<PAGE>
CRM FUNDS
- ------------------------------------
- ------------------------------------
FUND INFORMATION: SHAREHOLDER ACCOUNT INFORMATION:
Forum Financial Services, Inc. Forum Shareholder Services, LLC
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, 1998
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
Compared to market behavior for most of the last decade, this past year was
marked by record volatility, leaving investors feeling they've been on a rocky
ride, both in terms of daily and monthly fluctuations in global stock prices. As
the market twisted and turned, the larger, more blue chip issues continued to
significantly outpace the smaller stocks. This is evident in the S&P 500's
advance of 9.06% and the Russell 2000 Index's decline of 18.89% for the period
from October 1, 1997 through September 30, 1998.
By the end of the period, the spread between large cap stock performance and
small cap stock performance stood at its widest since inception of these indices
in 1979. This is a trend that we at CRM believe must correct and reverse itself
over the next market cycle, swinging the pendulum towards small and medium size
companies. During such a swing, our Value approach to investing will position
the CRM Funds to take optimum advantage of this capital markets shift.
Although the situation is challenging to many portfolio managers, the increased
volatility in the marketplace gives Value investors opportunities on which we
can capitalize. To justify this optimism, let us summarize the salient points of
our Value investment strategies:
- we begin by the early identification of dynamic change in a company's
operations
- we focus on change that will improve a company's stock valuation
- we conduct multi-level evaluations based on extensive research
- we select stocks that have a greater upside potential than risk over an 18
to 24 month period
- we strive to reduce downside risks while offering potential for capital
appreciation
We hope that you view our track record since the inception of the first CRM Fund
as a vindication of the Value approach to investing. Of course, it is our duty
to remind you that past performance is no guarantee of future return.
The CRM Funds have accumulated approximately $200 million in assets since the
inception of our first fund in October 1995--a remarkable success that proves
that the investment community, from institutions to individual shareholders, has
confidence in our Value approach to investing.
Our overall plan was to develop a family of Funds that capitalized on investment
strengths our firm has employed for over 25 years. As you know from our history,
we have used the Value approach consistently, reinforcing it with our team
decision making process. As a result, our CRM Funds offer you, our shareholder,
the benefits of the same approach used successfully with our individually
managed clients, at the same time as we offer you exposure to more varied
segments of the stock market.
- --------------------------------------------------------------------------------
THE CRM FUNDS
1
<PAGE>
If you have any questions or would like additional information about our no-load
CRM Funds, including a prospectus, please call us at (800) CRM-2883. Read it
carefully before you invest or send money. We thank you for your investment and
look forward to helping you reach your investment goals.
Sincerely,
The CRM Funds
Cramer Rosenthal McGlynn, LLC
/s/ Fred M. Filoon /s/ Ronald H. McGlynn /s/ Jay B. Abramson
Fred M. Filoon Ronald H. McGlynn Jay B. Abramson
President President and CEO Executive Vice President
- --------------------------------------------------------------------------------
THE CRM FUNDS
2
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
AN INTERVIEW WITH RONALD MCGLYNN, JAY ABRAMSON AND SCOTT CHER
PORTFOLIO MANAGERS FOR THE CRM SMALL CAP VALUE FUND ("FUND")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q. SCOTT, HOW DID THE SMALL CAP VALUE FUND PERFORM?
For the twelve months ended September 30, 1998, the Investor Shares of the Fund
had an average annual total return of -18.81%, compared to a -21.21% return for
the Lipper Small Cap Funds Average and -18.89% for the Russell 2000 Index. The
average annual total return for the year ended September 30, 1998 (since the
inception of the Fund) is 15.14%, compared to 6.91% for the Russell 2000.
Q. WHAT WAS BEHIND THIS PERFORMANCE?
The market was propelled this year by the stocks of the very largest, blue-chip,
companies and by those with the highest P/E ratios. Given our style of favoring
companies that are overlooked, out-of-favor and typically with low P/E ratios,
we were somewhat out of synch with the current market momentum. I believe that
our very disciplined process of buying and selling securities led the Fund to
outperform the Russell 2000, as measured since inception. This was during a time
when small cap stocks in general trailed large cap stocks significantly.
Q. RON, WILL YOU EXPLAIN YOUR INVESTMENT STRATEGY?
Sure. First, we search for companies undergoing some significant change, whether
it's change in their products, management or the way they do business. These
companies are often intrinsically undervalued or simply misunderstood by the
investment community. Then our team examines every aspect of a company to
determine why it is selling at what we consider to be substantially below its
real worth. We weigh the many reasons companies may be selling for less than
their real worth: companies may be early in their investment life cycle, don't
have the track record, or don't have widespread Wall Street coverage. Based on
this research, we make our investment decisions -- that is our Value approach to
buying companies.
Q. IS THAT THE WHOLE STORY?
That's about half of the process. The other half, which is equally important, is
following a very disciplined sale criteria. When we buy a stock, we set target
prices for where we believe the stock should be priced within a certain time
period. When the stock reaches our target price, we sell. We monitor our
holdings daily, but we don't change our target price unless there is a
significant change in the stock's fundamentals.
Q. JAY, WHAT IS YOUR OUTLOOK FOR THE NEXT YEAR?
As we enter the last quarter of this calendar year, the high P/E growth stocks
continue to outperform Value stocks. Valuation levels for the overall market,
and especially for the large capitalization growth stocks, are at historic
peaks. More importantly, however, is the very distinct difference in performance
across the various market capitalization of the market. The market is cyclical
and history tells us that Value stocks, and small cap Value stocks in
particular, are overdue for a period of outperformance. Regardless of the macro
events, however, we feel that our Fund is comprised of good companies selling at
unrealistically low valuation levels. And if there is one thing we at CRM have
learned, it is the importance of sticking to our investment style -- which is
summed up best in our Fund's name, Small Cap Value Fund.
THE OPINIONS EXPRESSED IN THIS INTERVIEW REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH SEPTEMBER 30, 1998. THE MANAGERS' OPINIONS ARE SUBJECT TO CHANGE AT
ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
- --------------------------------------------------------------------------------
THE CRM FUNDS
3
<PAGE>
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE FUND
AN INTERVIEW WITH RONALD MCGLYNN AND JAY ABRAMSON
PORTFOLIO MANAGERS FOR THE CRM LARGE CAP VALUE FUND ("FUND")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q. RON, HOW DID THE FUND PERFORM?
The cumulative total return of the Fund's Investor Shares since inception on
August 25th of this year through September 30, 1998 is 0.20%, compared to a
- -11.94% return for the Lipper Capital Appreciation Funds Average and 6.02% for
the S&P 500 Index.
Q. HOW DID THIS PERFORMANCE COMPARE TO YOUR ORIGINAL EXPECTATIONS?
The Fund commenced operations on August 25, 1998. In my opinion, performance
information, given such a short time period, is by definition misleading. We
expect that over a longer period the Fund will outperform the overall market and
our specific benchmark.
Q. JAY, HOW IS THE FUND MANAGED?
We mainly buy companies that have a market capitalization greater than $10
billion. As with all our funds, we rely on a Value approach to investing, but
there is a slight twist with the Fund: Most companies with a market cap greater
than $10 billion are typically followed extensively by Wall Street, but that
does not mean the consensus on Wall Street is always accurate. Sure, we will
listen to what the Street is saying and factor those comments into our research,
but the Street's opinions are only a part of our entire research process.
Q. SO THE SAME TEAM IS MANAGING THE LARGE CAP VALUE FUND?
That's right. While Ron and I are responsible for the day-to-day management of
each fund, along with Scott for the Small Cap Value Fund and Michael for Mid Cap
Value Fund, we are supported by a large and experienced Research and Portfolio
Management Group. In fact, of our 58 employees, 22 are in our Research and
Portfolio Management Group. We strongly believe that we can not have enough
people scrutinizing a particular company, for the simple reason that each person
brings a different perspective to our research and analysis.
THE OPINIONS EXPRESSED IN THIS INTERVIEW REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH SEPTEMBER 30, 1998. THE MANAGERS' OPINIONS ARE SUBJECT TO CHANGE AT
ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
- --------------------------------------------------------------------------------
THE CRM FUNDS
4
<PAGE>
- --------------------------------------------------------------------------------
CRM VALUE FUND
AN INTERVIEW WITH RONALD MCGLYNN AND JAY ABRAMSON
PORTFOLIO MANAGERS FOR THE CRM VALUE FUND ("FUND")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q. RON, HOW DID THE FUND PERFORM?
The cumulative total return of the Fund's Investor Shares since inception on
January 2nd of this year through September 30, 1998 is -6.70%, compared to a
- -1.77% return for the Lipper Capital Appreciation Funds Average and 6.02% for
the S&P 500 Index.
Q. HOW DID PERFORMANCE COMPARE TO YOUR ORIGINAL EXPECTATIONS?
As we've said with all our new funds, our performance numbers, good, bad or
indifferent, are not necessarily representative of what we expect our long-term
numbers to be. And remember, long-term is not one full year. It's three years,
at least.
Q. JAY, IS THE FUND MANAGED LIKE THE OTHERS?
Basically, yes, but with a difference. With this Fund we do not limit our
investments within certain market capitalization parameters. Instead, we pick
the companies we believe represent the best Value in the small, medium and large
cap sectors for this Fund.
Q. DO YOU THINK THIS FUND WILL HAVE THE BEST PERFORMANCE?
There will be times when it does have the best performance, but that will depend
first, on stock picking and, second, on our capitalization weightings. Although
this Fund will have all of the best names from the other three funds, remember
that the small, medium and large cap markets do not move in lockstep with one
another. A case in point has been the last year. The larger caps have outpaced
the medium caps which have outpaced the small caps. This Fund may be right for
someone looking for diversification across all three markets.
THE OPINIONS EXPRESSED IN THIS INTERVIEW REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH SEPTEMBER 30, 1998. THE MANAGERS' OPINIONS ARE SUBJECT TO CHANGE AT
ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
- --------------------------------------------------------------------------------
THE CRM FUNDS
5
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following information compares a change in value of a $10,000 investment in
the Investor Shares of the CRM Small Cap Value Fund ("Fund") with the
performance of the Russell 2000 Index since inception (10/1/95). The Russell
2000 is an unmanaged capitalization weighted index of 2000 small capitalization
U.S. companies and reflects the reinvestment of dividends. 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-INVESTOR SHARES VS RUSSELL 2000 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRM SMALL CAP VALUE FUND-INVESTOR SHARES RUSSELL 2000 INDEX
<S> <C> <C>
10/1/95 $10,000.00 $10,000.00
10/31/95 $9,840.00 $9,553.70
11/30/95 $10,450.00 $9,965.29
12/31/95 $10,734.10 $10,219.74
1/31/96 $10,904.16 $10,208.06
2/29/96 $11,404.36 $10,530.68
3/31/96 $11,984.58 $10,739.55
4/30/96 $12,474.76 $11,316.63
5/31/96 $13,335.09 $11,771.08
6/30/96 $13,405.12 $11,291.17
7/31/96 $12,574.80 $10,305.79
8/31/96 $13,275.07 $10,904.25
9/30/96 $13,715.24 $11,329.98
10/31/96 $13,965.33 $11,153.69
11/30/96 $14,525.55 $11,611.27
12/31/96 $14,914.93 $11,909.55
1/31/97 $15,159.61 $12,145.25
2/28/97 $15,000.03 $11,851.22
3/31/97 $14,521.31 $11,295.51
4/30/97 $14,468.12 $11,323.34
5/31/97 $16,021.31 $12,588.12
6/30/97 $17,053.23 $13,120.90
7/31/97 $17,946.85 $13,733.09
8/31/97 $18,234.08 $14,042.99
9/30/97 $18,808.55 $15,068.16
10/31/97 $18,000.04 $14,398.38
11/30/97 $17,500.04 $14,300.37
12/31/97 $18,155.33 $14,557.06
1/31/98 $17,930.91 $14,335.36
2/28/98 $19,692.59 $15,410.26
3/31/98 $20,926.88 $16,057.80
4/30/98 $21,364.49 $16,146.01
5/31/98 $20,466.82 $15,279.77
6/30/98 $19,782.35 $15,323.51
7/31/98 $18,233.88 $14,072.19
8/31/98 $14,351.46 $11,343.59
9/30/98 $15,271.57 $12,221.29
INVESTMENT VALUE ON 9/30/98
CRM Small Cap Value Fund-Investor Shares $15,272
Russell 2000 Index $12,221
AVERAGE ANNUAL TOTAL RETURN*
ONE YEAR SINCE INCEPTION ON 10/1/95
CRM Small Cap Value Fund-Investor Shares (18.81%) 15.14%
Russell 2000 Index (18.89%) 6.91%
</TABLE>
* Annualized return for the Russell 2000 Index based on an inception date of
9/30/95.
