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F O R U M
F U N D S
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ANNUAL REPORT
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MARCH 31, 1998
AUSTIN GLOBAL
EQUITY FUND
<PAGE>
AUSTIN GLOBAL EQUITY FUND
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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, 1998
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Dear Fellow Shareholders:
The Austin Global Equity Fund in the year ended March 31, 1998, achieved
considerable growth and gained recognition within its peer group. As of March
31, the Fund's one, three and since inception (December 8, 1993) average annual
total returns were 39.88%, 24.77%, and 17.26% respectively, which compare
favorably with the average Morningstar World Stock Fund's returns of 25.62%,
19.10%, and 15.91%, respectively. Your Fund has earned an overall 5-star rating
which places us in the top 10% of the Morningstar international equity fund
universe based on risk/reward evaluation[fn i]. With the Fund in its fifth year
of existence, we thought it appropriate to expand upon some concepts that guide
your Fund's investment decisions.
As a global fund, we seek investment opportunities in stock markets of developed
and developing countries. At present, your Fund is invested in 16 countries,
including the United States. Of our approximate 35 non-U.S. holdings, 25 are
traded on a U.S. exchange with the concomitant obligation of conforming to
S.E.C. disclosure regulations. We believe there is a comfort factor in that
these regulations are the best source of financial information for passive
investors like us.
The attractiveness of investing throughout the world is that it substantially
increases the number of investment opportunities available to us at reasonable
prices and that we deem financially dependable. Of course, there are risks in
the global arena that are not present in the U.S. investment environment. An
example is dealing with different degrees of political and economic stability in
various countries. While we are willing to accept a minor degree of risk, it is
only in cases where we believe the opportunity of the investment outweighs such
risk.
Conceptually, investing in stock markets throughout the world enhances
diversification. This suggests that there are benefits to investing in different
countries where economics may not be in synchronization. The examples of Japan,
Europe and the U.S. make this point. Japan, the second largest economy in the
world, is in recession; European countries are either beginning recovery or have
recovered; and the U.S. continues its robust expansion. As these different
regions present enticing opportunities, we will invest in them to the best of
our abilities.
One significant area of opportunity to be watched is the world wide trend of
privatization. Privatization, in our use of the word, is the conversion of state
owned enterprises (SOEs) to privately owned corporations through stock
floatations or underwritings. Privatization has gained momentum since Great
Britain successfully sold its holdings in communication, water and electric
utilities. In the past decade, scores of developed and developing nations have
transformed its SOEs into private companies. Privatization may differ from
country to country but there are common elements to the global movement. A
country's continued financing of large and inefficient SOEs has increased
indebtedness to unacceptable levels. In such cases, needed capital for expansion
and improvements is reduced or eliminated. Therefore, the need to become
efficient, competitive and to expand markets can only be met by attracting
external private capital and management skills.
Among the Fund's ten largest positions are two very successful examples of
privatization: British Energy and Telecom Italia Mobile. British Energy, an
electric utility, was privatized in 1996, at which time we purchased its stock
at $3.28 per share. As of March 31st, these shares are priced at $8.80 per
share. Telecom Italia Mobile, a mobile telephone company, was privatized via a
spin-off from being a state controlled enterprise. The Fund's
<PAGE>
AUSTIN GLOBAL EQUITY FUND
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adjusted 1995 cost was $1.24 per share and now sells at $5.37 per share. We
believe stock floatations of former SOEs will continue to provide opportunities
in stable, well financed and attractively priced companies. This, in part, is
due to the nature of the transforming process.
An adjunct to the privatization process is that if properly and successfully
executed, it will be popular among the issuing country's citizens because of
their profitable participation through share purchases. The potential of
initiating a popular program and receiving political credit for it are some of
the reasons governments are sensitive to pricing floatations "right", at an
advantageous offering price to citizens and foreign investors. We like the
opportunities presented to the Fund by privatization and will continue to
allocate investments accordingly.
The Fund seeks companies in the U.S. and elsewhere that have strong finances and
operations in established businesses that are selling at reasonable or
compelling values. We have them in Japan, France, the United States and other
markets. Some investments require the patience to await events that will make
for price appreciation or unlock the values inherent in the companies. It could
entail waiting for the local government to launch a program to aid banks, as is
needed in Japan. Or it could be a structural change, like the adoption of the
EMU in Europe, that may foster mergers among corporations in member nations.
