or attributable to
the Target Fund, whether Known or unknown,
accrued or unaccrued, absolute or contingent or
conditional or unmatured.
N-14 REGISTRATION STATEMENT The Trust's Registration Statement on Form N-14
under the 1940 Act that will register the shares
of the Acquiring Fund to be issued in the
Reorganization and will include the proxy
materials necessary for shareholders of the
Target Fund to approve the Reorganization.
MATERIAL AGREEMENTS The agreements set forth in Schedule B.
NET VALUE OF ASSETS Value of Assets net of Liabilities.
REORGANIZATION DOCUMENTS Such bills of sale, assignments and other
instruments as desirable for the Target Fund to
transfer to the Acquiring Fund all right and
title to and interest in the Target Fund's
Assets and for the Acquiring Fund to assume the
Target Fund's Liabilities.
SCHEDULE A Schedule A to this Plan.
SCHEDULE B Schedule B to this Plan.
TARGET FINANCIAL STATEMENTS The audited financial statements of the Target
Fund for its most recently completed fiscal year
and, if applicable, the unaudited financial
statements of the Target Fund for its most
recently completed semi-annual period.
VALUATION TIME The time on the Closing Date, the business day
immediately preceding the Closing Date if the
Closing Date is not a business day, or such
other date as the parties may agree to in
writing, that the Trust determines the net asset
value of the shares of the Acquiring Fund and
determines the net value of the Assets of or
attributable to the Target Fund. Unless
otherwise agreed to in writing, the Valuation
Time shall be at the time of day then set forth
in the Acquiring Fund's and Target Fund's
Registration Statement on Form N-1A as the time
of day at which net asset value is calculated.
2. REGULATORY FILINGS AND SHAREHOLDER ACTION.
(a) The Trust shall promptly prepare and file the N-14 Registration
Statement with the SEC. The Trust and the Target Fund shall
promptly prepare and file any other appropriate regulatory
filings, including, without limitation, filings with federal,
state or foreign securities regulatory authorities.
(b) The parties shall seek an order of the SEC, if appropriate,
providing them with any necessary relief from Section 17 of the
1940 Act to permit them to consummate the transactions
contemplated by this Plan.
(c) As soon as practicable after the effective date of the N-14
Registration Statement, the Target Fund shall hold a shareholder
meeting to consider and approve this plan, the reorganization and
such other matters as the Target Fund's Board of Trustees may
determine.
3. TRANSFER OF ASSETS. The Trust on behalf of the Acquiring Fund and the
Target Fund shall take the following steps with respect to the
Reorganization:
2
(a) On or prior to the Closing Date, the Target Fund shall
endeavor to pay or make reasonable provision to pay out of
the Assets all of the Liabilities, expenses, costs and
charges of or attributable to the Target Fund that are Known
to the Target Fund and that are due and payable as of the
Closing Date.
(b) At the Effective Time, the Target shall assign, transfer,
deliver and convey all of the Target's Assets to the
Acquiring Fund, subject to all of the Target's Liabilities.
The Acquiring Fund, shall then accept the Target's Assets
and assume the Target's Liabilities such that at and after
the Effective Time (i) all of the Target's Assets at or
after the Effective Time shall become and be the Assets of
the Acquiring Fund and (ii) all of the Target's Liabilities
at the Effective Time shall attach to the Acquiring Fund,
enforceable against the Acquiring Fund to the same extent as
if initially incurred by the Acquiring Fund.
(c) Within a reasonable time prior to the Closing Date, the
Target Fund shall provide its Assets List to the Trust. The
parties agree that the Target Fund may sell any asset on the
Assets List prior to the Effective Time. After the Target
Fund provides the Assets List, the Target Fund will not
acquire any additional securities or permit to exist any
encumbrances, rights, restrictions or claims not reflected
on the Assets List, without the prior consent of the Trust.
Within a reasonable time after receipt of the Assets List
and prior to the Closing Date, the Trust will advise the
Target Fund of any investments shown on the Assets List that
the Trust has determined to be inconsistent with the
investment objective, policies and restrictions of the
Acquiring Fund. The Target Fund will dispose of any such
securities prior to the Closing Date to the extent
practicable and consistent with applicable legal
requirements, including the Target Fund's investment
objective, policies and restrictions. In addition, if the
Trust determines that, as a result of the Reorganization the
Acquiring Fund would own an aggregate amount of an
investment that would exceed a percentage limitation
applicable to the Acquiring Fund, the Trust will advise the
Target Fund in writing of any such limitation and the Target
Fund shall dispose of a sufficient amount of such investment
as may be necessary to avoid violating the limitation as of
the Effective Time, to the extent practicable and consistent
with applicable legal requirements, including the Target
Fund's investment objective, policies and restrictions.
Notwithstanding the foregoing, the Target Fund has no plan
or intention to sell or dispose of more than 66 percent of
its assets (such percentage determined by using asset values
as of the Closing Date) prior to the Reorganization.
(d) The Target Fund shall assign, transfer, deliver and convey
the Assets to the Acquiring Fund at the Effective Time on
the following bases:
(1) In exchange for the transfer of the Assets, the Trust,
on behalf of the Acuiring Fund, shall simultaneously
issue and deliver to the Target Fund full and
fractional shares of beneficial interest of Acquiring
Fund. The Trust shall determine the number of shares of
the Acquiring Fund to be issued by dividing the Net
Value of Assets of the Target Fund by the net asset
value of one Acquiring Fund share. Based on this
calculation, the Trust shall issue shares of beneficial
interest of the Acquiring Fund with an aggregate net
asset value equal to the Net Value of the Assets of the
Target Fund.
3
(2) The parties shall determine, as of the Valuation Time,
the net asset value of the Acquiring Fund shares to be
delivered and the net asset value of the Assets to be
conveyed, substantially in accordance with the Trust's
current valuation procedures. The parties shall make
all computations to the fourth decimal place or such
other decimal place as the parties may agree to in
writing.
(3) The Target Fund shall transfer the Assets with good and
marketable title to the Trust's custodian for the
account of the Acquiring Fund. The Target Fund shall
transfer all cash in the form of immediately available
funds payable to the order of the Trust's custodian for
the account of the Acquiring Fund. The Target Fund
shall transfer any of the Assets that were not
transferred to the Trust's custodian at the Effective
Time to the Trust's custodian at the earliest
practicable date thereafter.
(e) Promptly after the Closing Date, the Target Fund will
deliver to the Trust its Statement of Assets and Liabilities
as of the Closing Date (usually within one week).
4. DISSOLUTION AND LIQUIDATION OF THE TARGET FUND, REGISTRATION OF
SHARES AND ACCESS TO RECORDS. The Trust on behalf of the Target
Fund and the Acquiring Fund also shall take the following steps
in connection with the Reorganization:
(a) At or as soon as reasonably practical after the
Effective Time, the Target Fund shall dissolve and
liquidate by transferring to shareholders of record
full and fractional shares of beneficial interest of
the Acquiring Fund equal in value to the shares of the
Target Fund held by the shareholder. Each Target Fund
shareholder also shall have the right to receive any
unpaid dividends or other distributions that the Target
Fund declared with respect to the shareholder's Target
Fund shares before the Effective Time. The Trust shall
record on its books the ownership by the shareholders
of the respective Acquiring Fund shares; the Target
Fund shall simultaneously redeem and cancel on its
books all of its issued and outstanding shares of the
Target Fund. The Target Fund shall then wind up its
affairs and take all steps as are necessary and proper
to terminate its registration under the 1940 Act and
dissolve as soon as is reasonably possible after the
Effective Time and in accordance with all applicable
laws and regulations.
(b) If a former Target Fund shareholder requests a change
in the registration of the shareholder's Acquiring Fund
shares to a person other than the shareholder, the
Acquiring Fund shall require the shareholder to (i)
furnish the Acquiring Fund with an instrument of
transfer properly endorsed, accompanied by any required
signature guarantees and otherwise in proper form for
transfer; (ii) if any of the shares are outstanding in
certificate form, deliver to the Acquiring Fund the
certificate representing such shares; and (iii) pay to
the Acquiring Fund any transfer or other taxes required
by reason of such registration or establish to the
reasonable satisfaction of the Acquiring Fund that such
tax has been paid or does not apply.
(c) At and after the Closing Date, the Target Fund shall
provide the Trust and its transfer agent with immediate
access to: (i) all records containing the names,
addresses and taxpayer identification numbers of all of
the Target Fund shareholders and the number and
percentage ownership of the outstanding shares of the
Target Fund owned by each shareholder as of the
Effective Time and (ii) all original documentation
(including all applicable Internal Revenue Service
forms, certificates, certifications and correspondence)
relating to the Target Fund shareholders' taxpayer
identification numbers and their liability for
4
or exemption from back-up withholding. The Target Fund
shall preserve and maintain, or shall direct its
service providers to preserve and maintain, its records
as required by Section 31 of and Rules 31a-1 and 31a-2
under the 1940 Act.
5. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TARGET
FUND. The Trust on behalf of itself and the Target Fund
represents and warrants to, and agrees as follows:
(a) The Trust is organized as a Delaware business trust
duly created, validly existing and in good standing under
the laws of the State of Delaware. The Board of Trustees of
the Trust duly established and designated the Acquiring Fund
as a series of the Trust. The Trust is registered with the
SEC as an open-end management investment company under the
1940 Act, and such registration is full force and effect.
The Trust's Registration Statement relating to the Acquiring
Fund will be effective with the SEC prior to the Effective
Date.
(b) The Trust has the power and all necessary federal,
state and local qualifications and authorizations to own all
of its properties and Assets, to carry on its business as
now being conducted and described in its currently effective
Registration Statement on Form N-1A, to enter into this Plan
and to consummate the transactions contemplated herein.
(c) The Board of Trustees of the Trust has duly
authorized the execution and delivery of the Plan by the
Trust on behalf of the Target Fund and the transactions
contemplated herein. Duly authorized officers of the Trust
have executed and delivered the Plan on behalf of the Target
Fund. The Plan represents a valid and binding contract,
enforceable in accordance with its terms, subject as to
enforcement to bankruptcy, insolvency, reorganization,
arrangement, moratorium, and other similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles. The execution and delivery of
this Plan does not, and, subject to the approval of
shareholders referenced in Section 2(c), the consummation of
the transactions contemplated by this Plan will not, violate
the Trust's Trust Instrument, By-Laws or any Material
Agreement. Except for the approval of Target Fund
shareholders, the Target Fund does not need to take any
other action to authorize its officers to effectuate this
Plan and the transactions contemplated herein.
(d) For each taxable year of its operation (including
the taxable year ending on the Closing Date), the Target
Fund has met the requirements of Subchapter M of the Code
for qualification and treatment as a regulated investment
company and has elected to be treated as such, has been
eligible to and has computed its federal income tax under
Section 852 of the Code, and shall have distributed all of
its investment company taxable income and net capital gain
(as defined in the Code), that has accrued through the
Closing Date.
(e) The materials included within the N-14 Registration
Statement when filed with the SEC, when Part A of the N-14
Registration Statement is distributed to shareholders, at
the time of the Target Fund shareholder meeting and at the
Effective Time of the Reorganization, insofar as they relate
to the Target Fund (i) shall comply in all material respects
with the applicable provisions of the 1933 Act and the 1940
Act, the rules and regulations thereunder and state
securities laws, and (ii) shall not contain any untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements made therein not misleading.
(f) The Trust has duly authorized and validly issued
all of the issued and outstanding shares of the Target Fund
and all of the shares are validly outstanding, fully paid
and non-assessable, and are offered for sale and sold in
conformity with the registration requirements of all
applicable federal and state securities laws. There are no
5
outstanding options, warrants or other rights to subscribe
for or purchase the Target Fund shares, nor are there any
securities convertible into Target Fund shares.
(g) The Target Fund shall operate its business in the
ordinary course between the date hereof and the Effective
Time, it being agreed that such ordinary course of business
will include the declaration and payment of customary
dividends and distributions and any other dividends and
distributions deemed advisable in anticipation of the
Reorganization.
(h) At the Effective Time, the Target Fund will have
good and marketable title to the Assets and full right,
power and authority to assign, transfer, deliver and convey
the Assets.
(i) The Target Fund Financial Statements, copies of
which have been previously delivered to the Trust, fairly
present the financial position of the Target Fund as of the
Target Fund's most recent fiscal year-end and the results of
the Target Fund's operations and changes in its net Assets
for the periods indicated. The Target Financial Statements
are in accordance with generally accepted accounting
principles consistently applied.
(j) To the Knowledge of the Trust and the Target Fund,
the Target Fund has no liabilities, whether or not
determined or determinable, other than the Liabilities
disclosed or provided for in the Target Financial Statements
or Liabilities incurred in the ordinary course of business
subsequent to the date of the Target Financial Statements,
and Liabilities set forth in the Assets List.
(k) Other than the claims, actions, suits,
investigations or proceedings set forth on Schedule B, the
Target Fund does not Know of any claims, actions, suits,
investigations or proceedings of any type pending or
threatened against it or the Assets or businesses. The
Target Fund does not Know of any facts that it currently has
reason to believe are likely to form the basis for the
institution of any such claim, action, suit, investigation
or proceeding against it. For purposes of this provision,
investment underperformance or negative investment
performance shall not be deemed to constitute such facts,
provided all required performance disclosures have been
made. Other than the orders, decrees or judgments set forth
on Schedule C, the Target Fund is not a party to or subject
to the provisions of any order, decree or judgment of any
court or governmental body that adversely affects, or is
reasonably likely to adversely affect, its financial
condition, results of operations, business, properties or
the Assets or its ability to consummate the transactions
contemplated by the Plan.
(l) Except for contracts, agreements, franchises,
licenses or permits entered into or granted in the ordinary
course of its business or listed in Schedule B, in each case
under which no material default exists, the Trust is not a
party to or subject to any material contract, debt
instrument, employee benefit plan, lease, franchise, license
or permit of any kind or nature whatsoever on behalf of the
Target Fund.
(m) At the date hereof and at the Closing Date, all
federal and other tax returns and reports of the Target Fund
required by law to have been filed by such dates shall have
been filed and are or will be correct in all material
respects, and all federal and other taxes shall have been
paid so far as due, or provision shall have been made for
the payment thereof and, to the best of the Target Fund's
knowledge, no such return is currently under audit and no
assessment has been asserted with respect to such returns.
(n) Since the date of the Target Financial Statements,
there has been no material adverse change in the financial
condition, results of operations, business, properties or
Assets of the Target Fund. For all purposes under this Plan,
investment underperformance, negative investment performance
and/or investor redemptions shall
6
not be considered material adverse changes, provided all
required performance disclosures have been made.
6. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TRUST.
The Trust, on behalf of itself and the Acquiring Fund, represents
and warrants to, and agrees as follows:
(a) The Trust is organized as a Delaware business trust
duly created, validly existing and in good standing under
the laws of the State of Delaware. The Board of Trustees of
the Trust duly established and designated the Acquiring Fund
as a series of the Trust. The Trust is registered with the
SEC as an open-end management investment company under the
1940 Act, and such registration is full force and effect.
The Trust's Registration Statement relating to the Acquiring
Fund will be effective with the SEC prior to the Effective
Date.
(b) The Trust has the power and all necessary federal,
state and local qualifications and authorizations to own all
of its properties and assets, to carry on its business as
described in its Registration Statement on Form N-1A as
filed with the SEC, to enter into this Plan and to
consummate the transactions contemplated herein.
(c) The Board of Trustees of the Trust has duly
authorized the execution and delivery of the Plan on behalf
of the Acquiring Fund and the transactions contemplated
herein. Duly authorized officers of the Trust have executed
and delivered the Plan. The Plan represents a valid and
binding contract, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles. The
execution and delivery of this Plan does not, and the
consummation of the transactions contemplated by this Plan
will not, violate the Trust's Trust Instrument, By-Laws or
any Material Agreement. The Trust does not need to take any
other action to authorize its officers to effectuate the
Plan and the transactions contemplated herein on behalf of
the Acquiring Fund.
(d) For each taxable year of its operation, the
Acquiring Fund has met the requirements of Subchapter M of
the Code for qualification and treatment as a regulated
investment company and has elected to be treated as such,
has been eligible to and has computed its federal income tax
under Section 852 of the Code, and will do so for the
taxable year including the Closing Date.
(e) The materials included within the N-14 Registration
Statement when filed with the SEC, when Part A of the N-14
Registration Statement is distributed to shareholders, at
the time of the Target Fund shareholder meeting and at the
Effective Time of the Reorganization, insofar as they relate
to the Trust and the Acquiring Fund (i) shall comply in all
material respects with the applicable provisions of the 1933
Act and the 1940 Act, the rules and regulations thereunder
and state securities laws, and (ii) shall not contain any
untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to
make the statements made therein not misleading.
