As filed with the Securities and Exchange Commission on September 02, 2005
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 02109
(800) 472-6114
Date of fiscal year end: December 31
Date of reporting period: June 30, 2005
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. REPORT TO STOCKHOLDERS
[LOGO] ICM FUNDS
ICM SERIES TRUST
----------------
ICM/ISABELLE SMALL CAP
VALUE FUND
Semi-Annual Report
June 30, 2005
ICM/ISABELLE
SMALL CAP VALUE FUND
TABLE OF CONTENTS
SHAREHOLDER LETTER 1
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
"WHAT YOU (HAVE) SEEN IS (NOT NECESSARILY) WHAT YOU WILL GET"
To our Valued Shareholders:
I am particularly eager to share this correspondence with you as I believe that
our efforts at re-focusing the research effort and the construction of the
portfolio have begun to manifest themselves in the performance of the portfolio.
For the year to date period ended June 30, 2005 ICM/Isabelle Small Cap Value
Fund's (the "Fund") value decreased by 3.07%, while the Russell 2000(R) Index
(the "Index") declined by 1.25%. While it would appear that the Fund's
under-performance of its benchmark Index implies the contrary, I am encouraged
that the strategic decisions we made followed by the tactical actions that we
began taking at the beginning of this year, both described in my last
correspondence with you, have had a profound positive impact on performance. For
additional Fund performance and related information please refer to pages 6 and
7.
SO WHAT HAVE WE DONE AND HOW HAS IT HELPED?
Late last year we came to the conclusion that our investment philosophy and
approach were not as well served by our investment process as they should have
been. Our review suggested that we had become too concerned with
diversification, particularly as it related to performance benchmarks. The
thought of greater diversification to dampen performance volatility was
credible, but did not fit our investment perspective and capabilities as an
organization. In the attempt at increasing diversification, we added many more
investment holdings, effectively diluting our ability to focus on the individual
issues. We were evaluating companies as we always have, "buying the business,
not the stock", but we were not able to provide the depth of research that has
proven itself critical to our success in stock selection.
The strategy to remedy this was really quite simple: Reduce the number of
holdings while increasing the analytical intensity on each one. From a high of
nearly eighty positions last year, the Fund's portfolio now has just
1
forty-nine. Further, the distribution of holdings is now much more reflective of
the renewed focus on individual companies. At year end 2004, the top ten of the
fifty-five positions held accounted for 27.4% of the total dollar value, while
the last ten made up 10.8%. At the end of the second quarter of 2005 the top ten
positions made up almost 33% of the overall portfolio value, with the bottom ten
contributing just 5.9%. This is now as it should be; resulting in a very much
lower "noise" level from names entering and exiting. Realistically, going
forward, we would expect the Fund to hold the number of holdings right in the
current neighborhood of forty to fifty.
WITH THAT SAID, WHAT HAS TRANSPIRED OVER THE PAST SIX MONTHS AND WHY ARE WE SO
ENCOURAGED THAT OUR EFFORTS ARE INDEED PAYING OFF?
Early in the year, the markets basically marked time, attempting to reach higher
ground with every hint at continuing economic growth, only to retreat on nearly
any negative thought; whether about the economy, the price of oil (or any
commodity for that matter), foreign policy, fears of inflation, and often just
concern about the over-valuation of stocks in general. Following the end of the
first quarter, however, that vacillation gave way. The small-cap market became
decidedly negative for a time, partially due to the self-fulfillment of the
notion that small cap stocks have outperformed for so long they have to give way
to larger cap stocks, which are more attractive, but also due to the growing
belief that cyclical and commodity-oriented companies had seen the best of their
recoveries. After a sharp drop in April, all of those concerns seemed to vanish,
the Index gained 10.7% in May and June.
The continuing effort at bolstering and refining the portfolio focus was ongoing
through most of the period and only recently did we believe that we were seeing
its merits. While the transition undoubtedly caused some disruption in
performance, the resulting portfolio has performed exceedingly well during May
and June of 2005. The attention to detail and the reduction in portfolio
weightings to reflect specific areas of interest is bringing the tenor of the
Fund much closer to where we would like it to be.
2
To be more specific, we held our ground when the "pundits" suggested investors
bail out of cyclicals and commodities and move more into technology. As stock
pickers we ultimately decided that the cycles that are driving many of our
holdings would be longer and stronger than most were predicting. As such, we
stayed the course. That perseverance and the continued refocusing of the Fund's
portfolio more than paid off. Although lagging slightly in the strong month of
May (Fund returned 5.64% vs. a 6.54% return for the Index), performance
rebounded even more strongly in June, finally outpacing the benchmark Index
(Fund returned 5.47% vs. a 3.86% return for the Index).
