<PAGE>
POLARIS GLOBAL
VALUE FUND
ANNUAL REPORT
MAY 31, 1999
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HTTP://WWW.POLARISCAPITAL.COM
<PAGE>
POLARIS GLOBAL VALUE FUND
ANNUAL REPORT
MAY 31, 1999
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
The Polaris Global Value Fund climbed 3.22% during the last half of the fiscal
year while the Fund's benchmark, the MSCI World Index rose 8.74% for the same
time period. For the year ended May 31, 1999, the Fund returned (11.95)% and the
Index returned 13.13%.
Performance was unsatisfactory because of the lack of breadth in the marketplace
during the period and the fact that many of the Fund's holdings did not begin to
realize their values until the last two months of the period. As returns for
April and May show, performance can rebound quickly when market conditions and
investor sentiment change.
Some of the Fund's holdings, such as Chock Full O'Nuts, Helix Technology and
Mechanic's Financial did perform well during the past six months. The Fund's
underperformance is primarily attributed to two trends. First, cyclical stocks,
such as Valmet, Methanex and WPI Group, continued to be penalized by the market.
Second, many of the Fund's holdings, particularly U.S. thrifts, continued to be
undervalued despite their positive fundamentals. The Fund's manager believes
that these stocks represent significant latent value in the portfolio.
For a more detailed discussion on the Fund's strategy and performance, see our
commentary covering the period June 30, 1999 that will be mailed to all
shareholders shortly. Thank you for your continued support.
Sincerely,
[SIGNATURE]
Bernard R. Horn, Jr.
Portfolio Manager
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. DURING THE PERIOD CERTAIN
FEES AND EXPENSES WERE WAIVED BY THE SERVICE PROVIDERS. WITHOUT THESE WAIVERS
TOTAL RETURNS WOULD HAVE BEEN LOWER. IF THE MAXIMUM SALES CHARGE HAD BEEN
REFLECTED AND IF THERE HAD BEEN NO FEE WAIVERS, THE QUOTED PERFORMANCE WOULD
HAVE BEEN LOWER. ADDITIONAL PERFORMANCE FIGURES FOR THE FUND CAN BE FOUND IN THE
PERFORMANCE CHART & ANALYSIS SECTION OF THIS REPORT.
THE MSCI WORLD INDEX IS A GROUP OF UNMANAGED SECURITIES WIDELY REGARDED BY
INVESTORS TO BE REPRESENTATIVE OF THE MARKET IN GENERAL. ONE CANNOT INVEST
DIRECTLY IN AN INDEX.
THE VIEWS IN THIS REPORT WERE THOSE OF THE FUND MANAGER AS OF MAY 31, 1999, AND
MAY NOT REFLECT THE VIEWS OF THE MANAGER ON THE DATE THIS REPORT IS FIRST
PUBLISHED OR ANY TIME THEREAFTER. THESE VIEWS ARE INTENDED TO ASSIST
SHAREHOLDERS OF THE FUND IN UNDERSTANDING THEIR INVESTMENT IN THE FUND AND DO
NOT CONSTITUTE INVESTMENT ADVICE.
1
<PAGE>
POLARIS GLOBAL VALUE FUND
PERFORMANCE CHART & ANALYSIS
MAY 31, 1999
- --------------------------------------------------------------------------------
The following chart compares changes in the value of a $10,000 investment in
Polaris Global Value Fund (the "Fund"), including reinvested dividends and
distributions, to the performance of the Morgan Stanley Capital International
World Index ("MSCI"). 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 important to keep in mind that the MSCI
excludes the effect of any expenses which have been deducted from the Fund's
return. It is not possible to invest directly in any index. PERFORMANCE
INFORMATION PRESENTED HERE REPRESENTS ONLY PAST PERFORMANCE AND DOES NOT
NECESSARILY INDICATE FUTURE RESULTS.
