N-CSR 1 d41762nvcsr.txt FORM N-CSR 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 811-07883 ICON Funds (Exact name of registrant as specified in charter) 5299 DTC Blvd. Suite 1200 Greenwood Village, CO 80111 (Address of principal executive offices) (Zip code) Erik L. Jonson 5299 DTC Blvd. Suite 1200 Greenwood Village, CO 80111 (Name and address of agent for service) Registrant's telephone number, including area code: 303-790-1600 Date of fiscal year end: September 30, 2006 Date of reporting period: September 30, 2006 ITEM 1. REPORTS TO STOCKHOLDERS. (GRAPHIC) 2006 Annual Report ICON U.S. DIVERSIFIED FUNDS Investment Update ICON BOND FUND ICON CORE EQUITY FUND ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND (ICON LOGO) STRENGTH IN NUMBERS Table of Contents ABOUT THIS REPORT (UNAUDITED) 2 MESSAGE FROM ICON FUNDS (UNAUDITED) 5 MANAGEMENT OVERVIEWS (UNAUDITED) AND SCHEDULES OF INVESTMENTS 10 ICON Bond Fund 10 ICON Core Equity Fund 20 ICON Covered Call Fund 29 ICON Equity Income Fund 45 ICON Long/Short Fund 54 SIX MONTH HYPOTHETICAL EXPENSE EXAMPLE (UNAUDITED) 64 FINANCIAL STATEMENTS 68 FINANCIAL HIGHLIGHTS 74 NOTES TO FINANCIAL STATEMENTS 78 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 91 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 92 OTHER INFORMATION (UNAUDITED) 95
About This Report HISTORICAL RETURNS All total returns mentioned in this report account for the change in a Fund's per-share price, the reinvestment of any dividends and capital gain distributions, and adjustments for financial statement purposes. If your account is set up to receive Fund distributions in cash rather than reinvest them, your actual return may differ from these figures. The Funds' performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. The Adviser may have reimbursed certain fees or expenses of some of the Funds. If not for these reimbursements, performance would have been lower. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, results would have been lower. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconadvisers.com for performance results current to the most recent month-end. PORTFOLIO DATA This report reflects ICON's views, opinions, and portfolio holdings as of September 30, 2006, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's holdings as of September 30, 2006 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology does not consider company-specific factors beyond financial data, those factors may impact a stock's performance, and therefore, Fund performance. The ICON system relies on the integrity of financial statements released to the market as part of our analysis. This Report contains statements regarding industry or sector themes, new market themes, investment outlook, relative strength, value-to-price ratios, and portfolio managers' expectations, beliefs, goals and the like that are based on current expectations, recent individual stock performance relative to current market prices, estimates of company values and other information supplied to the market by the companies we follow. Words such as "expects," "suggests," "anticipates," "targets," "goals," "value," 2 About This Report "estimates," variations of such words and similar expressions are intended to identify forward looking statements, which are not statements of historical fact. Forward looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to assess. These risks and uncertainties are based on a number of important factors, including, among others: stock price fluctuations; the integrity and accuracy of historical and projected financial and other information supplied by companies to the public; interest rates; future earnings growth rates, and other factors beyond the control of our portfolio managers. Therefore, actual outcome may differ materially from what is expressed in such forward looking statements. There are risks associated with mutual fund investing, including the risk of loss of principal. The likelihood of loss may be greater if you invest for a shorter period of time. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. The prospectus contains this and other information about the Funds and is available by visiting www.iconadvisers.com or calling 1-800-764-0442. Please read the prospectus carefully. There are risks associated with selling short, including the risk that the Long/Short Fund may have to cover its short position at a higher price than the short price, resulting in a loss. The Fund's loss on a short sale is potentially unlimited as a loss occurs when the value of a security sold short increases. Call options involve certain risks, such as limited gains and lack of liquidity of the underlying securities, and are not suitable for all investors. Investments in foreign securities may entail unique risks, including political, market, and currency risks. Investing in fixed income securities such as bonds involves interest rate risk. When interest rates rise, the value of fixed income securities generally decreases. The Bond Fund may invest up to 25% of its assets in high-yield bonds that are below investment grade. High-yield bonds involve a greater risk of default and price volatility than U.S. Government and other higher-quality bonds. About This Report 3 About This Report (continued) COMPARATIVE INDEXES The comparative indexes discussed in this report are meant to provide a basis for judging the Funds' performance against a specific securities index. Each index shown accounts for both change in security price and reinvestment of dividends and distributions, but does not reflect the costs of managing a mutual fund. The Funds' portfolios may significantly differ in holdings and composition from the index. Individuals cannot invest directly in an index. - The unmanaged Standard & Poor's Composite 1500 (S&P Composite 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of large-cap, mid-cap, and small-cap U.S. companies. - The Lehman Brothers (LB) U.S. Universal Index represents the union of the U.S. Aggregate Index, the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, the non-ERISA portion of the Commercial Mortgage-Backed Securities (CMBS) Index and the CMBS High-Yield Index. All securities in this market-value weighted index have at least one year remaining to maturity and meet certain minimum issue size criteria. Index returns and statistical data included in this report are provided by Bloomberg, FactSet Research Systems, and Lehman Brothers. 4 About This Report Message from ICON Funds -------------------------------------------------------------------------------- We were pleased with the Funds' industry tilting early in the period, as value and relative strength pulled us toward cyclical, industrial even commodity-based industries. -------------------------------------------------------------------------------- Dear ICON Shareholder: We realize you are faced with many mutual fund choices as you structure your financial plan, and we appreciate your continued commitment to diversify with one or more of the ICON Diversified Funds. To those shareholders who are receiving their first ICON Funds Annual Report, we welcome you. You may have decided to invest in an ICON Diversified Fund because you were attracted to ICON's value-based, bottom-up investment system, which pursues industries we believe are poised to outperform the broader market. Or perhaps you thought ICON stood out among other managers because we take a quantitative, unemotional, and objective approach. Whether you invest in our U.S. Diversified Funds, such as the ICON Core Equity Fund, our Sector Funds, such as the ICON Healthcare Fund, or our International Funds, such as the ICON Asia-Pacific Region Fund, each is powered by ICON's unique systematic discipline. Guided by an investment system that relies primarily on analyzing data, not speculation, we find "strength in numbers," as our firm's slogan declares. THE CYCLICAL MARKET THEME OF THE PAST THREE YEARS During the third calendar quarter of 2006, there was a major shift in market industry leadership. As a result of our industry rotation, you will see many stocks in Funds that were not held in the Semiannual Report as of March 31, 2006. Indeed, there are many companies that have not been owned by the Funds since late 1999 or early 2000. Before describing that rotation, let's review the industry and sector theme of the preceding three years. Most domestic stock market indexes hit a low on March 11, 2003 and then embarked on a three-year bull market, hitting a peak on May 5, 2006. Table #1 shows cumulative performance for Standard & Poor's Composite 1500 Sector Indexes over that period. As you can see, the market leadership over that period was in the cyclical, economically sensitive sectors of Energy, Materials, and Industrials. These sectors include companies whose revenues are very dependent on the ups and downs of the economy. The opposite is true of the lagging sectors; Healthcare, Consumer Staples, and Telecommunication are generally considered to be defensive, recession-proof sectors. On an industry level, a few of the top performing industries over that period included steel, metals & mining, construction materials, oil & gas exploration and homebuilders. These industries tend to be comprised of small- and mid-sized companies. Among the worst performing industries were brewers, pharmaceuticals, systems software, soft drinks and packaged foods, which contrary to the previous leaders, tend to be comprised of large, mature companies. Message from ICON Funds 5 Message from ICON Funds (continued) -------------------------------------------------------------------------------- (CRAIG T. CALLAHAN PHOTO) Craig T. Callahan President and Chairman of the Board of Trustees Our system is suggesting a market with new leadership and an entirely new personality. -------------------------------------------------------------------------------- We are proud of our discipline and our ability to endure volatility when it is required to capture industry leadership.
TABLE 1 CUMULATIVE TOTAL RETURNS 3/11/03 - 5/5/06 S&P 1500 SECTOR INDEX RETURN % --------------------- -------- Energy 158.00 Materials 118.15 Industrials 105.75 Utilities 95.68 Financials 83.86 S&P COMPOSITE 1500 INDEX 79.04 Consumer Discretionary 73.89 Information Technology 68.39 Telecommunication Services 64.17 Consumer Staples 44.01 Health Care 31.64
Data Source: FactSet Research Systems Returns include the reinvestment of dividends and capital gain distributions. We were pleased with the Funds' industry tilting during that period, as value and relative strength pulled us toward cyclical, industrial even commodity- based industries. Looking back, we believe those industries were on sale because investors were incorrectly fearful of a slow or sluggish economy, as investors worried that higher oil prices, war, and terrorism would hurt the economy. As investors realized that the economy was growing and cyclical firms were prosperous, stock prices occasionally surged to reflect fair value. From an ICON perspective, price was trying to catch up with fair value, which over a three-year period made for impressive returns in the leading industries. 6 Message from ICON Funds It is interesting to note that the leading industries during that period, being small- and mid-sized cyclical and commodity based, are inherently volatile. While there were outstanding returns to be earned in the "sweet spot" of the market, it required us to be tolerant of volatility and be patient during the unpleasant ride associated with those industries. We do not like volatility at ICON, and we certainly do not seek it, but we are proud of our discipline and our ability to endure it when it is required to capture industry leadership. It is also interesting to note that lower-quality stocks tended to perform better than what many would consider high-quality stocks over that three-year period. At ICON, quality is measured by liquidity, debt, efficiency and consistency, and we tend to favor higher quality stocks. Our preference for high-quality stocks slightly inhibited the Funds' performance. Consistent with our style, however, we leave the potential higher returns associated with speculative and riskier turnaround situations to other investors. ICON DETECTS A NEW MARKET THEME For the first four months of 2006, the same sector and industry themes from the previous three years persisted, as shown in Table #2, which highlights sector index returns from January 1, 2006 through the market peak on May 5, 2006.
TABLE 2 CUMULATIVE TOTAL RETURNS 1/1/06 - 5/5/06 S&P 1500 SECTOR INDEX RETURN % --------------------- -------- Energy 18.08 Materials 16.12 Industrials 14.28 Telecommunication Services 11.61 Financials 8.59 S&P COMPOSITE 1500 INDEX 7.57 Consumer Discretionary 5.77 Information Technology 5.01 Utilities 3.82 Consumer Staples 3.61 Health Care (1.97)
Data Source: FactSet Research Systems Returns include the reinvestment of dividends and capital gain distributions. Generally, the same cyclical leadership was at the top and the same defensive sectors were lagging as seen the previous three years. All market and theme peaks are different. This time, the leading industries did not reach the extreme overpricing typical of most peaks. They were headed toward it, but perhaps because of investor concerns and uncertainty over terrorism, oil prices, and even mid-term elections, stock prices did not reach lofty extremes. During the market drop from early May through mid-June 2006, the previous leaders fell the most, which was similar to market corrections seen in 2004 and 2005. Even the brief market bounce in late June was led by the previous Message from ICON Funds 7 Message from ICON Funds (continued) cyclical leadership, similar to rebounds in 2004 and 2005. Since the market low on July 17, 2006, the market has experienced a three-month climb with entirely new leadership. The industries that led the previous three-plus years have been sluggish. New leadership in defensive, recession-proof industries has prevailed. In the weeks following that sudden change on July 17, we have sold cyclical industries and gradually invested in new industries as relative strength has met our standards. The combination of value and relative strength has pulled us to mature companies in defensive, steady growth industries such as pharmaceuticals, diversified banks, electric utilities, packaged food & meats, multi-utilities, diversified capital markets, and integrated telecommunication services. This rotation resulted in significant sector shifts in the ICON Core Equity Fund, which best represents our system's sector and industry positioning. The Industrials sector was reduced from 18.0% of the Fund on June 30 to 3.7% on September 30. Financials, Health Care, Information Technology and Telecommunication & Utilities were all increased from 18.9%, 5.8%, 13.7% and 2.5%, respectively, to 24.8%, 14.5%, 18.2% and 9.0%. Major rotations occurred throughout the ICON Fund family to capture the new leadership. For most of the period, the ICON system measured long-term government bonds at below fair value, and since they were not attractive to our system, we concentrated the ICON Bond Fund in bonds from the short end of the maturity spectrum. We continue to watch valuation readings for a signal to move into long-term bonds. As mentioned earlier, you will see equity holdings that are new in the last few months, some not being held since late 1999 or early 2000. The ICON Funds now look very different than they did when they participated in the theme that prevailed in the three and a half years ending this spring. The stocks and industries now owned in the Funds were not leaders over the last three years as they were not preferred by investors but they were not stagnant. They were growing their profits and the underlying value of their firms. Now, we find attractive bargains among them as our estimate of value has grown above the market price. The large, mature companies that have led the recent market advance are heavily weighted in the Funds' market-capitalization weighted benchmarks, so the indexes gained an immediate surge off the July 17 low. The shift in leadership was sudden, but guided by our system, we have rotated industries as they meet our standards of value and relative strength. STAYING TRUE TO THE ICON DISCIPLINE Our system is suggesting a market with new leadership and an entirely new personality. The stocks and industries we expect to lead are not as inherently volatile as those of the previous theme. We do not know how long 8 Message from ICON Funds this new theme will last, but given the price discounts to our estimates of fair value, we expect it may last at least a year. To better position the ICON Diversified Funds for the changing theme that we believe is taking place, we will follow our value-driven process to reduce or eliminate lagging industries and increase positions in the new leading industries. In closing, we are most grateful for the privilege of playing a role in your investment portfolio. In addition to reading this report on your Funds and communicating with your financial adviser, we invite you to visit our website at www.iconadvisers.com for current market updates, up-to-date Fund performance and holdings, and information about your account. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and President of the Adviser Message from ICON Funds 9 Management Overview ICON Bond Fund -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION September 30, 2006 Corporate Bonds 64.6% Investment Grade 50.3% Non-Investment Grade 14.3% U.S. Governments and Agencies 30.9% Foreign Government Bonds 2.8% Short-Term Investments 0.3% Percentages are based upon net assets. PORTFOLIO HIGHLIGHTS September 30, 2006 Number of Bonds(1) 131 Weighted average maturity(1) 3.9 Years Weighted average duration(1) 3.0 Years 30-Day SEC Yield (after expense limitation) - Class I 4.60% 30-Day SEC Yield (before expense limitation) - Class I 4.43% Yield is for the Fund's Class I shares. Yield for the Fund's other share classes will vary due to differences in charges and expenses. (1) Excludes cash and cash equivalents. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. For the Fund's fiscal year ended September 30, 2006, the Lehman Brothers U.S. Universal Index gained 4.09%, outperforming the ICON Bond Fund, which returned 2.72% for Class I shares, 2.09% for Class C shares, and 3.06% for Class Z shares over the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Throughout the period, bond investors speculated about U.S. economic growth and how the Federal Reserve, with its new chairman Ben Bernanke, would alter monetary policy. We have long believed that an upward sloping yield curve is the normal structure for the bond market, but the yield curve remains flat to inverted. In this setting, our valuation system has identified long-term government bonds at below fair value, with bond valuations on the short end of the yield curve looking more attractive. Guided by these readings, we have maintained the Fund's holdings in shorter maturity bonds. This proved to be the correct positioning as bond yields rose steadily from September 2005 until the Federal Reserve's second to last rate hike on May 10, 2006. After the May meeting of the Federal Open Market Committee, however, longer term bond yields fell quickly as investors began pricing in their expectations of future Fed rate cuts. Due to the uncertainty of the timing of these rate cuts, short-term bond yields failed to fall as precipitously. This led to a full inversion of the yield curve as the Fed Funds Rate was 5.25%, Treasury bills stood at just under 5%, while 10-year bonds closed around 4.6% as of September 30, 2006. We believe the fall in long-term bond yields and the Fund's weighting toward the shorter end of the maturity spectrum were the primary reasons for relative underperformance during the period. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. Since the ICON model values bonds with the expectation of a normal upward-sloping yield curve, this recent reversal has been a difficult one for our system. Unfortunately, we have been in a situation where our system identifies the best bond value on the short end of the yield curve, which demonstrates no relative strength, and finds all the relative strength on the long end of the yield curve, which demonstrates no value, according to our analysis. 10 Management Overview (TODD BURCHETT PHOTO) Todd Burchett Portfolio Manager As mentioned above, long-term bonds have not shown value in the past 12 months. The Fund found value in bonds of shorter duration and was invested there for most of the period. This positioning outperformed the Lehman Brothers benchmark from September 2005 to May 10, 2006, then the theme reversed as investors anticipated future Fed rate cuts. Since the Fund's benchmark had a significantly higher duration, it made up enough ground from May to September to overtake the Fund in performance. The Fund's weighted average maturity over the period was 4.58 years with a weighted duration of 3.34. This was shorter than the index, which has a typical average maturity in excess of 7 years with an average duration around 4.7. Credit spreads have remained historically tight, so we have been moving the Fund toward higher credit quality issuers. Given our bond valuation readings and continued investor fears of a slowing economy, the higher quality issues are more attractive to us. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE BOND MARKET? A. With the current inversion of the yield curve, the ICON bond model is not identifying value in longer government maturities. Given their recent performance however, these bonds tend to have the greatest relative strength. We continue to see value on the short end of the yield curve, but these maturities have not experienced the significant yield declines of the longer maturities and lack relative strength. We are keeping the Fund invested in maturities that show the greatest value, which continue to be on the shorter end of the yield curve. As the longer maturities have already priced in future Fed rate cuts, we believe the shorter maturities will benefit the most if the Fed does cut rates. Conversely, if the Fed surprises investors by raising rates, we believe the longer maturities would suffer most. Management Overview 11 Management Overview (continued) ICON Bond Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund's position in shorter-term bonds benefited performance for a majority of the period, until longer-term bond yields started falling in May. - Our system is currently identifying the best bond value on the short end of the yield curve, but shorter maturity bonds have not demonstrated the strength of the long end of the yield curve, which we believe is overvalued. This has led to the Fund's relative underperformance. 12 Management Overview TOP 10 BOND HOLDINGS September 30, 2006 Fannie Mae, 5.25%, 8/1/12 7.7% Fannie Mae, 5.13%, 1/2/14 6.6% DaimlerChrysler NA Holdings, 6.50%, 11/15/13 2.8% Household Finance Corp., 5.75%, 1/30/07 2.1% General Motors Acceptance Corp., 6.13%, 2/1/07 1.9% Federal Home Loan Mortgage Corp., 5.05%, 2/28/13 1.6% Federal Home Loan Mortgage Corp., 5.16%, 2/27/15 1.6% Fannie Mae, 5.00%, 3/9/15 1.6% DaimlerChrysler NA Holding, 4.75%, 1/15/08 1.4% Ford Motor Credit Co., 6.50%, 1/25/07 1.3%
Percentages are based upon net assets. CREDIT QUALITY DIVERSIFICATION September 30, 2006 Aaa 18.6% Aa2 14.5% Aa3 7.3% A1 8.7% A2 5.8% A3 7.7% Baa1 9.5% Baa2 4.0% Baa3 5.6% Ba1 4.6% Ba2 4.8% Ba3 0.9% B1 2.9% B2 2.0% B3 0.4% Caa1 1.0%
Percentages are based upon total investments less short-term investments. Ratings based on Moody's. Management Overview 13 Management Overview (continued) ICON Bond Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Bond Fund - Class I 9/30/02 2.72% N/A 4.31% ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 4.09% N/A 4.75% ------------------------------------------------------------------------------------------- ICON Bond Fund - Class C 10/21/02 2.09% N/A 4.35% ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 4.09% N/A 5.32% ------------------------------------------------------------------------------------------- ICON Bond Fund - Class Z 5/6/04 3.06% N/A 3.62% ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 4.09% N/A 4.92% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. Class C total returns exclude applicable sales charges. If sales charges were included, returns would be lower. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
LEHMAN BROTHERS U.S. UNIVERSAL ICON BOND FUND - CLASS I INDEX ------------------------ ------------------------------ 9/30/02 10000.00 10000.00 10053.00 10200.00 10245.00 10385.00 10854.00 10706.00 9/30/03 10820.00 10714.00 11070.00 10795.00 11422.00 11083.00 10984.00 10812.00 9/30/04 11406.00 11186.00 11527.00 11330.00 11404.00 11266.00 11744.00 11615.00 9/30/05 11528.00 11565.00 11510.00 11639.00 11531.00 11599.00 11585.00 11587.00 9/30/06 11842.00 12039.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 14 Management Overview Schedule of Investments ICON Bond Fund September 30, 2006
INTEREST MATURITY PRINCIPAL AMOUNT RATE DATE VALUE ------------------------------------------------------------------------------------------------ CORPORATE BONDS (64.6%) $ 220,000 Ace INA Holdings, Inc. 8.88% 08/15/29 $ 279,859 400,000 Afc Capital Trust I 8.21 02/03/27 415,730 1,000,000 AIG International Lease Finance Corp. 5.75 02/15/07 1,000,996 1,032,000 AK Steel Corp. 7.88 02/15/09 1,028,129 275,000 Allied Waste North America 5.75 02/15/11 263,656 150,000 Allstate Life Global Fund 3.50 07/30/07 147,871 750,000 American General Finance 5.38 10/01/12 747,511 500,000 Autozone, Inc. 5.50 11/15/15 473,872 112,000 Avnet, Inc. 8.00 11/15/06 112,226 250,000 Bank One Corp. 4.13 09/01/07 246,726 297,000 Calenergy Co., Inc. 7.63 10/15/07 303,339 1,127,000 Chartered Semiconductor - YD 5.75 08/03/10 1,123,497 410,000 Chesapeake and Potomac Telephone of Maryland 8.30 08/01/31 472,492 1,020,000 Cigna Corp. 8.25 01/01/07 1,026,201 450,000 Cincinnati Financial Corp. 6.90 05/15/28 492,512 750,000 Cit Group, Inc. 4.75 12/15/10 733,297 355,000 Cit Group, Inc. 7.75 04/02/12 393,059 410,000 CNA Financial Corp. 6.60 12/15/08 419,275 400,000 Comcast Cable Communications Holdings 8.88 05/01/17 483,346 250,000 Comcast Cable Communications Holdings 8.38 03/15/13 285,172 360,000 Corestates Capital WB 6.75 11/15/06 360,339 1,000,000 Countrywide Financial 4.25 12/19/07 987,804 700,000 Countrywide Home Loan 5.50 02/01/07 700,055 1,000,000 Countrywide Home Loan 4.13 09/15/09 968,744 114,000 Cox Communications, Inc. 7.63 06/15/25 125,908 100,000 D.R. Horton, Inc. 8.00 02/01/09 104,645 470,000 DaimlerChrysler NA Holding 4.13 03/07/07 467,302 1,250,000 DaimlerChrysler NA Holding 4.75 01/15/08 1,238,005 500,000 DaimlerChrysler NA Holding 8.00 06/15/10 537,515 1,000,000 DaimlerChrysler NA Holding 7.75 01/18/11 1,071,413 250,000 DaimlerChrysler NA Holding 8.50 01/18/31 297,103 2,500,000 DaimlerChrysler NA Holdings 6.50 11/15/13 2,563,672 500,000 Deutsche Telekom International Finance - YD 8.50 06/15/10 545,447 260,000 Dillards, Inc. 9.50 09/01/09 278,850 232,000 Dillards, Inc. 9.13 08/01/11 251,430 750,000 Embratel - YD 11.00 12/15/08 823,125 500,000 Farmers Insurance Capital Notes* 7.20 07/15/48 508,654 6,000 First American Financial 7.55 04/01/28 6,569 940,000 First Chicago NBD Corp. 7.00 10/16/06 940,471 1,200,000 Ford Motor Credit Co. 6.50 01/25/07 1,199,178 500,000 Ford Motor Credit Co. 4.95 01/15/08 486,217 1,000,000 Ford Motor Credit Co. 5.63 10/01/08 959,327 500,000 Gannett Co., Inc. 5.50 04/01/07 499,159 940,000 General Electric Capital Corp. 2.80 01/15/07 933,534 441,000 General Mills, Inc. 2.63 10/24/06 440,242
Schedule of Investments 15 Schedule of Investments (continued) ICON Bond Fund September 30, 2006
INTEREST MATURITY PRINCIPAL AMOUNT RATE DATE VALUE ------------------------------------------------------------------------------------------------ $1,750,000 General Motors Acceptance Corp. 6.13% 02/01/07 $ 1,747,623 500,000 General Motors Acceptance Corp. 6.13 08/28/07 499,288 1,000,000 GMAC LLC 5.13 05/09/08 979,931 250,000 Goldman Sachs Group, Inc. 7.35 10/01/09 264,985 500,000 Goldman Sachs Group, Inc. 6.88 01/15/11 529,936 500,000 Goldman Sachs Group, Inc. 6.60 01/15/12 527,596 650,000 GTE Southwest, Inc. 6.23 01/01/07 650,996 1,028,000 Hilton Hotels Corp. 7.95 04/15/07 1,040,850 1,950,000 Household Finance Corp. 5.75 01/30/07 1,952,381 138,000 Household Finance Corp. 7.65 05/15/07 139,838 670,000 Household Finance Corp. 5.88 02/01/09 681,074 500,000 Household Finance Corp. 7.00 05/15/12 540,609 700,000 Household Finance Corp. 6.38 11/27/12 734,373 750,000 IBM Corp. 2.38 11/01/06 748,249 250,000 IBM Corp. 3.80 02/01/08 245,234 500,000 International Lease Finance Corp. 4.75 04/30/07 498,284 1,109,000 International Lease Finance Corp. 5.63 06/01/07 1,110,434 500,000 International Lease Finance Corp. 6.38 03/15/09 512,406 294,000 International Lease Finance Corp. 4.88 09/01/10 290,482 450,000 John Hancock* 7.38 02/15/24 523,293 500,000 Johnson Controls, Inc. 5.00 11/15/06 499,509 50,000 JP Morgan Chase & Co. 6.70 11/01/07 50,646 455,000 JP Morgan Chase & Co. 6.75 08/15/08 466,750 921,000 Keycorp 3.05 11/22/06 917,812 750,000 Keycorp 2.75 02/27/07 740,696 500,000 Kraft Foods, Inc. 5.25 06/01/07 499,166 430,000 Liberty Mutual Insurance* 8.20 05/04/07 434,205 250,000 Loews Corp. 6.75 12/15/06 250,330 260,000 Marsh & Mclennan Cos, Inc. 5.38 03/15/07 259,840 500,000 McDonnell Douglas Corp. 6.88 11/01/06 500,417 288,000 Merck & Co., Inc. 2.50 03/30/07 284,155 500,000 Morgan Stanley 3.88 01/15/09 486,595 250,000 Morgan Stanley 4.25 05/15/10 241,755 500,000 Morgan Stanley 4.75 04/01/14 475,490 400,000 New Jersey Bell Telephone 7.85 11/15/29 438,817 122,000 NLV Financial Corp.* 6.50 03/15/35 114,238 929,000 Owens Illinois, Inc. 8.10 05/15/07 938,290 500,000 Pemex Project Funding Master Trust 8.50 02/15/08 517,750 270,000 Phillip Morris Co., Inc. 7.20 02/01/07 270,968 815,000 Popular NA, Inc. 6.13 10/15/06 815,172 300,000 Private Export Funding, Series B 6.49 07/15/07 302,648 200,000 Pulte Homes, Inc. 4.88 07/15/09 196,451 350,000 Royal Caribbean Cruises - YD 6.75 03/15/08 353,721 100,000 Sears Roebuck Acceptance Corp. 6.70 11/15/06 99,908 100,000 Sears Roebuck Acceptance Corp. 7.00 06/15/07 100,413 382,000 Sears Roebuck Acceptance Corp. 6.25 05/01/09 385,424
16 Schedule of Investments
INTEREST MATURITY PRINCIPAL AMOUNT RATE DATE VALUE ------------------------------------------------------------------------------------------------ $ 213,000 Semco Energy, Inc. 6.40% 11/25/08 $ 203,646 650,000 St. Paul Companies, Inc. 5.75 03/15/07 651,234 40,000 Suntrust Bank 2.50 11/01/06 39,903 500,000 Target Corp. 3.38 03/01/08 488,213 350,000 Telefonica de Argentina - YD 9.13 11/07/10 371,000 500,000 Tennessee Gas Pipeline 7.00 10/15/28 497,982 450,000 Time Warner Cos., Inc. 7.48 01/15/08 461,327 630,000 Travelers Property & Casualty 6.75 11/15/06 630,508 288,000 TRW, Inc. 6.32 05/27/08 291,664 500,000 Tyco International, Ltd. - YD 6.13 11/01/08 507,304 155,000 Union Carbide Corp. 6.70 04/01/09 156,731 550,000 Union Tank Car Co. 7.13 02/01/07 552,912 1,000,000 Viacom, Inc. 5.63 05/01/07 1,000,756 500,000 Wisconsin Power & Light Co. 7.00 06/15/07 505,282 ----------- TOTAL CORPORATE BONDS (COST $59,191,399) 58,960,964 ----------- U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS (30.9%) 270,000 Fannie Mae 3.10 07/28/08 260,945 400,000 Fannie Mae 5.50 03/15/11 409,413 7,000,000 Fannie Mae 5.25 08/01/12 7,036,588 6,000,000 Fannie Mae 5.13 01/02/14 5,983,356 1,500,000 Fannie Mae 5.00 03/09/15 1,460,877 500,000 Fannie Mae 5.00 04/17/15 486,585 1,000,000 Fannie Mae 5.00 07/09/18 956,649 700,000 Federal Farm Credit Bank 4.00 12/05/06 698,338 255,000 Federal Farm Credit Bank 5.90 08/04/08 258,951 1,000,000 Federal Home Loan Bank 4.00 02/12/10 969,066 405,000 Federal Home Loan Bank 4.80 03/19/13 394,674 750,000 Federal Home Loan Bank 5.50 02/14/20 729,044 500,000 Federal Home Loan Bank 5.50 03/03/20 486,325 500,000 Federal Home Loan Mortgage Corp. 5.75 04/15/08 505,480 1,500,000 Federal Home Loan Mortgage Corp. 5.05 02/28/13 1,475,063 370,000 Federal Home Loan Mortgage Corp. 5.00 10/29/13 362,280 457,000 Federal Home Loan Mortgage Corp. 5.00 09/15/14 446,105 1,500,000 Federal Home Loan Mortgage Corp. 5.16 02/27/15 1,470,743 400,000 Federal Home Loan Mortgage Corp. 5.00 12/15/15 388,237 550,000 Federal Home Loan Mortgage Corp. 5.00 09/09/16 532,011 975,000 Federal Home Loan Mortgage Corp. 5.25 07/27/17 950,346
Schedule of Investments 17 Schedule of Investments (continued) ICON Bond Fund September 30, 2006
INTEREST MATURITY PRINCIPAL AMOUNT RATE DATE VALUE ------------------------------------------------------------------------------------------------ $1,000,000 US Treasury Note 3.50% 05/31/07 $ 990,312 1,000,000 US Treasury Note 3.00 02/15/08 976,289 ----------- TOTAL U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY 28,227,677 ----------- BONDS (COST $28,345,806) FOREIGN GOVERNMENT BOND (2.8%) 1,000,000 Federal Republic Of Brazil - YD 9.38 04/07/08 1,055,000 750,000 Federal Republic Of Brazil - YD 14.50 10/15/09 937,500 500,000 Republic of South Africa - YD 6.50 06/02/14 525,000 ----------- TOTAL FOREIGN GOVERNMENT BONDS (COST $2,500,343) 2,517,500 ----------- SHORT-TERM INVESTMENTS (0.3%) 255,380 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# 255,380 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $255,380) 255,380 ----------- TOTAL INVESTMENTS (COST $90,292,928) 98.6% 89,961,521 OTHER ASSETS LESS LIABILITIES 1.4% 1,334,202 ----------- TOTAL NET ASSETS 100.0% $91,295,723 ===========