(f) The Trust shall duly authorize the Acquiring Fund
shares to be issued and delivered to the Target Fund as of
the Effective Time. When issued and delivered, the Acquiring
Fund shares shall be duly and validly issued, fully paid and
non-assessable, and no shareholder of the Acquiring Fund
shall have any preemptive right of subscription or purchase
in respect of them. There are no outstanding options,
warrants or other rights to subscribe for or purchase the
Acquiring Fund shares, nor are there any securities
convertible into Acquiring Fund shares.
(g) The Trust does not Know of any claims, actions,
suits, investigations or proceedings of any type pending or
threatened against the Acquiring Fund or its assets or
7
businesses. There are no facts that the Trust currently has
reason to believe are likely to form the basis for the
institution of any such claim, action, suit, investigation
or proceeding against it. The Acquiring Fund is not a party
to or subject to the provisions of any order, decree or
judgment of any court or governmental body that adversely
affects, or is reasonably likely to adversely affect, its
financial condition, results of operations, business,
properties or assets or its ability to consummate the
transactions contemplated herein.
(h) Except for contracts, agreements, franchises,
licenses or permits entered into or granted in the ordinary
course of its business, in each case under which no material
default exists, the Trust is not a party to or subject to
any material contract, debt instrument, employee benefit
plan, lease, franchise, license or permit of any kind or
nature whatsoever on behalf of the Acquiring Fund.
(i) The Trust has made all state filings to register
the Acquiring Fund shares in each jurisdiction that the
Target Fund is currently registered and all necessary steps
have been taken under all relevant jurisdictions' securities
laws to consummate the Reorganization.
(j) Since December 31, 2002, there has been no material
adverse change in the financial condition, business,
properties or assets of the Acquiring Fund.
(k) At the date hereof and at the Closing Date, all
federal and other tax returns and reports of the Acquiring
Fund required by law then to be filed shall have been filed
and are or will be correct in all material respects, and all
federal and other taxes shown as due on said returns and
reports shall have been paid or provision shall have been
made for the payment thereof, and, to the best of the
Acquiring Fund's knowledge, no such return is currently
under audit and no assessment has been asserted with respect
to such returns.
7. CONDITIONS TO THE TARGET FUND'S OBLIGATIONS. The obligations of
the Target Fund with respect to the Reorganization shall be
subject to the following conditions precedent:
(a) The Trust shall have duly executed and delivered the
applicable Reorganization Documents to the Target Fund.
(b) The Target Fund's shareholders shall have approved the
Reorganization in the manner required by the Target Fund's
Articles of Incorporation and applicable law. If the Target
Fund shareholders fail to approve the Reorganization, that
failure shall release the Target Fund of its obligations
under this Plan.
(c) On behalf of the Acquiring Fund, the Trust shall have
delivered to the Target Fund a certificate dated as of the
Closing Date and executed in its name by the Secretary or
Assistant Secretary of the Trust, in a form reasonably
satisfactory to the Target Fund, stating that the
representations and warranties of the Trust in this Plan
that apply to the Reorganization are true and correct in all
material respects at and as of the Valuation Time.
(d) The Trust on behalf of the Target Fund shall have received
an opinion of Dechert LLP, as counsel to the Trust, in form
and substance reasonably satisfactory to the Target Fund and
dated as of the Closing Date, substantially to the effect
that:
(1) The Trust is a Delaware business trust duly created,
validly existing and in good standing under the laws of
the State of Delaware and is an open-end, management
investment company registered under the 1940 Act;
(2) The Plan has been duly authorized, executed and
delivered by the Trust, and assuming due authorization,
execution, and delivery of this Plan by the Target
8
Fund, represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and transfer and similar laws
relating to or affecting creditors' rights generally
and court decisions with respect thereto, and further
subject to the application of equitable principles in
any proceeding whether at law or in equity or with
respect to the enforcement of provisions of the Plan
and the effect of judicial decisions which have held
that certain provisions are unenforceable when their
enforcement would violate an implied covenant of good
faith and fair dealing or would be commercially
unreasonable or when default under the Plan is not
material;
(3) The shares of the Acquiring Fund to be delivered as
provided for by this Plan are duly authorized and upon
delivery will be validly issued, fully paid and
non-assessable by the Trust;
(4) The execution and delivery of this Plan did not, and
the consummation of the Reorganization will not,
violate the Trust Instrument or By-Laws of the Trust or
any Material Agreement to which the Trust is a party or
by which it is bound; and
(5) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by the Trust
of the Reorganization or for the execution and delivery
of the Acquiring Fund's Reorganization Documents,
except those that have been obtained under the 1933
Act, the 1940 Act and the rules and regulations under
those Acts or that may be required under state
securities laws or subsequent to the Effective Time or
when the failure to obtain the consent, approval,
authorization or order would not have a material
adverse effect on the operation of the Acquiring Fund.
In rendering such opinion, such counsel may (i) rely on
the opinion of other counsel to the extent set forth in
such opinion, (ii) make assumptions regarding the
authenticity, genuineness and/or conformity of
documents and copies thereof without independent
verification thereof, (iii) limit such opinion to
applicable federal and state law, (iv) define the word
"Knowledge" and related terms to mean the Knowledge of
attorneys then with such firm who have devoted
substantive attention to matters directly related to
this Plan and (v) rely on certificates of officers or
trustees of the Trust.
(e) The Trust on behalf of the Target Fund shall have received
an opinion of Dechert LLP with respect to the tax matters
specified in Section 8(e) addressed to the Trust on behalf
Target Fund in form and substance reasonably satisfactory to
them, and dated as of the Closing Date.
(f) The N-14 Registration Statement shall have become effective
under the 1933 Act as to the Acquiring Fund's shares and the
SEC shall not have instituted or, to the Knowledge of the
Trust, contemplated instituting, any stop order suspending
the effectiveness of the N-14 Registration Statement.
(g) No action, suit or other proceeding shall be threatened or
pending before any court or governmental agency in which it
is sought to restrain or prohibit, or obtain damages or
other relief in connection with the Reorganization.
(h) The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted
any proceeding seeking to enjoin consummation of the
Reorganization under Section 25(c) of the 1940 Act.
9
(i) The Trust shall have performed and complied in all material
respects with each of its agreements and covenants required
by this Plan to be performed or complied with by it prior to
or at the Reorganization's Valuation Time and Effective
Time.
(j) Except to the extent prohibited by Rule 19b-1 under the 1940
Act, the Acquiring Fund shall have declared a dividend or
dividends that, together with all previous such dividends,
shall have the effect of distributing to the Acquiring
Fund's shareholder substantially all investment company
taxable income of or attributable to the Acquiring Fund
earned prior to the Closing Date and substantially all net
capital gain of or attributable to the Acquiring Fund
realized prior to such date.
(k) The Target Fund shall have received from the Trust on behalf
of the Acquiring Fund a duly executed instrument whereby the
Acquiring Fund assumes all of the Liabilities of or
attributable to the Target Fund.
(l) Neither party shall have terminated this Plan with respect
to the Reorganization pursuant to Section 10 of this Plan.
(m) The parties shall have received any necessary order of the
SEC exempting the parties from the prohibitions of Section
17 of the 1940 Act or any similar relief necessary to permit
the Reorganization.
(n) The parties shall have received a certificate from Cutler &
Company, LLC stating that it will pay all of the expenses
incurred by the Target Fund and the Acquiring Fund in
connection with the Reorganization.
(o) The Board of Trustees of the Trust shall have determined
that the Target Fund's participation in the Reorganization
is in the best interests of the Target Fund and that the
interests of the Target Fund's existing shareholders will
not be diluted as a result of effecting the Reorganization.
(p) The Parties shall have received such assurances as they deem
appropriate with respect to the audited and pro forma
financial information of the Acquiring Fund and the Target
Fund contained in the N-14 Registration Statement.
8. CONDITIONS TO TRUST'S OBLIGATIONS. The obligations of the Trust
with respect to the Reorganization shall be subject to the
following conditions precedent:
(a) The Trust on behalf of the Target Fund shall have duly
executed and delivered its applicable Reorganization
Documents to the Trust.
(b) The Target Fund's shareholders shall have approved the
Reorganization in the manner required by the Trust's Trust
Instrument and applicable law. If the Target Fund
shareholders fail to approve the Reorganization, that
failure shall release the Acquiring Fund of its obligations
under this Plan.
(c) The Target Fund shall have delivered to the Acquiring Fund a
certificate dated as of the Closing Date and executed in its
name by its Secretary or Assistant Secretary, in a form
reasonably satisfactory to the Acquiring Fund, stating that
the representations and warranties of the by the Trust on
behalf of the Target Fund in this Plan that apply to the
Reorganization are true and correct in all material respects
at and as of the Valuation Time.
(d) The Trust on behalf of the Acquiring Fund shall have
received an opinion of Dechert, LLP, in form and substance
reasonably satisfactory to the Trust on behalf of the
Acquiring Fund and dated as of the Closing Date,
substantially to the effect that:
10
(1) The Target Fund is a series of the Trust, which is a
Delaware business trust duly created, validly existing
and in good standing under the laws of the State of
Delaware and is an open-end, management investment
company registered under the 1940 Act;
(2) The Plan has been duly authorized, executed and
delivered by the Trust on behalf of the Target Fund
and, assuming due authorization, execution and delivery
of this Plan by the Trust on behalf of the Acquiring
Fund, represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to
the effect of bankruptcy, insolvency, moratorium,
fraudulent conveyance and transfer and similar laws
relating to or affecting creditors' rights generally
and court decisions with respect thereto, and further
subject to the application of equitable principles in
any proceeding, whether at law or in equity or with
respect to the enforcement of provisions of the Plan
and the effect of judicial decisions which have held
that certain provisions are unenforceable when their
enforcement would violate an implied covenant of good
faith and fair dealing or would be commercially
unreasonable or when default under the Plan is not
material;
(3) The execution and delivery of this Plan did not, and
the consummation of the Reorganization will not,
violate the Trust Instrument or By-Laws of the Trust or
any Material Agreement to which the Target Fund is a
party or by which it is bound; and
(4) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental
authority, is required for the consummation by the
Target Fund of the Reorganization or the execution and
delivery of the Target Fund's Reorganization Documents,
except those that have been obtained under the 1933
Act, the 1940 Act and the rules and regulations under
those Acts or that may be required under state
securities laws or subsequent to the Effective Time or
when the failure to obtain the consent, approval,
authorization or order would not have a material
adverse effect on the operation of the Target Fund.
In rendering such opinion, such counsel may (i) rely on
the opinion of other counsel to the extent set forth in
such opinion, (ii) make assumptions regarding the
authenticity, genuineness and/or conformity of
documents and copies thereof without independent
verification thereof, (iii) limit such opinion to
applicable federal and state law, (iv) define the word
"Knowledge" and related terms to mean the Knowledge of
attorneys then with such firm who have devoted
substantive attention to matters directly related to
this Plan and (v) rely on certificates of officers or
Trustees of the Trust on behalf of the Target Fund.
(e) The Trust shall have received an opinion of Dechert LLP
addressed to the Trust on behalf of the Target Fund in form
and substance reasonably satisfactory to it, based upon
certain facts, assumptions, and representations made in
certificates provided by them, their affiliates and/or
principal shareholders and dated as of the Closing Date,
substantially to the effect that, for federal income tax
purposes:
(1) The Reorganization will constitute a "reorganization"
within the meaning of Code Section 368(a). The
Acquiring Fund and the Target Fund each will be a
"party to a reorganization." Code Section 368(b).
(2) The Target Fund shareholders will recognize no gain or
loss on their receipt of voting shares of the Acquiring
Fund in exchange for their voting shares of the Target
Fund pursuant to the Reorganization. Code Section
354(a)(1).
11
(3) The Target Fund will not recognize gain or loss on the
transfer of all of the Assets to the Acquiring Fund
solely in exchange for voting shares of the Acquiring
Fund and the assumption by the Acquiring Fund of the
Liabilities pursuant to the Reorganization. Code
Sections 357(a) and 361(a).
(4) The Target Fund will not recognize gain or loss on its
distribution of voting shares of the Acquiring Fund to
its shareholders pursuant to the liquidation of the
Target Fund. Code Section 361(c).
(5) The Acquiring Fund will not recognize gain or loss on
its acquisition of all of the Assets solely in exchange
for voting shares of the Acquiring Fund and the
assumption by the Acquiring Fund of the Liabilities.
Code Section 1032(a).
(6) The aggregate tax basis of the voting shares of the
Acquiring Fund received by each of the Target Fund's
shareholders pursuant to the Reorganization will equal
the aggregate tax basis of the voting shares of the
Target Fund surrendered in exchange therefor. Code
Section 358(a)(1).
(7) The holding period of the voting shares of the
Acquiring Fund received by each of the Target Fund's
shareholders pursuant to the Reorganization will
include the period that the shareholder held the voting
shares of the Target Fund exchanged therefor, provided
that the shareholder held such shares as a capital
asset on the date of the Reorganization. Code Section
1223(1).
(8) The Acquiring Fund's basis in the Assets received
pursuant to the Reorganization will equal the Target
Fund's basis in the Assets immediately before the
Reorganization. Code Section 362(b).
(9) The Acquiring Fund's holding period in the Assets
received pursuant to the Reorganization will include
the period during which the Target Fund held the
Assets. Code Section 1223(2).
(10) No opinion will be expressed by Dechert LLP, however,
as to whether any gain or loss will be recognized (a)
by the Target Fund in connection with the transfer from
the Target Fund to the Acquiring Fund of any Section
1256 contracts (as defined in Section 1256 of the Code)
or (b) by the Target Fund or the Acquiring Fund in
connection with any disposition of assets by the Target
Fund or the Acquiring Fund prior to or following the
Reorganization.
(f) The N-14 Registration Statement shall have become
effective under the 1933 Act as to the Acquiring Fund's
shares and no stop order suspending the effectiveness of the
N-14 Registration Statement shall have been instituted or,
to the knowledge of the Trust, contemplated by the SEC.
(g) No action, suit or other proceeding shall be threatened
or pending before any court or governmental agency in which
it is sought to restrain or prohibit or obtain damages or
other relief in connection with the Reorganization.
(h) The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted
any proceeding seeking to enjoin consummation of the
Reorganization under Section 25(c) of the 1940 Act.
(i) The Target Fund shall have performed and complied in
all material respects with each of its agreements and
covenants required by this Plan to be performed or complied
with by it prior to or at the Valuation Time and Effective
Time.
12
(j) Except to the extent prohibited by Rule 19b-1 under the
1940 Act, the Target Fund shall have declared a dividend or
dividends that, together with all previous such dividends,
shall have the effect of distributing to the Target Fund's
shareholders substantially all investment company taxable
income of or attributable to the Target Fund earned prior to
the Closing Date and substantially all net capital gain of
or attributable to the Target Fund realized prior to such
date.
(k) Neither party shall have terminated this Plan with
respect to the Reorganization pursuant to Section 10 of this
Plan.
(l) The parties shall have received any necessary order of
the SEC exempting the parties from the prohibitions of
Section 17 of the 1940 Act or any similar relief necessary
to permit the Reorganization.
(m) The parties shall have received a certificate from
Cutler & Company, LLC that it will pay all of the expenses
incurred by the Acquiring Fund and the Target Fund in
connection with the Reorganization. Any such expenses so
borne by Cutler & Company, LLC that relate to the Target
Fund shall be solely and directly related to the
Reorganization within the meaning of Revenue Ruling 73-54,
1973 - 1 C.B. 187.
(n) The Board of Trustees of the Trust shall have
determined that the Acquiring Fund's participation in the
Reorganization is in the best interests of the Acquiring
Fund and that the interests of the Acquiring Fund's existing
shareholders will not be diluted as a result of effecting
the Reorganization.
(o) The parties shall have received such assurances as they
deem appropriate with respect to the audited and pro forma
financial information of the Acquiring Fund and the Target
Fund contained in the N-14 Registration Statement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the parties hereto shall survive the completion
of the transactions contemplated herein.
10. TERMINATION OF PLAN. A majority of a party's Board of Trustees
may terminate this Plan with respect to the Acquiring Fund or
Target Fund, as appropriate, at any time before the applicable
Effective Time if: (i) the party's conditions precedent set forth
in Sections 7 or 8, as appropriate, are not satisfied or (ii) the
Board of Trustees determines that the consummation of the
Reorganization is not in the best interests of shareholders and
gives notice to the other party.
11. GOVERNING LAW. This Plan and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the
laws of the State of Delaware, except to the extent preempted by
federal law, without regard to conflicts of law principles.
12. BROKERAGE FEES. Each party represents and warrants that there are
no brokers or finders entitled to receive any payments in
connection with the transactions provided for in the Plan.