COMPARISON OF CHANGE IN VALUE OF A $10,000 INVESTMENT
<TABLE>
<CAPTION>
Since Inception
Average Annual Total Return as of 5/31/99 One Year Five Year on July 31, 1989
- --------------------------------------------- -------- --------- ----------------
<S> <C> <C> <C> <C>
Polaris Global Value Fund (11.95%) 15.71% 11.27%
MSCI 13.13% 15.62% 9.97%
Investment Value on 5/31/99
- ---------------------------------------------
Polaris Global Value Fund $28,568
MSCI $25,477
</TABLE>
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
POLARIS GLOBAL VALUE FUND MSCI
<S> <C> <C>
7/31/1989 $10,000.00 $10,000.00
8/31/1989 $10,000.00 $9,755.50
9/30/1989 $10,008.01 $10,028.45
10/31/1989 $9,794.84 $9,691.49
11/30/1989 $9,745.86 $10,075.84
12/31/1989 $9,882.30 $10,397.13
1/31/1990 $9,882.30 $9,908.98
2/28/1990 $9,645.13 $9,481.41
3/31/1990 $9,603.65 $8,906.08
4/30/1990 $9,584.45 $8,774.89
5/31/1990 $9,815.43 $9,696.17
6/30/1990 $10,062.78 $9,624.23
7/31/1990 $9,970.20 $9,709.03
8/31/1990 $9,316.16 $8,805.12
9/30/1990 $8,597.88 $7,873.54
10/31/1990 $8,944.38 $8,605.52
11/30/1990 $8,942.59 $8,461.12
12/31/1990 $8,721.71 $8,635.24
1/31/1991 $9,079.30 $8,947.98
2/28/1991 $9,389.81 $9,773.24
3/31/1991 $9,291.21 $9,482.20
4/30/1991 $9,525.35 $9,553.39
5/31/1991 $9,863.50 $9,766.93
6/30/1991 $9,493.62 $9,160.99
7/31/1991 $9,766.09 $9,590.68
8/31/1991 $9,887.19 $9,557.25
9/30/1991 $10,151.18 $9,804.91
10/31/1991 $10,116.66 $9,960.93
11/30/1991 $9,717.05 $9,523.84
12/31/1991 $10,220.40 $10,214.08
1/31/1992 $10,628.19 $10,021.95
2/29/1992 $11,073.51 $9,846.06
3/31/1992 $10,594.03 $9,379.26
4/30/1992 $11,120.55 $9,506.95
5/31/1992 $11,372.99 $9,882.08
6/30/1992 $11,064.78 $9,547.97
7/31/1992 $10,822.46 $9,569.23
8/31/1992 $10,626.58 $9,798.78
9/30/1992 $10,563.88 $9,705.81
10/31/1992 $10,409.65 $9,439.80
11/30/1992 $10,866.63 $9,605.71
12/31/1992 $11,219.80 $9,680.32
1/31/1993 $11,214.19 $9,709.79
2/28/1993 $11,133.44 $9,936.90
3/31/1993 $11,732.42 $10,510.09
4/30/1993 $11,746.50 $10,994.24
5/31/1993 $12,114.17 $11,244.73
6/30/1993 $11,936.09 $11,147.55
7/31/1993 $12,236.88 $11,374.26
8/31/1993 $12,818.13 $11,892.90
9/30/1993 $12,825.82 $11,670.27
10/31/1993 $13,504.31 $11,989.11
11/30/1993 $13,149.14 $11,308.04
12/31/1993 $14,103.77 $11,858.61
1/31/1994 $14,683.44 $12,637.98
2/28/1994 $14,385.36 $12,471.67
3/31/1994 $13,694.87 $11,931.14
4/30/1994 $13,616.80 $12,297.18
5/31/1994 $13,773.40 $12,326.03
6/30/1994 $13,656.32 $12,288.98
7/31/1994 $14,152.05 $12,519.79
8/31/1994 $14,553.97 $12,893.97
9/30/1994 $14,044.58 $12,552.28
10/31/1994 $14,206.09 $12,906.44
11/30/1994 $13,667.68 $12,343.85
12/31/1994 $13,711.42 $12,460.49
1/31/1995 $13,540.02 $12,270.46
2/28/1995 $14,024.76 $12,446.37
3/31/1995 $14,451.11 $13,043.26
4/30/1995 $15,098.52 $13,494.81
5/31/1995 $15,362.74 $13,607.19
6/30/1995 $16,118.59 $13,599.95
7/31/1995 $16,908.40 $14,277.35
8/31/1995 $17,106.23 $13,956.26
9/30/1995 $17,816.14 $14,359.73
10/31/1995 $17,711.02 $14,130.55
11/30/1995 $18,031.59 $14,618.11
12/31/1995 $18,074.87 $15,042.42
1/31/1996 $17,953.77 $15,311.42
2/29/1996 $18,267.96 $15,401.53
3/31/1996 $18,474.38 $15,654.62
4/30/1996 $19,398.10 $16,019.51
5/31/1996 $19,937.37 $16,030.15
