As filed with the Securities and Exchange Commission on March 10, 2006
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
Suite 240
21 Custom House Street
Boston, MA 02109
(800) 472-6114
Date of fiscal year end: DECEMBER 31, 2005
Date of reporting period: JANUARY 1, 2005 - DECEMBER 31, 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
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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
Annual Report
December 31, 2005
ICM/ISABELLE
SMALL CAP VALUE FUND
TABLE OF CONTENTS
SHAREHOLDER LETTER ......................................................... 1
PORTFOLIO OF INVESTMENTS ................................................... 8
STATEMENT OF ASSETS AND LIABILITIES ........................................ 12
STATEMENT OF OPERATIONS .................................................... 13
STATEMENTS OF CHANGES IN NET ASSETS ........................................ 14
FINANCIAL HIGHLIGHTS ....................................................... 16
NOTES TO FINANCIAL STATEMENTS .............................................. 20
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM .................... 30
ADDITIONAL INFORMATION ..................................................... 32
FUND TRUSTEE AND OFFICERS .................................................. 35
SHAREHOLDER LETTER
To our Valued Shareholders:
As always, we appreciate the opportunity to communicate with you. Through this
annual shareholder letter, we can reflect on what has gone on in the world of
small cap stocks and how we have managed those assets that you have entrusted to
us. In doing so, we aim to offer you an assessment not only of how we performed
in both absolute and relative terms, but also how those results came to be. We
should be self-critical in examining whether what we obtained was what we
intended: Is our philosophy, our approach, our investment process achieving the
desired result? What did we do well and, what could we do better? Finally, just
as we look back we look forward, providing in our own humble way, ideas about
what the New Year might hold. These are the things we feel should be conveyed to
you, so that you might better understand why your portfolio did what it did and
how we believe it might behave going forward.
For the fiscal year ended December 31, 2005, domestic stocks struggled to gain
ground in the face of some daunting forces. Corporate profits continued to
advance smartly, but as you may recall from last year's correspondence, we
suggested that stocks in general were already expensive. Further, rapidly rising
energy and commodity costs, as well as continuing geopolitical uncertainties,
and a number of natural disasters, regularly weighed on stock markets,
ultimately limiting any gains. Small stocks, the object of repeated concerns
about valuation and length of out performance, nevertheless continued to do
relatively well. While the S&P 500 returned, with dividends, a total of 4.91%,
the Russell 2000 fared nearly as well, advancing 4.55%. Your Fund's Investment
Class shares returned 4.81%, slightly bettering its benchmark, the Russell 2000
Index. We are encouraged that our actions over the past 15 months appear to be
gradually bearing fruit, evidenced to us by the fact that second half
performance was much better than that of the first half of the year: The Fund
under-performed the Russell 2000 index by 1.82% through the end of June, but
from that time until year end outperformed by 2.25%.
As we discussed in detail last year, in 2005 we set out to intensify our
research efforts and to create a more focused portfolio, in the belief that if
we based our decisions on individual stock selection and detailed fundamental
analysis, we could do a better job with fewer names. Throughout 2005 we have
worked diligently, continuing to focus the portfolio until we could bring the
above process to a steady state. At the end of 2004 there were some 57 holdings
in the portfolio, whereas there are presently just 42. It is important to point
out that, in reducing the number of holdings, we did not reduce the
diversification of the portfolio, which remains well represented across a
variety of economic sectors.
1
I know I am perhaps overbearing in revisiting our discussions on investment
philosophy and approach each year, but I cannot over stress our belief that if
you want to pick stocks, you have to be willing to focus intensely on a given
candidate. You get paid for having a good batting average, but you don't have to
go to bat a lot. I know this runs contrary to the vast majority of portfolio
pundits and advisory services who continuously assert that you should own a lot
of names and not deviate too much from the sector weightings of your benchmark,
but individual security analysis and stock selection is what we do and what we
feel we do best. To reiterate, we do not sacrifice sector diversification in
having fewer names, but the leverage of our efforts is apparent in the
potentially greater 'bang for the buck' we may get with a more focused
portfolio. But you have to be right and to be right you must do your homework -
and keep doing it. For us, the more is not necessarily the merrier. If we can
accomplish this, we truly believe that we can outperform the Fund's benchmark
over the long term while mitigating risk. It is true that at times Fund
volatility will be greater because the portfolio has fewer holdings, but
provided our research efforts are effective we believe the Fund will benefit
tremendously over time.
I feel that we have indeed been moving in the right direction. Although a number
of the Fund's investments performed very poorly on a year-to-year basis, we
believe our heightened efforts at risk mitigation spared the Fund potentially
serious damage: We remained disciplined, jettisoning most, in whole or in large
part, ahead of major declines. This was evident in the area of healthcare, where
a number of our now former holdings reacted negatively to product delays or
developmental complications. Epix Pharmaceuticals (NASD: EPIX), which is
developing a new imaging agent, lost more than 77% for the year, but the Fund's
holding experienced less than half of that. Similarly, we exited Genitope (NASD:
GTOP), Maxygen (NASD:MAXY), and Neose (NASD: NTEC), with relatively modest
actual losses.