13. AMENDMENTS. The parties may, by agreement in writing authorized
by the Board of Trustees, amend this Plan at anytime before or
after the Target Fund's shareholders approve the Reorganization.
However, after the Target Fund shareholders approve the
Reorganization, the parties may not amend this Plan in a manner
that materially alters the obligations of either party with
respect to the Reorganization. The parties shall not deem this
Section to preclude them from changing the Closing Date or the
Effective Time by mutual agreement.
14. WAIVERS. At any time prior to the Closing Date, either party may
by written instrument signed by it (i) waive the effect of any
inaccuracies in the representations and warranties made to it
contained herein and (ii) waive compliance with any of the
agreements, covenants or conditions
13
made for its benefit contained herein. The parties agree that any
waiver shall apply only to the particular inaccuracy or
requirement for compliance waived, and not any other or future
inaccuracy or lack of compliance.
15. COOPERATION AND FURTHER ASSURANCES. Each party will cooperate
with the other in fulfilling its obligations under this Plan and
will provide such information and documentation as is reasonably
requested by the other in carrying out this Plan's terms. Each
party will provide such further assurances concerning the
performance of obligations under this Plan and the consummation
of the Reorganization as the other shall deem necessary,
advisable or appropriate.
16. UPDATING OF N-14 REGISTRATION STATEMENT. If at any time prior to
the Effective Date, a party becomes aware of any material
information that is not reflected in the N-14 Registration
Statement, the party discovering the information shall notify the
other party and the parties shall cooperate in promptly
preparing, filing and clearing with the SEC, and, if appropriate,
distributing to shareholders appropriate disclosure with respect
to the information.
17. LIMITATION ON LIABILITIES. The obligations of the Target Fund,
the Trust, and the Acquiring Fund shall not bind any of the
Trustees, shareholders, nominees, officers, agents, or employees
of the Target Fund or the Trust personally, but shall bind only
the assets and property of the Acquiring Fund and Target Fund,
respectively. The execution and delivery of this Plan by the
parties' officers shall not be deemed to have been made by any of
them individually or to impose any liability on any of them
personally, but shall bind only the Assets and the property of
the Acquiring Fund or Target Fund, as appropriate.
18. NOTICES. Any notice, report, statement, certificate or demand
required or permitted by any provision of this Plan shall be in
writing and shall be given by prepaid telegraph, telecopy,
certified mail or overnight express courier to:
For the Target Fund and the Trust:
Cheryl O. Tumlin, Esq.
Forum Financial Group
Two Portland Square
Portland, ME 04101
With copies to:
John V. O'Hanlon, Esq.
Dechert LLP
Ten Post Office Square - South
Boston, MA 02109-4603
For the Acquiring Fund and the Trust:
Cheryl O. Tumlin, Esq.
Forum Financial Group, LLC
Two Portland Square
Portland, ME 04101
With copies to:
John V. O'Hanlon, Esq.
Dechert LLP
Ten Post Office Square - South
Boston, MA 02109-4603
14
19. GENERAL. This Plan supersedes all prior agreements between the
parties (written or oral), is intended as a complete and
exclusive statement of the terms of the agreement between the
parties and may not be changed or terminated orally. The parties
may execute this Plan in counterparts, which shall be considered
one and the same agreement, and shall become effective when the
counterparts have been executed by and delivered to both parties.
The headings contained in this Plan are for reference only and
shall not affect in any way the meaning or interpretation of this
Plan. Nothing in this Plan, expressed or implied, confers upon
any other person any rights or remedies under or by reason of
this Plan. Neither party may assign or transfer any right or
obligation under this Plan without the written consent of the
other party.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers designated below to execute this Plan as of the date first written
above.
THE CUTLER TRUST, FOR ITSELF AND ON BEHALF OF
CUTLER CORE FUND
(TARGET FUND)
ATTEST:
____________________________________________ By: ______________________________________________
Name: Name:
Title: Title:
THE CUTLER TRUST, FOR ITSELF AND ON BEHALF OF
CUTLER VALUE FUND
(ACQUIRING FUND)
ATTEST:
____________________________________________ By: ______________________________________________
Name: Name:
Title: Title:
15
SCHEDULE A
TO AGREEMENT AND PLAN OF REORGANIZATION
MATERIAL AGREEMENTS
(1) The following agreements are the Material Agreements of the Target Fund and
the Trust related to a Reorganization:
Investment Advisory Agreement between the Trust and Cutler & Company, LLC
dated December 31, 1992, and restated May 1, 1996.
Distribution Agreement between the Trust and Forum Fund Services, LLC dated
November 1, 1999.
Custodian Agreement between the Trust and Forum Trust, LLC dated as of
April 20, 1999.
Management Agreement between the Trust and Forum Administrative Services,
LLC dated November 1, 2002.
Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, dated November 1, 2002.
Fund Accounting Agreement the Trust and Forum Accounting Services, LLC
dated October 1, 1997, as amended on August 25, 2000 and November 1, 2002.
(2) The following agreements are the Material Agreements of the Acquiring Fund
and the Trust related to a Reorganization:
Investment Advisory Agreement between the Trust and Cutler & Company, LLC
dated December 31, 1992, and restated May 1, 1996.
Distribution Agreement between the Trust and Forum Fund Services, LLC dated
November 1, 1999.
Custodian Agreement between the Trust and Forum Trust, LLC dated as of
April 20, 1999.
Management Agreement between the Trust and Forum Administrative Services,
LLC dated November 1, 2002.
Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, dated November 1, 2002.
Fund Accounting Agreement the Trust and Forum Accounting Services, LLC
dated October 1, 1997, as amended on August 25, 2000 and November 1, 2002.
16
SCHEDULE B
TO AGREEMENT AND PLAN OF REORGANIZATION
(1) Claims, actions, suits, investigations or proceedings pending or
threatened against the Target Fund or the Assets or its businesses:
None
(2) Orders, decrees or judgments to which the Target Fund is a party that
adversely affect, or are reasonably likely to adversely affect, the Target
Fund's financial condition, results of operations, business, properties or
the Assets or ability to consummate the transactions contemplated by the
Plan:
None
17
EXHIBIT B
MANAGEMENT'S DISCUSSION OF PERFORMANCE
CUTLER VALUE FUND
18
ANNUAL REPORT JUNE 30, 2002
- --------------------------------------------------------------------------------
CUTLER CORE FUND Cutler & Company, LLC Forum Shareholder Services, LLC
CUTLER VALUE FUND 3555 Lear Way Two Portland Square
MEDFORD, OREGON 97504 PORTLAND, MAINE 04101
To The Cutler Trust Shareholders:
Enclosed is our annual report for the fiscal year ended June 30, 2002. This has
been a period of unsightly surprises.
It always has been understood that markets respond poorly to surprises. Just as
we were recovering from the technology bubble, the World Trade Center attack
created great confusion and damage. As we were pulling things together again,
the accounting outrages came to light. The stock markets have reacted quite
erratically even though the underlying economy has remained remarkably resilient
and the Federal Reserve has maintained a high degree of monetary stability.
Value stocks have outperformed growth stocks in this period and we believe may
continue to do so in the foreseeable future. Value investing and conservative
stock selection have been our primary equity focus for twenty- five years. As a
result of this evaluation, we anticipate making changes to the Core Fund in the
upcoming months. In preparation for the upcoming changes, we are very pleased to
announce the recent addition of two new investment professionals who have joined
Cutler & Company as portfolio managers and principals. Mr. Joseph Gagnon, CFA
and Mr. Kelly Ko, CFA bring vast experience in traditional value investing, and
assumed responsibility for the management of the Funds effective June 16, 2002.
We are additionally pleased to inform you that the Trust has added a third
Independent Trustee to the Board, Mr. Robert E. Clarke, retired Vice President
of Chevron Corporation.
While the events of the past twelve months have been unsettling and investment
returns disappointing, all of us at The Cutler Trust are confident in the
resiliency of Corporate America, have faith in her long-term productivity, and
firmly believe - this too shall pass. As always, if we can answer any of your
questions, or address any of your concerns, please do not hesitate to call upon
us.
Sincerely,
/s/ KENNETH R. CUTLER /s/ BROOKE R. ASHLAND
Kenneth R. Cutler Brooke R. Ashland
Chairman Chairman Board of Managers
The Cutler Trust Cutler & Company, LLC
B-1
- --------------------------------------------------------------------------------
THE CUTLER TRUST
INVESTMENT ADVISER'S REPORT JUNE 30, 2002
- --------------------------------------------------------------------------------
OUTLOOK
While the past twelve months certainly have been trying times for the securities
markets and the Cutler Funds, the US economy appears to be poised for recovery.
Traditional economic indicators are positive: Inflation is low, interest rates
are at reasonable levels, the country has a sound monetary policy, housing
statistics are positive, the manufacturing sector is up and recovering, and
orders for durable goods are up. In addition, the Federal Reserve has added an
extraordinary amount of liquidity (i.e. income tax refunds, additional
government spending), and all the above factors contribute to making a good case
for economic recovery. However, volatility should continue as investors react to
breaking news.
The unsettling events of the past year have contributed to the worst bear
markets in the last 100 years. NASDAQ is down 75% from its peak in March 2000
and the S&P 500 Index is down more than 35% from its market highs in March 2000.
Moreover, public confidence has been shaken by questionable accounting practices
and corporate governance.
There are, of course, other uncertainties that can possibly derail the economic
recovery. However, barring new surprises, we believe the economy will recover in
the ensuing months leading to a return to a positive investment environment.
VALUE FUND
As of June 30, 2002, the Cutler Value Fund's one-year total return was -14.07%,
versus the Lipper Large Cap Value Category (the Fund's benchmark peer group) of
- -13.43%.*
The Value Fund's underperformance was primarily due to poor performance in the
Utilities and Healthcare sectors, with Worldcom and Bristol-Myers being the
largest contributors. Conversely, the Consumer Discretionary and Energy sectors
were among the best performing sectors, benefiting from our holdings in Mattel,
Staples and Burlington Resources.
We believe fundamental stock selection will be the focus in the second half of
2002, which potentially favors our style of investing. As such, we have
repositioned the portfolio seeking to take advantage of companies with strong
balance sheets and
B-2
- --------------------------------------------------------------------------------
THE CUTLER TRUST
INVESTMENT ADVISER'S REPORT JUNE 30, 2002 (continued)
- --------------------------------------------------------------------------------
reasonable valuations, in sectors that we consider to be oversold and neglected.
The most opportunistic sectors include food retailers, drugs, telecommunications
and technology, where valuations appear to be bottoming out. As one of the
hardest hit sectors, telecommunications is well positioned to recover through
restructuring (Chapter 11) or through mergers, which should improve the overall
long-term outlook for the industry.
CORE FUND
As of June 30, 2002, the Cutler Core Fund's one-year total return was -20.12%
versus the Lipper Large Cap Core Category (the Fund's benchmark peer group) of
- -19.06%. *
Similar to the Value Fund, the Core Fund's underperformance was primarily due to
poor performance in the Utilities and Healthcare sectors with Worldcom and
Bristol-Myers being the largest contributors. Consumer Discretionary and Energy
were among the best performing sectors, benefiting from our holdings in Staples,
Wal-Mart and Burlington Resources.
The Core Fund consists of approximately one-half value stocks (essentially the
same issues as the Value Fund) and one-half growth stocks. Our comments relative
to the Value Fund, above, apply to that portion of the Core Fund. The growth
sector of the Core Fund was impacted to a greater extent by the extremely poor
performance of growth stocks in general. Growth stocks tend to reflect the
belief that future earnings will increase faster than the market as a whole.
During the past year, several industries thought to be in that category have had
rather disastrous results, accounting scandals have placed many earnings
projections in doubt, and an economic slowdown in some traditional growth areas,
have made this sector extremely hard to navigate.
* PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. PLEASE SEE PAGE 4 FOR
ADDITIONAL FUND PERFORMANCE AND RELATED DISCLOSURE. THE VIEWS IN THIS REPORT
WERE THOSE OF THE FUNDS' MANAGERS AS OF JUNE 30, 2002 AND MAY NOT REFLECT THEIR
VIEWS ON THE DATE THIS REPORT IS FIRST PUBLISHED OR ANYTIME THEREAFTER. THESE
VIEWS ARE INTENDED TO ASSIST SHAREHOLDERS OF THE FUNDS IN UNDERSTANDING THEIR
INVESTMENTS AND DOES NOT CONSTITUTE INVESTMENT ADVICE. (08/02).
B-3
- --------------------------------------------------------------------------------
THE CUTLER TRUST
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
JUNE 30, 2002
- --------------------------------------------------------------------------------
These charts reflect the 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. The result is compared with a
broad-based securities market index and may also include an industry focused
index comparison. The S&P 500 Index is a broad-based market weighted index
composed of 500 large capitalization companies and reflects the reinvestment of
dividends. The Russell 1000 Value Index consists of stocks in the Russell 1000
Index with lower price-to-book ratios and lower forecasted growth values. Each
Fund is professionally managed while each Index is unmanaged and is not
available for investment.
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. 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. The performance
tables and graphs do not reflect the deduction of taxes that a shareholder would
pay on Fund distributions or the redemption of Fund shares.
Cutler Core Fund Cutler Value Fund
vs. S&P 500 Index vs. S&P 500 Index
vs. Russell 1000 Value Index
Average Annual Total Return Average Annual Total Return
Since Since
Inception Value Inception Value
One Year Five Year on 12/30/92 6/30/02 One Year Five Year on 12/30/92 6/30/02
-------- --------- ----------- ------- -------- --------- ----------- -------
Cutler Core Fund (20.12%) 0.83% 7.98% $20,729 Cutler Value Fund (14.07%) 4.62% 10.07% $24,883
S&P 500 Index (17.97%) 3.67% 11.06% $27,084 S&P 500 Index (17.97%) 3.67% 11.06% $27,084
Russell 1000 Value
Index (8.95%) 6.53% 12.80% $27,863
[Cutler Core Fund Total Return Chart]
CUTLER CORE FUND S&P 500 INDEX
---------------- -------------
Dec 30 1992 10000 10000
9900 9950
9770 10033
9920 10170
10110 10385
9869 10134
9979 10404
Jun 1993 10045 10434
10135 10392
10549 10786
10585 10701
10838 10922
10534 10818
10509 10949
10733 11321
10315 11014
9896 10535
9999 10670
10164 10844
Jun 1994 9907 10579
10114 10926
10487 11373
10259 11095
10395 11344
10071 10931
10205 11093
10744 11381
11019 11824
11146 12172
11390 12530
11837 13030
Jun 1995 11752 13333
11892 13774
11967 13809
12653 14391
12599 14340
13151 14969
13718 15257
13960 15776
13938 15923
14136 16076
14103 16313
14336 16733
Jun 1996 14447 16796
14046 16055
14180 16394
15016 17316
15824 17793
16745 19137
16226 18758
17234 19929
17739 20086
17147 19262
18061 20411
18900 21653
Jun 1997 19888 22622
20829 24422
19603 23055
20730 24316
20096 23505
21028 24592
21637 25014
21774 25291
22745 27114
23766 28501
23546 28788
23245 28294
Jun 1998 24182 29442
24265 29129
21489 24922
22305 26519
23835 28674
24648 30411
26284 32163
26621 33507
26142 32466
26493 33765
26777 35072
25996 34245
Jun 1999 27925 36144
27143 35017
26539 34844
26318 33889
27778 36033
28793 36766
30277 38930
28707 36974
28498 36275
30843 39821
30351 38624
30275 37831
Jun 2000 30329 38763
28774 38158
30234 40527
28407 38388
28445 38225
26774 35213
27843 35386
29459 36641
26767 33302
25672 31193
27445 33616
27239 33841
Jun 2001 25949 33018
25794 32693
24611 30648
22266 28174
23038 28712
24788 30914
24726 31185
24004 30730
23514 30137
24583 31271
22674 29376
22339 29160
Jun 2002 20729 27084
[Cutler Value Fund Total Return Chart]
CUTLER VALUE FUND S&P 500 INDEX RUSSELL INDEX
----------------- ------------- -------------
Dec 30 1992 10000 10000 10000
9770 10033 10272
9950 10170 10631
10100 10385 10945
9989 10134 10804
10150 10404 11100
Jun 1993 10165 10434 11266
10055 10392 11390
10478 10786 11802
10352 10701 11821
10544 10922 11811
10392 10818 11566
10499 10949 11787
10661 11321 12230
10356 11014 11813
9995 10535 11373
10108 10670 11591
10271 10844 11725
Jun 1994 10056 10579 11444
10313 10926 11800
10797 11373 12140
10540 11095 11737
10674 11344 11901
10364 10931 11421
10584 11093 11554
10906 11381 11910
11291 11824 12381
11510 12172 12653
11740 12530 13053
12148 13030 13602
Jun 1995 12302 13333 13786
12533 13774 14266
12596 13809 14468
13150 14391 14990
13087 14340 14842
13773 14969 15594
14097 15257 15985
14511 15776 16484
14574 15923 16608
14662 16076 16891
14768 16313 16956
15055 16733 17167
Jun 1996 15132 16796 17182
14481 16055 16532
14727 16394 17005
15551 17316 17681
15883 17793 18365
16869 19137 19697
16478 18758 19445
17254 19929 20387
17653 20086 20687
17074 19262 19944
17982 20411 20781
18879 21653 21942
Jun 1997 19851 22622 22883
21162 24422 24605
19786 23055 23729
20837 24316 25163
20381 23505 24460
21401 24592 25541
21957 25014 26287
22051 25291 25915
23333 27114 27659
24634 28501 29351
24563 28788 29547
24033 28294 29109
Jun 1998 24794 29442 29482
24369 29129 28962
21397 24922 24652
22444 26519 26067
24063 28674 28086
25149 30411 29395
25901 32163 30395
25717 33507 30638
25578 32466 30205
26060 33765 30831
28607 35072 33710
28129 34245 33339
Jun 1999 29282 36144 34307
28586 35017 33303
27766 34844 32067
26547 33889 30946
27788 36033 32727
27214 36766 32471
26752 38930 32628
25509 36974 31564
23671 36275 29219
27029 39821 32784
26541 38624 32402
27978 37831 32744
Jun 2000 26572 38763 31248
26599 38158 31639
27686 40527 33399
27131 38388 33705
28056 38225 34533
27485 35213 33251
29069 35386 34917
29929 36641 35051
28792 33302 34077
27964 31193 32872
29496 33616 34485
30026 33841 35259
Jun 2001 28956 33018 34477
28984 32693 30538
28259 30648 29315
26107 28174 27251
26302 28712 27017
27784 30914 28588
28143 31185 29261
27415 30730 29035
27387 30137 29082
28706 31271 30458
26713 29376 29413
26713 29160 29561
Jun 2002 24883 27084 27863
B-4
STATEMENT OF ADDITIONAL INFORMATION
THE CUTLER TRUST - CUTLER CORE FUND
MARCH __, 2003
This Statement of Additional Information supplements the Proxy
Statement/Prospectus dated March __, 2003 relating to the proposed transfer of
substantially all of the assets and liabilities of the Cutler Core Fund (the
"Core Fund") to the Cutler Value Fund (the "Value Fund"), each a series of The
Cutler Trust (the "Trust"), in exchange for shares of the Value Fund (the
"Reorganization").