The accompanying notes are an integral part of the financial statements. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. * Security was acquired pursuant to Rule 144A of the Securities Act of 1933 and may be deemed to be restricted for resale. These securities are considered to be illiquid. The aggregate value of these securities at September 30, 2006 was $1,580,390, which represented 1.73% of the Fund's Net Assets. YD Yankee Dollar Bond. 18 Schedule of Investments THIS PAGE INTENTIONALLY LEFT BLANK Management Overview ICON Core Equity Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 98.3% Top 10 Equity Holdings 19.9% Number of Stocks 103 Short-Term Investments 1.5% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Microsoft Corp. 3.3% Bank of America Corp. 2.3% General Electric Co. 2.1% JPMorgan Chase & Co. 2.1% Johnson & Johnson, Inc. 2.0% American International Group, Inc. 1.8% Intel Corp. 1.7% Cisco Systems, Inc. 1.6% International Business Machines Corp. 1.5% FPL Group, Inc. 1.5% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. For the fiscal year ended September 30, 2006, the Fund's benchmark, the S&P Composite 1500 Index, gained 10.32%, compared to the ICON Core Equity Fund's return of 4.35% for Class I shares, 3.54% for Class C shares, and 4.57% for Class Z shares. Since their inception on May 31, 2006 through September 30, 2006, the Class A shares of the Fund have returned (4.49%) (and (9.96%) with maximum sales charge) vs. the S&P Composite 1500 Index return of 4.96% for the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Strong corporate earnings and near-low long-term interest rates proved to be the dominant forces during the first seven months of the fiscal year. The Fund flourished in these conditions. Our emphasis on cyclical industries, primarily from the Industrials and Materials sectors, fueled returns in the first half. However, a major market shift -- the first significant theme change we've seen since March 2003 -- abruptly began in May and featured more defensive industries and mature, large-cap issues. When the market reversal occurred, the Fund was concentrated in the small- and mid-cap cyclical stocks that we had seen dominate the first three years of the bull market. Those stocks rapidly became some of the worst performers in virtually every sector, but clear leadership was vague. Consistent with our investment style, we watched the ICON system closely during this uncertain period, waiting for our relative strength metrics to validate the true industry leaders. Eventually, our system discerned that more mature, larger cap recession-proof stocks were leading. When leadership became more evident, we gradually rotated out of cyclical holdings into more mature, recession-proof stocks. While the ICON system's rigorous focus on valuation identified the new theme, the Fund missed some upside as we waited for leadership to develop clearly. In general, the Fund's exposure to the Materials sector throughout the period contributed to performance, but positions in the Industrials and Energy sectors detracted from returns. While the Energy sector was a strong performer during the first seven months of the year, Energy issues declined sharply from early May through the end of the period, causing a significant drag on overall performance. 20 Management Overview (ROBERT STRAUS, CMT PHOTO) Robert Straus, CMT Portfolio Manager (J.C. WALLER, III PHOTO) J.C. Waller, III Portfolio Manager (DEREK ROLLINGSON PHOTO) Derek Rollingson Portfolio Manager (TODD BURCHETT PHOTO) Todd Burchett Portfolio Manager Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. Our objective is to keep the Fund diversified among the sectors and industries throughout the market that are demonstrating the best value and relative strength. Guided by these parameters, we concentrated the Fund in industries with a heavy cyclical bent, primarily in the Industrials, Materials, and Energy sectors, until near the end of the period. As market leadership suddenly swung in May toward more defensive industries, the Fund's cyclical positioning hindered returns. From an industry standpoint, the worst performing industry in the Fund was oil & gas drilling, with the oil & gas exploration & production industry also accounting for negative performance. The Fund's relative performance was also hindered by its positions in the gold and semiconductor industries. The gold industry suffered significant losses during the month of September. At the time of the industry collapse, our system indicated both value and relative strength in gold issues. On a relative basis, the Fund's lack of significant exposure to companies in the pharmaceutical industry contributed to underperformance versus it broad benchmark. For most of the year, the industry was not attractive to our system. On the positive side, the steel, aluminum, internet software & services, wireless telecommunications services, and healthcare distributors industries added to returns during the period. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE EQUITY MARKET? A. Despite volatile interest rate and commodity price movements, both closed the period well below their peaks reached in the spring and summer months. We believe the combination of relatively low long-term interest rates and stable, growing corporate earnings continues to provide a solid foundation for stocks. Our analysis suggests, however, that mature, blue-chip issues will lead the market higher. We have gradually rotated into this strong leadership as our metrics dictate, and we believe the Fund is well-positioned to benefit should this theme endure. Management Overview 21 Management Overview (continued) ICON Core Equity Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund repositioned from cyclical stocks into recession-proof, larger-cap names late in the period but missed some gains as we waited for definitive industry leadership to emerge. - The Fund's exposure to the Materials sector aided performance, but positions in the Industrials and Energy sectors detracted from overall returns. - A lack of exposure to pharmaceutical companies contributed to underperformance versus the Fund's broad benchmark. 22 Management Overview SECTOR COMPOSITION September 30, 2006 Financial 24.8% Information Technology 18.2% Healthcare 14.5% Consumer Discretionary 11.1% Telecommunication and Utilities 9.0% Leisure and Consumer Staples 8.4% Energy 4.7% Materials 3.9% Industrials 3.7%
Percentages are based upon net assets. Management Overview 23 Management Overview (continued) ICON Core Equity Fund INDUSTRY COMPOSITION September 30, 2006 Pharmaceuticals 6.3% Other Diversified Financial Services 5.5% Systems Software 4.4% Investment Banking & Brokerage 4.1% Computer Hardware 3.8% Semiconductors 3.3% Diversified Banks 3.1% Multi-Utilities 3.1% Integrated Telecommunication Services 3.1% Broadcast & Cable TV 3.0% Health Care Distributors 3.0% Oil & Gas Storage & Transportation 2.9% Multi-Line Insurance 2.7% Health Care Facilities 2.5% Communications Equipment 2.5% Health Care Services 2.2% Industrial Conglomerates 2.1% Electric Utilities 2.0% Diversified Capital Markets 2.0% Footwear 1.9% General Merchandise Stores 1.9% Apparel Accessories & Luxury Goods 1.7% Soft Drinks 1.7% Asset Management & Custody Banks 1.7% IT Consulting & Other Services 1.7% Thrifts & Mortgage Finance 1.7% Consumer Finance 1.6% Automobile Manufacturers 1.5% Specialty Stores 1.5% Department Stores 1.4% Oil & Gas Equipment & Services 1.3% Diversified Chemicals 1.2% Household Products 1.0% Gold 1.0% Home Furnishing Retail 0.9% Metal & Glass Containers 0.9% Hypermarkets & Super Centers 0.9% Property & Casualty Insurance 0.9% Drug Retail 0.9% Life & Health Insurance 0.9% Wireless Telecommunication Services 0.8% Internet Software & Services 0.8% Mortgage Reits 0.8% Restaurants 0.8% Electronic Equipment Manufacturers 0.8% Office Electronics 0.8% Marine 0.8% Specialty Chemicals 0.8% Aerospace & Defense 0.6% Oil & Gas Drilling 0.5% Biotechnology 0.5% Diversified Commercial & Professional Services 0.3% Home Building 0.2%
Percentages are based upon net assets. 24 Management Overview AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class I 10/12/00 4.35% 9.98% 8.37% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 2.61% ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class C 11/28/00 3.54% 9.12% 6.62% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 2.45% ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class Z 5/6/04 4.57% N/A 11.89% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 10.25% ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class A* 5/31/06 N/A N/A (4.49%) ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class A (including maximum sales charge of 5.75%)* 5/31/06 N/A N/A (9.96%) ------------------------------------------------------------------------------------------- S&P Composite 1500 Index* N/A N/A 4.96% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Since Inception performance results for Class C shares include returns for certain time periods that were restated as of June 8, 2004. Class Z shares are available only to institutional investors. Class C total returns exclude applicable sales charges. If sales charges were included, returns would be lower. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON CORE EQUITY FUND - CLASS I S&P COMPOSITE 1500 INDEX ------------------------------- ------------------------ 10/12/00 10000.00 10000.00 11850.00 10031.00 10810.00 8861.00 12680.00 9444.00 9/30/01 10040.00 8037.00 12456.00 8963.00 13234.00 9049.00 12048.00 7887.00 9/30/02 9717.00 6525.00 9461.00 7054.00 8715.00 6818.00 10515.00 7890.00 9/30/03 11374.00 8135.00 12571.00 9140.00 13001.00 9336.00 13072.00 9498.00 9/30/04 13072.00 9320.00 14556.00 10218.00 14167.00 10015.00 14659.00 10187.00 9/30/05 15487.00 10574.00 15959.00 10798.00 17415.00 11322.00 16736.00 11127.00 9/30/06 16162.00 11665.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 10/12/00 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 25 Schedule of Investments ICON Core Equity Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (98.3%) 72,400 A.C. Moore Arts & Crafts, Inc.(a) $ 1,377,772 30,400 Agnico-Eagle Mines, Ltd. 946,352 43,600 America Movil S.A. de C.V. - ADR 1,716,532 55,100 American International Group, Inc. 3,650,926 36,100 Ameriprise Financial, Inc. 1,693,090 23,900 AmerisourceBergen Corp. 1,080,280 20,400 Apple Computer, Inc.(a) 1,571,412 50,700 AT&T, Inc. 1,650,792 85,100 Bank of America Corp. 4,558,807 33,600 Barrick Gold Corp. - ADR 1,032,192 82,700 Cablevision Systems Corp. 1,878,117 29,900 Canon, Inc. - ADR 1,563,471 25,600 Caremark Rx, Inc. 1,450,752 55,500 Cash America International, Inc. 2,168,940 21,000 Celgene Corp.(a) 909,300 104,500 CenterPoint Energy, Inc. 1,496,440 9,500 Centex Corp. 499,890 145,000 Cisco Systems, Inc.(a) 3,335,000 79,600 Coca-Cola Enterprises, Inc. 1,658,068 56,500 Comcast Corp. - Class A(a) 2,082,025 25,900 Comerica, Inc. 1,474,228 38,400 Curtiss-Wright Corp. 1,165,440 54,700 CVS Corp. 1,756,964 26,100 DaVita, Inc.(a) 1,510,407 15,400 Deutsche Bank AG - ADR 1,858,780 13,700 Diamond Offshore Drilling, Inc. 991,469 17,500 Dick's Sporting Goods, Inc.(a) 796,600 27,400 Dominion Resources, Inc. of Virginia 2,095,826
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 78,700 Family Dollar Stores, Inc. $ 2,301,188 30,700 Fannie Mae 1,716,437 25,100 Federal Home Loan Mortgage Corp. 1,664,883 50,200 Forest Laboratories, Inc.(a) 2,540,622 68,800 FPL Group, Inc. 3,096,000 53,000 Frontline, Ltd. 2,041,030 122,100 General Electric Co. 4,310,130 53,800 General Maritime Corp. 1,968,004 32,400 General Motors Corp. 1,077,624 4,200 Google, Inc. - Class A(a) 1,687,980 30,200 Grant Prideco, Inc.(a) 1,148,506 22,300 Healthcare Services Group, Inc. 561,068 44,500 Henry Schein, Inc.(a) 2,231,230 156,100 Hercules, Inc.(a) 2,461,697 83,000 Hewlett-Packard Co. 3,045,270 59,100 Honda Motor Co., Ltd. - ADR 1,987,533 88,800 Horace Mann Educators Corp. 1,707,624 26,800 Infosys Technologies, Ltd. - ADR 1,279,164 53,300 ING Group N.V. - ADR 2,344,134 170,100 Intel Corp. 3,498,957 38,100 International Business Machines Corp. 3,121,914 38,300 International Flavors & Fragrances, Inc. 1,514,382 62,500 Johnson & Johnson, Inc. 4,058,750 91,100 JPMorgan Chase & Co. 4,278,056 39,500 K-Swiss, Inc. 1,187,370 63,200 K-V Pharmaceutical Co.(a) 1,497,840
26 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 48,700 Kindred Healthcare, Inc.(a) $ 1,447,851 48,200 Kirby Corp.(a) 1,510,106 44,600 Kohl's Corp.(a) 2,895,432 48,100 Korea Electric Power Corp. - ADR 940,355 13,400 Lehman Brothers Holding, Inc. 989,724 58,800 Lifepoint Hospitals, Inc.(a) 2,076,816 39,800 Liz Claiborne, Inc. 1,572,498 60,300 MDU Resources Group, Inc. 1,347,102 46,300 Mellon Financial Corp. 1,810,330 47,200 Merck & Co., Inc. 1,977,680 24,600 Merrill Lynch & Co., Inc. 1,924,212 30,200 MetLife, Inc. 1,711,736 242,300 Microsoft Corp. 6,622,059 26,300 Morgan Stanley 1,917,533 66,900 Motorola, Inc. 1,672,500 112,100 Myers Industries, Inc. 1,905,700 52,500 Mylan Laboratories, Inc. 1,056,825 25,000 National-OilWell Varco, Inc.(a) 1,463,750 88,000 O'Charley's, Inc.(a) 1,669,360 129,400 Oracle Corp.(a) 2,295,556 31,100 Overseas Shipholding Group, Inc. 1,921,047 30,200 PetsMart, Inc. 838,050 59,100 Pfizer, Inc. 1,676,076 45,600 Philadelphia Consolidated Holding Corp.(a) 1,813,968 32,900 Procter & Gamble Co. 2,039,142 134,400 PSS World Medical, Inc.(a) 2,686,656 24,400 Quest Diagnostics, Inc. 1,492,304
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 33,200 Redwood Trust, Inc. $ 1,672,284 64,700 Rent-A-Center, Inc.(a) 1,895,063 26,700 Rogers Corp.(a) 1,648,725 57,500 Satyam Computer Services, Ltd. - ADR 2,224,675 26,300 Sempra Energy 1,321,575 66,800 Steven Madden, Ltd. 2,621,232 137,091 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 1,316,074 26,900 Target Corp. 1,486,225 65,000 Telenor ASA - ADR 2,531,100 55,100 Texas Instruments, Inc. 1,832,075 12,500 The Bear Stearns Cos., Inc. 1,751,250 108,200 The DIRECTV Group, Inc.(a) 2,129,376 9,500 The Goldman Sachs Group, Inc. 1,607,115 52,500 The Pepsi Bottling Group, Inc. 1,863,750 35,200 UBS AG - ADR 2,087,712 27,200 Universal Health Services, Inc. - Class B 1,630,096 26,800 V.F. Corp. 1,955,060 53,500 Verizon Communications, Inc. 1,986,455 32,200 Wachovia Corp. 1,796,760 36,800 Wal-Mart Stores, Inc. 1,814,976 83,200 Wells Fargo & Co. 3,010,175 22,900 World Acceptance Corp.(a) 1,007,142 ------------ TOTAL COMMON STOCKS (COST $183,820,468) 198,760,528