Perhaps the greatest impact to last year's Fund performance can be attributed to
what we didn't do. In this case, it was to hold on to some of the Fund's earlier
winners. It seems as though many of the business cycles we identified early on
as having significant recovery potential are playing out much longer and
stronger than was initially thought. We alluded to this in both last year's
letter to shareholders as well as this year's mid year correspondence, and
indeed the Fund's investments in materials and basic industries continue to
perform exceptionally well. For example, A.M. Castle (NYSE:CAS), a metals
distributor, returned almost 83% for the year, on top of a 64% performance in
2004 and 60% the year before that. Aleris (NYSE: ARS), formerly known as
Commonwealth Industries, an integrated aluminum scrap to sheet metal producer,
did better yet, advancing more than 90% last year, following gains of 71% and
22% in 2004 and 2003, respectively. We exited some of the Fund's better 2004
holdings too early: RTI (NYSE: RTI), a titanium products manufacturer gained
some 85% last year, following a gain of 22% in 2004 and 67% in 2003; JLG
Industries (NYSE: JLG), which makes a wide variety of lift equipment, followed
similarly, up 132% in 2005, after rising 29% the previous year and 103% in 2003.
2
The Fund's best performer last year was a basic materials-related company,
Lamson and Sessions (NYSE: LMS) which shot up some 174%, on the strength of far
better than expected earnings from both its plastic pipe and Carlon building
products divisions. With rapidly escalating oil and gas prices, it is no
surprise that Energy did well, with Magnum Hunter, recently acquired by Cimarex
(NYSE: XEC), Denbury Resources (NYSE: DNR), and Newpark Resources (NYSE: NR),
all returning on the order of 50% or more. Construction names such as Shaw Group
(NYSE: SGR) and Quanta Services (NYSE: PWR) produced gains of 63% and 64%,
respectively, as demand for plant and equipment finally began to improve. Once
dramatically undervalued, stock brokerage firm ITG Group (NYSE: ITG) put its
difficulties behind it, rebounding more than 77%. Finally, despite our
difficulties in the healthcare sector, Durect (NASD: DRRX), our multi-faceted
drug delivery candidate, continued to perform well, returning some 55% for the
year.
In essence, then, we had our share of winners, without being hurt too badly by
those losing positions. Unfortunately there just weren't enough big winners to
further propel the Fund's performance. The good news is that many of those
issues that seemed to mark time, are, we believe, yet outstanding prospects for
the future. For example, we mentioned in our mid-year letter Magnetek (NYSE:
MAG) which has a very interesting trove of intellectual property in the area of
power management as it applies to alternative energy sources; Chemtura (NYSE:
CEM), a specialty chemical producer that we have discussed in the past as having
great potential following a successful restructuring and merger with the former
Great Lakes Chemicals; Dynegy (NYSE: DYN), which continues its turnaround and
restructuring towards becoming once again a more or less pure (and profitable)
utility company; and Navigant International (NASD: FLYR), a very undervalued
provider of corporate travel services.
3
We have also found some promising new names, a couple of which are already
providing impetus to performance. After having some success in the energy patch
(like most everyone), we pared the Fund's weightings down considerably for a
time, but since have sought to selectively add to that area with companies like
Petrohawk (NASD: HAWK), which increased in price by over 55% last year. Having
also done well in the past with non-bank financials, particularly insurance, we
added Assured Guaranty (NYSE: AGO) and Arch Capital Group (NASD: ACGL). Finally,
although the Fund's performance was not helped by its biotech exposure, we
remain undaunted, having recently made two very interesting investments, Sirna
Therapeutics (NASD: RNAI) and Novavax (NASD: NVAX), following long periods of
observation. We believe that though early, they exhibit modest valuations while
offering tremendous potential in the genetic regulation of protein expression
and recombinant vaccines. Happily, the Fund's initial purchase of Novavax,
albeit off of a modest base, has already returned nearly 300% as of year end
2005,
We are comfortable with the Fund's holdings at this juncture, but continue to
seek out interesting investment candidates. We feel that there will always exist
individual companies to be found that offer great potential, but are either
undiscovered or suffer from neglect due to some anomalous set of circumstances.
Thus our continued responsibility is to be curious, proactive, and watchful, all
in an effort to continually improve our understanding of existing holdings and
to provide new investments for the Fund's portfolio. That said, we feel that the
general market outlook is one that should continue to reward stock selection,
but that large and powerful forces will continue to impact the overall economy.
We envision the booming capitalistic expansions to continue in China, with
places like India beginning to take a similar path, mindful of course that sharp
short-term dislocations are possible owing to financial disequilibrium. Such
growth likely will only prolong and potentially exacerbate the short to
intermediate term need for raw materials, and of course, energy. It is like the
industrial revolution of the 19th century re-occurring via modern technology but
in a vastly compressed time frame. How this will affect inflation and interest
rates is uncertain, but an upward bias would certainly be suggested to us.
Finally, we cannot help but point out that there continue to be geopolitical
concerns that are of considerable concern.
4
Although we must eventually look at 'the big picture' in an effort to determine
what the likely outcomes will be, we again want to remind the Fund's
shareholders that we first look at individual opportunities, which we can assess
closely, expanding our analysis from the entity to its industry or sector and
only then finally incorporating our views on the economy as it will potentially
affect that candidate.
In closing, then, to be effective, we will continue to refine our focus and
process, understanding longer-term trends as they might benefit the Fund's
existing and potential investments, acting swiftly, seeking to minimize losses
where circumstances dictate. If we can build on recent success, I believe that
the Fund's shareholders will be rewarded all the more so.
In looking forward to the coming year, we thank you for your continued support,
patience, and loyalty.