The Fund is professionally managed while the index is unmanaged and is not
available for investment.
- --------------------------------------------------------------------------------
THE CRM FUNDS
6
<PAGE>
- --------------------------------------------------------------------------------
CRM VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following information compares a change in value of a $10,000 investment in
the Investor Shares of the CRM Value Fund ("Fund") with the performance of the
Standard and Poor's 500 Composite Index ("S&P 500") since inception (1/2/98).
The S&P 500 is an unmanaged market weighted index composed of 500 large
capitalization companies and reflects the reinvestment of dividends. 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 VALUE FUND VS S&P 500 INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRM VALUE FUND INVESTOR SHARES S&P 500 INDEX
<S> <C> <C>
12/31/97 $10,000.00 $10,000.00
1/31/98 $10,230.00 $10,110.49
2/28/98 $10,870.00 $10,839.28
3/31/98 $11,480.00 $11,393.91
4/30/98 $11,430.00 $11,508.50
5/31/98 $11,280.00 $11,310.90
6/30/98 $11,060.00 $11,769.98
7/31/98 $10,770.00 $11,644.99
8/31/98 $9,180.00 $9,963.45
9/30/98 $9,330.00 $10,601.78
INVESTMENT VALUE ON 9/30/98
CRM Value Fund Investor Shares $9,330
S&P 500 Index $10,602
CUMULATIVE TOTAL RETURN
SINCE INCEPTION ON 1/2/98
CRM Value Fund Investor Shares (6.70%)
S&P 500 Index 6.02%
</TABLE>
The Fund is professionally managed while the index is unmanaged and is not
available for investment. Total return would have been lower had certain fees
and expenses not been voluntarily waived and/or reimbursed.
- --------------------------------------------------------------------------------
THE CRM FUNDS
7
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -------------
<C> <S> <C>
COMMON STOCK (84.8%)
AUTOMOTIVE PARTS AND EQUIPMENT (0.8%)
105,000 Safety Components International,
Inc.*.................................. $ 1,391,250
-------------
BANKING AND FINANCIAL (4.8%)
174,000 Golden State Bancorp, Inc.*............. 3,455,657
266,700 PBOC Holdings, Inc.*.................... 2,933,700
126,000 Pilgrim America Capital Corp.*.......... 2,409,750
-------------
8,799,107
-------------
BUILDING AND CONSTRUCTION (3.1%)
235,600 Morrison Knudsen Corp.*................. 2,532,700
257,200 Walter Industries, Inc.*................ 3,198,927
-------------
5,731,627
-------------
BUILDING MATERIALS (1.0%)
208,500 Dal-Tile International, Inc.*........... 1,889,530
-------------
BUSINESS SERVICES (7.3%)
137,000 BTG, Inc.*.............................. 924,750
505,300 Caribiner International, Inc.*.......... 4,295,050
350,700 LGS Group, Inc.*........................ 2,883,735
169,800 World Color Press, Inc.*................ 5,263,800
-------------
13,367,335
-------------
COMMUNICATIONS (6.9%)
262,300 COMSAT Corp............................. 9,246,075
100,000 Young Broadcasting Corp.*............... 3,400,000
-------------
12,646,075
-------------
CONSUMER CYCLICALS (2.3%)
480,000 Loews Cineplex Entertainment*........... 4,140,000
-------------
CONSUMER PRODUCTS (5.5%)
195,300 Gibson Greetings, Inc.*................. 3,967,030
129,300 Nutramax Products, Inc.*................ 743,475
223,876 United Stationers, Inc.*................ 5,345,040
-------------
10,055,545
-------------
DIVERSIFIED INDUSTRIES (0.8%)
70,000 Elsag Bailey Process Automation N.V*.... 1,474,375
-------------
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -------------
<C> <S> <C>
ELECTRONIC EQUIPMENT AND COMPONENTS (3.3%)
234,600 BMC Industries, Inc..................... $ 1,407,600
238,000 CommScope, Inc.*........................ 2,751,875
245,800 Glenayre Technologies, Inc.*............ 1,782,050
-------------
5,941,525
-------------
ENERGY EXPLORATION AND DISTRIBUTION (8.6%)
634,500 EEX Corp.*.............................. 3,093,190
160,000 Equitable Resources, Inc................ 4,070,000
101,600 Getty Properties Corp................... 1,422,400
184,400 Nuevo Energy Co.*....................... 3,895,450
245,700 Ocean Energy, Inc.*..................... 3,224,815
-------------
15,705,855
-------------
FINANCIAL SERVICES (2.7%)
331,800 Richmond County Financial Corp.......... 4,977,000
-------------
HEALTH CARE (4.7%)
101,600 Acuson Corp.*........................... 1,733,550
147,400 Bindley Western Industries, Inc......... 4,864,200
7,900 CONMED Corp.*........................... 180,710
94,500 Integrated Health Services, Inc......... 1,588,780
52,166 Medical Resources, Inc.*................ 133,675
-------------
8,500,915
-------------
INDUSTRIAL AND COMMERCIAL MACHINERY (1.2%)
1,400 EG&G, Inc............................... 31,675
151,400 Hussmann International, Inc............. 2,147,990
-------------
2,179,665
-------------
INDUSTRIAL TECHNOLOGIES (4.1%)
1,069,200 Safety-Kleen Corp.*..................... 3,541,725
239,500 UNOVA, Inc.*............................ 3,936,780
-------------
7,478,505
-------------
METAL INDUSTRIES (3.9%)
224,000 Oregon Steel Mills, Inc................. 2,632,000
75,000 Schnitzer Steel Industries, Inc......... 1,125,000
254,300 WHX Corp.*.............................. 3,274,110
-------------
7,031,110
-------------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
8
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -------------
REAL ESTATE (4.3%)
<C> <S> <C>
208,900 Insignia Financial Group, Inc.-Class
A*..................................... $ 2,062,885
139,267 Insignia/ESG Holdings, Inc.*............ 1,601,570
196,600 SL Green Realty Corp.................... 4,128,600
-------------
7,793,055
-------------
RETAIL (7.0%)
105,000 Fred Meyer, Inc.*....................... 4,081,875
226,200 Shopko Stores, Inc.*.................... 7,351,500
236,800 Sunglass Hut International, Inc.*....... 1,361,600
-------------
12,794,975
-------------
TECHNOLOGY (8.0%)
187,500 ChoicePoint, Inc.*...................... 9,023,440
197,600 GTECH Holdings Corp.*................... 5,248,750
49,700 Silicon Valley Group*................... 397,600
-------------
14,669,790
-------------
TRANSPORTATION EQUIPMENT (4.0%)
174,800 Gencorp, Inc............................ 3,364,900
222,500 Mascotech, Inc.......................... 4,005,000
-------------
7,369,900
-------------
UTILITIES (0.5%)
46,400 Washington Water Power Co............... 919,300
-------------
TOTAL COMMON STOCK (COST $169,120,073)............... $ 154,856,439
-------------
SHORT-TERM HOLDINGS (15.2%)
CASH MANAGEMENT ACCOUNTS (0.1%)
$148,589 Forum Daily Assets Cash Fund (Cost
$148,589).............................. 148,589
-------------
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -------------
<C> <S> <C>
COMMERCIAL PAPER (7.4%)
$1,500,000 Dupont Corp., 5.30%, 10/9/98............ $ 1,498,233
1,000,000 Ford Motor Credit Co., 5.32%, 10/2/98... 999,852
1,500,000 Ford Motor Credit Co., 5.22%, 10/6/98... 1,498,913
2,000,000 GE Capital Corporation, 5.31%,
10/5/98................................ 1,998,822
2,500,000 GMAC, 5.31%, 10/2/98.................... 2,499,631
1,000,000 Georgia Power Company, 5.37%, 10/5/98... 999,403
1,000,000 IBM Credit Corp., 5.35%, 10/7/98........ 999,108
1,500,000 Lucent Technologies, Inc., 5.45%,
10/1/98................................ 1,500,000
500,000 Merrill Lynch, 5.50%, 10/1/98........... 500,000
500,000 Merrill Lynch, 5.50%, 11/3/98........... 497,479
500,000 Merrill Lynch, 5.50%, 1/4/99............ 492,744
-------------
TOTAL COMMERCIAL PAPER (COST $13,484,185)............ $ 13,484,185
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (4.4%)
2,000,000 5.47%, 10/2/98.......................... 1,999,701
2,500,000 5.18%, 10/5/98.......................... 2,498,583
3,500,000 5.18%, 10/9/98.......................... 3,496,033
-------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION DISCOUNT
NOTES (COST $7,994,317)............................. $ 7,994,317
-------------
U.S.TREASURY BILLS (3.3%)
3,500,000 3.91%, 10/1/98.......................... 3,500,000
2,500,000 5.05%, 10/15/98......................... 2,495,205
-------------
TOTAL U.S. TREASURY BILLS (COST $5,995,205).......... $ 5,995,205
-------------
SHORT-TERM HOLDINGS (COST $27,622,296)............... $ 27,622,296
-------------
TOTAL INVESTMENTS (100.0%) (COST $196,742,369)....... $ 182,478,735
-------------
-------------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
9
<PAGE>
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
COMMON STOCK (52.5%)
AEROSPACE (2.4%)
1,500 Lockheed Martin Corp.................... $ 151,215
1,600 Northrop Grumman Corp................... 116,800
-----------
268,015
-----------
BANKING AND FINANCIAL (3.8%)
1,500 Banc One Corp........................... 63,938
5,000 Bank of New York Co., Inc............... 136,876
2,500 Summit Bancorp.......................... 93,750
3,300 Torchmark Corp.......................... 118,594
-----------
413,158
-----------
BASIC MATERIALS (0.6%)
1,000 Aluminum Co. of America................. 71,000
-----------
BUSINESS SERVICES (0.5%)
2,000 Dun & Bradstreet Corp................... 54,000
-----------
CHEMICALS AND ALLIED PRODUCTS (2.5%)
2,800 Air Products and Chemicals, Inc......... 83,300
2,100 E.I. du Pont de Nemours & Co............ 117,863
2,800 Rohm & Haas Co.......................... 77,876
-----------
279,039
-----------
COMMUNICATIONS (4.0%)
2,300 AT&T Corp............................... 134,407
3,500 MCI Worldcom, Inc.*..................... 171,064
3,000 SBC Communications, Inc................. 133,313
-----------
438,784
-----------
COMPUTER EQUIPMENT (1.1%)
1,000 Hewlett-Packard Co...................... 52,938
500 IBM Corp................................ 64,000
-----------
116,938
-----------
CONSUMER DURABLES (1.1%)
1,500 Maytag Corp............................. 71,625
1,000 Newell Co............................... 46,063
-----------
117,688
-----------
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
CONSUMER NON-DURABLES (0.7%)
1,500 Sara Lee Corp........................... $ 81,000
-----------
CONSUMER PRODUCTS (0.6%)
1,000 Procter & Gamble Co..................... 70,938
-----------
CONTAINERS AND PACKAGING (0.5%)
6,000 Stone Container Corp.*.................. 51,750
-----------
DIVERSIFIED INDUSTRIAL (3.1%)
3,600 Allied-Signal Inc....................... 127,350
1,000 Eaton Corp.............................. 62,688
4,000 Rockwell International Corp............. 144,501
-----------
334,539
-----------
ELECTRONIC EQUIPMENT AND COMPONENTS (2.5%)
1,000 Honeywell, Inc.......................... 64,063
1,900 Philips Electronics NV.................. 101,413
2,000 Raytheon Co., Class A................... 103,625
-----------
269,101
-----------
FOOD (2.9%)
2,000 ConAgra, Inc............................ 53,875
1,300 General Mills, Inc...................... 91,000
6,000 PepsiCo, Inc............................ 176,626
-----------
321,501
-----------
HEALTH CARE (1.1%)
2,000 Baxter International, Inc............... 119,000
-----------
INSURANCE (2.9%)
1,900 American General Corp................... 121,363
3,000 Equitable Companies Inc................. 124,125
1,500 Marsh & McLennan Cos., Inc.............. 74,625
-----------
320,113
-----------
MINING (0.6%)
1,300 Phelps Dodge Corp....................... 67,844
-----------
NONDEPOSITORY CREDIT INSTITUTIONS (2.1%)
3,500 FNMA.................................... 224,875
-----------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
10
<PAGE>
- --------------------------------------------------------------------------------
CRM LARGE CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
OIL AND GAS EXTRACTION (3.5%)
3,900 Burlington Resources, Inc............... $ 145,761
3,000 Enron Corp.............................. 158,439
1,500 Schlumberger, Ltd....................... 75,469
-----------
379,669
-----------
PAPER AND ALLIED PRODUCTS (1.3%)
4,300 Fort James Corp......................... 141,090
-----------
PETROLEUM REFINING AND RELATED INDUSTRIES (0.7%)
1,500 Royal Dutch Petroleum Co................ 71,435
-----------
PHARMACEUTICALS (4.0%)
3,000 American Home Products Corp............. 157,125
3,000 Astra AB, sponsored ADR................. 51,560
1,000 Bristol-Myers Squibb Co................. 103,875
1,000 Merck & Co., Inc........................ 129,562
-----------
442,122
-----------
RETAIL (2.2%)
13,000 KMart Corp.*............................ 155,188
2,000 Sears, Roebuck and Co................... 88,375
-----------
243,563
-----------
TECHNOLOGY (4.3%)
3,000 Sun Microsystems, Inc.*................. 149,438
2,000 Texas Instruments, Inc.................. 105,500
2,500 Xerox Corp.............................. 211,875
-----------
466,813
-----------
TRANSPORTATION (1.2%)
1,600 AMR Corp.*.............................. 88,700
1,200 Burlington Northern Santa Fe Corp....... 38,400
-----------
127,100
-----------
TRANSPORTATION EQUIPMENT (1.0%)
2,100 General Motors Corp..................... 114,844
-----------
WHOLESALE TRADE-NONDURABLE GOODS (1.3%)
6,000 Sysco Corp.............................. 141,375
-----------
TOTAL COMMON STOCK (COST $5,690,814)................. $ 5,747,294
-----------
</TABLE>
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
SHORT-TERM HOLDINGS (47.5%)
CASH MANAGEMENT ACCOUNTS (9.5%)
$518,078 Forum Daily Assets Cash Fund............ $ 518,078
518,077 Forum Daily Assets Government
Obligations............................ 518,077
-----------
TOTAL CASH MANAGEMENT ACCOUNTS (COST $1,036,155).....