Schedule of Investments 27 Schedule of Investments (continued) ICON Core Equity Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SHORT-TERM INVESTMENTS (1.5%) $3,102,312 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# $ 3,102,312 ------------ TOTAL SHORT-TERM INVESTMENT (COST $3,102,312) 3,102,312 TOTAL INVESTMENTS 99.8% (COST $186,922,780) 201,862,840 OTHER ASSETS LESS LIABILITIES 0.2% 363,925 ------------ TOTAL NET ASSETS 100.0% $202,226,765 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. 28 Schedule of Investments Management Overview ICON Covered Call Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 103.0% Top 10 Equity Holdings 20.8% Number of Stocks 118 Options Purchased Put Options 0.2% Short-Term Investments 3.3% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Microsoft Corp. 3.3% Intel Corp. 2.6% Bank of America Corp. 2.5% The Goldman Sachs Group, Inc. 2.2% Roche Holdings, Ltd. - ADR 1.9% Cisco Systems, Inc. 1.8% Procter & Gamble Co. 1.7% National Grid PLC - ADR 1.6% JPMorgan Chase & Co. 1.6% Comcast Corp. - Class A 1.6% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. For the Fund's fiscal year ended September 30, 2006, its benchmark, the S&P Composite 1500 Index, gained 10.32%, while the ICON Covered Call Fund returned 0.30% for Class I shares, (0.36%) for Class C shares, and 0.88% for Class Z shares. Since their inception on May 31, 2006 through September 30, 2006, the Class A shares of the Fund have returned 0.51% (and (5.28%) with maximum sales charge) compared to the S&P Composite 1500's return of 4.96% during the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Fund lagged its benchmark for the period due to three major factors. Consistent with the Fund's strategy, we wrote covered call options on stocks identified by the ICON system as undervalued. When equity issues performed strongly during a market rally in the first calendar quarter of 2006, these call positions limited the Fund's upside potential, as we would expect during a rising market. Secondly, relative performance was influenced by a significant market shift, the first theme change in more than three years, which began to emerge in May. The small- and mid-cap cyclical stocks that we had seen dominate the recent bull market became some of the worst performers in virtually every sector. After a number of weeks of ambiguous industry leadership, mature, larger-cap issues with a recession-proof tilt finally began to advance following a market low in July. As we waited patiently for the market to show clarity, the Fund lost ground against its broad benchmark. Finally, option premiums, as represented by the Chicago Board Options Exchange Volatility Index (VIX), remained low relative to historical levels, hindering returns. The VIX averaged 13.24 for the period and ended it at 11.98, well below its historical average of the past 15 years of 18.93. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. With option premium levels hovering at 15-year lows and the broad market reaching five-year highs in early spring, we added a new tactic to the management of the Fund. In order to provide additional downside protection, we began purchasing out-of-the-money index put options. When the market experienced a steep downturn in early May through mid June, these put options help to mitigate part of the losses on the Fund's long equity positions. Even though the Fund has an emphasis on call writing, our objective in constructing the portfolio is to diversify among the sectors and industries Management Overview 29 Management Overview (continued) ICON Covered Call Fund that are demonstrating the best value and relative strength. Focusing on our valuation measures, we concentrated the Fund in industries with a heavy cyclical nature, primarily in the Industrials, Materials, and Energy sectors, until near the end of the period. After the market experienced an unclear period, leadership finally swung toward more defensive industries, and we gradually repositioned the Fund after our relative strength measures pointed to more mature, recession-proof positions. In particular, exposure to the oil & gas drilling, oil & gas exploration and production, and coal & consumable fuel industries, all from the Energy sector, dampened returns. Their negative performance reflected the sector's extremely poor showing beginning with the early May sell-off and extending through mid-June, as investors appeared to become wary of the long bull run in Energy. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE EQUITY MARKET? A. With option premium levels remaining low, we expect to continue buying index put options to provide supplemental downside protection for the Fund. This strategy would be particularly beneficial if the market continues to rally and prices begin to approach fair value. We are currently seeing strong combinations of value and relative strength from a number of larger-cap, "blue chip" companies that support our analysis that this group represents the clearest market leadership for the foreseeable future. To capture the new theme, we began rotating into this group during the last three months of the period as our system dictated. Looking ahead, our metrics indicate the Fund is well-positioned to benefit should this theme persist. 30 Management Overview (ROBERT STRAUS, CMT PHOTO) Robert Straus, CMT Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2006 - When equity issues performed strongly during a market rally in the first quarter of 2006, the Fund's call positions limited upside potential. - We identified a new market theme in the final fiscal quarter that featured more defensive industries, and while we waited for clear industry leadership to emerge, the Fund lost ground vs. its benchmark. - Industries within the Energy sector caused a drag on Fund returns when they performed poorly in early summer. The Chicago Board Options Exchange Volatility Index (VIX) is an up-to-the-minute market estimate of expected volatility that is calculated by using real-time S&P 500 Index option bid/ask quotes. VIX uses nearby and second nearby options with at least 8 days left to expiration and then weights them to yield a constant, 30-day measure of the expected volatility of the S&P 500 Index. Management Overview 31 Management Overview (continued) ICON Covered Call Fund SECTOR COMPOSITION September 30, 2006 Financial 25.0% Information Technology 20.6% Healthcare 14.6% Leisure and Consumer Staples 12.8% Telecommunication and Utilities 11.5% Consumer Discretionary 8.9% Energy 5.8% Industrials 2.3% Materials 1.5%
Percentages are based upon net assets. 32 Management Overview INDUSTRY COMPOSITION September 30, 2006 Pharmaceuticals 7.0% Integrated Telecommunication Services 5.3% Investment Banking & Brokerage 5.1% Semiconductors 5.1% Systems Software 5.0% Other Diversified Financial Services 4.5% Soft Drinks 4.1% Oil & Gas Storage & Transportation 3.8% Computer Hardware 3.5% Diversified Banks 3.5% Health Care Facilities 3.1% Communications Equipment 3.0% Multi-Utilities 3.0% Regional Banks 2.9% Broadcast & Cable TV 2.3% Household Products 2.3% Multi-Line Insurance 2.3% IT Consulting & Other Services 2.2% Wireless Telecommunication Services 2.0% Integrated Oil & Gas 2.0% General Merchandise Stores 1.9% Managed Health Care 1.8% Diversified Capital Markets 1.6% Health Care Distributors 1.6% Specialty Stores 1.5% Brewers 1.5% Apparel Accessories & Luxury Goods 1.4% Gold 1.3% Airlines 1.2% Asset Management & Custody Banks 1.2% Electric Utilities 1.2% Department Stores 1.1% Packaged Foods & Meats 1.1% Mortgage Reits 1.1% Footwear 1.0% Aerospace & Defense 0.9% Biotechnology 0.8% Office Electronics 0.8% Life & Health Insurance 0.8% Data Processing & Outsourced Services 0.8% Movies & Entertainment 0.7% Thrifts & Mortgage Finance 0.7% Property & Casualty Insurance 0.7% Automobile Manufacturers 0.6% Photographic Products 0.6% Reinsurance 0.6% Home Furnishing Retail 0.5% Home Improvement Retail 0.5% Internet Software & Services 0.3% Diversified Chemicals 0.3% Drug Retail 0.3% Health Care Supplies 0.2% Home Building 0.2% Trucking 0.2%
Percentages are based upon net assets. Management Overview 33 Management Overview (continued) ICON Covered Call Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class I 9/30/02 0.30% N/A 10.69% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 15.63% ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class C 11/21/02 (0.36%) N/A 8.23% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 12.96% ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class Z 5/6/04 0.88% N/A 5.57% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 10.25% ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class A* 5/31/06 N/A N/A 0.51% ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class A (including maximum sales charge of 5.75%)* 5/31/06 N/A N/A (5.28%) ------------------------------------------------------------------------------------------- S&P Composite 1500 Index* N/A N/A 4.96% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. Class C total returns exclude applicable sales charges. If sales charges were included, returns would be lower. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON COVERED CALL FUND - CLASS I S&P COMPOSITE 1500 INDEX -------------------------------- ------------------------ 9/30/02 10000.00 10000.00 10490.00 10811.00 10050.00 10450.00 11770.00 12093.00 9/30/03 12400.00 12469.00 13541.00 14009.00 13799.00 14308.00 13944.00 14557.00 9/30/04 13706.00 14285.00 14568.00 15661.00 14416.00 15349.00 14470.00 15613.00 9/30/05 14966.00 16206.00 14946.00 16550.00 15414.00 17353.00 15044.00 17054.00 9/30/06 15011.00 17878.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 34 Management Overview Schedule of Investments ICON Covered Call Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (103.0%) 22,900 A.C. Moore Arts & Crafts, Inc.(a)x) $ 435,787 6,200 A.G. Edwards, Inc.(x) 330,336 9,800 Alaska Air Group, Inc.(a)x) 372,792 4,500 Allied Irish Banks PLC - ADR 243,270 23,700 America Movil S.A. de C.V. - ADR(x) 933,069 6,200 AmerisourceBergen Corp.(x) 280,240 7,100 Amgen, Inc.(a)x) 507,863 25,400 AmSurg Corp.(a)x) 565,404 5,600 Apple Computer, Inc.(a)x) 431,368 15,400 AT&T, Inc.(x) 501,424 29,800 Bank of America Corp.(x) 1,596,386 26,300 Barrick Gold Corp. - ADR(x) 807,936 9,200 BNP Paribas - ADR 494,426 4,900 BT Group PLC - ADR 247,793 5,100 Canon, Inc. - ADR 266,679 2,900 Centex Corp.(x) 152,598 9,500 Chevron Corp.(x) 616,170 8,200 Chubb Corp.(x) 426,072 49,700 Cisco Systems, Inc.(a)x) 1,143,100 42,500 Coca-Cola Enterprises, Inc.(x) 885,275 12,300 Cognizant Technology Solutions Corp.(a)x) 910,938 26,900 Comcast Corp. - Class A(a)x) 991,265 8,300 Community Health Systems, Inc.(a)x) 310,005 7,500 Cullen/Frost Bankers, Inc.(x) 433,650 5,000 CVS Corp.(x) 160,600 4,600 Deutsche Bank AG - ADR(x) 555,220 5,300 Dick's Sporting Goods, Inc.(a)x) 241,256 8,100 Dollar Tree Stores, Inc.(a)x) 250,776 4,900 Dominion Resources, Inc. of Virginia(x) 374,801
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 4,100 East-West Bancorp, Inc.(x) $ 162,401 6,300 EchoStar Communications Corp. - Class A(a)x) 206,262 4,000 Everest Re Group, Ltd.(x) 390,120 17,800 Family Dollar Stores, Inc.(x) 520,472 10,400 Fiserv, Inc.(a)x) 489,736 7,400 Fomento Economico Mexicano, S.A. de C.V. - ADR(x) 717,356 17,600 Forest Laboratories, Inc.(a)x) 890,736 14,500 FPL Group, Inc.(x) 652,500 11,100 Frontline, Ltd.(x) 427,461 9,600 Fuji Photo Film 350,016 23,000 General Maritime Corp.(x) 841,340 11,800 General Motors Corp.(x) 392,468 5,000 Gildan Activewear, Inc. - Class A(a) 242,300 11,800 Gol - Linhas Aereas Inteligentes S.A. - ADR(x) 405,330 500 Google, Inc. - Class A(a)x) 200,950 7,200 Health Net, Inc.(a)x) 313,344 27,500 Heineken N.V. - ADR 628,375 2,300 Henkel KGaA - ADR 320,751 15,200 Henry Schein, Inc.(a)x) 762,128 10,200 Hercules, Inc.(a)x) 160,854 24,100 Hewlett-Packard Co.(x) 884,229 9,400 Infosys Technologies, Ltd. - ADR(x) 448,662 4,800 ING Group N.V. - ADR(x) 211,104 79,300 Intel Corp.(x) 1,631,201 10,800 International Business Machines Corp.(x) 884,952 13,700 Johnson & Johnson, Inc.(x) 889,678 21,500 JPMorgan Chase & Co.(x) 1,009,640
Schedule of Investments 35 Schedule of Investments (continued) ICON Covered Call Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 16,300 Kindred Healthcare, Inc.(a)x) $ 484,599 11,100 Kohl's Corp.(a)x) 720,612 5,900 Korea Electric Power Corp. - ADR(x) 115,345 13,700 Lifepoint Hospitals, Inc.(a)x) 483,884 18,000 Loews Corp.(x) 682,200 15,400 Merck & Co., Inc.(x) 645,260 6,000 Merrill Lynch & Co., Inc.(x) 469,320 8,700 MetLife, Inc.(x) 493,116 76,300 Microsoft Corp.(x) 2,085,279 4,600 Molson Coors Brewing Co. - Class B(x) 316,940 9,900 Morgan Stanley(x) 721,809 19,100 Motorola, Inc.(x) 477,500 16,300 National Grid PLC - ADR 1,021,847 8,100 Nestle S.A. - ADR 708,345 6,100 Newcastle Investment Corp. 167,201 5,100 Nike, Inc. - Class B(x) 446,862 8,000 Northrop Grumman Corp.(x) 544,560 8,500 Novartis AG - ADR(x) 496,740 44,700 Oracle Corp.(a)x) 792,978 12,100 Overseas Shipholding Group, Inc.(x) 747,417 9,000 PetsMart, Inc.(x) 249,750 7,700 Philippine Long Distance Telephone Co. - ADR(x) 335,412 6,200 PNC Financial Services Group, Inc.(x) 449,128 17,800 Procter & Gamble Co.(x) 1,103,244 15,000 PT Telekomunikasi Indonesia - ADR(x) 542,400 10,300 Redwood Trust, Inc.(x) 518,811 11,300 Rent-A-Center, Inc.(a)x) 330,977 2,500 Research in Motion, Ltd.(a)x) 256,650 13,600 Roche Holdings, Ltd. - ADR 1,178,440 5,200 RWE AG - ADR 480,480
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 2,400 Ryder System, Inc.(x) $ 124,032 14,700 Schering-Plough Corp.(x) 324,723 63,139 Siliconware Precision Industries Co. - ADR(x) 375,677 4,500 Steven Madden, Ltd.(x) 176,580 10,100 SunTrust Banks, Inc.(x) 780,528 13,100 Symantec Corp.(a)x) 278,768 45,833 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR(x) 439,997 7,900 Target Corp.(x) 436,475 26,400 Telefonos de Mexico S.A. de C.V. - ADR(x) 675,312 19,700 Telenor ASA - ADR 767,118 23,600 Texas Instruments, Inc.(x) 784,700 21,900 The Bank of New York Co., Inc.(x) 772,194 2,300 The Bear Stearns Cos., Inc.(x) 322,230 2,900 The Cooper Cos., Inc.(x) 155,150 12,500 The DIRECTV Group, Inc.(a)x) 246,000 8,200 The Goldman Sachs Group, Inc.(x) 1,387,193 8,700 The Hartford Financial Services Group, Inc.(x) 754,725 27,700 The Pepsi Bottling Group, Inc. 983,350 5,700 The Sherwin- Williams Co.(x) 317,946 14,200 The Walt Disney Co.(x) 438,922 10,000 Total SA - ADR(x) 659,400 2,900 Triad Hospitals, Inc.(a)x) 127,687 8,900 Tsakos Energy Navigation, Ltd.(x) 396,940 8,200 UBS AG - ADR(x) 486,342 9,300 UnitedHealth Group, Inc.(x) 457,560 9,200 V.F. Corp.(x) 671,140
36 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 16,100 Verizon Communications, Inc.(x) $ 597,793 11,100 Wachovia Corp.(x) 619,380 10,000 Washington Mutual, Inc.(x) 434,700 4,400 Wellpoint, Inc.(a)x) 339,020 24,200 Wells Fargo & Co.(x) 875,556 15,600 Xerox Corp.(a)x) 242,736 ----------- TOTAL COMMON STOCKS (COST $60,175,989) 65,017,845
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SHORT-TERM INVESTMENTS (3.3%) $2,100,130 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# $ 2,100,130 ----------- TOTAL SHORT-TERM INVESTMENT (COST $2,100,130) 2,100,130 PUT OPTIONS PURCHASED (0.2%) 100 Midcap Spider Trust, Expiration December 2006, Exercise Price $730 146,000 ----------- TOTAL PUT OPTIONS PURCHASED (COST $170,300) 146,000 TOTAL INVESTMENTS (COST $62,446,419) 106.5% 67,263,975 LIABILITIES LESS OTHER ASSETS (6.5)% (4,080,790) ----------- TOTAL NET ASSETS 100.0% $63,183,185 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. x Portion or all of this security is pledged as collateral for call options written. Schedule of Investments 37 Schedule of Written Options ICON Covered Call Fund September 30, 2006
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- A.C. Moore Arts & Crafts, Inc. Expiration December 2006 Exercise Price $20.00 229 $ 28,625 A.G. Edwards, Inc. Expiration November 2006 Exercise Price $55.00 38 4,275 Expiration November 2006 Exercise Price $60.00 12 180 Expiration January 2007 Exercise Price $55.00 12 2,640 Alaska Air Group, Inc. Expiration October 2006 Exercise Price $40.00 98 5,145 America Movil S.A. De C.V. - ADR Expiration November 2006 Exercise Price $40.00 119 20,527 Expiration January 2007 Exercise Price $45.00 118 11,800 AmerisourceBergen Corp. Expiration November 2006 Exercise Price $45.00 62 11,005 Amgen, Inc. Expiration October 2006 Exercise Price $75.00 45 1,125 Expiration January 2007 Exercise Price $75.00 26 5,460 AmSurg Corp. Expiration October 2006 Exercise Price $25.00 200 2,500 Expiration December 2006 Exercise Price $25.00 54 2,970
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Apple Computer, Inc. Expiration April 2007 Exercise Price $90.00 56 $ 27,440 AT&T, Inc. Expiration April 2007 Exercise Price $32.50 133 26,267 Bank of America Corp. Expiration January 2007 Exercise Price $52.50 120 30,000 Barrick Gold Corp. - ADR Expiration January 2007 Exercise Price $35.00 75 6,750 Expiration January 2007 Exercise Price $37.50 137 6,508 Expiration April 2007 Exercise Price $37.50 51 5,610 Centex Corp. Expiration April 2007 Exercise Price $65.00 29 6,090 Chevron Corp. Expiration December 2006 Exercise Price $70.00 95 8,075 Chubb Corp. Expiration January 2007 Exercise Price $52.50 25 4,813 Expiration January 2007 Exercise Price $55.00 57 4,988 Cisco Systems, Inc. Expiration January 2007 Exercise Price $22.50 455 81,900 Expiration April 2007 Exercise Price $25.00 42 5,145
38 Schedule of Written Options
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Coca-Cola Enterprises, Inc. Expiration November 2006 Exercise Price $20.00 238 $ 28,560 Expiration November 2006 Exercise Price $22.50 60 750 Cognizant Technology Solutions Corp. Expiration October 2006 Exercise Price $70.00 41 20,500 Expiration January 2007 Exercise Price $75.00 82 46,740 Comcast Corp. - Class A Expiration January 2007 Exercise Price $37.50 269 43,040 Community Health Systems, Inc. Expiration December 2006 Exercise Price $40.00 83 10,998 Cullen/Frost Bankers, Inc. Expiration October 2006 Exercise Price $60.00 75 18,750 CVS Corp. Expiration January 2007 Exercise Price $35.00 50 4,375 Deutche Bank AG - ADR Expiration January 2007 Exercise Price $125.00 46 21,850 Dick's Sporting Goods, Inc. Expiration January 2007 Exercise Price $45.00 53 16,960
