As filed with the Securities and Exchange Commission on March 7, 2007
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material under Rule 14a-12
THE CUTLER TRUST
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(Name of Registrant as Specified In Its Charter)
c/o ULTIMUS FUND SOLUTIONS, LLC
225 Pictoria Drive, Suite 450
Cincinnati, Ohio 45246
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(Address of principal executive offices)
Not Applicable
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X ] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11(set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(4) Date Filed:
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PROXY
STATEMENT
The Cutler Trust
March 5, 2007
Important Voting Information Inside!
TABLE OF CONTENTS
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Letter from the President....................................................1
Notice of Special Meeting of Shareholders....................................2
Important Information to Help You Understand and Vote on the Proposals.......3
Meeting Information..........................................................5
Proposal 1: Election of Trustees.............................................8
Proposal 2: Approval of Investment Advisory Agreement.......................14
Other Business..............................................................20
Independent Registered Public Accounting Firm...............................20
Additional Information......................................................21
Appendix A: Investment Advisory Agreement..................................23
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THE CUTLER TRUST
Cutler Equity Fund
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INVESTMENT ADVISER: SHAREHOLDER SERVICES:
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CUTLER INVESTMENT COUNSEL, LLC c/o ULTIMUS FUND SOLUTIONS, LLC
3555 LEAR WAY P.O. BOX 46707
MEDFORD, OREGON 97504 CINCINNATI, OHIO 45246
TOLL FREE: 1-888-CUTLER4
March 5, 2007
Dear Shareholder:
We are writing to inform you of the upcoming Special Meeting of
Shareholders of the Cutler Equity Fund (the "Fund") scheduled to be held on
Monday April 9, 2007 at 1:30 p.m., Eastern time at 225 Pictoria Drive, Suite
450, Cincinnati, Ohio 45246 (the "Special Meeting") to vote on two important
proposals affecting the Fund:
1. To elect five Trustees; and
2. To approve or disapprove a revised Investment Advisory Agreement
between The Cutler Trust and Cutler Investment Counsel, LLC,
investment adviser to the Fund.
Whether or not you are planning to attend the Special Meeting, we need your
vote. PLEASE COMPLETE, SIGN, AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED, POSTAGE-PAID ENVELOPE SO THAT YOUR SHARES MAY BE
VOTED AT THE SPECIAL MEETING.
If you are a shareholder of record of the Fund as of the close of business
on March 5, 2007, you are entitled to notice of, and to vote at the Special
Meeting and at any adjournment or postponement thereof.
The Board has recommended approval of the proposals listed above and
encourages you to vote "FOR" each proposal.
If you have any questions regarding the proposals or need assistance in
completing your proxy card, please contact Shareholder Services, toll-free at
1-888-CUTLER4 (1-888-288-5374). I urge you to read the entire proxy statement
completely and carefully. COPIES OF THE FUND'S MOST RECENT ANNUAL AND
SEMI-ANNUAL REPORT ARE AVAILABLE WITHOUT CHARGE BY WRITING TO THE FUND AT P.O.
BOX 46707, CINCINNATI, OHIO 45246-0707, OR BY CALLING THE FUND NATIONWIDE
(TOLL-FREE) AT 1-888-CUTLER4 (1-888-288-5374).
Thank you for taking the time to consider these important proposals and for
your continuing investment in the Cutler Equity Fund.
Sincerely,
/s/ Erich M. Patten
Erich M. Patten
President
1
The Cutler Trust
3555 Lear Way
Medford, Oregon 97504
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
CUTLER EQUITY FUND
TO BE HELD ON APRIL 9, 2007
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NOTICE IS HEREBY GIVEN that a special meeting of the shareholders (the
"Special Meeting") of the Cutler Equity Fund (the "Fund"), will be held on April
9, 2007 at 1:30 p.m. Eastern time at the offices of Ultimus Fund Solutions, LLC,
the Fund's transfer agent, located at 225 Pictoria Drive, Suite 450, Cincinnati,
Ohio 45246, to consider and vote on the following matters:
1. To elect five Trustees for The Cutler Trust;
2. To approve or disapprove a revised Investment Advisory Agreement
between The Cutler Trust and Cutler Investment Counsel, LLC,
investment adviser to the Fund; and
3. To transact any other business, not currently contemplated, that may
properly come before the Special Meeting or any adjournment thereof.
This is a notice and proxy statement for the Special Meeting. Shareholders
of record of the Fund as of the close of business on March 5, 2007 (the "Record
Date") are entitled to notice of, and to vote at, this Special Meeting or any
adjournments or postponement thereof. Your attention is directed to the attached
proxy statement.
THE BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU CAST YOUR VOTE "FOR" EACH
OF THE PROPOSALS.
March 5, 2007
BY ORDER OF THE BOARD OF TRUSTEES
/s/ Cassandra W. Borchers
Cassandra W. Borchers
Assistant Secretary
PLEASE EXECUTE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PREPAID ENVELOPE, THUS AVOIDING UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AND WILL NOT
AFFECT YOUR RIGHT TO REVOKE ANY PRIOR PROXY AND TO VOTE IN PERSON IF YOU ATTEND
THE SPECIAL MEETING.
2
THE CUTLER TRUST
QUESTIONS AND ANSWERS
IMPORTANT INFORMATION TO HELP YOU UNDERSTAND AND VOTE ON THE PROPOSALS
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March 5, 2007
The Cutler Equity Fund (the "Fund") will be holding a Special Meeting of
Shareholders on Monday April 9, 2007 at 1:30 p.m., Eastern time, at the offices
of Ultimus Fund Solutions, LLC, the Fund's transfer agent, at 225 Pictoria
Drive, Suite 450, Cincinnati, Ohio 45246. Shareholders of the Fund are receiving
this proxy statement and proxy card to consider and to vote on the proposals set
forth in this Proxy Statement.
We ask that you give each proposal careful consideration. This section of
the Proxy Statement is intended to give you a quick review of each proposal and
the proxy process. Details about the proposals are set forth in the Proxy
Statement. We urge you to read the entire Proxy Statement completely and
carefully.
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Q: WHY ARE SHAREHOLDERS BEING MAILED THIS PROXY MATERIAL?
A: You are receiving these proxy materials -- including the Proxy Statement and
the accompanying proxy card -- because you have the right to vote on two
important proposals concerning your investment in the Fund. The purpose of this
Proxy Statement is to disclose important information about the proposals and to
seek shareholder approval of the proposals. The proposals have been unanimously
approved by the Board of Trustees.
Q: WHAT ARE SHAREHOLDERS BEING ASKED TO VOTE ON IN PROPOSAL 1?
A: Shareholders are being asked to approve five nominees to serve on the Board
of Trustees.
Q: WHAT ARE SHAREHOLDERS BEING ASKED TO VOTE ON IN PROPOSAL 2?
A: Shareholders are being asked to approve a revised Investment Advisory
Agreement between the Trust and its current investment adviser, Cutler
Investment Counsel, LLC.
Q: WHY IS THE FUND ASKING FOR APPROVAL OF THESE PROPOSALS?
A: The Fund is seeking shareholder approval of Proposal 1 to increase the size
of its Board of Trustees and to add two additional independent Trustees who are
not otherwise affiliated with the Trust or its investment adviser.
The Fund is seeking approval of Proposal 2 in order to update the Investment
Advisory Agreement by basically:
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1) removing outdated references to the Fund's former administrator and
transfer agent;
2) replacing outdated references to a predecessor investment adviser with
the name of the current investment adviser;
3) replacing outdated references to the former name of the Fund with
"Cutler Equity Fund";
4) reflecting the current address of the Trust and its investment
adviser;
5) specifying that the revised Investment Advisory Agreement is governed
by Oregon law (as opposed to New York law); and
6) removing a provision relating to in-kind distributions which
management believes is not necessary or appropriate to be included in
an investment advisory agreement.
Q: HOW DOES THE BOARD OF TRUSTEES RECOMMEND I VOTE ON THE PROPOSALS?
A: The Board unanimously recommends that shareholders vote in favor of the
proposals.
Q: ARE THERE OTHER CHANGES AFFECTING THE FUND?
A: Not at this time.
Q: WHERE IS THE MEETING GOING TO BE HELD?
A: The Meeting is scheduled for Monday April 9, 2007 at 1:30 p.m., Eastern time,
at the offices of the Fund's transfer agent, Ultimus Fund Solutions, LLC, 225
Pictoria Drive, Suite 450, Cincinnati, Ohio 45246.
