<PAGE>
AUSTIN
GLOBAL EQUITY FUND
ANNUAL REPORT
JUNE 30, 1996
AUSTIN
Investment Management, Inc.
Registered Investment Advisors
<PAGE>
AUSTIN GLOBAL EQUITY FUND
- ------------------------------------------------------------------------------
Two Portland Square Shareholder Inquiries
Portland, Maine 04101 Forum Financial Corp.
P.O. Box 446
Portland, Maine 04112
207-879-0001
ANNUAL REPORT JUNE 30, 1996
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August 26, 1996
Dear Shareholder:
Generally favorable market trends prevailed in most of the
markets of Europe, the Pacific Rim, Japan and particularly the
United States for the 12 month period ended June 30, 1996. The
favorable forces behind those trends were a well-balanced U.S.
economy and good corporate earnings reports. In June 1995, the
U.S. Federal Reserve Bank moved to dampen domestic inflationary
expectations by lifting interest rates to 6 percent. The Fed
subsequently lowered rates to 5.25% by end of June 1996. The
resulting increased availability of capital at more favorable
rates stimulated domestic as well as foreign economies and
markets. Moreover, inflation remained in check in most developed
economies of the world.
Markets throughout the world were volatile through 1996,
reflecting the Fed's shifting policies. Market participants
caused markets to gyrate by alternating between despair about
accelerating economies producing an unacceptable rate of
inflation and optimism about moderating economic expansion and
lower interest rates. This volatility was amplified among
several industry categories such as semiconductors,
telecommunication services, and equipment software.
The Fund has been overweighted relative to the market in these
sectors and the recent weakness has affected its short term
performance. Nevertheless, we believe that these technologies
offer long term benefits and value. In our view, investing
globally in selected stock of small to medium capitalized
companies together with those of newly privatized companies will
produce attractive long-term growth opportunities. We expect to
continue to pursue selected quality investments in these areas.
The Fund's performance continues to compare favorably with that
of its peers; since its inception on December 8, 1993, the Fund's
total return is 34.7% compared with 26.5% for World Stock funds
tracked by Morningstar.(1) For the year ended June 30, 1996, the
Fund's total return was 16.22%. The average total return of the
163 funds in the Morningstar World Stock category during this
period was 19.73%.(2)
_______________________________
1 Morningstar return is based on an inception date of January 1,
1994.
2 Past performance is no guarantee of future results. These
returns assume reinvestment of all dividends and capital gains
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. For the period
reported, some of the Fund's fees were waived; otherwise total
return would have been lower.
2
<PAGE>
The following chart compares changes in the value of a $10,000
investment in the Fund, including reinvested dividends and
distributions, against the performance of the Standard & Poor's
500 composite stock index and the Morgan Stanley Capital
International World Index.
AUSTIN GLOBAL EQUITY FUND VS. S&P 500 INDEX AND
MORGAN STANLEY CAPITAL INTERNATIONAL WORLD INDEX
[GRAPH]
The S&P 500 is a capitalization weighted index composed of 500
widely held U.S. companies. The Fund underperformed the S&P 500
due to the index weighting in American Stocks including
substantially large capitalized companies such as Coca-Cola,
AT&T, and IBM. Over the past several years, a wide range of
investors have favored these types of investments. Because the
Fund's focus is global and concentrated on moderate to smaller
capitalized stocks, the S&P 500 has not proven to be a suitable
benchmark for the Fund's performance. For this reason, we have
also included the comparison to the MSCI World Index. This index
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 S&P 500 and the MSCI World indices
are unmanaged and do not reflect the reinvestment of dividends.
Of course, one cannot invest directly in an index.
We believe that attractive investment opportunities will continue
to appear in the coming months, and we will strive to maintain a
favorable level of performance for our investors. Thank you for
your continued support and interest in the Fund.
Regards,
/s/ Peter A. Vlachos
Peter A. Vlachos
Austin Investment Management, Inc.