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Dollar Tree Stores, Inc. Expiration November 2006 Exercise Price $30.00 28 $ 5,320 Expiration February 2007 Exercise Price $32.50 53 8,215 Dominion Resources, Inc. of Virginia Expiration January 2007 Exercise Price $80.00 25 4,000 Expiration January 2007 Exercise Price $85.00 24 1,140 East-West Bancorp, Inc. Expiration October 2006 Exercise Price $40.00 29 2,610 Expiration October 2006 Exercise Price $45.00 12 150 Echostar Communications Corp. - Class A Expiration March 2007 Exercise Price $40.00 63 3,150 Everest Re Group, Ltd. Expiration April 2007 Exercise Price $110.00 40 9,100 Family Dollar Stores, Inc. Expiration October 2006 Exercise Price $27.50 89 17,577 Expiration January 2007 Exercise Price $30.00 89 13,795 Fiserv, Inc. Expiration January 2007 Exercise Price $50.00 104 13,780
Schedule of Written Options 39 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2006
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Fomento Economico Mexicano, S.A. de C.V. - ADR Expiration October 2006 Exercise Price $95.00 25 $ 9,000 Expiration October 2006 Exercise Price $100.00 38 4,655 Forest Laboratories, Inc. Expiration November 2006 Exercise Price $50.00 53 15,105 Expiration January 2007 Exercise Price $50.00 46 17,940 Expiration February 2007 Exercise Price $55.00 77 15,208 FPL Group, Inc. Expiration December 2006 Exercise Price $45.00 116 15,370 Frontline, Ltd. Expiration February 2007 Exercise Price $40.00 111 25,530 General Maritime Corp. Expiration February 2007 Exercise Price $40.00 230 19,550 General Motors Corp. Expiration December 2006 Exercise Price $35.00 118 20,945 Gol - Linehas Aereas Inteligentes S.A. - ADR Expiration October 2006 Exercise Price $40.00 118 1,180 Google, Inc. - Class A Expiration January 2007 Exercise Price $430.00 5 9,425
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Health Net, Inc. Expiration October 2006 Exercise Price $47.50 28 $ 630 Expiration January 2007 Exercise Price $55.00 44 1,100 Henry Schein, Inc. Expiration October 2006 Exercise Price $50.00 106 12,720 Expiration January 2007 Exercise Price $55.00 26 1,950 Expiration April 2007 Exercise Price $55.00 20 3,450 Hercules, Inc. Expiration December 2006 Exercise Price $15.00 20 2,800 Expiration March 2007 Exercise Price $15.00 62 11,780 Hewlett-Packard Co. Expiration February 2007 Exercise Price $40.00 241 39,765 Infosys Technologies. Ltd. - ADR Expiration October 2006 Exercise Price $45.00 48 18,480 Expiration April 2007 Exercise Price $55.00 46 11,960 ING Group N.V. - ADR Expiration January 2007 Exercise Price $45.00 48 9,360 Intel Corp. Expiration January 2007 Exercise Price $20.00 387 62,887
40 Schedule of Written Options
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- International Business Machines Corp. Expiration October 2006 Exercise Price $85.00 56 $ 2,660 Expiration January 2007 Exercise Price $85.00 33 6,518 Expiration January 2007 Exercise Price $90.00 19 1,235 Johnson & Johnson, Inc. Expiration January 2007 Exercise Price $65.00 110 23,100 JPMorgan Chase & Co. Expiration December 2006 Exercise Price $47.50 161 20,125 Expiration January 2007 Exercise Price $45.00 54 16,740 Kindred Healthcare, Inc. Expiration February 2007 Exercise Price $35.00 163 18,745 Kohl's Corp. Expiration April 2007 Exercise Price $75.00 111 23,865 Korea Electric Power Corp. - ADR Expiration December 2006 Exercise Price $20.00 59 4,868 Lifepoint Hospitals, Inc. Expiration November 2006 Exercise Price $40.00 137 3,425 Loews Corp. Expiration December 2006 Exercise Price $38.375 117 14,918 Expiration January 2007 Exercise Price $40.00 63 5,513
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Merck & Co., Inc. Expiration January 2007 Exercise Price $42.50 76 $ 14,060 Expiration January 2007 Exercise Price $45.00 78 6,630 Merrill Lynch & Co., Inc. Expiration April 2007 Exercise Price $85.00 60 15,600 MetLife, Inc. Expiration December 2006 Exercise Price $55.00 74 22,200 Expiration March 2007 Exercise Price $60.00 13 2,275 Microsoft Corp. Expiration April 2007 Exercise Price $27.50 432 72,360 Expiration April 2007 Exercise Price $30.00 99 6,435 Molson Coors Brewing Co. - Class B Expiration October 2006 Exercise Price $75.00 46 230 Morgan Stanley Expiration January 2007 Exercise Price $70.00 18 10,170 Expiration April 2007 Exercise Price $75.00 81 34,830 Motorola, Inc. Expiration April 2007 Exercise Price $30.00 191 15,280 Nike, Inc. - Class B Expiration January 2007 Exercise Price $90.00 10 3,150 Expiration April 2007 Exercise Price $90.00 41 19,680
Schedule of Written Options 41 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2006
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Northrop Grumman Corp. Expiration November 2006 Exercise Price $70.00 56 $ 5,040 Expiration November 2006 Exercise Price $75.00 24 240 Novartis AG - ADR Expiration January 2007 Exercise Price $60.00 85 14,450 Oracle Corp. Expiration March 2007 Exercise Price $16.00 191 48,705 Overseas Shipholding Group, Inc. Expiration October 2006 Exercise Price $60.00 30 8,625 Expiration October 2006 Exercise Price $65.00 12 660 Expiration January 2007 Exercise Price $75.00 10 525 Expiration April 2007 Exercise Price $70.00 69 17,077 PetsMart, Inc. Expiration October 2006 Exercise Price $30.00 90 2,025 Philippine Long Distance Telephone Co. - ADR Expiration December 2006 Exercise Price $45.00 77 13,860 PNC Financial Services Group, Inc. Expiration January 2007 Exercise Price $75.00 62 10,385 Procter & Gamble Co. Expiration April 2007 Exercise Price $65.00 128 26,240
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- PT Telekounikasi Indonesia - ADR Expiration October 2006 Exercise Price $35.00 98 $ 16,905 Expiration January 2007 Exercise Price $40.00 52 8,970 Redwood Trust, Inc. Expiration October 2006 Exercise Price $50.00 103 16,737 Rent-A-Center, Inc. Expiration December 2006 Exercise Price $30.00 113 21,187 Research In Motion, Ltd. Expiration March 2007 Exercise Price $110.00 25 19,500 Ryder System, Inc. Expiration November 2006 Exercise Price $55.00 24 3,480 Schering-Plough Corp. Expiration February 2007 Exercise Price $22.50 147 18,375 Siliconware Precision Industries Co. - ADR Expiration December 2006 Exercise Price $7.50 576 23,040 Steve Madden, Ltd. Expiration December 2006 Exercise Price $40.00 30(+) 15,524 SunTrust Banks, Inc. Expiration January 2007 Exercise Price $85.00 101 3,535 Symantec Corp. Expiration April 2007 Exercise Price $22.50 131 21,615
42 Schedule of Written Options
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Taiwan Semiconductor Manufacturing Co., Ltd. - ADR Expiration January 2007 Exercise Price $11.00 390# $ 25,564 Target Corp. Expiration April 2007 Exercise Price $60.00 79 18,762 Telefonos de Mexico S.A. de C.V. - ADR Expiration October 2006 Exercise Price $25.00 129 12,900 Expiration November 2006 Exercise Price $22.50 135 45,900 Texas Instruments, Inc. Expiration October 2006 Exercise Price $35.00 50 1,375 Expiration January 2007 Exercise Price $32.50 25 7,250 Expiration April 2007 Exercise Price $37.50 161 26,162 The Bank of New York Co., Inc. Expiration October 2006 Exercise Price $35.00 175 14,875 Expiration October 2006 Exercise Price $37.50 44 220 The Bear Stearns Cos., Inc. Expiration January 2007 Exercise Price $155 23 5,348 The Cooper Cos., Inc. Expiration February 2007 Exercise Price $60.00 29 6,453 The DIRECTV Group, Inc. Expiration January 2007 Exercise Price $20.00 69 6,728
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- The Goldman Sachs Group, Inc. Expiration October 2006 Exercise Price $165.00 24 $ 16,080 Expiration January 2007 Exercise Price $180.00 30 14,100 Expiration April 2007 Exercise Price $190.00 28 14,000 The Hartford Financial Services Group, Inc. Expiration December 2006 Exercise Price $95.00 30 1,650 Expiration January 2007 Exercise Price $90.00 22 5,390 Expiration March 2007 Exercise Price $90.00 35 12,600 The Sherwin-Williams Co. Expiration January 2007 Exercise Price $55.00 46 19,780 Expiration March 2007 Exercise Price $60.00 11 2,970 The Walt Disney Co. Expiration April 2007 Exercise Price $32.50 99 14,355 Total SA - ADR Expiration October 2006 Exercise Price $70.00 80 1,400 Expiration May 2007 Exercise Price $70.00 20 5,800 Triad Hospitals, Inc. Expiration November 2006 Exercise Price $45.00 29 3,843 Tsakos Energy Navagation, Ltd. Expiration December 2006 Exercise Price $50.00 89 4,005
Schedule of Written Options 43 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2006
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- UBS AG - ADR Expiration December 2006 Exercise Price $60.00 82 $ 16,605 UnitedHealth Group, Inc. Expiration January 2007 Exercise Price $55.00 27 3,105 Expiration January 2007 Exercise Price $57.50 66 4,290 VF Corp. Expiration February 2007 Exercise Price $80.00 92 19,320 Verizon Communications, Inc. Expiration April 2007 Exercise Price $37.50 129 22,897 Wachovia Corp. Expiration January 2007 Exercise Price $60.00 85 5,525 Expiration January 2007 Exercise Price $65.00 26 195
UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE CONTRACTS* VALUE ----------------------------------------------- Washington Mutual, Inc. Expiration January 2007 Exercise Price $50.00 100 $ 1,250 Wellpoint, Inc. Expiration December 2006 Exercise Price $80.00 17 3,570 Expiration December 2006 Exercise Price $85.00 27 1,890 Wells Fargo & Co. Expiration January 2007 Exercise Price $37.50 190 14,250 Xerox Corp. Expiration April 2007 Exercise Price $17.00 133 8,645 ---------- Total Options Written (Premiums received $2,108,685) 13,216 $2,002,352 ==========
The accompanying notes are an integral part of the financial statements. * All written options have 100 shares per contract unless otherwise noted. (+) Contracts have 150 shares per contract. # Contracts have 114 shares per contract. ADR American Depositary Receipt. 44 Schedule of Written Options Management Overview ICON Equity Income Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities Common Stocks 94.6% Convertible Preferred Stocks 0.7% Top 10 Equity Holdings 19.0% Number of Stocks 101 Options Purchased Call Options 0.1% Number of Securities on Which Options Have Been Purchased 2 Bonds & Short-Term Investments Convertible Corporate Bonds 0.4% Corporate Bonds 2.0% U.S. Government and Agencies 2.2% Short-Term Investments 1.2% Number of Bonds 8 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Microsoft Corp. 3.0% JPMorgan Chase & Co. 2.0% Johnson & Johnson, Inc. 1.9% AT&T, Inc. 1.9% General Electric Co. 1.8% American International Group, Inc. 1.8% Procter & Gamble Co. 1.8% Merck & Co., Inc. 1.8% Bank of America Corp. 1.5% Intel Corp. 1.5% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. For the fiscal year ended September 30, 2006, the Fund's benchmark, the S&P Composite 1500 Index, gained 10.32%, while the ICON Equity Income Fund returned 4.02% for Class I shares, 3.03% for Class C shares, and 4.04% for Class Z shares. Since their inception on May 31, 2006 through September 30, 2006, the Class A shares of the Fund have returned 0.46% (and (5.33%) with maximum sales charge) compared to the S&P 1500 return of 4.96% during the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The first seven months of the fiscal year were marked by strong corporate earnings and near historically low long-term interest rates. Guided by the ICON valuation system, we placed an emphasis on cyclical industries, primarily from the Industrials and Materials sectors, and this aided returns through the first half. However, a major market shift - the first significant theme change since March 2003 - began in May and featured more defensive industries and mature, large-cap issues. The small- and mid-cap cyclical stocks that we saw dominate the first three years of the bull market rapidly became some of the worst performers in virtually every sector after the market shift in May, but clear leadership was elusive. We watched our system closely during this time of ambiguity, waiting for our relative strength metrics to confirm the true industry leaders. As we gained more confidence that a new theme was indeed taking hold, we gradually moved away from cyclical holdings into more mature, recession-proof stocks. While the ICON system's rigorous focus on valuation identified the new theme, the Fund missed some upside as we waited for leadership to clearly develop. We have been encouraged that one outcome of the market reversal has been an increase in the number of stocks with the combination of attractive value/price ratios, relative strength, and dividends for the Equity Income Fund. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. The ICON Equity Income Fund seeks diversified exposure to those sectors and industries throughout the market that are priced below our estimate of intrinsic value and that are showing strength relative to the broad market. As market leadership turned in the final three months of the period to larger, more mature companies, the Fund was able to identify more opportunities to invest in dividend-paying stocks. Management Overview 45 Management Overview (continued) ICON Equity Income Fund Early in the period, the Fund's exposure to the Financial and Materials sectors contributed to performance, but positions in the Leisure & Consumer Staples sector detracted from returns. While the Financials sector was the largest contributor in terms of performance, stocks in the Fund lagged the benchmark as holdings in the property & casualty insurance industry struggled in the last half of the year. On an industry level, diversified metals & mining, investment banking & brokerage, and pharmaceuticals all performed well for the Fund. In particular, Southern Copper Corp. surged on a sharp increase in copper prices. With an average weight in the Fund of 1.02% during the fiscal year, Southern Copper was up almost 89% during the holding period. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE EQUITY MARKET? A. We continue to keep a close eye on valuations to determine the sustainability of the new market theme. As our valuations indicate, we expect that industries dominated by larger, blue-chip companies to lead the market higher in the months ahead. This new leadership has opened up opportunities for the Fund to hold more stocks and fewer convertible instruments. Since the Fund focuses on securities that are intended to generate returns from both equity appreciation and income, we believe the current leadership in industries heavily composed of dividend-paying stock will be a positive for the Fund. 46 Management Overview (DEREK ROLLINGSON PHOTO) Derek Rollingson Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund missed some gains as we patiently waited for clear industry leadership to develop following a market reversal in May. - The Fund's exposure to the Financial and Materials sectors contributed to performance, but positions in the Leisure & Consumer Staples sector detracted from returns. - Holdings in the diversified metals & mining, investment banking & brokerage, and pharmaceuticals industries performed well during the period. Management Overview 47 Management Overview (continued) ICON Equity Income Fund SECTOR COMPOSITION September 30, 2006 Financial 28.4% Information Technology 13.1% Healthcare 11.0% Telecommunication and Utilities 10.4% Leisure and Consumer Staples 9.1% Industrials 8.1% Consumer Discretionary 7.0% Energy 3.8% Materials 3.7%
Percentages are based upon common stock positions as a percentage of net assets. 48 Management Overview INDUSTRY COMPOSITION September 30, 2006 Pharmaceuticals 7.1% Other Diversified Financial Services 6.4% Investment Banking & Brokerage 4.6% Integrated Telecommunication Services 4.0% Diversified Banks 3.5% HOUSEHOLD PRODUCTS 3.3% Multi-Line Insurance 3.1% Systems Software 3.0% Computer Hardware 2.6% Communications Equipment 2.3% Semiconductors 2.2% Asset Management & Custody Banks 2.2% Independent Power Producers & Energy Traders 1.9% Industrial Conglomerates 1.8% Diversified Capital Markets 1.8% Aerospace & Defense 1.8% Mortgage Reits 1.8% Thrifts & Mortgage Finance 1.7% Life & Health Insurance 1.7% Electric Utilities 1.6% Integrated Oil & Gas 1.5% Oil & Gas Storage & Transportation 1.5% Footwear 1.4% Tobacco 1.3% Water Utilities 1.2% Apparel Accessories & Luxury Goods 1.1% Automobile Manufacturers 1.1% Health Care Services 1.1% Construction & Farm Machinery & Heavy Trucks 1.1% It Consulting & Other Services 1.1% Packaged Foods & Meats 1.0% Apparel Retail 1.0% Multi-Utilities 1.0% General Merchandise Stores 1.0% Health Care Facilities 1.0% Internet Software & Services 1.0% Office Electronics 1.0% Hypermarkets & Super Centers 1.0% Motorcycle Manufacturers 1.0% Health Care Equipment 0.9% Regional Banks 0.9% Restaurants 0.9% Electrical Components & Equipment 0.9% Broadcasting & Cable Tv 0.9% Marine 0.8% Health Care Distributors 0.8% Steel 0.8% Commodity Chemicals 0.8% Diversified Commercial & Professional Services 0.8% Soft Drinks 0.8% Oil & Gas Exploration & Production 0.8% Gas Utilities 0.7% Metal & Glass Containers 0.6% Diversified Metals & Mining 0.6% Property & Casualty Insurance 0.5% Diversified Chemicals 0.5% Trucking 0.5% Airlines 0.5% Specialized Consumer Services 0.4% Paper Packaging 0.4%