6/30/1996 $19,730.02 $16,107.99
7/31/1996 $18,940.82 $15,535.52
8/31/1996 $19,721.18 $15,710.85
9/30/1996 $20,474.53 $16,322.72
10/31/1996 $20,578.95 $16,433.42
11/30/1996 $21,976.26 $17,351.05
12/31/1996 $22,292.72 $17,069.96
1/31/1997 $23,344.94 $17,272.53
2/28/1997 $23,379.96 $17,467.95
3/31/1997 $23,223.31 $17,119.12
4/30/1997 $23,947.88 $17,675.47
5/31/1997 $25,942.74 $18,763.24
6/30/1997 $27,974.05 $19,695.85
7/31/1997 $30,511.30 $20,599.75
8/31/1997 $29,971.25 $19,218.54
9/30/1997 $32,078.23 $20,259.37
10/31/1997 $30,102.21 $19,189.88
11/30/1997 $29,686.80 $19,526.20
12/31/1997 $29,995.54 $19,760.91
1/31/1998 $29,974.54 $20,308.38
2/28/1998 $31,557.20 $21,678.77
3/31/1998 $32,608.05 $22,590.86
4/30/1998 $33,361.30 $22,808.23
5/31/1998 $32,447.20 $22,519.02
6/30/1998 $31,084.42 $23,050.04
7/31/1998 $30,695.05 $23,009.64
8/31/1998 $24,692.32 $19,937.85
9/30/1998 $24,854.56 $20,287.04
10/31/1998 $26,314.68 $22,117.50
11/30/1998 $27,677.46 $23,429.36
12/31/1998 $27,340.57 $24,570.44
1/31/1999 $26,577.42 $25,104.89
2/28/1999 $26,079.72 $24,433.59
3/31/1999 $26,278.80 $25,447.34
4/30/1999 $29,795.91 $26,446.93
5/31/1999 $28,568.24 $25,476.86
</TABLE>
Prior to June 1, 1998, Polaris Capital Management, Inc. managed a limited
partnership with an investment objective and investment policies that were, in
all material respects, equivalent to those of the Fund. On June 1, 1998, the
limited partnership reorganized into the Fund. The performance for the Fund
includes the performance of the predecessor limited partnership. For periods
prior to June 1, 1998, the performance figures include the expenses for the
limited partnership. For all periods except "Since Inception", had the Fund's
first year estimated expenses been used, the performance would have been lower.
The limited partnership was neither registered under the Investment Company Act
of 1940, as amended ("1940 Act"), nor subject to certain investment limitations,
diversification requirements, and other restrictions imposed by the 1940 Act and
the Internal Revenue Code, which, if applicable, may have had an adverse affect
on its performance.
2
<PAGE>
POLARIS GLOBAL VALUE FUND
SCHEDULE OF INVESTMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
COMMON STOCK (99.6%)
<TABLE>
<CAPTION>
Shares Security Description Value
- --------- ------------------------------------------------------------ -----------
<C> <S> <C>
BUILDING AND CONSTRUCTION (7.1%)
57,000 Barratt Developments $ 293,191
70,000 Beazer Group PLC 216,484
41,000 Bellway PLC 234,543
118,000 Crest Nicholson PLC 294,970
23,300 Koninklijke Boskalis Westminster NV 345,951
-----------
1,385,139
-----------
BUSINESS SERVICES (3.6%)
10,543 Cendant Corp. 194,388
5,700 Takefuji Corp. 502,441
-----------
696,829
-----------
CHEMICALS AND ALLIED PRODUCTS (5.3%)
32,000 Arisawa Manufacturing Co. 450,257
52,000 Methanex Corp. (a) 194,323
29,000 Wellman, Inc. 395,125
-----------
1,039,705
-----------
CONSUMER GOODS (7.1%)
55,000 Chock Full o' Nuts Corp. (a) 574,063
3,150 Christian Dior SA 447,610
28,000 Kesko Oyj 371,820
-----------
1,393,493
-----------
ELECTRONICS AND ELECTRICAL EQUIPMENT (4.8%)
12,300 Draka Holding NV 443,705