We are also convinced that long-term growth of the Fund is linked to
participation in the growth of technology companies. Therefore, we have selected
telecommunication equipment and software as areas of focus. We have invested in
several such companies at what we believe to be attractive prices and acceptable
price earnings ratios. Usually these purchases were made when the companies were
out-of-favor with investors. Cisco, Lernout & Hauspie and Lucent are companies
serving these dynamic growth areas which are owned by Fund. These companies'
year to year growth patterns will not, however, be perfect. They will be
impacted from time to time by various economic and business events. However, we
think they will produce very attractive results over the long term.
The above concepts and undertakings have served the Fund well since inception.
We will continue these efforts in the future and hope that they will yield
comparable results. We thank you for your confidence in our investment style.
Regards,
/s/ Peter A. Vlachos
Peter A. Vlachos
Austin Investment Management, Inc.
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i The Morningstar World Stock Fund Average includes 235 funds with the same
investment objective as of 3/31/98. The Morningstar proprietary star ratings
reflect historical risk-adjusted performance through 3/31/98. The Fund was rated
5 stars for the 3 year period among 722 international equity funds. These
ratings are subject to change monthly and are calculated from the Fund's 3-year
average annual total 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. 10% of the funds in an investment category
receive 5 stars.
Past performance is no guarantee of future results. The Fund's average annual
total return assumes reinvestment of all dividend and capital gain
distributions. Investment return and principal value will fluctuate so that,
when redeemed, an investor's shares may be worth more or less than their
original cost. During this period some of the Fund's fees were waived or
expenses reimbursed; without such waivers or reimbursements, performance would
have been lower. Forum Financial Services, Inc. is the Fund's distributor.
2
<PAGE>
AUSTIN GLOBAL EQUITY FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
MARCH 31, 1998
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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 GRAPH CHART]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Inception* Dec-93 Mar-94 Mar-95 Mar-96 Mar-97
Austin Global Equity Fund $ 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>
<TABLE>
<S><C>
Mar-98
$ 19,872
$ 19,978
</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 is unmanaged and its performance reflects the reinvestment of dividends. It
is not possible to invest directly in any index. PAST PERFORMANCE IS NOT
PREDICTIVE OF FUTURE PERFORMANCE. SHARES MAY BE WORTH MORE OR LESS AT REDEMPTION
THAN AT ORIGINAL PURCHASE.
INVESTMENT VALUE ON 3/31/98
- ---------------------------
Austin Global Equity Fund $ 19,872
Morgan Stanley Capital International World Index $ 19,978
<TABLE>
<S> <C> <C>
AVERAGE ANNUAL TOTAL RETURN AS OF 3/31/98 ONE YEAR INCEPTION TO DATE
- ----------------------------------------- -------- -----------------
Austin Global Equity Fund 39.88% 17.26%
Morgan Stanley Capital International World Index 31.96% 17.31%
</TABLE>
*Inception date for Austin Global Equity Fund was December 8, 1993.
3 FORUM FUNDS(R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1998
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<TABLE>
<S> <C> <C>
COMMON STOCK (92.7%) SHARES/FACE VALUE
----------------- ---------------
AUSTRALIA (0.8%)
Telstra Corp., Ltd. 2,500 $ 129,219
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BELGIUM (2.8%)
Lernout & Hauspie Speech Products NV (a) 5,000 436,875
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BRAZIL (2.5%)
Telecomunicacoes SA Telebras, Brasileiras, ADR 3,000 389,437
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CANADA (2.6%)
Gulf Canada Resources Ltd. (a) 25,000 143,750
Newcourt Credit Group, Inc. 5,000 250,000
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393,750
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FRANCE (3.8%)
AXA, UAP, ADR 5,000 258,750
L'Air Liquide 1,000 169,473
Societe BIC, SA 2,000 152,299
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580,522
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GERMANY (6.7%)
RWE AG 8,000 430,424
SAP AG 1,500 598,593
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1,029,017
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HONG KONG (3.5%)
China Telecom (Hong Kong) Ltd., SP, ADR 10,000 410,625
Hong Kong and China Gas Co., Ltd., ADR 72,000 120,802
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531,427
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IRELAND (1.8%)
Esat Telecom Group plc (a) 10,000 280,000
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ITALY (5.9%)
Telecom Italia Mobile SpA 150,000 806,010
Telecom Italia SpA 7 55
