As filed with the Securities and Exchange Commission on March 8, 2004
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: JANUARY 1, 2003 THROUGH DECEMBER 31, 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.
LOGO ICM FUNDS
ICM SERIES TRUST
---------------------
ICM/ISABELLE SMALL CAP
VALUE FUND
Annual Report
December 31, 2003
ICM/ISABELLE
SMALL CAP VALUE FUND
TABLE OF CONTENTS
SHAREHOLDER LETTER ........................................................ 1
PORTFOLIO OF INVESTMENTS .................................................. 9
STATEMENT OF ASSETS AND LIABILITIES ....................................... 13
STATEMENT OF OPERATIONS ................................................... 14
STATEMENTS OF CHANGES IN NET ASSETS ....................................... 15
FINANCIAL HIGHLIGHTS ...................................................... 16
NOTES TO FINANCIAL STATEMENTS ............................................. 20
REPORT OF INDEPENDENT AUDITORS ............................................ 26
FUND TRUSTEES AND OFFICERS ................................................ 27
SHAREHOLDER LETTER
February 8, 2004
Dear Shareholder:
Ironwood Capital Management is pleased to report another good quarter and a
much-improved year for your Fund, The ICM/Isabelle Small Cap Value Fund, which
returned 17.75% for the fourth quarter, and 41.39% for the past year. For a
longer term perspective, the Fund's 5-year and since inception (March 9, 1998)
average annual returns for the period ended December 31, 2003 were 15.38% and
6.13%, respectively.*
The financial markets benefited from a very strong 2003, although the year did
not necessarily start out in a positive direction. The first three months of
this past year brought us an investment environment that was very similar to the
second half of 2002: corporate earnings' forecasts were falling, corporate
scandals were abounding, and risk aversion reigned. All "top-down" factors
pointed, and the market reacted in the same direction, down. Negative sentiment
permeated each sector of the market with many securities priced for potential
bankruptcy.
Then, in the midst of all this, the Iraqi war began and quickly ended. With its
conclusion, a huge dark cloud of negative sentiment was apparently lifted from
the marketplace. The market rallied, and finally, additional top-down forces
assisted the market further. Accommodative fiscal and monetary policies, in the
form of federal tax cuts and low interest rates, finally kicked in.
As the year moved on, investor sentiment came full swing toward economic
optimism. These hopes were supported by strong Gross Domestic Product (GDP),
manufacturing and job reports during the latter half of the year. Most stocks
gained, with the market leaders coming from (as they typically do off market
'bottoms') the small cap camp. Within this group, investors clamored for the
riskiest shares - the beaten down, those with no earnings, and companies with
weak business models. Toward the end of the year, these speculative shares began
to look very expensive and sentiment began to tilt toward more stable, quality
companies. We expect this trend to continue in 2004.
1
PERFORMANCE
Our own performance mirrored that of the broad market, this being decidedly
better during the second half of 2003 as the market began to better appreciate
those companies with solid business models and those possessing real economic
value. In fact, since the end of the first quarter your Fund's portfolio
returned approximately 67.7%, outperforming the Russell 2000 Value Index's 53.8%
return by 13.9%. This provided a good sign that indeed our portfolio was well
positioned to continue to benefit from an economic recovery.
As we have mentioned in previous conversations, we have made adjustments to the
sector concentrations and the number of securities in the portfolio. In the past
the portfolio has held 45-55 stocks and we have expanded this to approximately
70 stocks today. These adjustments have, in our opinion, reduced volatility with
negligible impact on the portfolio's performance.
INVESTMENT UPDATE
We have repeated it often, but it is important for us to continue to assert that
our investment philosophy remains focused on economic value. That is a constant.
We seek to invest in entities that, according to our analyses, possess
significant excess economic value relative to their current market value. As the
tone of the general economy and business climate changes, we would expect to
find different types of companies across varying sectors with such
characteristics.
We believe that 2003 was a year of inflection. Sentiment moved from almost
desperately negative to solidly optimistic. In such an environment large moves
in individual stocks are to be expected. We also had our share of takeovers,
which for too long a time had become an endangered species. However, these had
already begun to do well in the prior year so the acquisition premiums did not
produce spectacular gains. Nonetheless, Signal Technology, bought by Crane Corp,
exited at about a 23% premium from the year's opening price, while Johnson &
Johnson took SCIOS out at about 38% higher than its opening price. Finally,
another long-time holding, Elite Information Group was purchased by Thomson
Financial for a then year-to-date gain of 51%. Other Fund holdings that
performed well include:
2
Tesoro Petroleum: TSO
- ----------------------
Tesoro proved to be one of our best turnarounds for 2003. A fairly good
refiner based largely in the West, this company went on an acquisition
spree over the last few years which saddled it with debt and nearly caused
it to go bankrupt as refining margins, for a time in 2002, temporarily
contracted to unprecedented levels. This provided us the entry we were
looking for as the stock dropped from the mid-teens to under $2. We
recognized that the assets were fungible, had significant value, and most
importantly, that a return to just long term average refining margins would
produce almost $8 per share in annual cash flow. Since then, margins have
recovered, cash flow is up considerably, and debt is down; all of which
resulted in a rebound of some 222%, as the stock has risen once again to
the mid-teens.
Ariad Pharmaceuticals: ARIA
- ----------------------------
Although biotechnology stocks did well last year, Ariad was a standout
within the group, gaining 221%. It did take patience, but our earlier
research elucidated a company that was rich in intellectual property, had a
reasonable balance sheet, but simply needed to sharpen its focus and begin
a clinical development and commercialization effort. New leadership at the
FDA and a shift in its direction provided the visibility, while management,
with a little friendly prodding, finally took the initiative and should
have two cancer drugs in advanced clinical trials this year. In addition,
the company is attempting to enforce a major patent covering a specific
cell-signaling pathway. We have imparted no economic value in our models
for this, but there is a real possibility of significant royalties being
generated if they are successful.