Percentages are based upon common stock positions as a position of net assets. Management Overview 49 Management Overview (continued) ICON Equity Income Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class I 9/30/02 4.02% N/A 15.02% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 15.63% ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class C 11/8/02 3.03% N/A 12.68% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 13.21% ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class Z 5/10/04 4.04% N/A 10.48% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 11.52% ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class A* 5/31/06 N/A N/A 0.46% ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class A (including maximum sales charge of 5.75%)* 5/31/06 N/A N/A (5.33)% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index* N/A N/A 4.96% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. Class C total returns exclude applicable sales charges. If sales charges were included, returns would be lower. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON EQUITY INCOME FUND - CLASS I S&P COMPOSITE 1500 INDEX ------------------------------- ------------------------ 9/30/02 10000.00 10000.00 10819.00 10811.00 10091.00 10450.00 12073.00 12093.00 9/30/03 12482.00 12469.00 14475.00 14009.00 14940.00 14308.00 15016.00 14557.00 9/30/04 14928.00 14285.00 16146.00 15661.00 15847.00 15349.00 16192.00 15613.00 9/30/05 16822.00 16206.00 16849.00 16550.00 18083.00 17353.00 17316.00 17054.00 9/30/06 17498.00 17878.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 50 Management Overview Schedule of Investments ICON Equity Income Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (94.6%) 20,600 A.G. Edwards, Inc. $ 1,097,568 28,100 Abbott Laboratories 1,364,536 26,300 Acuity Brands, Inc. 1,194,020 39,200 Alliant Energy Corp. 1,400,616 20,900 Allied Irish Banks PLC - ADR 1,129,854 13,300 Altria Group, Inc. 1,018,115 15,700 American Financial Group, Inc. 736,801 37,700 American International Group, Inc. 2,498,002 62,700 Angelica Corp. 1,066,527 79,200 AT&T, Inc. 2,578,752 77,100 Banco Santander Central Hispano SA - ADR 1,217,409 40,000 Bank of America Corp. 2,142,800 33,400 Black Hills Corp. 1,122,574 25,800 Canon, Inc. - ADR 1,349,082 19,000 Caremark Rx, Inc. 1,076,730 35,300 Chesapeake Corp. 505,143 20,900 Chevron Corp. 1,355,574 84,500 Cisco Systems, Inc.(a) 1,943,500 42,400 Citigroup, Inc. 2,106,008 38,400 Clear Channel Communications, Inc. 1,107,840 12,600 CNOOC, Ltd. - ADR 1,049,454 51,000 Coca-Cola Enterprises, Inc. 1,062,330 17,100 Colgate-Palmolive Co. 1,061,910 53,400 Companhia De Saneamento Basico do Estado De Sao Paulo - ADR 1,607,340 58,900 ConAgra Foods, Inc. 1,441,872 12,600 Cummins, Inc. 1,502,298 10,500 Deutsche Bank AG - ADR 1,267,350
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 17,100 E.I. du Pont de Nemours and Co. $ 732,564 23,100 Edison International 961,884 23,500 Eli Lilly & Co. 1,339,500 21,200 Exelon Corp. 1,283,448 6,600 Express Scripts, Inc.(a) 498,234 47,000 Family Dollar Stores, Inc. 1,374,280 21,400 Fannie Mae 1,196,474 18,100 Federal Home Loan Mortgage Corp. 1,200,573 20,800 Foot Locker, Inc. 525,200 11,200 Forest Laboratories, Inc.(a) 566,832 72,500 General Electric Co. 2,559,250 18,400 General Maritime Corp. 673,072 47,400 General Motors Corp. 1,576,524 3,400 Google, Inc. - Class A(a) 1,366,460 10,600 Greif, Inc. 849,166 21,400 Harley-Davidson, Inc. 1,342,850 45,100 Hewlett-Packard Co. 1,654,719 23,000 Hillenbrand Industries, Inc. 1,310,540 27,100 Honeywell International, Inc. 1,108,390 53,300 Horace Mann Educators Corp. 1,024,959 30,600 Infosys Technologies, Ltd. - ADR 1,460,538 40,709 ING Group N.V. - ADR 1,790,382 104,000 Intel Corp. 2,139,280 23,100 International Business Machines Corp. 1,892,814 28,400 iStar Financial, Inc. 1,184,280 18,200 Jackson Hewitt Tax Services, Inc. 546,182 40,800 Johnson & Johnson, Inc. 2,649,552
Schedule of Investments 51 Schedule of Investments (continued) ICON Equity Income Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 60,300 JPMorgan Chase & Co. $ 2,831,688 16,100 Kimberly-Clark Corp. 1,052,296 22,200 Knightsbridge Tankers, Ltd. 573,204 9,700 Lehman Brothers Holding, Inc. 716,442 33,100 Limited Brands, Inc. 876,819 18,500 Lincoln National Corp. 1,148,480 26,200 Manor Care, Inc. 1,369,736 30,900 McDonald's Corp. 1,208,808 21,500 McKesson HBOC, Inc. 1,133,480 28,700 Mellon Financial Corp. 1,122,170 58,700 Merck & Co., Inc. 2,459,530 17,500 Merrill Lynch & Co., Inc. 1,368,850 21,700 MetLife, Inc. 1,229,956 170,500 MFA Mortgage Investments, Inc. 1,270,225 150,300 Microsoft Corp. 4,107,699 25,400 Morgan Stanley 1,851,914 51,700 Motorola, Inc. 1,292,500 12,400 Nike, Inc. - Class B 1,086,488 22,900 Nordic American Tanker Shipping, Ltd. 796,920 17,000 NOVA Chemicals Corp. 522,070 7,200 Petrochina Co., Ltd. - ADR 775,080 51,300 Pfizer, Inc. 1,454,868 31,431 Philippine Long Distance Telephone Co. - ADR 1,369,134 17,700 PNC Financial Services Group, Inc. 1,282,188
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 17,000 Posco - ADR $ 1,103,810 40,000 Procter & Gamble Co. 2,479,200 28,800 Raytheon Co. 1,382,688 14,000 Ryder System, Inc. 723,520 52,000 Seaspan Corp. 1,168,960 159,822 Siliconware Precision Industries Co. - ADR 950,941 27,400 SkyWest, Inc. 671,848 9,100 Southern Copper Corp. 841,750 36,600 Southern Union Co. 966,606 20,900 Spartech Corp. 559,493 11,100 State Street Corp. 692,640 20,400 Steven Madden, Ltd. 800,496 11,800 The Allstate Corp. 740,214 33,700 The Bank of New York Co., Inc. 1,188,262 9,900 The Bear Stearns Cos., Inc. 1,386,990 24,500 TXU Corp. 1,531,740 21,000 UBS AG - ADR 1,245,510 23,100 Universal Corp. 843,843 21,900 V.F. Corp. 1,597,605 41,700 Verizon Communications, Inc. 1,548,321 25,100 Wachovia Corp. 1,400,580 27,300 Wal-Mart Stores, Inc. 1,346,436 31,800 Wells Fargo & Co. 1,150,524 ------------ TOTAL COMMON STOCKS (COST $119,622,745) 131,034,474
52 Schedule of Investments
SHARES OR PRINCIPAL INTEREST MATURITY AMOUNT RATE DATE VALUE ---------------------------------------------------- CONVERTIBLE PREFERRED STOCKS (0.7%) 7,000 Northrop Grumman Corp. 7.00% 04/04/21 $ 931,000 ---------- TOTAL CONVERTIBLE PREFERRED STOCKS (COST $927,374) 931,000 CORPORATE BONDS (2.0%) $1,000,000 DaimlerChrysler AG 6.50 11/15/13 1,025,469 1,288,000 Household Finance Corp. 4.75 07/15/13 1,244,017 575,000 United Rentals NA, Inc. 7.75 11/15/13 566,375 ---------- TOTAL CORPORATE BONDS (COST $2,907,894) 2,835,861 U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS (2.2%) 1,323,000 Freddie Mac 5.16 02/27/15 1,297,196 258,000 Freddie Mac 5.00 09/29/17 248,275 750,000 U.S. Treasury Note 3.13 01/31/07 745,371 750,000 U.S. Treasury Note 4.00 08/31/07 743,642 ---------- TOTAL U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS (COST $3,057,741) 3,034,484 CONVERTIBLE CORPORATE BONDS (0.4%) 600,000 International Rectifier Corp. 4.25 07/15/07 592,500 ---------- TOTAL CONVERTIBLE CORPORATE BONDS (COST $596,555) 592,500
SHARES OR PRINCIPAL AMOUNT VALUE ---------------------------------------------- CALL OPTIONS PURCHASED (0.1%) 250 Comcast Corp. Expiration January 2008, Exercise Price $40.00 $ 80,000 882 ExpressJet Holdings Inc. Expiration March 2007, Exercise Price $7.50 59,535 ------------ TOTAL CALL OPTIONS PURCHASED (COST $124,707) 139,535 SHORT-TERM INVESTMENTS (1.2%) $1,692,811 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# 1,692,811 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,692,811) 1,692,811 TOTAL INVESTMENTS (COST $128,929,827) 101.2% 140,260,665 LIABILITIES LESS OTHER ASSETS (1.2%) (1,628,949) ------------ TOTAL NET ASSETS 100.0% $138,631,716 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. Schedule of Investments 53 Management Overview ICON Long/Short Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 88.5% Top 10 Long Equity Holdings 13.2% Number of Long Stocks 114 Number of Short Positions 14 Short-Term Investments 8.3% Percentages are based upon net assets. TOP 10 LONG EQUITY HOLDINGS September 30, 2006 CIGNA Corp. 1.5% Bank of America Corp. 1.3% American International Group, Inc. 1.3% International Business Machines Corp. 1.3% Johnson & Johnson, Inc. 1.3% Cognizant Technology Solutions Corp. 1.3% Morgan Stanley 1.3% The Goldman Sachs Group, Inc. 1.3% Forest Laboratories, Inc. 1.3% BT Group PLC - ADR 1.3% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. The Fund's benchmark, the S&P Composite 1500 Index, gained 10.32% for the fiscal year ended September 30, 2006. In comparison, the ICON Long/ Short Fund returned only 7.50% for Class I shares, 6.65% for Class C shares, and 7.73% for Class Z shares. Since their inception on May 31, 2006 through September 30, 2006, the Class A shares of the Fund have returned (1.94%) (and (7.58%) with maximum sales charge) compared to the S&P Composite 1500 Index total return of 4.96% during the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Strong corporate earnings and historically low long-term interest rates dominated the first seven months of the fiscal year, even as investors remained concerned about higher oil and commodity prices and Federal Reserve interest rate hikes. This setting was beneficial for the Fund. Our system pointed us toward cyclical industries, primarily from the Industrials, Materials, and Financial sectors, and this positioning aided returns in the first half. However, we saw an abrupt market turnaround begin in May, representing the first significant theme change since March 2003. ICON's valuation methodology identified this emerging leadership in defensive industries and mature, large-cap issues. The small- and mid-cap cyclical stocks that we saw dominate the first three years of the bull market became some of the worst performers in virtually every sector, but clear industry leadership was hard to discern. We watched our system closely during this period of uncertainty, waiting for our relative strength metrics to confirm the true industry leaders. As we gained more confidence that the new theme was indeed solidifying, we gradually moved away from cyclical holdings into more mature, recession-proof stocks. While the ICON system's rigorous focus on valuation identified the new theme, the Fund gave up some of its gains as we waited for leadership to develop clearly. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. We seek to diversify the Fund among the sectors and industries throughout the market that are demonstrating the best value and relative strength, buying long those stocks we identify as undervalued and selling short stocks we view as overvalued. During the late spring and summer, we modestly increased the Fund's short exposure to take advantage of industries that were both overpriced 54 Management Overview (J.C. Waller III PHOTO) J.C. Waller, III Portfolio Manager and showing signs of weakness vs. the market. Stocks from the home entertainment software and internet retail industries that were sold short proved beneficial. We also took short positions in stocks from a handful of other industry groups, most notably in construction & engineering. Guided by our system's valuation metrics, we overweighted the Fund in industries with a heavy cyclical bent until near the end of the period, primarily in the Industrials, Materials, and Energy sectors, and this worked in the Fund's favor until early May. Despite being underweight relative to the benchmark, the Fund's exposure to the Financials sector also contributed measurably to its positive performance. As market leadership shifted toward more defensive industries in July, we started to gradually reposition but had to wait patiently for relative strength measurements to point to the genuine leaders. Positions in the Energy sector brought about the largest contraction in returns as we saw a sharp correction in energy stocks and crude oil during the latter part of the reporting period. This drop was felt in the oil & gas drilling, oil & gas exploration & production, and coal & consumable fuel industries, which were the Fund's three largest detractors on an industry level. These industries were either eliminated or significantly reduced by the end of the period because our analysis determined declining relative strength. The largest contributor to performance was the Fund's overweight exposure to the steel industry. The construction & farm machinery & heavy trucks industry, part of the Fund's economically sensitive theme for the first three fiscal quarters, was the second best contributor to returns. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE EQUITY MARKET? A. Our analysis concludes that abundant value remains in the market. There is mounting evidence in our metrics that larger companies are poised to lead and that the cyclical leadership of the last three years has shifted to sectors that are more recession proof and defensive in nature. Only time will tell whether this theme will hold, but we are gradually situating the Fund to benefit from this perceived new leadership. We continue to concentrate on diversifying the Fund with long positions in underpriced industries and shorting only when our system reveals overpriced areas. Management Overview 55 Management Overview (continued) ICON Long/Short Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - Positions in the Industrials, Materials, and Energy sectors helped the Fund until early May 2006, when a market shift began to favor more defensive sectors and larger, more mature companies. - As market leadership shifted toward more defensive industries, we began to reposition the Fund but gave up some gains as we waited for market leadership to clarify. - Energy stocks were generally the poorest performers in the Fund, after a sharp correction hurt the Energy sector during the latter part of the reporting period. 56 Management Overview SECTOR COMPOSITION September 30, 2006 Financial 25.5% Healthcare 12.2% Telecommunication and Utilities 11.8% Information Technology 11.5% Leisure and Consumer Staples 8.8% Consumer Discretionary 6.9% Energy 5.2% Industrials 5.1% Materials 1.5%
Percentages are based upon long positions as a percentage of net assets. Management Overview 57 Management Overview (continued) ICON Long/Short Fund INDUSTRY COMPOSITION September 30, 2006 Regional Banks 4.9% Pharmaceuticals 4.6% Investment Banking & Brokerage 4.0% Diversified Banks 3.9% Other Diversified Financial Services 3.8% Integrated Telecommunication Services 3.7% Diversified Capital Markets 3.6% IT Consulting & Other Services 3.5% Electric Utilities 3.5% Soft Drinks 3.2% Semiconductors 3.1% Multi-Line Insurance 2.8% Oil & Gas Storage & Transportation 2.7% Health Care Facilities 2.7% Food Retail 2.7% Railroads 2.5% Managed Health Care 2.4% Mortgage Reits 2.3% General Merchandise Stores 2.2% Multi-Utilities 1.9% Distillers & Vintners 1.9% Specialty Stores 1.7% Trucking 1.5% Wireless Telecommunication Services 1.4% Water Utilities 1.3% Apparel Accessories & Luxury Goods 1.3% Computer Hardware 1.3% Health Care Distributors 1.2% Internet Software & Services 1.2% Biotechnology 1.2% Electronic Equipment Manufacturers 1.1% Oil & Gas Exploration & Production 1.1% Airlines 1.0% Data Processing & Outsourced Services 1.0% Oil & Gas Drilling 1.0% Household Appliances 0.9% Gold 0.8% Home Furnishing Retail 0.7% Steel 0.6% Leisure Products 0.6% Oil & Gas Equipment & Services 0.6% Office Electronics 0.4% Photographic Products 0.4% Asset Management & Custody Banks 0.3%