As time has progressed the Fund's portfolio winners have made more of a
difference while we also have done a better job of pruning potential losers more
quickly. During this period some of those better contributors included Durect
Corporation (NASD: DRRX), a drug delivery company which we feel has an excellent
platform of intellectual property that is now rapidly gaining visibility,
particularly in the area of pain management (+55.2%); Newpark Resources (NYSE:
NR), an energy services provider that makes drilling fluids and may have an
exciting new product for potable water treatment (+45.6%); and Denbury Resources
(NYSE: DNR), which extracts oil and gas utilizing its significant reserves of
carbon dioxide (+44.9%). On the losing side, in some instances we were building
new positions, as in the case of Activcard (NASD: ACTV), a developer and
provider of so called "smart cards", which fell 48.7%; and with Hooker Furniture
(NASD: HOFT), a furniture manufacturer known for its attractive but moderately
priced entertainment systems, which retreated by 23%. In another, we ultimately
believed the long-term thesis would yet provide compelling returns. Magnetek
(NYSE: MAG), although losing over 62% during the period, due primarily to an
unfavorable patent litigation outcome, remains on track in its development of
exciting new dc power-supply and control technologies which are being rolled out
as the business cycle for these items begins to turn up. While the Magnetek
stock price did not fully recover to previous levels, it did make a strong
recovery (+60%) in late June through late July from its low of $1.90 reached in
early May to just under $3. As an example of our investment conviction, we
almost tripled the Fund's holdings of Magnetek, purchasing some 433,000 shares,
over half of which were bought at $2.25 or less.
3
WHAT IS OUR OUTLOOK FOR THE BALANCE OF THE YEAR?
Although we like to talk in terms of specific situations, it appears to us that
a number of the cyclical recoveries that have taken life should continue to
gather momentum for some time. We feel that the push of energy and commodity
inputs is finally forcing manufacturers and producers of many kinds to look at
profitability rather than market share as a more important determinant of
participation in a given business. Grudgingly, in the face of rapidly rising
input costs, sizable price increases have been announced by manufacturers across
a variety of industries, and to the surprise of many, they have for the most
part been accepted by customers. This is a good turn of events in that not only
does the product become more profitable to the supplier, but also implied is a
sense that demand from the buyer's end customer is more robust, giving
confidence as to the development of future business. As such, we intend to
continue to emphasize the Fund's presence in basic industries such as chemicals,
mining, and perhaps paper; as well as in energy, but we see more than just a
pricing play; and in selected areas of manufacturing, those more tied to capital
spending than to the consumer. Despite volatility, the healthcare area continues
to be one of considerable attraction for the same reasons as we have described
in the past: Big pharmaceutical companies have become too big to innovate, and
have become the dominant means of distribution, leaving smaller firms to provide
the new discoveries. Finally, our interest is rising in two other areas, both of
which appear to be gradually emerging from notably ugly downturns. We are
invested in what we believe are two promising turnarounds in the utility area,
Aquila (NYSE: ILA) and Dynegy (NYSE: DYN), as well as in the telecommunications
equipment sector via Broadwing (NASD: BWNG). All three are asset rich, and if
they can execute successfully by paying down debt while their industries
recover, the rewards of ownership should be most satisfying.
In closing, let me revert to the first person. In that I have averred a renewed
encouragement with respect to our investment activities, I am much more
confident that the recent improvement in our methodology will not be transient.
Absent some terrible exogenous event which could negatively impact markets in
general, I believe that we are functioning better and are better
4
positioned to provide you, the Fund's shareholders, with above average long-term
returns. For your patience and perseverance through this journey, I am grateful.
I look forward to our next communication while inviting your continued
participation as an investor in the Fund.
Respectfully submitted,
/s/ Warren J. Isabelle
Warren J. Isabelle
Portfolio Manager
- ----------
INVESTMENTS IN SMALLER COMPANIES 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. RETURNS SHOWN
ARE FOR THE FUND'S INVESTMENT SHARE CLASS; OTHER SHARE CLASS RETURNS WILL VARY.
THE VIEWS IN THIS REPORT WERE THOSE OF THE FUND MANAGER AS OF JUNE 30, 2005 AND
MAY NOT REFLECT HIS VIEWS ON THE DATE THIS REPORT IS FIRST PUBLISHED OR ANYTIME
THEREAFTER. THESE VIEWS ARE INTENDED TO ASSIST SHAREHOLDERS OF THE FUND IN
UNDERSTANDING THEIR INVESTMENTS IN THE FUND AND DO NOT CONSTITUTE INVESTMENT
ADVICE.
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 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.
[The following table was represented as a line graph in the printed material.]