4,790 Intel Corp. 258,959
83,000 VTECH Holdings Ltd. 241,898
-----------
944,562
-----------
FINANCIAL INSTITUTIONS (24.5%)
22,900 Abington Bancorp, Inc. 326,325
16,100 American Bank (Waterbury, CT) 338,100
24,200 Banco Bilbao Vizcaya SA 349,952
90,400 Charter Pacific Bank (a) 361,600
19,500 Hawthorne Financial Corp. (a) 307,125
34,000 Horizon Bank & Trust Co. (a) 229,500
31,000 Ipswich Savings Bank 311,937
3,600 Jyske Bank 288,275
14,500 MECH Financial, Inc. 512,938
15,616 North Valley Bancorp 199,104
20,812 Peoples Heritage Financial Group, Inc. 390,225
357,000 Sanlam Ltd. (a) 343,406
10,157 UST Corp. 245,037
26,900 Warren Bancorp, Inc. 215,200
12,791 Webster Financial Corp. 371,738
-----------
4,790,462
-----------
FOOD AND BEVERAGES (1.8%)
21,900 Orkla ASA, "A" 347,088
-----------
INDUSTRIALS (4.6%)
21,400 Helix Technology Corp. 365,138
11,000 Walter AG 309,396
58,900 WPI Group, Inc. (a) 231,919
-----------
906,453
-----------
<CAPTION>
Shares Security Description Value
- --------- ------------------------------------------------------------ -----------
<C> <S> <C>
MANUFACTURING (10.8%)
72,369 Fedders Corp., "A" $ 398,030
2,700 Kone Corp. 351,482
13,700 Radex-Heraklith AG 386,772
57,100 Rautaruukki Oyj 352,256
30,000 Valmet Oyj 307,410
5,500 Veba AG 314,572
-----------
2,110,522
-----------
METALS AND MINING (5.3%)
80,950 Palabora Mining Co. 421,782
5,800 Phelps Dodge Corp. 300,514
24,100 RTI International Metals (a) 320,831
-----------
1,043,127
-----------
OIL AND RELATED INDUSTRIES (1.8%)
19,050 Repsol SA, ADR 342,900
-----------
PAPER AND PACKAGING PRODUCTS (2.9%)
91,700 Sappi Ltd. 558,652
-----------
REAL ESTATE (1.6%)
179,000 Countryside Properties PLC 321,966
-----------
RUBBER AND PLASTIC PRODUCTS (3.6%)
16,400 Continental AG 380,686
289,750 Crean (James) PLC (a) 333,263
-----------
713,949
-----------
TELECOMMUNICATIONS (3.2%)
185,000 Total Access Communications SA (a) 632,700
-----------
TEXTILES (2.0%)
8,800 Gamma Holdings NV 395,659
-----------
TRANSPORTATION (7.0%)
2,374 A. Friedrich Flender AG (a) 263,122
5,600 AMR Corp. (a) 364,350
12,998 KLM Royal Dutch Airlines NV (a) 377,826
321 KLM Royal Dutch Airlines NV, ADR 9,309
155,600 Neptun Maritime Oyj (a) 354,680
-----------
1,369,287
-----------
TRANSPORTATION EQUIPMENT (1.1%)
3,925 Toyota Motor Corp. 211,950
-----------
UTILITIES - ELECTRIC, GAS AND SANITARY SERVICES (1.4%)
21,600 Union Electrica Fenosa SA 282,766
-----------
OTHER (0.0%)
37,500 Utopia (b) -
-----------
Total Common Stock (COST $18,219,166) $19,487,209
-----------
SHORT-TERM INVESTMENTS (0.4%)
<CAPTION>
Principal
Amount
- --------- ------------------------------------------------------------ -----------
<C> <S> <C>
70,874 BT Investment Money Market $ 70,874
1,084 Middlesex Savings Bank 1,084
1,116 Stoneham Savings Bank 1,116
-----------
Total Short-Term Investments, AT COST 73,074
-----------
Total Investments (100.0%) (COST $18,292,240) $19,560,283
-----------
-----------
</TABLE>
- ------------------------------------------------
(a) Non-income producing security.
(b) Security valued by or at the direction of the Trustees and is considered a
fair-valued security.
ADR - American Depository Receipt.
