As filed with the Securities and Exchange Commission on September 8, 2003
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-08507
ICM SERIES TRUST
Two Portland Square
Portland, Maine 04101
207-879-1900
Warren J. Isabelle, President
21 Custom House Street
Suite 240
Boston, MA 02110
Date of fiscal year end: DECEMBER 31, 2003
Date of reporting period: JUNE 30, 2003
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
ICM FUNDS
ICM SERIES TRUST
----------------------
ICM/ISABELLE SMALL CAP
VALUE FUND
Semi-Annual Report
June 30, 2003
ICM/ISABELLE
SMALL CAP VALUE FUND
TABLE OF CONTENTS
SHAREHOLDER LETTER ..................... 2
PORTFOLIO OF INVESTMENTS ............... 8
STATEMENT OF ASSETS AND LIABILITIES .... 11
STATEMENT OF OPERATIONS ................ 12
STATEMENTS OF CHANGES IN NET ASSETS .... 13
FINANCIAL HIGHLIGHTS ................... 14
NOTES TO FINANCIAL STATEMENTS .......... 18
SHAREHOLDER LETTER
Dear Shareholder:
1st half 2003 - The Tale of Two Quarters
The market sang to the same tune in the first quarter of 2003 as it did during
the second half of 2002. The same drivers of the difficult markets then; a weak
economy, geopolitical fears, a looming war, high energy prices, and dismal
investor confidence - continued to dominate first quarter 2003 headlines. Market
sentiment in early March was as poor as we have ever witnessed.
And then the Iraqi war ended. With its conclusion, a huge dark cloud of negative
market sentiment was lifted from the marketplace. Investors stopped looking in
their rear view mirrors and looked forward to smoother economic roads. Stocks
took notice and rallied strongly from their deeply undervalued and oversold
conditions to a quarterly advance not seen for several years. In addition, money
began flowing into equities again, merger and acquisition activity picked up,
even IPO's got back into the headlines. Although current economic figures have
not yet depicted a rapid, broad recovery, the stock market gains were generated
across most industry groups. As is typical of recovering economies and markets,
small caps led the charge.
Overall, for the first six months of 2003, the Russell 2000 Index increased
17.0%, the S&P 500 Index grew by 10.8% and the ICM/Isabelle Small Cap Value Fund
returned 11.2%. Despite the relative underperformance during the first half,
which was understandably disappointing, the Fund increased 31.8% during the
second quarter, outperforming the Russell 2000 Index and S&P 500 Index by 8.8%
and 16.9%, respectively.* This provided a good and welcome sign that indeed our
portfolio is well positioned to benefit from an economic recovery.
As is also common in rising equity markets, merger and acquisition activity
picks up its pace. The first half of 2003 was no exception, especially in the
technology and biotechnology sectors. Three of our long-term portfolio companies
- - Scios, ELITE Information Group, and Signal Technology -were purchased by other
companies at a premium price thus generating
2
exceptional returns for our shareholders. In addition, several of our companies
experienced solid organic share appreciation during the first half, including:
Network Equipment Technologies, Inc. (+115%), Quanta Services, Inc. (+102%),
EPIX Medical, Inc. (+96%), Ariad Pharmaceuticals, Inc. (+91%), Tesoro Petroleum,
Inc. (+52%), Praecis Pharmaceuticals, Inc. (+51%), and Castle (AM) & Co. (+44%).
Notwithstanding our successes we are more disappointed with those companies that
failed to participate in the market rally, including: AK Steel Holding Corp.
(-55%) and MagneTek, Inc. (-43%). AK Steel Holding Corp. was plagued by higher
energy prices, increasing medical and pension expenses as well as a failed
purchase of National Steel. We believe that AK Steel Holding Corp. can yet be
one of the most profitable steel companies in the industry, and could become an
acquisition target in the future as the steel industry continues to consolidate.
MagneTek, Inc. continues to be hit by spending slowdowns in the
telecommunications sector in addition to incurring costs to build out its sales
and marketing infrastructure. We believe MagneTek, Inc. has been successful at
generating a strong new product portfolio which has the potential to produce
much improved revenue growth and cash flow.
We are well known for having great patience with our holdings, giving them
ample, perhaps more than ample time in some cases, to reveal and execute their
business strategy. However, we must make it clear, the more so in this era of
harsh volatility, that improving economic results are what ultimately drives
share prices up from being undervalued. If those results are not forthcoming,
make no mistake about it, we will divest ourselves of any holding, in search of
more attractive investment candidates.
In fact, over the first half of the year, we invested new monies into several
new companies that we believe represent real economic values. We continue to
favor the energy sector, particularly those companies producing natural gas,
which we believe will be supply-constrained over the next year, resulting in
higher prices for this product. Newpark Resources (NR) is illustrative of this
theme. In addition, we believe that retail and business services companies,
which faltered as the war began, will likely show ongoing strength as consumer
confidence improves. Navigant International, Inc. (FLYR), Paxar Corp. (PXR), and
Steven Madden Ltd. (SHOO) are three such companies. Finally, we continue to find
good value in the health care arena with investments in Maxygen, Inc. (MAXY) and
U.S. Physical Therapy (USPH).
