<PAGE>
AUSTIN GLOBAL EQUITY FUND
- --------------------------------------------------------------------------------
Two Portland Square Shareholder Inquiries
Portland, ME 04101 Forum Financial Corp.
P.O. Box 446
Portland, ME 04112
207-879-0001
- --------------------------------------------------------------------------------
ANNUAL REPORT MARCH 31, 1997
- --------------------------------------------------------------------------------
May 23, 1997
Dear Shareholder,
We are pleased to present this report on the operations of the Austin Global
Equity Fund for the period ending March 31, 1997. Throughout this period, we
have continued to diversify the Fund's investments among the global markets and
to seek attractive investment opportunities worldwide, even though the Asian and
European markets lagged the comparable U.S. markets. Nevertheless, we are
convinced that the global markets provide attractive long-term opportunities,
particularly in economies undergoing fundamental changes and among state managed
entities that are becoming outstanding privatized companies.
The Japanese economy, for example, is not only recovering from one of its worst
recessions in more than fifty years, but is also embarking on important
structural reforms. Therefore, as we anticipate the implementation of these
reforms to be a lengthy one, we see the Japanese market as having promising
opportunities for long-term investment.
We have also expressed our investment convictions by our investments in
privatized companies in England, the Netherlands, Italy and Malaysia. We
anticipate additional investment in privatized companies as we identify
individual companies with interesting long-term growth potential coupled with
reasonable prices.
Our adherence to these investment principles has been borne out by comparing the
Fund's long term performance against its peers. The fund has earned a four star
(`em) rating for its overall risk-adjusted performance from Morningstar and was
rated among 478 international equity funds for the 3-year period ended 3/31/97.1
During this period, the Fund's annualized rate of return was 12.82% per year,
compared to 10.68% for the Morningstar World Stock Fund Average (the "MWSF") and
12.78% for the Morgan Stanley Capital International World Index (the "MSCI").
For the year ended March 31, 1997, the Fund's total return was 8.51%, compared
to 9.36% for the MSCI and 10.67% for the MWSF. Since its inception on December
9, 1993, the Fund's annualized compounded return is 11.19%, compared to 11.96%
for the MSCI and 11.41% for the MWSF.
In the short term, the Fund's performance is largely dependent upon the economic
conditions prevailing in the market with the greatest weighting of investments
in any given period. We believe, however, that the value we seek today will rise
to the top over the long haul. With this principle in mind, we will continue to
strive for outstanding performance for our investors. Thank you for your
continued support and interest in the Fund.
Regards,
Peter A. Vlachos
Austin Investment Management, Inc.
- --------
1 MORNINGSTAR PROPRIETARY RATINGS REFLECT HISTORICAL RISK-ADJUSTED PERFORMANCE
AS OF 3/31/97. THESE RATINGS MAY CHANGE MONTHLY AND ARE CALCULATED FROM THE
FUND'S 3 YEAR AVERAGE ANNUAL RETURN IN EXCESS OF 90-DAY TREASURY BILL RETURNS
WITH APPROPRIATE FEE ADJUSTMENTS AND A RISK FACTOR THAT REFLECTS FUND
PERFORMANCE BELOW 90-DAY TREASURY BILL RETURNS. THE 1-YEAR RATING IS CALCULATED
USING THE SAME METHODOLOGY, BUT IT IS NOT A COMPONENT OF THE OVERALL RATING. THE
FUNDS' RATING FOR THE 3 YEAR PERIOD IS 4 STARS. FOR THE L-YEAR PERIOD, THE FUND
RECEIVED 3 STARS AND WAS RATED AMONG 939 INTERNATIONAL EQUITY FUNDS. TEN PERCENT
OF THE FUNDS IN AN INVESTMENT CATEGORY RECEIVE 5 STARS, THE NEXT 22.5% RECEIVE 4
STARS AND THE NEXT 35% RECEIVE 3 STARS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. INVESTMENT RETURN AND
PRINCIPAL VALUE OF AN INVESTMENT WILL FLUCTUATE SO THAT AN INVESTOR'S SHARES,
WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL COST. THE FUND'S
ADVISER HAS WAIVED A PORTION OF ITS FEES. IN THE ABSENCE OF THESE WAIVERS,
PERFORMANCE FIGURES WOULD BE LOWER. FORUM FINANCIAL SERVICES, INC. IS THE FUND'S
DISTRIBUTOR.