We had our share of losers as well, but their impact was far overshadowed by our
winners.
AK Steel: AKS
- -------------
Originally, we believed that the steel industry would turn just like a
number of other mature, cyclical commodity businesses, and felt that
management was well prepared to lead the company through to
3
renewed profitability. Unfortunately, we were way too early on the cyclical
call, and very much novices at understanding the political complexities of
this industry, which continues to go through rapid change. Finally, our
understanding of management was flawed. AK floundered badly for much of the
year falling by more than 60% before we exited the position. While the
steel industry may yet recover, it will look very different and huge legacy
costs are yet to be dealt with. We simply decided that we could not
determine who the winners would be and left it at that.
Oneida Ltd.: OCQ
- -----------------
The famous maker of flatware continued to struggle as manufacturing costs
could not be shifted fast enough to compete with offshore sites such as
those in China. Though business continues to struggle, the company has made
the deep cuts necessary and moved from being a high cost manufacturer to a
lower cost outsourcer. We believe that as the economy recovers this will
provide significant upside potential for Oneida Ltd., and we have
maintained our position despite a 46% decline last year.
Given the uneven economic news and higher stock valuations, we were active in
taking profits in several stocks that performed well and a handful of the
cyclical companies that rallied strongly from their lows. We sold our positions
in technology stocks' Skyworks Solutions and Network Equipment Technologies,
reaping returns of over 100% in each. In addition, we sold our position in JLG
Industries, which increased nearly 300% off its March low. These companies are
leaders in their respective industries and have shown improved earnings, but the
gains in their share prices have arguably outstripped even best case valuations.
Notwithstanding our successes, we are disappointed with those companies, which
failed to participate in the market rally, including: DT Industries, an
automation equipment supplier, and Oneida Ltd. To reap the rewards offered
through value investing, patience is a must, and we believe that despite their
difficulties, DT Industries and Oneida Ltd. are well positioned to produce
significant returns as the economy further strengthens and their businesses,
restructured to fit a new business climate, begin to recover.
4
Although the rally has made it much more difficult to find value in the market,
we believe that careful stock picking and a focus on "buying the business" will
continue to reward our efforts. We invested monies into several new companies
throughout the year, which we believe represent real economic values. Several of
these new investments, which represent a healthy cross-section of the overall
economy, have begun to show good returns, including: Allmerica Financial
(insurance), Teletech Holdings (business services), Magnum Hunter (energy),
Danka Business Systems (office supplies distribution), Enpro Industries
(industrial) and Navigant International (business travel management).
2004 OUTLOOK: EARNINGS, EARNINGS, AND MORE EARNINGS
The bias toward increased risk is now turning positive, and indeed, there are
many more and greater hints of positive corporate guidance reappearing after an
absence of several years. Evidence that employment conditions are firming is
accumulating and business investment is accelerating. This is fortunate but
expected, given all the stimuli poured into the US economy over the past year: a
weaker dollar, tax cuts, falling yields, war spending, and higher real estate
prices. And stocks reacted accordingly. What more can these forces provide in
2004?
We believe the tailwind from the "top down" forces of falling interest rates and
rapidly expanding liquidity conditions is abating and nearly over. The stock
market is not broadly cheap. With the economy on the mend, the baton has been
passed to corporate profits, and sustained earnings growth is the next force
that will carry equity prices higher.
The corporate profit backdrop continues to improve. The massive cost cutting
enacted by firms over the past couple years has lifted profit margins, providing
considerable leverage as top-line growth strengthens. Earnings expectations are
thus getting increasingly higher.
There is danger reflected in current valuations and the sense of complacency
that attends them. One needs to be skeptical of big promises and focused on
realistic expectations. The greatest risks for equities include the Federal
Reserve suggesting that it will soon take away easy money and begin raising
interest rates, potential earnings disappointments, and an
5
economic fade as tax cuts become recurring and thus lose their incremental
impact. Finally, vigilance, as always, is warranted on the geopolitical front.
In several sectors, hope and perception has raced well ahead of reality and we
have taken profits in those areas. As value buyers, we will buy in periods of
price weakness as a way to take advantage of emotionally driven volatility: We
view our race as a marathon not a sprint.
We thank you for your continued trust and greatly appreciate your support.
Sincerely,
/S/ WARREN J. ISABELLE /S/ RICK L. DROSTER
- ---------------------- -------------------
Warren J. Isabelle Rick L. Droster
*PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS AND CURRENT PERFORMANCE MAY
BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. MARKET VOLATILITY CAN
SIGNIFICANTLY IMPACT SHORT-TERM 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. FOR THE MOST RECENT MONTH END PERFORMANCE,
PLEASE CALL 1-800-472-6114. RETURNS SHOWN ARE FOR THE FUND'S INVESTMENT CLASS;
PERFORMANCE FOR OTHER CLASSES WILL VARY. TOTAL RETURN FIGURES INCLUDE THE
REINVESTMENT OF DIVIDENDS AND CAPITAL GAINS. SOME OF THE FUND'S FEES WERE WAIVED
OR EXPENSES REIMBURSED; OTHERWISE, RETURNS WOULD HAVE BEEN LOWER.