See Notes to Financial Statements. 3
<PAGE>
POLARIS GLOBAL VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS
Investments (Note 2):
Investments, at cost............................................... $ 18,292,240
Net unrealized appreciation........................................ 1,268,043
--------------
Total investments, at value...................................... 19,560,283
Receivable for Fund shares issued.................................... 130
Interest, dividends and other receivables............................ 92,689
Organization costs, net of amortization (Note 2)..................... 33,333
--------------
Total Assets........................................................... 19,686,435
--------------
LIABILITIES
Payable for Fund shares redeemed..................................... 250,000
Payable to other related parties (Note 3)............................ 5,710
Accrued expenses and other liabilities............................... 43,145
--------------
Total Liabilities...................................................... 298,855
--------------
NET ASSETS $ 19,387,580
--------------
--------------
COMPONENTS OF NET ASSETS
Paid-in capital...................................................... $ 17,696,225
Undistributed net investment income.................................. 28,625
Accumulated net realized gain on investments
and foreign currency transactions.................................. 396,453
Unrealized appreciation on investments
and foreign currency translations.................................. 1,266,277
--------------
NET ASSETS............................................................. $ 19,387,580
--------------
--------------
SHARES OF BENEFICIAL INTEREST 2,251,802
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION
PRICE PER SHARE $ 8.61
</TABLE>
See Notes to Financial Statements. 4
<PAGE>
POLARIS GLOBAL VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1999 (a)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME
Dividend income (net of foreign withholding taxes of $38,260)........ $ 458,289
Interest income...................................................... 19,246
-------------
Total Investment Income................................................ 477,535
-------------
EXPENSES
Investment advisory (Note 3)......................................... 199,686
Administration (Note 3).............................................. 40,000
Transfer agent (Note 3).............................................. 28,356
Custody.............................................................. 20,831
Accounting (Note 3).................................................. 39,000
Audit................................................................ 20,700
Legal................................................................ 9,707
Trustees............................................................. 1,641
Registration......................................................... 29,119
Amortization of organization costs (Note 2).......................... 6,667
Miscellaneous........................................................ 16,207
-------------
Total Expenses......................................................... 411,914
Fees waived (Note 5)............................................... (62,378)
-------------
Net Expenses........................................................... 349,536
-------------
NET INVESTMENT INCOME.................................................. 127,999
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain on investments sold................................ 734,552
Net realized loss on foreign currency transactions................... (9,263)
-------------
Net realized gain on investments and foreign currency
transactions..................................................... 725,289
-------------
Net change in unrealized depreciation on investments................. (3,705,540)
Net change in unrealized depreciation on
foreign currency translations...................................... (1,766)
-------------
Net change in unrealized depreciation on investments
and foreign currency translations................................ (3,707,306)
-------------
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS
AND FOREIGN CURRENCY TRANSACTIONS.................................... (2,982,017)
-------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $ (2,854,018)
-------------
-------------
</TABLE>
- ----------------------------------------------------------------------
(a) The Fund commenced operations on June 1, 1998 (Note 1).
See Notes to Financial Statements. 5
<PAGE>
POLARIS GLOBAL VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
May 31, 1999
(a)
<S> <C>
- ---------------------------------------------------------------------------------------
NET ASSETS, Beginning of Period....................................... $ -
---------------
OPERATIONS
Net investment income............................................... 127,999
Net realized gain on investments sold
and foreign currency transactions................................. 725,289
Net change in unrealized depreciation
on investments and foreign currency translations.................. (3,707,306)
---------------
Net decrease in net assets resulting
from operations............................................... (2,854,018)
---------------
DISTRIBUTIONS TO SHAREHOLDERS FROM
Net investment income............................................... (90,111)
Net realized gain on investments.................................... (338,099)
---------------
Total distributions to shareholders............................. (428,210)
---------------
CAPITAL SHARE TRANSACTIONS
Sale of shares...................................................... 3,797,127
Transactions due to acquisition (Note 6)............................ 21,861,590
Reinvestment of distributions....................................... 427,279
Redemption of shares................................................ (3,416,188)
---------------
Net increase from capital share transactions.................... 22,669,808
---------------
Net increase in net assets.......................................... 19,387,580
---------------
NET ASSETS, End of Period (Including line (A))........................ $ 19,387,580
---------------
---------------
SHARE TRANSACTIONS
Sale of shares...................................................... 429,321
Transactions due to acquisition (Note 6)............................ 2,186,159
Reinvestment of distibutions........................................ 53,323
Redemption of shares................................................ (417,001)
---------------
Net increase in shares.......................................... 2,251,802
---------------
---------------
(A) Accumulated undistributed net investment income................... $ 28,625
---------------
---------------
</TABLE>
- --------------------------------------------------------------------------------
(a) The Fund commenced operations on June 1, 1998 (Note 1).