<PAGE>
AUSTIN GLOBAL EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
MARCH 31, 1997
The following chart compares changes in the value of a $10,000 investment in the
Fund, including reinvested dividends and distributions, against the Morgan
Stanley Capital International World Index ("MSCI").
AUSTIN GLOBAL EQUITY FUND VS. MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
9-Dec-93 31-Dec-93 31-Mar-94 31-Mar-95 31-Mar-96 31-Mar-97
<S> <C> <C> <C> <C> <C> <C>
Austin Global Equity $ 10,000 $ 10,000 $ 9,890 $ 10,230 $ 13,092 $ 14,206
Morgan Stanley Captial
International World Index $ 10,000 $ 10,487 $ 10,551 $ 11,534 $ 13,844 $ 15,139
</TABLE>
The MSCI measures the performance of a diverse range of global stock markets in
the United States, Canada, Europe, Australia, New Zealand and the Far East. The
MSCI in unmanaged and returns do not include the reinvestment dividends. It is
not possible to invest directly in any index. PAST PERFORMANCE IS NOT PREDICTIVE
OF FUTURE PERFORMANCE.
INVESTMENT VALUE ON 3/31/97
Austin Global Equity Fund $ 14,206
Morgan Stanley Capital International World Index $ 15,139
AVERAGE ANNUAL TOTAL RETURN ONE YEAR INCEPTION TO DATE*
------------- --------------------
Austin Global Equity Fund 8.5% 11.2%
Morgan Stanley Capital
International World Index 9.4% 12.0%
*Inception date for Austin Global Equity Fund was December 8, 1993.
2 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1997
<TABLE>
<S> <C>
ASSETS:
INVESTMENTS (NOTE 2):
INVESTMENTS AT COST ........................................ $ 7,751,755
NET UNREALIZED APPRECIATION (DEPRECIATION) ................. 2,530,658
---------
TOTAL INVESTMENTS AT VALUE ............................. 10,282,413
INTEREST, DIVIDENDS AND OTHER RECEIVABLES ...................... 28,087
ORGANIZATION COSTS, NET OF AMORTIZATION (NOTE 2) ............... 30,319
---------
TOTAL ASSETS ....................................................... 10,340,819
---------
LIABILITIES:
PAYABLE TO ADVISER (NOTE 3) .................................. 2,290
PAYABLE TO OTHER RELATED PARTIES (NOTE 3) .................... 2,249
ACCRUED FEES AND OTHER EXPENSES .............................. 46,990
--------
TOTAL LIABILITIES .................................................. 51,529
--------
NET ASSETS ......................................................... $ 10,289,290
==========
COMPONENTS OF NET ASSETS:
PAID IN CAPITAL .............................................. $ 8,021,638
UNREALIZED APPRECIATION (DEPRECIATION) ON INVESTMENTS ........ 2,530,658
ACCUMULATED NET REALIZED GAIN (LOSS) ......................... (263,006)
--------
NET ASSETS ......................................................... $ 10,289,290
==========
SHARES OF BENEFICIAL INTEREST ...................................... 801,074
=======
NET ASSET VALUE (OFFERING AND REDEMPTION
PRICE PER SHARE) ................................................ $ 12.84
=====
</TABLE>
See notes to Financial Statements. 3 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENTS OF OPERATIONS
<TABLE>
Nine Months Ended Year Ended
March 31, 1997 June 30, 1996
-------------- -----------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income ............................................. $ 84,125 119,618
Interest income ............................................. 27,108 30,567
----------- -----------
Total investment income ......................................... 111,233 150,185
----------- -----------
EXPENSES:
Investment advisory (Note 3) ............................... 118,156 142,592
Administration (Note 3) .................................... 19,693 23,765
Distribution (Note 3) ...................................... 1,731 2,291
Transfer agent (Note 3) .................................... 20,781 22,218
Custody ..................................................... 4,889 5,946
Accounting (Note 3) ........................................ 27,000 39,000
Audit ....................................................... 16,188 14,542
Legal ....................................................... 20,529 21,393
Trustees .................................................... 2,960 7,726
Amortization of organization costs (Note 2) ................. 5,978 7,971
Registration ................................................ 7,316 4,292
Reporting ................................................... 13,658 2,441
Miscellaneous ............................................... 7,716 14,955
----------- -----------
Total expenses ................................................... 266,595 309,132
Fees waived (Note 3) ........................................ (69,562) (71,022)
----------- -----------
Net expenses ..................................................... 197,033 238,110
----------- -----------