Percentages are based upon long positions as a percentage of net assets. 58 Management Overview AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class I 9/30/02 7.50% N/A 15.80% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 15.63% ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class C 10/17/02 6.65% N/A 13.40% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 14.44% ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class Z 5/6/04 7.73% N/A 10.71% ------------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% N/A 10.25% ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class A* 5/31/06 N/A N/A (1.94%) ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class A (including maximum sales charge of 5.75%)* 5/31/06 N/A N/A (7.58%) ------------------------------------------------------------------------------------------- S&P Composite 1500 Index* N/A N/A 4.96% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. Class C total returns exclude applicable sales charges. If sales charges were included, returns would be lower. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON LONG/SHORT FUND - CLASS I S&P COMPOSITE 1500 INDEX ------------------------------ ------------------------ 9/30/02 10000.00 10000.00 9760.00 10811.00 8880.00 10450.00 11039.00 12093.00 9/30/03 12000.00 12469.00 13453.00 14009.00 14435.00 14308.00 14455.00 14557.00 9/30/04 14091.00 14285.00 15897.00 15661.00 15751.00 15349.00 15699.00 15613.00 9/30/05 16726.00 16206.00 16903.00 16550.00 18891.00 17353.00 18379.00 17054.00 9/30/06 17982.00 17878.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 59 Schedule of Investments ICON Long/Short Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (88.5%) 100,000 99 Cents Only Stores(a) $ 1,183,000 50,000 A.C. Moore Arts & Crafts, Inc.(a) 951,500 19,000 A.G. Edwards, Inc. 1,012,320 100,000 Advanced Semiconductor Engineering, Inc. - ADR(a) 467,000 20,000 Alaska Air Group, Inc.(a) 760,800 50,000 America Movil S.A. de C.V. - ADR 1,968,500 45,000 American Electric Power Co., Inc. 1,636,650 40,000 American International Group, Inc. 2,650,400 22,000 AmerisourceBergen Corp. 994,400 12,500 Amphenol Corp. - Class A 774,125 60,000 AmSouth Bancorp. 1,742,400 75,000 AmSurg Corp.(a) 1,669,500 40,000 AstraZeneca PLC - ADR 2,500,000 23,000 Atwood Oceanics, Inc.(a) 1,034,310 100,000 AU Optronics Corp. - ADR 1,425,000 50,000 Bank of America Corp. 2,678,500 55,000 Barrick Gold Corp. - ADR 1,689,600 16,300 Big 5 Sporting Goods Corp. 371,640 60,000 Borders Group, Inc. 1,224,000 50,000 BT Group PLC - ADR 2,528,500 17,100 Burlington Northern Santa Fe Corp. 1,255,824 28,000 Canadian National Railway Co. - ADR 1,174,320 25,000 CIGNA Corp. 2,908,000 50,000 Citigroup, Inc. 2,483,500
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 75,000 Coca-Cola Enterprises, Inc. $ 1,562,250 35,000 Cognizant Technology Solutions Corp.(a) 2,592,100 50,000 Colonial Bancgroup, Inc. 1,225,000 25,000 Columbia Sportswear Co.(a) 1,395,750 25,000 Comerica, Inc. 1,423,000 70,000 Companhia De Saneamento Basico do Estado De Sao Paulo - ADR 2,107,000 30,000 Compass Bancshares, Inc. 1,709,400 75,000 Constellation Brands, Inc.(a) 2,158,500 42,000 Convergys Corp.(a) 867,300 40,000 Credit Suisse Group - ADR 2,318,000 27,000 CSG Systems International, Inc.(a) 713,610 20,000 Cullen/Frost Bankers, Inc. 1,156,400 20,000 Deutsche Bank AG - ADR 2,414,000 25,000 Deutsche Telekom AG - ADR 396,750 53,000 Dollar Tree Stores, Inc.(a) 1,640,880 25,000 Dominion Resources, Inc. of Virginia 1,912,250 40,000 East-West Bancorp, Inc. 1,584,400 40,000 Eastman Kodak Co. 896,000 54,000 Family Dollar Stores, Inc. 1,578,960 7,300 Fiserv, Inc.(a) 343,757 20,000 Fomento Economico Mexicano, S.A. de C.V. - ADR 1,938,800 50,000 Forest Laboratories, Inc.(a) 2,530,500 40,000 FPL Group, Inc. 1,800,000 50,000 Frontline, Ltd. 1,925,500
60 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 50,000 General Maritime Corp. $ 1,829,000 35,000 Genzyme Corp.(a) 2,361,450 45,050 HCC Insurance Holdings, Inc. 1,481,244 40,000 Helen of Troy, Ltd.(a) 702,400 25,000 Helix Energy Solutions Group, Inc.(a) 835,000 30,000 Henry Schein, Inc.(a) 1,504,200 25,000 HSBC Holdings PLC - ADR 2,288,250 150,000 Impac Mortgage Holdings, Inc. 1,405,500 50,000 Infosys Technologies, Ltd. - ADR 2,386,500 32,000 International Business Machines Corp. 2,622,080 36,400 j2 Global Communications, Inc.(a) 988,988 40,000 Johnson & Johnson, Inc. 2,597,600 50,000 JPMorgan Chase & Co. 2,348,000 100,000 K2, Inc.(a) 1,173,000 65,000 Kindred Healthcare, Inc.(a) 1,932,450 50,000 Koninkljke Ahold N.V. - ADR(a) 529,500 50,000 Kroger Co. 1,157,000 15,000 Lan Airlines S.A. - ADR 571,650 25,000 Lehman Brothers Holding, Inc. 1,846,500 50,000 Lifepoint Hospitals, Inc.(a) 1,766,000 30,000 Liz Claiborne, Inc. 1,185,300 75,000 MGP Ingredients, Inc. 1,595,250 35,000 Morgan Stanley 2,551,849 75,000 Mylan Laboratories, Inc. 1,509,750 19,500 National-OilWell Varco, Inc.(a) 1,141,725
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 50,000 Newcastle Investment Corp. $ 1,370,500 26,000 Norfolk Southern Corp. 1,145,300 27,000 Old Dominion Freight Line, Inc.(a) 810,810 25,000 Overseas Shipholding Group, Inc. 1,544,250 50,000 PepsiAmericas, Inc. 1,067,000 34,000 PetsMart, Inc. 943,500 40,000 Pinnacle West Capital Corp. 1,802,000 19,000 Posco - ADR 1,233,670 60,000 PT Telekomunikasi Indonesia - ADR 2,169,600 50,000 Range Resources Corp. 1,262,000 35,000 Redwood Trust, Inc. 1,762,950 45,000 Rent-A-Center, Inc.(a) 1,318,050 28,000 Rowan Cos., Inc. 885,640 23,500 Ryder System, Inc. 1,214,480 50,000 Safeway, Inc. 1,517,500 50,000 Satyam Computer Services, Ltd. - ADR 1,934,500 250,030 Siliconware Precision Industries Co. - ADR 1,487,679 29,200 SkyWest, Inc. 715,984 50,000 Southern Co. 1,723,000 40,000 Southwest Water Co. 489,200 75,000 SUPERVALU, Inc. 2,223,750 175,048 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 1,680,461 90,000 Telefonos de Mexico S.A. de C.V. - ADR 2,302,200 75,000 Texas Instruments, Inc. 2,493,750 16,500 The Bank of New York Co., Inc. 581,790
Schedule of Investments 61 Schedule of Investments (continued) ICON Long/Short Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 15,000 The Goldman Sachs Group, Inc. $ 2,537,550 18,000 The Hartford Financial Services Group, Inc. 1,561,500 50,000 The Pepsi Bottling Group, Inc. 1,775,000 24,000 The Stanley Works 1,196,400 30,000 Tim Participacoes S.A. - ADR 835,500 50,000 Travelzoo, Inc.(a) 1,441,000 40,000 UBS AG - ADR 2,372,400 41,000 Umpqua Holdings Corp. 1,172,600 17,000 Union Pacific Corp. 1,496,000 40,000 UnitedHealth Group, Inc. 1,968,000 35,000 Wachovia Corp. 1,953,000 60,000 Wells Fargo & Co. 2,170,800 22,000 Wintrust Financial Corp. 1,103,300 90,000 Xcel Energy, Inc. 1,858,500 50,000 Xerox Corp.(a) 778,000 25,000 YRC Worldwide, Inc.(a) 926,000 ------------ TOTAL COMMON STOCKS (COST $170,197,403) 176,409,196
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SHORT-TERM INVESTMENTS (8.3%) $16,642,494 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# $ 16,642,494 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $16,642,494) 16,642,494 TOTAL INVESTMENTS (COST $186,839,897) 96.8% 193,051,690 OTHER ASSETS LESS LIABILITIES 3.2% 6,361,400 ------------ TOTAL NET ASSETS 100.0% $199,413,090 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. All shares held may be pledged as collateral for investment securities sold short. 62 Schedule of Investments Schedule of Short Securities ICON Long/Short Fund September 30, 2006
SHARES SHORT SECURITY VALUE --------------------------------------------- 50,000 Affymetrix, Inc.(a) $ 1,078,000 25,000 Ditech Networks Inc.(a) 192,750 13,500 Fluor Corp. 1,038,015 75,000 Insituform Technologies, Inc.(a) 1,821,000 50,000 Luby's Cafeteria, Inc.(a) 493,500 20,000 Millipore Corp.(a) 1,226,000 50,000 On Assignment, Inc.(a) 490,500 25,000 Quanta Services, Inc.(a) 421,500 10,000 Sunoco, Inc. 621,900 25,000 Techne Corp.(a) 1,271,500 35,000 Teradyne, Inc.(a) 460,600 10,000 Tesoro Corp. 579,800 23,000 URS Corp.(a) 894,470 12,000 Washington Group International, Inc. 706,320 ----------- TOTAL SHORT SECURITIES (PROCEEDS $11,666,402) $11,295,855 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. Schedule of Investments 63 Six Month Hypothetical Expense Example September 30, 2006 (unaudited) EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the various ICON Funds and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/06 - 9/30/06). ACTUAL EXPENSES The first set of lines in the table for each Fund provide information about actual account values and actual expenses. The Example includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example does not include client specific fees, such as the $10 fee charged to IRA accounts, or the $15 fee charged for wire redemptions. You may use this information, 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 for each Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second set of lines in the table for each Fund provide 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 costs 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 the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. 64 Expense Example
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/06 9/30/06 4/1/06-9/30/06* 4/1/06-9/30/06 ------------------------------------------------------------------------------------------------- ICON BOND FUND ------------------------------------------------------------------------------------------------- CLASS I ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,026.90 $ 5.08 1.00% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.98 5.07 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------------------------- Actual period return 1,000.00 1,023.80 8.12 1.60% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,016.98 8.09 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS Z ------------------------------------------------------------------------------------------------- Actual period return 1,000.00 1,027.90 4.06 0.80% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,021.00 4.04 (5% return before expenses) ------------------------------------------------------------------------------------------------- ICON CORE EQUITY FUND ------------------------------------------------------------------------------------------------- CLASS I ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 928.00 5.99 1.24% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.79 6.27 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 924.30 9.78 2.03% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,014.83 10.25 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS Z ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 929.80 4.20 0.87% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,020.65 4.40 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 955.00 24.28 7.43% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,000.00 24.84 (5% return before expenses) -------------------------------------------------------------------------------------------------
Expense Example 65 Six Month Hypothetical Expense Example (continued) September 30, 2006 (unaudited)
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/06 9/30/06 4/1/06-9/30/06* 4/1/06-9/30/06 ------------------------------------------------------------------------------------------------- ICON COVERED CALL FUND ------------------------------------------------------------------------------------------------- CLASS I ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 973.90 $ 7.29 1.47% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.62 7.45 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 970.30 10.99 2.22% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,013.85 11.23 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS Z ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 978.20 6.05 1.22% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.88 6.17 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,005.00 4.93 1.47% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,020.00 4.96 (5% return before expenses) ------------------------------------------------------------------------------------------------- ICON EQUITY INCOME FUND ------------------------------------------------------------------------------------------------- CLASS I ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 967.70 6.05 1.23% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.85 6.21 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 963.10 10.82 2.20% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,013.98 11.10 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS Z ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 967.80 5.92 1.20% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.98 6.08 (5% return before expenses) -------------------------------------------------------------------------------------------------
66 Expense Example
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/06 9/30/06 4/1/06-9/30/06* 4/1/06-9/30/06 ------------------------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,005.00 $ 4.82 1.44% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,020.00 4.86 (5% return before expenses) ------------------------------------------------------------------------------------------------- ICON LONG/SHORT FUND ------------------------------------------------------------------------------------------------- CLASS I ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 951.80 6.84 1.40% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.99 7.08 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS C ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 947.70 11.21 2.30% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,013.49 11.59 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS Z ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 952.60 5.69 1.16% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.17 5.88 (5% return before expenses) ------------------------------------------------------------------------------------------------- CLASS A ------------------------------------------------------------------------------------------------- Actual period return 1,000.00 981.00 5.10 1.54% ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,020.00 5.20 (5% return before expenses) -------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six month expense ratio annualized, multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. Information shown for Class A shares reflects values using expense ratios and rates of return for the period May 31, 2006 (date of commencement of operations) through September 30, 2006. As such, the expense ratio is annualized, multiplied by the average account value of the period of operation, multiplied by 122/365 to reflect the actual period. Total returns exclude applicable sales charges. If sales charges were included (maximum 5.75%), returns would be lower. Expense Example 67 Statements of Assets and Liabilities September 30, 2006
ICON ICON ICON ICON ICON CORE COVERED EQUITY LONG/SHORT BOND FUND EQUITY FUND CALL FUND INCOME FUND FUND ----------- ------------ ----------- ------------ ------------ ASSETS Investments, at cost $90,292,928 $186,922,780 $62,446,419 $128,929,827 $186,839,897 ----------- ------------ ----------- ------------ ------------ Investments, at value 89,961,521 201,862,840 67,263,975 140,260,665 193,051,690 Cash 771,295 - 18,481 92,339 3,255,516 Deposits for short sales - - - - 13,572,316 Receivables: Fund shares sold 428,164 300,584 68,828 243,899 1,038,570 Investments sold - 2,391,081 2,665,615 3,142,071 - Interest 1,358,397 790 534 73,269 4,235 Dividends - 121,845 63,911 202,081 256,219 Expense reimbursements by Advisor 14,492 - 1,675 2,555 3,730 Other assets 37,241 40,276 28,612 34,469 45,932 ----------- ------------ ----------- ------------ ------------ Total Assets 92,571,110 204,717,416 70,111,631 144,051,348 211,228,208 ----------- ------------ ----------- ------------ ------------ LIABILITIES Options written, at value (premiums received of $2,108,685) - - 2,002,352 - - Common stocks sold short, at value (proceeds of $11,666,402) - - - - 11,295,855 Payables: Due to custodian bank - - - - - Interest - - 3,880 347 - Investments bought 771,295 2,011,996 4,749,212 4,994,666 - Fund shares redeemed 396,500 189,105 58,442 217,175 268,042 Distributions due to shareholders 6,584 - - 42,479 - Advisory fees & fee waiver recoupment 44,850 123,910 65,583 84,621 137,056 Accrued distribution fees 18,895 96,775 13,885 29,965 52,549 Fund accounting fees 2,359 4,417 2,152 3,159 4,282 Transfer agent fees 4,725 13,660 3,945 7,347 5,490 Administration fees 3,539 7,844 2,449 5,358 7,524 Trustee fees 2,106 4,654 1,455 3,176 4,529 Accrued expenses 24,534 38,290 25,091 31,339 39,791 ----------- ------------ ----------- ------------ ------------ Total Liabilities 1,275,387 2,490,651 6,928,446 5,419,632 11,815,118 ----------- ------------ ----------- ------------ ------------ NET ASSETS - ALL SHARE CLASSES $91,295,723 $202,226,765 $63,183,185 $138,631,716 $199,413,090 =========== ============ =========== ============ ============ NET ASSETS - CLASS I $90,324,438 $104,965,758 $60,321,103 $133,835,464 $168,522,268 =========== ============ =========== ============ ============ NET ASSETS - CLASS C $ 967,664 $ 95,841,554 $ 2,841,776 $ 4,753,143 $ 26,763,112 =========== ============ =========== ============ ============ NET ASSETS - CLASS Z $ 3,621 $ 1,291,161 $ 5,240 $ 24,374 $ 3,306,418 =========== ============ =========== ============ ============ NET ASSETS - CLASS A $ - $ 128,292 $ 15,066 $ 18,735 $ 821,292 =========== ============ =========== ============ ============ NET ASSETS CONSIST OF Paid-in capital $93,043,832 $173,688,216 $55,835,825 $121,735,520 $187,378,659 Accumulated undistributed net investment income/(loss) 37,685 - - 240,595 44,891 Accumulated undistributed net realized gain/(loss) from investments (1,454,387) 13,598,489 2,423,471 5,324,763 5,407,200 Unrealized appreciation/(depreciation) on investments, written options and securities sold short (331,407) 14,940,060 4,923,889 11,330,838 6,582,340 ----------- ------------ ----------- ------------ ------------ NET ASSETS $91,295,723 $202,226,765 $63,183,185 $138,631,716 $199,413,090 =========== ============ =========== ============ ============ Shares outstanding (unlimited shares authorized, no par value) Class I 9,033,787 6,898,432 4,370,342 8,957,415 9,806,340 Class C 96,559 6,600,758 212,310 320,141 1,605,603 Class Z 362 84,790 376 1,632 191,279 Class A - 8,503 1,092 1,256 47,802 Net asset value (offering and redemption price per share) Class I $ 10.00 $ 15.22 $ 13.80 $ 14.94 $ 17.19 Class C $ 10.02 $ 14.52 $ 13.39 $ 14.85 $ 16.67 Class Z $ 10.00 $ 15.23 $ 13.94 $ 14.94 $ 17.29 Class A $ - $ 15.09 $ 13.80 $ 14.92 $ 17.18 Class A maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent per share $ - $ 16.01 $ 14.64 $ 15.83 $ 18.23