$ 1,036,155
-----------
COMMERCIAL PAPER (7.0%)
100,000 Coca Cola Co., 5.30%, 12/3/98........... 99,073
100,000 Consolidated National Gas, 5.51%,
10/1/98................................ 100,000
100,000 Ford Motor Credit Co., 5.37%, 10/1/98... 100,000
100,000 GMAC, 5.55%, 10/1/98.................... 100,000
120,000 General Electric Capital Corp., 5.49%,
11/2/98................................ 119,414
100,000 Lucent Technologies, Inc., 5.45%,
10/1/98................................ 100,000
150,000 Progress Capital Corp., 5.45%,
10/2/98................................ 149,977
-----------
TOTAL COMMERCIAL PAPER (COST $768,464)............... $ 768,464
-----------
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (3.7%)
400,000 5.18%, 10/9/98 (Cost $399,547).......... 399,547
-----------
TREASURY BILLS (27.3%)
1,000,000 4.13%, 10/1/98.......................... 1,000,000
1,000,000 4.52%, 10/22/98......................... 997,410
1,000,000 4.46%, 11/12/98......................... 994,903
-----------
TOTAL TREASURY BILLS (COST $2,992,312)............... $ 2,992,313
-----------
SHORT-TERM HOLDINGS (COST $5,196,479)................ $ 5,196,479
-----------
TOTAL INVESTMENTS (100.0%) (COST $10,887,293)........ $10,943,773
-----------
-----------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
11
<PAGE>
- --------------------------------------------------------------------------------
CRM VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
COMMON STOCK (79.0%)
AUTOMOTIVE PARTS AND EQUIPMENT (4.4%)
2,500 General Motors Corp..................... $ 136,715
14,000 Safety Components International,
Inc.*.................................. 185,500
-----------
322,215
-----------
BANKING AND FINANCIAL (12.5%)
2,500 Aetna Life & Casualty Inc............... 173,750
4,000 Allmerica Financial Corp................ 238,500
5,000 Bank of New York Co., Inc............... 136,875
8,000 Golden State Bancorp, Inc.*............. 159,500
5,000 Golden State Bancorp Warrants*.......... 21,094
5,000 Torchmark Corp.......................... 179,690
-----------
909,409
-----------
BASIC MATERIALS (4.0%)
4,000 Ashland, Inc............................ 185,000
9,200 Johns Manville Corp..................... 104,650
-----------
289,650
-----------
BUSINESS SERVICES (0.4%)
40,000 StarBase Corp.*......................... 31,250
-----------
COMMUNICATIONS (10.2%)
9,860 Alcatel ADR............................. 167,620
14,000 Cincinnati Bell, Inc.................... 364,000
6,000 COMSAT Corp............................. 211,500
-----------
743,120
-----------
CONSUMER PRODUCTS (2.0%)
6,000 United Stationers, Inc.*................ 143,250
-----------
CONTAINERS AND PACKAGING (2.8%)
4,800 Owens-Illinois, Inc.*................... 120,000
10,000 Stone Container Corp.*.................. 86,250
-----------
206,250
-----------
ELECTRONIC EQUIPMENT AND COMPONENTS (2.0%)
6,000 Raychem Corp............................ 146,250
-----------
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
ENERGY (3.0%)
14,000 USEC, Inc.*............................. $ 216,125
-----------
ENERGY EXPLORATION AND DISTRIBUTION (2.0%)
11,000 Ocean Energy, Inc.*..................... 144,375
-----------
FINANCIAL SERVICES (1.2%)
2,000 Chase Manhattan Corp.................... 86,500
-----------
HEALTH CARE (6.9%)
3,000 Perkin-Elmer Corp....................... 206,062
8,000 Quorum Health Group, Inc.*.............. 130,000
3,000 Wellpoint Health Networks Inc.*......... 168,188
-----------
504,250
-----------
INDUSTRIAL AND COMMERCIAL MACHINERY (9.8%)
5,000 Allied-Signal Inc....................... 176,875
7,500 Applied Power Inc....................... 204,845
4,000 Ingersoll-Rand Co....................... 151,750
5,000 Rockwell International Corp............. 180,625
-----------
714,095
-----------
INDUSTRIAL TECHNOLOGIES (1.4%)
30,000 Safety-Kleen Corp.*..................... 99,375
-----------
RETAIL (3.9%)
4,000 Fred Meyer, Inc.*....................... 155,500
11,000 KMart Corp.*............................ 131,314
-----------
286,814
-----------
TECHNOLOGY (9.4%)
6,000 Autodesk Inc............................ 157,500
100,000 Communication Intelligence*............. 59,380
15,000 National Semiconductor Corp.*........... 145,313
4,000 Sun Microsystems, Inc.*................. 199,250
1,500 Xerox Corp.............................. 127,125
-----------
688,568
-----------
UTILITIES (3.1%)
5,000 Montana Power Co........................ 223,437
-----------
TOTAL COMMON STOCK (COST $6,923,034)................. $ 5,754,933
-----------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
12
<PAGE>
- --------------------------------------------------------------------------------
CRM VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
SHORT-TERM HOLDINGS (21.0%)
CASH MANAGEMENT ACCOUNTS (1.4%)
$104,256 Forum Daily Assets Cash Fund
(Cost $104,256)........................ $ 104,256
-----------
COMMERCIAL PAPER (8.6%)
100,000 Countrywide Credit Industries, 5.53%,
10/1/98................................ 100,000
150,000 Ford Motor Credit Co., 5.32%, 10/2/98... 149,978
150,000 GMAC, 5.31%, 10/2/98.................... 149,978
130,000 General Electric Capital Corp., 5.30%,
10/5/98................................ 129,921
100,000 Merrill Lynch & Co., Inc., 5.61%,
10/1/98................................ 100,000
-----------
TOTAL COMMERCIAL PAPER (COST $629,877)............... $ 629,877
-----------
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ----------- ---------------------------------------- -----------
<C> <S> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (2.1%)
$150,000 5.18%, 10/9/98 (Cost $149,830).......... $ 149,830
-----------
TREASURY BILLS (8.9%)
150,000 4.82%, 10/1/98.......................... 150,000
150,000 5.13%, 10/15/98......................... 149,708
350,000 4.52%, 10/22/98......................... 349,095
-----------
TOTAL TREASURY BILLS (COST $648,803)................. $ 648,803
-----------
TOTAL SHORT-TERM HOLDINGS (COST $1,532,766).......... $ 1,532,766
-----------
TOTAL INVESTMENTS (100.0%) (COST $8,455,800)......... $ 7,287,699
-----------
-----------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
13
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP LARGE CAP
VALUE FUND VALUE FUND VALUE FUND
------------ ----------- -----------
<S> <C> <C> <C>
ASSETS:
Investments (Note 2)
Investments at cost................................. $196,742,369 $10,887,293 $ 8,455,800
Net unrealized appreciation (depreciation).......... (14,263,634) 56,480 (1,168,101)
------------ ----------- -----------
Total investments at value.............................. 182,478,735 10,943,773 7,287,699
Cash.................................................... -- 92,207 --
Receivable from Adviser................................. -- 11,082 8,941
Receivable for securities sold.......................... 2,974,895 -- --
Receivable for Fund shares sold......................... 89,622 36,000 1,000
Interest, dividends and other receivables............... 110,052 7,671 21,750
Organization costs, net................................. 34,764 -- 25,581
------------ ----------- -----------
Total assets................................................ 185,688,068 11,090,733 7,344,971
------------ ----------- -----------
LIABILITIES:
Dividends payable....................................... 235 -- --
Payable for securities purchased........................ 6,204,726 399,547 178,774
Payable for Fund shares redeemed........................ 38,416 -- 2,500
Payable to Adviser...................................... 133,375 -- --
Payable to Administrator................................ 13,295 2,554 2,083
Payable to Custodian.................................... 2,653 -- 1,170
Accrued fees and other expenses......................... 120,341 20,871 44,148
------------ ----------- -----------
Total liabilities........................................... 6,513,041 422,972 228,675
------------ ----------- -----------
NET ASSETS.................................................. $179,175,027 $10,667,761 $ 7,116,296
------------ ----------- -----------
------------ ----------- -----------
COMPONENTS OF NET ASSETS:
Paid in capital......................................... $197,659,652 $10,620,370 $ 8,459,649
Undistributed net investment income..................... -- 14,671 19,876
Net unrealized appreciation (depreciation).............. (14,263,634) 56,480 (1,168,101)
Accumulated undistributed net realized loss............. (4,220,991) (23,760) (195,128)
------------ ----------- -----------
NET ASSETS.................................................. $179,175,027 $10,667,761 $ 7,116,296
------------ ----------- -----------
------------ ----------- -----------
NET ASSETS BY SHARE CLASS
Investor Shares......................................... $130,928,821 $10,667,761 $ 7,116,296
Institutional Shares.................................... 48,246,206 -- --
------------ ----------- -----------
NET ASSETS.................................................. $179,175,027 $10,667,761 $ 7,116,296
------------ ----------- -----------
------------ ----------- -----------
SHARES OF BENEFICIAL INTEREST OUTSTANDING
Investor Shares......................................... 9,617,646 1,064,174 762,934
Institutional Shares.................................... 3,516,391 -- --
------------ ----------- -----------
------------ ----------- -----------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE) PER SHARE
Investor Shares......................................... $ 13.61 $ 10.02 $ 9.33
Institutional Shares.................................... 13.72 -- --
------------ ----------- -----------
------------ ----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
14
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP LARGE CAP
VALUE FUND VALUE FUND VALUE FUND
------------- ---------- -----------
<S> <C> <C> <C>
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1998 (a)
------------- -----------------------
INVESTMENT INCOME:
Dividend income......................................... $ 1,132,104 $ 8,884 $ 50,169
Interest income......................................... 904,574 18,130 48,713
------------- ---------- -----------
Total investment income..................................... 2,036,678 27,014 98,882
------------- ---------- -----------
EXPENSES:
Investment advisory fees................................ 1,434,005 6,174 39,465
Shareholder services.................................... 419,344 2,058 13,155
Administration fees..................................... 190,232 2,554 18,414
Transfer agent services................................. 202,963 3,487 24,969
Professional services................................... 96,391 8,601 19,433
Registration fees....................................... 69,967 3,034 9,449
Accounting services..................................... 51,000 5,677 30,516
Custody fees............................................ 28,869 137 6,604
Trustees fees and expenses.............................. 19,235 -- 519
Amortization of organization costs...................... 17,383 -- 4,419
Printing................................................ 36,834 729 904
Miscellaneous........................................... 38,910 29 1,780
------------- ---------- -----------
Total expenses.............................................. 2,605,133 32,480 169,627
------------- ---------- -----------
Expenses reimbursed and fees waived (Note 4)............ (17,897) (20,137 ) (90,621)
------------- ---------- -----------
Net expenses............................................ 2,587,236 12,343 79,006
------------- ---------- -----------
NET INVESTMENT INCOME (LOSS)................................ (550,558) 14,671 19,876
------------- ---------- -----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss on investments sold................... (3,867,578) (23,760 ) (195,128)
Net change in unrealized appreciation (depreciation).... (39,373,134) 56,480 (1,168,101)
------------- ---------- -----------
Net realized and unrealized gain (loss) on investments...... (43,240,712) 32,720 (1,363,229)
------------- ---------- -----------
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM
OPERATIONS................................................. $ (43,791,270) $ 47,391 $(1,343,353)
------------- ---------- -----------
------------- ---------- -----------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for commencement of operations.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