NET INVESTMENT INCOME (LOSS) ..................................... (85,800) (87,925)
----------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold ................ (304,425) 1,258,826
Net change in unrealized appreciation
(depreciation) on investments ............................... 965,563 229,692
----------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS ............................................. 661,138 1,488,518
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................................... $ 575,338 $ 1,400,593
=========== ===========
</TABLE>
See notes to Financial Statements. 4 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
Nine Months Year Year
Ended Ended Ended
March 31, 1997 June 30, 1996 June 30, 1995
---------------- --------------- ----------------
<S> <C> <C> <C>
NET ASSETS - Beginning of Period ....................... $ 10,325,740 $ 8,473,594 $ 7,645,637
------------ ------------ -----------
OPERATIONS:
Net investment income (loss) ....................... (85,800) (87,925) $ 33,819
Net realized gain (loss) on
investments sold ............................. (304,425) 1,258,826 (137,102)
Net change in unrealized appreciation (depreciation)
on investments .................................. 965,563 229,692 1,450,500
------------ ------------ ------------
Net increase (decrease) in net assets resulting
from operations ................................ 575,338 1,400,593 1,347,217
------------ ------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments ................... (842,069) (199,483) --
------------ ------------ ------------
CAPITAL SHARE TRANSACTIONS (a):
Sale of shares ..................................... 214,455 842,317 1,247,864
Reinvestment of distributions ...................... 841,133 198,975 --
Redemption of shares ............................... (825,307) (390,256) (1,767,124)
------------ ------------ ------------
Net increase (decrease) in capital transactions 230,281 651,036 (519,260)
------------ ------------ ------------
Net increase (decrease) ........................ (36,450) 1,852,146 827,957
------------ ------------ ------------
NET ASSETS - End of Period (Including line b) ..........$ 10,289,290 $ 10,325,740 $ 8,473,594
============ ============ ============
(a) Shares Issued (Redeemed)
Sale of shares 15,520 68,184 122,991
Reinvestment of distributions 63,196 16,550 -
Redemption of shares (60,694) (32,250) (172,895)
-------------- ------------- -------------
Net increase (decrease) in shares 18,022 52,484 (49,904)
=============== ============== =============
(b) Accumulated undistributed net investment income: $ - $ - $ 33,819
=============== ============== ==============
</TABLE>
See Notes to Financial Statements. 5 FORUM FUNDS(R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1997
<TABLE>
COMMON STOCKS (85.7%) SHARES VALUE
------ ------
<S> ..................................... <C> <C>
GERMANY (6.0%)
RWE AG .................................. 8,000 $ 357,710
SAP AG .................................. 1,500 255,336
-------
613,046
-------
HONG KONG (1.1%)
Hong Kong and China Gas Co., Ltd., ADR .. 60,000 112,650
--------
ITALY (5.4%)
Telecom Italia Mobile SpA ............... 150,000 431,580
Telecom Italia SpA ...................... 50,000 124,980
--------
556,560
-------
JAPAN (2.8%)
Nisshinbo Industries, Inc.(a) ........... 20,000 131,976
Tokio Marine & Fire Insurance Co., ADR .. 3,000 152,250
--------
284,226
-------
MALAYSIA (1.5%)
Nestle (Malaysia) Berhad ................ 9,500 75,101
Telekom Malaysia Berhad ................. 10,000 77,844
--------
152,945
-------
NETHERLANDS (8.7%)
Aegon NV, ADR ........................... 6,265 434,635
Royal Dutch Petroleum Co. ............... 1,500 262,500
Royal PTT Nederland NV, ADR ............. 5,434 196,983
-------
894,118
-------
SINGAPORE (1.0%)
Development Bank of Singapore ........... 5,000 58,119
Fraser & Neave, Ltd. .................... 6,000 48,986
--------
107,105
-------
SWITZERLAND (4.3%)
Bank Fuer International Zahlungsausgleich 25 185,684
Roche Holdings, Ltd., ADR ............... 3,000 259,159
--------
444,843
-------
UNITED KINGDOM (16.7%)
B.A.T. Industries plc, ADR .............. 15,000 249,375
Boosey & Hawkes plc(b) .................. 15,000 192,729
British Energy plc(b) ................... 90,000 188,415
Cable & Wireless plc, ADR ............... 10,000 237,500
EMI Group plc ........................... 10,000 183,083
HSBC Holdings plc, ADR .................. 1,000 232,287
Lowndes Lambert Group Holdings plc(a) ... 20,000 34,974
Reuters Holdings plc, ADR ............... 2,500 145,470
RTZ Corp. plc, ADR ...................... 4,000 250,500
-------
1,714,333
---------
UNITED STATES (38.2%)
Cascade Communications Corp.(a) ......... 9,000 237,375