Average Annual Return for the period ended 6/30/2005
One year .............................. 6.04%
Five year.............................. 6.71%
Inception (3/9/1998) .................. 6.80%
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 9,494
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
1/31/2004 14,722 13,600
2/29/2004 15,040 13,722
3/31/2004 14,866 13,850
4/30/2004 14,907 13,143
5/31/2004 14,630 13,353
6/30/2004 15,255 13,915
7/31/2004 13,944 12,978
8/31/2004 13,617 12,911
9/30/2004 14,303 13,517
10/31/2004 14,323 13,784
11/30/2004 15,582 14,979
12/31/2004 16,688 15,423
1/31/2005 16,023 14,779
2/28/2005 16,350 15,029
3/31/2005 15,767 14,599
4/30/2005 14,518 13,763
5/31/2005 15,337 14,664
6/30/2005 16,176 15,230
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.
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
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.
[The following table was represented as a line graph in the printed material.]
Average Annual Return for the period ended 6/30/2005
One year............................... 6.59%
Five year.............................. 7.13%
Inception (3/27/1998) ................. 7.20%
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 9,169
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
1/31/2004 14,976 13,135
2/29/2004 15,294 13,253
3/31/2004 15,130 13,376
4/30/2004 15,171 12,694
5/31/2004 14,894 12,896
6/30/2004 15,539 13,439
7/31/2004 14,198 12,534
8/31/2004 13,871 12,470
9/30/2004 14,577 13,055
10/31/2004 14,598 13,312
11/30/2004 15,877 14,467
12/31/2004 17,013 14,895
1/31/2005 16,338 14,274
2/28/2005 16,676 14,516
3/31/2005 16,092 14,100
4/30/2005 14,813 13,293
5/31/2005 15,652 14,163
6/30/2005 16,563 14,709
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
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005 (UNAUDITED)
MARKET
SHARES SECURITY VALUE
------ -------- -----
COMMON STOCK - 100.20%
CAPITAL GOODS - 3.91%
68,800 Lamson & Sessions Co. $ 813,216
81,500 Shaw Group, Inc. 1,753,065
------------
2,566,281
------------
CONSUMER CYCLICALS - 16.31%
64,300 4Kids Entertainment, Inc.+ 1,278,284
93,100 Gevity HR, Inc. 1,864,793
18,800 Hooker Furniture Corp. 328,436
87,200 Maytag Corp. 1,365,552
145,900 Navigant International, Inc.+ 2,143,271
98,600 Russell Corp. 2,016,370
105,400 Sunterra Corp. 1,708,534
------------
10,705,240
------------
CONSUMER STAPLES - 6.63%
17,100 Chiquita Brands International, Inc. 469,566
176,100 Playtex Products, Inc. 1,894,836
40,500 United Stationers, Inc. 1,988,550
------------
4,352,952
------------
ENERGY - 5.29%
16,000 Denbury Resources, Inc. 636,320
160,200 Newpark Resources 1,201,500
95,300 Petrohawk Energy Corp. 1,029,240
16,700 Whiting Petroleum Corp. 606,377
------------
3,473,437
------------
FINANCIALS - 7.99%
50,900 Allmerica Financial Corp. 1,887,881
8,400 Arch Capital Group, Ltd. 378,420
21,700 Assured Guaranty, Ltd. 506,912
237,100 PMA Capital Corp. - Class A 2,093,593
29,300 USI Holdings Corp.+ 377,384
------------
5,244,190
------------
The accompanying notes are an integral part of the financial statements.
8
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005 (UNAUDITED)(CONTINUED)
MARKET
SHARES SECURITY VALUE
------ -------- -----
HEALTH CARE - 13.40%
280,800 ARIAD Pharmaceuticals, Inc. $ 1,870,128
501,400 Durect Corp. 2,552,126
76,700 Genitope Corp. 984,828
63,100 HealthTronics, Inc. 819,669
87,400 Maxygen, Inc. 599,564
170,600 Neopharm, Inc. 1,704,294
152,300 Sirna Therapeutics, Inc.+ 266,525
------------
8,797,134
------------
INDUSTRIALS - 4.67%
83,800 Global Power Equipment Group, Inc. 666,210
134,300 Quanta Services, Inc. 1,181,840
193,800 Transpro, Inc. 1,219,002
------------
3,067,052
------------
INFORMATION TECHNOLOGY - 11.40%
289,600 ActivCard Corp. 1,323,472
41,500 Analogic Corp. 2,088,280
68,200 Cherokee International Corp. 255,068
77,300 Datastream Systems, Inc. 562,744
24,000 HMS Holdings Corp. 159,840
594,400 MagneTek, Inc. 1,527,608
523,844 SoftBrands, Inc.+ 940,300
44,600 Technitrol, Inc. 630,198
------------
7,487,510
------------
MATERIALS - 19.29%
84,208 Aleris International, Inc. 1,898,891
115,600 AM Castle & Co. 1,787,176
113,300 Crompton Corp. 1,603,195
163,400 Material Sciences Corp. 2,379,104
87,600 Olin Corp. 1,597,824
249,200 PolyOne Corp. 1,649,704
200,800 Western Silver Corp. 1,746,960
------------
12,662,854
------------
OTHER - 1.74%
327,200 Westaff, Inc. 1,145,200
------------
The accompanying notes are an integral part of the financial statements.