Telecom Italia SpA, ADR 1,277 101,442
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907,507
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JAPAN (5.1%)
Bank of Tokyo-Mitsubishi, ADR 10,000 120,625
Nippon Telegraph & Telephone, ADR 2,500 105,781
Nisshinbo Industries, Inc. (a) 20,000 100,694
Tokio Marine & Fire Insurance Co., ADR 8,000 448,000
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775,100
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MALAYSIA (0.7%)
Nestle (Malaysia) Berhad 10,000 55,448
Telecom Malaysia Berhad 15,000 51,879
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107,327
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NETHERLANDS (11.1%)
Aegon NV, ADR 6,388 774,944
Philips Electronics NV 4,000 293,750
</TABLE>
See Notes to Financial Statements. 4 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 1998
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<TABLE>
<S> <C> <C>
SHARES/FACE VALUE
----------------- ---------------
NETHERLANDS (CONTINUED)
Royal Dutch Petroleum Co. 6,000 $ 340,875
Royal PTT Nederland NV, ADR 5,573 288,751
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1,698,320
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RUSSIA (1.1%)
Lukoil Holding, ADR 2,500 175,735
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SWITZERLAND (3.1%)
Bank Fuer International Zahlungsausgleich 25 155,463
Roche Holdings, Ltd., ADR 3,000 324,700
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480,163
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UNITED KINGDOM (9.1%)
Boosey & Hawkes plc 15,000 163,273
British Energy plc (a) 90,000 790,875
HSBC Holdings plc, ADR 1,000 305,883
Reuters Group plc 2,166 139,842
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1,399,873
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UNITED STATES (32.1%)
Bank of New York Co., Inc. 18,000 1,130,625
Chris-Craft Industries, Inc. (a) 5,305 312,634
Cisco Systems Inc. (a) 6,000 410,250
ContiFinancial Corp. (a) 5,000 152,500
Cooper Cameron Corp. (a) 5,000 301,875
Knightsbridge Tankers Ltd. 5,000 142,500
Kos Pharmaceuticals, Inc. (a) 22,000 206,250
Liberty Financial Cos., Inc. 7,500 296,719
Lucent Technologies, Inc. 2,000 255,750
McGraw-Hill Cos., Inc. 5,000 380,313
Microsoft Corp. (a) 2,000 179,000
MoneyGram Payment Systems, Inc. (a) 10,000 151,250
NeoPath, Inc. (a) 10,000 137,500
Philip Morris Cos., Inc. 6,000 250,125
Schlumberger, Ltd. 6,000 454,500
Schweitzer-Mauduit International, Inc. 5,000 172,500
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4,934,291
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TOTAL COMMON STOCK (COST $9,476,907) 14,248,563
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PREFERRED STOCK (3.3%)
CSC Holdings Inc. (cost $275,200) 10,000 513,750
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SHORT-TERM HOLDINGS (4.0%)
Boston 1784 Institutional US Treasury Money Market Fund 296,249 296,249
Dreyfus Government Cash Management Fund 316,270 316,270
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TOTAL SHORT-TERM HOLDINGS (COST $612,519) 612,519
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TOTAL INVESTMENTS (100.0%) (COST $10,364,626) $ 15,374,832
===============
</TABLE>
(a) Non-income producing security.
ADR - American Depositary Receipts
See Notes to Financial Statements. 5 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MARCH 31, 1998
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<TABLE>
<S> <C>
ASSETS:
Investments (Note 2):
Investments at cost $ 10,364,626
Net unrealized appreciation (depreciation) 5,010,206
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Total investments at value 15,374,832
Interest, dividends and other receivables 32,136
Prepaid expenses 12,301
Organization costs, net of amortization (Note 2) 5,484
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Total assets 15,424,753
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LIABILITIES:
Payable to adviser (Note 3) 10,869
Payable to other related parties (Note 3) 3,180
Accrued expenses and other liabilities 31,742
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Total liabilities 45,791
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NET ASSETS $ 15,378,962
==================
COMPONENTS OF NET ASSETS:
Paid in capital $ 10,047,354
Unrealized appreciation (depreciation) on investments 5,010,206
Accumulated net realized gain (loss) 321,402
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NET ASSETS $ 15,378,962
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SHARES OF BENEFICIAL INTEREST: 945,268
==================
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE PER SHARE): $ 16.27
==================
</TABLE>
See Notes to Financial Statements. 6 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED MARCH 31, 1998
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<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income $ 216,787
Interest income 42,926