Chris-Craft Industries, Inc.(a) ......... 5,150 204,069
Cisco Systems, Inc.(a) .................. 4,000 192,500
</TABLE>
See notes to Financial Statements. 6 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS (continued)
MARCH 31, 1997
<TABLE>
SHARES/FACE VALUE
----------- -------
<S> <C> <C>
Dailey Petroleum Services Corp.(a) ............... 7,500 $ 50,625
DBT Online, Inc.(a) .............................. 5,000 210,000
Intel Corp. ...................................... 3,000 417,375
Knightsbridge Tankers Ltd.(a) .................... 5,000 121,250
Kos Pharmaceuticals, Inc.(a) ..................... 12,000 240,000
Liberty Financial Cos., Inc. ..................... 5,000 202,500
Nationwide Financial Services, Inc.(a) ........... 10,800 278,100
NeoPath, Inc.(a) ................................. 10,000 137,500
Oracle Corp.(a) .................................. 8,500 327,782
Philip Morris Cos., Inc. ......................... 2,000 228,250
Schlumberger, Ltd. ............................... 3,000 321,750
Tejas Gas Corp.(a) ............................... 6,000 260,250
The Walt Disney Co. .............................. 2,098 153,150
Trusted Information Systems, Inc.(a) ............. 10,000 130,000
WorldCom, Inc.(a) ................................ 10,000 220,000
-------
3,932,476
---------
TOTAL COMMON STOCKS (cost $7,404,144) ............ 8,812,302
---------
WARRANTS (12.5%)
United States (12.5%)
Bank of New York(a) .............................. 15,000 1,290,000
----------
TOTAL WARRANTS (cost $167,500)
1,290,000
---------
SHORT-TERM HOLDINGS (1.8%)
1784 Institutional U.S. Treasury Money Market Fund 180,111 180,111
--------
TOTAL SHORT-TERM HOLDINGS (cost $180,111) ........ 180,111
--------
TOTAL INVESTMENTS (100.0%) (cost $7,751,755) ..... $10,282,413
===========
</TABLE>
(a) Non-income producing security.
(b) Securities that may be resold to "qualified
institutional buyers" under Rule 144A, or securities offered pursuant to
Section 4(2) of the Securities Act of 1933, as amended.
ADR American Depositary Receipts.
See notes to Financial Statements. 7 FORUM FUNDS(R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1. ORGANIZATION
Forum Funds(R) (the "Trust") is an open-end management investment company
organized as a Delaware business trust. The Trust currently has eleven active
investment portfolios (the "Funds"). The Trust Instrument of the Trust
authorizes each Fund to issue an unlimited number of shares of beneficial
interest without par value. Included in this report is Austin Global Equity Fund
(the "Fund"), a diversified portfolio of the Trust that commenced operations on
December 8, 1993.
Effective November 25, 1996, the Fund changed its fiscal year end to March 31.
Prior to November 25, 1996, its fiscal year end was June 30.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles which require management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of increase and decrease in net assets from operations
during the fiscal period. Actual results could differ from those estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION - Securities held by the Fund for which market quotations are
readily available are valued using the last reported sales price provided by
independent pricing services. If no sales are reported, the mean of the last bid
and asked price is used. In the absence of readily available market quotations,
securities are valued at fair value as determined by the Board of Trustees.
Securities with a maturity of 60 days or less are valued at amortized cost.
INTEREST AND DIVIDEND INCOME - Interest income is accrued as earned. Dividends
on securities held by the Fund are recorded on the ex-dividend date.
Distributions to Shareholders - Distributions from net investment income and net
capital gains, if any, are declared and paid at least annually. Distributions
are based on amounts calculated in accordance with applicable income tax
regulations.
ORGANIZATION COSTS - The costs incurred by the Fund in connection with its
organization and registration of shares have been capitalized and are being
amortized using the straight-line method over a five year period beginning with
the commencement of the Fund's operations. Certain of these costs were paid by
Forum Financial Services, Inc.(R) and have been reimbursed by the Fund.
FEDERAL TAXES - The Fund intends to qualify and continue to qualify each year as
a regulated investment company and distribute all of its taxable income. In
addition, by distributing in each calendar year substantially all of its net
investment income, capital gains and certain other amounts, if any, the Fund
will not be subject to a Federal excise tax. Therefore, no Federal income tax
provision is required.