INVESTMENTS IN SMALLER COMPANIES GENERALLY CARRY GREATER RISK THAN IS
CUSTOMARILY ASSOCIATED WITH LARGER COMPANIES FOR VARIOUS REASONS SUCH AS
NARROWER PRODUCT LINES, LIMITED FINANCIAL RESOURCES AND LESS DEPTH IN
MANAGEMENT. THE RUSSELL 2000 VALUE INDEX CONSISTS OF STOCKS IN THE RUSSELL 2000
INDEX WITH LOWER PRICE-TO-BOOK RATIOS AND LOWER FORECASTED GROWTH VALUES. ONE
CANNOT INVEST DIRECTLY IN AN INDEX.
THE VIEWS IN THIS REPORT WERE THOSE OF THE FUND MANAGER AS OF DECEMBER 31, 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 THEIR INVESTMENTS IN THE FUND AND DO NOT CONSTITUTE INVESTMENT
ADVICE. (02/04).
6
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 Investment
Class' 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.
Average Annual Return for the
period ending 12/31/03
One year............................... 41.39%
Five year............................... 15.38%
Inception (3/9/1998).................... 6.13%
[Edgar representation of line graph
ICM/Isabelle Small Cap Value Fund Russell 2000
Date Investment Class 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
7/31/2003 11,293 11,087
8/31/2003 12,081 11,595
9/30/2003 11,999 11,381
10/31/2003 12,736 12,337
11/30/2003 13,310 12,774
12/31/2003 14,129 13,034
]
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE
DATA QUOTED. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
FOR THE MOST RECENT MONTH END PERFORMANCE, PLEASE CALL (800) 472-6114. 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
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
Institutional Class' 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.
Average Annual Return for the
period ending 12/31/03
One year............................... 41.86%
Five year............................... 15.72%
Inception (3/27/1998)................... 6.48%
[Edgar representation of line graph
ICM/Isabelle Small Cap Value Fund Russell 2000
Date Institutional Class 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
7/31/2003 11,465 10,708
8/31/2003 12,264 11,199
9/30/2003 12,182 10,992
10/31/2003 12,939 11,915
11/30/2003 13,523 12,338
12/31/2003 14,362 12,588
]
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE
DATA QUOTED. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
FOR THE MOST RECENT MONTH END PERFORMANCE, PLEASE CALL (800) 472-6114. 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.
8
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003
MARKET
SHARES SECURITY VALUE
- ------ -------- -----
COMMON STOCK - 88.90%
CAPITAL GOODS - 0.51%
44,600 National RV Holdings, Inc.+ $ 443,770
-----------
CONSUMER DISCRETIONARY - 10.20%
38,600 4Kids Entertainment, Inc.+ 1,004,372
42,700 Chiquita Brands International, Inc.+ 962,031
93,300 Innovo Group, Inc.+ 296,694
152,400 InterTAN, Inc.+ 1,542,288
45,800 Navigant International, Inc.+ 634,330
30,500 PC Mall, Inc.+ 492,575
48,800 Russell Corp. 856,928
39,100 Steven Madden Ltd.+ 797,640
31,000 Tommy Hilfiger Corp.+ 459,110
126,200 Tweeter Home Entertainment Group+ 1,192,590
53,600 Visteon Corp. 557,976
-----------
8,796,534
-----------
CONSUMER STAPLES - 1.37%
201,000 Oneida Ltd. 1,183,890
-----------
ENERGY - 10.71%
99,500 Denbury Resources, Inc.+ 1,384,045
95,100 Harvest Natural Resources, Inc.+ 946,245
201,400 Magnum Hunter Resources, Inc.+ 1,915,314
110,600 Mission Resources Corp.+ 249,956
245,000 Newpark Resources+ 1,173,550
29,200 Southwestern Energy Co.+ 697,880
71,600 Tesoro Petroleum Corp.+ 1,043,212
151,700 Willbros Group, Inc.+ 1,823,434
-----------
9,233,636
-----------
FINANCIALS - 3.60%
33,700 Allmerica Financial Corp.+ 1,036,949
27,500 Hilb Rogal & Hamilton Co. 881,925
111,300 Rewards Network, Inc.+ 1,186,458
-----------
3,105,332
-----------
HEALTH CARE - 16.48%
29,300 Analogic Corp. 1,201,300
372,900 ARIAD Pharmaceuticals, Inc.+ 2,778,105
95,100 Avigen, Inc.+ 559,188
390,800 Celsion Corp.+ 511,948
57,200 Chattem, Inc.+ 1,023,880
The accompanying notes are an integral part of the financial statements.
9
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
DECEMBER 31, 2003
MARKET
SHARES SECURITY VALUE
- ------ -------- -----
HEALTH CARE (CONTINUED)
222,300 Durect Corp.+ $ 573,534
57,300 EPIX Medical, Inc.+ 932,844
61,600 Hanger Orthopedic Group, Inc.+ 959,112
99,400 Maxygen, Inc.+ 1,056,622
23,000 Neopharm, Inc.+ 421,360
43,700 Neose Technologies, Inc.+ 402,040
202,700 PRAECIS Pharmaceuticals, Inc.+ 1,305,388
69,200 Sirna Therapeutics, Inc.+ 359,840
133,500 Theragenics Corp.+ 730,245
19,500 United Therapeutics Corp.+ 447,525
60,400 U.S. Physical Therapy, Inc.+ 950,092
-----------
14,213,023
-----------
INDUSTRIALS - 11.09%
442,100 DT Industries, Inc.+ 543,783
123,900 GenCorp, Inc. 1,334,403
212,500 Global Power Equipment Group, Inc.+ 1,419,500
18,500 NACCO Industries, Inc. - Class A 1,655,380
180,300 Quanta Services, Inc.+ 1,316,190
29,600 RTI International Metals, Inc.+ 499,352
73,304 Sypris Solutions, Inc.+ 1,232,240
145,200 Transpro, Inc.+ 608,388
56,369 Woodhead Industries, Inc. 952,636
-----------
9,561,872
-----------
INFORMATION TECHNOLOGY - 10.47%
106,300 Agilysys, Inc. 1,185,245
310,500 Danka Business Systems plc, ADR+ 1,366,200
32,000 EMS Technologies, Inc.+ 657,280
122,700 Hypercom Corp.+ 584,052
24,000 Imation Corp. 843,600
74,400 Intercept, Inc.+ 839,976
100,900 Lamson & Sessions Co.+ 582,193
166,600 MagneTek, Inc.+ 1,097,894
15,900 SeaChange International, Inc.+ 244,860
247,500 Sycamore Networks, Inc.+ 1,296,900
29,700 TeleTech Holdings, Inc.+ 335,610
-----------
9,033,810
-----------
MATERIALS - 20.52%
11,500 American Vanguard Corp. 428,605
206,200 Castle (AM) & Co.+ 1,505,260
217,600 Commonwealth Industries, Inc. 2,184,704
The accompanying notes are an integral part of the financial statements.