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. THE S&P 500
INDEX IS A BROAD-BASED, UNMANAGED MEASUREMENT OF CHANGES IN STOCK MARKET
CONDITIONS BASED ON THE AVERAGE OF 500 WIDELY HELD COMMON STOCKS. ONE CANNOT
INVEST DIRECTLY IN AN INDEX. FOR A DESCRIPTION OF THE RUSSELL 2000 INDEX AND TO
REVIEW ADDITIONAL FUND PERFORMANCE, PLEASE REFER TO THE PERFORMANCE CHARTS FOUND
ON PAGES 6 AND 7.
THE VIEWS IN THIS REPORT WERE THOSE OF THE FUND MANAGER AS OF DECEMBER 31, 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 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 chart in the printed material.]
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
7/31/2005 17,180 16,194
8/31/2005 16,811 15,894
9/30/2005 17,251 15,944
10/31/2005 16,606 15,449
11/30/2005 17,062 16,199
12/31/2005 17,491 16,125
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.
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
7/31/2005 17,576 15,641
8/31/2005 17,218 15,351
9/30/2005 17,679 15,399
10/31/2005 17,013 14,921
11/30/2005 17,478 15,645
12/31/2005 17,918 15,574
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
DECEMBER 31, 2005
MARKET
SHARES SECURITY VALUE
------ -------- -----
COMMON STOCK - 93.59%
CAPITAL GOODS - 1.45%
30,900 Shaw Group, Inc.+ $ 898,881
------------
CONSUMER CYCLICALS - 12.69%
57,200 4Kids Entertainment, Inc.+ 897,468
714,500 Danka Business Systems plc, ADR+ 1,171,780
66,200 Gevity HR, Inc. 1,702,664
18,900 Hooker Furniture Corp. 324,135
176,300 Navigant International, Inc.+ 1,919,907
23,800 Russell Corp. 320,348
105,700 Sunterra Corp.+ 1,503,054
------------
7,839,356
------------
CONSUMER STAPLES - 3.62%
28,500 Playtex Products, Inc.+ 389,595
38,000 United Stationers, Inc.+ 1,843,000
------------
2,232,595
------------
ENERGY - 3.93%
22,000 Denbury Resources, Inc.+ 501,160
97,000 Newpark Resources+ 740,110
89,500 Petrohawk Energy Corp.+ 1,183,190
------------
2,424,460
------------
FINANCIALS - 10.26%
18,200 Arch Capital Group, Ltd.+ 996,450
24,300 Assured Guaranty, Ltd. 616,977
43,900 Hanover Insurance Group, Inc. 1,833,703
188,100 PMA Capital Corp. - Class A+ 1,717,353
85,000 USI Holdings Corp.+ 1,170,450
------------
6,334,933
------------
The accompanying notes are an integral part of the financial statements.
8
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005 (Continued)
MARKET
SHARES SECURITY VALUE
------ -------- -----
HEALTH CARE - 10.84%
252,600 ARIAD Pharmaceuticals, Inc.+ $ 1,477,710
410,800 Durect Corp.+ 2,082,756
133,000 Neopharm, Inc.+ 1,435,070
237,900 Novavax, Inc.+ 915,915
257,700 Sirna Therapeutics, Inc.+ 780,831
------------
6,692,282
------------
INDUSTRIALS - 1.97%
229,900 Proliance International, Inc.+ 1,216,171
------------
INFORMATION TECHNOLOGY - 12.83%
39,600 Analogic Corp. 1,894,860
164,200 Datastream Systems, Inc.+ 1,432,645
88,300 HMS Holdings Corp.+ 675,495
628,300 MagneTek, Inc.+ 2,041,975
529,944 SoftBrands, Inc.+ 1,075,787
46,700 Technitrol, Inc. 798,570
------------
7,919,332
------------
MATERIALS - 23.01%
72,208 Aleris International, Inc.+ 2,327,985
66,600 AM Castle & Co.+ 1,454,544
159,500 Chemtura Corp. 2,025,650
210,400 ICO, Inc.+ 679,592
152,000 Material Sciences Corp.+ 2,143,200
87,500 Olin Corp. 1,722,000
296,500 PolyOne Corp.+ 1,906,495
172,800 Western Silver Corp.+ 1,945,728
------------
14,205,194
------------
OTHER - 2.75%
343,300 Westaff, Inc.+ 1,699,335
------------
The accompanying notes are an integral part of the financial statements.
9
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005 (Continued)
MARKET
SHARES SECURITY VALUE
------ -------- -----
TELECOMMUNICATION SERVICES - 3.44%
351,500 Broadwing Corp.+ $ 2,126,575
------------
UTILITIES - 6.80%
539,600 Aquila, Inc.+ 1,942,560
466,300 Dynegy, Inc. - Class A+ 2,256,892
------------
4,199,452
------------
TOTAL COMMON STOCK (COST $41,858,038) 57,788,566
------------
SHORT-TERM INVESTMENT - 5.03%
3,108,670 Fifth Third Institutional Money Market Fund
(Cost $3,108,670) 3,108,670
------------
TOTAL SHORT-TERM INVESTMENT (COST $3,108,670) 3,108,670
------------
TOTAL INVESTMENTS (COST $44,966,708)* - 98.62% 60,897,236
OTHER ASSETS NET OF LIABILITIES - 1.38% 849,268
------------
NET ASSETS - 100.00% $ 61,746,504
============
- ----------
+ Non-income producing security.
ADR American Depositary Receipt.
The accompanying notes are an integral part of the financial statements.