3
SO WHAT DOES THE FUTURE HOLD?
The stock market has two key protagonists in its corner who have provided fiscal
and legislative assistance - the Federal Reserve Bank, which is committed to
flooding the markets with liquidity (via low interest rates), and a Republican
Administration driven to generate economic growth (witness the new federal tax
cut enacted in May).
In our view, phase one of the market rally is now complete. Stocks are priced
for an economic recovery and it will be imperative that corporate profits
follow. Given the recent rally, valuation continues to be an important issue.
The key question to consider is whether we are borrowing gains from the future
with the current fundamental economic picture still uncertain for many
companies. Again, we must reiterate that our investments are maintained strictly
on the basis of economic value: just as we will jettison chronic laggards, those
holdings that we believe have become over-valued will be sold and the proceeds
re-directed at better opportunities.
The first and second quarter corporate profits were driven largely by cost
cutting and a weaker dollar as opposed to top-line growth. Corporations have
taken advantage of low interest rates by refinancing and/or raising record
amounts of "cheap" debt capital. Given the actions that managements have done to
firm up their balance sheets, sales & administrative, and working capital
infrastructures, many companies are levered for strong profit upside upon the
onset of an economic recovery - when it comes.
So, it appears that many of the pieces for an economic recovery are in place.
However, there is still a lack of conviction in future demand, so capital
spending and hiring remain soft. Thus, there remains a significant amount of
unused manufacturing capacity at many companies. This will take time to work
itself out. Overall, management confidence remains an important underlying
factor. It's a long process for managements to regain confidence, however, this
is what is needed to propel the second-half and 2004 corporate profits.
Managements need to believe that a rebound will not peter out, as has repeatedly
occurred since 2000. CEO confidence will lead to business spending, which will
lead to inventory rebuilding and job creation, which leads to overall economic
growth and corporate profits. Rising corporate profits inevitably leads to
higher stock prices.
4
Whatever the economic and market environment is or will be, our job will remain
the same - to find unrecognized economic value in businesses built for the
long-term. As such, we believe our investment philosophy is a good roadmap for
future market journeys, and we will continue to work diligently in an effort to
build long-term returns for our shareholders. We thank you for your continued
trust and greatly appreciate your support.
On behalf of the entire ICM investment team,
/s/ Warren J. Isabelle
Warren J. Isabelle, CFA
President
*For additional Fund performance information please refer to pages 6 and 7.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. MARKET VOLATILITY CAN
SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN INVESTMENT MADE TODAY
MAY DIFFER SUBSTANTIALLY FROM THE FUND'S HISTORICAL PERFORMANCE. Investment
return and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than original cost. Total return figures
include the reinvestment of dividends and capital gains. Returns stated are for
the Fund's Investment Share Class; returns for other share classes will vary.
The views in this letter were those of the Fund manager as of June 30, 2003 and
may not reflect his views on the date this report is first published or anytime
thereafter. These views are intended to assist shareholders in understanding the
Fund's investment methodology and do not constitute investment advice. (08/03).
5
ICM/ISABELLE SMALL CAP VALUE FUND
Investment Class
ILLUSTRATION OF $10,000 INVESTMENT
The graph below reflects the change in value of a hypothetical $10,000
investment in the ICM/Isabelle Small Cap Value Fund (the "Fund") Investment
Class compared with a broad-based securities market index since the Fund's
inception. The Russell 2000 Index is composed of the 2,000 smallest stocks in
the Russell 3000 Index, a market weighted index of the 3,000 largest U.S.
publicly traded companies. The Fund is professionally managed while the Index is
unmanaged and not available for investment.