15
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LARGE CAP
SMALL CAP VALUE FUND VALUE FUND VALUE FUND
---------------------------- ------------- -------------
YEAR ENDED YEAR ENDED PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 (a) 1998 (a)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
NET ASSETS--BEGINNING OF PERIOD............................. $ 144,000,755 $ 45,384,710 -- $ 100
------------- ------------- ------------- -------------
OPERATIONS:
Net investment income (loss)............................ (550,558) (476,883) 14,671 19,876
Net realized gain (loss) on investments sold............ (3,867,578) 9,079,299 (23,760) (195,128)
Net change in unrealized appreciation (depreciation).... (39,373,134) 20,662,630 56,480 (1,168,101)
------------- ------------- ------------- -------------
Net increase (decrease) in net assets resulting from
operations......................................... (43,791,270) 29,265,046 47,391 (1,343,353)
------------- ------------- ------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments--Investor Shares....... (7,725,721) (3,073,364) -- --
Return of capital--Investor Shares...................... (212,312) -- -- --
------------- ------------- ------------- -------------
Net decrease in net assets resulting from
distributions...................................... (7,938,033) (3,073,364) -- --
------------- ------------- ------------- -------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Investor Shares......................... 86,883,053 78,761,282 10,620,370 11,976,249
Sale of shares--Institutional Shares.................... 64,007,466 -- -- --
Reinvestment of distributions--Investor Shares.......... 7,442,799 3,008,999 -- --
Redemption of shares--Investor Shares................... (67,420,738) (9,345,918) -- (3,516,700)
Redemption of shares--Institutional Shares.............. (4,009,005) -- -- --
------------- ------------- ------------- -------------
Net increase from capital transactions.............. 86,903,575 72,424,363 10,620,370 8,459,549
------------- ------------- ------------- -------------
Net increase........................................ 35,174,272 98,616,045 10,667,761 7,116,196
------------- ------------- ------------- -------------
NET ASSETS--END OF PERIOD................................... $ 179,175,027 $ 144,000,755 $ 10,667,761 $ 7,116,296
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Accumulated undistributed net investment income............. $ -- $ -- $ 14,671 $ 19,876
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
<CAPTION>
SHARES SHARES SHARES SHARES
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Investor Shares......................... 5,036,141 5,232,267 1,064,174 1,103,650
Sale of shares--Institutional Shares.................... 3,750,486 -- -- --
Reinvestment of distributions--Investor Shares.......... 473,135 221,739 -- --
Redemption of shares--Investor Shares................... (4,034,611) (620,752) -- (340,726)
Redemption of shares--Institutional Shares.............. (234,095) -- -- --
------------- ------------- ------------- -------------
Net increase in shares.................................. 4,991,056 4,833,254 1,064,174 762,924
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for commencement of operations.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
16
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
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 PERIOD INDICATED.
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
------------------------------------------------------------
INSTITUTIONAL
INVESTOR SHARES SHARES
-------------------------------------------- --------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1996 1998 (a)
------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 17.68 $ 13.71 $ 10.00 $ 15.99
------------- ------------- ------- -------
Investment Operations
Net investment income (loss)........................ (0.06) (0.06) (0.02) 0.01
Net realized and unrealized gain (loss) on
investments........................................ (3.15) 4.89 3.73 (2.28)
------------- ------------- ------- -------
Total from Investment Operations........................ (3.21) 4.83 3.71 (2.27)
------------- ------------- ------- -------
Distributions from
Net investment income............................... -- -- --(b) --
Net realized gain on investments.................... (0.84) (0.86) -- --
Return of capital................................... (0.02) -- -- --
------------- ------------- ------- -------
Total distributions..................................... (0.86) (0.86) -- --
------------- ------------- ------- -------
Net asset value, end of period.......................... $ 13.61 $ 17.68 $ 13.71 $ 13.72
------------- ------------- ------- -------
------------- ------------- ------- -------
Total Return............................................ (18.81)% 37.14 % 37.15 % (14.20)%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver............ 1.38 % 1.50 % 1.49 % 1.15 %(c)
Expenses, excluding reimbursement/waiver............ 1.38 % 1.50 % 1.98 % 1.23 %(c)
Net investment income (loss), including
reimbursement/waiver............................... (0.34)% (0.56)% (0.40)% 0.08 %(c)
Average commission rate (d)............................. $ 0.0539 $ 0.0560 $ 0.0467 $ 0.0539
Portfolio turnover rate................................. 57.32 % 98.91 % 111.18 % 57.32 %
Net assets at end of period (000's omitted)............. $ 130,929 $ 144,001 $ 45,385 $ 48,246
</TABLE>
(a)See Note 1 of Notes to Financial Statements for commencement of
operations.
(b) Less than $0.01 per share.
(c) Annualized.
(d) Amount represents the average commission per share, paid to
brokers, on the purchase and sale of equity securities on which
commissions are charged.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
17
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
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 PERIOD INDICATED.
<TABLE>
<CAPTION>
LARGE CAP VALUE
FUND VALUE FUND
--------------- ---------------
INVESTOR SHARES INVESTOR SHARES
--------------- ---------------
PERIOD ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 (a) 1998 (a)
--------------- ---------------
<S> <C> <C>
Net asset value, beginning of period................................................. $ 10.00 $ 10.00
------- -------
Investment Operations
Net investment income............................................................ 0.01 0.03
Net realized and unrealized gain (loss) on investments........................... 0.01 (0.70)
------- -------
Total from Investment Operations..................................................... 0.02 (0.67)
------- -------
Distributions from
Net investment income............................................................ -- --
Net realized gain on investments................................................. -- --
------- -------
Total distributions.................................................................. -- --
------- -------
Net asset value, end of period....................................................... $ 10.02 $ 9.33
------- -------
------- -------
Total Return......................................................................... 0.20% (6.70)%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver......................................... 1.50%(b) 1.50%(b)
Expenses, excluding reimbursement/waiver......................................... 3.95%(b) 3.22%(b)
Net investment income (loss), including reimbursement/waiver..................... 1.78%(b) 0.38%(b)
Average commission rate (c).......................................................... $ 0.0592 $ 0.0522
Portfolio turnover rate.............................................................. 6.98% 125.73%
Net assets at end of period (000's omitted).......................................... $ 10,668 $ 7,116
</TABLE>
(a) See Note 1 of Notes to Financial Statements for commencement of
operations.
(b) Annualized.
(c) Amount represents the average commission per share, paid to
brokers, on the purchase and sale of portfolio securities.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
18
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION
The CRM Funds (the "Trust") is an open-end management investment company
organized as a Delaware business trust. The Trust currently has four active
diversified investment portfolios. These financial statements relate to Small
Cap Value Fund, Large Cap Value Fund and Value Fund (each a "Fund" and
collectively the "Funds"), each of which issues Investor Shares, with the
exception of Small Cap Value Fund, which, in addition, issues Institutional
Shares. The Trust Instrument of the Trust authorizes each Fund to issue an
unlimited number of shares of beneficial interest of $0.001 par value. The
classes of each Fund and their date of commencement of operations are as
follows:
<TABLE>
<S> <C>
Small Cap Value Fund (Investor Shares)................................ October 1, 1995
Small Cap Value Fund (Institutional Shares)........................... January 27, 1998
Large Cap Value Fund (Investor Shares)................................ August 25, 1998
Value Fund (Investor Shares).......................................... January 6, 1998
</TABLE>
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, 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 results could differ from those
estimates.
The following represent significant accounting policies of the Funds:
SECURITY VALUATION--Securities, other than short-term securities, held by
the Funds 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 Funds are recorded on the ex-dividend
date.
DISTRIBUTIONS TO SHAREHOLDERS--Distributions to shareholders from net
investment income are declared and paid at least annually by all Funds
except Large Cap Value Fund, for which dividends representing the net
- --------------------------------------------------------------------------------
THE CRM FUNDS
19
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
investment income are declared and paid at least quarterly. Distributions to
shareholders from 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 Funds in connection with their
organization and registration of shares prior to June 30, 1998, have been
capitalized and are being amortized using the straight-line method over a
five year period beginning with the commencement of the Funds' operations.
FEDERAL TAXES--Each 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 substantially all
of its net investment income, capital gains and certain other amounts, if
any, each Fund will not be subject to a federal excise tax. Since the Funds
intend 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 Funds is Cramer Rosenthal McGlynn, LLC (the
"Adviser"). The Adviser receives monthly, from each Fund, an advisory fee at an
annual rate of 0.75% of the average daily net assets of each Fund. Prior to
January 1, 1998, the Trust had an Investment Advisory Agreement with CRM
Advisors, LLC, an affiliate of Cramer, Rosenthal, McGlynn, Inc., that was
identical in all material terms including fees.
On behalf of each Fund, the Trust has entered into an Administration Agreement
with Forum Administrative Services, LLC ("FAdS"). For its services, FAdS
receives a fee computed and paid monthly at an annual rate of 0.15% of the
average daily net assets of each Fund for the first $50 million in assets, 0.10%
for the next $50 million in assets and 0.05% thereafter, subject to an annual
minimum of $25,000. Prior to January 1, 1998, the Trust had an Administration
Agreement with Forum Financial Services, Inc.-Registered Trademark- ("FFSI")
pursuant to which FFSI received a monthly fee equal to the greater of an annual
rate of 0.15% of the average daily net assets of each Fund or $40,000 per year.
Forum Shareholder Services, LLC ("FSS"), an affiliate of FAdS, serves as each
Fund's transfer agent and dividend disbursing agent, for which it receives a fee
of $24,000 per year plus certain account and additional class charges. Prior to
January 1, 1998, Forum Financial Corp.-Registered Trademark- ("FFC") served as
the transfer agent and dividend disbursing agent, for which it was entitled to
receive a fee of $12,000 per year plus certain shareholder account fees.