10
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2005 (Continued)
* Cost for Federal income tax purposes is $45,153,747 and net unrealized
appreciation (depreciation) consists of:
Gross Unrealized Appreciation $ 16,272,582
Gross Unrealized Depreciation (529,093)
------------
Net Unrealized Appreciation (Depreciation) $ 15,743,489
============
PORTFOLIO HOLDINGS
% OF TOTAL INVESTMENTS
[The following table was represented as a pie chart in the printed material.]
Consumer Cyclicals 12.87%
Capital Goods 1.48%
Consumer Staples 3.67%
Energy 3.98%
Financials 10.40%
Health Care 10.99%
Information Technology 13.00%
Industrials 2.00%
Materials 23.33%
Other 2.79%
Telecommunication Services 3.49%
Utilities 6.90%
Short-Term Investment 5.10%
The accompanying notes are an integral part of the financial statements.
11
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2005
ASSETS:
Investments in securities at market value
(cost $44,966,708) $ 60,897,236
Cash 1,137,496
Receivable for securities sold 171,223
Receivable for Fund shares sold 6,275
Interest and dividends receivable 9,394
Prepaid expenses 10,669
------------
TOTAL ASSETS 62,232,293
------------
LIABILITIES:
Payable for Fund shares redeemed 295,059
Payable to adviser 57,465
Payable for trustees' fees and expenses 5,986
Other accrued expenses 127,279
------------
TOTAL LIABILITIES 485,789
------------
NET ASSETS $ 61,746,504
============
NET ASSETS CONSIST OF:
Paid-in capital 43,815,412
Accumulated net realized gain (loss) on investments 2,000,564
Net unrealized appreciation (depreciation) of investments 15,930,528
------------
NET ASSETS $ 61,746,504
============
INVESTMENT CLASS SHARES:
Net Assets (unlimited shares of $0.001 par beneficial
interest authorized; 3,519,130 shares outstanding) $ 50,171,211
============
Net asset value, offering and redemption price
per Investment Class Share $ 14.26
============
INSTITUTIONAL CLASS SHARES:
Net Assets (unlimited shares of $0.001 par beneficial
interest authorized; 788,247 shares outstanding) $ 11,575,293
============
Net asset value, offering and redemption price
per Institutional Class Share $ 14.68
============
The accompanying notes are an integral part of the financial statements.
12
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
YEAR ENDED
DECEMBER 31, 2005
-----------------
INVESTMENT INCOME
Dividends $ 295,878
Interest 27,847
------------
TOTAL INCOME 323,725
------------
EXPENSES
Investment advisory fees 677,806
Administration fees 61,004
Transfer agent fees
Investment Class Shares 90,197
Institutional Class Shares 14,957
Distribution fees
Investment Class Shares 138,525
Accounting fees 61,901
Custodian fees 14,369
Professional fees 149,021
Registration fees 36,442
Trustees' fees and expenses 27,369
Compliance services fees 36,735
Miscellaneous fees 46,478
------------
TOTAL EXPENSES 1,354,804
Fees waived and expenses reimbursed (64,001)
------------
NET EXPENSES 1,290,803
------------
NET INVESTMENT INCOME (LOSS) (967,078)
------------
REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS
Net realized gain (loss) on investments 10,819,514
Net increase from payment by service provider 1,516
Net change in unrealized appreciation (depreciation)
of investments (7,959,925)
------------
Net realized and unrealized gain (loss) on investments 2,861,105
------------
INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,894,027
============
The accompanying notes are an integral part of the financial statements.
13
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
OPERATIONS
Net investment income (loss) $ (967,078) $ (1,136,362)
Net realized gain (loss) on investments 10,819,514 6,212,138
Net increase from payment by affiliate
and other service provider 1,516 21,855
Net change in unrealized appreciation
(depreciation) of investments (7,959,925) 8,290,142
------------ ------------
Increase (decrease) in net assets
resulting from operations 1,894,027 13,387,773
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
Net realized gains:
Investment Class (8,672,721) --
Institutional Class (1,868,751) --
------------ ------------
Total distributions to shareholders (10,541,472) --
------------ ------------
CAPITAL SHARE TRANSACTIONS
Proceeds from shares subscribed:
Investment Class 8,629,573 49,075,671
Institutional Class 904,948 2,633,693
Reinvestment of distributions
Investment Class 8,463,918 --
Institutional Class 1,796,885 --
Redemption of shares
Investment Class (30,621,231) (56,958,648)
Institutional Class (4,798,274) (8,356,053)
------------ ------------
Increase (Decrease) in net assets
from capital share transactions (a) (15,624,181) (13,605,337)
------------ ------------
TOTAL INCREASE (DECREASE)
IN NET ASSETS (24,271,626) (217,564)
------------ ------------
The accompanying notes are an integral part of the financial statements.
14
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
(Continued)
YEAR ENDED YEAR ENDED
DECEMBER 31, 2005 DECEMBER 31, 2004
----------------- -----------------
NET ASSETS
Beginning of period $ 86,018,130 $ 86,235,694
------------ ------------
End of period (including
accumulated net investment loss
of $967,078 and $-, respectively) $ 61,746,504 $ 86,018,130
============ ============
(a) Transactions in capital stock were:
Investment Class
Shares sold 547,778 3,435,681
Reinvestment of distributions 614,663 --
Shares redeemed (1,986,988) (4,018,097)
------------ ------------
Increase (Decrease) in shares outstanding (824,547) (582,416)
============ ============
Institutional Class
Shares sold 58,268 186,489
Reinvestment of distributions 126,720 --
Shares redeemed (310,541) (573,322)
------------ ------------
Increase (Decrease) in shares outstanding (125,553) (386,833)
============ ============
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.