10
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS (Continued)
DECEMBER 31, 2003
MARKET
SHARES SECURITY VALUE
- ------ -------- -----
MATERIALS (CONTINUED)
282,200 Crompton Corp. $ 2,023,374
29,500 EnPro Industries, Inc.+ 411,525
281,000 Graphic Packaging International Corp.+ 1,140,860
102,700 Material Sciences Corp. 1,038,297
58,000 Olin Corp. 1,163,480
81,400 Paxar Corp.+ 1,090,760
374,200 PolyOne Corp.+ 2,391,138
126,200 Shaw Group, Inc.+ 1,718,844
89,600 Strategic Diagnostics, Inc.+ 423,808
172,400 Terra Nitrogen Co., LP 855,104
63,000 Wausau-Mosinee Paper Corp. 851,760
88,000 Western Silver Corp.+ 464,640
-----------
17,692,159
-----------
OTHER - 1.66%
144,100 First Consulting Group, Inc.+ 811,283
263,500 Westaff, Inc.+ 616,590
-----------
1,427,873
-----------
TELECOMMUNICATION SERVICES - 0.86%
81,200 Lightbridge, Inc.+ 738,920
-----------
UTILITIES - 1.43%
67,300 Duquesne Light Holdings, Inc. 1,234,283
-----------
TOTAL COMMON STOCK (COST $61,064,791) $76,665,102
===========
PRINCIPAL
- ---------
REPURCHASE AGREEMENT - 8.98%
$7,743,153 Fifth Third Bancorp, 0.60%, 1/2/04,
to be repurchased at $7,743,411,
collateralized by US Government
Obligations (Cost $7,743,153) 7,743,153
-----------
The accompanying notes are an integral part of the financial statements.
11
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2003 (Continued)
MARKET
VALUE
-----
TOTAL INVESTMENTS (COST $68,807,944)* - 97.88% $ 84,408,255
OTHER ASSETS NET OF LIABILITIES - 2.12% 1,827,439
-------------
NET ASSETS - 100.00% $ 86,235,694
=============
- ------------
ADR American Depositary Receipt.
LP Limited Partnership.
+ Non-income producing security.
* Cost for federal income tax purposes is $70,200,885; the difference
between book basis and tax basis net unrealized appreciation is
primarily attributable to the tax deferral losses on wash sales. The
net unrealized appreciation on a tax basis consists of:
Gross Unrealized Appreciation ........................ $ 18,009,433
Gross Unrealized Depreciation ........................ (3,802,063)
-------------
Net Unrealized Appreciation .......................... $ 14,207,370
=============
The accompanying notes are an integral part of the financial statements.
12
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 200
ASSETS:
Investments in securities at market value
(cost $61,064,791) $ 76,665,102
Investments in repurchase agreements
(cost $7,743,153) 7,743,153
Receivable for securities sold 185,154
Receivable for Fund shares sold 2,296,213
Interest and dividends receivable 20,247
Prepaid expenses 8,755
------------
TOTAL ASSETS 86,918,624
------------
LIABILITIES:
Due to custodian 152
Payable for Fund shares redeemed 538,386
Payable to adviser 69,121
Accrued expenses 75,271
------------
TOTAL LIABILITIES 682,930
------------
NET ASSETS $ 86,235,694
============
NET ASSETS CONSIST OF:
Paid-in-Capital 74,181,282
Accumulated net realized gain (loss) on
investments (3,545,899)
Net unrealized appreciation (depreciation)
of investments 15,600,311
------------
NET ASSETS $ 86,235,694
============
INVESTMENT CLASS SHARES:
Net Assets (unlimited shares of $0.001 par
beneficial interest authorized; 4,926,093
shares outstanding) $ 67,982,335
============
Net asset value, offering and redemption
price per Investment Class Share $ 13.80
============
INSTITUTIONAL CLASS SHARES:
Net Assets (unlimited shares of $0.001
par beneficial interest authorized;
1,300,633 shares outstanding) $ 18,253,359
============
Net asset value, offering and
redemption price per Institutional
Class Share $ 14.03
============
The accompanying notes are an integral part of the financial statements.
13
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED
DECEMBER 31, 2003
-----------------
INVESTMENT INCOME
Dividends $ 462,795
Interest 27,578
------------
TOTAL INCOME 490,373
------------
EXPENSES
Investment advisory fees 787,513
Administration fees 78,750
Transfer agent fees
Investment Class Shares 120,448
Institutional Class Shares 17,338
Distribution fees
Investment Class Shares 151,371
Accounting fees 62,665
Custodian fees 30,349
Professional fees 120,159
Registration fees 36,370
Trustees fees and expenses 18,181
Amortization of organization costs 1,867
Miscellaneous fees 42,910
------------
TOTAL EXPENSES 1,467,921
Expenses reimbursed (46,284)
------------
NET EXPENSES 1,421,637
------------
NET INVESTMENT INCOME (LOSS) (931,264)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments 1,415,100
Net change in unrealized appreciation
(depreciation) of investments 27,090,438
------------
Net realized and unrealized gain (loss) on 28,505,538
investments ------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 27,574,274
============
The accompanying notes are an integral part of the financial statements.