9
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 2005 (UNAUDITED)(CONTINUED)
MARKET
SHARES SECURITY VALUE
------ -------- -----
TELECOMMUNICATION SERVICES - 3.23%
459,400 Broadwing Corp. $ 2,122,428
------------
UTILITIES - 6.34%
522,700 Aquila, Inc. 1,886,947
468,000 Dynegy, Inc. - Class A 2,274,480
------------
4,161,427
------------
TOTAL COMMON STOCK (COST $51,391,299) 65,785,705
------------
TOTAL INVESTMENTS (COST $51,391,299)* - 100.20% 65,785,705
------------
OTHER ASSETS NET OF LIABILITIES - (0.20)% (131,913)
------------
NET ASSETS - 100.00% $ 65,653,792
============
- ----------
+ Non-income producing security.
* Cost for Federal income tax purposes is substantially the same as for
financial statements and net unrealized appreciation (depreciation)
consists of:
Gross Unrealized Appreciation ..................... $ 16,875,856
Gross Unrealized Depreciation ..................... (2,481,450)
------------
Net Unrealized Appreciation (Depreciation) ........ $ 14,394,406
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
[The following table was represented as a pie chart in the printed material.]
Materials 19.20%
Consumer Cyclicals 16.30%
Health Care 13.40%
Information Technology 11.40%
Financials 8.00%
Consumer Staples 6.60%
Utilities 6.30%
Industrials 4.70%
Energy 5.30%
Capital Goods 3.90%
Telecommunication Services 3.20%
Other 1.70%
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, 2005 (UNAUDITED)
ASSETS:
Investments in securities at market value
(cost $51,391,299) $ 65,785,705
Receivable for securities sold 294,616
Receivable for Fund shares sold 3,656
Interest and dividends receivable 5,928
Prepaid expenses 15,142
------------
TOTAL ASSETS 66,105,047
------------
LIABILITIES:
Payable for securities purchased 104,268
Due to custodian 183,288
Payable to adviser 46,017
Other accrued expenses 117,682
------------
TOTAL LIABILITIES 451,255
------------
NET ASSETS $ 65,653,792
============
NET ASSETS CONSIST OF:
Paid-in capital 42,173,508
Accumulated net investment income (loss) (513,104)
Accumulated net realized gain (loss) on investments 9,598,982
Net unrealized appreciation (depreciation) of investments 14,394,406
------------
NET ASSETS $ 65,653,792
============
INVESTMENT CLASS SHARES:
Net Assets (unlimited shares of $0.001 par beneficial
interest authorized; 3,444,189 shares outstanding) $ 54,434,859
============
Net asset value, offering and redemption price
per Investment Class Share $ 15.80
============
INSTITUTIONAL CLASS SHARES:
Net Assets (unlimited shares of $0.001 par beneficial
interest authorized; 693,477 shares outstanding) $ 11,218,933
============
Net asset value, offering and redemption price
per Institutional Class Share $ 16.18
============
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, 2005
(UNAUDITED)
----------------
INVESTMENT INCOME
Dividends $ 164,320
Interest 578
------------
TOTAL INCOME 164,898
------------
EXPENSES
Investment advisory fees 356,123
Administration fees 32,052
Transfer agent fees
Investment Class Shares 42,718
Institutional Class Shares 6,569
Distribution fees
Investment Class Shares 72,591
Accounting fees 29,289
Custodian fees 9,364
Professional fees 70,890
Registration fees 17,607
Trustees' fees and expenses 11,643
Compliance services fees 17,746
Miscellaneous fees 30,486
------------
TOTAL EXPENSES 697,078
Fees waived and expenses reimbursed (19,076)
------------
NET EXPENSES 678,002
------------
NET INVESTMENT INCOME (LOSS) (513,104)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS AND FOREIGN
CURRENCY TRANSACTIONS
Net realized gain (loss) on investments 6,910,898
Net change in unrealized appreciation (depreciation)
of investments (9,496,047)
------------
Net realized and unrealized gain (loss) on investments (2,585,149)
------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ (3,098,253)
============
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
JUNE 30, YEAR ENDED
2005 DECEMBER 31,
(UNAUDITED) 2004
------------ ------------
OPERATIONS
Net investment income (loss) $ (513,104) $ (1,136,362)
Net realized gain (loss) on investments 6,910,898 6,212,138
Net increase from payment by affiliate -- 21,855
Net change in unrealized appreciation
(depreciation) of investments (9,496,047) 8,290,142
------------ ------------
Increase (decrease) in net assets
resulting from operations (3,098,253) 13,387,773
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares subscribed:
Investment Class 4,835,264 49,075,671
Institutional Class 904,094 2,633,693
Redemption of shares
Investment Class (18,688,684) (56,958,648)
Institutional Class (4,316,759) (8,356,053)
------------ ------------
Increase (Decrease) in net assets
from capital share transactions (a) (17,266,085) (13,605,337)
------------ ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (20,364,338) (217,564)
------------ ------------
NET ASSETS
Beginning of period 86,018,130 86,235,694
------------ ------------
End of period (including
accumulated net investment loss
of $513,104 and $-, respectively) $ 65,653,792 $ 86,018,130