This Statement of Additional Information consists of this cover page and the
following documents:
1. The Prospectus for the Core Fund and the Value Fund dated October 30, 2002,
which was previously filed with the SEC via Edgar on October 30, 2002 (File
No. 811-7242) and is incorporated by reference herein.
2. The Statement of Additional Information for the Core Fund and the Value
Fund dated October 30, 2002, which was previously filed with the SEC via
Edgar on October 30, 2002 (File No. 811-7242) and is incorporated by
reference herein.
3. The Annual Report for the Core Fund and the Value Fund dated June 30, 2002,
which was previously filed with the SEC via Edgar on September 5, 2002
(File No. 811-7242) and is incorporated by reference herein.
4. The Semi-Annual Report for the Core Fund and the Value Fund dated December
31, 2002, which was previously filed with the SEC via Edgar on February __,
2003 (File No. 811- ) and is incorporated by reference herein.
5. The Financial Statements and Schedules of the Core Fund and Value Fund
required by Regulation SX for the periods specified in Article 3 thereof,
which are attached hereto as Appendix A.
This Statement of Additional Information is not a Prospectus; a Proxy
Statement/Prospectus dated March __, 2003, relating to the Reorganization may be
obtained without charge by writing or calling:
Forum Shareholder Services, LLC
P.O. Box 446
Portland, Maine 04112
(888) 288-5374
This Statement of Additional Information relates to, and should be read
in conjunction with, such Prospectus/Proxy Statement.
APPENDIX A
PRO FORMA FINANCIAL STATEMENTS OF CUTLER VALUE FUND POST-
REORGANIZATION AND AS OF DECEMBER 31, 2002
The following unaudited pro forma combined financial information
relates to the acquisition of all the assets and liabilities of Cutler Core
Fund, a series of Cutler Trust by and in exchange for shares of Cutler Value
Fund, also a series of Cutler Trust (the "Reorganization"). The information
gives effect to the Reorganization as if it had occurred on December 31, 2002
and consists of a statement of the pro forma combined portfolio of investments
and a statement of assets and liabilities as of December 31, 2002 and a
statement of operations for the year ended December 31, 2002. The pro forma
combined results of operations represent the level of expenses of Cutler Value
Fund following the Reorganization if the Reorganization had been consummated on
December 31, 2002. There is no guarantee that the pro forma financial
information will accurately predict the actual results of the Reorganization.
This unaudited information should be read in conjunction with the separate
financial statements of Cutler Core Fund and Cutler Value Fund.
PRO FORMA PORTFOLIO OF INVESTMENTS AS OF DECEMBER 31, 2002
CUTLER TRUST
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS - % OF NET ASSETS (UNAUDITED)
DECEMBER 31, 2002
CUTLER VALUE
CUTLER VALUE CUTLER CORE PRO FORMA
Total Security FUND FUND COMBINED
------------------- ------------------- --------------------
Shares Description Value Value Value
COMMON STOCK 100.0% 99.9% 99.9%
AGRICULTURE 2.9% 2.4% 2.6%
25,350 Philip Morris Cos., Inc. $ 526,890 $ 500,546 $ 1,027,436
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BANKS 21.1% 16.4% 18.5%
38,450 Bank of New York Co., Inc. 389,350 531,912 921,262
50,500 Citigroup, Inc. 800,573 976,523 1,777,096
34,874 FleetBoston Financial Corp. 481,723 365,715 847,438
53,250 JP Morgan Chase & Co. 754,800 523,200 1,278,000
14,950 Mellon Financial Corp. 231,074 159,271 390,345
54,450 U.S. Bancorp 612,197 543,232 1,155,429
18,550 Wells Fargo & Co. 508,540 360,899 869,439
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3,778,257 3,460,752 7,239,009
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BUSINESS SERVICES 0.0% 2.4% 1.3%
9,800 Microsoft Corp. + - 506,660 506,660
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CHEMICALS 1.2% 0.7% 1.0%
8,900 E.I. Du Pont de Nemours & Co. 220,480 156,880 377,360
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COMMUNICATION EQUIPMENT 1.4% 1.6% 1.5%
67,550 Motorola, Inc. 252,580 331,728 584,308
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DRUGS & PHARMACEUTICALS 8.7% 12.3% 10.6%
59,000 Bristol-Myers Squibb Co. 605,373 760,478 1,365,851
26,400 Merck & Co., Inc. 543,456 951,048 1,494,504
14,650 Pfizer, Inc. - 447,851 447,851
22,650 Wyeth 411,400 435,710 847,110
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1,560,229 2,595,087 4,155,316
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ELECTRIC, GAS & UTILITY COMPANIES 3.1% 3.1% 3.1%
11,150 Duke Energy Corp. 128,964 88,907 217,871
19,000 Exelon Corp. 427,437 575,193 1,002,630
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556,401 664,100 1,220,501
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ELECTRIC MACHINERY 0.0% 3.9% 2.1%
18,250 General Electric Co. - 444,388 444,388
25,500 Texas Instruments, Inc. - 382,755 382,755
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- 827,143 827,143
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ELECTRONIC & OTHER ELECTRICAL EQUIPMENT
& COMPONENTS, EXCEPT COMPUTER EQUIPMENT 0.0% 0.5% 0.3%
6,600 Intel Corp. - 102,762 102,762
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FOOD & SOFT DRINKS 2.6% 3.0% 2.8%
23,350 General Mills, Inc. 464,805 631,478 1,096,283
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FOREST PRODUCTS 2.6% 1.5% 2.0%
16,000 Weyerhaeuser Co. 462,574 324,786 787,360
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Page 1 of 3
CUTLER TRUST
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS - % OF NET ASSETS (UNAUDITED)
DECEMBER 31, 2002
CUTLER VALUE
CUTLER VALUE CUTLER CORE PRO FORMA
Total Security FUND FUND COMBINED
------------------- ------------------- --------------------
Shares Description Value Value Value
GENERAL MERCHANDISE STORES 2.7% 3.6% 3.2%
27,750 Federated Department Stores, Inc. + 494,6303,418 798,090
9,000 Wal-Mart Stores, Inc. - 454,590 454,590
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494,672 758,008 1,252,680
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GROCERY STORES 5.3% 2.8% 3.9%
37,350 Kroger Co. + 413,288 163,770 577,058
41,350 Safeway, Inc. + 539,616 426,320 965,936
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952,904 590,090 1,542,994
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INDUSTRIAL & COMMERCIAL MACHINERY & COMPUTER
EQUIPMENT 11.3% 8.6% 9.8%
93,750 Apple Computer, Inc. + 674,943 668,495 1,343,438
8,500 Caterpillar, Inc. 226,314 162,306 388,620
60,800 Hewlett-Packard Co. 767,312 288,176 1,055,488
13,450 IBM Corp. 356,500 685,875 1,042,375
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2,025,069 1,804,852 3,829,921
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INSTRUMENTS & RELATED PRODUCTS 1.1% 1.6% 1.4%
22,350 Honeywell International, Inc. 202,800 333,600 536,400
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MEDIA 2.4% 3.4% 2.9%
16,700 AOL Time Warner, Inc. + - 218,770 218,770
56,000 Walt Disney Co. 421,614 491,747 913,361
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421,614 710,517 1,132,131
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MEDICAL PRODUCTS 0.0% 2.0% 1.1%
8,000 Johnson & Johnson - 429,680 429,680
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MISCELLANEOUS RETAIL 0.0% 1.5% 0.8%
10,850 Costco Wholesale Corp. + - 304,451 304,451
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OIL & GAS EXTRACTION 3.4% 3.2% 3.3%
12,600 Burlington Resources, Inc. 307,080 230,310 537,390
31,800 Transocean, Inc. 292,320 445,440 737,760
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599,400 675,750 1,275,150
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PETROLEUM PRODUCTS 6.8% 5.2% 6.0%
16,850 ConocoPhillips 411,315 404,057 815,372
22,260 Exxon Mobil Corp. 373,858 403,906 777,764
24,200 Unocal Corp. 440,352 299,684 740,036
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1,225,525 1,107,647 2,333,172
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PRIMARY METAL INDUSTRIES 2.2% 1.3% 1.7%
29,950 Alcoa, Inc. 403,206 279,055 682,261
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PRINTING & PUBLISHING 1.4% 1.7% 1.6%
9,700 Knight-Ridder, Inc. 246,675 366,850 613,525
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Page 2 of 3
CUTLER TRUST
PRO FORMA COMBINED SCHEDULE OF INVESTMENTS - % OF NET ASSETS (UNAUDITED)
DECEMBER 31, 2002
CUTLER VALUE
CUTLER VALUE CUTLER CORE PRO FORMA
Total Security FUND FUND COMBINED
------------------- ------------------- --------------------
Shares Description Value Value Value
PROPERTY & CASUALTY INSURANCE 3.2% 2.8% 3.0%
20,200 American International Group, Inc. 572,715 595,855 1,168,570
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SECURITY & COMMODITY BROKERS, DEALERS, EXCHANGES
& SERVICES 1.6% 1.6% 1.6%
15,650 Morgan Stanley 283,432 341,316 624,748
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TRANSPORTATION 3.5% 3.9% 3.7%
18,250 General Motors Corp. 281,979 390,716 672,695
13,050 Union Pacific Corp. 347,246 434,058 781,304
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629,225 824,774 1,453,999
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VOICE & DATA TRANSMISSION 11.5% 8.9% 10.1%
256,550 AT&T Wireless Services, Inc. + 651,445 798,061 1,449,506
45,750 SBC Communications, Inc. 672,328 567,955 1,240,283
32,550 Verizon Communications, Inc. 745,937 515,374 1,261,311
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2,069,710 1,881,390 3,951,100
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Total Common Stock 17,949,163 21,105,757 39,054,920
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Short-Term Investments 0.3% - 0.1%
48,379 Forum Daily Assets Government Fund 48,379 48,379
6,209 Forum Daily Assets Cash Fund - 6,209 6,209
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48,379 6,209 54,588
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Total Investments - Costs 22,264,383 26,683,015 48,947,398
Total Investments $17,997,542 $21,111,966 $39,109,508
Percent of Net Assets 100.3% 99.9% 100.0%
Net Assets $17,932,038 $21,122,244 $39,054,282
TOTAL SHARES/FACE 782,353 846,619 1,628,972
- -------------------------------------------------------
+ Non-income producing security.
Page 3 of 3
PRO FORMA STATEMENT OF OPERATIONS AS OF DECEMBER 31, 2002
CUTLER TRUST
PRO FORMA STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE TWELVE-MONTHS ENDED DECEMBER 31, 2002
CUTLER VALUE
CUTLER CUTLER ADJUSTMENTS PRO FORMA
VALUE FUND CORE FUND COMBINED
-------------- -------------- --------------- ---------------
Investment Income
Dividend income $ 487,698 $ 628,122 $ - $ 1,115,820
Interest income 7,089 11,288 - 18,377
-------------- -------------- --------------- ---------------
TOTAL INVESTMENT INCOME 494,787 639,410 - 1,134,197
-------------- -------------- --------------- ---------------
EXPENSES
Investment advisory fees 160,667 274,400 - 435,067
Administration fees 24,962 38,738 (5,691) 58,009
Transfer agency fees 18,005 20,557 (13,000) 25,562
Shareholder servicing fees 8,428 8,775 - 17,203
Custody fees 8,636 14,582 (3,600) 19,618
Accounting fees 44,500 43,500 (42,000) 46,000
Legal fees 14,371 25,898 - 40,269
Audit fees 16,511 18,489 (17,500) 17,500
Directors fees 10,497 17,405 - 27,902
Other 34,211 56,695 - 90,906
-------------- -------------- --------------- ---------------
Total Expenses 340,788 519,039 (81,791) 778,036
Fees waived by Adviser (72,623) (55,921) 75,619 (52,925)
-------------- -------------- --------------- ---------------
Net Expenses 268,165 463,118 (6,172) 725,111
-------------- -------------- --------------- ---------------
NET INVESTMENT INCOME 226,622 176,292 6,172 409,086
-------------- -------------- --------------- ---------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS
Net realized loss from investments (754,167) (8,345,466) - (9,099,633)
Net change in unrealized depreciation of investments (5,258,844) (3,645,826) - (8,904,670)
-------------- -------------- --------------- ---------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS (6,013,011) (11,991,292) - (18,004,303)
-------------- -------------- --------------- ---------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $ (5,786,389) $ (11,815,000) $ 6,172 $ (17,595,217)
============== ============== =============== ===============
PRO FORMA STATEMENT OF ASSETS AND LIABILITIES AS OF DECEMBER 31, 2002
CUTLER TRUST
PRO FORMA STATEMENT OF ASSETS & LIABILITIES (UNAUDITED)
DECEMBER 31, 2002
CUTLER VALUE
CUTLER VALUE CUTLER CORE PRO FORMA
FUND FUND COMBINED
------------------ ------------------ ------------------
ASSETS
Total investments, at value
(Cost $22,264,383 and $26,683,015, respectively and 48,947,398 combined) $ 17,997,542 $ 21,111,966 $ 39,109,508
Receivables:
Investment securities sold - 101,339 101,339
Interest and dividends 43,697 55,754 99,451
Prepaid expenses 12,922 950 13,872
------------------ ------------------ ------------------
Total Assets 18,054,161 21,270,009 39,324,170
------------------ ------------------ ------------------
LIABILITIES
Payables:
Fund shares redeemed - 7,711 7,711
Dividends 68,005 74,008 142,013
Accrued Liabilities:
Investment advisory fees 2,851 9,093 11,944
Administration fees 3,333 3,333 6,666
Transfer agency fees 3,101 3,503 6,604
Custodian fees 1,702 2,570 4,272
Other related parties 1,579 1,547 3,126
Other 41,552 46,000 87,552
------------------ ------------------ ------------------
Total Liabilities 122,123 147,765 269,888
------------------ ------------------ ------------------
NET ASSETS $ 17,932,038 $ 21,122,244 $ 39,054,282
================== ================== ==================
COMPONENTS OF NET ASSETS
Paid-in capital $ 23,632,929 $ 38,225,630 $ 61,858,559
Undistributed net investment income 795 6,767 7,562
Accumulated net realized loss on investments (1,434,845) (11,539,104) (12,973,949)
Net unrealized depreciation on investments (4,266,841) (5,571,049) (9,837,890)
------------------ ------------------ ------------------
NET ASSETS $ 17,932,038 $ 21,122,244 $ 39,054,282
================== ================== ==================
NET ASSET VALUE, Offering and Redemption Price per share:
Based on net assets of $17,932,038 and 2,332,939 shares outstanding and net
assets of $21,122,244 and 3,023,183 shares outstanding, respectively,
resulting in net assets of $39,054,282 and 5,079,655 shares outstanding. $7.69 $6.99 $7.69
See Notes to Financial Statements.