Date ICM/Isabelle Small Cap Value Fund RUSSELL 2000 Index
- ---- --------------------------------- ------------------
3/9/1998 10,000 10,000
3/31/1998 10,000 10,431
4/30/1998 9,900 10,488
5/31/1998 9,460 9,924
6/30/1998 9,040 9,944
7/31/1998 7,770 9,139
8/31/1998 5,910 7,365
9/30/1998 6,110 7,941
10/31/1998 6,480 8,265
11/30/1998 6,730 8,698
12/31/1998 6,910 9,236
1/31/1999 7,250 9,359
2/28/1999 6,920 8,601
3/31/1999 6,690 8,735
4/30/1999 7,550 9,518
5/31/1999 8,260 9,657
6/30/1999 8,390 10,094
7/31/1999 8,390 9,817
8/31/1999 8,390 9,453
9/30/1999 8,250 9,455
10/31/1999 8,370 9,563
11/30/1999 9,280 10,061
12/31/1999 10,330 11,199
1/31/2000 10,860 11,020
2/29/2000 11,690 12,839
3/31/2000 11,880 11,993
4/30/2000 11,740 11,271
5/31/2000 11,260 10,614
6/30/2000 11,690 11,540
7/31/2000 11,530 11,168
8/31/2000 11,710 12,020
9/30/2000 12,050 11,667
10/31/2000 11,300 11,146
11/30/2000 10,840 10,002
12/31/2000 11,129 10,861
1/31/2001 12,009 11,427
2/28/2001 11,835 10,677
3/31/2001 11,794 10,155
4/30/2001 12,347 10,949
5/31/2001 13,043 11,218
6/30/2001 14,067 11,605
7/31/2001 12,808 10,977
8/31/2001 12,224 10,623
9/30/2001 9,972 9,193
10/31/2001 10,545 9,731
11/30/2001 11,067 10,484
12/31/2001 12,101 11,131
1/31/2002 12,071 11,015
2/28/2002 11,886 10,713
3/31/2002 13,699 11,575
4/30/2002 13,955 11,680
5/31/2002 13,473 11,162
6/30/2002 13,658 10,608
7/31/2002 11,549 9,006
8/31/2002 10,965 8,983
9/30/2002 9,829 8,338
10/31/2002 9,798 8,605
11/30/2002 10,811 9,373
12/31/2002 9,992 8,851
1/31/2003 9,409 8,606
2/28/2003 8,559 8,346
3/31/2003 8,426 8,454
4/30/2003 9,378 9,255
5/31/2003 10,494 10,248
6/30/2003 11,108 10,434
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE RESULTS. THE PERFORMANCE TABLE AND
GRAPH DO NOT REFLECT THE DEDUCTION OF TAXES THAT A SHAREHOLDER WOULD PAY ON FUND
DISTRIBUTIONS OR THE REDEMPTION OF FUND SHARES. Total return figures include the
reinvestment of dividends and capital gains. Some of the Fund's fees were waived
or expenses reimbursed; otherwise total return would have been lower.
6
ICM/ISABELLE SMALL CAP VALUE FUND
Institutional Class
ILLUSTRATION OF $10,000 INVESTMENT
The graph below reflects the change in value of a hypothetical $10,000
investment in the ICM/Isabelle Small Cap Value Fund (the "Fund") Institutional
Class compared with a broad-based securities market index since the Fund's
inception. The Russell 2000 Index is composed of the 2,000 smallest stocks in
the Russell 3000 Index, a market weighted index of the 3,000 largest U.S.
publicly traded companies. The Fund is professionally managed while the Index is
unmanaged and not available for investment.
Date ICM/Isabelle Small Cap Value Fund RUSSELL 2000 Index
- --------- --------------------------------- ------------------
3/27/1998 10,000 10,000
3/31/1998 9,970 10,074
4/30/1998 9,870 10,130
5/31/1998 9,460 9,584
6/30/1998 9,040 9,605
7/31/1998 7,780 8,827
8/31/1998 5,920 7,113
9/30/1998 6,120 7,670
10/31/1998 6,480 7,982
11/30/1998 6,740 8,401
12/31/1998 6,920 8,920
1/31/1999 7,260 9,039
2/28/1999 6,940 8,307
3/31/1999 6,690 8,437
4/30/1999 7,560 9,193
5/31/1999 8,270 9,327
6/30/1999 8,400 9,749
7/31/1999 8,400 9,481
8/31/1999 8,400 9,130
9/30/1999 8,270 9,132
10/31/1999 8,390 9,236
11/30/1999 9,300 9,717
12/31/1999 10,360 10,817
1/31/2000 10,890 10,643
2/29/2000 11,720 12,400
3/31/2000 11,920 11,583
4/30/2000 11,780 10,886
5/31/2000 11,300 10,251
6/30/2000 11,740 11,145
7/31/2000 11,580 10,787
8/31/2000 11,760 11,610
9/30/2000 12,100 11,268
10/31/2000 11,350 10,765
11/30/2000 10,900 9,660
12/31/2000 11,179 10,490
1/31/2001 12,079 11,036
2/28/2001 11,905 10,312
3/31/2001 11,854 9,807
4/30/2001 12,417 10,575
5/31/2001 13,113 10,835
6/30/2001 14,147 11,209
7/31/2001 12,888 10,602
8/31/2001 12,315 10,260
9/30/2001 10,042 8,879
10/31/2001 10,636 9,398
11/30/2001 11,158 10,126
12/31/2001 12,233 10,751
1/31/2002 12,202 10,639
2/28/2002 12,018 10,347
3/31/2002 13,850 11,179
4/30/2002 14,116 11,281
5/31/2002 13,625 10,780
6/30/2002 13,820 10,245
7/31/2002 11,690 8,698
8/31/2002 11,107 8,676
9/30/2002 9,950 8,053
10/31/2002 9,930 8,311
11/30/2002 10,953 9,053
12/31/2002 10,124 8,549
1/31/2003 9,541 8,312
2/28/2003 8,681 8,061
3/31/2003 8,548 8,165
4/30/2003 9,510 8,939
5/31/2003 10,646 9,898
6/30/2003 11,281 10,077
Past performance is not predictive of future results. The performance table and
graph do not reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. Total return figures include the
reinvestment of dividends and capital gains. Some of the Fund's fees have been
waived or expenses reimbursed; otherwise total return would have been lower.