3
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1996
ASSETS:
Investments, at value (cost $9,046,864) $10,611,959
Interest, dividends and other receivables 24,014
Receivable for shares issued 2,109
Organization costs, net 19,433
-----------
Total assets 10,657,515
-----------
LIABILITIES:
Payable for securities purchased 275,240
Accrued advisory fees 11,088
Accrued management fees 2,121
Accrued fees and other expenses 43,326
-----------
Total liabilities 331,775
-----------
NET ASSETS $10,325,740
-----------
-----------
COMPONENTS OF NET ASSETS:
Capital paid in $ 7,809,275
Net unrealized appreciation 1,565,095
Accumulated net realized gains 951,370
-----------
NET ASSETS $10,325,740
-----------
-----------
SHARES OUTSTANDING 783,052
-----------
-----------
NET ASSET VALUE PER SHARE $ 13.19
-----------
-----------
See Notes to Financial Statements Stone Bridge Funds, Inc.
4
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JUNE 30, 1996
INVESTMENT INCOME:
Dividend income $ 119,618
Interest income 30,567
-----------
Total income 150,185
-----------
EXPENSES:
Advisory 142,592
Administration 23,765
Distribution 2,291
Transfer agency 22,218
Accounting 39,000
Auditing 14,542
Legal 21,393
Other 43,331
-----------
Total expenses 309,132
Advisory fees waived (71,022)
-----------
Net expenses 238,110
-----------
NET INVESTMENT LOSS (87,925)
-----------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain 1,258,826
Net change in unrealized appreciation 229,692
-----------
Net realized and unrealized gain on investments 1,488,518
-----------
INCREASE IN NET ASSETS FROM OPERATIONS $ 1,400,593
-----------
-----------
See Notes to Financial Statements Stone Bridge Funds, Inc.
5
<PAGE>
AUSTIN GLOBAL EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED JUNE 30, 1995 AND 1996
Amount Shares
NET ASSETS-JUNE 30, 1994 $ 7,645,637
------------
OPERATIONS:
Net investment income 33,819
Net realized loss on investments (137,102)
Change in unrealized appreciation 1,450,500
------------
1,347,217
------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 1,247,864 122,991
Shares repurchased (1,767,124) (172,895)
------------ --------
(519,260) (49,904)
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NET ASSETS-JUNE 30, 1995 $ 8,473,594
------------
OPERATIONS:
Net investment loss (87,925)
Net realized gain on investments 1,258,826
Change in unrealized appreciation 229,692
------------
1,400,593
------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized capital gains (199,483)
------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares 842,317 68,184
Reinvested dividends 198,975 16,550
Shares repurchased (390,256) (32,250)
------------ --------
651,036 52,484
------------ --------
NET ASSETS-JUNE 30, 1996 $ 10,325,740
------------
------------
See Notes to Financial Statements Stone Bridge Funds, Inc.
6
<PAGE>
AUSTIN GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 1996
COMMON STOCKS (85.4%) SHARES VALUE
------- ----------
CANADA (3.1%)
GST Telecommunications, Inc.* 25,000 $ 328,125
----------
GERMANY (5.0%)
RWE AG 8,000 311,140
Systeme, Anwendungen, Producte in
der Datenverarbeitung 1,500 220,939
----------
532,079
----------
HONG KONG (3.1%)
Hong Kong and China Gas
Company, Ltd., ADR 60,000 95,724
Hutchison Whampoa, Ltd., ADR 7,500 235,933
----------
331,657
----------
ITALY (4.2%)
Telecom Italia, SPA 50,000 107,470
Telecom Italia Mobile, SPA 150,000 335,130
----------
442,600
----------
JAPAN (6.3%)
Bank of Tokyo-Mitsubishi, ADR 7,350 171,806
Nisshinbo Industries Inc. 20,000 196,932
Tokio Marine & Fire Insurance
Company, ADR 4,500 299,813
----------
668,551
----------
MALAYSIA (1.6%)
Nestle (Malaysia) Berhad 9,500 76,525
Telekom Malaysia Berhad 10,000 88,969
----------
165,494
----------
NETHERLANDS (4.6%)
Aegon NV, ADR 6,182 285,139
Royal PTT Nederland NV, ADR 5,348 201,887
----------
487,026
----------
PORTUGAL (0.2%)
Portugal Telecom, SA, ADR 1,000 26,250
----------
Stone Bridge Funds, Inc.