Q: WHO IS ELIGIBLE TO VOTE AT THE MEETING?
A: Shareholders as of March 5, 2007 (the "Record Date") are entitled to vote at
the Special Meeting or any adjournment of the Special Meeting. Shareholders may
cast one vote for each share they own.
Q: HOW DO I VOTE MY PROXY?
A: To vote, please complete the enclosed proxy card and return the card in the
enclosed self-addressed, postage-paid envelope. You may also attend the meeting
and vote your shares in person.
Q: WILL THE FUND BE REQUIRED TO PAY FOR THIS PROXY SOLICITATION?
A: Yes, the Fund will pay the cost of this proxy solicitation.
Q: WHERE CAN I GET MORE INFORMATION ABOUT THE PROPOSALS?
A: Please contact Shareholder Services directly at 1-888-288-5374
(1-888-CUTLER4) between the hours of 8:30 a.m. to 5:30 p.m., Eastern time.
Representatives will be happy to answer any questions you may have.
4
THE CUTLER TRUST
3555 LEAR WAY
MEDFORD, OREGON 97504
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SPECIAL MEETING OF THE SHAREHOLDERS OF
CUTLER EQUITY FUND
TO BE HELD APRIL 9, 2007
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PROXY STATEMENT
MARCH 5, 2007
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This Proxy Statement is furnished by The Cutler Trust (the "Trust") to the
shareholders of the Cutler Equity Fund (the "Fund"), a series of the Trust, on
behalf of the Trust's Board of Trustees in connection with the Fund's
solicitation of shareholders' proxies for use at a Special Meeting to be held
Monday April 9, 2007, at 1:30 p.m., Eastern time, at the offices of Ultimus Fund
Solutions, LLC, the Fund's transfer agent, at 225 Pictoria Drive, Suite 450,
Cincinnati, Ohio 45246, for the purposes set forth below and in the accompanying
Notice of Special Meeting. The approximate mailing date of this Proxy Statement
to shareholders is March 7, 2007.
At the Special Meeting, the shareholders of the Fund will be asked:
1. To elect five Trustees for The Cutler Trust (the "Trust");
2. To approve or disapprove a revised Investment Advisory Agreement between
the Trust and Cutler Investment Counsel, LLC, the investment adviser to the
Fund (the "Adviser"); and
3. To transact any other business, not currently contemplated, that may
properly come before the Special Meeting or any adjournment thereof.
MEETING INFORMATION
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RECORD DATE/SHAREHOLDERS ENTITLED TO VOTE. The Fund is a separate
investment series, or portfolio, of the Trust, a Delaware business trust and
registered investment company under the Investment Company Act of 1940, as
amended (the "Investment Company Act"). The shares of beneficial interest of the
Trust entitled to vote at the meeting are issued in series. Currently there is
one series issued, the Cutler Equity Fund, which will be referred to as the
"Fund". The record holders of outstanding shares of the Fund are entitled to one
vote per share (and a fractional vote per fractional share) on all matters
presented at the Special Meeting. Shareholders of the Fund at the close of
business on March 5, 2007 (the "Record Date") will be entitled to notice of and
to be
5
present and vote at the Special Meeting. As of the Record Date, there were
3,457,922.853 shares of beneficial interest of the Fund outstanding and entitled
to vote, representing total net assets of $39,489,478.98.
VOTING PROXIES. Whether you expect to be personally present at the Special
Meeting or not, we encourage you to vote by proxy. You can do this by executing,
dating and returning the enclosed proxy card. Properly executed proxies will be
voted as you instruct by the persons named in the accompanying proxy card. In
the absence of such direction, however, the persons named in the accompanying
proxy card intend to vote FOR the Proposals and may vote in their discretion
with respect to other matters not now known to the Board of Trustees that may be
properly presented to the Special Meeting.
Shareholders who execute proxies may revoke them at any time before they
are voted, by executing a later dated proxy card, by writing to the Assistant
Secretary of the Trust, Cassandra W. Borchers, c/o Ultimus Fund Solutions, LLC,
P.O. Box 46707, Cincinnati, Ohio 45246-0707, or by voting in person at the time
of the Special Meeting. If not so revoked, the shares represented by the proxy
will be voted at the Special Meeting, and any adjournments and postponement
thereof, as instructed. Attendance by a shareholder at the Special Meeting does
not, in itself, revoke a proxy.
REQUIRED VOTE. If a quorum (as described below) is represented at the
Special Meeting, the vote of a plurality of the Trust's shares represented at
the meeting is required for the election of Trustees (Proposal 1 below) and the
vote of a "majority of the outstanding shares" of the Fund is required for
approval of the revised Investment Advisory Agreement (Proposal 2 below). The
vote of a "majority of the outstanding shares" means the vote of the lesser of
(1) 67% or more of the shares present or represented by proxy at the Special
Meeting, if the holders of more than 50% of the outstanding shares of the Fund
are present or represented by proxy, or (2) more than 50% of the outstanding
shares of the Fund.
All properly executed proxies received prior to the Special Meeting will be
voted at the Special Meeting in accordance with the instructions marked thereon.
Proxies received prior to the Special Meeting on which no vote is indicated will
be voted "FOR" the Proposals.
QUORUM REQUIRED TO HOLD MEETING. In order to transact business at the
Special Meeting, a "quorum" must be present. Under the Trust's Agreement and
Declaration of Trust, a quorum is constituted by the presence in person or by
proxy of more than one third of the outstanding shares of the Fund entitled to
vote at the Special Meeting.
Abstentions and broker non-votes (i.e., proxies from brokers or nominees
indicating that they have not received instructions from the beneficial owners
on an item for which the brokers or nominees do not have discretionary power to
vote) will be treated as present for determining whether a quorum is present
with respect to a particular matter. Abstentions and broker non-votes will not,
however, be counted as voting on any matter at the Special Meeting when the
voting requirement is based on achieving a percentage of "voting securities
present." Therefore, a broker non-vote or abstention will have no effect on
Proposal 1 which is determined by a plurality of favorable votes. Because
Proposal 2 requires the affirmative vote of the Fund's outstanding shares for
approval, a broker non-vote or abstention will have the effect of a vote against
Proposal 2.
6
If a quorum of shareholders of the Fund is not present at the Special
Meeting, or if a quorum is present but sufficient votes to approve a proposal
are not received, the persons named as proxies may, but are under no obligation
to, propose one or more adjournments of the Special Meeting for a period or
periods not more than ninety (90) days in the aggregate to permit further
solicitation of proxies. Any business that might have been transacted at the
Special Meeting may be transacted at any such adjourned session(s) at which a
quorum is present. The Special Meeting may also be adjourned from time to time
by a majority of the votes of the Fund properly cast upon the question of
adjourning the Special Meeting to another date and time, whether or not a quorum
is present. The persons named as proxies will vote all proxies in favor of
adjournment that voted in favor of the proposal, and vote against adjournment
all proxies that voted against the proposal (including abstentions and broker
non-votes). Abstentions and broker non-votes will have the same effect at any
adjourned meeting as noted above.
METHOD AND COSTS OF PROXY SOLICITATION. Proxies will be solicited primarily
by mail and telephone. The solicitation may also include facsimile or oral
communications by certain officers or employees of the Trust, the Adviser, or
Ultimus Fund Solutions, LLC ("Ultimus"), the Fund's administrator, who will not
be paid for these services.
The Fund will pay the costs of the Special Meeting and the expenses
incurred in connection with the solicitation of proxies, which will include
reasonable fees paid to any proxy solicitation service used for its printing and
mailing efforts. The Trust, the Adviser or Ultimus may also request
broker-dealer firms, custodians, nominees and fiduciaries to forward proxy
materials to the beneficial owners of the shares of the Fund held of record by
such persons. If requested, the Fund shall reimburse such broker-dealer firms,
custodians, nominees and fiduciaries for their reasonable expenses incurred in
connection with such proxy solicitation, including reasonable expenses in
communicating with persons for whom they hold shares of the Fund. The estimated
cost for conducting this Special Meeting and the related proxy solicitation is
expected to be approximately $4,000.
PRINCIPAL SHAREHOLDERS. On the Record Date, Axelson Fishing Tackle
Manufacturing Co. Profit Sharing Plan, 17351 Murphy Avenue, Irvine, CA 92714,
owned of record 5.24% of the outstanding shares of the Fund. No other persons
owned of record and, according to information available to the Fund, no other
persons owned beneficially 5% or more of the Fund's outstanding shares.
