<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
- --------------------------------------------------------------------------------
ANNUAL REPORT SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
Having now completed our first two years, we are pleased to report that the
CRM Small Cap Value Fund continues to enjoy strong performance. The Fund has
achieved an average return of 37.14% for the twelve months ended September 30,
1997. This compares favorably to the average small company growth fund return of
29.80%, as measured by Lipper Analytical Services, and a return of 32.99% for
the Russell 2000 Index.
To reiterate what we have described in previous reports to shareholders, 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-four 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 for investment. 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. As an additional valuation tool, we also develop a
"private market" value for our investments, i.e. what a strategic buyer might
pay for the whole company.
Two of our best performing holdings in recent months have been United
Stationers and LGS Group. United Stationers is a leading distributor of office
and business products which returned from private to public ownership in late
1996. A new management team has embarked on an aggressive acquisition program
and investors have increased its stock valuation to a level more comparable to
other high quality companies in the same industry. LGS Group is a Canadian
systems integration company which has significant and growing exposure to Year
2000 projects. Although there is an urgency to Year 2000 projects, business from
this source will extend well beyond the turn of the century. Three of the
largest holdings in the Fund are Fred Meyer, Bindley Western Industries and
Mascotech, all of which were discussed in our last shareholder letter and
continue to perform well.
We take great pride in the Fund's first two years of operations. Within the
short period of twenty-four months, the Fund has accumulated over $144 million
in assets. With the thousands of mutual funds to choose from, we thank you for
your decision to invest in the CRM Small Cap Value Fund.
Sincerely,
The CRM Funds CRM Advisors, LLC
<TABLE>
<S> <C> <C>
[SIG] [SIG] [SIG]
Fred Filoon Ronald H. McGlynn Jay B. Abramson
President President Executive Vice President
Portfolio Manager
</TABLE>
<PAGE>
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CRM SMALL CAP VALUE FUND
AN INTERVIEW WITH JAY ABRAMSON
PORTFOLIO MANAGER OF THE CRM SMALL CAP VALUE FUND
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q. JAY, HOW DID THE FUND PERFORM DURING THE LAST TWELVE MONTHS?
The Fund has performed very well. For the twelve months ending September 30,
1997, the Fund returned 37.14%, which compares very favorably to the increase in
the Russell 2000 Index of 32.99% during the same period.
Q. WHAT FACTORS LED THE FUND TO SUCH STRONG RETURNS IN THE PAST YEAR?
During the summer, investors shifted their focus from large capitalization
companies to small caps, and that process has continued into the fall. Also, our
focus on stocks that offer compelling value has been rewarded with meaningful
gains in most of our holdings with only a few underperformers.
Q. HOW DOES YOUR FUND DIFFER FROM OTHER SMALL CAP FUNDS?
Cramer Rosenthal McGlynn, an affiliate of the Fund's manager, has approximately
$3.5 billion of assets under management and pursues a highly intensive internal
research process to identify new investment opportunities. It is important to
remember that 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 serves to limit downside risk.
Q. CAN YOU EXPLAIN YOUR "VALUE" APPROACH?
We look at more than size; we look for companies that have undergone fundamental
changes such as restructuring, or divestiture of a losing subsidiary, or
diversification, or change in top level management - all of which can point to
potential new growth and profitability. We look for companies that have been
consistently undervalued or underappreciated - or just plain misunderstood by
the investment community. We invest before the word gets around and while the
price of the stock is still reasonable - or better, a bargain. That's value.
Q. HOW DO YOU FIND YOUR SMALL CAP INVESTMENTS?
Our search for new opportunities is very labor intensive. First 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. Then, we want to
understand everything about the company; what it makes, what it costs to make
it, what do its competitors think. Management is interrogated, customers and
competitors are contacted, news releases are scrutinized. 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. Then, once a stock is in
the Fund, it is closely watched by two analysts. As you can see, our process is
very much a "bottom-up" approach to investing.
Q. HOW DO YOU LIMIT RISK IN YOUR FUND IN AN ENVIRONMENT OF INCREASING MARKET
VOLATILITY AND GENERALLY HIGH EQUITY VALUATIONS?