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
INVESTMENT CLASS 2005 2004
------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.31 $ 13.80
-------- --------
Increase (decrease) from
investment operations:
Net investment loss (0.23)* (0.19)*
Net realized and unrealized gains
(losses) on investments 0.91* 2.70*
-------- --------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS 0.68 2.51
-------- --------
Less distributions from
net realized gains (2.73) --
-------- --------
NET ASSET VALUE, END OF PERIOD $ 14.26 $ 16.31
======== ========
TOTAL RETURN ** 4.81% 18.12%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 50,171 $ 70,825
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 2.04% 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 (1.56)% (1.38)%
After waivers and/or reimbursements (1.47)% (1.35)%
Portfolio turnover rate 65.68% 90.58%
- ----------
* Based on average shares outstanding.
** Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at the end of the period. Total return reflects 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.
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
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
------------ ------------ ------------
$ 9.76 $ 11.82 $ 10.87
-------- -------- --------
(0.13)* (0.14) (0.08)
4.17* (1.92) 1.03
-------- -------- --------
4.04 (2.06) 0.95
-- -- --
-------- -------- --------
$ 13.80 $ 9.76 $ 11.82
======== ======== ========
41.39% (17.43)% 8.74%
$ 67,983 $ 64,552 $ 85,386
1.94% 1.80% 1.74%
1.88% 1.71% 1.74%
(1.32)% (1.17)% (0.61)%
(1.26)% (1.08)% (0.61)%
51.70% 50.41% 43.16%
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.
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
INSTITUTIONAL CLASS 2005 2004
------------ ------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 16.63 $ 14.03
-------- --------
Increase (decrease) from
investment operations:
Net investment loss (0.20)* (0.16)*
Net realized and unrealized gains
(losses) on investments 0.98* 2.76*
-------- --------
NET INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS 0.78 2.60
-------- --------
Less distributions from
net realized gains (2.73)
-------- --------
NET ASSET VALUE, END OF PERIOD $ 14.68 $ 16.63
======== ========
TOTAL RETURN ** 5.31% 18.46%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 11,576 $ 15,193
Ratio of expenses to average net assets:
Before waivers and/or reimbursements 1.81% 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 (1.35)% (1.12)%
After waivers and/or reimbursements (1.24)% (1.10)%
Portfolio turnover rate 65.68% 90.58%
* Based on average shares outstanding.
** Assumes initial investment at net asset value at the beginning of each
period, reinvestment of all distributions and the complete redemption of
the investment at the end of the period. Total return reflects 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.
The accompanying notes are an integral part of the financial statements.
18
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS (Continued)
YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
2003 2002 2001
------------ ------------ ------------
$ 9.89 $ 11.95 $ 10.92
-------- -------- --------
(0.10)* (0.11) (0.05)
4.24* (1.95) 1.08
-------- -------- --------
4.14 (2.06) 1.03
-------- -------- --------
-- -- --
--
-------- -------- --------
$ 14.03 $ 9.89 $ 11.95
======== ======== ========
41.86% (17.24)% 9.43%
$ 18,253 $ 20,920 $ 29,502
1.61% 1.49% 1.49%
1.55% 1.44% 1.49%
(0.98)% (0.86)% (0.36)%
(0.93)% (0.82)% (0.36)%
51.70% 50.41% 43.16%
The accompanying notes are an integral part of the financial statements.
19
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005
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 accounting principles generally
accepted in the United States of America for investment companies.
A. SECURITY VALUATION. Exchange traded securities and over-the-counter
securities listed on the NASDAQ National Market System for which market
quotations are readily available are valued using the last reported sales
price or the NASDAQ Official Closing Price ("NOCP"), 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 or NOCP, such securities are valued at the
mean of the last bid and asked price. Non-exchange traded securities for
which quotations are available are generally valued at the mean between
the current bid and asked prices. Debt securities may be valued at prices
supplied by the Fund's pricing agent based on broker or dealer supplied
valuations or matrix pricing, a method of valuing securities by reference
to the value of other securities with similar characteristics, such as
rating, interest rate and maturity. Money market instruments that mature
in sixty days or less may be valued at amortized cost.
20
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
The Fund values securities at fair value pursuant to procedures adopted by
the Trust's 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. Fair valuation is based on
subjective factors and as a result, the fair value price of an asset may
differ from the asset's market price and may not be the price at which the
asset may be sold. Fair valuation could result in a different net asset
value ("NAV") than a NAV determined by using market quotes.
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, 2005, the Fund reclassified $967,078 to
decrease accumulated net realized gain and $967,078 to increase
accumulated net investment loss. The reclassification has no impact on the
net asset value of the Fund and is primarily due to net operating losses.
21
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
As of December 31, 2005, distributable earnings on a tax basis were as
follows:
Undistributed Ordinary Income $ 396,919
Undistributed Long-Term Gain 1,790,685
Unrealized Appreciation (Depreciation) 15,743,489
------------
Total $ 17,931,093
============
The tax character of distributions paid during 2005 and 2004 were as
follows:
2005 2004
------------ ------------
Ordinary Income $ 4,097 $ --
Long-Term Capital Gain 10,537,375 --
------------ ------------
Total $ 10,541,472 $ --
============ ============
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 accounting principles
generally accepted in the United States of America.