All Trustees and officers as a group owned of record or beneficially less
than 1% of the Fund's outstanding shares on the Record Date.
REPORTS TO SHAREHOLDERS. Copies of the Fund's most recent annual and
semi-annual report are available without charge by writing to the Fund at P.O.
Box 46707, Cincinnati, Ohio 45246-0707, or by calling the Fund nationwide
(toll-free) at 1-888-CUTLER4 (1-888-288-5374).
7
INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS. The Fund's investment
adviser is Cutler Investment Counsel, LLC, located at 3555 Lear Way, Medford,
Oregon 97504. The Adviser manages the Fund's portfolio and oversees the daily
business operations of the Fund. The Fund's administrator and transfer agent,
Ultimus Fund Solutions, LLC, and the Fund's principal underwriter, Ultimus Fund
Distributors, LLC, are located at 225 Pictoria Drive, Suite 450, Cincinnati,
Ohio 45246.
PROPOSAL 1:
ELECTION OF TRUSTEES
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The Board of Trustees of the Trust has nominated five individuals (the
"Nominees") for election to the Board. At the Special Meeting, the shareholders
of the Trust will be asked to elect the Nominees to serve on the Board of
Trustees of the Trust. It is intended that the enclosed Proxy will be voted FOR
the election of the five Nominees named below as Trustees, unless such authority
has been withheld in the Proxy. Each Nominee has consented to serve as a Trustee
if elected.
Shareholders are being asked to elect the five Nominees to serve on the
Board of Trustees of the Trust in order to increase the size of the Board from
three Trustees to five, while ensuring that at least two-thirds of the members
of the Board have been elected by the shareholders of the Trust, as required by
the Investment Company Act. Currently, the Board consists of three Trustees, of
which two Trustees have been elected by shareholders and one has not. However,
with the Board's recent decision to increase the size of the Board and the
nomination by the Trustees of two additional Trustees who are not considered to
be "interested persons" under the Investment Company Act (referred to as
"Independent Trustees"), the Trust would no longer meet the requirement that
two-thirds of all Trustees must have been elected by shareholders. The
Investment Company Act also provides that vacancies on the Board of Trustees may
not be filled by Trustees unless thereafter at least two-thirds of the Trustees
shall have been elected by shareholders. To ensure continued compliance with the
forgoing requirements of the Investment Company Act, shareholders are being
asked at this Special Meeting to elect the five Nominees. The Nominees will be
elected for indefinite terms, subject to death, resignation, retirement or
removal. Each Nominee has indicated a willingness to serve as a member of the
Board of Trustees if elected. If any of the Nominees should not be available for
election, the persons named as proxies (or their substitutes) may vote for other
persons in their discretion. However, management has no reason to believe that
any Nominee will be unavailable for election. In evaluating the Nominees, the
Trustees took into account their background and experience, including their
familiarity with the issues relating to the Fund as well as their distinguished
careers. The Trustees also considered the prior experience of certain of the
Nominees as Trustees of the Trust.
8
THE BOARD OF TRUSTEES GENERALLY
The Board of Trustees oversees the management of the Trust and meets at
least quarterly to review reports about the Trust's operations. The Board of
Trustees provides broad supervision over affairs of the Trust. The Board of
Trustees, in turn, elects the officers of the Trust to actively supervise the
Fund's day-to-day operations. Subject to the Investment Company Act and
applicable Delaware law, they may fill vacancies in or reduce the number of
Board members, and may elect and remove such officers and appoint and terminate
such agents as they consider appropriate. They may appoint from their own number
and establish and terminate one or more committees consisting of two or more
Trustees who may exercise the powers and authority of the Board to the extent
that the Trustees determine. They may, in general, delegate such authority as
they consider desirable to any officer of the Trust, to any Committee of the
Board and to any agent or employee of the Trust.
The Trust shall indemnify each of its Trustees against all liabilities,
including but not limited to amounts paid in satisfaction of judgments, in
compromise or as fines and penalties, and expenses, including reasonable
accountants' and counsel fees, incurred by any Trustee in connection with the
defense or disposition of any action, suit or other proceeding, whether civil or
criminal, before any court or administrative or legislative body, in which such
Trustee may be or may have been involved as a party or otherwise or with which
such Trustee may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Trustee, and except that no Trustee
shall be indemnified against any liability to the Trust or its shareholders to
which such Trustee would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved in the
conduct of such Trustee's office.
INFORMATION REGARDING THE TRUST'S TRUSTEES, NOMINEES AND EXECUTIVE OFFICERS
The following is a list of the Trustees, Nominees and executive officers of
the Trust. The Trustees serve for an indefinite term, subject to death,
resignation, retirement or removal, and the officers are elected annually. Each
Trustee and Nominee who is an "interested person" of the Trust, as defined by
the Investment Company Act, is listed as such. The other Trustees and Nominees
are not considered "interested persons" of the Trust under the Investment
Company Act; that is, they are not employees or officers of, and have no
financial interest in, the Trust's affiliates or its service providers. During
the past fiscal year, the Board of Trustees met five times. Each Trustee
attended 100% of such Board meetings and, if he was a member, meetings of the
Trust's Audit Committee during such year.
9
Number of
Portfolios in
Fund Complex
Principal Occupation(s) During Overseen by
Position(s) Length of Past 5 Years and Directorships of Trustee/
Held with Time Served Public Companies Nominee
Name, Address and Age Trust
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INTERESTED TRUSTEES/NOMINEES:
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Matthew C. Patten (1)(2) Chairman, Since Treasurer since 2004 and 1
(age 31) Trustee and September Chairman and Trustee of the
3555 Lear Way Treasurer 2006 as Trust since September, 2006;
Medford, OR 97504 Chairman/ President since 2004 and
Trustee; Investment Committee Member
Since March and Portfolio Manager of Cutler
2004 as Investment Counsel, LLC since
Treasurer 2003; Portfolio Manager,
Member and President of Cutler
Venture Partners, LLC (a private
equity firm)since 2003;
Investment Committee Member
of Table Rock Management, LLC
("Table Rock")(a registered
investment adviser) from 2002
until 2004; Portfolio Manager -
Private Equity and Public Equity
of Table Rock from 2000 until
2004; Chief Operating Officer
and Portfolio Manager of Cutler
Asia, LLC (a private equity firm)
from 2000 until 2005; Director of
The First America Asia Fund I,
LP (a) private equity fund) from
1999 to 2006.
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INDEPENDENT TRUSTEES/NOMINEES:
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Robert B. Watts, Jr. (age 76) Trustee Since Counsel for Northhaven Associates 1
1710 Lake Village Dr. March since 1985
Medford, OR 97504 1996
Robert E. Clarke (age 84) Trustee Since Retired 1
One Skyline Drive May
Apt. 3407 2002
Medford, OR 97504
10
John P. Cooney (age 75) Nominee N/A U.S. Magistrate Judge (retiring 1
100 Greenway Circle March 2007)
Medford, OR 97504
Dr. Mario Campagna (age 79) Nominee N/A Retired 1
1701 Lake Village Drive
Medford, OR 97504
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EXECUTIVE OFFICERS:
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Erich M. Patten(3) President Since Investment Committee Member, Portfolio Manager and
(age 29) March Corporate Secretary of Cutler Investment Counsel, LLC
3555 Lear Way 2004 since 2003; Member of Cutler Venture Partners, LLC
Medford, OR 97504 (private equity firm) since 2003; Member of Cutler
Asia, LLC (a private equity firm) from 2003 until
2005; Investment Committee Member and Portfolio
Manager of Table Rock (a registered investment
adviser) from 2003 until 2004; Intern with the U.S.
Environmental Protection Agency in 2002; Clerk with
Sidley Austin Brown and Wood (a law firm) in 2001;
Investment Performance Specialist with Ashland
Partners, LLP from 1998 until 2003.
Brooke C. Ashland(3) Vice Since Investment Committee Member and Chief Executive
(age 55) President/ June Officer of Cutler Investment Counsel, LLC since 2003;
3555 Lear Way and Chief 2002 Portfolio Manager, Member and Chief Executive Officer
Medford, OR 97504 Compliance of Cutler Venture Partners, LLC (a private equity
Officer firm) since 2003; Chief Executive Officer of
Centricity, LLC (an investment adviser) since 2003;
General Partner of The First America Asia Fund I, LP
(a private equity fund) since 1999; Chief Operating
Officer, Chief Executive Officer and Portfolio Manager
of Cutler Asia, LLC (a private equity firm) since
1998; Chief Executive Officer and/or Chairman of the
Board of Managers for Table Rock (a registered
investment adviser) from 1995 to 2004; Chief Executive
Officer and President of Trustee Investment Services,
Inc. (a Trustee education firm) since 1991; President
of Big Bear Timber, LLC (farming) since 1989.
