<PAGE>
CRM SMALL CAP VALUE FUND
- ------------------------------------
- ------------------------------------
FUND INFORMATION: SHAREHOLDER ACCOUNT INFORMATION:
Forum Financial Services, Inc. Forum Financial Corp.
Two Portland Square P.O. Box 446
Portland, Maine 04101 Portland, Maine 04112
800-CRM-2883 800-844-8258
800-276-2883 (207) 879-8910
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ANNUAL REPORT OCTOBER 25, 1996
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Dear Fellow Shareholder:
Having now completed our first year, we are pleased to report that the CRM Small
Cap Value Fund enjoyed strong performance. For the twelve months ended September
30, 1996, the Fund achieved an average return of 37.2%. During the same period,
the average small company growth fund returned 18.4%, according to Lipper
Analytical Services, and the Russell 2000 Index returned 13.2%.
Our approach to finding good investments for the Fund is no different from the
approach we have successfully employed for our private management clients over
the past twenty-three years. We invest in companies undergoing some significant
change--change in their revenue/asset mix, change in their cost of doing
business and even change in their management. This change often creates a period
of undervaluation that can provide an attractive entry point. As value
investors, we are looking to acquire stocks that are trading at discounts to
market multiples of earnings and cash flow as well as at discounts to comparable
companies. We also develop a "private market" value for our investments, i.e.,
what a strategic buyer might pay for the whole company, as an additional
valuation tool.
Our performance benefited from contributions across a broad spectrum of sectors.
In retailing, Proffitt's has been consolidating regional department store chains
as evidenced by their mid-year acquisition of Younkers. Barrett Resources and
Flores & Rucks have each dramatically increased their reserve base as well as
current production rates of oil and gas through the drill bit as well as
acquisitions. During the year, three of our holdings were acquired by strategic
buyers--Acme Cleveland, a manufacturer of electronic products and metalworking
tools, Continuum, a provider of systems and software to the insurance industry
and Duplex Products, a manufacturer and distributor of printed forms.
Our largest holdings as of the end of the fiscal year include Mascotech, AEP
Industries and Fred Meyer. Mascotech has virtually completed a restructuring
which led to the divestiture of 40% of its revenue base and the repurchase of
more than 20% of its stock. Although the stock has appreciated 50% from our
initial purchases, we believe it will continue to look attractive as other
investors begin to understand the earnings power of its core metal forgings
business. AEP Industries tripled its size with the purchase of Borden's film and
packaging business. Yet, despite having $900 million in revenues, there is no
conventional Wall Street analyst coverage for AEP. As its operations are
consolidated, we believe earnings could increase over the next two years which
could propel the stock price too. Finally, Fred Meyer, having recovered from the
strike plagued 1995 year, is at the beginnings of what we believe could be
several years of significant earnings growth.
We take great pride in the Fund's first year of operations. Within the short
period of one year, the Fund has accumulated over $45 million in assets. With
the thousands of mutual funds to choose from, we thank you for choosing to
invest in the CRM Small Cap Value Fund.
Sincerely,
The CRM Funds CRM Advisors, LLC
[SIG] [SIG] [SIG]
Fred M. Filoon Jay B. Abramson
President Ronald H. McGlynn Executive Vice President
President Portfolio Manager
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(This Page Intentionally Left Blank)
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CRM SMALL CAP VALUE FUND
AN INTERVIEW WITH JAY ABRAMSON
PORTFOLIO MANAGER OF THE CRM SMALL CAP VALUE FUND
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Q. JAY, HOW DID THE FUND PERFORM IN ITS FIRST YEAR?
A. The Fund has performed very well. For the twelve months ended September 30,
1996, the Fund achieved an average return of 37.2%. During the same period, the
average small company growth fund returned 18.4%, according to Lipper Analytical
Services, and the Russell 2000 Index returned 13.2%.
Q. WHAT FACTORS LED THE FUND TO SUCH STRONG RETURNS IN THE PAST YEAR?
A. The market has favored small cap stocks during the past year in an
environment of rising prices for all sectors of the market. Strong stock
selection and the avoidance of any serious mistakes were the primary
contributors to performance. In addition, the Fund enjoyed the benefit of having
several companies acquired, resulting in a dramatic increase in their share
prices.