22
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
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
$43,481,712 and $70,491,653, respectively, for the fiscal year ended December
31, 2005.
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 fiscal year ended December 31, 2005, advisory fees of
$12,847 were waived by ICM.
On November 16, 2005, ICM entered into a transaction agreement (the "Transaction
Agreement") with MB Investment Partners, Inc. ("MBIP") and MB Investment
Partners and Associates LLC ("MBIPA"; formerly called Munn & Bernhard Associates
LLC) regarding a proposed transaction (the "Transaction"), upon the closing of
which MBIPA would acquire ICM. Pursuant to the Transaction Agreement, MBIPA
agreed to acquire ICM for a combination of cash and equity in MBIPA. The
Transaction was consummated on January 24, 2006 (the "Closing Date"). The change
in ownership of ICM resulting from the Transaction is deemed under the
Investment Company Act of 1940, as amended (the "1940 Act"), to constitute a
change in control of ICM. Accordingly, under the 1940 Act, a transfer took place
as a result of the Transaction, which transfer was deemed an "assignment" that
automatically terminated the former investment advisory agreement (the "Former
Agreement") between the Fund and ICM. The Former Agreement provides for its
automatic termination upon an assignment.
23
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
In anticipation of the Transaction and the consequent termination of the Former
Agreement, on October 17, 2005, the Trust's Board of Trustees (the "Board")
approved an interim investment advisory agreement (the "Interim Agreement")
between the Trust, on behalf of the Fund, and ICM. The Interim Agreement became
effective on the Closing Date and will remain in effect for a maximum of 150
days after the Closing Date. In addition to approving the Interim Agreement, on
October 17, 2005, the Board also approved a form of a proposed new investment
advisory agreement (the "New Agreement") between the Trust, on behalf of the
Fund, and ICM, which is intended to take effect upon obtaining the approval of
the Fund's shareholders at a special meeting (the "Meeting"), currently
scheduled to occur in April 2006. If approved by the Fund's shareholders, the
New Agreement will replace the Interim Agreement. The Board approved the Interim
Agreement in order to ensure that the provision of advisory services to the Fund
is not disrupted pending shareholder action at the Meeting. Since the Closing
Date, ICM has provided advisory services to the Fund pursuant to the Interim
Agreement, and will continue to do so until 150 days after the Closing Date,
unless the Interim Agreement is terminated sooner.
If approved by the Fund's shareholders, the New Agreement will take effect upon
such approval and will remain in effect for two years, and, unless earlier
terminated, will continue from year to year thereafter, provided that each such
continuance is approved annually with respect to the Fund (i) by the Board or by
the vote of a majority of the outstanding voting securities of the Fund, and, in
either case, (ii) by a majority of the Independent Trustees. The terms,
including the advisory fee, of the Interim Agreement and the New Agreement, are
the same in all material respects as those of the Former Agreement.
24
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
BOARD APPROVAL OF THE INTERIM AGREEMENT AND THE FORM OF NEW AGREEMENT - As
indicated above, the Fund's Board reviewed and approved the Interim Agreement
and the New Agreement during the twelve-month period covered by this report. The
Interim and the New Agreements are referred to collectively as the "Advisory
Agreements"). In accordance with regulations promulgated by the Securities and
Exchange Commission, a summary of the material factors taken into consideration
by the Board in connection with these actions is set forth below. Unless
otherwise noted, the factors considered, and the conclusions reached by the
Board with respect to each of the agreements were substantively the same.
Overall, the Board concluded with respect to each of the agreements that
continuing the investment advisory relationship between ICM and the Fund would
be in the best interests of the Fund and its shareholders, as well as consistent
with shareholder expectations, and that the services provided by ICM are
satisfactory and continue to support the Board's original selection of ICM.
Additionally, in connection with its approval of the Interim Agreement and the
New Agreement, the Board concluded that neither the Transaction nor the
implementation of the Advisory Agreements would alter the services provided to,
or the advisory fees incurred by, the Fund. The Board also concluded that
implementation of these agreements would avoid disruption of the services
provided to the Fund by ICM since the Fund's inception. During the course of its
deliberations, the Board was aware of, and acknowledged, the performance of the
Fund relative to other similarly managed investment companies, costs incurred by
ICM in providing services to the Fund and ICM's anticipated profits and other
benefits.
25
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
In determining whether to approve the Interim and New Agreements, the Board,
including the Independent Trustees, considered various materials and
representations provided by ICM and MBIPA and met with senior representatives of
ICM and MBIPA. The Independent Trustees were advised by independent legal
counsel throughout this process. The Board met on October 17, 2005 and November
17, 2005 to review and consider, among other things, information relating to the
Transaction, the Interim and New Agreements and the related proxy materials.