Our approach tends to limit downside risk by finding companies that are
relatively undiscovered or misunderstood and whose stocks reflect little of the
change taking place. Our principal risk is that other investors do not recognize
the dynamic change at a company as quickly as we would like and the stock takes
longer than expected to achieve its upside potential.
Q. WHAT IS YOUR OUTLOOK FOR THE SMALL CAP MARKET?
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.
- --------------------------------------------------------------------------------
THE CRM FUNDS
2
<PAGE>
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CRM SMALL CAP VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
SEPTEMBER 30, 1997
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- --------------------------------------------------------------------------------
The following information compares a change in value of a $10,000 investment in
the Fund with the performance of the Russell 2000 Index over the past 10 fiscal
year periods or since inception (for funds lacking 10-year records). The Russell
2000 is a capitalization weighted index of 2000 small capitalization U.S.
companies. The Index excludes the effect of any expenses, which have been
deducted from the Fund's return. Total 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. Total return for
the Fund assumes reinvestment of dividends and distributions. 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>
10/1/95 $10,000 $10,000
10/31/95 $9,840 $9,545
11/30/95 $10,450 $9,965
12/31/95 $10,734 $10,220
1/31/96 $10,904 $10,208
2/29/96 $11,404 $10,531
3/31/96 $11,985 $10,740
4/30/96 $12,475 $11,317
5/31/96 $13,336 $11,771
6/30/96 $13,406 $11,291
7/31/96 $12,575 $10,306
8/31/96 $13,275 $10,904
9/30/96 $13,715 $11,330
10/31/96 $13,965 $11,154
11/30/96 $14,526 $11,611
12/31/96 $14,915 $11,910
1/31/97 $15,180 $12,145
2/28/97 $15,000 $11,851
3/31/97 $14,521 $11,296
4/30/97 $14,469 $11,323
5/31/97 $16,021 $12,588
6/30/97 $17,053 $13,121
7/31/97 $17,947 $13,733
8/31/97 $18,234 $14,043
9/30/97 $18,809 $15,068
Investment value on 9/30/97
CRM Small Cap Value Fund $18,809
Russell 2000 Index $15,068
Average Annual Total Return*
Since Inception on
One Year 10/1/95
CRM Small Cap Value Fund 37.14% 37.09%
Russell 2000 Index 32.99% 22.68%
</TABLE>
* Annualized return for the Russell 2000 Index based on an inception date of
9/30/95.
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THE CRM FUNDS
3
<PAGE>
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CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1997
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ----------- ------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (87.8%)
ADVERTISING (2.3%)
135,000 True North Communications,
Inc........................... $ 3,349,689
-----------
AEROSPACE (4.1%)
107,300 DONCASTERS plc ADR*............ 3,219,000
87,000 Tracor, Inc.*.................. 2,675,250
-----------
5,894,250
-----------
AUTOMOTIVE REPAIR, SERVICES AND PARKING (1.8%)
77,000 Budget Group, Inc.*............ 2,541,000
-----------
BUILDING AND CONSTRUCTION (2.9%)
185,600 Morrison Knudsen Corp.*........ 2,250,402
100,000 Walter Industries, Inc.*....... 1,993,752
-----------
4,244,154
-----------
BUILDING MATERIALS (1.8%)
177,000 Dal-Tile International,
Inc.*......................... 2,655,000
-----------
BUSINESS SERVICES (7.4%)
76,600 ChoicePoint Inc.*.............. 2,862,926
59,000 Harte-Hanks Communications,
Inc........................... 1,943,313
350,700 LGS Group Inc.................. 3,499,986
85,700 Mail Boxes Etc.*............... 2,442,450
-----------
10,748,675
-----------