14
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2003 DECEMBER 31, 2002
OPERATIONS
Net investment income (loss) $ (931,264) $ (1,168,856)
Net realized gain (loss) on 1,415,100 (4,619,483)
investments
Net change in unrealized
appreciation (depreciation)
of investments 27,090,438 (16,433,375)
------------- -------------
Increase (decrease) in net assets
resulting from operations 27,574,274 (22,221,714)
------------- -------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares subscribed:
Investment Class 45,238,558 191,029,624
Institutional Class 74,529,769 59,296,256
Redemption of shares:
Investment Class (63,195,562) (194,708,806)
Institutional Class (83,383,754) (62,810,631)
------------- -------------
Increase (Decrease) in net assets from
capital share transactions (a) (26,810,989) (7,193,557)
------------- -------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS 763,285 (29,415,271)
------------- -------------
NET ASSETS
Beginning of period 85,472,409 114,887,680
------------- -------------
End of period (including
accumulated net investment income
of $- and $-, respectively) $ 86,235,694 $ 85,472,409
============= =============
(a) Transactions in capital stock were:
Investment Class
Shares sold 4,213,982 16,287,250
Shares redeemed (5,902,574) (16,896,256)
------------- -------------
Increase (Decrease) in shares (1,688,592) (609,006)
outstanding ============= =============
Institutional Class
Shares sold 7,762,501 5,062,126
Shares redeemed (8,576,722) (5,416,598)
------------- -------------
Increase (Decrease) in shares
outstanding (814,221) (354,472)
============= =============
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.
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
INVESTMENT CLASS 2003 2002
- ---------------- ---- ----
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.76 $ 11.82
---------- -----------
Increase (decrease) from
investment operations:
Net investment loss (0.13)* (0.14)
Net realized and unrealized gains
(losses) on investments 4.17* (1.92)
---------- -----------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS 4.04 (2.06)
---------- -----------
Less distributions from
net realized gains - -
---------- -----------
NET ASSET VALUE, END OF PERIOD $ 13.80 $ 9.76
========== ===========
TOTAL RETURN ** 41.39% (17.43)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 67,983 $ 64,552
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 1.94% 1.80%
After waivers and/or reimbursements 1.88% 1.71%
Ratio of net investment income (loss) to
average net assets:
Before waivers and/or reimbursements (1.32)% (1.17)%
After waivers and/or reimbursements (1.26)% (1.08)%
Portfolio turnover rate 51.70% 50.41%
<FN>
- -------------
* Based on average shares outstanding.
** Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions. Total return reflects 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.
</FN>
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
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 1999
---- ---- ----
$ 10.87 $ 10.33 $ 6.91
- ------------- -------------- ------------
(0.08) (0.05) (0.12)*
1.03 0.84 3.54*
- ------------- -------------- ------------
0.95 .79 3.42
- ------------- -------------- ------------
- (0.25) -
- ------------- -------------- ------------
$ 11.82 $ 10.87 $ 10.33
============= ============== ============
8.74% 7.73% 49.49%
$ 85,386 $ 75,237 $ 9,993
1.74% 1.82% 4.79%
1.74% 1.81% 1.95%
(0.61)% (0.44)% (4.23)%
(0.61)% (0.43)% (1.39)%
43.16% 53.91% 84.30%
The accompanying notes are an integral part of the financial statements.
17
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.
FOR THE YEAR FOR THE YEAR
ENDED ENDED
DECEMBER 31, DECEMBER 31,
INSTITUTIONAL CLASS 2003 2002
- ------------------- ---- ----
NET ASSET VALUE, BEGINNING OF PERIOD $ 9.89 $ 11.95
---------- -----------
Increase (decrease) from investment operations:
Net investment loss (0.10)* (0.11)
Net realized and unrealized gains
(losses) on investments 4.24* (1.95)
---------- -----------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS 4.14 (2.06)
---------- -----------
Less distributions from
net realized gains - -
---------- -----------
NET ASSET VALUE, END OF PERIOD $ 14.03 $ 9.89
============= ===========
TOTAL RETURN ** 41.86% (17.24)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 18,253 $ 20,920
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 1.61% 1.49%
After waivers and/or reimbursements 1.55% 1.44%
Ratio of net investment income (loss) to
average net assets:
Before waivers and/or reimbursements (0.98)% (0.86)%
After waivers and/or reimbursements (0.93)% (0.82)%
Portfolio turnover rate 51.70% 50.41%
<FN>
- ---------------
* Based on average shares outstanding.
** Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions. Total return reflects 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.
</FN>
The accompanying notes are an integral part of the financial statements.
18
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
FOR THE YEAR FOR THE YEAR FOR THE YEAR
ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2001 2000 1999
---- ---- ----
$ 10.92 $ 10.36 $ 6.92
- ----------- ------------- -----------
(0.05) (0.02) (0.10)*
1.08 0.83 3.54*
- ----------- ------------- -----------
1.03 0.81 3.44
- ----------- ------------- -----------
- (0.25) -
- ----------- ------------- -----------
$ 11.95 $ 10.92 $ 10.36
=========== ============= ==========
9.43% 7.90% 49.71%
$ 29,502 $ 26,225 $ 7,448
1.49% 1.57% 4.54%
1.49% 1.56% 1.70%
(0.36)% (0.18)% (4.14)%
(0.36)% (0.17)% (1.30)%
43.16% 53.91% 84.30%
The accompanying notes are an integral part of the financial statements.