CUTLER TRUST
PRO FORMA CAPITALIZATION (UNAUDITED)
DECEMBER 31, 2002
The following table sets forth the capitalization of Cutler Trust Value Fund,
and indicates the pro forma combined capitalization as of December 31, 2002 as
if the reorganization had occurred on that date.
CUTLER VALUE
CUTLER CUTLER PRO FORMA
VALUE FUND CORE FUND COMBINED
----------------------------------------------------------------------
Net assets 17,932,038 21,122,244 39,054,282
Net asset value per share: 7.69 6.99 7.69
Shares outstanding: 2,332,939 3,023,183 5,079,655
Shares authorized Unlimited Unlimited Unlimited
NOTES TO PRO FORMA FINANCIAL STATEMENTS
PRO FORMA FOOTNOTES REGARDING THE REORGANIZATION OF CUTLER CORE FUND, INC.
INTO CUTLER VALUE FUND AS OF DECEMBER 31, 2002 (UNAUDITED)
NOTE 1. BASIS OF COMBINATION
The accompanying pro forma financial statements are presented to show the effect
of the proposed reorganization of Cutler Core Fund (the "Fund") into Cutler
Value Fund, a series of Cutler Trust (the "Value Fund"), as if such
reorganization had taken place as of December 31, 2002. Note that the fiscal
year-end of Value Fund is June 30. The following notes refer to the accompanying
pro forma financial statements as if the above-mentioned reorganization of the
Fund with and into Value Fund had taken place as of December 31, 2002. For
purposes of these pro forma statements, the data for the Fund and the Value Fund
is for the twelve month period ended December 31, 2002.
Under the terms of the Agreement and Plan of Reorganization, the reorganization
of the Fund and the Value Fund should be treated as a tax free business
combination and accordingly will be accounted for by a method of accounting for
tax free mergers of investment companies. The acquisition would be accomplished
by an acquisition of the net assets of the Fund in exchange for shares of the
Value Fund at net asset value. The statements of assets and liabilities and the
related statements of operations of the Fund and the Value Fund have been
combined using data from the fund and data from the Value Fund as of December
31, 2002.
The accompanying pro forma financial statements should be read in conjunction
with the financial statements and schedules of investments of the Fund and the
Value Fund should be read in conjunction with the historical financial
statements of each of the Fund and the Value Fund which have been incorporated
by reference into this Statement of Additional Information.
NOTE 2. SHARES OF BENEFICIAL INTEREST
Under the proposed reorganization, the Fund will receive shares of the Value
Fund with an aggregate value equal to the Fund's net assets transferred to the
Value Fund. Shareholders will receive shares of a comparable class of the Value
Fund equal in value to aggregate value of the shares of the Fund class in which
they invest. Accordingly, shareholders of a Fund class will become shareholders
of a comparable class of the Value Fund.
The pro forma net asset value per share assumes that additional shares of the
Value Fund would have been issued on December 31, 2002 as a result of the
proposed reorganization. The amount of additional shares assumed to be issued
was calculated based on net assets of the Fund and the net asset value per share
of the Value Fund as of December 31, 2002.
NOTE 3. PRO FORMA ADJUSTMENTS
The Pro Forma Statement of Operations assumes similar rates of gross investment
income for the Fund's and the Value Fund's investments. Accordingly, the
combined gross investment income is equal to the sum of each of the Fund's and
the Value Fund's gross investment income. Certain expenses have been adjusted to
reflect the expected expenses of the combined entity. The pro forma investment
advisory, administration, transfer agency, custody, and shareholder servicing
fees of the combined fund and/or any related waivers and reimbursements are
based on the fee schedule in effect for the Value Fund based on the average net
assets of Fund and the Value Fund for the twelve months ended December 31, 2002.
PART C
OTHER INFORMATION
ITEM 15 - INDEMNIFICATION.
THE TRUST INSTRUMENT
In accordance with Section 3803 of the Delaware Business Trust Act, SECTION 10.2
of the Registrant's Trust Instrument provides as follows:
"SECTION 10.02 INDEMNIFICATION. (a) Subject to the exceptions and limitations
contained in Subsection 10.02(b): (i) every person who is, or has been, a
Trustee or officer of the Trust (hereinafter referred to as a "Covered Person")
shall be indemnified by the Trust to the fullest extent permitted by law against
liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a Trustee
or officer and against amounts paid or incurred by him in the settlement
thereof;
(ii) the words "claim," "action," "suit," or "proceeding" shall apply
to all claims, actions, suits or proceedings (civil, criminal or other,
including appeals), actual or threatened while in office or thereafter, and the
words "liability" and "expenses" shall include, without limitation, attorneys'
fees, costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a Covered Person:
(i) who shall have been adjudicated by a court or body before which the
proceeding was brought (A) to be liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office or (B) not to have acted in
good faith in the reasonable belief that his action was in the best interest of
the Trust; or
(ii) in the event of a settlement, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of his office, (A) by the court or other body approving
the settlement; (B) by at least a majority of those Trustees who are neither
Interested Persons of the Trust nor are parties to the matter based upon a
review of readily available facts (as opposed to a full trial-type inquiry); or
(C) by written opinion of independent legal counsel based upon a review of
readily available facts (as opposed to a full trial-type inquiry);
provided, however, that any Shareholder may, by appropriate legal proceedings,
challenge any such determination by the Trustees or by independent counsel.
(c) The rights of indemnification herein provided may be insured against
by policies maintained by the Trust, shall be severable, shall not be exclusive
of or affect any other rights to which any Covered Person may now or hereafter
be entitled, shall continue as to a person who has ceased to be a Covered Person
and shall inure to the benefit of the heirs, executors and administrators of
such a person. Nothing contained herein shall affect any rights to
indemnification to which Trust personnel, other than Covered Persons, and other
persons may be entitled by contract or otherwise under law.
(d) Expenses in connection with the preparation and presentation of a
defense to any claim, action, suit or proceeding of the character described in
Subsection 10.02(a) of this Section 10.02 may be paid by the Trust or Series
from time to time prior to final disposition thereof upon receipt of an
undertaking by or on behalf of such Covered Person that such amount will be paid
over by him to the Trust or Series if it is ultimately determined that he is not
entitled to indemnification under this Section 10.02; provided, however, that
either (i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments or (iii) either a majority of the Trustees who are neither
Interested Persons of the Trust nor parties to the matter, or independent legal
counsel in a written opinion, shall have determined, based upon a review of
readily available facts (as opposed to a trial-type inquiry or full
investigation), that there is reason to believe that such Covered Person will be
found entitled to indemnification under Section 10.02.
2
THE INVESTMENT ADVISORY AGREEMENTS
Section 4 of The Cutler Trust's (the "Trust") Investment Advisory Agreement with
Cutler & Company, LLC provides:
"SECTION 4. STANDARD OF CARE. (a) The Adviser shall give the Trust the benefit
of its best judgment and efforts in rendering its services to the Trust and
shall not be liable for error of judgment or mistake of law, for any loss
arising out of any investment, or in any event whatsoever, provided that nothing
herein shall be deemed to protect, or purport to protect, the Adviser against
any liability to the Trust or to the security holders of the Trust to which it
would otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of its duties hereunder, or by reason of reckless
disregard of its obligations and duties hereunder. (b) The Adviser shall not be
held responsible for any loss incurred by reason of any act or omission of any
dealer, broker or custodian; provided that such loss is not the result of the
Adviser's willful misfeasance, bad faith or gross negligence in the performance
of its duties hereunder, or the result of the Adviser's reckless disregard of
its obligations and duties hereunder."
THE DISTRIBUTION AGREEMENT
Section 2(f), 2(g) and Section 3 of the Trust's Distribution Agreement with
Forum Fund Services, LLC provides:
"SECTION 2(F) AND 2(G). INDEMNIFICATION. 2(f) The Trust will indemnify, defend
and hold Distributor, its several officers and directors, and any person who
controls Distributor within the meaning of Section 15 of the Securities Act
(collectively, the "Distributor Indemnitees"), free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
cost of investigating or defending such claims, demands or liabilities and any
counsel fees incurred in connection therewith) that any Distributor Indemnitee
may incur, under the Securities Act, or under common law or otherwise, arising
out of or based upon any alleged untrue statement of a material fact contained
in the Trust's Registration Statement and Prospectus under the Securities Act or
arising out of or based upon any alleged omission to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that in no event shall anything contained in this
paragraph (f) be so construed as to protect Distributor against any liability to
the Trust or its security holders to which Distributor would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of its duties, or by reason of its reckless disregard of its
obligations and duties under this Section 2. This agreement to indemnify
Distributor Indemnitees is expressly conditioned upon the Trust being notified
of any action brought against any Distributor Indemnitee, such notification to
be given by letter, facsimile transmission or telegram to the Trust and
referring to the person against whom such action is brought within ten days
after the summons or other first legal process shall have been served on such
person. The failure so to notify the Trust of any such action shall not relieve
the Trust from any liability which it may have to any Distributor Indemnitee
otherwise than on account of the indemnification provided for in this paragraph
(f). The Trust will be entitled to assume the defense of any suit brought to
enforce any such claim, and to retain counsel of good standing chosen by it and
approved by Distributor. In the event the Trust elects to assume the defense of
any such suit and retain counsel of good standing approved by Distributor, the
defendants in such suit shall bear the fees and expenses of any additional
counsel retained by any of them. In the event the Trust does not elect to assume
the defense of any such suit, or in case Distributor does not approve of counsel
chosen by the Trust or has been advised that it may have available defenses or
claims which are not available to or conflict with those available to the Trust,
the Trust will reimburse any Distributor Indemnitee named as defendant in such
suit for the fees and expenses of any counsel retained by any such person. The
indemnification provisions contained in this paragraph (f) and the Trust's
representations and warranties in this Agreement shall remain operative and in
full force and effect regardless of any investigation made by or on behalf of
any Distributor Indemnitee and shall survive the sale of any Shares made
pursuant to subscriptions obtained by Distributor. The indemnification
provisions of this paragraph (f) will inure exclusively to the benefit of the
Distributor Indemnitees and their respective successors and assigns. The Trust
agrees promptly to notify Distributor of the commencement of any litigation or
proceeding against the Trust or any of its trustees or officers in connection
with the issue or sale of Shares.
2(g) Distributor agrees to indemnify, defend and hold the Trust, its several
officers and directors, and any person who controls the Trust within the meaning
of Section 15 of the Securities Act (collectively, the "Trust Indemnitees"),
free and harmless from and against any and all claims, demands, liabilities, and
expenses (including the cost of investigating or defending such claims, demands
or liabilities and any reasonable counsel fees incurred in connection therewith)
which any Trust Indemnitee may incur under the Act, or under common law or
otherwise, but
3
only to the extent that such liability, or expense incurred by the Trust
Indemnitees resulting from such claims or demands shall arise out of or be based
upon any alleged untrue statement of a material fact contained in information
furnished in writing by Distributor in its capacity as distributor to the Trust
for use in the Trust's Registration Statement or Prospectus under the Securities
Act, or shall arise out of or be based upon any alleged omission to state a
material fact in connection with such information required to be stated in the
Registration Statement or Prospectus or necessary to make such information not
misleading. Distributor's agreement to indemnify the Trust Indemnitees is
expressly conditioned upon Distributor being notified of any action brought
against a Trust Indemnitee, such notification to be given by letter, facsimile
transmission or telegram addressed and referring to the person against whom such
action is brought within ten days after the summons or other first legal process
shall have been served on such person. Distributor shall have a right to control
the defense of such action, with counsel of its own choosing, satisfactory to
the Trust, if such action is based solely upon such alleged misstatement or
omission on Distributor's part, and in any other event Distributor and the Trust
Indemnitees named shall each have the right to participate in the defense or
preparation of the defense of any such action. The failure so to notify
Distributor of any such action shall not relieve Distributor from any liability
which it may have to any Trust Indemnitee otherwise than on account of the
indemnification provisions in this paragraph (g)."
"SECTION 3. STANDARD OF CARE. The Distributor shall give the Trust the benefit
of its best judgment and efforts in rendering its services to the Trust and
shall not be liable for error of judgment or mistake of law, or in any event
whatsoever, provided that nothing herein shall be deemed to protect, or purports
to protect, the Distributor against any liability to the Trust or to the
security holders of the Trust to which it would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of its
duties hereunder, or by reason of reckless disregard of its obligations and
duties hereunder."
ITEM 16 - EXHIBITS.
All references to a post effective amendment ("PEA") are to PEAs to Registrant's
Registration Statement on Form N-1A, file numbers 33-52850 and 811-7242.
(1) Trust Instrument of Registrant dated October 2, 1992 (Exhibit incorporated
by reference as filed in PEA No. 4 in Form N-1A Registration Statement via
EDGAR on March 8, 1996, accession number 0000912057-96-004156).
(2) By-Laws of Registrant dated October 2, 1992 (Exhibit incorporated by
reference as filed in PEA No. 4 in Form N-1A Registration Statement via
EDGAR on March 8, 1996, accession number 0000912057-96-004156).
(3) None.
(4) Form of Agreement and Plan of Reorganization between Registrant and Cutler
Core Fund (filed herewith).
(5) See Sections 2.04 and 2.07 of (1) above.
(6) Investment Advisory Agreement between Registrant and Cutler & Company, LLC
dated December 31, 1992, and restated May 1, 1996 (Exhibit incorporated by
reference as filed in PEA No. 8 in Form N-1A Registration Statement via
EDGAR on October 29, 1998, accession number 0001004402-98-000574).
(7) Distribution Agreement between the Registrant and Forum Fund Services, LLC
dated November 1, 1999 (Exhibit incorporated by reference as filed in PEA
No. 10 in Form N-1A Registration Statement via EDGAR on October 29, 1999,
accession number 0001004402-99-000421).
(8) None.
(9) Custodian Agreement between Registrant and Forum Trust, LLC dated as of
April 20, 1999 (Exhibit incorporated by reference as filed in PEA No. 9 in
Form N-1A Registration Statement via EDGAR on August 31, 1999, accession
number 0001004402-99-000370).
(10) None.(b)
(11) Opinion and consent of Dechert LLP regarding legality of securities (filed
herewith).
(12) Opinion and consent of Dechert LLP regarding the tax consequences of the
reorganization (to be filed by amendment).
4
(13) (a) Management Agreement between Registrant and Forum Administrative
Services, LLC dated November 1, 2002 (Exhibit incorporated by reference as
filed in PEA No. 14 in Form N-1A Registration Statement via EDGAR on
October 30, 2002, accession number 0001004402-02-000460).
(b) Fund Accounting Agreement between Registrant and Forum Accounting
Services, LLC dated October 1, 1997, as amended on August 25, 2000 and
November 1, 2002 (Exhibit incorporated by reference as filed in PEA No. 14
in Form N-1A Registration Statement via EDGAR on October 30, 2002,
accession number 0001004402-02-000460).
(c) Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, LLC dated November 1, 2002 (Exhibit incorporated by
reference as filed in PEA No. 14 in Form N-1A Registration Statement via
EDGAR on October 30, 2002, accession number 0001004402-02-000460).
(d) Shareholder Service Plan adopted by Registrant dated January 3, 1996 as
amended June 15, 2000 (Exhibit incorporated by reference as filed in PEA
No. 12 in Form N-1A Registration Statement via EDGAR on October 27, 2000,
accession number 0001004402-00-000358).
(14) Consent of Deloitte & Touche LLP (filed herewith).
(15) None.
(16) Powers of Attorney of Kenneth R. Cutler, Trustee; Robert E. Clarke,
Trustee; Hatten S. Yoder, Jr., Trustee and Robert B. Watts, Jr., Trustee
(filed herewith).
(17) Proxy Card for Cutler Core Fund (filed herewith).
ITEM 17 - UNDERTAKINGS
(1) The undersigned registrant agrees that prior to any public re-offering
of the securities registered through the use of a prospectus which is a part of
this registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c) of the Securities Act [17 CFR
230.145c], the re-offering prospectus will contain the information called for by
the applicable registration form for re-offerings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(2) The undersigned registrant agrees that every prospectus that is filed
under paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is effective,
and that, in determining any liability under the Securities Act, each
post-effective amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file copies of the tax opinions
required to be filed as an exhibit to the registration statement by Item 16(12)
of Form N-14 under the Securities Act of 1933, as amended, by means of a
post-effective amendment to the registration statement.