Carol S. Fischer (age 51) Vice Since Member and Chief Operating Officer of Cutler
3555 Lear Way President, 1996 Investment Counsel, LLC since 2003; Member and Chief
Medford, OR 97504 Assistant Operating Officer of Table Rock (a registered
Secretary and investment adviser) from 1994 to 2004; Secretary of
Asst. P.S.&S., Inc. (a sales company) since 1990.
Treasurer
11
John F. Splain (age 50) Secretary Since Managing Director, Ultimus Fund Solutions, LLC
225 Pictoria Drive March and Ultimus Fund Distributors, LLC since 1999.
Cincinnati, Ohio 45246 2005
Robert G. Dorsey (age 49) Vice Since Managing Director of Ultimus Fund Solutions,
225 Pictoria Drive President March LLC and Ultimus Fund Distributors, LLC since
Cincinnati, Ohio 45246 2005 1999.
(1) Matthew C. Patten is an Interested Trustee because of the positions he
holds with the Adviser and its affiliates.
(2) Matthew C. Patten and Erich M. Patten are brothers and the sons of
Brooke C. Ashland.
BOARD COMMITTEES. The Board of Trustees has established the standing
committees described below. The members of the Audit, Nominating and Valuation
Committees currently are, and subject to their election as Trustee at the
Special Meeting, will continue to be, Robert B. Watts, Jr. and Robert E. Clarke,
and, subject to their election as Trustee at the Special Meeting, John P. Cooney
and Dr. Mario Campagna. Matthew C. Patten is also a member of the Valuation
Committee and will continue to serve on the Valuation Committee subject to his
election as Trustee at the Special Meeting.
AUDIT COMMITTEE. The Audit Committee assists the Board in fulfilling its
responsibility for oversight of the quality and integrity of the accounting,
auditing and financial reporting practices of the Trust. It also selects the
Trust's independent registered public accounting firm, reviews the methods,
scope and results of the annual audit and the audit fees charged, and reviews
the Trust's internal accounting procedures and controls. During the fiscal year
ended June 30, 2006, the Audit Committee met twice.
NOMINATING COMMITTEE. The Nominating Committee meets as necessary and is
charged with the duty of nominating all Independent Trustees and committee
members, and presenting these nominations to the Board. The Nominating Committee
does not currently consider shareholder nominations. During the fiscal year
ended June 30, 2006, the Nominating Committee did not meet.
VALUATION COMMITTEE. The Valuation Committee reviews and provides advice
regarding the Trust's policies and procedures for determining net asset value
per share of the Trust's series. The Valuation Committee also produces fair
value determinations for securities maintained in the portfolios of the Trust's
series consistent with valuation procedures approved by the Board. The Valuation
Committee meets as necessary. During the fiscal year ended June 30, 2006, the
Valuation Committee did not meet.
12
TRUSTEE OWNERSHIP OF FUND SHARES
- --------------------------------------------------------------------------------------------------------------------
AGGREGATE DOLLAR RANGE OF
OWNERSHIP AS OF DECEMBER 31,
DOLLAR RANGE OF BENEFICIAL 2006 IN ALL FUNDS OVERSEEN BY
OWNERSHIP IN THE FUND TRUSTEE IN THE SAME FAMILY OF
TRUSTEE/NOMINEE AS OF DECEMBER 31, 2006 INVESTMENT COMPANIES
- ---------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
------------------
- --------------------------------------------------------------------------------------------------------------------
Matthew C. Patten None None
- --------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES/NOMINEES
-----------------------------
- --------------------------------------------------------------------------------------------------------------------
Robert B. Watts, Jr. None None
- --------------------------------------------------------------------------------------------------------------------
Robert E. Clarke None None
- --------------------------------------------------------------------------------------------------------------------
John P. Cooney None None
- --------------------------------------------------------------------------------------------------------------------
Dr. Mario Campagna None None
- --------------------------------------------------------------------------------------------------------------------
COMPENSATION OF TRUSTEES. Each Independent Trustee of the Trust is paid an
annual retainer fee of $10,000 for his service to the Trust. The fee is
paid monthly in equal payments. The Trustees are also reimbursed for travel
and related expenses incurred in attending Board meetings. Mr. Patten
receives no compensation (other than reimbursement for travel and related
expenses) for his service as a Trustee of the Trust. No officer or employee
of the Trust is compensated by the Trust but officers are reimbursed for
travel and related expenses incurred in attending Board meetings.
The following table sets forth the fees paid to each Trustee by the Trust
and the Fund Complex during the fiscal year ended June 30, 2006.
- ----------------------------------------------------------------------------------------------------------------
PENSION OR ESTIMATED TOTAL
AGGREGATE RETIREMENT ANNUAL COMPENSATION
TRUSTEE COMPENSATION BENEFITS BENEFITS UPON FROM TRUST AND
FROM TRUST ACCRUED RETIREMENT FUND COMPLEX
- ----------------------------------------------------------------------------------------------------------------
Matthew C. Patten(1) $ 0 $ 0 $ 0 $ 0
- ----------------------------------------------------------------------------------------------------------------
Robert B. Watts, Jr. 10,000 0 0 10,000
- ----------------------------------------------------------------------------------------------------------------
Robert E. Clarke 10,000 0 0 10,000
- ----------------------------------------------------------------------------------------------------------------
(1) Mr. Patten is an Interested Trustee because of the positions he
holds with the Adviser and its affiliates.
THE BOARD OF TRUSTEES, INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY
RECOMMENDS THAT YOU VOTE "FOR" EACH OF THE NOMINEES.
13
PROPOSAL 2:
APPROVAL OF REVISED INVESTMENT ADVISORY AGREEMENT
-------------------------------------------------------------------------------
OVERVIEW AND RELATED INFORMATION
On February 8, 2007, the Trustees approved a revised Investment Advisory
Agreement between the Trust and Cutler Investment Counsel, LLC (the "Adviser")
and are recommending that shareholders of the Fund approve such Investment
Advisory Agreement (the "Revised Agreement"). However, if the Revised Agreement
is not approved by shareholders, the investment advisory agreement currently in
effect shall remain in effect. As described below, the Revised Agreement
incorporates the material provisions of the Advisory Agreement currently in
effect.
The Adviser currently serves as investment adviser to the Fund. The reason
for the Trustees proposing the Revised Agreement for the Fund is that the
current Investment Advisory Agreement contains outdated references to the Fund's
former administrator and transfer agent; outdated references to Cutler &
Company, LLC, the former investment adviser to the Fund; outdated references to
the Fund's prior name, the "Cutler Value Fund"; outdated addresses; a reference
to New York law as controlling law, when neither the Trust nor the Adviser is
domiciled in New York; and certain provisions relating to in-kind distributions
which management believes are not necessary or appropriate to be included in an
investment advisory agreement. The Trustees have carefully considered the
matter, and have concluded that it is appropriate to approve the Revised
Agreement for the Fund, so that the Adviser can continue to manage the Fund on
otherwise substantially similar terms as are now in effect. NO CHANGE IN THE
FUND'S ADVISORY FEE RATE IS BEING PROPOSED.
INFORMATION REGARDING THE ADVISER
The Adviser currently acts as the Fund's investment adviser pursuant to an
Investment Advisory Agreement (the "Current Agreement") dated December 31, 1992
and restated as of May 1, 1996. The Trustees, including a majority of the
Trustees who are not a party to the Current Agreement, or interested persons of
such parties, initially approved the Current Agreement at a meeting held on
December 28, 1992 and most recently approved its continuance on December 19,
2006 for an annual term.
The Adviser, located at 3555 Lear Way, Medford, Oregon 97504 is an Oregon
limited liability company. The Adviser is majority owned by Brooke C. Ashland
who is also Chief Executive Officer and Chief Compliance Officer of the Adviser.
Ms. Ashland currently owns 75% of the outstanding ownership of the Adviser. The
principal business address of Ms. Ashland is 3555 Lear Way, Medford, Oregon
97504.
14
Listed below is information regarding the managing members and officers of
the Adviser.