Q. HOW DOES YOUR FUND DIFFER FROM OTHER SMALL CAP FUNDS?
A. Unlike many other small cap funds, our fund has a "value" as opposed to
"growth" approach. While all small cap funds tend to be more volatile than the
general market, we feel that our value orientation tends to limit downside risk.
Q. HOW DO YOU FIND SMALL CAP INVESTMENTS?
A. When it comes to finding new opportunities, we act like detectives. By this
I mean that we search for companies which appear to be undergoing some sort of
dynamic change, such as new management, a new product, a corporate
restructuring, etc. In other words, anything that might change a company's
fortunes for the better. As such, we are very inquisitive about all types of
news releases from many different sources. Our process is very much a "bottom
up" approach to investing.
Q. DO YOU EMPLOY ANY SPECIAL ANALYTICAL METHODS?
A. CRM Advisors, LLC is an affiliate of Cramer Rosenthal McGlynn, Inc., a well
established investment management firm with approximately $2.5 billion assets
under management as of September 30, 1996. We utilize the same analytical
methods as Cramer Rosenthal McGlynn. We pursue a highly intensive internal
research process to identify new investment opportunities. After identifying a
new idea, we commence an intensive due diligence process in order to become
knowledgeable about the business, familiar with management and, above all,
sensitive to the valuation of the stock. We work hard and fast in order to reach
a buy decision before the rest of the investment community recognizes the same
dynamic change and undervaluation.
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THE CRM FUNDS
2
<PAGE>
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CRM SMALL CAP VALUE FUND
AN INTERVIEW WITH JAY ABRAMSON
PORTFOLIO MANAGER OF THE CRM SMALL CAP VALUE FUND (CONTINUED)
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Q. IS THERE A LARGE COMMITMENT TO THE TECHNOLOGY SECTOR IN YOUR FUND?
A. Our fund will have very little exposure to any sector that is generally
characterized by high valuation relative to the general market or other sectors.
The majority of technology stocks have traditionally been viewed as growth
investments and accordingly carry high valuations. From time to time, however, a
good technology company will stumble temporarily and sell at what we consider to
be a reasonable valuation. If our due diligence on the company results in the
necessary conviction, we will add the stock to the portfolio. It's all part of
our "bottom up" approach to investing mentioned before.
Q. DO YOU PARTICIPATE IN INITIAL PUBLIC OFFERINGS?
A. We participate in IPO's only to the extent that we can understand the
company's business well and feel that the stock will be priced at an attractive
valuation on the offering. More often, however, we look for IPO's that have not
performed well but where we believe there is a dynamic change under way which
has been overlooked by other investors.
Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
A. We are very optimistic about the general attraction of small cap companies
relative to the general market, mainly because of reasonable valuations and low
expectations that characterize the group. Also, there appears to be no shortage
of small companies that have some "dynamic change" going for them and are
underfollowed or misunderstood by the investment community.
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THE CRM FUNDS
3
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CRM SMALL CAP VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
SEPTEMBER 30, 1996
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The following chart compares a change in value of a $10,000 investment in the
Fund, including reinvested dividends and distributions, and the performance of
the Russell 2000 Index (a capitalization weighted index of 2000 small
capitalization U.S. companies). The Index excludes the effect of any fees or
sales charges. Investment return and principal value of an investment in the
Fund will fluctuate so that an investor's shares, when redeemed, may be worth
more or less than their original cost. PAST PERFORMANCE CANNOT PREDICT NOR
GUARANTEE FUTURE RESULTS.