COMMUNICATIONS (3.4%)
107,500 COMSAT Corp.................... 2,559,846
70,000 Young Broadcasting Corp.*...... 2,397,500
-----------
4,957,346
-----------
COMPUTER EQUIPMENT AND SOFTWARE (4.3%)
126,000 Data General Corp.*............ 3,354,751
120,000 FileNet Corp.*................. 1,860,000
105,000 ProxyMed, Inc.*................ 1,102,500
-----------
6,317,251
-----------
CONSUMER PRODUCTS (5.1%)
93,700 Gibson Greetings, Inc.*........ 2,424,491
109,300 Nutramax Products, Inc.*....... 1,543,865
91,738 United Stationers, Inc.*....... 3,463,110
-----------
7,431,466
-----------
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ----------- ------------------------------- -----------
<C> <S> <C>
DIVERSIFIED INDUSTRIES (3.7%)
62,700 AEP Industries, Inc.*.......... $ 2,319,900
59,000 Denison International plc*..... 1,139,438
91,900 Elsag Bailey Process Automation
N.V.*......................... 1,550,817
25,000 Ivex Packaging Corp.*.......... 400,000
-----------
5,410,155
-----------
DRUGSTORES (0.8%)
170,000 Phar-Mor, Inc.*................ 1,190,000
-----------
ELECTRONIC EQUIPMENT AND COMPONENTS (7.0%)
158,000 CommScope, Inc.*............... 2,142,875
83,000 General Cable Corp.*........... 2,946,500
135,000 General Semiconductor, Inc.*... 1,738,126
67,000 GSE Systems, Inc.*............. 259,626
60,500 Harman International
Industries, Inc............... 3,028,783
-----------
10,115,910
-----------
ENERGY EXPLORATION AND DISTRIBUTION (10.0%)
350,000 Enserch Exploration, Inc.*..... 3,150,000
75,000 Forest Oil Corp.*.............. 1,368,750
71,000 Getty Realty Corp.............. 1,246,895
55,000 Howell Corp.................... 1,055,313
56,100 Nuevo Energy Co.*.............. 2,685,788
36,500 Ocean Energy, Inc.*............ 2,518,500
85,600 Penn Virginia Corp............. 2,551,952
-----------
14,577,198
-----------
FINANCIAL SERVICES (1.9%)
70,000 Golden State Bancorp, Inc.*.... 2,091,251
15,000 Long Island Bancorp, Inc....... 705,000
-----------
2,796,251
-----------
FOOD AND BEVERAGE STORES (0.1%)
31,700 Bruno's, Inc.*................. 170,388
-----------
HEALTH CARE (5.0%)
151,000 Bindley Western Industries,
Inc........................... 4,218,563
156,500 Medical Resources, Inc.*....... 3,032,190
-----------
7,250,753
-----------
</TABLE>
* Non-income producing security.
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SEE ACCOMPANYING NOTES. THE CRM FUNDS
4
<PAGE>
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CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1997
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- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SECURITY
SHARES DESCRIPTION VALUE
- ----------- ------------------------------- -----------
HOLDING, INSURANCE AND OTHER INVESTMENT COMPANIES (1.4%)
<C> <S> <C>
94,000 Pilgrim America Capital
Corp.*........................ $ 1,668,500
37,700 Preferred Employers Holdings,
Inc.*......................... 377,000
-----------
2,045,500
-----------
METAL INDUSTRIES (5.0%)
4,000 Carpenter Technology Corp...... 198,000
80,000 Commonwealth Industries Inc.... 1,540,000
18,000 Kaydon Corporation............. 1,080,000
102,000 Oregon Steel Mills, Inc........ 2,766,751
50,000 Schnitzer Steel Industries,
Inc........................... 1,681,252
-----------
7,266,003
-----------
METAL MINING (1.6%)
344,000 Amax Gold, Inc.*............... 2,279,001
-----------
METAL PRODUCTS (4.0%)
90,100 Safety Components
International, Inc.*.......... 1,441,600
81,000 TriMas Corp.................... 2,470,500
150,000 Whittaker Corp.*............... 1,950,000
-----------
5,862,100
-----------
REAL ESTATE (1.7%)
124,600 Insignia Financial Group, Inc.