19
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003
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.
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
20
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 - (Continued)
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.
Organization costs were completely amortized as of December 31, 2003.
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,
applicable to regulated investment companies including, among other
things, distributing substantially all of its earnings to its
shareholders.
21
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 - (Continued)
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.
For the year ended December 31, 2003, the Fund reclassified $2 to
decrease accumulated net realized loss and $931,264 to decrease
accumulated net investment loss, with a decrease to paid-in-capital of
$931,266. The reclassification has no impact on the net asset value of
the Fund.
For federal income tax purposes, the capital loss carryover is
$2,152,967, which expires in December of 2010.
As of December 31, 2003, there were no distributable earnings on a tax
basis.
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 at least 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.
22
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 - (Continued)
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.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments, aggregated
$39,288,409 and $79,197,206, respectively, for the year ended December 31, 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 to 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 year
ended December 31, 2003, no advisory fees were waived nor other expenses
reimbursed by ICM.
ADMINISTRATION AND OTHER SERVICES - Citigroup Global Transaction Services,
through its various affiliates (collectively "Citigroup"), provides certain
administration, portfolio accounting and transfer agency services to the Fund.
23
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 - (Continued)
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 $46,284 by FCM.
The custodian, Fifth Third Bank (the "Custodian"), has agreed to compensate the
Fund and decrease custody fees for interest on any cash balances left
uninvested. For the year ended December 31, 2003, the Fund's custodian expenses
were not reduced.
DISTRIBUTOR - Forum Fund Services, LLC is the Fund's distributor (the
"Distributor"). The Distributor is not affiliated with ICM or with Citigroup or
its affiliated companies. The Distributor receives no compensation from the Fund
for its distributions services.
No interested trustee, officer or employee of ICM, or Citigroup, or any
affiliate thereof, receives any compensation from the Trust for serving as a
trustee or officer of the Trust.
NOTE 4 - LINE OF CREDIT
The Fund has entered into a line of credit agreement with the Custodian to be
used for temporary purposes, primarily for financing redemptions. The agreement
provides that the Fund may borrow up to $5,000,000. The aggregate outstanding
principal amount of all loans may not exceed $5,000,000. Interest is charged to
the Fund, based on its borrowings, at a rate equal to the rate of interest on
overnight facilities which the Custodian is offering to other borrowers and
potential borrowers of comparable financial condition on the business day that a
loan is made pursuant to the agreement.
During the year ended December 31, 2003, the Fund was charged $206 from
borrowings under the line of credit. As of December 31, 2003, the Fund had no
loans outstanding under the line of credit.
24
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2003 - (Continued)
NOTE 5 - 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 the Distributor, 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
the Distributor. For the year ended December 31, 2003, the Fund incurred
$151,371 in distribution costs for Investment Class shares.
NOTE 6 - PROXY VOTING INFORMATION - UNAUDITED
A description of the policies and procedures that the Fund uses to determine how
to vote proxies relating to securities held in the Fund's portfolio is
available, without charge and upon request, by calling (800) 472-6114. This
information is also available from the EDGAR database on the SEC's Web site at
http://www.sec.gov.
25
REPORT OF INDEPENDENT AUDITORS
To the Shareholders and Board of Trustees
of the ICM Series Trust:
In our opinion, the accompanying statement of assets and liabilities, including
the schedule of investments, and the related statements of operations and of
changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the ICM/Isabelle Small Cap Value
Fund (the "Fund") at December 31, 2003, and the results of its operations for
the year then ended, and the changes in its net assets and the financial
highlights for each of the two years in the period then ended, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Fund's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these financial statements in accordance
with auditing standards generally accepted in the United States of America,
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of securities at December 31, 2003 by correspondence with the
custodian and brokers, provide a reasonable basis for our opinion. The financial
highlights of the Fund for the periods ended December 31, 2001 were audited by
other independent auditors whose report dated February 26, 2002 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 13, 2004
26
FUND TRUSTEES AND OFFICERS (UNAUDITED)
LENGTH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS POSITION(S) OF TIME DURING THE PAST
AND DATE OF BIRTH WITH THE TRUST SERVED(1) FIVE YEARS
- --------------------------------------------------------------------------------
INTERESTED TRUSTEES
- --------------------------------------------------------------------------------
WARREN J. Trustee, March Managing member and
ISABELLE, CFA(2) President and 1998 to Chief Investment Officer,
Ironwood Capital Chairman of Present Ironwood Capital
Management, LLC the Board, Management, LLC, August
21 Custom House Street Valuation 1997 to present
Suite 240 Committee(3)
Boston, MA 02110 (member)
Born: January 1952
- --------------------------------------------------------------------------------
RICHARD L. Trustee and March Executive Vice-President,
DROSTER(4) Executive 1998 to Ironwood Capital
Ironwood Capital Vice- Present Management, LLC, August
Management, LLC President, 1997 to present
21 Custom House Street Valuation
Suite 240 Committee(3)
Boston, MA 02110 (member)
Born: August 1961
27
FUND TRUSTEES AND OFFICERS (UNAUDITED)
(Continued)
LENGTH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS POSITION(S) OF TIME DURING THE PAST
AND DATE OF BIRTH WITH THE TRUST SERVED(1) FIVE YEARS
- --------------------------------------------------------------------------------
DISINTERESTED TRUSTEES
- --------------------------------------------------------------------------------
DONALD A. Trustee, March Assistant Professor,
NELSON, CPA Audit 1998 to Department of Accounting
Merrimack College Committee Present and Finance, Merrimack
Andover, MA 01810 (Chairman),(5) College, 1975 to present;
Born: February 1946 Nominating Certified Public
Committee(6) Accountant, 1972 to
and Valuation present
Committee(3)
(member)
- --------------------------------------------------------------------------------
JOHN A. FIFFY Trustee, March Acquisition Consultant,
Hewlett-Packard Co. Audit 1998 to Hewlett-Packard Co.