5
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has
been signed on behalf of the Registrant in the city of Portland and State of
Maine, February 7, 2003.
THE CUTLER TRUST
By: /S/ JOHN Y. KEFFER
---------------------------
John Y. Keffer
President
As required by the Securities Act of 1933, this Registration Statement has
been signed by the following persons in the capacities and on the dates
indicated:
SIGNATURE TITLE DATE
Principal Executive Officer
/S/ JOHN Y. KEFFER President February 7, 2003
- ---------------------------
John Y. Keffer
Principal Financial
/S/ STACEY E. HONG Treasurer February 7, 2003
- ---------------------------
Stacey E. Hong
All of the Trustees
/S/ JOHN Y. KEFFER February 7, 2003
- ---------------------------
John Y. Keffer Trustee
Kenneth R. Cutler* Trustee
Robert E. Clarke* Trustee
Hatten S. Yoder, Jr.* Trustee
Robert B. Watts, Jr.* Trustee
/S/ D. BLAINE RIGGLE February 7, 2003
- ---------------------------
By: D. Blaine Riggle* Attorney-in-fact
*Pursuant to powers of attorney filed as Exhibits to Registrant's Registration
Statement on Form N-14.
6
INDEX TO EXHIBITS
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
(4) Form of Agreement and Plan of Reorganization between
Registrant and Cutler Core Fund
(11) Opinion and Consent of Dechert LLP
(14) Consent of Deloitte & Touche LLP
(16)(a) Powers of Attorney of Kenneth R. Cutler, Trustee
(16)(b) Powers of Attorney of Robert E. Clarke, Trustee
(16)(c) Powers of Attorney of Hatten S. Yoder, Jr., Trustee
(16)(d) Powers of Attorney of Robert B. Watts, Jr., Trustee
(17) Proxy Card for Cutler Core Fund
7
FORM OF AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF REORGANIZATION (the "PLAN") is made as of this
_____ day of February, 2003, by and between The Cutler Trust (the "Trust"), a
Delaware business trust, on behalf of its series, the Cutler Value Fund (the
"Acquiring Fund") and the Trust, on behalf of its series, the Cutler Core Fund
(the "Target Fund").
WHEREAS, the Acquiring Funds and the Target Fund are separate series of the
Trust, which is an open-end management investment company registered with the
Securities and Exchange Commission (the "SEC") under the Investment Company Act
of 1940, as amended (the "1940 ACT");
WHEREAS, the parties desire that the Acquiring Fund acquire the assets and
assume the liabilities of the Target Fund in exchange solely for voting shares
of equal value of the Acquiring Fund and the distribution of the voting shares
of the Acquiring Fund to the shareholders of the Target Fund in connection with
the dissolution and liquidation of the Target Fund (the "Reorganization"); and
WHEREAS, the parties intend that the Reorganization qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "CODE"), and that the Acquiring Fund and the
Target Fund each be a "party to a reorganization," within the meaning of Section
368(b) of the Code, with respect to the Reorganization;
NOW, THEREFORE, in accordance with the mutual promises described herein,
the parties agree as follows:
1. DEFINITIONS.
The following terms shall have the following meanings:
1933 ACT The Securities Act of 1933, as amended.
1934 ACT The Securities Exchange Act of 1934, as amended.
ASSETS All property and assets of any kind and all
interests, rights, privileges and powers of or
attributable to the Target Fund whether or not
determinable at the Effective Time and wherever
located. Assets include all cash, cash
equivalents, securities, claims (whether
absolute or contingent, Known or unknown,
accrued or unaccrued or conditional or
unmatured), contract rights and receivables
(including dividend and interest receivables)
owned by or attributed to the Target Fund and
any deferred or prepaid expense shown as an
asset on the Target Fund's books.
ASSETS LIST A list of securities and other Assets and Known
Liabilities of or attributable to the Target
Fund as of the date provided to the Trust.
CLOSING DATE _________ , 2003 or such other date as the
parties may agree to in writing.
EFFECTIVE TIME 9:00 a.m. Eastern time on the business day
following the Closing Date, or such other time
as the parties may agree to in writing.
FUND The Acquiring Fund or the Target Fund as the
context may require.
KNOW, KNOWN OR KNOWLEDGE Known after reasonable inquiry.
LIABILITIES All liabilities of, allocated or attributable to
the Target Fund, whether Known or unknown,
accrued or unaccrued, absolute or contingent or
conditional or unmatured.
N-14 REGISTRATION STATEMENT The Trust's Registration Statement on Form N-14
under the 1940 Act that will register the shares
of the Acquiring Fund to be issued in the
Reorganization and will include the proxy
materials necessary for shareholders of the
Target Fund to approve the Reorganization.
MATERIAL AGREEMENTS The agreements set forth in Schedule B.
NET VALUE OF ASSETS Value of Assets net of Liabilities.
REORGANIZATION DOCUMENTS Such bills of sale, assignments and other
instruments as desirable for the Target Fund to
transfer to the Acquiring Fund all right and
title to and interest in the Target Fund's
Assets and for the Acquiring Fund to assume the
Target Fund's Liabilities.
SCHEDULE A Schedule A to this Plan.
SCHEDULE B Schedule B to this Plan.
TARGET FINANCIAL STATEMENTS The audited financial statements of the Target
Fund for its most recently completed fiscal year
and, if applicable, the unaudited financial
statements of the Target Fund for its most
recently completed semi-annual period.
VALUATION TIME The time on the Closing Date, the business day
immediately preceding the Closing Date if the
Closing Date is not a business day, or such
other date as the parties may agree to in
writing, that the Trust determines the net asset
value of the shares of the Acquiring Fund and
determines the net value of the Assets of or
attributable to the Target Fund. Unless
otherwise agreed to in writing, the Valuation
Time shall be at the time of day then set forth
in the Acquiring Fund's and Target Fund's
Registration Statement on Form N-1A as the time
of day at which net asset value is calculated.
2. REGULATORY FILINGS AND SHAREHOLDER ACTION.
(a) The Trust shall promptly prepare and file the N-14 Registration
Statement with the SEC. The Trust and the Target Fund shall
promptly prepare and file any other appropriate regulatory
filings, including, without limitation, filings with federal,
state or foreign securities regulatory authorities.
(b) The parties shall seek an order of the SEC, if appropriate,
providing them with any necessary relief from Section 17 of the
1940 Act to permit them to consummate the transactions
contemplated by this Plan.
(c) As soon as practicable after the effective date of the N-14
Registration Statement, the Target Fund shall hold a shareholder
meeting to consider and approve this plan, the reorganization and
such other matters as the Target Fund's Board of Trustees may
determine.
3. TRANSFER OF ASSETS. The Trust on behalf of the Acquiring Fund and the
Target Fund shall take the following steps with respect to the
Reorganization:
(a) On or prior to the Closing Date, the Target Fund shall
endeavor to pay or make reasonable provision to pay out of
the Assets all of the Liabilities, expenses, costs and
charges of or attributable to the Target Fund that are Known
to the Target Fund and that are due and payable as of the
Closing Date.
(b) At the Effective Time, the Target shall assign, transfer,
deliver and convey all of the Target's Assets to the
Acquiring Fund, subject to all of the Target's Liabilities.
The Acquiring Fund, shall then accept the Target's Assets
and assume the Target's Liabilities such that at and after
the Effective Time (i) all of the Target's Assets at or
after the Effective Time shall become and be the Assets of
the Acquiring Fund and (ii) all of the Target's Liabilities
at the Effective Time shall attach to the Acquiring Fund,
enforceable against the Acquiring Fund to the same extent as
if initially incurred by the Acquiring Fund.
(c) Within a reasonable time prior to the Closing Date, the
Target Fund shall provide its Assets List to the Trust. The
parties agree that the Target Fund may sell any asset on the
Assets List prior to the Effective Time. After the Target
Fund provides the Assets List, the Target Fund will not
acquire any additional securities or permit to exist any
encumbrances, rights, restrictions or claims not reflected
on the Assets List, without the prior consent of the Trust.
Within a reasonable time after receipt of the Assets List
and prior to the Closing Date, the Trust will advise the
Target Fund of any investments shown on the Assets List that
the Trust has determined to be inconsistent with the
investment objective, policies and restrictions of the
Acquiring Fund. The Target Fund will dispose of any such
securities prior to the Closing Date to the extent
practicable and consistent with applicable legal
requirements, including the Target Fund's investment
objective, policies and restrictions. In addition, if the
Trust determines that, as a result of the Reorganization the
Acquiring Fund would own an aggregate amount of an
investment that would exceed a percentage limitation
applicable to the Acquiring Fund, the Trust will advise the
Target Fund in writing of any such limitation and the Target
Fund shall dispose of a sufficient amount of such investment
as may be necessary to avoid violating the limitation as of
the Effective Time, to the extent practicable and consistent
with applicable legal requirements, including the Target
Fund's investment objective, policies and restrictions.
Notwithstanding the foregoing, the Target Fund has no plan
or intention to sell or dispose of more than 66 percent of
its assets (such percentage determined by using asset values
as of the Closing Date) prior to the Reorganization.
(d) The Target Fund shall assign, transfer, deliver and convey
the Assets to the Acquiring Fund at the Effective Time on
the following bases:
(1) In exchange for the transfer of the Assets, the Trust,
on behalf of the Acuiring Fund, shall simultaneously
issue and deliver to the Target Fund full and
fractional shares of beneficial interest of Acquiring
Fund. The Trust shall determine the number of shares of
the Acquiring Fund to be issued by dividing the Net
Value of Assets of the Target Fund by the net asset
value of one Acquiring Fund share. Based on this
calculation, the Trust shall issue shares of beneficial
interest of the Acquiring Fund with an aggregate net
asset value equal to the Net Value of the Assets of the
Target Fund.
(2) The parties shall determine, as of the Valuation Time,
the net asset value of the Acquiring Fund shares to be
delivered and the net asset value of the Assets to be
conveyed, substantially in accordance with the Trust's
current valuation procedures. The parties shall make
all computations to the fourth decimal place or such
other decimal place as the parties may agree to in
writing.
(3) The Target Fund shall transfer the Assets with good and
marketable title to the Trust's custodian for the
account of the Acquiring Fund. The Target Fund shall
transfer all cash in the form of immediately available
funds payable to the order of the Trust's custodian for
the account of the Acquiring Fund. The Target Fund
shall transfer any of the Assets that were not
transferred to the Trust's custodian at the Effective
Time to the Trust's custodian at the earliest
practicable date thereafter.
(e) Promptly after the Closing Date, the Target Fund will
deliver to the Trust its Statement of Assets and Liabilities
as of the Closing Date (usually within one week).
4. DISSOLUTION AND LIQUIDATION OF THE TARGET FUND, REGISTRATION OF
SHARES AND ACCESS TO RECORDS. The Trust on behalf of the Target
Fund and the Acquiring Fund also shall take the following steps
in connection with the Reorganization:
(a) At or as soon as reasonably practical after the
Effective Time, the Target Fund shall dissolve and
liquidate by transferring to shareholders of record
full and fractional shares of beneficial interest of
the Acquiring Fund equal in value to the shares of the
Target Fund held by the shareholder. Each Target Fund
shareholder also shall have the right to receive any
unpaid dividends or other distributions that the Target
Fund declared with respect to the shareholder's Target
Fund shares before the Effective Time. The Trust shall
record on its books the ownership by the shareholders
of the respective Acquiring Fund shares; the Target
Fund shall simultaneously redeem and cancel on its
books all of its issued and outstanding shares of the
Target Fund. The Target Fund shall then wind up its
affairs and take all steps as are necessary and proper
to terminate its registration under the 1940 Act and
dissolve as soon as is reasonably possible after the
Effective Time and in accordance with all applicable
laws and regulations.
(b) If a former Target Fund shareholder requests a change
in the registration of the shareholder's Acquiring Fund
shares to a person other than the shareholder, the
Acquiring Fund shall require the shareholder to (i)
furnish the Acquiring Fund with an instrument of
transfer properly endorsed, accompanied by any required
signature guarantees and otherwise in proper form for
transfer; (ii) if any of the shares are outstanding in
certificate form, deliver to the Acquiring Fund the
certificate representing such shares; and (iii) pay to
the Acquiring Fund any transfer or other taxes required
by reason of such registration or establish to the
reasonable satisfaction of the Acquiring Fund that such
tax has been paid or does not apply.
(c) At and after the Closing Date, the Target Fund shall
provide the Trust and its transfer agent with immediate
access to: (i) all records containing the names,
addresses and taxpayer identification numbers of
all of the Target Fund shareholders and the number and
percentage ownership of the outstanding shares of the
Target Fund owned by each shareholder as of the
Effective Time and (ii) all original documentation
(including all applicable Internal Revenue Service
forms, certificates, certifications and correspondence)
relating to the Target Fund shareholders' taxpayer
identification numbers and their liability for or
exemption from back-up withholding. The Target Fund
shall preserve and maintain, or shall direct its
service providers to preserve and maintain, its records
as required by Section 31 of and Rules 31a-1 and 31a-2
under the 1940 Act.
5. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TARGET FUND.
The Trust on behalf of itself and the Target Fund represents and
warrants to, and agrees as follows:
(a) The Trust is organized as a Delaware business trust duly
created, validly existing and in good standing under the laws of
the State of Delaware. The Board of Trustees of the Trust duly
established and designated the Acquiring Fund as a series of the
Trust. The Trust is registered with the SEC as an open-end
management investment company under the 1940 Act, and such
registration is full force and effect. The Trust's Registration
Statement relating to the Acquiring Fund will be effective with
the SEC prior to the Effective Date.
(b) The Trust has the power and all necessary federal, state
and local qualifications and authorizations to own all of its
properties and Assets, to carry on its business as now being
conducted and described in its currently effective Registration
Statement on Form N-1A, to enter into this Plan and to consummate
the transactions contemplated herein.
(c) The Board of Trustees of the Trust has duly authorized
the execution and delivery of the Plan by the Trust on behalf of
the Target Fund and the transactions contemplated herein. Duly
authorized officers of the Trust have executed and delivered the
Plan on behalf of the Target Fund. The Plan represents a valid
and binding contract, enforceable in accordance with its terms,
subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar laws
of general applicability relating to or affecting creditors'
rights and to general equity principles. The execution and
delivery of this Plan does not, and, subject to the approval of
shareholders referenced in Section 2(c), the consummation of the
transactions contemplated by this Plan will not, violate the
Trust's Trust Instrument, By-Laws or any Material Agreement.
Except for the approval of Target Fund shareholders, the Target
Fund does not need to take any other action to authorize its
officers to effectuate this Plan and the transactions
contemplated herein.
(d) For each taxable year of its operation (including the
taxable year ending on the Closing Date), the Target Fund has met
the requirements of Subchapter M of the Code for qualification
and treatment as a regulated investment company and has elected
to be treated as such, has been eligible to and has computed its
federal income tax under Section 852 of the Code, and shall have
distributed all of its investment company taxable income and net
capital gain (as defined in the Code), that has accrued through
the Closing Date.
(e) The materials included within the N-14 Registration
Statement when filed with the SEC, when Part A of the N-14
Registration Statement is distributed to shareholders, at the
time of the Target Fund shareholder meeting and at the Effective
Time of the Reorganization, insofar as they relate to the Target
Fund (i) shall comply in all material respects with the
applicable
provisions of the 1933 Act and the 1940 Act, the rules and
regulations thereunder and state securities laws, and (ii) shall
not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary
to make the statements made therein not misleading.
(f) The Trust has duly authorized and validly issued all of
the issued and outstanding shares of the Target Fund and all of
the shares are validly outstanding, fully paid and
non-assessable, and are offered for sale and sold in conformity
with the registration requirements of all applicable federal and
state securities laws. There are no outstanding options, warrants
or other rights to subscribe for or purchase the Target Fund
shares, nor are there any securities convertible into Target Fund
shares.
(g) The Target Fund shall operate its business in the
ordinary course between the date hereof and the Effective Time,
it being agreed that such ordinary course of business will
include the declaration and payment of customary dividends and
distributions and any other dividends and distributions deemed
advisable in anticipation of the Reorganization.
(h) At the Effective Time, the Target Fund will have good
and marketable title to the Assets and full right, power and
authority to assign, transfer, deliver and convey the Assets.
(i) The Target Fund Financial Statements, copies of which
have been previously delivered to the Trust, fairly present the
financial position of the Target Fund as of the Target Fund's
most recent fiscal year-end and the results of the Target Fund's
operations and changes in its net Assets for the periods
indicated. The Target Financial Statements are in accordance with
generally accepted accounting principles consistently applied.