7
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2003 (Unaudited)
MARKET
SHARES SECURITY VALUE
- ------- -------- ------------
COMMON STOCK - 99.11%
CONSUMER DISCRETIONARY - 8.86%
70,000 4Kids Entertainment, Inc. + $ 1,302,000
329,100 InterTAN, Inc. + 2,698,620
34,000 Navigant International, Inc. + 438,600
27,700 Steven Madden Ltd. + 604,968
140,900 Tommy Hilfiger Corp. + 1,301,916
111,300 Tweeter Home Entertainment Group + 966,084
------------
7,312,188
------------
CONSUMER STAPLES - 1.23%
150,800 Oneida Ltd. 1,017,900
------------
ENERGY - 10.13%
42,800 Denbury Resources, Inc. + 574,804
210,500 Magnum Hunter Resources, Inc. + 1,681,895
339,700 Mission Resources Corp. + 594,475
211,700 Newpark Resources + 1,160,116
76,200 Southwestern Energy Co. + 1,143,762
195,800 Tesoro Petroleum Corp. + 1,347,104
178,300 Willbros Group, Inc. + 1,852,537
------------
8,354,693
------------
FINANCIALS - 5.66%
68,400 Allmerica Financial Corp. + 1,230,516
250,500 iDine Rewards Network, Inc. + 3,441,870
------------
4,672,386
------------
HEALTH CARE - 18.02%
16,100 Analogic Corp. 785,036
965,700 ARIAD Pharmaceuticals, Inc. + 4,335,993
205,400 Avigen, Inc. + 710,684
112,300 EPIX Medical, Inc. + 1,589,045
72,700 Maxygen, Inc. + 797,519
697,600 PRAECIS Pharmaceuticals, Inc. + 3,418,240
83,700 Theragenics Corp. + 359,910
109,000 United Therapeutics Corp. + 2,374,020
39,600 U.S. Physical Therapy, Inc. + 496,980
------------
14,867,427
------------
INDUSTRIALS - 21.50%
91,800 Apogee Enterprises, Inc. 828,036
979,400 DT Industries, Inc. + 2,262,414
215,400 GenCorp, Inc. 1,914,906
The accompanying notes are an integral part of the financial statements.
8
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2003 (Unaudited) (Continued)
MARKET
SHARES SECURITY VALUE
- ------ -------- ------------
INDUSTRIALS (CONTINUED)
200,900 Global Power Equipment Group, Inc. + $ 934,185
229,400 JLG Industries, Inc. 1,559,920
49,300 NACCO Industries, Inc. - Class A 2,905,742
285,800 Quanta Services, Inc. + 2,029,180
112,200 RTI International Metals, Inc. + 1,215,126
200,100 Sypris Solutions, Inc. 2,067,033
212,900 Transpro, Inc. + 953,792
85,500 Woodhead Industries, Inc. 1,070,460
------------
17,740,794
------------
INFORMATION TECHNOLOGY - 7.03%
102,900 EMS Technologies, Inc. + 1,345,932
451,200 MagneTek, Inc. + 1,146,048
78,100 Network Equipment Technologies, Inc. + 657,602
90,400 Pioneer Standard Electronics, Inc. 766,592
174,300 Skyworks Solutions, Inc. + 1,180,011
184,200 Sycamore Networks, Inc. + 705,486
------------
5,801,671
------------
MATERIALS - 24.54%
397,094 AK Steel Holding Corp. + 1,437,481
262,100 Castle (AM) & Co. + 1,716,755
422,700 Commonwealth Industries, Inc. 1,995,144
423,400 Crompton Corp. 2,984,970
310,000 Graphic Packaging International Corp. + 1,398,100
178,600 Material Sciences Corp. 1,732,420
41,100 Olin Corp. 702,810
45,900 Paxar Corp. + 504,900
525,300 PolyOne Corp. 2,337,585
206,800 Shaw Group, Inc. + 2,491,940
298,200 Terra Nitrogen Co., LP 1,520,820
126,800 Wausau-Mosinee Paper Corp. 1,420,160
------------
20,243,085
------------
OTHER - 1.03%
381,200 Westaff, Inc. + 850,076
------------
TELECOMMUNICATION SERVICES - 1.11%
104,100 Lightbridge, Inc. + 911,916
------------
TOTAL COMMON STOCK (COST $87,026,135) $ 81,772,136
============
The accompanying notes are an integral part of the financial statements.