200 Forest Street Committee,(5) Present (formerly Compaq
Marlboro, MA 01752 Nominating Computer Corporation, a
Born: December 1950 Committee(6) computer hardware
and Valuation company), 1993 to present
Committee(3)
(member)
- --------------------------------------------------------------------------------
THOMAS R. Trustee, May President & CEO, Benjamin
VENABLES Audit 2003 to Franklin Savings Bank,
Benjamin Franklin Committee(2) Present 2002 to present;
Savings Bank and Self-employed Business
58 Main Street Nominating Consultant, 2001 to 2002;
Franklin, MA 02038 Committee(3) President & CEO,
Born: April 1955 (member) Lighthouse Bank, 2000 to
2001; Self-employed
(Consultant for Monc Real
Estate Development), 1997
to 2000
28
FUND TRUSTEES AND OFFICERS (UNAUDITED)
(Continued)
LENGTH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS POSITION(S) OF TIME DURING THE PAST
AND DATE OF BIRTH WITH THE TRUST SERVED(1) FIVE YEARS
- --------------------------------------------------------------------------------
OFFICERS
- -------------------------------------------------------------------------------
GARY S. SAKS Vice- March Chief Operating Officer
Ironwood Capital President, 1998 to and Compliance Officer,
Management, LLC Secretary, Present Ironwood Capital
21 Custom House Street Treasurer and Management, LLC, August
Suite 240 Chief 1997 to present
Boston, MA 02110 Financial
Born: May 1968 Officer
- --------------------------------------------------------------------------------
CHERYL O. Vice- January Counsel, Citigroup Global
TUMLIN, Esq. President, 2002 to Transaction Services, Fund
Citigroup Global Assistant Present Services ("Citigroup GTS"),
Transaction Services, Secretary 2003 to present; Counsel,
Fund Services Forum Financial Group,
Two Portland Square LLC (a mutual fund admin-
Portland, ME 04101 istration company acquired
Born: June 1966 by Citigroup GTS in 2003),
2001 to 2003 and 1996 to
1999; Counsel, I-many,
Inc., 1999 to 2001.
29
FUND TRUSTEES AND OFFICERS (UNAUDITED)
(Continued)
LENGTH PRINCIPAL OCCUPATION(S)
NAME, ADDRESS POSITION(S) OF TIME DURING THE PAST
AND DATE OF BIRTH WITH THE TRUST SERVED(1) FIVE YEARS
- --------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------------------------------------------------------------------------------
STACEY E. HONG Assistant August Director, Fund Accounting,
Citigroup Global Treasurer 2002 to Citigroup GTS ( a fund
Transaction Services, Present services company) since
Fund Services 2003. Director, Forum
Two Portland Square Accounting Services, LLC
Portland, ME 04101 (fund accountant acquired
Born: May 1966 by Citigroup GTS in 2003),
1992 to 2003
- --------------------------------------------------------------------------------
MARC D. Assistant January Counsel and Senior Manager
KEFFER, Esq. Secretary 2003 to for Offshore and Hedge
Citigroup Global Present Funds, Citigroup GTS, Fund
Transaction Services, Services, December 2003 to
Fund Services present; Counsel and
Two Portland Square Senior Manager for
Portland, ME 04101 Offshore and Hedge Funds,
Born: August 1966 Forum Financial Group, LLC
(a mutual fund
administration company
acquired by Citigroup
GTS in 2003), February
1999 to December 2003;
Associate, Osborne Law
Offices, Washington
D.C., 1992 through 1999.
(1) Term of service is indefinite.
(2) Mr. Isabelle owns a controlling interest in ICM and is the portfolio
manager of the Fund.
(3) Pursuant to a charter adopted by the Board, the Valuation Committee reviews
and provides advice regarding the Trust's policies and procedures for
determining net asset value per share of the The Valuation Committee also
produces Trust's series. fair value determinations for securities
maintained in the portfolios of the Trust
30
FUND TRUSTEES AND OFFICERS (UNAUDITED)
(Continued)
consistent with valuation procedures approved by the Board. The Valuation
Committee meets when necessary. During the fiscal year ended December 31,
2003, the Valuation Committee did not meet.
(4) Mr. Droster is a principal of ICM. He currently serves as Executive
Vice-President.
(5) Pursuant to a charter adopted by the Board, the Audit Committee assists the
Board in fulfilling its responsibility for oversight of the quality and
integrity of the accounting, auditing and financial reporting practices of
the Trust. It is responsible for meeting with the Trust's independent
auditors to (1) review the arrangements and scope of any audit; (2) discuss
matters of concern relating to the Trust's financial statements, including
any adjustments to such statements recommended by the auditors, or other
results of any audit; (3) consider the auditors' comments with respect to
the Trust's financial policies, procedures, and internal accounting
controls; and (4) review any form of opinion the auditors propose to render
to the Trust. The Audit Committee met two times during the fiscal year
ended December 31, 2003.
(6) Pursuant to a charter adopted by the Board, the Trust's Nominating
Committee, which meets when necessary, is charged with the duty of
nominating all Disinterested Trustees and committee members, and presenting
those nominations to the Board. The Nominating Committee Charter does not
provide for the recommendation of nominees by security holders of the
Trust. During the fiscal year ended December 31, 2003, the Nominating
Committee met once.