- ------------------------------------------------------------------------------------------------------------------
NAME ADDRESS PRINCIPAL OCCUPATION
- ------------------------------------------------------------------------------------------------------------------
Brooke C. Ashland 3555 Lear Way, Chief Executive Officer and Chief
Medford, Oregon Compliance Officer of Cutler
Investment Counsel, LLC
- ------------------------------------------------------------------------------------------------------------------
Carol S. Fischer 3555 Lear Way Chief Operating Officer of Cutler
Medford, Oregon Investment Counsel, LLC
- ------------------------------------------------------------------------------------------------------------------
Matthew C. Patten 3555 Lear Way, President of Cutler Investment Counsel,
Medford, Oregon LLC
- ------------------------------------------------------------------------------------------------------------------
Erich M. Patten 3555 Lear Way, Portfolio Manager and Secretary of
Medford, Oregon Cutler Investment Counsel, LLC
- ------------------------------------------------------------------------------------------------------------------
Chris Uhas 3555 Lear Way, Senior Vice President of Cutler
Medford, Oregon Investment Counsel, LLC
- ------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF THE INVESTMENT ADVISORY AGREEMENT
Cutler Investment Counsel, LLC and its predecessors or affiliates have
acted as investment adviser for the Fund since its inception, and currently acts
as the Fund's investment adviser pursuant to the Current Agreement. The Trustees
of the Trust approved the Current Agreement at a meeting held on December 28,
1992 and last approved the continuance of the Current Agreement at a meeting
held on December 19, 2006. The Current Agreement was originally approved by
written consent of the sole shareholder of the Trust dated December 30, 1992 and
last approved by the Fund's shareholders on March 20, 1996. The purpose of
submission of the Current Agreement to shareholders at such time was to approve
an increase in the advisory fees paid by the Trust. Under the Current Agreement,
the Adviser has overall advisory and administrative responsibility with respect
to the Fund. The Current Agreement also provides that the Adviser, subject to
its right to delegate its responsibilities to other parties, shall (1) make
decisions with respect to all purchases, sales and other transactions of
securities and other investment assets of the Fund, including the selection of
brokers, dealers and other persons to introduce or execute those transactions;
(2) follow and comply with the investment objectives of the Fund and the
policies set forth from time to time by the Board; (3) monitor the performance
of brokers, dealers and other persons who introduce or execute purchases, sales
and other transactions of securities and other investment assets of the Fund;
(4) maintain proper books and records for the Fund; and (5) report regularly to
the Board with information regarding the Fund.
Under the Current Agreement, the annual management fee rate payable by the
Fund to the Adviser is 0.75% of the average daily net assets of the Fund. For
the fiscal year ended June 30, 2006, the Fund paid the Adviser advisory fees of
$300,806.
15
The Revised Agreement incorporates the following revisions from the Current
Agreement:
(1) The Revised Agreement no longer contains references to the Fund's
former administrator and transfer agent, who was replaced by Ultimus
Fund Solutions, LLC in 2005.
(2) The Revised Agreement updates the name of the current investment
adviser to reflect a technical assignment of Cutler & Company, LLC's
duties to its affiliate, Cutler Investment Counsel, LLC, in 2003.
(3) The Revised Agreement reflects the current name of the Fund: the
Cutler Equity Fund.
(4) The addresses of the Trust and the Adviser have been updated.
(5) The Revised Agreement is governed by Oregon law, where the Trust and
the Adviser are domiciled, whereas the Current Agreement is governed
by New York law.
(6) The Revised Agreement does not include certain provisions relating to
in-kind redemptions because management believes these provisions are
neither necessary nor appropriate to be included in an investment
advisory agreement. Furthermore, the Fund has separately adopted
procedures that address in-kind redemptions in accordance with the
Investment Company Act.
In addition, the date of the Revised Agreement will be different from that
of the Current Agreement and there are certain other non-material changes
between the Revised Agreement and the Current Agreement. Except for the changes
described in this section, the Revised Agreement is substantially the same as
the Current Agreement. For a complete understanding of the proposed Revised
Agreement, please refer to the form of Revised Agreement provided as Appendix A.
The following is a brief summary of some important provisions contained in both
the Current Agreement and the Revised Agreement:
o The Current Agreement and the Revised Agreement each essentially
provides that the Adviser, under the Trustees' supervision, will (1)
decide what securities to buy and sell for the Fund's portfolio and
(2) select brokers and dealers to carry out portfolio transactions for
the Fund.
o The Current Agreement and the Revised Agreement each provides that it
will continue in effect for an initial period of one year and, after
that, it will continue in effect from year to year as long as the
continuation is approved at least annually (i) by the Trustees or by
vote of a majority of the outstanding voting securities of the Fund,
and (ii) by vote of a majority of the Trustees who are not "interested
persons" of the Trust (the "Independent Trustees").
o The Current Agreement and the Revised Agreement each may be terminated
without penalty by vote of the Trustees or by vote of a majority of
the outstanding voting securities of the Fund, on sixty days' written
notice to the Adviser, or by the Adviser upon ninety days' written
notice to the Trust, and terminates automatically in the event of its
"assignment" as defined in the Investment Company Act.
16
o The Current Agreement and the Revised Agreement each provides that the
Adviser will not be liable to the Trust, the Fund, or its shareholders
except for liability arising from the Adviser's willful misfeasance,
bad faith, gross negligence or reckless disregard of its obligations
or duties.
o Under both the Current Agreement and the Revised Agreement, the annual
advisory fee rate payable to the Adviser is equal to the annual rate
of 0.75% of the Fund's average daily net assets.
The Adviser does not serve as investment adviser to any other investment
companies.
BASIS FOR THE TRUSTEES' APPROVAL OF THE INVESTMENT ADVISORY AGREEMENT
At a meeting held on February 8, 2007, the Trustees, including the
Independent Trustees, approved the Revised Agreement and recommended that the
shareholders of the Fund approve the Revised Agreement. In considering these
actions, the Trustees noted that, in connection with their annual review of the
Fund's advisory arrangements (the "Annual Review") on December 19, 2006, they
had approved the Current Agreement (which, as discussed above, is substantially
similar in all material respects to the Revised Agreement) for an additional
one-year term. In connection with the Annual Review, the Trustees considered a
wide range of information of the type they regularly consider when determining
whether to continue the Fund's advisory agreement as in effect from year to
year. In approving the Revised Agreement, the Trustees considered the
information provided and the factors considered in connection with the Annual
Review as well as such new information as they considered appropriate, including
the Adviser's recommendation that the Trustees approve the Revised Agreement. In
considering the Revised Agreement, the Trustees did not identify any single
factor as determinative. Matters considered by the Trustees, including the
Independent Trustees, in connection with their approval of the Revised Agreement
included the following:
THE NATURE, EXTENT AND QUALITY OF THE SERVICES PROVIDED TO THE FUND UNDER
THE ADVISORY AGREEMENT. The Trustees considered the nature, extent and quality
of the services provided by the Adviser to the Fund and the resources dedicated
to the Fund by the Adviser. The Adviser provided the Trustees a copy of its Form
ADV and information on the background, qualifications, education and experience
of the Adviser's investment and operational personnel, including that of new
personnel who had joined the Adviser during the past year. The Adviser also
updated the Trustees on the expansion of the Adviser's product base and plans
for the firm's continued expansion during the coming year, providing not only
detailed information on its professional personnel, but each person's area of
responsibility and the percentage of each person's time committed to Fund
activities. The Trustees found that based on the performance and risk
characteristics of the Fund and the effectiveness of the Fund in achieving its
stated objective, they believe the Adviser has provided high quality services
and the Adviser has the financial resources and personnel to continue to provide
quality advisory services to the Fund. After reviewing these and related
factors, the Trustees concluded, within the context of their overall conclusions
regarding the Revised Agreement, that the nature, extent and quality of services
provided by the Adviser supported the approval of the Revised Agreement.
17
INVESTMENT PERFORMANCE OF THE FUND AND CUTLER. In connection with the
Annual Review, the Trustees had received information about the performance of
the Fund over various time periods, including information which compared the
performance of the Fund to the performance of peer groups of the Fund and the
Fund's performance benchmarks, including the S&P 500 Index, the Dow Jones
Industrial Average, comparable private accounts managed by the Adviser and
domestic equity funds in the Morningstar database of funds of similar size with
similar investment objectives. In addition, the Trustees received more recent
performance information in connection with their approval of the Revised
Agreement. These analyses and comparisons showed that the Fund has performed
competitively over both the short and long term and that even though the Fund
slightly underperformed the average for those mutual funds in the Morningstar
database listed as Large Cap Value under $100 million over certain time periods,
the Fund outperformed the S&P 500 Index, the Fund's primary benchmark for the
three-month and one year periods ended September 30, 2006 and again during the
one year period ended December 31, 2006 while also remaining competitive over
the long term, including the ten year periods. Based upon their review, the
Trustees found that the Fund's performance has been competitive with the returns
of relevant securities indices and other similarly situated mutual funds. The
Trustees noted that the Adviser's investment strategy has remained consistent
with its dividend focused philosophy while maintaining performance. The Board
concluded, within the context of their overall conclusions regarding the Revised
Agreement, that the Fund's performance and other relevant factors supported the
approval of the Revised Agreement.