9
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2003 (Unaudited) (Continued)
MARKET
VALUE
------------
Total Investments (Cost $87,026,135) * - 99.11% $ 81,772,136
Other Assets Net of Liabilities - 0.89% 735,984
------------
NET ASSETS - 100.00% $ 82,508,120
============
- -------------
LP Limited Partnership
+ Non-income producing security
* Cost for federal income tax purposes is the same as for financial
statement purposes and net unrealized depreciation consists of:
Gross Unrealized Appreciation . . . . . . . . . $ 12,638,790
Gross Unrealized Depreciation . . . . . . . . . (17,892,789)
------------
Net Unrealized Depreciation . . . . . . . . . $ (5,253,999)
============
The accompanying notes are an integral part of the financial statements.
10
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2003 (Unaudited)
ASSETS:
Investments in securities at market value
(cost $87,026,135) (Note 1) $ 81,772,136
Receivable for securities sold 1,259,790
Receivable for fund shares sold 36,707
Interest and dividends receivable 8,437
Prepaid expenses 20,896
------------
TOTAL ASSETS 83,097,966
------------
LIABILITIES:
Payable for securities purchased 74,265
Payable to custodian (Note 3) 415,681
Payable to adviser (Note 3) 69,068
Accrued expenses 30,832
------------
TOTAL LIABILITIES 589,846
------------
NET ASSETS $ 82,508,120
============
Investment Class Shares (Note 1):
Net Assets (unlimited shares of $0.001 par beneficial
interest authorized; 5,980,306 shares outstanding) $ 64,912,290
============
Net asset value, offering and redemption price
per Investment Class Share $ 10.85
============
Institutional Class Shares (Note 1):
Net Assets (unlimited shares of $0.001 par beneficial
interest authorized; 1,597,397 shares outstanding) $ 17,595,830
============
Net asset value, offering and redemption price
per Institutional Class Share $ 11.02
============
NET ASSETS CONSIST OF:
Paid-in-Capital 91,241,509
Accumulated net investment loss (353,515)
Accumulated net realized loss on investments (3,125,875)
Net unrealized depreciation of investments (5,253,999)
------------
NET ASSETS $ 82,508,120
============
The accompanying notes are an integral part of the financial statements.
11
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
Six Months Ended
June 30, 2003
(Unaudited)
----------------
INVESTMENT INCOME
Dividends $ 278,837
Interest 10,837
------------
TOTAL INCOME 289,674
------------
EXPENSES
Investment advisory fees (Note 3) 380,215
Distribution fees - Investment Class (Note 4) 71,624
Administration fees 38,021
Professional fees 38,249
Transfer agent fees 55,591
Accounting fees 26,559
Custodian fees 9,173
Amortization of organization costs (Note 1) 1,867
Miscellaneous fees 31,784
------------
TOTAL EXPENSES 653,083
Expenses reimbursed (Notes 3 & 4) (9,894)
------------
NET EXPENSES 643,189
------------
NET INVESTMENT LOSS (353,515)
------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS
Net realized gain on investments 1,835,126
Net change in unrealized appreciation (depreciation)
of investments 6,236,128
------------
Net realized and unrealized gain on investments 8,071,254
------------
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 7,717,739
============
The accompanying notes are an integral part of the financial statements.
12
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
Six Months Ended Year Ended
June 30, 2003 December 31,
(Unaudited) 2002
---------------- -------------
OPERATIONS
Net investment loss $ (353,515) $ (1,168,856)
Net realized gain (loss) on investments 1,835,126 (4,619,483)
Net change in unrealized appreciation
(depreciation) of investments 6,236,128 (16,433,375)
------------- -------------
Increase (decrease) in net assets
resulting from operations 7,717,739 (22,221,714)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares subscribed:
Investment Class 18,213,867 191,029,624
Institutional Class 60,952,788 59,296,256
Redemption of shares
Investment Class (23,771,890) (194,708,806)
Institutional Class (66,076,793) (62,810,631)
------------- -------------
Decrease in net assets derived
from capital share transactions (a) (10,682,028) (7,193,557)
------------- -------------
TOTAL DECREASE
IN NET ASSETS (2,964,289) (29,415,271)
------------- -------------
NET ASSETS
Beginning of period 85,472,409 114,887,680
------------- -------------
End of period (including
accumulated net investment loss
of $353,515 and $0, respectively) $ 82,508,120 $ 85,472,409
============= =============
(a) Transactions in capital stock were:
Investment Class
Shares sold 1,951,143 16,287,250
Shares redeemed (2,585,522) (16,896,256)
------------- -------------
Decrease in shares outstanding (634,379) (609,006)
============= =============
Institutional Class
Shares sold 6,623,654 5,062,126
Shares redeemed (7,141,111) (5,416,598)
------------- -------------
Decrease in shares outstanding (517,457) (354,472)
============= =============
The accompanying notes are an integral part of the financial statements.
13
ICM/ISABELLE SMALL CAP VALUE FUND FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each year or period indicated.