============ ============
(a) Transactions in capital stock were:
Investment Class
Shares sold 314,796 3,435,681
Shares redeemed (1,214,284) (4,018,097)
------------ ------------
Increase (Decrease) in shares outstanding (899,488) (582,416)
============ ============
Institutional Class
Shares sold 58,217 186,489
Shares redeemed (278,540) (573,322)
------------ ------------
Increase (Decrease) in shares outstanding (220,323) (386,833)
============ ============
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 ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
INVESTMENT CLASS (UNAUDITED) 2004
- ---------------- ---------------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.31 $ 13.80
------------ ------------
Increase (decrease) from investment operations:
Net investment loss (0.11)* (0.19)*
Net realized and unrealized gains
(losses)
(losses) on investments (0.40)* 2.70*
------------ ------------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS (0.51) 2.51
------------ ------------
Less distributions from
net realized gains -- --
------------ ------------
NET ASSET VALUE, END OF PERIOD $ 15.80 $ 16.31
============ ============
TOTAL RETURN** (3.07)% 18.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 54,435 $ 70,825
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 2.00%*** 1.89%
After waivers and/or reimbursements 1.95%*** 1.86%
Ratio of net investment income (loss) to
average net assets:
Before waivers and/or reimbursements (1.54)%*** (1.38)%
After waivers and/or reimbursements (1.49)%*** (1.35)%
Portfolio turnover rate 35.94% 90.58%
- ----------
* Calculated based on average shares outstanding during the period.
** 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 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. Not annualized for periods less than one
year.
*** Annualized for periods less than one year.
The accompanying notes are an integral part of the financial statements.
14
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001 2000
------------ ------------ ------------ ------------
$ 9.76 $ 11.82 $ 10.87 $ 10.33
------------ ------------ ------------ ------------
(0.13)* (0.14) (0.08) (0.05)
4.17* (1.92) 1.03 0.84
------------ ------------ ------------ ------------
4.04 (2.06) 0.95 0.79
------------ ------------ ------------ ------------
-- -- -- (0.25)
------------ ------------ ------------ ------------
$ 13.80 $ 9.76 $ 11.82 $ 10.87
============ ============ ============ ============
41.39% (17.43)% 8.74% 7.73%
$ 67,983 $ 64,552 $ 85,386 $ 75,237
1.94% 1.80% 1.74% 1.82%
1.88% 1.71% 1.74% 1.81%
(1.32)% (1.17)% (0.61)% (0.44)%
(1.26)% (1.08)% (0.61)% (0.43)%
51.70% 50.41% 43.16% 53.91%
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 ENDED YEAR ENDED
JUNE 30, 2005 DECEMBER 31,
INSTITUTIONAL CLASS (UNAUDITED) 2004
- ---------------- ---------------- ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.63 $ 14.03
------------ ------------
Increase (decrease) from
investment operations:
Net investment loss (0.10)* (0.16)*
Net realized and unrealized gains
(losses)
(losses) on investments (0.35)* 2.76*
------------ ------------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS (0.45) 2.60
------------ ------------
Less distributions from
net realized gains -- --
------------ ------------
NET ASSET VALUE, END OF PERIOD $ 16.18 $ 16.63
============ ============
TOTAL RETURN ** (2.65)% 18.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 11,219 $ 15,193
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 1.76%*** 1.63%
After waivers and/or reimbursements 1.70%*** 1.61%
Ratio of net investment income (loss) to
average net assets:
Before waivers and/or reimbursements (1.30)%*** (1.12)%
After waivers and/or reimbursements (1.24)%*** (1.10)%
Portfolio turnover rate 35.94% 90.58%
* Calculated based on average shares outstanding during the period.
** 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 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. Not annualized for periods less than one
year.
*** Annualized for periods less than one year.
The accompanying notes are an integral part of the financial statements.
16
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS (CONTINUED)
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001 2000
------------ ------------ ------------ ------------
$ 9.89 $ 11.95 $ 10.92 $ 10.36
------------ ------------ ------------ ------------
(0.10)* (0.11) (0.05) (0.02)
4.24* (1.95) 1.08 0.83
------------ ------------ ------------ ------------
4.14 (2.06) 1.03 0.81
------------ ------------ ------------ ------------
-- -- -- (0.25)
------------ ------------ ------------ ------------
$ 14.03 $ 9.89 $ 11.95 $ 10.92
============ ============ ============ ============
41.86% (17.24)% 9.43% 7.90%
$ 18,253 $ 20,920 $ 29,502 $ 26,225
1.61% 1.49% 1.49% 1.57%
1.55% 1.44% 1.49% 1.56%
(0.98)% (0.86)% (0.36)% (0.18)%
(0.93)% (0.82)% (0.36)% (0.17)%
51.70% 50.41% 43.16% 53.91%
The accompanying notes are an integral part of the financial statements.