During its deliberations, the Board was aware of, and acknowledged, information
with respect to each of the following overall factors: (1) the nature, extent
and quality of the services provided 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; (2) the investment
performance of the Fund relative to the Fund; (3) the advisory fees charged and
total expense ratios of the Fund compared to a relevant peer group of funds; (4)
the anticipated profitability to 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 (6) other benefits that, following the Transaction, may flow to ICM
and its affiliates from their relationship with the Fund. In approving the
Advisory Agreements, however, the Board gave substantial weight to the ICM's
representations and assurances to the effect that: (1) the duties and
responsibilities of ICM would not be diminished relative to those provided to
the Fund by ICM since the Fund's inception set forth in the Former Agreement;
(2) the personnel primarily responsible for providing investment and management
services to the Fund will not change as a result of the Transaction or
implementation of the Advisory Agreement; (3) the level and quality of advisory
services provided to the Trust will not be adversely affected as a result of the
Transaction or implementation of the Interim Agreement or the New Agreements;
(4) the rate at which the investment advisory fee to be paid by the Fund under
the New Agreement will remain unchanged from prior levels; and (5) the resources
that would be available to ICM as a result of its affiliation with MBIPA will
support ICM's continuing efforts to increase assets and, as a result, reduce
Fund expenses.
26
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
The Board also noted ICM's and MBIPA's commitment to ensure consistent portfolio
management personnel, maintain the current advisory fee structure and absorb
costs incurred by the Fund in connection with the holding of a shareholders'
meeting for the purpose of submitting the New Agreement for the approval of the
Fund's shareholders). The Board deemed the continuity in the identity of the
Fund's officers and the Fund's principal portfolio managers as well as the
anticipated access to business and financial resources of MBIPA to be of
substantial importance.
ADMINISTRATION AND OTHER SERVICES - Citigroup Fund Services, LLC, through its
various affiliates ("Citigroup"), provides administration, portfolio accounting
and transfer agency services to the Fund. For the fiscal year ended December 31,
2005, administration fees of $6,898, accounting fees of $7,232 and transfer
agency fees of $7,393 were waived by Citigroup.
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. For the fiscal year
ended December 31, 2005, the Fund was reimbursed expenses of $29,534 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 fiscal year ended December 31, 2005, the Fund was reimbursed
expenses of $97 by the Custodian.
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.
27
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
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.
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.
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 fiscal year ended December 31, 2005, the Fund was charged $1,490 from
borrowings under the line of credit. As of December 31, 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 fiscal year ended December 31, 2005, the Fund incurred
$138,525 in distribution costs for Investment Shares.
28
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005 - (Continued)
NOTE 6 - PAYMENTS BY AFFILIATE & OTHER SERVICE PROVIDER
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.
For the year ended December 31, 2005, Citigroup reimbursed the Fund to offset an
accounting error. As a result, the Fund reimbursed the shareholders who placed
trades during the re-evaluation period. In order to compensate the Fund for the
overstated number of shares issued to subscribing shareholders during the
reevaluation period, Citigroup reimbursed the Fund for the dollar value of these
shares. This amount is reflected as payment by other service provider on the
Statements of Changes in Net Assets. This payment had no effect on the total
return of the Fund.
29
ICM/ISABELLE SMALL CAP VALUE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Shareholders and Board of Trustees of the ICM Series Trust:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of the ICM/Isabelle Small Cap Value Fund, a series
of the ICM Series Trust (the "Fund"), as of December 31, 2005, and the related
statements of operations and changes in net assets and the financial highlights
for the year then ended. The statement of assets and liabilities, including the
portfolio of investments, of the Fund as of December 31, 2004, the related
statement of operations for the year then ended, the statement of changes in net
assets for the two years then ended and the financial highlights for the four
years then ended were audited by another independent registered public
accounting firm whose report dated February 17, 2005 expressed an unqualified
opinion on those statements. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit.
We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform an audit of the Fund's
internal control over financial reporting. Our audit included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements and financial highlights, assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. Our procedures
included confirmation of securities owned as of December 31, 2005, by
correspondence with the custodian and brokers or by other appropriate auditing
procedures where replies from brokers were not received. We believe that our
audit provides a reasonable basis for our opinion.
30
ICM/ISABELLE SMALL CAP VALUE FUND
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM - (Continued)
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
ICM/Isabelle Small Cap Value Fund as of December 31, 2005, the results of its
operations and changes in net assets and financial highlights for the year then
ended, in conformity with accounting principles generally accepted in the United
States of America.
Grant Thonton LLP
Boston, Massachusetts
February 7, 2006
31
ICM/ISABELLE SMALL CAP VALUE FUND
ADDITIONAL INFORMATION
DECEMBER 31, 2005 - (Unaudited)
CHANGE IN INDEPENDENT AUDITOR
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 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.
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 twelvemonth
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.
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.
32
ICM/ISABELLE SMALL CAP VALUE FUND
ADDITIONAL INFORMATION
DECEMBER 31, 2005 - (Unaudited) (Continued)
SHAREHOLDER EXPENSES
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 July 1, 2005 through December 31, 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 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.
33
ICM/ISABELLE SMALL CAP VALUE FUND
ADDITIONAL INFORMATION
DECEMBER 31, 2005 - (Unaudited) (Continued)
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 DURING
JULY 1, 2005 DECEMBER 31, 2005 PERIOD*
------------ ----------------- -------
Investment Shares
Actual Return $1,000.00 $1,081.28 $10.23
Hypothetical Return $1,000.00 $1,015.38 $ 9.91
Institutional Shares
Actual Return $1,000.00 $1,081.78 $ 8.92
Hypothetical Return $1,000.00 $1,016.84 $ 8.64
- ----------
* 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 most recent fiscal half-year/365 (to reflect the
half-year period).
FEDERAL TAX STATUS OF DIVIDENDS DECLARED DURING THE TAX YEAR
INCOME DIVIDENDS - All the income and any short-term capital gain dividends paid
by the Fund were ordinary income for federal income tax purposes. The Fund
designates 58.89% of its income dividend distributed as qualifying for the
corporate dividends-received deduction (DRD) and 57.66% for the qualified
dividend rate (QDI) as defined in Section 1(h)(11) of the Internal Revenue Code.