Pursuant to a separate Distribution Agreement, FFSI acts as distributor of the
Funds' shares and is not paid any fee for its distribution services.
- --------------------------------------------------------------------------------
THE CRM FUNDS
20
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Effective January 1, 1998, Forum Accounting Services, LLC ("FAcS") serves as the
fund accountant for each Fund. For these services, FAcS receives a fee of
$36,000 per year per Fund, plus certain class charges and certain amounts based
upon the number and types of portfolio transactions within each Fund. Prior to
January 1, 1998, FFC served as the fund accountant of the Trust pursuant to the
same terms and compensation as FAcS.
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, the Trust
pays shareholder servicing agents, including the Adviser, up to 0.25% of the
average daily net assets of each Fund attributable to accounts for which the
agent provides shareholder services.
Each Trustee, who was not an "affiliated person" as defined in the Act, received
from the Fund an annual fee of $10,000 plus out of pocket expenses.
4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Adviser and FAdS have voluntarily waived a portion of their fees and assumed
certain expenses of the Funds. For the period ended September 30, 1998, fees
waived and expenses reimbursed were as follows:
<TABLE>
<CAPTION>
SHAREHOLDER EXPENSES EXPENSES
INVESTMENT SERVICES TRANSFER REIMBURSED REIMBURSED
ADVISORY FEE FEE AGENT FEE BY ADVISER BY FADS TOTAL
------------ ----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C>
Small Cap Value Fund--
Institutional Shares.......... $ -- $ -- $ -- $ -- $ 17,897 $ 17,897
Large Cap Value Fund-- Investor
Shares........................ 6,174 2,058 823 11,082 897 20,137
Value Fund--Investor Shares.... 39,465 13,155 5,262 8,941 23,798 90,621
</TABLE>
5. SECURITIES TRANSACTIONS
The cost of securities purchased and the proceeds from sales of securities,
other than short-term securities, for the period ended September 30, 1998 were
as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS FROM
PURCHASES SALES
-------------- --------------
<S> <C> <C>
Small Cap Value Fund........................................ $ 172,846,815 $ 102,512,866
Large Cap Value Fund........................................ 6,017,745 303,171
Value Fund.................................................. 14,344,488 7,226,326
</TABLE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
21
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
For federal income tax purposes, the tax basis of investment securities owned,
the aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and net unrealized appreciation as of September 30, 1998 were as
follows:
<TABLE>
<CAPTION>
NET UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Small Cap Value Fund........ $ 196,769,845 $ 18,839,973 $ (33,131,083) $ (14,291,110)
Large Cap Value Fund........ 10,887,293 250,826 (194,346) 56,480
Value Fund.................. 8,486,553 183,532 (1,351,633) (1,168,101)
</TABLE>
6. FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
INCOME DIVIDENDS -- All the income and any short term capital gain dividends
paid by each Fund were ordinary income for federal income tax purposes. The
percentage of qualifying dividends eligible for the corporate dividends received
deduction was 53.33% and 100.00% for Large Cap Value Fund and Value Fund,
respectively.
CAPITAL GAIN DIVIDENDS -- Small Cap Value Fund declared long term capital gain
dividends and short term capital gain dividends of $2,698,138 and $5,027,583,
respectively, for the fiscal year ended September 30, 1998.
- --------------------------------------------------------------------------------
THE CRM FUNDS
22
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHAREHOLDERS AND BOARD OF TRUSTEES
THE CRM FUNDS
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of CRM Small Cap Value Fund, CRM Large Cap Value
Fund and CRM Value Fund, three of the Series constituting The CRM Funds, as of
September 30, 1998, the related statements of operations, statements of changes
in net assets and the financial highlights for each of the periods then ended as
indicated therein. 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, 1998 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, CRM Large Cap Value Fund and CRM Value Fund at September
30, 1998 and the results of their operations, changes in net assets and the
financial highlights for each of the periods indicated therein, in conformity
with generally accepted accounting principles.
/s/ Ernst & Young LLP
White Plains, New York
November 6, 1998
- --------------------------------------------------------------------------------
THE CRM FUNDS
23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES
John E. Appelt
Fred M. Filoon
Louis Klein, Jr.
Clement C. Moore, II
INVESTMENT ADVISER
Cramer Rosenthal McGlynn, LLC
707 Westchester Avenue
White Plains, New York 10604
ADMINISTRATOR
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
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
HTTP://WWW.CRMFUNDS.COM
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY TO
SHAREHOLDERS AND TO OTHERS WHO HAVE RECEIVED CURRENT PROSPECTUSES OF THE CRM
FUNDS.
[RECYCLE LOGO] This report has been printed on recycled
paper.-------------------------------------------
- -------------------------------------------
CRM
FUNDS
SMALL CAP
VALUE FUND
LARGE CAP
VALUE FUND
VALUE FUND
Investor Shares
ANNUAL REPORT
September 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
CRM FUNDS
- ------------------------------------
- ------------------------------------
FUND INFORMATION: SHAREHOLDER ACCOUNT INFORMATION:
Forum Financial Services, Inc. Forum Shareholder Services, LLC
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, 1998
- --------------------------------------------------------------------------------
Dear Fellow Shareholder:
Compared to market behavior for most of the last decade, this past year was
marked by record volatility, leaving investors feeling they've been on a rocky
ride, both in terms of daily and monthly fluctuations in global stock prices. As
the market twisted and turned, the larger, more blue chip issues continued to
significantly outpace the smaller stocks. This is evident in the S&P 500's
advance of 9.06% and the Russell 2000 Index's decline of 18.89% for the period
from October 1, 1997 through September 30, 1998.
By the end of the period, the spread between large cap stock performance and
small cap stock performance stood at its widest since inception of these indices
in 1979. This is a trend that we at CRM believe must correct and reverse itself
over the next market cycle, swinging the pendulum towards small and medium size
companies. During such a swing, our Value approach to investing will position
the CRM Funds to take optimum advantage of this capital markets shift.
Although the situation is challenging to many portfolio managers, the increased
volatility in the marketplace gives Value investors opportunities on which we
can capitalize. To justify this optimism, let us summarize the salient points of
our Value investment strategies:
- we begin by the early identification of dynamic change in a company's
operations
- we focus on change that will improve a company's stock valuation
- we conduct multi-level evaluations based on extensive research
- we select stocks that have a greater upside potential than risk over an 18
to 24 month period
- we strive to reduce downside risks while offering potential for capital
appreciation
We hope that you view our track record since the inception of the first CRM Fund
as a vindication of the Value approach to investing. Of course, it is our duty
to remind you that past performance is no guarantee of future return.
The CRM Funds have accumulated approximately $200 million in assets since the
inception of our first fund in October 1995--a remarkable success that proves
that the investment community, from institutions to individual shareholders, has
confidence in our Value approach to investing.
Our overall plan was to develop a family of funds that capitalized on investment
strengths our firm has employed for over 25 years. As you know from our history,
we have used the Value approach consistently,
<PAGE>
reinforcing it with our team decision-making process. As a result, our CRM Funds
offer you, our shareholder, the benefits of the same approach used successfully
with our individually managed clients, at the same time as we offer you exposure
to more varied segments of the stock market.
If you have any questions or would like additional information about our no-load
CRM Funds, including a prospectus, please call us at (800) CRM-2883. Read it
carefully before you invest or send money. We thank you for your investment and
look forward to helping you reach your investment goals.
Sincerely,
The CRM Funds Cramer Rosenthal McGlynn, LLC
<TABLE>
<S> <C> <C>
/s/ Fred M. Filoon /s/ Ronald H. McGlynn /s/ Jay B. Abramson
Fred M. Filoon Ronald H. McGlynn Jay B. Abramson
President President Executive Vice President
</TABLE>
2
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
AN INTERVIEW WITH RONALD MCGLYNN, JAY ABRAMSON AND SCOTT CHER
PORTFOLIO MANAGERS FOR THE CRM SMALL CAP VALUE FUND ("FUND")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q. SCOTT, HOW DID THE SMALL CAP VALUE FUND PERFORM?
Since inception on January 2, 1998, the Fund's Institutional Shares had a
cumulative total return of -14.20%, compared to a -16.63% return for the Lipper
Small Cap Funds Average and -16.05% for the Russell 2000 Index.
Q. WHAT WAS BEHIND THIS PERFORMANCE?
The market was propelled this year by the stocks of the very largest, blue-chip,
companies and by those with the highest P/E ratios. Given our style of favoring
companies that are overlooked, out-of-favor and typically with low P/E ratios,
we were somewhat out of synch with the current market momentum. I believe that
our very disciplined process of buying and selling securities led the Fund to
outperform the Russell 2000, as measured since inception. This was during a time
when small cap stocks in general trailed large cap stocks significantly.
Q. RON, WILL YOU EXPLAIN YOUR INVESTMENT STRATEGY?
Sure. First, we search for companies undergoing some significant change, whether
it's change in their products, management or the way they do business. These
companies are often intrinsically undervalued or simply misunderstood by the
investment community. Then our team examines every aspect of a company to
determine why it is selling at what we consider to be substantially below its
real worth. We weigh the many reasons companies may be selling for less than
their real worth: companies may be early in their investment life cycle, don't
have the track record, or don't have widespread Wall Street coverage. Based on
this research, we make our investment decisions -- that is our Value approach to
buying companies.
Q. IS THAT THE WHOLE STORY?
That's about half of the process. The other half, which is equally important, is
following a very disciplined sale criteria. When we buy a stock, we set target
prices for where we believe the stock should be priced within a certain time
period. When the stock reaches our target price, we sell. We monitor our
holdings daily, but we don't change our target price unless there is a
significant change in the stock's fundamentals.
Q. JAY, WHAT IS YOUR OUTLOOK FOR THE NEXT YEAR?
As we enter the last quarter of this calendar year, the high P/E growth stocks
continue to outperform Value stocks. Valuation levels for the overall market,
and especially for the large capitalization growth stocks, are at historic
peaks. More importantly, however, is the very distinct difference in performance
across the various market capitalization of the market. The market is cyclical
and history tells us that Value stocks, and small cap Value stocks in
particular, are overdue for a period of outperformance. Regardless of the macro
events, however, we feel that our Fund is comprised of good companies selling at
unrealistically low valuation levels. And if there is one thing we at CRM have
learned, it is the importance of sticking to our investment style -- which is
summed up best in our Fund's name, Small Cap Value Fund.
THE OPINIONS EXPRESSED IN THIS INTERVIEW REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH SEPTEMBER 30, 1998. THE MANAGERS' OPINIONS ARE SUBJECT TO CHANGE AT
ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
3
<PAGE>
- --------------------------------------------------------------------------------
CRM MID CAP VALUE FUND
AN INTERVIEW WITH RONALD MCGLYNN, JAY ABRAMSON AND MICHAEL PROBER
PORTFOLIO MANAGERS FOR THE CRM MID CAP VALUE FUND ("FUND")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Q. MICHAEL, HOW DID THE FUND PERFORM?
The cumulative total return of the Fund's Institutional Shares since inception
on January 2nd of this year through September 30, 1998 is -3.30%, compared to a
- -7.93% return for the Lipper Mid Cap Funds Average and -8.24% for the Russell
MidCap Value Index.
Q. HOW DID THIS PERFORMANCE OVER THE PERIOD COMPARE TO YOUR ORIGINAL
EXPECTATIONS?
Nine months is too short a period on which to measure any expectations and
certainly too short to compare the Fund's performance to the overall market.
Over a market cycle, however, we expect to outperform the overall market and our
specific benchmark.
Q. RON, WHY DID CRM START A MID CAP FUND?
As we mentioned in our cover letter to shareholders, we wanted to develop a
family of funds that capitalized on our firm's investment strengths that have
been developed over 25 years. We started three years ago with a single fund
emphasizing small cap companies; earlier this year we added a Mid Cap Value and
Value. A few months ago we rounded out our product line with the Large Cap Value
Fund. The impetus behind this diversification came from our shareholders, who
told us they wanted greater exposure to more varied segments of the stock
market.