Each Trustee oversees the Fund, which is the only portfolio within the
complex. No Trustee holds other directorships or trusteeships. The
Statement of Additional Information ("SAI") contains additional information
about the Fund's Trustees. The SAI is available for free, by contacting the
Fund at (800) 472-6114.
31
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.
As of the end of the period, December 31, 2003, ICM Series Trust has adopted a
code of ethics, as defined in Item 2 of Form N-CSR, that applies to its
President and Treasurer. A copy of the code of ethics is filed as an exhibit to
this Form N-CSR.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
At a regular meeting of the Board of Trustees held on August 21, 2003, the Board
unanimously approved a resolution appointing Mr. Donald A. Nelson as the "Audit
Committee financial expert" and that Mr. Nelson is "independent" for purposes of
this item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees - The aggregate fees billed for each of the last two fiscal
years (the "Reporting Periods") for professional services rendered by
the Registrant's principal accountant for the audit of the
Registrant's annual financial statements, or services that are
normally provided by the principal accountant in connection with the
statutory and regulatory filings or engagements for the Reporting
Periods, were $19,000 in 2002 and $19,000 in 2003.
(b) Audit Related Fees - There were no audit-related fees billed in the
Reporting Periods for assurance and related services rendered by the
principal accountant that were reasonably related to the performance
of the audit of the Registrant's financial statements and are not
reported under paragraph (a) of this Item 4.
(c) Tax Fees - The aggregate fees billed in the Reporting Periods for
professional services rendered by the principal accountant to the
Registrant for tax compliance, tax advice and tax planning ("Tax
Services") were $5,700 in 2002 (by Arthur Andersen LLP) and $6,000 in
2003 (by PriceWaterhouseCoopers). These services consisted of review
or preparation of U.S. federal, state, local and excise tax returns.
(d) All Other Fees - There were no other fees billed in the Reporting
Periods for products and services provided to the Registrant by the
principal accountant, or services provided to the investment adviser
other than the services reported above.
(e) (1) Pursuant to the Registrant's Audit Committee Charter (the
"Charter"), before an auditor is engaged by the Registrant to render
audit services, the Audit Committee must review and approve the
engagement. In addition, the Registrant's Audit Committee must review
and approve in advance any proposal that the Registrant employ its
auditor to render "permissible non-audit services" (as defined in the
Charter consistent with Rule 2-01(c)(4) of Regulation S-X), except as
described below. The Committee must also review and approve in advance
any proposal (except as set forth below) that the investment adviser,
and any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the Registrant (an
"Adviser-affiliated service provider"), employ the Registrant's
auditor to render non-audit services, if the engagement would relate
directly to the operations and financial reporting of the Registrant.
As a part of its review, the Committee must consider whether the
provision of such services is consistent with the auditor's
independence. Pre-approval by the Committee of non-audit services is
not required if: (1) (A) with respect to the Registrant, the aggregate
amount of all such permissible non-audit services provided to the
Registrant constitutes no more than 5% of the total amount of revenues
paid to the auditor by the Registrant during the fiscal year in which
the services are provided or (B) with respect to the adviser and any
Adviser-affiliated service provider, the aggregate amount of all such
non-audit services provided constitutes no more than 5% of the total
amount of revenues (of the type that would have to be pre-approved by
the Committee) paid to the auditor by the Registrant, the Adviser and
any Adviser-affiliated service provider during the fiscal year in
which the services are provided; (2)such services were not recognized
by the Registrant at the time of the engagement to be non-audit
services; and (3) such services are promptly brought to the attention
of the Committee and approved prior to the completion of the audit by
the Committee or its Delegate(s) (as defined below). The Committee may
delegate to one or more of its members ("Delegates") authority to
pre-approve the auditor's provision of audit services or permissible
non-audit services to the Registrant, or the provision of non-audit
services to the Adviser or any Adviser-affiliated service provider.
Any pre-approval determination made by a Delegate shall be presented
to the full Committee at its next meeting. The Committee shall
communicate any pre-approval made by it or a Delegate to Forum, who
will ensure that the appropriate disclosure is made in the
Registrant's periodic reports and other documents as required under
the federal securities laws.
(e) (2) No services included in (b) - (d) above were approved pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable as less than 50%.
(g) The aggregate non-audit fees billed by the principal accountant for
services rendered to the Registrant for the Reporting Periods were
$5,700 in 2002 and $6,000 in 2003. There were no fees billed in each
of the Reporting Periods for non-audit services rendered by the
prinicpal accountant to the Registrant's investment adviser (not
including any sub-adviser whose role is primarily portfolio management
and is subcontracted with or overseen by another investment adviser),
and any Adviser-affilated service provider.
(h) The Registrant's Audit Committee has considered whether the provision
of any non-audit services rendered to the investment adviser, to the
extent applicable, that were not pre-approved (not requiring
pre-approval) is compatible with maintaining the Auditor's
independence. Any services provided by the principal accountant to the
Registrant or to the investment adviser requiring pre-approval were
pre-approved as required.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
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 registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule
30a-3(c) under the Act) are effective in design and operation and are
sufficient to form the basis of the certifications requred by Rule 30a-(2)
under the Act, based on their evaluation of these disclosure controls and
procedures within 90 days of the filing date of this report on Form N-CSR.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act), or the internal
control over financial reporting of its service providers during the last
fiscal half year (the registrant's second half year in the case of an
annual report) that have materially affected, or are reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
ITEM 10. EXHIBITS.
(a) (1) A copy of the Code of Ethics (Exhibit filed herewith)
(a) (2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of
2002 (Exhibit filed herewith).
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).