-- Class A*................... 2,507,576
-----------
RETAIL (4.5%)
70,500 Fred Meyer, Inc.*.............. 3,754,125
105,500 ShopKo Stores, Inc.*........... 2,743,000
-----------
6,497,125
-----------
TRANSPORTION EQUIPMENT (8.0%)
45,000 Federal-Mogul Corp............. 1,670,626
101,500 GenCorp, Inc................... 2,886,407
30,500 Hayes Wheels International,
Inc.*......................... 1,029,375
222,500 Mascotech, Inc................. 4,561,250
170,000 Quixote Corp................... 1,508,753
-----------
11,656,411
-----------
TOTAL COMMON STOCKS (COST $102,653,702)..... $127,763,202
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ------------------------------- -----------
<C> <S> <C>
SHORT-TERM HOLDINGS (12.2%)
1,800,000 1st All American Corp., 5.89%,
10/6/97....................... $ 1,798,550
1,584,000 BellSouth Corp., 5.88%,
10/3/97....................... 1,583,490
100,000 General Electric Capital Co.,
5.73%, 10/1/97................ 100,000
900,000 Hyundai Motor Finance Co.,
5.79%, 10/1/97................ 900,000
250,000 International Lease Finance
Corp., 5.65%, 10/1/97......... 250,000
1,613,000 Merrill Lynch & Co., Inc.,
5.69%, 10/1/97................ 1,613,000
1,000,000 Merrill Lynch & Co., Inc.,
5.78%, 10/3/97................ 999,683
2,425,000 Merrill Lynch & Co., Inc.,
5.74%, 10/6/97................ 2,423,097
200,000 MetLife Funding, Inc., 5.68%,
10/1/97....................... 200,000
1,000,000 Mitsubishi Corp., 5.62%,
10/1/97....................... 1,000,000
200,000 Mitsubishi Corp., 5.79%,
10/2/97....................... 199,968
300,000 Mitsubishi Corp., 5.79%,
10/3/97....................... 299,905
500,000 Relistar Mortgage Corp., 5.70%,
10/2/97....................... 499,922
2,413,000 TMI-1 Fuel Corp., 5.70%,
10/2/97....................... 2,412,624
2,215,418 Boston 1784 Institutional US
Treasury Money Market Fund.... 2,215,418
1,177,740 Forum Daily Assets Treasury
Fund.......................... 1,177,740
-----------
TOTAL SHORT-TERM HOLDINGS (COST
$17,673,397) .............................. $17,673,397
-----------
TOTAL INVESTMENTS (100.0%) (COST
$120,327,099) ............................. $145,436,599
-----------
-----------
</TABLE>
* Non-income producing security.
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SEE ACCOMPANYING NOTES. THE CRM FUNDS
5
<PAGE>
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CRM SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $120,327,099)..... $145,436,599
Receivable for Fund shares sold............... 1,451,642
Receivable for securities sold................ 124,396
Organization costs, net....................... 52,146
Interest, dividends and other receivables..... 33,985
-----------
Total assets...................................... 147,098,768
-----------
LIABILITIES:
Payable for securities purchased.............. 2,607,406
Payable for Fund shares redeemed.............. 270,294
Payable to Advisor............................ 158,026
Payable to Administrator...................... 16,944
Accrued fees and other expenses............... 45,343
-----------
Total liabilities................................. 3,098,013
-----------
NET ASSETS........................................ $144,000,755
-----------
-----------
COMPONENTS OF NET ASSETS:
Paid in capital............................... $111,223,511
Net unrealized appreciation................... 25,109,500
Accumulated undistributed net realized gain... 7,667,744
-----------
NET ASSETS........................................ $144,000,755
-----------
-----------
SHARES OF BENEFICIAL INTEREST OUTSTANDING......... 8,142,981
-----------
-----------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE)
PER SHARE........................................ $ 17.68
-----------
-----------
</TABLE>
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SEE ACCOMPANYING NOTES. THE CRM FUNDS
6
<PAGE>
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CRM SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividend income............................... $ 470,704
Interest income............................... 320,579
-----------
Total investment income........................... 791,283
-----------
EXPENSES:
Investment advisory fees...................... 635,864
Shareholder services.......................... 211,955
Administration fees........................... 127,173
Professional Services......................... 76,142
Registration fees............................. 46,714
Accounting services........................... 41,500
Transfer agent services....................... 39,437