EXPENSE ALLOCATION - The Trust accounts separately for the assets and
liabilities and operations of each Fund. Expenses that are directly attributable
to more than one Fund are allocated among the respective Funds.
8 FORUM FUNDS(R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
MARCH 31, 1997
REALIZED GAIN AND LOSS - Security transactions are accounted for on a trade date
basis and realized gain and loss on investments sold are determined on the basis
of identified cost.
FOREIGN CURRENCY TRANSLATION - The books and records of the Fund are maintained
in United States dollars.
Foreign currency amounts are translated into U.S. dollars at the mean of the bid
and asked prices of such currencies against U.S. dollars as follows: assets and
liabilities at the rate of exchange at the end of the respective period;
purchases and sales of securities and income and expenses at the rate of
exchange prevailing on the dates of such transactions. The portion of the
results of operations arising from changes in the exchange rates and the portion
due to fluctuations arising from changes in the market prices of securities is
not isolated. Such fluctuations are included with the net realized and
unrealized gain or loss on investments.
The Portfolio may enter into forward contracts to purchase or sell foreign
currencies to protect against the effect on the U.S. dollar value of the
underlying portfolio of possible adverse movements in foreign exchange rates.
Risks associated with such contracts include the movement in value of the
foreign currency relative to the U.S. dollar and the ability of the counterparty
to perform. Fluctuations in the value of such contracts are recorded as
unrealized gains or losses; realized gains or losses include net gains or losses
on contracts which have terminated by settlement or by the Portfolio entering
into offsetting commitments.
Foreign security and currency transactions may involve certain considerations
and risks not typically associated with those of U.S. companies as a result of,
among other factors, the level of governmental supervision and regulation of
foreign securities markets and the possibility of political and economic
instability.
NOTE 3. ADVISORY FEES, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser to the Fund is Austin Investment Management, Inc.
("Adviser"). Pursuant to an Investment Advisory Agreement, the Adviser receives
an advisory fee from the Fund at an annual rate of 1.50% of the average daily
net assets of the Fund. The Adviser has voluntarily waived a portion of their
fees, so that total expenses of the Fund would not exceed 2.50% of average net
assets. For the period ended March 31, 1997, fees waived were $69,562.
The administrator and distributor of the Fund is Forum Financial Services,
Inc.(R) ("Forum"). Pursuant to an Administration and Distribution Agreement,
Forum receives a fee from the Fund at an annual rate of 0.25% of the average
annual daily net assets of the Fund. Forum may delegate to other persons
responsibility for certain services under this Agreement. In addition, certain
legal expenses of $5,503 were charged to the Fund by Forum.
Forum Financial Corp.(R) ("FFC") serves as the Company's transfer agent and
dividend disbursing agent, and fund accountant. For its services in these
capacities, FFC receives $12,000 plus certain shareholder account fees and
$36,000 plus certain adjustments based on the type and volume of portfolio
transactions, respectively. Forum and FFC are affiliated companies.
The Fund has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940 with respect to the Fund. Under the
Plan, the Fund may reimburse Forum for the distribution expenses incurred by
Forum on behalf of the Fund. The Fund may not reimburse Forum for any
distribution expenses in any fiscal year of the Fund in excess of 0.25% of the
average daily net assets of the Fund.
9 FORUM FUNDS(R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (continued)
MARCH 31, 1997
NOTE 4. SECURITY TRANSACTIONS
Purchases and sales of investment securities, other than short-term investments,
totaled $4,487,792 and $5,154,159 respectively, for the period ended March 31,
1997.
For Federal income tax purposes, the tax cost basis of investment securities
owned at March 31, 1997 was $7,751,755. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $2,811,079 and the aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value was
$280,421.
As of March 31, 1997, Austin Global Equity Fund had capital loss carryovers
available to offset future capital gains of $221,856 to expire in 2004.
NOTE 5. FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
(UNAUDITED)
Austin Global Equity Fund dividends declared consisted of 23.98% qualifying
dividends, and 76.02% ordinary dividends.