Q. IS MANAGING A MID CAP PRODUCT NEW TO CRM?
No, not at all. In fact, our firm has managed investments in small, medium and
large capitalization companies for over 25 years. Some of us have called our
strategy a "smidcap" Value style -- not all small, not all mid, but smid. In
addition to our CRM Funds, we manage (as of September 30, 1998) over $3.6
billion for institutions, pension plans, endowments, foundations, and
institutions, as well as family trusts, estates and individuals.
Q. JAY, HOW IS THE FUND MANAGED?
In much the same way all our Funds are managed. First, we are Value investors,
and our Value philosophy permeates our approach to every product we manage,
including the funds. Our buy and sell criteria are the same for all funds, and
the only real difference is the universe of companies from which we buy. For the
Small Cap Value Fund, our universe is companies with market capitalizations of
less than $1 billion. For Mid Cap Value, the universe is companies with market
capitalizations of between $1 billion and $10 billion; Large Cap Value is
greater than $10 billion; and Value is all market capitalizations.
Q. WHAT IS THE OUTLOOK FOR VALUE INVESTING?
We try not to predict which particular style will be in favor with investors.
Rather, as Ron outlined earlier, we stick to our philosophy of Value investing.
It's true that over the last eighteen months or so the large-cap, growth
investors have done better than the small and mid cap Value investors. But we
continue to look for good companies that are underappreciated and will do well
in all types of market conditions.
THE OPINIONS EXPRESSED IN THIS INTERVIEW REFLECT THOSE OF THE PORTFOLIO MANAGERS
ONLY THROUGH SEPTEMBER 30, 1998. THE MANAGERS' OPINIONS ARE SUBJECT TO CHANGE AT
ANY TIME BASED ON MARKET AND OTHER CONDITIONS.
4
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following information compares a change in value of a $10,000 investment in
the Institutional Shares of the Small Cap Value Fund ("Fund") with the
performance of the Russell 2000 Index since inception (1/2/98). The Russell 2000
is an unmanaged capitalization weighted index of 2000 small capitalization U.S.
companies and reflects the reinvestment of dividends. 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 INSTITUTIONAL SHARES RUSSELL 2000 INDEX
<S> <C> <C>
12/31/97 $10,000.00 $10,000.00
1/31/98 $9,944.38 $9,847.70
2/28/98 $10,920.89 $10,586.11
3/31/98 $11,606.92 $11,030.94
4/30/98 $11,854.14 $11,091.53
5/31/98 $11,359.70 $10,496.47
6/30/98 $10,982.69 $10,526.51
7/31/98 $10,129.79 $9,666.92
8/31/98 $7,972.81 $7,792.50
9/30/98 $8,479.60 $8,395.44
INVESTMENT VALUE ON 9/30/98
CRM Small Cap Value Fund Institutional Shares $8,480
Russell 2000 Index $8,395
CUMULATIVE TOTAL RETURN
SINCE INCEPTION ON 1/2/98
CRM Small Cap Value Fund Institutional Shares (14.20%)
Russell 2000 Index (16.05%)
</TABLE>
The Fund is professionally managed while the index is unmanaged and is not
available for investment. Total return would have been lower had certain fees
and expenses not been voluntarily waived and/or reimbursed.
- --------------------------------------------------------------------------------
THE CRM FUNDS
5
<PAGE>
- --------------------------------------------------------------------------------
CRM MID CAP VALUE FUND
COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The following information compares a change in value of a $10,000 investment in
the Institutional Shares of the CRM Mid Cap Value Fund ("Fund") with the
performance of the Russell Mid Cap Index since inception (1/2/98). The Russell
Mid Cap Index measures the performance of 800 of the smallest securities in the
Russell 1000 Index, which is an unmanaged capitalization weighted index of 1000
large capitalization U.S. companies and reflects reinvestment of dividends. 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 MID CAP VALUE FUND VS RUSSELL MID CAP INDEX
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
CRM MID CAP VALUE FUND INSTITUTIONAL SHARES RUSSELL MID CAP INDEX
<S> <C> <C>
12/31/97 $10,000.00 $10,000.00
1/31/98 $10,270.00 $9,801.80
2/28/98 $10,960.00 $10,553.13
3/31/98 $11,470.00 $11,039.71
4/30/98 $11,480.00 $11,055.36
5/31/98 $11,260.00 $10,696.62
6/30/98 $10,970.00 $10,828.63
7/31/98 $10,520.00 $10,305.82
8/31/98 $8,940.00 $8,643.49
9/30/98 $9,670.00 $9,175.98
INVESTMENT VALUE ON 9/30/98
CRM Mid Cap Value Fund Institutional Shares $9,670
Russell Mid Cap Index $9,176
CUMULATIVE TOTAL RETURN
SINCE INCEPTION ON 1/2/98
CRM Mid Cap Value Fund Institutional Shares (3.30%)
Russell Mid Cap Index (8.24%)
</TABLE>
The Fund is professionally managed while the index is unmanaged and is not
available for investment. Total return would have been lower had certain fees
and expenses not been voluntarily waived and/or reimbursed.
- --------------------------------------------------------------------------------
THE CRM FUNDS
6
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCK (84.8%)
AUTOMOTIVE PARTS AND EQUIPMENT (0.8%)
105,000 Safety Components International, Inc.*............... $ 1,391,250
-------------
BANKING AND FINANCIAL (4.8%)
174,000 Golden State Bancorp, Inc.*.......................... 3,455,657
266,700 PBOC Holdings, Inc.*................................. 2,933,700
126,000 Pilgrim America Capital Corp.*....................... 2,409,750
-------------
8,799,107
-------------
BUILDING AND CONSTRUCTION (3.1%)
235,600 Morrison Knudsen Corp.*.............................. 2,532,700
257,200 Walter Industries, Inc.*............................. 3,198,927
-------------
5,731,627
-------------
BUILDING MATERIALS (1.0%)
208,500 Dal-Tile International, Inc.*........................ 1,889,530
-------------
BUSINESS SERVICES (7.3%)
137,000 BTG, Inc.*........................................... 924,750
505,300 Caribiner International, Inc.*....................... 4,295,050
350,700 LGS Group, Inc.*..................................... 2,883,735
169,800 World Color Press, Inc.*............................. 5,263,800
-------------
13,367,335
-------------
COMMUNICATIONS (6.9%)
262,300 COMSAT Corp.......................................... 9,246,075
100,000 Young Broadcasting Corp.*............................ 3,400,000
-------------
12,646,075
-------------
CONSUMER CYCLICALS (2.3%)
480,000 Loews Cineplex Entertainment*........................ 4,140,000
-------------
CONSUMER PRODUCTS (5.5%)
195,300 Gibson Greetings, Inc.*.............................. 3,967,030
129,300 Nutramax Products, Inc.*............................. 743,475
223,876 United Stationers, Inc.*............................. 5,345,040
-------------
10,055,545
-------------
DIVERSIFIED INDUSTRIES (0.8%)
70,000 Elsag Bailey Process Automation N.V*................. 1,474,375
-------------
<CAPTION>
FACE
AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
<C> <S> <C>
ELECTRONIC EQUIPMENT AND COMPONENTS (3.3%)
234,600 BMC Industries, Inc.................................. $ 1,407,600
238,000 CommScope, Inc.*..................................... 2,751,875
245,800 Glenayre Technologies, Inc.*......................... 1,782,050
-------------
5,941,525
-------------
ENERGY EXPLORATION AND DISTRIBUTION (8.6%)
634,500 EEX Corp.*........................................... 3,093,190
160,000 Equitable Resources, Inc............................. 4,070,000
101,600 Getty Properties Corp................................ 1,422,400
184,400 Nuevo Energy Co.*.................................... 3,895,450
245,700 Ocean Energy, Inc.*.................................. 3,224,815
-------------
15,705,855
-------------
FINANCIAL SERVICES (2.7%)
331,800 Richmond County Financial Corp....................... 4,977,000
-------------
HEALTH CARE (4.7%)
101,600 Acuson Corp.*........................................ 1,733,550
147,400 Bindley Western Industries, Inc...................... 4,864,200
7,900 CONMED Corp.*........................................ 180,710
94,500 Integrated Health Services, Inc...................... 1,588,780
52,166 Medical Resources, Inc.*............................. 133,675
-------------
8,500,915
-------------
INDUSTRIAL AND COMMERCIAL MACHINERY (1.2%)
1,400 EG&G, Inc............................................ 31,675
151,400 Hussmann International, Inc.......................... 2,147,990
-------------
2,179,665
-------------
INDUSTRIAL TECHNOLOGIES (4.1%)
1,069,200 Safety-Kleen Corp.*.................................. 3,541,725
239,500 UNOVA, Inc.*......................................... 3,936,780
-------------
7,478,505
-------------
METAL INDUSTRIES (3.9%)
224,000 Oregon Steel Mills, Inc.............................. 2,632,000
75,000 Schnitzer Steel Industries, Inc...................... 1,125,000
254,300 WHX Corp.*........................................... 3,274,110
-------------
7,031,110
-------------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
7
<PAGE>
- --------------------------------------------------------------------------------
CRM SMALL CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
REAL ESTATE (4.3%)
<C> <S> <C>
208,900 Insignia Financial Group, Inc.-- Class A*............ $ 2,062,885
139,267 Insignia/ESG Holdings, Inc.*......................... 1,601,570
196,600 SL Green Realty Corp................................. 4,128,600
-------------
7,793,055
-------------
RETAIL (7.0%)
105,000 Fred Meyer, Inc.*.................................... 4,081,875
226,200 Shopko Stores, Inc.*................................. 7,351,500
236,800 Sunglass Hut International, Inc.*.................... 1,361,600
-------------
12,794,975
-------------
TECHNOLOGY (8.0%)
187,500 ChoicePoint, Inc.*................................... 9,023,440
197,600 GTECH Holdings Corp.*................................ 5,248,750
49,700 Silicon Valley Group*................................ 397,600
-------------
14,669,790
-------------
TRANSPORTATION EQUIPMENT (4.0%)
174,800 Gencorp, Inc......................................... 3,364,900
222,500 Mascotech, Inc....................................... 4,005,000
-------------
7,369,900
-------------
UTILITIES (0.5%)
46,400 Washington Water Power Co............................ 919,300
-------------
TOTAL COMMON STOCK (COST $169,120,073)............................. $ 154,856,439
-------------
SHORT-TERM HOLDINGS (15.2%)
CASH MANAGEMENT ACCOUNTS (0.1%)
148,589 Forum Daily Assets Cash Fund (Cost $148,589)......... 148,589
-------------
<CAPTION>
FACE AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
<C> <S> <C>
COMMERCIAL PAPER (7.4%)
1,500,000 Dupont Corp., 5.30%, 10/9/98......................... $ 1,498,233
1,000,000 Ford Motor Credit Co., 5.32%, 10/2/98................ 999,852
1,500,000 Ford Motor Credit Co., 5.22%, 10/6/98................ 1,498,913
2,000,000 GE Capital Corporation, 5.31%, 10/5/98............... 1,998,822
2,500,000 GMAC, 5.31%, 10/2/98................................. 2,499,631
1,000,000 Georgia Power Company, 5.37%, 10/5/98................ 999,403
1,000,000 IBM Credit Corp., 5.35%, 10/7/98..................... 999,108
1,500,000 Lucent Technologies, Inc., 5.45%, 10/1/98............ 1,500,000
500,000 Merrill Lynch, 5.50%, 10/1/98........................ 500,000
500,000 Merrill Lynch, 5.50%, 11/3/98........................ 497,479
500,000 Merrill Lynch, 5.50%, 1/4/99......................... 492,744
-------------
TOTAL COMMERCIAL PAPER (COST $13,484,185).......................... $ 13,484,185
-------------
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (4.4%)
2,000,000 5.47%, 10/2/98....................................... 1,999,701
2,500,000 5.18%, 10/5/98....................................... 2,498,583
3,500,000 5.18%, 10/9/98....................................... 3,496,033
-------------
TOTAL FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (COST $7,994,317)................................... $ 7,994,317
-------------
U.S. TREASURY BILLS (3.3%)
3,500,000 3.91%, 10/1/98....................................... 3,500,000
2,500,000 5.05%, 10/15/98...................................... 2,495,205
-------------
TOTAL U.S. TREASURY BILLS (COST $5,995,205)........................ $ 5,995,205
-------------
SHORT-TERM HOLDINGS (COST $27,622,296)............................. $ 27,622,296
-------------
TOTAL INVESTMENTS (100.0%) (COST $196,742,369)..................... $ 182,478,735
-------------
-------------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
8
<PAGE>
- --------------------------------------------------------------------------------
CRM MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
<C> <S> <C>
COMMON STOCK (85.7%)
AUTOMOTIVE PARTS AND EQUIPMENT (4.2%)
7,500 Safety Components International, Inc.*............... $ 99,375
4,200 Snap-On, Inc......................................... 129,414
-------------
228,789
-------------
BANKING AND FINANCIAL (11.1%)
2,600 Allmerica Financial Corp............................. 155,025
4,900 Golden State Bancorp, Inc.*.......................... 97,694
3,200 Golden State Bancorp Warrants*....................... 13,500
10,600 John Hancock Bank and Thrift Opportunity Fund........ 112,625
8,400 Sovereign Bancorp, Inc............................... 111,825
3,300 Torchmark Corp....................................... 118,590
-------------
609,259
-------------
COMMUNICATIONS (8.0%)
9,100 Cincinnati Bell, Inc................................. 236,600