THE COSTS OF THE SERVICES TO BE PROVIDED AND PROFITS TO BE REALIZED BY THE
ADVISER FROM ITS RELATIONSHIP WITH THE FUNd. In connection with the Annual
Review, the Trustees had considered the fees charged to the Fund for advisory
services as well as the total expense levels of the Fund. At that time, they
considered comparisons (against the Morningstar database) of the Fund's advisory
fees and total expense levels to those of its peer group, categorized both by
fund size and by investment style, and information about the advisory fees
charged by the Adviser to its other accounts. In evaluating the Fund's advisory
fees, the Trustees also took into account the demands, complexity and quality of
the investment management of the Fund. The Fund currently pays an investment
advisory fee computed at the annual rate of .75% of the Fund's average daily net
assets, and the total expense ratio for the Fund for the fiscal year ended June
30, 2006 was 1.26% of average net assets. The Trustees took note of the fact
that the Fund's advisory fee was equal to, and the Fund's expense ratio was
slightly below, the averages for funds with assets under $100 million which are
categorized by Morningstar as Large Cap Value (.76% and 1.32%, respectively) and
that the advisory fees charged to the Fund are lower than those paid by the
Adviser's comparable private accounts. The Adviser noted that it has had a
voluntary expense waiver in effect with respect to the Fund for the last several
fiscal years, but during the most recent fiscal year Fund expenses were below
the voluntary expense cap level such that the Adviser did not need to waive any
fees to maintain Fund expenses at the desired level. The Trustees noted that in
connection with the Annual Review they had concluded that the costs of the
services to be provided supported the renewal of the Current Agreement, the
advisory fees paid by the Fund and the Fund's respective total expense ratios
and that this is not expected to change as a result of the Revised Agreement.
As part of the Annual Review, the Trustees had also considered the
compensation directly or indirectly received by the Adviser from its
relationship with the Fund. The Trustees
18
noted that the Fund does not have any "soft dollar" arrangements with
broker-dealers that would otherwise benefit the Adviser and considered any
fall-out benefits to the Adviser from managing the Fund. In connection with the
Annual Review, the Trustees had reviewed information provided by management as
to the profitability of the Adviser's relationship with the Fund. The Adviser
provided the Trustees a copy of a recent balance sheet of the Adviser and an
analysis of the profitability of the Adviser with respect to the Fund in
comparison to its overall profitability. This information showed that the
Adviser is maintaining a reasonable, but not excessive, profit level with
respect to both the Fund and its other accounts such that the Adviser should be
able to maintain its current level and quality of service to the Fund and that
the Adviser's profitability with respect to the Fund is comparable to the firm's
overall profitability. The Trustees considered that the profitability of its
relationship to the Fund was not expected to change as a result of the Revised
Agreement.
After reviewing these and related factors, the Trustees concluded, within
the context of their overall conclusions regarding the Revised Agreement, that
the advisory fees charged to the Fund are fair and reasonable, and that the
costs of these services generally, and the related profitability of the Adviser
in respect of its relationship with the Fund, supported the approval of the
Revised Agreement.
ECONOMIES OF SCALE. In connection with the Annual Review, the Trustees had
considered the existence of any economies of scale in the provision of services
by the Adviser and whether those economies are shared with the Fund through
breakpoints in its investment advisory fees or other means, such as expense
waivers. The Trustees noted that, given the small size of the Fund, and the fact
that Fund asset levels have remained relatively constant over the past year
breakpoints are not appropriate at this time and it would not be relevant to
consider the extent to which economies of scale would be realized as the Fund
grows, and whether fee levels reflect these economies of scale. The Trustees
noted that this fact would not change as a result of the Revised Agreement. The
Trustees also concluded, however, that if the Fund grows significantly in
assets, it may become necessary for the Adviser to consider adding fee
breakpoints to the Revised Agreement.
The Trustees also considered other factors, either in connection with the
Annual Review or with their approval of the Revised Agreement. These factors
included, but were not limited to, whether the Fund has operated in accordance
with its investment objective and the Fund's record of compliance with its
investment restrictions, and the compliance programs of the Fund and the
Adviser. Based upon detailed information provided by the Adviser, the Trustees
determined that the Fund has operated in accordance with its investment
objective, that there have been no material violations of the Fund's investment
restrictions, the compliance policies of the Trust or any of the Trust's service
providers over the last year. They also considered the compliance program the
Adviser is providing to the Fund, noting that the Chief Compliance Officer of
the Fund, Brooke C. Ashland, is an Officer of the Adviser and the Adviser does
not charge the Fund for her services.
Based on their evaluation of all factors that they deemed to be material,
including those factors described above, and assisted by the advice of
independent counsel, the Trustees, including the Independent Trustees, concluded
that the Revised Agreement should be approved
19
and approved such Revised Agreement, subject to required shareholder approval.
The Board is recommending that shareholders of the Fund vote to approve the
Revised Agreement. The Trustees, including the Independent Trustees, further
resolved that if the Revised Agreement is not approved by the Trustees, the
Current Agreement shall remain in full force and effect.
OTHER BUSINESS
-------------------------------------------------------------------------------
The proxy holders have no present intention of bringing any other matter
before the meeting other than those specifically referred to above or matters in
connection with or for the purpose of effecting the same. Neither the proxy
holders nor the Board of Trustees are aware of any matters which may be
presented by others. If any other business shall properly come before the
meeting, the proxy holders intend to vote thereon in accordance with their best
judgment.
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
The firm of Deloitte & Touche LLP ("Deloitte") has been selected as the
independent registered public accounting firm for the Fund. Deloitte, in
accordance with Independence Standards Board Standard No. 1 (ISB No.1), has
confirmed to the Trust's Audit Committee that it is an independent registered
public accounting firm with respect to the Fund.
Deloitte audits the annual financial statements of the Fund and provides
other tax-related services to the Fund. Representatives of Deloitte are not
expected to be present at the Special Meeting, but have been given the
opportunity to make a statement if they so desire and will be available should
any matter arise requiring their presence.
The Trust's Audit Committee must pre-approve all audit and non-audit
services provided by the independent registered public accounting firm relating
to the operations or financial reporting of the Fund. Prior to the commencement
of any audit or non-audit services to the Fund, the Audit Committee reviews the
services to determine whether they are appropriate and permissible under
applicable law.
Less than 50% of the hours expended on Deloitte's engagement to audit the
Fund's financial statements for the most recent fiscal year were attributed to
work performed by persons who are not full-time, permanent employees of
Deloitte.
AUDIT FEES. The aggregate fees billed by Deloitte for professional services
rendered for the audit of the Fund's annual financial statements or for services
that are normally provided in connection with statutory and regulatory filings
or engagements were $20,500 and $19,675 with respect to the Fund's fiscal years
ended June 30 2006 and 2005, respectively.
20
AUDIT-RELATED FEES. No fees were billed by Deloitte in either of the last
two fiscal years for assurance and related services that are reasonably related
to the performance of the audit of the Fund's financial statements and are not
reported as Audit Fees in the preceding paragraph.
TAX FEES. The aggregate fees billed by Deloitte for professional services
rendered on behalf of the Fund for tax compliance, tax advice, and tax planning
were $3,800 and $3,775 with respect to the Fund's fiscal years ended June 30
2006 and 2005, respectively. The services comprising these fees are the
preparation of the Fund's federal income and excise tax returns.
ALL OTHER FEES. No fees were billed in either of the last two fiscal years
for products and services provided by Deloitte to the Fund other than the
services reported above. Deloitte has not provided any non-audit services in
either of the last two fiscal years to the Fund's investment adviser or any
entity controlling, controlled by, or under common control with the investment
adviser that provides ongoing services to the Fund.
ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
GENERAL
The cost of preparing, printing and mailing the enclosed proxy,
accompanying notice and proxy statement and all other costs incurred in
connection with the solicitation of proxies, including any additional
solicitation made by letter or telephone, will be paid by the Fund. In addition
to solicitation by mail, certain officers and representatives of the Fund and
certain financial services firms and their representatives, who will receive no
extra compensation for their services, may solicit proxies in person or by
telephone.