Custody fees.................................. 22,309
Reporting..................................... 20,554
Amortization of organization costs............ 17,382
Trustees fees and expenses.................... 15,285
Miscellaneous................................. 13,851
-----------
Total expenses.................................... 1,268,166
-----------
NET INVESTMENT LOSS............................... (476,883)
-----------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments sold......... 9,079,299
Net change in unrealized appreciation......... 20,662,630
-----------
Net realized and unrealized gain on investments... 29,741,929
-----------
INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... $29,265,046
-----------
-----------
</TABLE>
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SEE ACCOMPANYING NOTES. THE CRM FUNDS
7
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
-------------------------
1997 1996
------------ -----------
<S> <C> <C>
NET ASSETS--BEGINNING OF YEAR..................... $ 45,384,710 $ 100,000
------------ -----------
OPERATIONS:
Net investment loss........................... (476,883) (93,579)
Net realized gain on investments sold......... 9,079,299 2,217,922
Net change in unrealized appreciation......... 20,662,630 4,446,870
------------ -----------
Net increase in net assets resulting from
operations............................... 29,265,046 6,571,213
------------ -----------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income......................... -- (3,033)
Net realized gain on investments.............. (3,073,364) --
------------ -----------
Total distributions to shareholders....... (3,073,364) (3,033)
CAPITAL SHARE TRANSACTIONS:
Sale of shares................................ 78,761,282 40,407,658
Reinvestment of distributions................. 3,008,999 3,021
Redemption of shares.......................... (9,345,918) (1,694,149)
------------ -----------
Net increase from capital transactions.... 72,424,363 38,716,530
------------ -----------
Net increase.............................. 98,616,045 45,284,710
------------ -----------
NET ASSETS--END OF YEAR........................... $144,000,755 $45,384,710
------------ -----------
------------ -----------
<CAPTION>
SHARES SHARES
------------ -----------
<S> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Sale of shares................................ 5,232,267 3,428,401
Reinvestment of distributions................. 221,739 281
Redemption of shares.......................... (620,752) (128,955)
------------ -----------
Net increase in shares........................ 4,833,254 3,299,727
------------ -----------
------------ -----------
</TABLE>
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SEE ACCOMPANYING NOTES. THE CRM FUNDS
8
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CONTAINED BELOW IS PER SHARE OPERATING PERFORMANCE DATA FOR A SHARE OF
BENEFICIAL INTEREST OUTSTANDING, TOTAL INVESTMENT RETURN, RATIOS TO AVERAGE NET
ASSETS AND OTHER SUPPLEMENTAL DATA FOR EACH YEAR INDICATED.
<TABLE>
<CAPTION>
YEARS ENDED SEPTEMBER 30,
----------------------------
1997 1996
------------- -------------
<S> <C> <C>
Net asset value, beginning of period....................... $ 13.71 $ 10.00
------------- -------------
Investment Operations
Net investment loss.................................... (0.06) (0.02)
Net realized and unrealized gain on investments........ 4.89 3.73
------------- -------------
Total from Investment Operations........................... 4.83 3.71
------------- -------------
Distributions from
Net investment income.................................. -- -- (a)
Net realized gain on investments....................... (0.86) --
------------- -------------
Total distributions........................................ (0.86) --
------------- -------------
Net asset value, end of period............................. $ 17.68 $ 13.71
------------- -------------
------------- -------------
Total Return............................................... 37.14 % 37.15%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver............... 1.50 % 1.49%
Expenses, excluding reimbursement/waiver............... 1.50 % 1.98%
Net investment loss, including reimbursement/waiver.... (0.56)% (0.40)%
Average commission rate (b)................................ $ 0.0560 $ 0.0467
Portfolio turnover rate.................................... 98.91 % 111.18%
Net assets at end of period (000's omitted)................ $ 144,001 $ 45,385
</TABLE>
(a) Less than $0.01 per share.