17
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (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 Shares and
Institutional Shares (collectively, the "Shares"), each of which has equal
rights as to class and voting privileges. The Investment Shares have exclusive
voting rights with respect to its distribution plan pursuant to Rule 12b-1 under
the 1940 Act ("12b-1 Plan") and are subject to 12b-1 Plan expenses. The Fund
commenced operations on March 9, 1998 (March 27, 1998 for the Institutional
Shares). The investment objective of the Fund is to seek capital appreciation by
investing primarily in relatively undervalued common stocks of domestic small
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 provided by
independent pricing services. Money market instruments that mature in
sixty days or less may be valued at amortized cost.
The Fund values its investments at fair value pursuant to procedures
adopted by the Board of Trustees (the "Board") if (1) market quotations
are insufficient or not readily available or (2) the Adviser believes that
the prices or values available are unreliable.
18
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
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. 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. 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, 2004, the Fund reclassified $21,865 to
decrease accumulated net realized gain and $1,136,362 to decrease
accumulated net investment loss, with a decrease to paid-in capital of
$1,114,497. The reclassification has no impact on the net asset value of
the Fund and is primarily due to net operating losses. As of December 31,
2004, distributable earnings on a tax basis were as follows:
Undistributed Long-Term Gain $ 2,924,081
Unrealized Appreciation (Depreciation) 23,654,456
19
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
E. 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.
F. REPURCHASE AGREEMENTS. The Fund may invest in repurchase agreements.
The Fund will require the financial institution with which the Fund enters
into a repurchase agreement 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.
G. 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.
H. 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
$25,598,585 and $39,816,714, respectively, for the six months ended June 30,
2005.
20
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
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 an investment
advisory 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 annual Fund operating expenses, including its investment advisory
fee, to 1.95% of the average daily net assets annually for the Investment Shares
and 1.70% of the average daily net assets annually for the Institutional Shares,
and to waive such fees and reimburse expenses to the extent that they exceed
these amounts. For the six months ended June 30, 2005, advisory fees of $13,509
were waived by ICM.
INVESTMENT ADVISORY CONTRACT APPROVAL - Pursuant to the requirements of the
Investment Company Act of 1940, as amended (the "1940 Act"), the Board reviews
the Trust's investment advisory agreement every year to determine whether the
advisory contract should be renewed for an additional one-year period. Renewal
of the contract requires the approval of a majority of the Board, including a
majority of the trustees who are not "interested persons" of the Trust, as such
term is defined under the 1940 Act (the "Disinterested Trustees").
In considering the continuation of the advisory contract, the Board, including
the Disinterested Trustees, requests and reviews information relating to the
Fund, including but not limited to reports prepared by ICM and the Trust's
administrator and materials provided by counsel to the Trust and counsel to the
Disinterested Trustees. In addition to materials presented on an annual basis
(as described below), matters bearing on advisory services, including but not
limited to Fund performance, portfolio composition, soft dollar usage and
directed brokerage are considered at most, if not all, of the meetings of the
Board.
21
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
At the February 17, 2005 Board meeting, the Board, including the Disinterested
Trustees, considered the approval of the continuance of the Advisory Agreement
pertaining to the Fund. In evaluating the investment advisory agreement for the
Fund, the Board reviewed materials furnished by the Trust's administrator,
counsel to the Trust and the Disinterested Trustees, and ICM, including
information regarding ICM, its personnel and operations and its financial
condition. Among other information, the Board reviewed information regarding:
(1) the nature, extent and quality of the services provided to the Fund; (2) the
investment performance of the Fund and ICM relative to the Fund, including
information on both the short-term and long-term investment performance of the
Fund and comparisons to a relevant peer group of funds and an appropriate index;
(3) the advisory fees charged and total expense ratios of the Fund compared to a
relevant peer group of funds; (4) ICM's financial condition and the
profitability of ICM with respect to its relationship with the Fund; (5) the
extent to which economies of scale would be realized as the Fund grows and
whether ICM's advisory fee reflects these economies of scale; and (6) other
benefits received by ICM and its affiliates from their relationship with the
Fund. In considering the investment advisory agreement, the Board, including the
Disinterested Trustees, did not identify any single factor as all-important or
controlling, and this summary does not detail all the matters considered.