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 DECEMBER 31,
INVESTMENT CLASS (UNAUDITED) 2002
- ---------------- ------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.76 $ 11.82
------------ ------------
Increase (decrease) from
investment operations:
Net investment loss (0.05) (0.14)
Net gains (losses) on investments
(both realized and unrealized) 1.14 (1.92)
------------ ------------
Net increase (decrease) from
investment operations 1.09 (2.06)
------------ ------------
Less distributions from
net realized gains -- --
------------ ------------
Net Asset Value, End of Period $ 10.85 $ 9.76
============ ============
Total Return*** 11.17%(1) (17.43)%
Ratios/Supplemental Data
Net assets, end of period (in 000s) $ 64,912 $ 64,552
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 1.78%(2) 1.80%
After waivers and/or reimbursements 1.75%(2) 1.71%
Ratio of net investment loss to average
net assets:
Before waivers and/or reimbursements (1.02)%(2) (1.17)%
After waivers and/or reimbursements (0.99)%(2) (1.08)%
Portfolio turnover rate 18.90% 50.41%
- ------------
* Commencement of investment operations.
** Based on average shares outstanding.
*** Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at the end of the period. Total return reflects the
performance based on net operating expenses. During any period in which
fees were waived or expenses reimbursed, total return would have been
lower if expenses had not been reduced.
1 Not annualized.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
14
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
For the Year For the Year For the Year For the Period
Ended Ended Ended March 9, 1998*
December 31, December 31, December 31, through December 31,
2001 2000 1999 1998
- ------------ ------------ ------------ --------------------
$ 10.87 $ 10.33 $ 6.91 $ 10.00
- ------------ ------------ ------------ ------------
(0.08) (0.05) (0.12)** (0.04)
1.03 0.84 3.54** (3.05)
- ------------ ------------ ------------ ------------
0.95 0.79 3.42 (3.09)
- ------------ ------------ ------------ ------------
-- (0.25) -- --
- ------------ ------------ ------------ ------------
$ 11.82 $ 10.87 $ 10.33 $ 6.91
============ ============ ============ ============
8.74% 7.73% 49.49% (30.90)%(1)
$ 85,386 $ 75,327 $ 9,993 $ 1,660
1.74% 1.82% 4.79% 8.81%(2)
1.74% 1.81% 1.95% 1.95%(2)
(0.61)% (0.44)% (4.23)% (7.99)%(2)
(0.61)% (0.43)% (1.39)% (1.13)%(2)
43.16% 53.91% 84.30% 21.43%
The accompanying notes are an integral part of the financial statements.
15
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
The table below sets forth financial data for one share of capital stock
outstanding throughout each year or period indicated.
SIX MONTHS FOR THE YEAR
ENDED ENDED
JUNE 30, 2003 DECEMBER 31,
INVESTMENT CLASS (UNAUDITED) 2002
- ---------------- ------------ ------------
Net Asset Value, Beginning of Period $ 9.89 $ 11.95
------------ ------------
Increase (decrease) from
investment operations:
Net investment loss (0.03) (0.11)
Net gains (losses) on investments
(both realized and unrealized) 1.16 (1.95)
------------ ------------
Net increase (decrease) from
investment operations 1.13 (2.06)
------------ ------------
Less distributions from net realized gains -- --
------------ ------------
Net Asset Value, End of Period $ 11.02 $ 9.89
============ ============
Total Return*** 11.43%(1) (17.24)%
Ratios/Supplemental Data
Net assets, end of period (in 000s) $ 17,596 $ 20,920
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 1.53%(2) 1.49%
After waivers and/or reimbursements 1.50%(2) 1.44%
Ratio of net investment loss to
average net assets:
Before waivers and/or reimbursements (0.77)%(2) (0.86)%
After waivers and/or reimbursements (0.75)%(2) (0.82)%
Portfolio turnover rate 18.90% 50.41%
* Commencement of investment operations.
** Based on average shares outstanding.
*** Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at the end of the period. Total return reflects the
performance based on net operating expenses. During any period in which
fees were waived or expenses reimbursed, total return would have been
lower if expenses had not been reduced.
1 Not annualized.
2 Annualized.
The accompanying notes are an integral part of the financial statements.
16
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
For the Year For the Year For the Year For the Period
Ended Ended Ended March 27, 1998*
December 31, December 31, December 31, through December 31,
2001 2000 1999 1998
- ------------ ------------ ------------ --------------------
$ 10.92 $ 10.36 $ 6.92 $ 10.00
(0.05) (0.02) (0.10)** (0.04)
1.08 0.83 3.54** (3.04)
- ------------ ------------ ------------ ------------
1.03 0.81 3.44 (3.08)
- ------------ ------------ ------------ ------------
-- (0.25) -- --
- ------------ ------------ ------------ ------------
$ 11.95 $ 10.92 $ 10.36 $ 6.92
============ ============ ============ ============
9.43% 7.90% 49.71% (30.80)%(1)
$ 29,502 $ 26,225 $ 7,448 $ 3,734
1.49% 1.57% 4.54% 8.56%(2)
1.49% 1.56% 1.70% 1.70%(2)
(0.36)% (0.18)% (4.14)% (7.74)%(2)
(0.36)% (0.17)% (1.30)% (0.88)%(2)
43.16% 53.91% 84.30% 21.43%
The accompanying notes are an integral part of the financial statements.