In order to participate in the Special Meeting, shareholders may submit the
proxy card sent with the proxy statement or attend in person. Should
shareholders require additional information regarding the proxy or replacement
proxy cards, they may contact the Shareholder Services, toll-free, at
1-888-CUTLER4 (1-888-288-5374). Any proxy given by a shareholder is revocable
until the Special Meeting.
PROPOSALS OF SHAREHOLDERS
Any shareholders proposal intended to be presented at the next shareholder
meeting must be received by the Trust for inclusion in its Proxy Statement and
form of Proxy relating to such meeting at a reasonable time before the
solicitation of proxies for the meeting is made. Under current Delaware law and
the Investment Company Act, the Trust is not required to hold annual
shareholders' meetings.
21
By Order of the Board of Trustees
/s/ Cassandra W. Borchers
Cassandra W. Borchers
Assistant Secretary
Date: March 5, 2007
- --------------------------------------------------------------------------------
PLEASE EXECUTE THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE, THUS AVOIDING UNNECESSARY EXPENSE AND DELAY. NO POSTAGE IS NECESSARY
IF MAILED IN THE UNITED STATES. THE PROXY IS REVOCABLE AND WILL NOT AFFECT YOUR
RIGHT TO VOTE IN PERSON IF YOU ATTEND THE MEETING.
22
APPENDIX A
----------
THE CUTLER TRUST
INVESTMENT ADVISORY AGREEMENT
AGREEMENT made the ____ day of April, 2007, between The Cutler Trust (the
"Trust"), a business trust organized under the laws of the State of Delaware
with its principal place of business at 225 Pictoria Drive, Suite 450,
Cincinnati, Ohio 45246, and Cutler Investment Counsel, LLC (the "Adviser"), a
limited liability company organized under the laws of the State of Oregon with
its principal place of business at 3555 Lear Way, Medford, Oregon 97504.
WHEREAS, the Trust is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an open-end management investment company and is
authorized to issue its shares in separate series and classes (the "Shares");
and
WHEREAS, the Trust desires that the Adviser perform investment advisory
services for each separate investment portfolio of the Trust listed in Schedule
A hereto as it may be amended from time to time (each a "Fund" and,
collectively, the "Funds"), and the Adviser is willing to provide those services
on the terms and conditions set forth in this Agreement;
NOW THEREFORE, the Trust and the Adviser agree as follows:
SECTION 1. APPOINTMENT
The Trust hereby appoints the Adviser, and the Adviser hereby agrees, to
act as investment adviser to each Fund for the period and on the terms set forth
in this Agreement. In connection therewith, (i) the Trust has delivered to the
Adviser copies of its Trust Instrument and Bylaws, the Trust's Registration
Statement and all amendments thereto filed pursuant to the Act or the Securities
Act of 1933, as amended, with the Securities and Exchange Commission (the
"Registration Statement") and the current Prospectus and Statement of Additional
Information of each Fund (collectively, as currently in effect and as amended or
supplemented, the "Prospectus") and shall promptly furnish the Adviser with all
amendments of or supplements to the foregoing and (ii) the Adviser has delivered
to the Trust's Secretary copies of its entire Form ADV and all amendments
thereto as amended to date and will from time to time furnish the Trust's
Secretary with all amendments of or supplements to the Adviser's Form ADV.
SECTION 2. INVESTMENT ADVISORY DUTIES
Subject to the direction and control of the Trust's Board of Trustees (the
"Board"), the Adviser shall manage the investment and reinvestment of the assets
of the Funds, and, without limiting the generality of the foregoing, shall
provide the management and other services specified below, all in such manner
and to such extent as may be authorized by the Board.
23
(a) The Adviser shall make decisions with respect to all purchases, sales
and other transactions of securities and other investment assets of the Funds,
including the selection of brokers, dealers and other persons to introduce or
execute those transactions. To carry out such decisions, the Adviser is
authorized, as agent and attorney-in-fact for the Trust, for the account of, at
the risk of and in the name of the Trust, to place orders and issue instructions
with respect to those transactions of the Funds. In all purchases, sales and
other transactions in securities or other investment assets for the Funds, the
Adviser is authorized to exercise full discretion and act for the Trust in the
same manner and with the same force and effect as the Trust might or could do
with respect to such purchases, sales or other transactions, as well as with
respect to all other things necessary or incidental to the furtherance or
conduct of such purchases, sales or other transactions, subject to paragraph (b)
below.
(b) In making decisions with respect to all purchases, sales and other
transactions of securities and other investment assets of the Funds the Adviser
shall follow and comply with the investment objectives of the Funds, the
policies set forth from time to time by the Board (to the extent communicated to
the Adviser in writing or at a Board meeting attended by a representative of the
Adviser), the limitations imposed by the Trust's Trust Instrument and Bylaws,
the Trust's Registration Statement and the Funds' Prospectus(es) (in each case,
to the extent copies thereof are furnished to the Adviser as provided for in
Section l (i) above), the limitations set forth in the Act, and the requirements
of subchapter M of the Internal Revenue Code of 1986, as amended, in respect of
investment companies.
(c) The Adviser shall monitor the performance of brokers, dealers and other
persons who introduce or execute purchases, sales and other transactions of
securities and other investment assets of the Funds.
(d) The Adviser shall maintain records relating to portfolio transactions
and the placing and allocation of brokerage orders as are required to be
maintained by the Trust under the Act, including those required by paragraphs
(b)(5), (6) and (9) of Rule 3 la-1 promulgated under the Act. The Adviser shall
prepare and maintain, or cause to be prepared and maintained, in such form, for
such periods and in such locations as may be required by applicable law, all
documents and records relating to the services provided by the Adviser pursuant
to this Agreement required to be prepared and maintained by the Trust pursuant
to the rules and regulations of any national, state, or local government entity
with jurisdiction over the Trust, including the Securities and Exchange
Commission and the Internal Revenue Service. The books and records pertaining to
the Trust that are in possession of the Adviser shall be the property of the
Trust. The Trust, or the Trust's authorized representatives, shall have access
to such books and records at all times during the Adviser's normal business
hours. Upon the reasonable request of the Trust, copies of any such books and
records shall be provided promptly by the Adviser to the Trust or the Trust's
authorized representatives.
(e) The Adviser shall provide to the Board at each regularly scheduled
meeting thereof (or such other meetings as may be requested by the Trust) a
report containing an appropriate summary of all changes in the Funds' investment
portfolios since the prior report, will
24
inform the Board of important developments affecting the Funds, and on its own
initiative will furnish the Board from time to time with such information as it
believes appropriate for this purpose, whether concerning the individual issuers
whose securities are included in the Funds' investment portfolios, the
industries in which these issuers engage, or the economic, social or political
conditions prevailing in each country in which the Funds' maintain investments.
The Adviser also shall provide the Board with such statistical and analytical
information with respect to securities in the Funds' investment portfolios as
the Adviser believes appropriate or as the Board reasonably may request. The
Adviser shall provide other persons, in such forms and at such times as the
Trust's authorized representatives shall reasonably request, information about
portfolio transactions and prices or yield quotations of portfolio securities.
(f) The Adviser shall from time to time employ or associate with such persons as
it believes to be particularly fitted to assist it in the execution of its
duties under this Agreement, the cost of performance of such duties to be borne
and paid by the Adviser. No obligation may be incurred on behalf of the Trust in
any such respect.
SECTION 3. EXPENSES
(a) Subject to any other agreement by the Adviser or other person to
reimburse any expenses of the Trust that relate to the Funds, the Trust shall be
responsible for and assumes the obligation for payment of all of its other
expenses, including: (i) the fee payable under Section 5 hereof; (ii) expenses
of issue, repurchase and redemption of Shares; (iii) interest charges, taxes and
brokerage fees and commissions; (iv) premiums of insurance for the Trust, its
trustees and officers and fidelity bond premiums; (v) fees, interest charges and
expenses of third parties, including the Trust's custodian, administrator,
transfer agent, dividend disbursing agent and fund accountant; (vi) fees of
pricing, interest, dividend, credit and other reporting services; (vii) costs of
membership in trade associations; (viii) telecommunications expenses; (ix) funds
transmission expenses; (x) auditing, legal and compliance expenses; (xi) costs
of maintaining the Trust's existence; (xii) costs of preparing and printing the
Fund's Prospectuses, subscription application forms and shareholder reports and
delivering them to existing shareholders; (xiii) expenses of meetings of
shareholders and proxy solicitations therefor; (xiv) costs of maintaining books
of original entry for portfolio and fund accounting and other required books and
accounts, of calculating the net asset value of shares of the Trust and of
preparing tax returns; (xv) costs of reproduction, stationery and supplies;
(xvi) fees and expenses of the Trust's Trustees who are not affiliated persons
of the Adviser or its affiliated persons; (xvii) compensation of the Trust's
officers and employees; (xviii) costs of other personnel who may be employees of
the Adviser, or their respective affiliated persons performing services for the
Trust; (xix) costs of Trustee meetings; (xx) Securities and Exchange Commission
registration fees and related expenses; and (xxi) state or foreign securities
laws registration fees and related expenses.