CRM SMALL CAP VALUE FUND VS RUSSELL 2000 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRM SMALL CAP VALUE FUND RUSSELL 2000 INDEX
<S> <C> <C>
10/1/1995 $10,000 $10,000
10/31/1995 $9,840 $9,545
11/30/1995 $10,450 $9,942
12/31/1995 $10,734 $10,180
1/31/1996 $10,904 $10,161
2/29/1996 $11,404 $10,488
3/31/1996 $11,985 $10,656
4/30/1996 $12,475 $11,219
5/31/1996 $13,336 $11,856
6/30/1996 $13,407 $11,165
7/31/1996 $12,577 $10,179
8/31/1996 $13,277 $10,754
9/30/1996 $13,718 $11,158
Investment value on 9/30/96
CRM Small Cap Value Fund $13,718
Russell 2000 Index $11,156
Average Annual Total Return*
Since Inception on
YTD** 10/1/95
CRM Small Cap Value Fund 27.77% 37.15%
Russell 2000 Index 14.61% 13.22%
</TABLE>
* Annualized return for the Russell 2000 Index based on an inception date of
9/30/95.
** From 12/31/95 through 9/30/96.
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THE CRM FUNDS
4
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CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1996
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<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ----------- -------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (92.1%)
BUILDING CONSTRUCTION-GENERAL CONTRACTORS AND OPERATIVE
BUILDERS (1.3%)
45,000 Walter Industries, Inc.*........ $ 579,375
-----------
COMMUNICATIONS (2.3%)
720,000 Digicall Group Limited*......... --
55,000 Xpedite Systems, Inc.*.......... 1,058,750
-----------
1,058,750
-----------
ELECTRIC, GAS, AND SANITARY SERVICES (0.7%)
100,000 Recycling Industries, Inc.*..... 337,500
-----------
ELECTRONIC AND OTHER ELECTRICAL EQUIPMENT AND COMPONENTS,
EXCEPT COMPUTERS (4.4%)
40,000 Amphenol Corporation*........... 915,000
32,000 GSE Systems, Inc.*.............. 368,000
60,000 MagneTek, Inc.*................. 690,000
-----------
1,973,000
-----------
FABRICATED METAL PRODUCTS (7.9%)
25,000 Commercial Intertech
Corporation.................... 287,500
65,000 Cuno Incorporated*.............. 1,007,500
30,000 TriMas Corporation.............. 727,500
30,000 Watts Industries, Inc. -- Class
A.............................. 588,750
70,000 Whittaker Corporation*.......... 953,750
-----------
3,565,000
-----------
FINANCIAL SERVICES (6.3%)
25,000 FBL Financial Group, Inc.*...... 531,250
70,000 Glendale Federal Bank FSB*...... 1,242,500
22,000 Long Island Bancorp, Inc........ 635,250
34,000 PFF Bancorp, Inc.*.............. 420,750
-----------
2,829,750
-----------
FOOD STORES (2.7%)
30,000 Bruno's, Inc.*.................. 412,500
18,300 Penn Traffic Company*........... 141,825
50,000 Ruddick Corporation............. 687,500
-----------
1,241,825
-----------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ----------- -------------------------------- -----------
<C> <S> <C>
FOOD AND KINDRED PRODUCTS (4.0%)
20,000 Bush Boake Allen, Inc.*......... $ 477,500
120,000 Topps Company, Inc.*............ 510,000
25,000 Universal Foods Corporation..... 812,500
-----------
1,800,000
-----------
FURNITURE AND FIXTURES (1.9%)
60,000 Furniture Brands International,
Inc.*.......................... 877,500
-----------
GENERAL MERCHANDISE STORES (4.2%)
40,000 Fred Meyer, Inc.*............... 1,325,000
14,560 Proffitt's, Inc.*............... 575,120
-----------
1,900,120
-----------
HOLDING AND OTHER INVESTMENT COMPANIES (4.1%)
89,000 Express America Holdings
Company*....................... 517,312
151,000 First Australia Prime Income
Fund, Inc...................... 1,340,125
-----------
1,857,437
-----------
INDUSTRIAL AND COMMERCIAL MACHINERY AND COMPUTER EQUIPMENT
(4.1%)
22,000 Black Box Corporation*.......... 726,000
33,100 Power Control Technologies*..... 252,388
45,000 Wang Laboratories, Inc.*........ 877,500
-----------
1,855,888
-----------
LUMBER AND WOOD PRODUCTS, EXCEPT FURNITURE (2.1%)
27,000 Fibreboard Corporation*......... 945,000
-----------
MEASURING, ANALYZING, AND CONTROLLING INSTRUMENTS;
PHOTOGRAPHIC, MEDICAL, AND OPTICAL GOODS (9.5%)
40,000 Bindley Western Industries,
Inc............................ 700,000
35,500 Elsag Bailey Process Automation
N.V.*.......................... 758,813
83,487 Medical Resources, Inc.*........ 667,896
75,000 Rofin-Sinar Technologies,
Inc.*.......................... 815,625
65,000 Tracor, Inc.*................... 1,340,625
-----------
4,282,959
-----------
MISCELLANEOUS RETAIL (2.3%)
105,000 ProxyMed, Inc.*................. 1,050,000
-----------
</TABLE>
* Non-income producing security.