17
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 - (Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
ICM/Isabelle Small Cap Value Fund (the "Fund") is a series of the ICM Series
Trust (the "Trust"), which was organized as a Massachusetts business trust
pursuant to a Declaration of Trust dated November 18, 1997. The Trust is
registered under the Investment Company Act of 1940, as amended (the "1940
Act"). The Fund offers two classes of shares, Investment Class shares and
Institutional Class shares (collectively, the "Shares"), each of which has equal
rights as to class and voting privileges. The Investment Class has exclusive
voting rights with respect to its distribution plan pursuant to Rule 12b-1 under
the 1940 Act ("12b-1 Plan") and is subject to 12b-1 Plan expenses. The Fund
commenced operations on March 9, 1998 (March 27, 1998 for the Institutional
Class). The investment objective of the Fund is to seek capital appreciation by
investing its assets primarily in relatively undervalued common stocks of
domestic small market capitalization companies. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles for investment companies.
A. SECURITY VALUATION. Exchange traded securities for which market
quotations are readily available are valued using the last reported sales
price provided by independent pricing services as of the close of trading
on the New York Stock Exchange (normally 4:00 p.m. Eastern time), on each
Fund business day. In the absence of a sale, such securities are valued at
the mean of the last bid and asked price. Non-exchange traded securities
for which over-the-counter quotations are available are generally valued at
the mean between the closing bid and asked prices. Short-term instruments
that mature in sixty days or less may be valued at amortized cost unless
the Fund's investment adviser believes another valuation is more
appropriate.
18
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 - (Unaudited) (Continued)
Securities (including restricted securities) for which market quotations
are insufficient or not readily available, or in the judgment of the Fund's
investment adviser, for which the prices or values available do not
represent the fair value of the instrument, are valued in good faith, in
accordance with procedures adopted by the Trust's Board of Trustees.
Investments in other open-ended regulated investment companies are valued
at net asset value.
B. INVESTMENT INCOME AND SECURITIES TRANSACTIONS. Securities transactions
are accounted for on the date the securities are purchased or sold (trade
date). Cost is determined and gains and losses are based on the identified
cost basis for both financial statement and federal income tax purposes.
Dividend income is reported on the ex-dividend date. Interest income and
expenses are accrued daily.
C. NET ASSET VALUE PER SHARE. Net Asset value per share of each class of
shares of the Fund is determined daily as of the close of trading on the
New York Stock Exchange by dividing the value of the total assets, less
liabilities attributable to that class, by the number of outstanding shares
of that class. The net asset value of the classes may differ because of
different fees and expenses charged to each class.
D. ORGANIZATION COSTS. Organization costs are amortized on a straight-line
basis over five years from commencement of operations. If any of the
original shares are redeemed by any holder thereof prior to the end of the
amortization period, the redemption proceeds will be decreased by the pro
rata share of the unamortized organizational costs as of the date of
redemption. The pro rata shares will be derived by dividing the number of
original shares redeemed by the total number of original shares outstanding
at the time of redemption.
E. FEDERAL INCOME TAXES. The Trust intends to continue to qualify each year
as a regulated investment company by complying with all requirements of the
Internal Revenue Code of 1986, as amended,
19
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 - (Unaudited) (Continued)
applicable to regulated investment companies including, among other things,
distributing substantially all of its earnings to its shareholders.
Therefore, no federal income tax provision is required. The
characterization of distributions to shareholders for financial reporting
purposes is determined in accordance with federal income tax rules.
F. INCOME AND EXPENSES. Expenses directly attributable to a particular
class are charged directly to such class. In calculating net asset value
per share of each class, investment income, realized and unrealized gains
and losses and expenses, other than class specific expenses, are allocated
daily to each class of shares based on the proportion of net assets of each
class at the beginning of that day.
G. REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements. The
Fund will also require the financial institution to maintain collateral at
all times with a value equal to the amount the Fund paid for the
securities. In the event of default, the Fund may have difficulties
disposing of such securities.
H. DISTRIBUTIONS TO SHAREHOLDERS. The Fund will distribute substantially
all of its net investment income and capital gains, if any, at least
annually. Distributions to shareholders are recorded on the ex-dividend
date. Income and capital gain distributions are determined in accordance
with income tax regulations, which may differ from generally accepted
accounting principles.
I. USE OF ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at
the date of the financial statements, as well as the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
20
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 - (Unaudited) (Continued)
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments, aggregated
$14,264,521 and $28,631,776, respectively, for the period ended June 30, 2003.