CAPITAL GAIN DIVIDENDS - The Fund paid long-term capital gain dividends of
$10,537,375 for the tax year ended December 31, 2005.
34
ICM/ISABELLE SMALL CAP VALUE FUND
FUND TRUSTEE AND OFFICERS
DECEMBER 31, 2005 - (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. ISABELLE, CFA(2) Trustee, President March 1998 Managing member and Chief Investment
Ironwood Capital and Chairman of the to Present Officer, Ironwood Capital Management, LLC,
Management, LLC Board, Valuation August 1997 to present.
21 Custom House Street Committee (member)
Suite 240
Boston, MA 02110
Born: January 1952
- --------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------
DONALD A. NELSON, CPA Trustee, Audit March 1998 Associate Professor, Department of
c/o ICM Series Trust Committee, Nominating to Present Accounting and Finance, Merrimack College,
Two Portland Square Committee, Valuation 1975 to present; Certified Public
Portland, ME 04101 Committee and Accountant, 1972 to present.
Born: February 1946 Qualified Legal
Compliance Committee
(member)
35
ICM/ISABELLE SMALL CAP VALUE FUND
FUND TRUSTEE AND OFFICERS
DECEMBER 31, 2005 - (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
- --------------------------------------------------------------------------------------------------------------------------
JOHN A. FIFFY Trustee, Audit March 1998 Acquisition Consultant, Compaq Computer
c/o ICM Series Trust Committee, Nominating to Present Corporation (a computer hardware company),
Two Portland Square Committee, Valuation 1993 to present
Portland, ME 04101 Committee and
Born: December 1950 Qualified Legal
Compliance Committee
(member)
- --------------------------------------------------------------------------------------------------------------------------
THOMAS R. VENABLES Trustee, Audit May 2003 to President & CEO, Benjamin Franklin Bank,
c/o ICM Series Trust Committee, Nominating Present 2002 to present; Self-employed Business
Two Portland Square Committee, Valuation Consultant, 2001 to 2002; President & CEO,
Portland, ME 04101 Committee and Lighthouse Bank, 2000 to 2001
Born: April 1955 Qualified Legal
Compliance Committee
(member)
36
ICM/ISABELLE SMALL CAP VALUE FUND
FUND TRUSTEE AND OFFICERS
DECEMBER 31, 2005 - (Unaudited) (Continued)
NAME, ADDRESS LENGTH PRINCIPAL OCCUPATION(S)
AND DATE OF BIRTH POSITION(S) OF TIME DURING THE PAST
OFFICERS WITH THE TRUST SERVED(1) FIVE YEARS
- --------------------------------------------------------------------------------------------------------------------------
GARY S. SAKS Vice- President, March 1998 Chief Operating Officer and Compliance
Ironwood Capital Management, LLC Secretary, Treasurer to Present Officer, Ironwood Capital Management,
21 Custom House Street and Chief Financial LLC, August 1997 to present.
Suite 240 Officer
Boston, MA 02110
Born: May 1968
- ----------
(1) Term of service is indefinite.
(2) Mr. Isabelle owns a controlling interest in Ironwood Capital Management,
LLC ("ICM" or the "Adviser") and is the portfolio manager of the Fund.
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.
37
This page intentionally left blank.
IRONWOOD CAPITAL MANAGEMENT, LLC
AND ICM FUNDS
THE IRONWOOD TREE
is a small, hardy tree, which yields a very useful and solid wood. Patiently,
these trees remain under the forest canopy until taller neighbors fall.
Once given the opportunity, the Ironwood grows quickly to reach its
full potential. We believe this imagery is appropriate for our
firm as well as our investment style.
IRONWOOD CAPITAL MANAGEMENT, LLC,
the investment manager of the ICM/Isabelle Small Cap Value Fund, is an
independent investment management firm specializing in investing in small
company stocks.
ICM Series Trust Two
Portland Square
Portland, ME 04101
1-800-472-6114
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.
As of the end of the period, December 31, 2005, ICM Series Trust (the
"Registrant") 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.
Mr. Donald A. Nelson has been approved as the "Audit Committee financial
expert." The Board of Trustees of the Registrant has determined that he 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 2004 and $24,000 in 2005.
(b) Audit-Related Fees - The aggregate 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 were $0 in 2004 and $2,000 in 2005. These services
consisted of out of pocket expenses.
(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 $6,000 in 2004 and $2,500 in 2005. These services
consisted of review or preparation of U.S. federal, state, local and
excise tax returns.
(d) 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 Registrant's fund
administrator, 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
$6,000 in 2004 and $2,500 in 2005. There were no fees billed in each of
the Reporting Periods for non-audit services rendered by the principal
accountant to the investment adviser.
(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.
Not applicable.
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable.
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
Not applicable.
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) Code of Ethics (Exhibit filed herewith).
(a)(2) Certifications pursuant to Rule 30a-2(a) of the Investment Company Act of
1940 as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 (Exhibit
filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) of the Investment Company Act of
1940, as amended, and 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 /s/ March 9, 2006
---------------------------
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 March 9, 2006
-----------------------------------
By /s/ Gary S. Saks
-----------------------------------
Gary S. Saks, Treasurer
Date March 9, 2006
-----------------------------------