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SEE ACCOMPANYING NOTES THE CRM FUNDS
5
<PAGE>
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SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1996
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<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ----------- -------------------------------- -----------
MOTOR FREIGHT TRANSPORTATION AND WAREHOUSING (3.5%)
<C> <S> <C>
60,000 U.S. Industries, Inc.*.......... $ 1,575,000
-----------
OIL AND GAS EXTRACTION (10.3%)
54,100 Barrett Resources
Corporation*................... 1,907,025
30,000 Flores & Rucks, Inc.*........... 1,158,750
60,000 Forest Oil Corporation*......... 772,500
51,600 Getty Petroleum Corporation..... 806,250
-----------
4,644,525
-----------
PAPER AND ALLIED INDUSTRIES (0.2%)
10,000 Mail-Well, Inc.*................ 107,500
-----------
PRIMARY METAL INDUSTRIES (6.7%)
52,000 Commonwealth Aluminum
Corporation.................... 877,500
37,500 Schnitzer Steel Industries,
Inc............................ 1,087,500
25,000 Wolverine Tube, Inc.*........... 1,075,000
-----------
3,040,000
-----------
REAL ESTATE (1.7%)
31,000 Insignia Financial Group, Inc.
-- Class A*.................... 790,500
-----------
RUBBER AND MISCELLANEOUS PLASTICS PRODUCTS (2.0%)
20,700 AEP Industries, Inc.*........... 926,325
-----------
TRANSPORTATION EQUIPMENT (6.8%)
25,000 AMERCO*......................... 996,875
131,300 Mascotech, Inc.................. 1,871,025
30,000 Terex Corporation*.............. 217,500
-----------
3,085,400
-----------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ----------- -------------------------------- -----------
<C> <S> <C>
WHOLESALE TRADE-NONDURABLE GOODS (3.1%)
20,000 Cidco, Inc.*.................... $ 415,000
25,000 Federal-Mogul Corporation....... 528,125
12,000 Hughes Supply, Inc.............. 444,000
-----------
1,387,125
-----------
TOTAL COMMON STOCKS (COST $37,554,234) ...... $41,710,479
-----------
CONVERTIBLE PREFERRED STOCK (1.1%)
TRANSPORTATION EQUIPMENT (1.1%)
15,000 Terex Corporation, 13.00%, due
12/31/00(a).................... 517,500
-----------
TOTAL CONVERTIBLE PREFERRED STOCK
(COST $354,375) ............................ $ 517,500
-----------
WARRANTS (0.6%)
TRANSPORTATION EQUIPMENT (0.6%)
15,000 Terex Corporation(a)............ 262,500
-----------
TOTAL WARRANTS (COST $135,000) .............. $ 262,500
-----------
SHORT-TERM HOLDINGS (6.2%)
76,163 1784 Institutional U.S. Treasury
Money Market Fund ............. 76,163
1,527,736 Dreyfus Government Cash
Management Fund ............... 1,527,736
1,221,839 Forum Daily Assets Treasury
Fund .......................... 1,221,839
-----------
TOTAL SHORT-TERM HOLDINGS (COST
$2,825,738) ................................ $ 2,825,738
-----------
TOTAL INVESTMENTS (100.0%) (COST
$40,869,347) ............................... $45,316,217
-----------
-----------
</TABLE>
(a) Securities that may be resold to "qualified institutional buyers" pursuant
to Rule 144A, or securities offered pursuant to Section 4(2) of, the
Securities Act of 1933, as amended. These Securities, aggregate value of
$780,000 (1.7% of net assets), have beem determined to be liquid under
guidelines established by the Board of Trustees.