NOTE 3 - ADVISORY FEES, SERVICING FEES, AND OTHER TRANSACTIONS WITH
RELATED PARTIES
INVESTMENT ADVISER - Ironwood Capital Management, LLC ("ICM") serves as the
investment adviser for the Fund pursuant to an investment advisory agreement
(the "Agreement"). Under the terms of the Agreement, ICM receives a fee from the
Fund, accrued daily and paid monthly, at an annual rate of 1.00% of the average
daily net assets of the Fund. Pursuant of the terms of the Agreement, ICM is
obligated for as long as the Agreement remains in effect, to limit total Fund
expenses, including its investment advisory fee, to 1.95% of the average daily
net assets annually for the Investment Class and 1.70% of the average daily net
assets annually for the Institutional Class, and to waive such fees and
reimburse expenses to the extent that they exceed these amounts. For the period
ended June 30, 2003, no advisory fees were waived nor other expenses reimbursed
by ICM.
DISTRIBUTOR - Forum Fund Services, LLC ("FFS"), a registered broker-dealer and a
member of the National Association of Securities Dealers, Inc., is the Fund's
distributor. FFS receives no compensation for its distribution services and no
sales commissions. FFS may enter into arrangements with various financial
institutions through which investors may purchase or redeem Shares. FFS may, at
its own expense and from its own resources, compensate certain persons who
provide services in connection with the sale or expected sale of Shares.
21
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2003 - (Unaudited) (Continued)
Other Service Providers - Under separate servicing agreements, affiliates of
Forum Financial Group, LLC (collectively, "Forum") provide certain
administration, portfolio accounting and transfer agency services to the Fund.
For its services, Forum receives a fee from the Fund and is reimbursed for
certain out-of-pocket expenses.
In addition, the Fund has entered into separate transfer agency and operating
agreements with Charles Schwab & Co., Inc. ("Schwab") and Fidelity Capital
Markets ("FCM"), whereby Schwab and FCM make shares of the Fund available to
their clients in exchange for a servicing fee. These fees are included as part
of the Transfer Agency fees on the statement of operations. The Fund was
reimbursed expenses of $4,589 by FCM.
The custodian, Fifth Third Bank, has agreed to compensate the Fund and decrease
custody fees for interest on any cash balances left uninvested. For the period
ended June 30, 2003, the Fund's custodian expenses were not reduced.
No Trustee or officer who is an employee of ICM, or Forum Financial Group, LLC,
or any affiliate thereof, receives any compensation from the Trust for serving
as a Trustee or officer of the Trust.
NOTE 4 - DISTRIBUTION PLAN
The Trustees of the Fund have adopted a 12b-1 Plan with respect to the
Investment Class shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder, which permits the Fund to pay certain expenses associated with the
distribution of its Investment Class shares. Under the 12b-1 Plan, the Fund
compensates FFS, at a fee calculated at an annual rate of up to 0.25% of the
value of the average annual net assets attributable to the Investment Class
shares for distribution expenses borne, or paid to others, by FFS. For the
period ended June 30, 2003, the Fund incurred $71,624 in distribution costs for
Investment Class shares and FFS reimbursed expenses of $5,305.
22
This page intentionally left blank.
This page intentionally left blank.
IRONWOOD CAPITAL MANAGEMENT, LLC
AND ICM FUNDS
THE IRONWOOD TREE
is a small, hardy tree, which yields a very useful and solid wood. Patiently,
these trees remain under the forest canopy until taller neighbors fall.
Once given the opportunity, the Ironwood grows quickly
to reach its full potential. We believe this imagery is appropriate
for our firm as well as our investment style.
IRONWOOD CAPITAL MANAGEMENT, LLC,
the investment manager of the ICM/Isabelle Small Cap Value Fund,
is an independent investment management firm specializing
in investing in small company stocks.
ICM Series Trust
Two Portland Square
Portland, ME 04101
1-800-472-6114
- --------------------------------------------------------------------------------
There are risks associated with investing in funds of this type that invest in
stocks of small-sized companies, which tend to be more volatile and less liquid
than stocks of larger companies. Past Fund performance is not indicative of
future results.
This information is not authorized for distribution unless accompanied or
preceded by a current prospectus.
Distributor: Forum Fund Services, LLC
For account information, current performance and prices, call 1-800-472-6114
between the hours of 9:00 a.m. and 5:00 p.m. (Eastern Time), Monday through
Friday.
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. [RESERVED]
ITEM 6. [RESERVED]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. [RESERVED]
ITEM 9. CONTROLS AND PROCEDURES
(a) - The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that material information relating to the
registrant, including its consolidated subsidiaries, is made known to them by
others within those entities, particularly during the period in which this
report is being prepared. Further, in their opinion, the registrant's disclosure
controls and procedures are adequately designed, and are operating effectively
to ensure that information required to be disclosed by the registrant in the
reports it files or submits under the Securities Exchange Act of 1934 is
recorded, processed, summarized and reported within the time periods specified
in the Securities and Exchange Commission's rules and forms.
(b) - There were no significant changes in the registrant's internal controls or
in other factors that could significantly affect these controls subsequent to
the date of their most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
ITEM 10. EXHIBITS.
(a) Not applicable.
(b) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
(c) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).