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,
25
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.
(c) This Section shall survive the termination of this Agreement and shall
be binding upon the Trust's and the Adviser's successors and personal
representatives.
SECTION 5. COMPENSATION
(a) For the services provided by the Adviser pursuant to this Agreement,
the Trust shall pay the Adviser, with respect to each of the Funds, a fee at an
annual rate equal to the amount set forth in Schedule A hereto. Such fees shall
be accrued by the Trust daily and shall be payable monthly in arrears on the
first day of each calendar month for services performed under this Agreement
during the prior calendar month. Upon the termination of this Agreement, the
Trust shall pay to the Adviser such compensation as shall be payable prior to
the effective date of such termination.
(b) Notwithstanding anything in this Agreement to the contrary, the Adviser
and its affiliated persons, if any, may receive compensation or reimbursement
from the Trust with respect to the provision of shareholder support or other
services or service as an officer of the Trust.
SECTION 6. EFFECTIVENESS, DURATION AND TERMINATION
(a) This Agreement shall become effective with respect to a Fund on the
latter of the date on which the Trust's Registration Statement relating to the
Shares of the Fund becomes effective and date of its approval by a vote of a
majority of the outstanding voting securities of the Fund. Upon the
effectiveness of this Agreement, it shall supersede all previous agreements
between the Trust and the Adviser covering the subject matter hereof.
(b) This Agreement shall continue in effect with respect to a Fund for
twelve months and, thereafter, shall continue in effect for successive
twelve-month periods, provided that such continuance is specifically approved at
least annually (i) by the Board or by a vote of a majority of the outstanding
voting securities of the Fund and (ii) by a vote of a majority of Trustees of
the Trust who are not parties to this Agreement or interested persons of any
such party cast in person at a meeting called for the purpose of voting on such
approval. If the continuation of this
26
Agreement is not approved as to a Fund, the Adviser may continue to render to
the Fund the services described herein in the manner and to the extent permitted
by the Act.
(c) This Agreement may be terminated with respect to a Fund at any time,
without the payment of any penalty, (i) by the Board or by a vote of a majority
of the outstanding voting securities of the Fund on 60 days' written notice to
the Adviser or (ii) by the Adviser on 60 days' written notice to the Trust. This
Agreement shall automatically terminate in the event of its assignment.
SECTION 7. ACTIVITIES OF THE ADVISER
(a) Except to the extent necessary to perform its obligations under this
Agreement, nothing herein shall be deemed to limit or restrict the Adviser's
right, or the right of any of its officers, directors or employees (whether or
not they are a trustee, officer, employee or other affiliated person of the
Trust) to engage in any other business or to devote time and attention to the
management or other aspects of any other business, whether of a similar or
dissimilar nature, or to render services of any kind to any other corporation,
trust, firm, individual or association.
(b) The Adviser represents that it is currently registered, and during the
entire period this Agreement is in effect will be registered, as an investment
adviser under the Investment Advisers Act of 1940.
SECTION 8. LIMITATION OF SHAREHOLDER AND TRUSTEE LIABILITY
The Trustees of the Trust and the shareholders of each Fund shall not be
liable for any obligations of the Trust or of the Funds under this Agreement,
and the Adviser agrees that, in asserting any rights or claims under this
Agreement, it shall look only to the assets and property of the Trust or the
Fund to which the Adviser's rights or claims relate in settlement of such rights
or claims, and not to the Trustees of the Trust or the shareholders of the
Funds.
SECTION 9. "CUTLER" NAME
If the Adviser ceases to act as investment adviser to the Trust or any Fund
whose name includes the word "Cutler," or if the Adviser requests in writing,
the Trust shall take prompt action to change the name of the Trust or any such
Fund to a name that does not include the word "Cutler." The Adviser may from
time to time make available without charge to the Trust for the Trust's use any
marks or symbols owned by the Adviser, including marks or symbols containing the
word "Cutler" or any variation thereof, as the Adviser deems appropriate. Upon
the Adviser's request in writing, the Trust shall cease to use any such mark or
symbol at any time. The Trust acknowledges that any rights in or to the word
"Cutler" and any such marks or symbols which may exist on the date of this
Agreement or arise hereafter are, and under any and all circumstances shall
continue to be, the sole property of the Adviser. The Adviser may permit other
parties, including other investment companies, to use the word "Cutler" in their
names without the consent of the Trust. The Trust shall not use the word
"Cutler" in conducting any
27
business other than that of an investment company registered under the Act
without the permission of the Adviser.
SECTION 10. MISCELLANEOUS
(a) No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties hereto and, if required by the Act, by a vote of a majority of the
outstanding voting securities of any Fund thereby affected.
(b) If any part, term or provision of this Agreement is held to be illegal,
in conflict with any law or otherwise invalid, the remaining portion or portions
shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
(c) Section headings in this Agreement are included for convenience only
and are not to be used to construe or interpret this Agreement.
(d) Notices, requests, instructions and communications received by the
parties at their respective principal places of business, or at such other
address as a party may have designated in writing, shall be deemed to have been
properly given.
(e) This Agreement shall be governed by and shall be construed in
accordance with the laws of the State of Oregon.
(f) The terms "vote of a majority of the outstanding voting securities,"
"interested person," "affiliated person" and "assignment" shall have the
meanings ascribed thereto in the Act.
28
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of April ___, 2007
THE CUTLER TRUST
By: ____________________________
Erich M. Patten
President
CUTLER INVESTMENT COUNSEL, LLC
By: ___________________________
Brooke C. Ashland
Chief Executive Officer
And Manager
29
THE CUTLER TRUST
INVESTMENT ADVISORY AGREEMENT
SCHEDULE A
ADVISORY FEES
FEE AS A % OF
THE ANNUAL AVERAGE DAILY
FUND NET ASSETS OF THE FUND
---- ----------------------
Cutler Equity Fund 0.75%
30
THE CUTLER TRUST
Cutler Equity Fund
SPECIAL MEETING OF SHAREHOLDERS
APRIL 9, 2007
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
The undersigned hereby appoints John F. Splain and Cassandra W. Borchers, and
each of them, as Proxies with power of substitution and hereby authorizes each
of them to represent and to vote as provided on the reverse side, all shares of
beneficial interest of the Cutler Equity Fund which the undersigned is entitled
to vote at the special meeting of shareholders to be held on April 9, 2007 or at
any adjournment thereof.
The undersigned acknowledges receipt of the Notice of Special Meeting and Proxy
Statement dated March 5, 2007.
Date: _________________________, 2007
NOTE: Please sign exactly as your name
appears on this Proxy. If signing
for an estate, trust or corporation,
title or capacity should be stated.
If the shares are held jointly,
both signers should sign, although
the signature of one will bind the
other.
______________________________
______________________________
Signature(s)
IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED "FOR" THE PROPOSALS DESCRIBED
HEREIN.
1. With respect to the election of five Trustees:
01 Matthew C. Patten 04 Dr. Mario Campagna
02 Robert B. Watts Jr. 05 John P. Cooney
03 Robert E. Clarke
FOR ALL WITHHOLD ALL FOR ALL EXCEPT
[ ] [ ] [ ]
-------------------------------------------------------------------------
To withhold authority to vote for any Nominee(s), mark "FOR ALL EXCEPT" and
write the Nominee number(s) on the line provided.
2. To approve or disapprove a revised Investment Advisory Agreement between
the Trust and Cutler Investment Counsel, LLC.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. In their discretion, the Proxies are authorized to vote upon such other
matters as may properly come before the meeting.
PLEASE MARK YOUR PROXY, DATE AND SIGN IT ON THE REVERSE SIDE, AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE WHICH REQUIRES NO POSTAGE IF MAILED IN THE
UNITED STATES.