* Non-income producing security.
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SEE ACCOMPANYING NOTES THE CRM FUNDS
6
<PAGE>
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CRM SMALL CAP VALUE FUND
STATEMENT OF ASSETS & LIABILITIES
SEPTEMBER 30, 1996
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<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $40,869,347)...... $45,316,217
Interest, dividends and other receivables..... 35,009
Receivable for securities sold................ 403,480
Receivable for shares issued.................. 35,400
Organization costs, net....................... 69,528
-----------
Total assets...................................... 45,859,634
-----------
LIABILITIES:
Accrued advisory fees......................... 20,099
Accrued trustees fees......................... 3,750
Accrued fees and other expenses............... 49,279
Payable for securities purchased.............. 397,396
Payable for shares redeemed................... 4,400
-----------
Total liabilities................................. 474,924
-----------
NET ASSETS........................................ $45,384,710
-----------
-----------
COMPONENTS OF NET ASSETS:
Capital paid in............................... $38,799,147
Net unrealized appreciation................... 4,446,870
Accumulated net realized gains................ 2,138,693
-----------
NET ASSETS........................................ $45,384,710
-----------
-----------
SHARES OUTSTANDING................................ 3,309,727
-----------
-----------
NET ASSET VALUE PER SHARE......................... $ 13.71
-----------
-----------
</TABLE>
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SEE ACCOMPANYING NOTES THE CRM FUNDS
7
<PAGE>
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CRM SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
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<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income............................... $ 156,746
Interest income............................... 91,184
----------
Total investment income........................... 247,930
----------
EXPENSES:
Advisory fees................................. 172,105
Administration fees........................... 40,000
Shareholder services.......................... 57,368
Transfer agency............................... 20,413
Accounting services........................... 39,000
Professional services......................... 31,516
Registration fees............................. 39,292
Trustees fees and expenses.................... 15,000
Amortization of organization costs............ 17,383
Other......................................... 22,182
----------
Total expenses.................................... 454,259
----------
Expenses reimbursed and fees waived by the
Advisor and Administrator.................... (112,750)
----------
Net expenses...................................... 341,509
----------
NET INVESTMENT LOSS............................... (93,579)
----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.............. 2,217,922
Net unrealized appreciation................... 4,446,870
----------
Net realized and unrealized gain on investments... 6,664,792
----------
INCREASE IN NET ASSETS FROM OPERATIONS............ $6,571,213
----------
----------
</TABLE>
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SEE ACCOMPANYING NOTES THE CRM FUNDS
8
<PAGE>
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CRM SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED SEPTEMBER 30, 1996
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<TABLE>
<CAPTION>
AMOUNT SHARES
----------- ---------
<S> <C> <C>
NET ASSETS--OCTOBER 1, 1995....................... $ 100,000 10,000
----------- ---------
OPERATIONS:
Net investment loss........................... (93,579)
Net realized gain on investments.............. 2,217,922
Net unrealized appreciation................... 4,446,870
-----------
6,571,213
-----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income......................... (3,033)
-----------
CAPITAL SHARE TRANSACTIONS:
Sale of shares................................ 40,407,658 3,428,401
Reinvested dividends.......................... 3,021 281
----------- ---------
40,410,679 3,428,682
Shares repurchased............................ (1,694,149) (128,955)
----------- ---------
38,716,530 3,309,727
----------- ---------
---------
NET ASSETS--SEPTEMBER 30, 1996.................... $45,384,710
-----------
-----------
</TABLE>
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SEE ACCOMPANYING NOTES THE CRM FUNDS
9
<PAGE>
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CRM SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
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SELECTED DATA FOR A SHARE OUTSTANDING DURING THE PERIOD
<TABLE>
<CAPTION>
YEAR ENDED
SEPTEMBER 30,
1996
-------------
<S> <C>
Beginning net asset value per share........................................ $ 10.00
Net investment loss........................................................ (0.02)
Net realized and unrealized gain on securities............................. 3.73
Dividends from net investment income (a)................................... --
-------------
Ending net asset value per share........................................... $ 13.71
-------------
-------------
Ratios to average net assets:
Expenses (b)........................................................... 1.49%
Net investment loss.................................................... (0.40)%
Total return............................................................... 37.15%
Portfolio turnover rate.................................................... 111.18%
Average brokerage commission rate (c)...................................... $ 0.0374
Net assets at end of period (000's omitted)................................ $ 45,385
</TABLE>
(a)Less than $0.01 per share.