See Notes to Financial Statements. 6
<PAGE>
POLARIS GLOBAL VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
Selected per share data and ratios for an average share outstanding throughout
the period:
<TABLE>
<CAPTION>
Year Ended
May 31, 1999
(a)
<S> <C>
- ---------------------------------------------------------------------------------------
Net Asset Value, Beginning of Period.................................. $ 10.00
---------------
Investment operations:
Net investment income............................................... 0.06
Net realized and unrealized loss on investments
and foreign currency transactions................................. (1.27)
---------------
Total from investment operations...................................... (1.21)
---------------
Distributions to shareholders from:
Net investment income............................................... (0.04)
Net realized gain on investments and foreign currency
transactions...................................................... (0.14)
---------------
Total distributions to shareholders................................... (0.18)
---------------
Net Asset Value, End of Period........................................ $ 8.61
---------------
---------------
Total return (b)...................................................... (11.95)%
Ratios/supplementary data:
Net assets at end of period (000 omitted)............................. $ 19,388
Ratios to average net assets:
Expenses, including waiver of fees.................................. 1.75%
Expenses, excluding waiver of fees.................................. 2.06%
Net investment income, including waiver of fees..................... 0.63%
Portfolio turnover rate............................................... 51%
</TABLE>
- --------------------------------------------------------------------------------
(a) The Fund commenced operations on June 1, 1998 (Note 1).
(b) Total return would have been lower had certain expenses not been reduced
during the period (Note 5).
See Notes to Financial Statements. 7
<PAGE>
POLARIS GLOBAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
NOTE 1. ORGANIZATION
Forum Funds-Registered Trademark- (the "Trust") is a Delaware business trust
that is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "Act"). The Trust currently has
seventeen active investment portfolios. This report relates to Polaris Global
Value Fund (the "Fund"), a diversified series of the Trust. The Fund commenced
operations on June 1, 1998 after it acquired the net assets of Global Limited
Partnership (the "Partnership"), in exchange for Fund shares. The Partnership
commenced operations on July 31, 1989 and ceased operations on May 31, 1998.
Under its Trust Instrument, the Trust is authorized to issue an unlimited number
of the Fund's shares of beneficial interest without par value.
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, the
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 amounts could differ from those
estimates.
The following represent the significant accounting policies of the Fund:
SECURITY VALUATION - On each Fund business day, the Trust determines the net
asset value per share of the Fund as of the close of the regular trading day on
the New York Stock Exchange. Securities, other than short-term securities, held
by the Fund, and for which market quotations are readily available, are valued
using the last reported sales price provided by independent pricing services. If
no sales price is reported, the mean of the last bid and ask price is used. In
the absence of readily available market quotations, securities are valued at
fair value as determined by the Trust's Board of Trustees. Securities that
mature in sixty days or less are valued at amortized cost, which approximates
market value. Foreign short-term investments are valued at the current market
price, then marked-to-market to recognize any gain or loss on the transaction.
SECURITY TRANSACTIONS AND INVESTMENT INCOME - Investment transactions are
accounted for on trade date. Dividend income is recorded on the ex-dividend date
except that certain dividends from foreign securities where the ex-dividend date
may have passed are recorded as soon as the Fund is informed of the ex-dividend
date. Dividend income is recorded net of unrecoverable withholding tax. Interest
income is recorded as earned. Identified cost of investments sold is used to
determine gain and loss for both financial statement and federal income tax
purposes. Foreign dividend and interest income amounts and realized capital gain
or loss are converted to U.S. dollar equivalents using foreign exchange rates in
effect at the date of the transactions.
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.
8
<PAGE>
POLARIS GLOBAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
The Fund may enter into transactions to purchase or sell foreign currencies to
protect the U.S. dollar value of its underlying portfolio securities against the
effect of possible adverse movements in foreign exchange rates. Principal risks
associated with such transactions 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 forward currency transactions are
recorded daily as unrealized gain or loss; realized gain or loss includes net
gain or loss on transactions that have terminated by settlement or by the Fund
entering into offsetting commitments.
REPURCHASE AGREEMENTS - The Fund may invest in repurchase agreements. The Fund,
through its custodian, receives delivery of the underlying securities, whose
market value must always equal or exceed the repurchase price. In the event of
default, the Fund may have difficulties disposing of such securities.
DISTRIBUTIONS TO SHAREHOLDERS - Distributions to shareholders of net investment
income and net capital gain, if any, are declared and paid at least annually.
Distributions are based on amounts calculated in accordance with applicable
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 - Costs incurred by the Fund in connection with its
organization are amortized using the straight-line method over a five-year
period.