(j) To the Knowledge of the Trust and the Target Fund, the
Target Fund has no liabilities, whether or not determined or
determinable, other than the Liabilities disclosed or provided
for in the Target Financial Statements or Liabilities incurred in
the ordinary course of business subsequent to the date of the
Target Financial Statements, and Liabilities set forth in the
Assets List.
(k) Other than the claims, actions, suits, investigations or
proceedings set forth on Schedule B, the Target Fund does not
Know of any claims, actions, suits, investigations or proceedings
of any type pending or threatened against it or the Assets or
businesses. The Target Fund does not Know of any facts that it
currently has reason to believe are likely to form the basis for
the institution of any such claim, action, suit, investigation or
proceeding against it. For purposes of this provision, investment
underperformance or negative investment performance shall not be
deemed to constitute such facts, provided all required
performance disclosures have been made. Other than the orders,
decrees or judgments set forth on Schedule C, the Target Fund is
not a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body that adversely
affects, or is reasonably likely to adversely affect, its
financial condition, results of operations, business, properties
or the Assets or its ability to consummate the transactions
contemplated by the Plan.
(l) Except for contracts, agreements, franchises, licenses
or permits entered into or granted in the ordinary course of its
business or listed in Schedule B, in each case under which no
material default exists, the Trust is not a party to or subject
to any material contract, debt instrument, employee benefit plan,
lease, franchise, license or permit of any kind or nature
whatsoever on
behalf of the Target Fund.
(m) At the date hereof and at the Closing Date, all federal
and other tax returns and reports of the Target Fund required by
law to have been filed by such dates shall have been filed and
are or will be correct in all material respects, and all federal
and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof and, to the best of
the Target Fund's knowledge, no such return is currently under
audit and no assessment has been asserted with respect to such
returns.
(n) Since the date of the Target Financial Statements, there
has been no material adverse change in the financial condition,
results of operations, business, properties or Assets of the
Target Fund. For all purposes under this Plan, investment
underperformance, negative investment performance and/or investor
redemptions shall not be considered material adverse changes,
provided all required performance disclosures have been made.
6. CERTAIN REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE TRUST. The
Trust, on behalf of itself and the Acquiring Fund, represents and
warrants to, and agrees as follows:
(a) The Trust is organized as a Delaware business trust duly
created, validly existing and in good standing under the laws of
the State of Delaware. The Board of Trustees of the Trust duly
established and designated the Acquiring Fund as a series of the
Trust. The Trust is registered with the SEC as an open-end
management investment company under the 1940 Act, and such
registration is full force and effect. The Trust's Registration
Statement relating to the Acquiring Fund will be effective with
the SEC prior to the Effective Date.
(b) The Trust has the power and all necessary federal, state
and local qualifications and authorizations to own all of its
properties and assets, to carry on its business as described in
its Registration Statement on Form N-1A as filed with the SEC, to
enter into this Plan and to consummate the transactions
contemplated herein.
(c) The Board of Trustees of the Trust has duly authorized
the execution and delivery of the Plan on behalf of the Acquiring
Fund and the transactions contemplated herein. Duly authorized
officers of the Trust have executed and delivered the Plan. The
Plan represents a valid and binding contract, enforceable in
accordance with its terms, subject as to enforcement to
bankruptcy, insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability relating to or
affecting creditors' rights and to general equity principles. The
execution and delivery of this Plan does not, and the
consummation of the transactions contemplated by this Plan will
not, violate the Trust's Trust Instrument, By-Laws or any
Material Agreement. The Trust does not need to take any other
action to authorize its officers to effectuate the Plan and the
transactions contemplated herein on behalf of the Acquiring Fund.
(d) For each taxable year of its operation, the Acquiring
Fund has met the requirements of Subchapter M of the Code for
qualification and treatment as a regulated investment company and
has elected to be treated as such, has been eligible to and has
computed its federal income tax under Section 852 of the Code,
and will do so for the taxable year including the Closing Date.
(e) The materials included within the N-14 Registration
Statement when filed with the SEC, when Part A of the N-14
Registration Statement is
distributed to shareholders, at the time of the Target Fund
shareholder meeting and at the Effective Time of the
Reorganization, insofar as they relate to the Trust and the
Acquiring Fund (i) shall comply in all material respects with the
applicable provisions of the 1933 Act and the 1940 Act, the rules
and regulations thereunder and state securities laws, and (ii)
shall not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements made therein not misleading.
(f) The Trust shall duly authorize the Acquiring Fund shares
to be issued and delivered to the Target Fund as of the Effective
Time. When issued and delivered, the Acquiring Fund shares shall
be duly and validly issued, fully paid and non-assessable, and no
shareholder of the Acquiring Fund shall have any preemptive right
of subscription or purchase in respect of them. There are no
outstanding options, warrants or other rights to subscribe for or
purchase the Acquiring Fund shares, nor are there any securities
convertible into Acquiring Fund shares.
(g) The Trust does not Know of any claims, actions, suits,
investigations or proceedings of any type pending or threatened
against the Acquiring Fund or its assets or businesses. There are
no facts that the Trust currently has reason to believe are
likely to form the basis for the institution of any such claim,
action, suit, investigation or proceeding against it. The
Acquiring Fund is not a party to or subject to the provisions of
any order, decree or judgment of any court or governmental body
that adversely affects, or is reasonably likely to adversely
affect, its financial condition, results of operations, business,
properties or assets or its ability to consummate the
transactions contemplated herein.
(h) Except for contracts, agreements, franchises, licenses
or permits entered into or granted in the ordinary course of its
business, in each case under which no material default exists,
the Trust is not a party to or subject to any material contract,
debt instrument, employee benefit plan, lease, franchise, license
or permit of any kind or nature whatsoever on behalf of the
Acquiring Fund.
(i) The Trust has made all state filings to register the
Acquiring Fund shares in each jurisdiction that the Target Fund
is currently registered and all necessary steps have been taken
under all relevant jurisdictions' securities laws to consummate
the Reorganization.
(j) Since December 31, 2002, there has been no material
adverse change in the financial condition, business, properties
or assets of the Acquiring Fund.
(k) At the date hereof and at the Closing Date, all federal
and other tax returns and reports of the Acquiring Fund required
by law then to be filed shall have been filed and are or will be
correct in all material respects, and all federal and other taxes
shown as due on said returns and reports shall have been paid or
provision shall have been made for the payment thereof.
7. CONDITIONS TO THE TARGET FUND'S OBLIGATIONS. The obligations of the
Target Fund with respect to the Reorganization shall be subject to the
following conditions precedent:
(a) The Trust shall have duly executed and delivered the applicable
Reorganization Documents to the Target Fund.
(b) The Target Fund's shareholders shall have approved the
Reorganization in the manner required by the Target Fund's
Articles of Incorporation and applicable
law. If the Target Fund shareholders fail to approve the
Reorganization, that failure shall release the Target Fund of its
obligations under this Plan.
(c) On behalf of the Acquiring Fund, the Trust shall have delivered
to the Target Fund a certificate dated as of the Closing Date and
executed in its name by the Secretary or Assistant Secretary of
the Trust, in a form reasonably satisfactory to the Target Fund,
stating that the representations and warranties of the Trust in
this Plan that apply to the Reorganization are true and correct
in all material respects at and as of the Valuation Time.
(d) The Trust on behalf of the Target Fund shall have received an
opinion of Dechert LLP, as counsel to the Trust, in form and
substance reasonably satisfactory to the Target Fund and dated as
of the Closing Date, substantially to the effect that:
(1) The Trust is a Delaware business trust duly created, validly
existing and in good standing under the laws of the State of
Delaware and is an open-end, management investment company
registered under the 1940 Act;
(2) The Plan has been duly authorized, executed and delivered by
the Trust, and assuming due authorization, execution, and
delivery of this Plan by the Target Fund, represents a
legal, valid and binding contract, enforceable in accordance
with its terms, subject to the effect of bankruptcy,
insolvency, moratorium, fraudulent conveyance and transfer
and similar laws relating to or affecting creditors' rights
generally and court decisions with respect thereto, and
further subject to the application of equitable principles
in any proceeding whether at law or in equity or with
respect to the enforcement of provisions of the Plan and the
effect of judicial decisions which have held that certain
provisions are unenforceable when their enforcement would
violate an implied covenant of good faith and fair dealing
or would be commercially unreasonable or when default under
the Plan is not material;
(3) The shares of the Acquiring Fund to be delivered as provided
for by this Plan are duly authorized and upon delivery will
be validly issued, fully paid and non-assessable by the
Trust;
(4) The execution and delivery of this Plan did not, and the
consummation of the Reorganization will not, violate the
Trust Instrument or By-Laws of the Trust or any Material
Agreement to which the Trust is a party or by which it is
bound; and
(5) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental
authority is required for the consummation by the Trust of
the Reorganization or for the execution and delivery of the
Acquiring Fund's Reorganization Documents, except those that
have been obtained under the 1933 Act, the 1940 Act and the
rules and regulations under those Acts or that may be
required under state securities laws or subsequent to the
Effective Time or when the failure to obtain the consent,
approval, authorization or order would not have a material
adverse effect on the operation of the Acquiring Fund.
In rendering such opinion, such counsel may (i) rely on the
opinion of other counsel to the extent set forth in such
opinion, (ii) make assumptions regarding the authenticity,
genuineness and/or conformity of documents and copies
thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, (iv)
define the word "Knowledge" and related terms to mean the
Knowledge of attorneys then with such firm who have devoted
substantive attention to matters directly related to this
Plan and (v) rely on certificates of officers or trustees of
the Trust.
(e) The Trust on behalf of the Target Fund shall have received an
opinion of Dechert LLP with respect to the tax matters specified
in Section 8(e) addressed to the Trust on behalf Target Fund in
form and substance reasonably satisfactory to them, and dated as
of the Closing Date.
(f) The N-14 Registration Statement shall have become effective under
the 1933 Act as to the Acquiring Fund's shares and the SEC shall
not have instituted or, to the Knowledge of the Trust,
contemplated instituting, any stop order suspending the
effectiveness of the N-14 Registration Statement.
(g) No action, suit or other proceeding shall be threatened or
pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief
in connection with the Reorganization.
(h) The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding
seeking to enjoin consummation of the Reorganization under
Section 25(c) of the 1940 Act.
(i) The Trust shall have performed and complied in all material
respects with each of its agreements and covenants required by
this Plan to be performed or complied with by it prior to or at
the Reorganization's Valuation Time and Effective Time.
(j) Except to the extent prohibited by Rule 19b-1 under the 1940 Act,
the Acquiring Fund shall have declared a dividend or dividends
that, together with all previous such dividends, shall have the
effect of distributing to the Acquiring Fund's shareholder
substantially all investment company taxable income of or
attributable to the Acquiring Fund earned prior to the Closing
Date and substantially all net capital gain of or attributable to
the Acquiring Fund realized prior to such date.
(k) The Target Fund shall have received from the Trust on behalf of
the Acquiring Fund a duly executed instrument whereby the
Acquiring Fund assumes all of the Liabilities of or attributable
to the Target Fund.
(l) Neither party shall have terminated this Plan with respect to the
Reorganization pursuant to Section 10 of this Plan.
(m) The parties shall have received any necessary order of the SEC
exempting the parties from the prohibitions of Section 17 of the
1940 Act or any similar relief necessary to permit the
Reorganization.
(n) The parties shall have received a certificate from Cutler &
Company, LLC stating that it will pay all of the expenses
incurred by the Target Fund and the Acquiring Fund in connection
with the Reorganization.
(o) The Board of Trustees of the Trust shall have determined that the
Target Fund's participation in the Reorganization is in the best
interests of the Target Fund and that the interests of the Target
Fund's existing shareholders will not be diluted as a result of
effecting the Reorganization.
(p) The Parties shall have received such assurances as they deem
appropriate with respect to the audited and pro forma financial
information of the Acquiring Fund and the Target Fund contained
in the N-14 Registration Statement.
8. CONDITIONS TO TRUST'S OBLIGATIONS. The obligations of the Trust with
respect to the Reorganization shall be subject to the following
conditions precedent:
(a) The Trust on behalf of the Target Fund shall have duly executed
and delivered its applicable Reorganization Documents to the
Trust.
(b) The Target Fund's shareholders shall have approved the
Reorganization in the manner required by the Trust's Trust
Instrument and applicable law. If the Target Fund shareholders
fail to approve the Reorganization, that failure shall release
the Acquiring Fund of its obligations under this Plan.
(c) The Target Fund shall have delivered to the Acquiring Fund a
certificate dated as of the Closing Date and executed in its name
by its Secretary or Assistant Secretary, in a form reasonably
satisfactory to the Acquiring Fund, stating that the
representations and warranties of the by the Trust on behalf of
the Target Fund in this Plan that apply to the Reorganization are
true and correct in all material respects at and as of the
Valuation Time.
(d) The Trust on behalf of the Acquiring Fund shall have received an
opinion of Dechert, LLP, in form and substance reasonably
satisfactory to the Trust on behalf of the Acquiring Fund and
dated as of the Closing Date, substantially to the effect that:
(1) The Target Fund is a series of the Trust, which is a
Delaware business trust duly created, validly existing and
in good standing under the laws of the State of Delaware and
is an open-end, management investment company registered
under the 1940 Act;
(2) The Plan has been duly authorized, executed and delivered by
the Trust on behalf of the Target Fund and, assuming due
authorization, execution and delivery of this Plan by the
Trust on behalf of the Acquiring Fund, represents a legal,
valid and binding contract, enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and transfer and similar
laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and further
subject to the application of equitable principles in any
proceeding, whether at law or in equity or with respect to
the enforcement of provisions of the Plan and the effect of
judicial decisions which have held that certain provisions
are unenforceable when their enforcement would violate an
implied covenant of good faith and fair dealing or would be
commercially unreasonable or when default under the Plan is
not material;
(3) The execution and delivery of this Plan did not, and the
consummation of the Reorganization will not, violate the
Trust Instrument or By-Laws of the Trust or any Material
Agreement to which the Target Fund is a
party or by which it is bound; and
(4) To the Knowledge of such counsel, no consent, approval,
authorization or order of any court or governmental
authority, is required for the consummation by the Target
Fund of the Reorganization or the execution and delivery of
the Target Fund's Reorganization Documents, except those
that have been obtained under the 1933 Act, the 1940 Act and
the rules and regulations under those Acts or that may be
required under state securities laws or subsequent to the
Effective Time or when the failure to obtain the consent,
approval, authorization or order would not have a material
adverse effect on the operation of the Target Fund.
In rendering such opinion, such counsel may (i) rely on the
opinion of other counsel to the extent set forth in such
opinion, (ii) make assumptions regarding the authenticity,
genuineness and/or conformity of documents and copies
thereof without independent verification thereof, (iii)
limit such opinion to applicable federal and state law, (iv)
define the word "Knowledge" and related terms to mean the
Knowledge of attorneys then with such firm who have devoted
substantive attention to matters directly related to this
Plan and (v) rely on certificates of officers or Trustees of
the Trust on behalf of the Target Fund.
(e) The Trust shall have received an opinion of Dechert LLP
addressed to the Trust on behalf of the Target Fund in form and
substance reasonably satisfactory to it, based upon certain
facts, assumptions, and representations made in certificates
provided by them, their affiliates and/or principal shareholders
and dated as of the Closing Date, substantially to the effect
that, for federal income tax purposes:
(1) The Reorganization will constitute a "reorganization" within
the meaning of Code Section 368(a). The Acquiring Fund and
the Target Fund each will be a "party to a reorganization."
Code Section 368(b).
(2) The Target Fund shareholders will recognize no gain or loss
on their receipt of voting shares of the Acquiring Fund in
exchange for their voting shares of the Target Fund pursuant
to the Reorganization. Code Section 354(a)(1).
(3) The Target Fund will not recognize gain or loss on the
transfer of all of the Assets to the Acquiring Fund solely
in exchange for voting shares of the Acquiring Fund and the
assumption by the Acquiring Fund of the Liabilities pursuant
to the Reorganization. Code Sections 357(a) and 361(a).
(4) The Target Fund will not recognize gain or loss on its
distribution of voting shares of the Acquiring Fund to its
shareholders pursuant to the liquidation of the Target Fund.
Code Section 361(c).
(5) The Acquiring Fund will not recognize gain or loss on its
acquisition of all of the Assets solely in exchange for
voting shares of the Acquiring Fund and the assumption by
the Acquiring Fund of the Liabilities. Code Section 1032(a).