(b) During the period, various fees were waived and expenses
reimbursed. Had such waivers and reimbursements not occurred, the
percentage of expenses to average net assets would have been
1.98%.
(c) Amount represents the average commission per share, paid to
brokers, on the purchase and sale of portfolio securities.
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SEE ACCOMPANYING NOTES THE CRM FUNDS
10
<PAGE>
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CRM SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
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1. ORGANIZATION
The CRM Funds (the "Trust") is registered under the Investment Company Act of
1940 (the "Act") as an open-end management investment company. CRM Small Cap
Value Fund (the "Fund"), a diversified portfolio of the Trust, commenced
operations on October 1, 1995. Currently, the Fund is the only series of the
Trust.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Fund's financial statements are prepared in accordance with generally
accepted accounting principles which permit management to make certain estimates
and assumptions at the date of the financial statements and are based, in part,
on the following significant accounting policies.
SECURITY VALUATION -- Securities, other than short-term 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 sale is reported, the mean of the last bid and ask price is used. If no
mean price is available, the last bid price is used. In the absence of
readily available market quotations, securities are valued at fair value
determined pursuant to procedures adopted by the Board of Trustees.
Short-term securities, having a maturity of 60 days or less, are valued at
amortized cost.
SECURITY TRANSACTIONS -- Investment security transactions are recorded on a
trade date basis. Realized gains and losses on investments sold are recorded
on the basis of identified cost.
INTEREST AND DIVIDEND INCOME AND DIVIDENDS TO SHAREHOLDERS -- Interest
income is accrued as earned. Dividend income is recorded on ex-dividend
date. Dividends to shareholders from net investment income and net capital
gains are declared and paid annually. More frequent dividend distributions
to shareholders may be made when necessary pursuant to Federal tax
requirements.
Distributions from net investment income and realized capital gain are based
on amounts calculated in accordance with applicable income tax regulations.
Any differences between financial statement amounts available for
distribution and distributions made in accordance with income tax
regulations are primarily attributable to organizational costs and the
timing of loss recognition on certain security sales.
Discounts on U.S. Treasury Bills purchased are amortized over the life of
the respective securities.
ORGANIZATIONAL COSTS -- The Fund incurred costs in connection with its
organization in the amount of $86,911. These costs have been capitalized and
are being amortized using the straight-line method over a five year period
beginning on the commencement of the Fund's operations.
- --------------------------------------------------------------------------------
THE CRM FUNDS
11
<PAGE>
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CRM SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1996
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- --------------------------------------------------------------------------------
FEDERAL INCOME TAX -- The Fund intends to qualify as a regulated investment
company under Subchapter M of the Internal Revenue Code and to distribute
all of its taxable income. Therefore, no provision for Federal income taxes
is required.
3. ADVISORY, SERVICING FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The investment adviser to the Fund is CRM Advisors, LLC (the "Adviser"), an
affiliate of Cramer Rosenthal McGlynn, Inc. ("CRM"). The Adviser receives
monthly, from the Fund, an advisory fee at an annual rate of 0.75% of the
average daily net assets of the Fund.
The administrator of the Fund is Forum Financial Services, Inc. ("Forum").