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Total investment income 259,713
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EXPENSES:
Investment advisory (Note 3) 195,053
Administration (Note 3) 32,509
Transfer agent (Note 3) 25,482
Custody 6,259
Accounting (Note 3) 36,000
Audit 19,650
Legal 7,017
Trustees 1,814
Amortization of organization costs (Note 2) 7,970
Miscellaneous 17,699
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Total expenses 349,453
Fee waived (Note 3) (24,463)
------------------
Net expenses 324,990
------------------
NET INVESTMENT INCOME (LOSS) (65,277)
------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) on investments sold 1,816,799
Net change in unrealized appreciation (depreciation) on investments 2,479,548
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NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS 4,296,347
------------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 4,231,070
==================
</TABLE>
See Notes to Financial Statements. 7 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
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<TABLE>
<S> <C> <C> <C>
Year Nine Months Year
Ended Ended Ended
March 31, 1998 March 31, 1997 June 30, 1996
------------------ ------------------- ------------------
NET ASSETS - Beginning of Period $ 10,289,290 $ 10,325,740 $ 8,473,594
- -------------------------------- ------------------ ------------------- ------------------
OPERATIONS:
Net investment income (loss) (65,277) (85,800) (87,925)
Net realized gain (loss) on investments sold 1,816,799 (304,425) 1,258,826
Net change in unrealized appreciation (depreciation)
on investments 2,479,548 965,563 229,692
------------------ ------------------- ------------------
Net increase (decrease) in net assets resulting
from operations 4,231,070 575,338 1,400,593
------------------ ------------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments (1,232,391) (842,069) (199,483)
------------------ ------------------- ------------------
CAPITAL SHARE TRANSACTIONS (a):
Sale of shares 1,230,491 214,455 842,317
Reinvestment of distributions 1,232,391 841,133 198,975
Redemption of shares (371,889) (825,307) (390,256)
------------------ ------------------- ------------------
Net increase (decrease) from capital transactions 2,090,993 230,281 651,036
------------------ ------------------- ------------------
Net increase (decrease) in net assets 5,089,672 (36,450) 1,852,146
------------------ ------------------- ------------------
NET ASSETS - End of Period $ 15,378,962 $ 10,289,290 $ 10,325,740
- -------------------------- ================== =================== ==================
(a) Shares Issued (Redeemed)
Sale of shares 81,338 15,520 68,184
Reinvestment of distributions 88,280 63,196 16,550
Redemption of shares (25,424) (60,694) (32,250)
------------------ -------------------
================== =================== ==================
Net increase (decrease) in shares 144,194 18,022 52,484
================== =================== ==================
</TABLE>
See Notes to Financial Statements. 8 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
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Selected per share data and ratios for a share
outstanding throughout each period.
<TABLE>
<S> <C> <C> <C> <C> <C>
Nine
Year Months Year Year Period
Ended Ended Ended Ended Ended
March 31, March 31, June 30, June 30, June 30,
1998 1997 1996 1995 1994 (a)
---------- ----------- ---------- ---------- -----------
Net Asset Value, Beginning of Period $12.84 $13.19 $11.60 $9.80 $10.00
---------- ----------- ---------- ---------- -----------
Investment Operations
Net Investment Income (Loss) (0.07) (0.11) (0.12) 0.04(b) (0.03)
Net Realized and Unrealized Gain (Loss)
on Investments 4.95 0.86 1.98 1.76 (0.17)
---------- ----------- ---------- ---------- -----------
Total from Investment Operations 4.88 0.75 1.86 1.80 (0.20)
Distributions from
Net Realized Gain on Investments (1.45) (1.10) (0.27) - -
---------- ----------- ---------- ---------- -----------
Net Asset Value, End of Period $16.27 $12.84 $13.19 $11.60 $9.80
========== =========== ========== ========== ===========
Total Return 39.88% 5.38%(c) 16.22% 18.37% (3.57)%(d)
Ratio/Supplementary Data:
Net Assets at End of Period (000's omitted) $15,379 $10,289 $10,326 $8,474 $7,646
Ratios to Average Net Assets:
Expenses including reimbursement/waiver 2.50% 2.50%(d) 2.50% 2.50% 2.36%(d)
Expenses excluding reimbursement/waiver 2.69% 3.38%(d) 3.25% 3.19% 4.18%(d)
Net investment income (loss) including
reimbursement/waiver (0.50)% (1.09)%(d) (0.98)% 0.41% (0.83)%(d)
Average Commission Rate (e) $0.0681 $0.0383 $0.0542 N/A N/A
Portfolio Turnover Rate 57.37% 44.79% 93.55% 35.31% 2.49%
</TABLE>
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(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) For the fiscal years beginning on or after September 1, 1995, the Fund is
required to disclose average commission per share paid to brokers on the
purchase and sale of equity securities.