7
<PAGE>
AUSTIN GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1996
SHARES VALUE
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SINGAPORE (1.2%)
Development Bank of Singapore 5,000 $ 62,347
Fraser and Neave, Ltd. 6,000 62,064
----------
124,411
----------
SWITZERLAND (4.2%)
Bank Fuer International Zahlungsausgleich 25 219,712
Roche Holdings, Ltd., ADR 3,000 228,779
----------
448,491
----------
UNITED KINGDOM (8.0%)
HSBC Holdings Plc., ADR 1,000 151,152
RTZ Corporation Plc., ADR 4,000 241,000
Reuters Holdings Plc., ADR 2,500 181,250
Thorn EMI Plc., ADR 10,000 278,751
----------
852,153
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UNITED STATES (43.9%)
American Express Company 4,000 178,500
Aradigm Corporation* 15,000 153,750
BroadBand Technologies, Inc.* 8,000 258,000
Brooks Fiber Properties, Inc.* 10,000 330,000
C.U.C. International, Inc.* 5,000 177,500
Cisco Systems, Inc.* 6,000 339,750
The Walt Disney Company 2,098 131,912
Freeport-McMoran Oil & Gas Royalty Trust 35,000 87,500
Globalstar Telecommunications+ 6,000 258,000
Intel Corporation 4,000 293,750
Intercargo Corporation 10,000 86,250
Loral Space & Communications 19,000 258,875
MEMC Electronic Materials, Inc.* 7,000 271,250
Oracle Corporation* 10,500 414,094
PairGain Technologies, Inc.* 8,000 496,000
Patlex Corporation* 5,000 195,000
Schlumberger, Ltd. 3,000 252,750
U.S. Satellite Broadcasting Company, Inc.* 7,000 264,250
Wang Laboratories, Inc.* 6,000 113,250
Wang Laboratories, Inc.+ 2,000 96,500
----------
4,656,881
----------
TOTAL COMMON STOCKS (COST $7,858,886) $9,063,718
----------
Stone Bridge Funds, Inc.
8
<PAGE>
AUSTIN GLOBAL EQUITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JUNE 30, 1995
WARRANTS (5.8%) SHARES/FACE VALUE
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UNITED STATES (5.8%)
Bank of New York* 15,000 $ 620,625
-----------
TOTAL WARRANTS (COST $167,500) $ 620,625
-----------
CORPORATE BONDS (4.0%)
UNITED STATES (4.0%)
Baby Superstore, Inc., 4.875%, due 10/1/00 300,000 $ 236,625
C-Cube Microsystems, Inc., 5.875%, due 11/1/05 150,000 186,563
-----------
TOTAL CORPORATE BONDS (COST $516,050) $ 423,188
-----------
SHORT-TERM HOLDINGS (4.8%)
Dreyfus Government Cash Management Fund 353,224 $ 353,224
Forum Daily Assets Treasury Fund 49,513 49,513
1784 Institutional U.S. Treasury Money Market Fund 101,691 101,691
-----------
TOTAL SHORT-TERM HOLDINGS (COST $504,428) $ 504,428
-----------
TOTAL INVESTMENTS (100.0%) (COST $9,046,864) $10,611,959
-----------
* Non-income producing securities
+ Security exempt from registration. This security may be resold in
transactions exempt from registration under Rule 144A of the Securities
Act of 1933 to qualified institutional buyers.
Stone Bridge Funds, Inc.