Pursuant to an Administration Agreement, Forum receives monthly a fee equal to
the greater of an annual rate of 0.15% of the average daily net assets of the
Fund or $40,000 per year. Forum also serves as distributor of the Fund's shares
pursuant to a Distribution Agreement under which it receives no additional fees.
Forum Financial Corp. ("FFC") serves as the Fund's transfer agent and dividend
disbursing agent, for which it receives a fee of $12,000 per year plus certain
shareholder account fees. FFC also provides fund accounting services to the
Fund. For these services, FFC receives a fee of $36,000 per year plus certain
amounts based upon the number and types of portfolio transactions within the
Fund. Forum and FFC are affiliated companies.
The Trust has adopted a shareholder servicing plan which allows it to obtain the
services of the Adviser and other qualified financial institutions to act as
shareholder servicing agents for their customers. Under this plan, Forum may pay
shareholder servicing agents up to 0.25% of the average daily net assets of the
Fund attributable to accounts for which the agent provides shareholder services.
The Trust reimburses Forum an amount equal to any shareholder servicing fees it
pays to shareholder servicing agents.
For the year ended September 30, 1996, the Adviser waived $39,803 of its
advisory fee and $57,368 of its shareholder servicing fee. For the same period,
Forum waived $15,579 of its administration fee.
Each Trustee, who is not an "affiliated person" as defined in the Act, receives
from the Fund an annual fee of $5,000 plus out of pocket expenses.
4. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales (including maturities) of portfolio
securities (excluding short-term investments) during the year ended September
30, 1996 amounted to $61,769,431 and $25,943,824, respectively.
The cost basis of securities for Federal income tax purposes is $40,872,136. At
September 30, 1996, accumulated net unrealized appreciation on investments was
$4,446,870, consisting of $6,082,561 of gross unrealized appreciation and
$1,635,691 of gross unrealized depreciation.
- --------------------------------------------------------------------------------
THE CRM FUNDS
12
<PAGE>
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CRM SMALL CAP VALUE FUND
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
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SHAREHOLDERS AND BOARD OF TRUSTEES
CRM SMALL CAP VALUE FUND
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments of CRM Small Cap Value Fund, one of the Series
constituting The CRM Funds, as of September 30, 1996 and the related statement
of operations, the statement of 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 the 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 include confirmation of securities owned as of September 30, 1996 by
correspondence with the custodian and brokers. 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of CRM
Small Cap Value Fund at September 30, 1996, the results of its operations, the
changes in its net assets, and the financial highlights for the year then ended,
in conformity with generally accepted accounting principles.
[SIG]
White Plains, New York
November 12, 1996
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THE CRM FUNDS
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CRM SMALL CAP VALUE FUND
OTHER INFORMATION
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FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
INCOME DIVIDENDS -- All of the income dividends paid by the Fund were ordinary
income for federal income tax purposes. The percentage of income dividends that
were qualifying dividends for the corporate dividends received deduction were
63.45%.
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THE CRM FUNDS
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DIRECTORS
John E. Appelt
Fred M. Filoon
Louis Klein, Jr.
Clement C. Moore, II
Eugene A. Trainor, III
INVESTMENT ADVISER
CRM Advisors, LLC
707 Westchester Avenue
White Plains, New York 10604
ADMINISTRATOR AND DISTRIBUTOR
Forum Financial Services, Inc.
Two Portland Square
Portland, Maine 04101
CUSTODIAN
The First National Bank of Boston, N.A.
150 Royall Street
Canton, Massachusetts 02021
LEGAL COUNSEL
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
INDEPENDENT AUDITORS
Ernst & Young, LLP
One North Broadway
White Plains, NY 10601
INVESTOR INFORMATION: (800) 844-8258
(207) 879-8910
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY TO
SHAREHOLDERS AND TO OTHERS WHO HAVE RECEIVED A
COPY OF THE CRM SMALL CAP VALUE FUND PROSPECTUS.
This report has been printed on recycled paper.
[LOGO]
[LOGO]
SMALL CAP
VALUE FUND
ANNUAL REPORT
September 30, 1996
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