(b) Amount represents the average commission per share, paid to
brokers, on the purchase and sale of portfolio securities.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
9
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION
The CRM Funds (the "Trust") is an open-end management investment company
organized as a Delaware business trust. The CRM Small Cap Value Fund (the
"Fund"), is a diversified portfolio of the Trust that commenced operations on
October 1, 1995. Currently, the Fund is the only series of the Trust. The Trust
Instrument of the Trust authorizes the Fund to issue an unlimited number of
shares of beneficial interest of $0.001 par value.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with generally accepted
accounting principles which require management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increase and decrease in net assets from
operations during the fiscal period. Actual results could differ from those
estimates.
The following represent significant accounting policies of the Fund:
SECURITY VALUATION -- Securities, 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 sales are reported, the mean of the last bid and asked price is used. In
the absence of readily available market quotations, securities are valued at
fair value as determined by the Board of Trustees. Securities with a
maturity of 60 days or less are valued at amortized cost.
REALIZED GAIN AND LOSS -- Security transactions are accounted for on a trade
date basis and realized gain and loss on investments sold are determined on
the basis of identified cost.
INTEREST AND DIVIDEND INCOME -- Interest income is accrued as earned.
Dividends on securities held by the Fund are recorded on the ex-dividend
date.
DISTRIBUTIONS TO SHAREHOLDERS -- Distributions from net investment income
and net capital gains, if any, are declared and paid at least annually.
Distributions are based on amounts calculated in accordance with applicable
income tax regulations.
ORGANIZATION COSTS -- The costs incurred by the Fund in connection with
their organization and registration of shares have been capitalized and are
being amortized using the straight-line method over a five year period
beginning with the commencement of the Fund's operations.
FEDERAL TAXES -- The Fund intends to continue to qualify each year as a
regulated investment company under Subchapter M of the Internal Revenue
Code. In addition, by distributing in each calendar year
- --------------------------------------------------------------------------------
THE CRM FUNDS
10
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
substantially all of its net investment income, capital gains and certain
other amounts, if any, the Fund will not be subject to a federal excise tax.
Since the Fund intends to meet these minimum distribution requirements, no
federal income tax provision is currently 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. 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.-Registered
Trademark- ("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.-Registered Trademark- ("FFC"), an affiliate of Forum,
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, including the Adviser, up to 0.25% of the average
daily net assets of the Fund attributable to accounts for which the agent
provides shareholder services. Currently, payments are being made solely to the
Adviser. The Trust reimburses Forum an amount equal to any shareholder servicing
fees it pays to shareholder servicing agents.
Each Trustee, who is not an "affiliated person" as defined in the Investment
Company Act of 1940, receives from the Fund an annual fee of $5,000 plus out of
pocket expenses.
4. SECURITIES TRANSACTIONS
Purchases and sales of investment securities, other than short-term investments,
totaled $134,740,310 and $79,209,516, respectively, for the year ended September
30, 1997.
For federal income tax purposes, the tax basis of investment securities owned as
of September 30, 1997 was $120,354,575. At September 30, 1997 accumulated net
unrealized appreciation on investments was $25,082,024, consisting of
$28,517,997 of gross unrealized appreciation and $3,435,973 of gross unrealized
depreciation.
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THE CRM FUNDS
11
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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, 1997 and the related statement
of operations for the year then ended, related statement of changes in net
assets and the financial highlights for the two years 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 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 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, 1997 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
audits provide 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, 1997, the results of its operations for
the year then ended, the changes in its net assets and the financial highlights
for each of the two years then ended, in conformity with generally accepted
accounting principles.
[SIG]
White Plains, New York
November 7, 1997
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THE CRM FUNDS
12
<PAGE>
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TRUSTEES
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
BankBoston, N.A.
P.O. Box 1959
Boston, Massachusetts 02105
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) CRM-2883
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]
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CRM
FUNDS
SMALL CAP
VALUE FUND
ANNUAL REPORT
September 30, 1997
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