9
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1. SUMMARY OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Stone Bridge Funds, Inc. (the "Company") is registered as an open-end
management investment company. The Company consists of two active investment
portfolios. Included in this report is Austin Global Equity Fund (the
"Fund"), a diversified portfolio that commenced operations on December 8,
1993. The Fund's financial statements are prepared in accordance with
generally accepted accounting principles ("GAAP") which permits management to
make certain estimates and assumptions at the date of the financial
statements and are based, in part, on the following accounting policies.
A) SECURITY VALUATION
Securities, other than short-term, 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 sale 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
determined by the Company's Board of Directors. Securities
with maturity of sixty days or less are valued at amortized cost.
B) FOREIGN CURRENCY TRANSLATION
The books and records of the Fund are maintained in United
States dollars. Foreign currency amounts are translated into
United States dollars on the following basis:
(i) market value of investment securities, other assets and
liabilities - at the current rates of exchange.
(ii) purchases and sales of investment securities,
income and expenses - at the rates of exchange
prevailing on the respective dates of such transactions.
Although the net assets of the Fund are presented at the
foreign exchange rates and market values at the close of the
year, the Fund does not isolate that portion of the results
of operations arising as a result of changes in the foreign
exchange rates from the fluctuations arising from changes in
the market prices of the securities held at year end.
Similarly, the Fund does not isolate the effect of changes in
foreign exchange rates from the fluctuations arising from
changes in the market prices of portfolio securities sold
during the year. Accordingly, realized foreign currency
gains (losses) are included in the reported net realized loss
on investment transactions.
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.
C) PURCHASES AND REDEMPTIONS OF SHARES
Purchases and redemptions of the Fund's shares are effected
at the time of determination of the next net asset value
following the receipt of any purchase or redemption order.
The Company determines the net asset value per share of the
Fund as of 4:00 p.m., Eastern Time, on each Fund business day
by dividing the value of the Fund's net assets by the number
of shares outstanding at the time the determination is made.
D) SECURITY TRANSACTIONS AND INVESTMENT INCOME
Realized gains and losses on investments sold are recorded on
the basis of specific identification. Interest income is
accrued as earned and dividend income is recorded on ex-date.
10
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
E) DISTRIBUTIONS TO SHAREHOLDERS
Distributions from net investment income and net capital
gains, if any, are declared and paid at least annually and
are based on their tax basis. The difference between
financial statement amounts available for distribution and
distributions made in accordance with income tax regulations
are primarily attributable to the deferral of post October
losses and utilization of capital loss carryforwards.
F) FEDERAL TAXES
No provision for Federal income taxes is required because the
Fund has qualified and intends to continue to qualify as a
regulated investment company under the Internal Revenue Code.
The Fund intends to distribute all of its taxable income to
its shareholders.
G) ORGANIZATION COSTS
The costs incurred by the Fund in connection with its
organization have been capitalized and are being amortized on
a straight-line basis over a five year period beginning on
the commencement of the Fund's operations.
NOTE 2. INVESTMENT ADVISORY AND ADMINISTRATIVE SERVICES 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 1.5% of the
average daily net assets of the Fund. The Adviser has agreed to reimburse the
fund for certain expenses that exceed the limits applicable to the Fund under
the laws of any state. During the year ended June 30, 1996, fees waived by
the adviser were $71,022.
The administrator and distributor of the Fund is Forum Financial Services,
Inc. ("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 $5,843 were charged to the Fund by Forum.
Forum Financial Corp. ("FFC") serves as the Company's transfer agent and
dividend disbursing agent, for which it receives $12,000 plus certain
shareholder account fees. FFC also serves as the Company's fund accountant
and receives $36,000 plus certain adjustments based on the type and volume of
portfolio transactions.
Forum and FFC are affiliated companies.
NOTE 3. DISTRIBUTION PLAN
The Company 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.
11
<PAGE>
AUSTIN GLOBAL EQUITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 4. PURCHASES AND SALES OF SECURITIES
Purchases and sales (excluding short-term investments) of securities during
the year ended June 30, 1996 amounted to $9,380,284 and $8,576,225,
respectively. Unrealized appreciation and depreciation as of June 30, 1996
were $1,974,348 and $409,253, respectively. The cost of investments for
Federal income tax purposes at June 30, 1996 is the same as for financial
reporting purposes.