See Notes to Financial Statements. 9 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998
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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 twenty-two
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 was reorganized as a series of the Trust.
As a result of this reorganization, the Fund's fiscal year end changed from June
30 to March 31.
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
capital gain, if any, are declared and paid at least annually. Distributions are
based on amounts calculated in accordance with applicable federal income tax
regulations, which may differ from generally accepted accounting principles.
These differences are due primarily to differing treatments of income and gain
on various investment securities held by the Fund, timing differences and
differing characterizations of distributions made by the Fund.
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) ("FFSI"), a registered broker-dealer and a
member of the National Association Services Dealers, Inc., 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 substantially all of its taxable
income. In addition, by distributing in each calendar year substantially all of
its net investment income, capital gain 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.
REALIZED GAIN AND LOSS - Security transactions are recorded on trade date.
Realized gain and loss on investments sold are determined on the basis of
identified cost.
10 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (continued)
- --------------------------------------------------------------------------------
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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: (i) assets
and liabilities at the rate of exchange at the end of the respective period; and
(ii) 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 are
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 gain or loss; realized gain or loss include net gain or loss 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
INVESTMENT ADVISER - 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 its fees, so that total expenses of the Fund would not exceed 2.50%
of average net assets. For the year ended March 31, 1998, fees waived were
$24,463.
ADMINISTRATIVE AND OTHER SERVICES - Effective June 19, 1997, the administrator
of the Fund is Forum Administrative Services, LLC ("FAS"). For its services, FAS
receives an administrative fee at an annual rate of 0.25% of the average daily
net assets of the Fund. In addition, certain legal expenses of $125 were charges
to the Fund by FAS. FFSI acts as the distributor of the Fund's shares. Prior to
June 19, 1997, FFSI served as the administrator of the Fund pursuant to the same
terms and compensation as FAS.
Forum Financial Corp.(R) ("FFC"), an affiliate of FAS and FFSI, serves as the
Company's transfer agent and dividend disbursing agent, and for those services
receives an annual fee of $12,000 plus certain shareholder account fees.
Effective June 19, 1997, Forum Accounting Services, LLC ("FAcS") acts as the
fund accountant. For its services, FAcS receives $36,000 plus certain
adjustments based on the type and volume of portfolio transactions. Prior to
June 19, 1997, FFC served as the fund accountant pursuant to the same terms and
compensation as FAcS.
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 FFSI for the distribution expenses incurred by FFSI
on behalf of the Fund. The Fund may not reimburse FFSI 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. There were no unreimbursed distribution charges for the
year ended March 31, 1998.
11 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1998 (concluded)
- --------------------------------------------------------------------------------
NOTE 4. SECURITY TRANSACTIONS
Cost of purchases and proceeds from sales of securities, other than short-term
investments, totaled $7,308,089 and $6,944,424 respectively, for the year ended
March 31, 1998.
For federal income tax purposes, the tax cost basis of investment securities
owned as of March 31, 1998, was $10,364,626. The aggregate gross unrealized
appreciation for all securities in which there was an excess of market value
over tax cost was $5,482,216 and the aggregate gross unrealized depreciation for
all securities in which there was an excess of tax cost over market value was
$472,010.
12 FORUM FUNDS (R)
<PAGE>
AUSTIN GLOBAL EQUITY FUND
INDEPENDENT AUDITORS' REPORT
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The Board of Trustees and Shareholders,
Austin Global Equity Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Austin Global Equity Fund as of March 31, 1998,
the related statements of operations for the year then ended, the statement of
changes in net assets for the year ended March 31, 1998, the nine months ended
March 31, 1997 and the year ended June 30, 1996, 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, 1998 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, 1998, the results of its operations , the changes in its
net assets, and financial highlights for the respective stated periods, in
conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Boston, Massachusetts
May 1, 1998
13 FORUM FUNDS (R)
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INVESTMENT ADVISOR
Austin Investment Management, Inc.
375 Park Avenue, Suite 2207
New York, NY 10152-2207
CUSTODIAN
BankBoston, N.A.
P.O. Box 1959
Boston, MA 02105
TRUSTEES
John Y. Keffer
Costas Azariadis
James C. Cheng
J. Michael Parish
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DISTRIBUTOR
Forum Financial Services, Inc.(R)
Two Portland Square
Portland, ME 04101
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY
TO SHAREHOLDERS AND TO OTHERS WHO HAVE RECEIVED
A COPY OF THE AUSTIN GLOBAL EQUITY FUND
PROSPECTUS.