(6) The aggregate tax basis of the voting shares of the
Acquiring Fund received by each of the Target Fund's
shareholders pursuant to the
Reorganization will equal the aggregate tax basis of the
voting shares of the Target Fund surrendered in exchange
therefor. Code Section 358(a)(1).
(7) The holding period of the voting shares of the Acquiring
Fund received by each of the Target Fund's shareholders
pursuant to the Reorganization will include the period that
the shareholder held the voting shares of the Target Fund
exchanged therefor, provided that the shareholder held such
shares as a capital asset on the date of the Reorganization.
Code Section 1223(1).
(8) The Acquiring Fund's basis in the Assets received pursuant
to the Reorganization will equal the Target Fund's basis in
the Assets immediately before the Reorganization. Code
Section 362(b).
(9) The Acquiring Fund's holding period in the Assets received
pursuant to the Reorganization will include the period
during which the Target Fund held the Assets. Code Section
1223(2).
(10) No opinion will be expressed by Dechert LLP, however, as to
whether any gain or loss will be recognized (a) by the Core
Fund in connection with the transfer from the Core Fund to
the Value Fund of any Section 1256 contracts (as defined in
Section 1256 of the Code) or (b) by the Core Fund or the
Value Fund in connection with any disposition of assets by
the Core Fund or the Value Fund prior to or following the
Reorganization.
(f) The N-14 Registration Statement shall have become effective
under the 1933 Act as to the Acquiring Fund's shares and no stop
order suspending the effectiveness of the N-14 Registration
Statement shall have been instituted or, the Knowledge of the
Trust, contemplated by the SEC.
(g) No action, suit or other proceeding shall be threatened or
pending before any court or governmental agency in which it is
sought to restrain or prohibit or obtain damages or other relief
in connection with the Reorganization.
(h) The SEC shall not have issued any unfavorable advisory
report under Section 25(b) of the 1940 Act nor instituted any
proceeding seeking to enjoin consummation of the Reorganization
under Section 25(c) of the 1940 Act.
(i) The Target Fund shall have performed and complied in all
material respects with each of its agreements and covenants
required by this Plan to be performed or complied with by it
prior to or at the Valuation Time and Effective Time.
(j) Except to the extent prohibited by Rule 19b-1 under the 1940
Act, the Target Fund shall have declared a dividend or dividends
that, together with all previous such dividends, shall have the
effect of distributing to the Target Fund's shareholders
substantially all investment company taxable income of or
attributable to the Target Fund earned prior to the Closing Date
and substantially all net capital gain of or attributable to the
Target Fund realized prior to such date.
(k) Neither party shall have terminated this Plan with respect
to the Reorganization pursuant to Section 10 of this Plan.
(l) The parties shall have received any necessary order of the
SEC exempting the parties from the prohibitions of Section 17 of
the 1940 Act or any similar relief necessary to permit the
Reorganization.
(m) The parties shall have received a certificate from Cutler &
Company, LLC that it will pay all of the expenses incurred by the
Acquiring Fund and the Target Fund in connection with the
Reorganization. Any such expenses so borne by the adviser that
relate to the Target Fund shall be solely and directly related to
the Reorganization within the meaning of Revenue Ruling 73-54,
1973 - 1 C.B. 187.
(n) The Board of Trustees of the Trust shall have determined
that the Acquiring Fund's participation in the Reorganization is
in the best interests of the Acquiring Fund and that the
interests of the Acquiring Fund's existing shareholders will not
be diluted as a result of effecting the Reorganization.
(o) The parties shall have received such assurances as they deem
appropriate with respect to the audited and pro forma financial
information of the Acquiring Fund and the Target Fund contained
in the N-14 Registration Statement.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The representations and
warranties of the parties hereto shall survive the completion of the
transactions contemplated herein.
10. TERMINATION OF PLAN. A majority of a party's Board of Trustees may
terminate this Plan with respect to the Acquiring Fund or Target Fund,
as appropriate, at any time before the applicable Effective Time if:
(i) the party's conditions precedent set forth in Sections 7 or 8, as
appropriate, are not satisfied or (ii) the Board of Trustees
determines that the consummation of the Reorganization is not in the
best interests of shareholders and gives notice to the other party.
11. GOVERNING LAW. This Plan and the transactions contemplated hereby
shall be governed, construed and enforced in accordance with the laws
of the State of Delaware, except to the extent preempted by federal
law, without regard to conflicts of law principles.
12. BROKERAGE FEES. Each party represents and warrants that there are no
brokers or finders entitled to receive any payments in connection with
the transactions provided for in the Plan.
13. AMENDMENTS. The parties may, by agreement in writing authorized by the
Board of Trustees, amend this Plan at anytime before or after the
Target Fund's shareholders approve the Reorganization. However, after
the Target Fund shareholders approve the Reorganization, the parties
may not amend this Plan in a manner that materially alters the
obligations of either party with respect to the Reorganization. The
parties shall not deem this Section to preclude them from changing the
Closing Date or the Effective Time by mutual agreement.
14. WAIVERS. At any time prior to the Closing Date, either party may by
written instrument signed by it (i) waive the effect of any
inaccuracies in the representations and warranties made to it
contained herein and (ii) waive compliance with any of the agreements,
covenants or conditions made for its benefit contained herein. The
parties agree that any waiver shall apply only to the particular
inaccuracy or requirement for compliance waived, and not any other or
future inaccuracy or lack of compliance.
15. COOPERATION AND FURTHER ASSURANCES. Each party will cooperate with the
other in fulfilling its obligations under this Plan and will provide
such information and
documentation as is reasonably requested by the other in carrying out
this Plan's terms. Each party will provide such further assurances
concerning the performance of obligations under this Plan and the
consummation of the Reorganization as the other shall deem necessary,
advisable or appropriate.
16. UPDATING OF N-14 REGISTRATION STATEMENT. If at any time prior to the
Effective Date, a party becomes aware of any material information that
is not reflected in the N-14 Registration Statement, the party
discovering the information shall notify the other party and the
parties shall cooperate in promptly preparing, filing and clearing
with the SEC, and, if appropriate, distributing to shareholders
appropriate disclosure with respect to the information.
17. LIMITATION ON LIABILITIES. The obligations of the Target Fund, the
Trust, and the Acquiring Fund shall not bind any of the Trustees,
shareholders, nominees, officers, agents, or employees of the Target
Fund or the Trust personally, but shall bind only the assets and
property of the Acquiring Fund and Target Fund, respectively. The
execution and delivery of this Plan by the parties' officers shall not
be deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the
Assets and the property of the Acquiring Fund or Target Fund, as
appropriate.
18. NOTICES. Any notice, report, statement, certificate or demand required
or permitted by any provision of this Plan shall be in writing and
shall be given by prepaid telegraph, telecopy, certified mail or
overnight express courier to:
For the Target Fund and the Trust:
Cheryl O. Tumlin, Esq.
Forum Financial Group
Two Portland Square
Portland, ME 04101
With copies to:
John V. O'Hanlon, Esq.
Dechert LLP
Ten Post Office Square - South
Boston, MA 02109-4603
For the Acquiring Fund and the Trust:
Cheryl O. Tumlin, Esq.
Forum Financial Group, LLC
Two Portland Square
Portland, ME 04101
With copies to:
John V. O'Hanlon, Esq.
Dechert LLP
Ten Post Office Square - South
Boston, MA 02109-4603
19. GENERAL. This Plan supersedes all prior agreements between the parties
(written or oral), is intended as a complete and exclusive statement
of the terms of the agreement between the parties and may not be
changed or terminated orally. The parties may execute this
Plan in counterparts, which shall be considered one and the same
agreement, and shall become effective when the counterparts have been
executed by and delivered to both parties. The headings contained in
this Plan are for reference only and shall not affect in any way the
meaning or interpretation of this Plan. Nothing in this Plan,
expressed or implied, confers upon any other person any rights or
remedies under or by reason of this Plan. Neither party may assign or
transfer any right or obligation under this Plan without the written
consent of the other party.
IN WITNESS WHEREOF, the parties hereto have caused their duly authorized
officers designated below to execute this Plan as of the date first written
above.
THE CUTLER TRUST, FOR ITSELF AND ON BEHALF OF
CUTLER CORE FUND
(TARGET FUND)
ATTEST:
____________________________________________ By: ______________________________________________
Name: Name:
Title: Title:
THE CUTLER TRUST, FOR ITSELF AND ON BEHALF OF
CUTLER VALUE FUND
(ACQUIRING FUND)
ATTEST:
____________________________________________ By: ______________________________________________
Name: Name:
Title: Title:
SCHEDULE A
TO AGREEMENT AND PLAN OF REORGANIZATION
MATERIAL AGREEMENTS
(1) The following agreements are the Material Agreements of the Target Fund and
the Trust related to a Reorganization:
Investment Advisory Agreement between the Trust and Cutler & Company, LLC
dated December 31, 1992, and restated May 1, 1996.
Distribution Agreement between the Trust and Forum Fund Services, LLC dated
November 1, 1999.
Custodian Agreement between the Trust and Forum Trust, LLC dated as of
April 20, 1999.
Management Agreement between the Trust and Forum Administrative Services,
LLC dated November 1, 2002.
Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, dated November 1, 2002.
Fund Accounting Agreement the Trust and Forum Accounting Services, LLC
dated October 1, 1997, as amended on August 25, 2000 and November 1, 2002.
(2) The following agreements are the Material Agreements of the Acquiring Fund
and the Trust related to a Reorganization:
Investment Advisory Agreement between the Trust and Cutler & Company, LLC
dated December 31, 1992, and restated May 1, 1996.
Distribution Agreement between the Trust and Forum Fund Services, LLC dated
November 1, 1999.
Custodian Agreement between the Trust and Forum Trust, LLC dated as of
April 20, 1999.
Management Agreement between the Trust and Forum Administrative Services,
LLC dated November 1, 2002.
Transfer Agency and Services Agreement between Registrant and Forum
Shareholder Services, dated November 1, 2002.
Fund Accounting Agreement the Trust and Forum Accounting Services, LLC
dated October 1, 1997, as amended on August 25, 2000 and November 1, 2002.
SCHEDULE B
TO AGREEMENT AND PLAN OF REORGANIZATION
(1) Claims, actions, suits, investigations or proceedings pending or
threatened against the Target Fund or the Assets or its businesses:
None
(2) Orders, decrees or judgments to which the Target Fund is a party that
adversely affect, or are reasonably likely to adversely affect, the Target
Fund's financial condition, results of operations, business, properties or
the Assets or ability to consummate the transactions contemplated by the
Plan:
None
February 6, 2003
Board of Trustees
The Cutler Trust
Two Portland Square
Portland, ME 04101
Re: The Cutler Trust
Shares to be Issued Pursuant to Agreement and Plan of Reorganization
Dear Sirs:
We have acted as counsel to The Cutler Trust, a Delaware business trust (the
"Trust"), and we have a general familiarity with the Trust's business
operations, practices and procedures. You have asked for our opinion regarding
the proposed issuance of shares of beneficial interest by the Trust in
connection with the acquisition by the Cutler Value Fund, a series of the Trust,
of the assets of the Cutler Core Fund, also a series of the Trust, which will be
registered on a Form N-14 Registration Statement (the "Registration Statement")
to be filed by the Trust with the Securities and Exchange Commission.
We have examined originals or certified copies, or copies otherwise identified
to our satisfaction as being true copies, of various corporate records of the
Trust and such other instruments, documents and records as we have deemed
necessary in order to render this opinion. We have assumed the genuineness of
all signatures, the authenticity of all documents examined by us and the
correctness of all statements of fact contained in those documents.
On the basis of the foregoing, it is our opinion that the shares of beneficial
interest of the Trust registered under the Securities Act of 1933 in the
Registration Statement when issued in accordance with the terms described in the
Registration Statement and the Agreement and Plan of Reorganization, referenced
therein, will be duly and validly issued and outstanding, fully paid and
non-assessable by the Trust.
Very truly yours,
/S/ DECHERT LLP
Dechert LLP
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement No.
33-XXXX on Form N-14 of the Cutler Trust of our report dated August 9, 2002 in
the Proxy Statement /Prospectus and the Statement of Additional Information
which constitute part of this Registration Statement and the reference to us
under the heading "Experts" in such Proxy Statement/Prospectus.
/s/ DELOITTE & TOUCHE
DELOITTE & TOUCHE
Boston, Massachusetts
February 7, 2003
THE CUTLER TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that KENNETH R. CUTLER constitutes and
appoints D. Blaine Riggle, Cheryl O. Tumlin, and Patrick J. Keniston, and each
of them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the Registration Statement on Form N-14 and any
or all amendments thereto of The Cutler Trust and to file the same with the
Securities and Exchange Commission, granting unto the said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
/S/ KENNETH R. CUTLER
---------------------------
Kenneth R. Cutler
Dated: February 5, 2003
THE CUTLER TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that HATTEN S. YODER, JR. constitutes and
appoints D. Blaine Riggle, Cheryl O. Tumlin, and Patrick J. Keniston, and each
of them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the Registration Statement on Form N-14 and any
or all amendments thereto of The Cutler Trust and to file the same with the
Securities and Exchange Commission, granting unto the said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
/S/ HATTEN S. YODER, JR.
---------------------------
Hatten S. Yoder, Jr.
Dated: February 5, 2003
THE CUTLER TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that ROBERT B. WATTS, JR. constitutes and
appoints D. Blaine Riggle, Cheryl O. Tumlin, and Patrick J. Keniston, and each
of them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the Registration Statement on Form N-14 and any
or all amendments thereto of The Cutler Trust and to file the same with the
Securities and Exchange Commission, granting unto the said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
/S/ ROBERT B. WATTS, JR.
---------------------------
Robert B. Watts, Jr.
Dated: February 5, 2003
THE CUTLER TRUST
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that ROBERT E. CLARKE constitutes and
appoints D. Blaine Riggle, Cheryl O. Tumlin, and Patrick J. Keniston, and each
of them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign the Registration Statement on Form N-14 and any
or all amendments thereto of The Cutler Trust and to file the same with the
Securities and Exchange Commission, granting unto the said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in and about the premises, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or their or his substitute
or substitutes may lawfully do or cause to be done by virtue hereof.
/S/ ROBERT E. CLARKE
---------------------------
Robert E. Clarke
Dated: February 5, 2003
THE CUTLER TRUST
CUTLER CORE FUND
TWO PORTLAND SQUARE
PORTLAND, MAINE 04101
PROXY
FOR SPECIAL SHAREHOLDERS MEETING TO BE HELD
APRIL 10, 2003
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
Revoking any such prior appointments, the undersigned appoints D. Blaine
Riggle and Cheryl O. Tumlin (or, if only one shall act, that one) proxies with
the power of substitution to vote all of the shares of Cutler Core Fund (the
"Core Fund"), a series of The Cutler Trust (the "Trust"), registered in the name
of the undersigned at the Special Meeting of Shareholders of the Core Fund to be
held at the offices of Forum Financial Group, LLC, Two Portland Square, 4th
Floor Conference Room, Portland, Maine 04101, on April 10, 2003, at 1:00 p.m.
(Eastern Time), and at any adjournment or adjournments thereof.
The shares of beneficial interest represented by this Proxy will be voted
in accordance with the instructions given by the undersigned below. IF NO
INSTRUCTIONS ARE GIVEN, SUCH SHARES WILL BE VOTED FOR THE PROPOSAL SET FORTH
BELOW. The Board of Trustees has approved the Proposal and recommends voting FOR
the Proposal.
PROPOSAL: To approve the Agreement and Plan of Reorganization (the
"Plan") between the Core Fund and the Cutler Value Fund (the "Value
Fund"), each a series of the Trust. Under the Plan, the Core Fund will
transfer all of its assets and liabilities to the Value Fund in
exchange solely for shares of the Value Fund. The Core Fund will then
distribute the shares received from the Value Fund proportionately to
its shareholders and then terminate.
FOR [_____] AGAINST [_____] ABSTAIN [_____]
The proxies are authorized to vote in their discretion on any other
business which may properly come before the meeting and any adjournments
thereof.
(NOTE: Checking the box labeled ABSTAIN will result in the shares covered by the
Proxy being treated as if they were voted AGAINST the proposal.) Receipt is
acknowledged of the Notice and Proxy Statement for the Special Meeting of
Shareholders to be held on April 10, 2003. This Proxy may be revoked at any time
before it is exercised. PLEASE SIGN AND DATE THIS PROXY IN THE SPACE PROVIDED.
Execution by shareholders who are not individuals must be made by an authorized
signatory. Executors, administrators, trustees, guardians and others signing in
a representative capacity should give their full title as such.
__________________________________________________________ __________
Authorized Signature Date
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Printed Name (and Title if Applicable)
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Authorized Signature (Joint Investor or Second Signatory) Date
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Printed Name (and Title if Applicable)