NOTE 5. CAPITAL SHARE TRANSACTIONS
The Company has 20 billion shares of $.001 par value stock authorized of
which 2 billion is allocated to the Fund.
12
<PAGE>
AUSTIN GLOBAL EQUITY FUND
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SELECTED DATA FOR A SHARE OUTSTANDING Year Ended Year Ended Period Ended
June 30, June 30, June 30,
1996 1995 1994(c)
---------- ---------- -------------
<S> <C> <C> <C>
Beginning Net Asset Value Per Share $11.60 $9.80 $10.00
---------- ---------- -------------
Net Investment Income/(Loss) (0.12) 0.04 (d) (0.03)
Net Realized and Unrealized Gain (Loss)
on Investments 1.98 1.76 (0.17)
Distributions from Realized Capital Gains (0.27) - -
---------- ---------- -------------
Ending Net Asset Value Per Share $13.19 $11.60 $ 9.80
---------- ---------- -------------
---------- ---------- -------------
Ratios to Average Net Assets:
Expenses (a) 2.50% 2.50% 2.36% (b)
Net Investment Income (Loss) (0.98%) 0.41% (0.83%) (b)
Total Return 16.22% 18.37% (3.57%) (b)
Portfolio Turnover Rate 93.55% 35.31% 2.49%
Net Assets at End of Period (000's omitted) $10,326 $8,474 $7,646
Average Commission Rate Paid on
Portfolio Investment Transactions $0.0542(e) - -
(a) During the period, various fees and
expenses were waived and reimbursed
respectively. Had such waiver and
reimbursement not occurred, the ratio of
expenses to average net assets would
have been: 3.25% 3.19% 4.18% (b)
(b) Annualized.
(c) For the period December 8, 1993
(commencement of operations) through
June 30, 1994.
(d) Calculated using weighted average
number of shares outstanding.
(e) Amount represents the average
commission per share paid to brokers on
the purchase or sale of equity securities.
</TABLE>
See Notes to Financial Statements Stone Bridge Funds, Inc.
13
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Shareholders,
Stone Bridge Funds, Inc.:
We have audited the accompanying statement of assets and liabilities,
including the schedule of investments, of Austin Global Equity Fund (one of
the portfolios constituting Stone Bridge Funds, Inc.) as of June 30, 1996,
the related statements of operations for the year then ended, and of changes
in net assets for each of the two years then ended, and the financial
highlights for the two year period then ended and for the period from
December 8, 1993 (commencement of operations) to June 30, 1994. These
financial statements and financial highlights are the responsibility of the
Company'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, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of June 30, 1996, by correspondence with the custodian
and brokers; where replies were not received from brokers, we performed other
auditing procedures. 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 the Austin Global
Equity Fund portfolio of Stone Bridge Funds, Inc. at June 30, 1996, 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
New York, New York
August 16, 1996
______________________________________________________________
UNAUDITED DIVIDEND INFORMATION
In December 1995, the Fund declared a long term and short term capital gain
dividend of $0.1004 and $0.1649 per share, respectively.
14
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<PAGE>
INVESTMENT ADVISER
Austin Investment Management, Inc.
375 Park Avenue, Suite 2207
New York, New York 10152-2207
ADMINISTRATOR & DISTRIBUTOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
DIRECTORS
John Y. Keffer
Joseph J. Nicholson
David B. Pinter
Max J. Schwartz
Seymour G. Siegel
OFFICERS
John Y. Keffer, CHAIRMAN AND PRESIDENT
Max Berueffy, VICE PRESIDENT
AND SECRETARY
Michael D. Martins, TREASURER AND
ASSISTANT SECRETARY
Lynn Y. Kelley, ASSISTANT TREASURER
David I. Goldstein, ASSISTANT SECRETARY