FEDERAL TAXES - The Fund intends to qualify each year as a regulated investment
company and distribute all its taxable income. In addition, by distributing in
each calendar year substantially all its net investment income, capital gain and
certain other amounts, if any, the Fund will not be subject to federal excise
tax. Therefore, no federal income or excise tax provision is required.
EXPENSE ALLOCATION - The Trust accounts separately for the assets and
liabilities and operations of its funds. Expenses that are directly attributable
to more than one fund are allocated among the respective funds in proportion to
each fund's average daily net assets.
NOTE 3. ADVISORY FEES, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISER - The investment adviser to the Fund is Polaris Capital
Management, Inc. (the "Adviser"). Pursuant to an Investment Advisory Agreement,
the Adviser receives an advisory fee from the Fund at an annual rate of 1.00% of
the average daily net assets of the Fund.
ADMINISTRATOR - The administrator of the Fund is Forum Administrative Services,
LLC ("FAdS"). For its services, FAdS receives an administrative fee at an annual
rate of 0.10% of the first $150 million of the Fund's average daily net assets
and 0.05% of the Fund's average daily net assets in excess of $150 million, with
a $40,000 minimum fee per year.
TRANSFER AGENT - The transfer agent and dividend disbursing agent for the Fund
is Forum Shareholder Services, LLC ("FSS"). FSS receives an annual fee of
$24,000, plus certain shareholder account fees.
9
<PAGE>
POLARIS GLOBAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICE AGENT - The Trust has adopted a shareholder servicing plan
(the "Plan") with respect to the Fund under which FAdS is authorized to enter
into shareholder service agreements with financial institutions and other
persons who provide services for and maintain shareholder accounts as set forth
in the Plan. Under the Plan, the Trust, through FAdS, pays the shareholder
servicing agent a fee of up to 0.25% of the average daily net assets of the
shares owned by investors for which the shareholder servicing agent maintained a
servicing relationship. FAdS may pay any or all amounts of these payments to
various institutions that provide shareholder servicing to their clients.
DISTRIBUTOR - Forum Fund Services, LLC ("FFS"), a registered broker-dealer and a
member of the National Association of Services Dealers, Inc., is the Fund's
distributor. FFS receives no compensation for its distribution services.
OTHER SERVICE PROVIDERS - Forum Accounting Services, LLC ("FAcS") provides fund
accounting services to the Fund. For its services, FAcS receives an annual fee
of $36,000, plus certain amounts based upon the asset level of the Fund as well
as the number and type of portfolio transactions made by the Fund.
NOTE 4. SECURITY TRANSACTIONS
The cost of purchases and the proceeds from sales of investment securities,
other than short-term investments, aggregated $10,610,887 and $9,908,825,
respectively, for the year ended May 31, 1999.
For federal income tax purposes, the tax basis of investment securities owned as
of May 31, 1999, was $18,694,818, and the net unrealized appreciation of
investment securities was $865,465. The aggregate gross unrealized appreciation
for all securities in which there was an excess of market value over tax cost
was $3,486,370, and the aggregate gross unrealized depreciation for all
securities in which there was an excess of tax cost over market value was
$2,620,905.
NOTE 5. WAIVER OF FEES
Certain service providers of the Fund have voluntarily agreed to waive a portion
of their fees and reimburse certain expenses of the Fund to the extent that the
Fund's net expenses exceed the annual rate of 1.75% of the Fund's average daily
net assets. Fee waivers and expense reimbursements may be reduced or eliminated
at any time. For the year ended May 31, 1999, the Adviser waived fees of
$62,378.
NOTE 6. ACQUISITION OF FUNDS
As of June 1, 1998, Polaris Global Value Fund acquired all the net assets of the
Global Value Limited Partnership. The net assets and unrealized gain associated
with the acquired fund immediately prior to acquisition were $21,861,590, and
$4,973,583, respectively. The shares issued as a result of the acquisition
amounted to 2,186,159.
The net assets of Polaris Global Value Fund immediately after the acquisition
were $21,861,590.
10
<PAGE>
POLARIS GLOBAL VALUE FUND
NOTES TO FINANCIAL STATEMENTS (concluded)
- --------------------------------------------------------------------------------
NOTE 7. CHANGES IN INDEPENDENT ACCOUNTANT
On May 31, 1999, the Board of Trustees of the Trust approved Deloitte & Touche
LLP ("Deloitte") as the new independent accountant for the Fund, subject to the
resignation of PricewaterhouseCoopers LLP ("PwC") as auditors for the Fund. The
decision to replace PwC with Deloitte was motivated by the fact that Deloitte
already serves as independent auditor for the other stand alone Funds of the
Trust.