5,600 COMSAT Corp.......................................... 197,400
-------------
434,000
-------------
CONSUMER PRODUCTS (2.8%)
6,400 United Stationers, Inc.*............................. 152,800
-------------
CONTAINERS AND PACKAGING (2.7%)
5,900 Owens-Illinois, Inc.*................................ 147,500
-------------
ELECTRONIC EQUIPMENT AND COMPONENTS (3.6%)
3,500 Raychem Corp......................................... 85,314
2,900 Thomas & Betts Corp.................................. 110,382
-------------
195,696
-------------
ENERGY (7.0%)
3,300 Columbia Energy Group................................ 193,460
12,000 USEC, Inc.*.......................................... 185,250
-------------
378,710
-------------
ENERGY EXPLORATION AND DISTRIBUTION (7.4%)
28,400 EEX Corp.*........................................... 138,453
4,700 Equitable Resources, Inc............................. 119,557
11,010 Ocean Energy, Inc.*.................................. 144,507
-------------
402,517
-------------
<CAPTION>
FACE AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
<C> <S> <C>
HEALTH CARE (6.2%)
6,200 Quorum Health Group, Inc.*........................... $ 100,750
1,800 Perkin-Elmer Corp.................................... 123,639
2,000 Wellpoint Health Networks Inc........................ 112,126
-------------
336,515
-------------
INDUSTRIAL AND COMMERCIAL MACHINERY (5.4%)
3,500 Applied Power Inc.................................... 95,595
6,300 Hussmann International, Inc.......................... 89,381
2,800 Ingersoll-Rand Co.................................... 106,226
-------------
291,202
-------------
INDUSTRIAL TECHNOLOGIES (3.7%)
31,500 Safety-Kleen Corp.*.................................. 104,345
5,800 UNOVA, Inc.*......................................... 95,339
-------------
199,684
-------------
REAL ESTATE (3.2%)
3,360 New Plan Excel Realty Trust.......................... 78,331
5,100 TrizecHahn Corp...................................... 95,625
-------------
173,956
-------------
RETAIL (3.4%)
2,600 Fred Meyer, Inc.*.................................... 101,075
7,100 KMart Corp.*......................................... 84,755
-------------
185,830
-------------
TECHNOLOGY (8.3%)
2,900 ChoicePoint Inc.*.................................... 139,560
6,200 General Instrument Corp.*............................ 134,075
6,800 GTECH Holdings Corp.*................................ 180,625
-------------
454,260
-------------
UTILITIES (8.7%)
2,640 MarketSpan Corp...................................... 75,735
6,100 Montana Power Co..................................... 272,590
4,812 Sempra Energy........................................ 125,410
-------------
473,735
-------------
TOTAL COMMON STOCK (COST $5,351,861)............................... $ 4,664,453
-------------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
9
<PAGE>
- --------------------------------------------------------------------------------
CRM MID CAP VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FACE AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
<C> <S> <C>
SHORT-TERM HOLDINGS (14.3%)
CASH MANAGEMENT ACCOUNTS (5.1%)
277,540 Forum Daily Assets Cash Fund......................... $ 277,540
277 Forum Daily Assets Government Obligations Fund....... 277
-------------
TOTAL CASH MANAGEMENT ACCOUNTS
(COST $277,817)................................................... $ 277,817
-------------
COMMERCIAL PAPER (5.6%)
100,000 Ford Motor Credit Co., 5.32%, 10/2/98................ 99,985
100,000 General Electric Capital Corp., 5.30%, 10/5/98....... 99,939
100,000 Lucent Technologies, Inc., 5.45%, 10/1/98............ 100,000
-------------
TOTAL COMMERCIAL PAPER (COST $299,924)............................. $ 299,924
-------------
<CAPTION>
FACE AMOUNT/ SECURITY
SHARES DESCRIPTION VALUE
- ------------ ----------------------------------------------------- -------------
<C> <S> <C>
FEDERAL HOME LOAN MORTGAGE CORPORATION
DISCOUNT NOTES (1.8%)
100,000 5.18%, 10/9/98 (Cost $99,887)........................ $ 99,887
-------------
TREASURY BILLS (1.8%)
100,000 4.00%, 10/1/98 (Cost $100,000)....................... 100,000
-------------
TOTAL SHORT-TERM HOLDINGS (COST $777,628).......................... $ 777,628
-------------
TOTAL INVESTMENTS (100.0%) (COST $6,129,489)....................... $ 5,442,081
-------------
-------------
</TABLE>
* Non-income producing security.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
10
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP MID CAP VALUE
VALUE FUND FUND
------------- -------------
<S> <C> <C>
ASSETS:
Investments (Note 2)
Investments at cost......................... $ 196,742,369 $ 6,129,489
Net unrealized depreciation................. (14,263,634) (687,408)
------------- -------------
Total investments at value.................... 182,478,735 5,442,081
Cash.......................................... -- --
Receivable from Advisor....................... -- 78,197
Receivable for securities sold................ 2,974,895 --
Receivable for Fund shares sold............... 89,622 --
Interest, dividends and other receivables..... 110,052 5,026
Organization costs, net....................... 34,764 25,581
------------- -------------
Total assets...................................... 185,688,068 5,550,885
------------- -------------
------------- -------------
LIABILITIES:
Dividends payable............................. 235 --
Payable for securities purchased.............. 6,204,726 99,887
Payable for Fund shares redeemed.............. 38,416 --
Payable to Advisor............................ 133,375 --
Payable to Administrator...................... 13,295 2,083
Payable to Custodian.......................... 2,653 830
Accrued fees and other expenses............... 120,341 109,803
------------- -------------
Total liabilities................................. 6,513,041 212,603
------------- -------------
NET ASSETS........................................ $ 179,175,027 $ 5,338,282
------------- -------------
------------- -------------
COMPONENTS OF NET ASSETS:
Paid in capital............................... $ 197,659,652 $ 5,969,486
Undistributed net investment income........... -- 28,981
Net unrealized depreciation................... (14,263,634) (687,408)
Accumulated undistributed net realized gain
(loss)...................................... (4,220,991) 27,223
------------- -------------
NET ASSETS........................................ $ 179,175,027 $ 5,338,282
------------- -------------
------------- -------------
NET ASSETS BY SHARE CLASS
Investor Shares............................... $ 130,928,821 $ --
Institutional Shares.......................... 48,246,206 5,338,282
------------- -------------
NET ASSETS.................................... $ 179,175,027 $ 5,338,282
------------- -------------
------------- -------------
SHARES OF BENEFICIAL INTEREST OUTSTANDING
Investor Shares............................... 9,617,646 --
Institutional Shares.......................... 3,516,391 552,149
------------- -------------
------------- -------------
NET ASSET VALUE (OFFERING AND REDEMPTION PRICE)
PER SHARE
Investor Shares............................... $ 13.61 $ --
Institutional Shares.......................... 13.72 9.67
------------- -------------
------------- -------------
</TABLE>
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
11
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP VALUE
FUND MID CAP VALUE FUND
------------------ ----------------------
YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30,
1998 1998 (a)
------------------ ----------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividend income............................... $ 1,132,104 $ 43,729
Interest income............................... 904,574 25,038
------------------ ----------
Total investment income........................... 2,036,678 68,767
------------------ ----------
EXPENSES:
Investment advisory fees...................... 1,434,005 25,934
Shareholder services.......................... 419,344 --
Administration fees........................... 190,232 18,414
Transfer agent services....................... 202,963 20,075
Professional services......................... 96,391 18,997
Registration fees............................. 69,967 17,917
Accounting services........................... 51,000 28,516
Custody fees.................................. 28,869 5,505
Trustees fees and expenses.................... 19,235 325
Amortization of organization costs............ 17,383 4,419
Printing...................................... 36,834 2,384
Miscellaneous................................. 38,910 1,431
------------------ ----------
Total expenses.................................... 2,605,133 143,917
------------------ ----------
Expenses reimbursed and fees waived (Note
4).......................................... (17,897) (104,131)
------------------ ----------
Net expenses...................................... 2,587,236 39,786
------------------ ----------
NET INVESTMENT INCOME (LOSS)...................... (550,558) 28,981
------------------ ----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) on investments
sold........................................ (3,867,578) 27,223
Net change in unrealized depreciation......... (39,373,134) (687,408)
------------------ ----------
Net realized and unrealized loss on investments... (43,240,712) (660,185)
------------------ ----------
DECREASE IN NET ASSETS RESULTING FROM
OPERATIONS....................................... $(43,791,270) $(631,204)
------------------ ----------
------------------ ----------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for commencement of operations.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
12
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND MID CAP VALUE FUND
--------------------------------------- ------------------
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1998 (a)
------------------ ------------------ ------------------
<S> <C> <C> <C>
NET ASSETS--BEGINNING OF PERIOD................... $144,000,755 $ 45,384,710 $ 100
------------------ ------------------ ------------------
OPERATIONS:
Net investment income (loss).................. (550,558) (476,883) 28,981
Net realized gain (loss) on investments
sold........................................ (3,867,578) 9,079,299 27,223
Net change in unrealized appreciation
(depreciation).............................. (39,373,134) 20,662,630 (687,408)
------------------ ------------------ ------------------
Net increase (decrease) in net assets
resulting from operations............... (43,791,270) 29,265,046 (631,204)
------------------ ------------------ ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain on investments--Investor
Shares...................................... (7,725,721) (3,073,364) --
Return of capital--Investor Shares............ (212,312) -- --
------------------ ------------------ ------------------
Net decrease in net assets resulting from
distributions........................... (7,938,033) (3,073,364) --
------------------ ------------------ ------------------
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Investor Shares............... 86,883,053 78,761,282 --
Sale of shares--Institutional Shares.......... 64,007,466 -- 5,998,670
Reinvestment of distributions--Investor
Shares...................................... 7,442,799 3,008,999 --
Redemption of shares--Investor Shares......... (67,420,738) (9,345,918) --
Redemption of shares--Institutional Shares.... (4,009,005) -- (29,284)
------------------ ------------------ ------------------
Net increase from capital transactions.... 86,903,575 72,424,363 5,969,386
------------------ ------------------ ------------------
Net increase.............................. 35,174,272 98,616,045 5,338,182
------------------ ------------------ ------------------
NET ASSETS--END OF PERIOD......................... $179,175,027 $144,000,755 $5,338,282
------------------ ------------------ ------------------
------------------ ------------------ ------------------
Accumulated undistributed net investment income... $ -- $ -- $ 28,981
------------------ ------------------ ------------------
------------------ ------------------ ------------------
<CAPTION>
SHARES SHARES SHARES
------------------ ------------------ ------------------
<S> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Sale of shares--Investor Shares............... 5,036,141 5,232,267 --
Sale of shares--Institutional Shares.......... 3,750,486 -- 555,219
Reinvestment of distributions--Investor
Shares...................................... 473,135 221,739 --
Redemption of shares--Investor Shares......... (4,034,611) (620,752) --
Redemption of shares--Institutional Shares.... (234,095) -- (3,080)
------------------ ------------------ ------------------
Net increase in shares........................ 4,991,056 4,833,254 552,139
------------------ ------------------ ------------------
------------------ ------------------ ------------------
</TABLE>
(a) See Note 1 of Notes to Financial Statements for commencement of operations.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
13
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
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 PERIOD INDICATED.