NOTE 6. ACQUISITION OF STONE BRIDGE FUNDS
At a meeting on October 15, 1996, the Board of Trustees of the Trust approved an
Agreement and Plan of Reorganization (the "Agreement") for the acquisition of
The Stone Bridge Funds, Inc. ("Stone Bridge") by the Trust. Pursuant to the
Agreement, all of the assets and liabilities of the Stone Bridge Austin Global
Equity Fund were transferred to the Forum Austin Global Equity Fund in exchange
for shares of Forum Austin Global Equity Fund. The net assets attributed to
Stone Bridge Austin Global Equity Fund were exchanged for 829,444 shares of
Forum Austin Global Equity Fund. The reorganization, which qualified as a
tax-free reorganization for Federal income tax purposes, was completed on
November 25, 1996, following the approval of the reorganization by Stone Bridge
shareholders. The results of operations occurring prior to the date of merger
reflected in the accompanying financial statements are the results of operations
of the Stone Bridge Austin Global Equity Fund. The following is a summary of the
Net Assets, Shares Outstanding, Net Asset Value per share, and Unrealized
Appreciation associated with the transaction:
<TABLE>
Before Acquisition After Acquisition
------------------ -----------------
Forum Austin Stone Bridge Austin Forum Austin
Global Equity Global Equity Global Equity
------------- ------------- -------------
<S> <C> <C> <C>
Net Assets $ 10.00 $ 11,095,887 $ 11,095,897
Shares Outstanding 1.00 829,444 829,445
Net Asset Value, per share 10.00 13.38 13.38
Unrealized Appreciation - $ 2,842,016 $ 2,842,016
</TABLE>
10 FORUM FUNDS(R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
Selected per share data and ratios for a share
outstanding throughout each period.
<TABLE>
Nine Months Year Year Period
Ended Ended Ended Ended
March 31, June 30, June 30, June 30,
1997 1996 1995 1994(a)
---------------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $13.19 $11.60 $9.80 $10.00
---------------- ----------- ---------- -----------
Investment Operations
Net Investment Income (Loss) (0.11) (0.12) 0.04(b) (0.03)
Net Realized and Unrealized Gain (Loss) 0.86 1.98 1.76 (0.17)
on investments
---------------- ----------- ---------- -----------
Total from Investment Operations 0.75 1.86 1.80 (0.20)
Distributions from
Net Realized Gain on Investments (1.10) (0.27) - -
---------------- ----------- ---------- -----------
Net Asset Value, End of Period $12.84 $13.19 $11.60 $9.80
================ =========== ========== ===========
Total Return 5.38%(c) 16.22% 18.37% (3.57%)(d)
Ratio/Supplementary Data:
Net Assets at End of Period (000's omitted) $10,289 $10,326 $8,474 $7,646
Ratios to Average Net Assets:
Expenses including reimbursement/waiveriver 2.50%(d) 2.50% 2.50% 2.36%(d)
Expenses excluding reimbursement/waiver 3.38%(d) 3.25% 3.19% 4.18%(d)
Net investment income (loss) including
reimbursement/waiver (1.09%)(d) (0.98%) 0.41% (0.83%)(d)
Average Commission Rate (e) $0.0383 $0.0542 N/A N/A
Portfolio Turnover Rate 44.79% 93.55% 35.31% 2.49%
</TABLE>
- -----------------------------------------------
(a) For the period December 8, 1993 (commencement of operations) through
June 30, 1994.
(b) Calculated using the weighted average shares outstanding.
(c) Not annualized.
(d) Annualized.
(e) Amount represents the average commission per share paid to brokers on the
purchase and sale of equity securities.
11 FORUM FUNDS(R)
<PAGE>
- --------------------------------------------------------------------------------
AUSTIN GLOBAL EQUITY FUND
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
The Board of Trustees and Shareholders,
Forum Funds:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Austin Global Equity Fund as of March 31, 1997,
the related statements of operations for the nine months ended March 31, 1997,
and the year ended June 30, 1996, the statement of changes in net assets for the
nine months ended March 31, 1997, and the years ended June 30, 1996 and 1995,
and the financial highlights for each of the periods presented. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, confirmation of securities owned as of March 31, 1997 by
correspondence with the custodian. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Austin Global Equity
Fund, as of March 31, 1997, the results of its operations, the changes in its
net assets, and the financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, MA
May 9, 1997
12
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INVESTMENT ADVISER
Austin Investment Management, Inc.
375 Park Avenue, Suite 2207
New York, NY 10152-2207
CUSTODIAN
The First National Bank of Boston
P.O. Box 1959
Boston, Massachusetts 02105
TRUSTEES
John Y. Keffer
Costas Azaridis
James C. Cheng
J. Michael Parish
ADMINISTRATOR AND DISTRIBUTOR
Forum Financial Service, Inc.(R)
Two Portland Square
Portland, ME 04101