The Fund commenced operations on June, 1 1998. As of the date of their
resignation, PwC had not issued a principal accountant's report on the Fund's
financial statements for the fiscal year ended May 31, 1999, nor had they
commenced their audit of the Fund's annual financial statements. The Fund had no
disagreements with PwC through the date of their resignation on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
NOTE 8. FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
(UNAUDITED)
SPECIAL 1999 TAX INFORMATION
The Fund intends to elect to pass through to its shareholders the credit for
taxes paid in foreign countries during its fiscal year ended May 31, 1999. In
accordance with the current tax laws, the foreign income and foreign tax per
share (for a share outstanding on May 31, 1999) is as follows:
<TABLE>
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX
- --------------------- ----------- -----------
<S> <C> <C>
Austria.............. $ 0.0062 $ 0.0011
Finland.............. $ 0.0227 $ 0.0040
France............... $ 0.0054 $ 0.0007
Germany.............. $ 0.0077 $ 0.0009
Holland.............. $ 0.0027 $ 0.0005
Hong Kong............ $ 0.0082 $ 0.0000
Ireland.............. $ 0.0053 $ 0.0000
<CAPTION>
COUNTRY DIVIDENDS FOREIGN TAX
- --------------------- ----------- -----------
<S> <C> <C>
Italy................ $ 0.0042 $ 0.0007
Japan................ $ 0.0047 $ 0.0008
Netherlands.......... $ 0.0260 $ 0.0044
Norway............... $ 0.0023 $ 0.0004
South Africa......... $ 0.0231 $ 0.0000
Spain................ $ 0.0102 $ 0.0018
United Kingdom....... $ 0.0108 $ 0.0014
----------- -----------
$ 0.1395 $ 0.0167
----------- -----------
----------- -----------
</TABLE>
The dividend pass through of foreign tax credit will affect only those
shareholders of the Fund who are holders on the dividend record date in December
1999. Accordingly, shareholders will receive more detailed information along
with their form 1099-DIV in January 2000.
INCOME DIVIDENDS - All the income and any short term capital gain dividends paid
by the Fund were ordinary income for federal income tax purposes. The percentage
of qualifying dividends eligible for the corporate dividends received deduction
was 22.39%.
CAPITAL GAIN DIVIDENDS - The Fund declared long term capital gain dividends of
$338,099, for the fiscal year ended May 31, 1999.
11
<PAGE>
POLARIS GLOBAL VALUE FUND
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
To the Board of Trustees and Shareholders,
Polaris Global Value Fund:
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of Polaris Global Value Fund (the "Fund") as of May
31, 1999, the related statements of operations and changes in net assets, and
the financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit 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,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of the securities owned as of May 31, 1999 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
audit provides a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of the Polaris Global
Value Fund as of May 31, 1999, and the results of its operations, the changes in
its net assets and its financial highlights for the year ending May 31, 1999, in
conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
July 16, 1999
12
<PAGE>
TABLE OF CONTENTS
MAY 31, 1999
<TABLE>
<CAPTION>
Page
<S> <C>
A Message to Our Shareholders.............. 1
Performance Chart and Analysis............. 2
Schedule of Investments.................... 3
Statement of Assets and Liabilities........ 4
Statement of Operations.................... 5
Statement of Changes in Net Assets......... 6
Financial Highlights....................... 7
Notes to Financial Statements.............. 8
Independent Auditors' Report............... 12
</TABLE>
INVESTMENT ADVISER
Polaris Capital Management, Inc.
125 Summer Street
Boston, MA 02110
DISTRIBUTOR
Forum Fund Services, LLC
Two Portland Square
Portland, ME 04101
TRANSFER AGENT
Forum Shareholder Services, LLC
Two Portland Square
Portland, ME 04101
INDEPENDENT ACCOUNTANT
Deloitte & Touche LLP
200 Berkeley Street
Boston, MA 02116
This report is for the information of the shareholders of the Polaris Global
Value Fund. Its use in connection with any offering of the Fund's shares is
authorized only in case of a concurrent or prior delivery of the Fund's current
prospectus.
POLARIS GLOBAL
VALUE FUND
ANNUAL REPORT
MAY 31, 1999
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