<TABLE>
<CAPTION>
SMALL CAP VALUE FUND
-------------------------------------------------------------
INVESTOR INSTITUTIONAL
SHARES SHARES
--------------------------------------------- -------------
YEAR ENDED YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1998 1997 1996 1998 (a)
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................... $ 17.68 $ 13.71 $ 10.00 $ 15.99
------------- ------------- ------------- -------------
Investment Operations
Net investment income (loss)........................ (0.06) (0.06) (0.02) 0.01
Net realized and unrealized gain (loss) on
investments....................................... (3.15) 4.89 3.73 (2.28)
------------- ------------- ------------- -------------
Total from Investment Operations........................ (3.21) 4.83 3.71 (2.27)
------------- ------------- ------------- -------------
Distributions from
Net investment income............................... -- -- --(b) --
Net realized gain on investments.................... (0.84) (0.86) -- --
Return of capital................................... (0.02)
------------- ------------- ------------- -------------
Total distributions..................................... (0.86) (0.86) -- --
------------- ------------- ------------- -------------
Net asset value, end of period.......................... $ 13.61 $ 17.68 $ 13.71 $ 13.72
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Total Return............................................ (18.81)% 37.14% 37.15% (14.20)%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver............ 1.38% 1.50% 1.49% 1.15%(c)
Expenses, excluding reimbursement/waiver............ 1.38% 1.50% 1.98% 1.23%(c)
Net investment income (loss), including
reimbursement/ waiver............................. (0.34)% (0.56)% (0.40)% 0.08%(c)
Average commission rate (d)............................. $ 0.0539 $ 0.0560 $0.0467 $0.0539
Portfolio turnover rate................................. 57.32% 98.91% 111.18% 57.32%
Net assets at end of period (000's omitted)............. $130,929 $144,001 $45,385 $48,246
</TABLE>
(a) See Note 1 of Notes to Financial Statements for commencement of
operations.
(b) Less than $0.01 per share.
(c) Annualized.
(d) Amount represents the average commission per share, paid to
brokers, on the purchase and sale of equity securities on which
commissions are charged.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
14
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
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 PERIOD INDICATED.
<TABLE>
<CAPTION>
MID CAP VALUE FUND
----------------------
INSTITUTIONAL SHARES
----------------------
PERIOD ENDED
SEPTEMBER 30, 1998 (a)
----------------------
<S> <C>
Net asset value, beginning of period................................... $ 10.00
-------
Investment Operations
Net investment income.............................................. 0.05
Net realized and unrealized loss on investments.................... (0.38)
-------
Total from Investment Operations....................................... (0.33)
-------
Distributions from
Net investment income.............................................. --
Net realized gain on investments................................... --
-------
Total distributions.................................................... --
-------
Net asset value, end of period......................................... $ 9.67
-------
-------
Total Return........................................................... (3.30)%
Ratio/Supplementary Data:
Ratios to average net assets:
Expenses, including reimbursement/waiver........................... 1.15%(b)
Expenses, excluding reimbursement/waiver........................... 4.16%(b)
Net investment income (loss), including reimbursement/waiver....... 0.84%(b)
Average commission rate (c)............................................ $0.0566
Portfolio turnover rate................................................ 77.75%
Net assets at end of period (000's omitted)............................ $ 5,338
</TABLE>
(a) See Note 1 of Notes to Financial Statements for commencement of
operations.
(b) Annualized.
(c) Amount represents the average commission per share, paid to
brokers, on the purchase and sale of equity securities on which
commissions are charged.
- --------------------------------------------------------------------------------
SEE ACCOMPANYING NOTES. THE CRM FUNDS
15
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
1. ORGANIZATION
The CRM Funds (the "Trust") is an open-end management investment company
organized as a Delaware business trust. The Trust currently has four active
diversified investment portfolios. These financial statements relate to Small
Cap Value Fund and Mid Cap Value Fund (each a "Fund" and collectively the
"Funds"), each of which issues Institutional Shares, with the exception of Small
Cap Value Fund, which, in addition, issues Investor Shares. The Trust Instrument
of the Trust authorizes each Fund to issue an unlimited number of shares of
beneficial interest of $0.001 par value. The classes of each Fund and their date
of commencement of operations are as follows:
<TABLE>
<S> <C>
Small Cap Value Fund (Investor Shares) October 1, 1995
Small Cap Value Fund (Institutional Shares) January 27, 1998
Mid Cap Value Fund (Institutional Shares) January 6, 1998
</TABLE>
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, 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 results could differ from those
estimates.
The following represent significant accounting policies of the Funds:
SECURITY VALUATION -- Securities, other than short-term securities, held by
the Funds 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 Funds are recorded on the ex-dividend
date.
DISTRIBUTIONS TO SHAREHOLDER -- 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.
- --------------------------------------------------------------------------------
THE CRM FUNDS
16
<PAGE>
- --------------------------------------------------------------------------------
THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ORGANIZATION COSTS -- The costs incurred by the Funds in connection with
their organization and registration of shares prior to June 30, 1998, have
been capitalized and are being amortized using the straight-line method over
a five year period beginning with the commencement of the Funds' operations.
FEDERAL TAXES -- Each 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 substantially all
of its net investment income, capital gains and certain other amounts, if
any, each Fund will not be subject to a federal excise tax. Since the Funds
intend 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 Funds is Cramer Rosenthal McGlynn, LLC (the
"Adviser"). The Adviser receives monthly, from each Fund, an advisory fee at an
annual rate of 0.75% of the average daily net assets of each Fund. Prior to
January 1, 1998, the Trust had an Investment Advisory Agreement with CRM
Advisors, LLC, an affiliate of Cramer, Rosenthal, McGlynn, Inc., that was
identical in all material terms including fees.
On behalf of each Fund, the Trust has entered into an Administration Agreement
with Forum Administrative Services, LLC ("FAdS"). For its services, FAdS
receives a fee computed and paid monthly at an annual rate of 0.15% of the
average daily net assets of each Fund for the first $50 million in assets, 0.10%
for the next $50 million in assets and 0.05% thereafter, subject to an annual
minimum of $25,000. Prior to January 1, 1998, the Trust had an Administration
Agreement with Forum Financial Services, Inc.-Registered Trademark- ("FFSI")
pursuant to which FFSI received a monthly fee equal to the greater of an annual
rate of 0.15% of the average daily net assets of each Fund or $40,000 per year.
Forum Shareholder Services, LLC ("FSS"), an affiliate of FAdS, serves as each
Fund's transfer agent and dividend disbursing agent, for which it receives a fee
of $24,000 per year plus certain account and additional class charges. Prior to
January 1, 1998, Forum Financial Corp.-Registered Trademark- ("FFC") served as
the transfer agent and dividend disbursing agent, for which it was entitled to
receive a fee of $12,000 per year plus certain shareholder account fees.
Pursuant to a separate Distribution Agreement, FFSI acts as distributor of the
Funds' shares and is not paid any fee for its distribution services.
Effective January 1, 1998, Forum Accounting Services, LLC ("FAcS") serves as the
fund accountant for each Fund. For these services, FAcS receives a fee of
$36,000 per year per Fund, plus certain class charges and certain amounts based
upon the number and types of portfolio transactions within each Fund. Prior to
January 1, 1998, FFC served as the fund accountant of the Trust pursuant to the
same terms and compensation as FAcS.
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THE CRM FUNDS
17
<PAGE>
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THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998
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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, the Trust
pays shareholder servicing agents, including the Adviser, up to 0.25% of the
average daily net assets of each Fund attributable to accounts for which the
agent provides shareholder services.
Each Trustee, who was not an "affiliated person" as defined in the Act, received
from the Fund an annual fee of $10,000 plus out of pocket expenses.
4. WAIVER OF FEES AND REIMBURSEMENT OF EXPENSES
The Adviser and FAdS have voluntarily waived a portion of their fees and assumed
certain expenses of the Funds. For the period ended September 30, 1998, fees
waived and expenses reimbursed were as follows:
<TABLE>
<CAPTION>
INVESTMENT EXPENSES EXPENSES
ADVISORY REIMBURSED REIMBURSED
FEE BY ADVISER BY FADS TOTAL
------------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Small Cap Value Fund--Institutional
Shares.................................... $ -- $ -- $ 17,897 $ 17,897
Mid Cap Value Fund--Institutional Shares... 25,934 78,197 -- 104,131
</TABLE>
5. SECURITIES TRANSACTIONS
The cost of securities purchased and the proceeds from sales of securities,
other than short-term securities, for the period ended September 30, 1998 were
as follows:
<TABLE>
<CAPTION>
COST OF PROCEEDS
PURCHASES FROM SALES
-------------- --------------
<S> <C> <C>
Small Cap Value Fund............................................ $ 172,846,815 $ 102,512,866
Mid Cap Value Fund.............................................. 8,496,343 3,171,705
</TABLE>
For federal income tax purposes, the tax basis of investment securities owned,
the aggregate gross unrealized appreciation, the aggregate gross unrealized
depreciation and net unrealized appreciation as of September 30, 1998 were as
follows:
<TABLE>
<CAPTION>
NET
UNREALIZED UNREALIZED UNREALIZED
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
-------------- ------------- -------------- --------------
<S> <C> <C> <C> <C>
Small Cap Value Fund............ $ 196,769,845 $ 18,839,973 $ (33,131,083) $ (14,291,110)
Mid Cap Value Fund.............. 6,129,489 217,086 (904,494) (687,408)
</TABLE>
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THE CRM FUNDS
18
<PAGE>
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THE CRM FUNDS
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998
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6. FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE FISCAL YEAR
INCOME DIVIDENDS -- All the income and any short term capital gain dividends
paid by each Fund were ordinary income for federal income tax purposes. The
percentage of qualifying dividends eligible for the corporate dividends received
deduction was 100.00% for Mid Cap Value Fund.
CAPITAL GAIN DIVIDENDS -- Small Cap Value Fund declared long term capital gain
dividends and short term capital gain dividends of $2,698,138 and $5,027,583,
respectively, for the fiscal year ended September 30, 1998.
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THE CRM FUNDS
19
<PAGE>
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THE CRM FUNDS
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
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SHAREHOLDERS AND BOARD OF TRUSTEES
THE CRM FUNDS
We have audited the accompanying statements of assets and liabilities, including
the schedules of investments of CRM Small Cap Value Fund and CRM Mid Cap Value
Fund, two of the Series constituting The CRM Funds, as of September 30, 1998,
the related statements of operations, statements of changes in net assets and
the financial highlights for each of the periods then ended as indicated
therein. 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, 1998 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 and CRM Mid Cap Value Fund at September 30, 1998 and the
results of their operations, changes in net assets and the financial highlights
for each of the periods indicated therein, in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
White Plains, New York
November 6, 1998
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THE CRM FUNDS
20
<PAGE>
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TRUSTEES
John E. Appelt
Fred M. Filoon
Louis Klein, Jr.
Clement C. Moore, II
INVESTMENT ADVISER
Cramer Rosenthal McGlynn, LLC
707 Westchester Avenue
White Plains, New York 10604
ADMINISTRATOR
Forum Administrative Services, LLC
Two Portland Square
Portland, Maine 04101
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
HTTP://WWW.CRMFUNDS.COM
THIS REPORT IS AUTHORIZED FOR DISTRIBUTION ONLY TO
SHAREHOLDERS AND TO OTHERS WHO HAVE RECEIVED CURRENT PROSPECTUSES OF THE CRM
FUNDS.
[RECYCLE LOGO] This report has been printed on recycled paper.
- -------------------------------------------
- -------------------------------------------
CRM
FUNDS
[LOGO]
SMALL CAP
VALUE FUND
MID CAP
VALUE FUND
Institutional Shares
ANNUAL REPORT
September 30, 1998
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