Overall, the Board concluded that continuation of the Advisory Agreement would
be in the best interests of the Fund and its shareholders and that the services
provided by ICM under the Advisory Agreement are satisfactory and continue to
support the Board's original selection of ICM.
In considering the nature, extent and quality of the services provided to the
Fund, the Board specifically discussed the nature and high quality of services
provided by ICM, as well as ICM's effective coordination of service provider
relationships and its attentiveness to the importance of regulatory compliance.
In particular, the Board noted the fact that ICM had not experienced any
material Code of Ethics violations during the last 12 months
22
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
and that no claims had been made against ICM's Errors and Omissions Insurance
policy during the past 3 years. In addition, the Board also considered the
nature and extent of benefits that ICM received from the brokerage and research
services it received from broker-dealers who executed portfolio transactions for
the Fund, ICM's trading policies and average commissions per trade charged to
the Fund, determining that the quality of those services, as described by ICM,
also contributed to the overall quality of services provided by ICM to the Fund.
The Board determined that these considerations supported the conclusion that the
services provided to the Fund by ICM are satisfactory.
The Board also considered ICM's long-term and short-term performance, reviewing
publicly available statistical information ("Peer Group information") regarding
the performance achieved by funds generally considered comparable to the Fund
and noting in particular that for the three-month period ended December 31,
2004, each Fund share class outperformed the Russell 2000 Index and ranked in
the top quartile of the Lipper Small-Cap Core Funds and Lipper Small-Cap Value
Funds categories. In concluding that the Fund's performance was satisfactory and
merited continuation of the Advisory Agreement, the Board based its conclusion
on the specific facts and circumstances of the Fund and did not rely primarily
upon the Peer Group information. The performance of the Fund relative to
unregistered accounts of ICM was not a material factor in the Board's
deliberations in light of the difference between the regulatory and investment
environments experienced by such accounts and the Fund.
The Board considered ICM's compensation for providing advisory services to the
Fund, the cost to ICM to provide such services, and ICM's profitability as a
result of the Advisory Agreement and concluded, based on information presented
by ICM, that the profits realized by ICM were not excessive. In this regard, the
Board noted the relatively higher costs to ICM in operating a registered
investment company as opposed to separately managed unregistered accounts. The
Board was also informed as to ICM's
23
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
overall financial condition. The Board also reviewed comparative information on
fees and expenses of similar mutual funds, including those with similar levels
of assets under management, noting that some of the funds in the peer group were
part of larger fund complexes and thus enjoyed operational efficiencies not
available to a stand-alone fund. In this regard, the Board noted that while
ICM's contractual advisory fee was above the mean and median advisory fee for
funds comprising the Fund's Lipper Inc. peer group, the factors discussed above
supported a finding that the fees were reasonable.
The Board also concluded that, at the Fund's current size, there were reduced
economies of scale available that might be used to lessen Fund expenses, and
noted that if the Fund should see a substantial increase in its asset levels,
opportunities for such savings might be possible. In addition, the Board was
informed as to potential benefits that might inure to ICM as a result of its
investment advisory relationship to the Fund, including the potential for an
"incremental degree of publicity" that ICM may attract as a result of managing
the Fund, which increase, were it to occur, could also translate into an
increase in Fund assets.
After requesting and reviewing such information as it deemed necessary, the
Board and the Disinterested Trustees concluded that the continuance of the
Advisory Agreement was in the best interests of the Fund and its shareholders.
ADMINISTRATION AND OTHER SERVICES - Citigroup Fund Services, LLC, through its
various affiliates ("Citigroup"), provides administration, portfolio accounting
and transfer agency services to the Fund.
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
24
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
included as part of the Transfer Agency fees on the statement of operations. For
the period ended June 30, 2005, the Fund was reimbursed expenses of $5,567 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 six months ended June 30, 2005, no custodian expenses were
reimbursed.
DISTRIBUTOR - Foreside Fund Services, LLC is the Fund's distributor (the
"Distributor). The Distributor is not affiliated with the Adviser or Citigroup
or its various affiliates. The Distributor receives no compensation from the
Fund for its distribution services. No 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.
Under a Compliance Services Agreement with the Trust, the Distributor provides a
Chief Compliance Officer to the Trust as well as certain additional compliance
support functions.
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.
25
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
During the six months ended June 30, 2005, the Fund was charged $374 from
borrowings under the line of credit. As of June 30, 2005, the Fund had no loans
outstanding under the line of credit.
NOTE 5 - DISTRIBUTION PLAN
The Trustees of the Fund have adopted a 12b-1 Plan with respect to the
Investment 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 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 Shares for distribution expenses borne, or paid to others, by the
Distributor. For the six months ended June 30, 2005, the Fund incurred $72,591
in distribution costs for Investment Shares.
NOTE 6 - INVESTMENT RESTRICTION VIOLATIONS
For the year ended December 31, 2004, the Adviser reimbursed the Fund to offset
a trading investment restriction violation. As a result of the trading
investment restriction, the Fund sold the violating securities at a loss. This
amount is reflected as payment by affiliate on the Statements of Changes in Net
Assets. This payment had no effect on the total return of the Fund.
NOTE 7 - PROXY VOTING INFORMATION
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 and on the
SEC's website at www.sec.gov. The Fund's proxy voting record for the
twelve-month period ended June 30, is available, without charge and upon
request, by calling (800) 472-6114, on the Fund's website www.icmfunds.com and
on the SEC's website at www.sec.gov.
26
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
NOTE 8 - AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULES
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available, without charge and upon request, on the SEC's website at
www.sec.gov. or may be reviewed and copied at the SEC's Public Reference Room in
Washington, D.C. Information on the operation of the Public Reference Room may
be obtained by calling (800) SEC-0330.
NOTE 9 - SHAREHOLDER EXPENSES EXAMPLE
As a shareholder of the Fund, you incur ongoing costs, including management
fees, distribution fees with respect to Investment Shares and other Fund
expenses. This example is intended to help you understand these costs (in
dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds.
The following example is based on $1,000 invested at the beginning of the period
and held for the entire period from January 1, 2005 through June 30, 2005.
ACTUAL EXPENSES - The first line of the table below provides information about
actual account values and actual expenses. You may use the information in this
line, together with the amount you invested, to estimate the expenses that you
paid over the period. Simply divide your account value by $1,000 (for example,
an $8,600 account value divided by $1,000 = 8.6), then multiply the result by
the number in the first line under the heading "Expenses Paid During Period" to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The second line of the table
provides information about hypothetical account values and hypothetical expenses
based on the Fund's actual expense ratio and an assumed rate of return of 5% per
year before expenses, which is not the Fund's actual return. The hypothetical
account values and expenses may not be used to
27
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing cost of investing in the
Fund and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Please note that expenses shown in the table are meant to highlight your ongoing
costs only and do not reflect any transactional costs. Therefore, the second
line of the table is useful in comparing ongoing costs only, and will not help
you determine the relative total costs of owning different funds. In addition,
if these transactional costs had been included, your costs would have been
higher.
BEGINNING ENDING EXPENSES
ACCOUNT VALUE ACCOUNT VALUE PAID
JANUARY 1, JUNE 30, DURING
2005 2005 PERIOD*
------------- ------------- -------------
Investment Shares
Actual Return $ 1,000.00 $ 969.33 $ 9.52
Hypothetical Return
(5% return before
expenses) $ 1,000.00 $ 1,015.12 $ 9.74
Institutional Shares
Actual Return $ 1,000.00 $ 973.52 $ 8.32
Hypothetical Return
(5% return before
expenses) $ 1,000.00 $ 1,016.36 $ 8.50
- ----------
* Expenses are equal to the Fund's annualized expense ratios of 1.95% and
1.70% for Investment Shares and Institutional Shares, respectively,
multiplied by the average account value over the period, multiplied by the
number of days in the most recent fiscal half-year/365 (to reflect the
half-year period).
28
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2005 - (UNAUDITED)(CONTINUED)
NOTE 10 - CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM On February 7,
2005 PricewaterhouseCoopers LLP ("PwC") resigned as the independent registered
public accounting firm of the Trust. At a special meeting on March 29, 2005, the
Trust's Board approved Grant Thornton, LLP ("GT") as the new independent
registered public accounting firm for the registrant.
PwC's reports for the past two fiscal years did not contain either an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.
During the Fund's past two fiscal years and through the date of PwC's
resignation, the Fund had no disagreements with PwC on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedures.
29
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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
DISTRIBUTOR
Foreside Fund Services, LLC
Two Portland Square,
1st Floor Portland, ME 04101
1-866-453-5199
www.foresides.com
- --------------------------------------------------------------------------------
This report is submitted for the general information of the shareholders of the
Fund. It is not authorized for distribution to prospective investors unless
preceded or accompanied by an effective prospectus, which includes information
regarding the Fund's risks, objectives, fees and expenses, experience of its
management, and other information.
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.
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. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS
Included as part of report to shareholder under Item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES Not
applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The registrant does not accept nominees to the board of directors from
shareholders.
ITEM 11. 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 Investment Company Act of 1940 (the "Act")) are effective, based on
their evaluation of these disclosure controls and procedures required by Rule
30a-3(b) as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) that occurred during the
registrant's last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
Registrant ICM Series Trust
By /s/ Warren J. Isabelle
-----------------------------
Warren J. Isabelle, President
Date August 31, 2005
---------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By /s/ Warren J. Isabelle
-----------------------------------
Warren J. Isabelle, President
Date August 31, 2005
-----------------------------------
By /s/ Gary S. Saks
-----------------------------------
Gary S. Saks, Treasurer
Date August 31, 2005
-----------------------------------