The accompanying notes are an integral part of the financial statements. 68 Financial Statements Statements of Operations For the year ended September 30, 2006
ICON ICON ICON ICON ICON CORE COVERED EQUITY LONG/SHORT BOND FUND EQUITY FUND CALL FUND INCOME FUND FUND ----------- ------------ ----------- ----------- ----------- INVESTMENT INCOME Interest $ 4,518,533 $ 157,565 $ 56,286 $ 611,065 $ 366,882 Dividends - 2,032,573 802,440 3,680,781 1,594,688 Foreign taxes withheld - (2,548) - - (1,291) ----------- ------------ ----------- ----------- ----------- Total Investment Income 4,518,533 2,187,590 858,726 4,291,846 1,960,279 ----------- ------------ ----------- ----------- ----------- EXPENSES Advisory fees 516,753 1,480,347 450,913 1,009,634 1,032,304 Distribution fees: Class I 212,850 263,725 142,080 325,625 252,623 Class C 8,342 905,957 32,565 43,427 185,317 Class A - 34 4 5 168 Fund accounting fees 26,892 51,227 24,505 36,282 33,424 Transfer agent fees 54,702 159,810 43,813 84,228 63,676 Administration fees 39,997 91,617 27,916 62,509 56,185 Registration fees: Class I 12,660 9,798 8,513 10,161 11,217 Class C 7,723 7,973 6,094 6,201 7,359 Class A - 1 1 1 1 Custody fees 17,135 31,082 109,002 25,965 28,861 Insurance expense 5,060 9,615 3,734 9,509 4,196 Trustee fees and expenses 8,503 16,492 6,603 11,057 11,691 Interest expense 5,203 586 14,670 1,369 1,005 Dividends on short positions - - - - 12,450 Other expenses 59,868 121,000 51,403 78,655 84,676 ----------- ------------ ----------- ----------- ----------- Total expenses before expense (reimbursement)/recoupment and transfer agent earnings credit 975,688 3,149,264 921,816 1,704,628 1,785,153 Transfer agent earnings credit (1,457) (3,283) (1,019) (2,203) (2,935) Expense (reimbursement)/recoupment by Advisor due to expense limitation agreement (101,883) - (10,037) (5,476) 133,170 ----------- ------------ ----------- ----------- ----------- Net Expenses 872,348 3,145,981 910,760 1,696,949 1,915,388 ----------- ------------ ----------- ----------- ----------- NET INVESTMENT INCOME (LOSS) 3,646,185 (958,391) (52,034) 2,594,897 44,891 ----------- ------------ ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investment transactions (1,371,071) 17,009,597 7,622,102 6,633,609 6,871,673 Written options - - (3,251,372) - - Securities sold short - - - 18,970 1,296,419 ----------- ------------ ----------- ----------- ----------- Total net realized gain/(loss) (1,371,071) 17,009,597 4,370,730 6,652,579 8,168,092 ----------- ------------ ----------- ----------- ----------- Change in net unrealized appreciation/(depreciation) on investments, written options and securities sold short 143,765 (10,215,314) (4,231,738) (4,514,597) (5,119,897) ----------- ------------ ----------- ----------- ----------- Net realized and unrealized gain/(loss) on investments (1,227,306) 6,794,283 138,992 2,137,982 3,048,195 ----------- ------------ ----------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 2,418,879 $ 5,835,892 $ 86,958 $4,732,879 $ 3,093,086 =========== ============ =========== =========== ===========
The accompanying notes are an integral part of the financial statements. Financial Statements 69 Statements of Changes in Net Assets
ICON BOND FUND ICON CORE EQUITY FUND ---------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ------------------ ------------------ ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 3,646,185 $ 2,741,954 $ (958,391) $ (959,954) Net realized gain/(loss) from investment transactions, written options and securities sold short (1,371,071) (11,900) 17,009,597 14,916,012 Change in net unrealized appreciation/(depreciation) on investments, written options and securities sold short 143,765 (2,183,484) (10,215,314) 8,567,211 ------------ ------------ ------------ ------------ Net increase/(decrease) in net assets resulting from operations 2,418,879 546,570 5,835,892 22,523,269 ------------ ------------ ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class I (3,568,886) (2,853,077) - - Class C (35,016) (31,705) - - Class Z (163) (101) - - Class A - - - - Net realized gains Class I (67,629) (338,815) (3,632,925) - Class C (720) (4,379) (3,157,999) - Class Z (5) (6) (44,621) - Class A - - - - ------------ ------------ ------------ ------------ Net decrease from dividends and distributions (3,672,419) (3,228,083) (6,835,545) - ------------ ------------ ------------ ------------ FUND SHARE TRANSACTIONS Shares sold Class I 64,855,369 68,872,908 48,438,116 58,022,225 Class C 680,279 1,493,441 30,392,845 24,404,517 Class Z 3,382 4,736 144,544 1,088,280 Class A - - 126,818 - Reinvested dividends and distributions Class I 3,549,356 3,161,012 3,340,799 - Class C 32,459 34,828 3,039,446 - Class Z 169 106 44,621 - Class A - - - - Shares repurchased Class I (59,254,239) (48,473,705) (40,446,108) (23,305,845) Class C (720,554) (876,763) (14,874,966) (10,044,802) Class Z (5,070) (181) (69,837) (7,314) Class A - - - - ------------ ------------ ------------ ------------ Net increase/(decrease) from fund share transactions 9,141,151 24,216,382 30,136,278 50,157,061 ------------ ------------ ------------ ------------ Total net increase/(decrease) in net assets 7,887,611 21,534,869 29,136,625 72,680,330 NET ASSETS Beginning of period 83,408,112 61,873,243 173,090,140 100,409,810 ------------ ------------ ------------ ------------ End of period $ 91,295,723 $ 83,408,112 $202,226,765 $173,090,140 ============ ============ ============ ============
70 Financial Statements
ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND --------------------------------------- --------------------------------------- --------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ $ (52,034) $ (269,738) $ 2,594,897 $ 2,384,761 $ 44,891 $ (365,486) 4,370,730 (929,262) 6,652,579 8,338,413 8,168,092 (1,286,092) (4,231,738) 5,856,219 (4,514,597) 5,084,010 (5,119,897) 10,046,242 ------------ ------------ ------------ ------------ ------------ ------------ 86,958 4,657,219 4,732,879 15,807,184 3,093,086 8,394,664 ------------ ------------ ------------ ------------ ------------ ------------ - - (3,020,514) (2,332,579) - - - - (62,488) (30,549) - - - - (546) (410) - - - - (137) - - - (466,120) (2,014,072) (8,604,004) (690,470) - (1,266,628) (32,162) (97,417) (280,066) (13,763) - (183,354) (31) (118) (1,603) (103) - (1,524) - - - - - - ------------ ------------ ------------ ------------ ------------ ------------ (498,313) (2,111,607) (11,969,358) (3,067,874) - (1,451,506) ------------ ------------ ------------ ------------ ------------ ------------ 21,879,443 22,320,205 35,024,898 40,993,500 155,386,607 48,606,994 471,669 2,209,902 1,641,563 2,071,831 15,396,350 10,192,112 84,618 727 5,128 9,609 3,298,177 101,583 15,074 - 18,735 - 828,559 - 459,746 1,901,482 10,796,225 2,824,292 - 1,158,739 27,565 88,746 293,967 36,636 - 163,651 31 118 2,148 513 - 1,524 - - 137 - - - (15,996,624) (15,241,634) (34,657,379) (44,139,761) (42,414,938) (26,815,665) (1,268,384) (751,331) (817,109) (418,636) (3,333,058) (1,348,857) (80,654) (790) (4,693) (3,317) (54,803) (7,915) (27) - (29) - (10,006) - ------------ ------------ ------------ ------------ ------------ ------------ 5,592,457 10,527,425 12,303,591 1,374,667 129,096,888 32,052,166 ------------ ------------ ------------ ------------ ------------ ------------ 5,181,102 13,073,037 5,067,112 14,113,977 132,189,974 38,995,324 58,002,083 44,929,046 133,564,604 119,450,627 67,223,116 28,227,792 ------------ ------------ ------------ ------------ ------------ ------------ $ 63,183,185 $ 58,002,083 $138,631,716 $133,564,604 $199,413,090 $ 67,223,116 ============ ============ ============ ============ ============ ============
Financial Statements 71 Statements of Changes in Net Assets (continued)
ICON BOND FUND ICON CORE EQUITY FUND ---------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ------------------ ------------------ ------------------ ------------------ TRANSACTIONS IN FUND SHARES Shares sold Class I 6,497,960 6,619,646 3,111,904 4,143,039 Class C 68,321 142,887 2,023,988 1,818,535 Class Z 338 455 9,247 74,785 Class A - - 8,503 - Reinvested dividends and distributions Class I 355,905 304,338 223,460 - Class C 3,232 3,347 211,758 - Class Z 17 10 2,991 - Class A - - - - Shares repurchased Class I (5,932,254) (4,658,204) (2,631,913) (1,647,530) Class C (72,047) (84,344) (993,097) (740,648) Class Z (505) (17) (4,524) (514) Class A - - - - ----------- ----------- ------------ ------------ Net increase/(decrease) 920,967 2,328,118 1,962,317 3,647,667 ----------- ----------- ------------ ------------ Shares outstanding beginning of period 8,209,741 5,881,623 11,630,166 7,982,499 ----------- ----------- ------------ ------------ Shares outstanding end of period 9,130,708 8,209,741 13,592,483 11,630,166 =========== =========== ============ ============ PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities and written options) Purchase of securities (including short sale transactions) $44,043,104 $30,243,959 $309,597,013 $230,365,019 Proceeds from sales of securities (including short sale transactions) 31,016,317 18,795,990 287,820,163 183,339,859 Purchases of long-term U.S. government securities 14,805,946 27,647,371 - - Proceeds from sales of long-term U.S. government securities 11,229,676 28,497,651 - - ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ 37,685 $ (4,435) $ - $ - =========== =========== ============ ============
The accompanying notes are an integral part of the financial statements. 72 Financial Statements
ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND --------------------------------------- --------------------------------------- --------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 1,585,494 1,669,418 2,306,970 2,741,457 8,952,416 3,261,050 35,165 168,643 108,682 139,266 916,226 700,414 5,982 54 338 633 185,742 6,835 1,094 - 1,249 - 48,384 - 33,630 141,902 729,216 183,923 - 77,095 2,068 6,733 20,038 2,394 - 11,065 2 9 145 34 - 101 - - 9 - - - (1,164,572) (1,138,447) (2,290,509) (2,917,378) (2,470,963) (1,771,701) (94,159) (56,539) (54,361) (27,971) (201,278) (91,534) (5,853) (57) (304) (219) (3,184) (524) (2) - (2) - (582) - ------------ ----------- ------------ ------------ ------------ ----------- 398,849 791,716 821,471 122,139 7,426,761 2,192,801 ------------ ----------- ------------ ------------ ------------ ----------- 4,185,271 3,393,555 8,458,973 8,336,834 4,224,263 2,031,462 ------------ ----------- ------------ ------------ ------------ ----------- 4,584,120 4,185,271 9,280,444 8,458,973 11,651,024 4,224,263 ============ =========== ============ ============ ============ =========== $101,463,973 $92,623,516 $216,358,850 $187,781,662 $213,729,009 $83,387,797 100,165,236 86,038,491 210,597,210 188,205,266 105,361,679 57,223,650 - - 3,470,308 1,564,975 - - - - 4,539,570 - - - $ - $ - $ 240,595 $ 485,602 $ 44,891 $ - ============ =========== ============ ============ ============ ===========
Financial Statements 73 Financial Highlights
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS ---------------------------------------- ------------------------------------------ NET ASSET NET NET REALIZED DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT AND UNREALIZED TOTAL FROM FROM NET FROM NET TOTAL BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT INVESTMENT REALIZED DIVIDENDS AND OF PERIOD (LOSS)(x) ON INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS --------- ---------- -------------- ---------- ---------- ------------- ------------- ICON BOND FUND CLASS I+ Year Ended September 30, 2006 $10.16 $ 0.42 $(0.15) $ 0.27 $(0.42) $(0.01) $(0.43) Year Ended September 30, 2005 10.52 0.40 (0.29) 0.11 (0.41) (0.06) (0.47) Year Ended September 30, 2004 10.41 0.45 0.10 0.55 (0.44) - (0.44) September 30, 2002 (inception) to September 30, 2003 10.00 0.42 0.38 0.80 (0.39) - (0.39) CLASS C Year Ended September 30, 2006 10.18 0.36 (0.15) 0.21 (0.36) (0.01) (0.37) Year Ended September 30, 2005 10.54 0.33 (0.28) 0.05 (0.35) (0.06) (0.41) Year Ended September 30, 2004 10.42 0.38 0.12 0.50 (0.38) - (0.38) October 21, 2002 (inception) to September 30, 2003 9.79 0.37 0.60 0.97 (0.34) - (0.34) CLASS Z Year Ended September 30, 2006 10.15 0.45 (0.15) 0.30 (0.44) (0.01) (0.45) Year Ended September 30, 2005 10.51 0.42 (0.28) 0.14 (0.44) (0.06) (0.50) May 6, 2004 (inception) to September 30, 2004 10.26 0.46 (0.02) 0.44 (0.19) - (0.19) ICON CORE EQUITY FUND CLASS I Year Ended September 30, 2006 15.14 (0.02) 0.67 0.65 - (0.57) (0.57) Year Ended September 30, 2005 12.78 (0.05) 2.41 2.36 - - - Year Ended September 30, 2004 11.12 (0.07) 1.73 1.66 - - - Year Ended September 30, 2003 9.50 (0.04) 1.66 1.62 - - - Year Ended September 30, 2002 10.04 (0.07) (0.20) (0.27) - (0.27) (0.27) CLASS C Year Ended September 30, 2006 14.58 (0.14) 0.65 0.51 - (0.57) (0.57) Year Ended September 30, 2005 12.41 (0.15) 2.32 2.17 - - - Year Ended September 30, 2004 10.88 (0.16) 1.69 1.53 - - - Year Ended September 30, 2003 9.36 (0.11) 1.63 1.52 - - - Year Ended September 30, 2002 9.98 (0.15) (0.20) (0.35) - (0.27) (0.27) CLASS Z Year Ended September 30, 2006 15.12 0.02 0.66 0.68 - (0.57) (0.57) Year Ended September 30, 2005 12.79 (0.14) 2.47 2.33 - - - May 6, 2004 (inception) to September 30, 2004 12.07 (0.03) 0.75 0.72 - - - CLASS A May 31, 2006 (inception) to September 30, 2006 15.80 (0.27) (0.44) (0.71) - - - ICON COVERED CALL FUND CLASS I+ Year Ended September 30, 2006 13.88 (0.01) 0.05 0.04 - (0.12) (0.12) Year Ended September 30, 2005 13.25 (0.06) 1.26 1.20 - (0.57) (0.57) Year Ended September 30, 2004 12.40 (0.07) 1.36 1.29 - (0.44) (0.44) September 30, 2002 (inception) to September 30, 2003 10.00 (0.07) 2.47 2.40 - - - CLASS C Year Ended September 30, 2006 13.56 (0.11) 0.06 (0.05) - (0.12) (0.12) Year Ended September 30, 2005 13.06 (0.16) 1.23 1.07 - (0.57) (0.57) Year Ended September 30, 2004 12.32 (0.16) 1.34 1.18 - (0.44) (0.44) November 21, 2002 (inception) to September 30, 2003 10.75 (0.17) 1.74 1.57 - - - CLASS Z Year Ended September 30, 2006 13.94 0.02 0.10 0.12 - (0.12) (0.12) Year Ended September 30, 2005 13.29 (0.03) 1.25 1.22 - (0.57) (0.57) May 6, 2004 (inception) to September 30, 2004 12.86 (0.01) 0.44 0.43 - - - CLASS A May 31, 2006 (inception) to September 30, 2006 13.73 0.03 0.04 0.07 - - -
74 Financial Highlights
RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO AVERAGE NET AVERAGE NET ASSETS(a) ASSETS(a) ------------------------ ------------------------ BEFORE AFTER BEFORE AFTER EXPENSE EXPENSE EXPENSE EXPENSE LIMITATION/ LIMITATION/ LIMITATION/ LIMITATION/ RECOUPMENT RECOUPMENT RECOUPMENT RECOUPMENT AND AND AND AND NET ASSET NET ASSETS, AVERAGE NET TRANSFER TRANSFER TRANSFER TRANSFER VALUE, END OF ASSETS FOR AGENT AGENT AGENT AGENT PORTFOLIO BEGINNING TOTAL PERIOD THE PERIOD EARNINGS EARNINGS EARNINGS EARNINGS TURNOVER OF PERIOD RETURN* (IN THOUSANDS) (IN THOUSANDS) CREDIT CREDIT CREDIT CREDIT RATE(b) --------- ------- -------------- -------------- ----------- ----------- ----------- ----------- --------- $10.00 2.72% $90,324 $85,162 1.11% 1.01%(e) 4.14% 4.24% 66.82% 10.16 1.05% 82,415 71,253 1.18% 1.10% 3.72% 3.80% 76.28% 10.52 5.41% 61,502 46,295 1.29% 1.30% 4.28% 4.27% 37.98% 10.41 8.19% 39,338 33,787 1.45% 1.30% 4.01% 4.16% 41.65% 10.02 2.09% 968 982 3.08% 1.61%(e) 2.17% 3.64% 66.82% 10.18 0.47% 988 926 3.42% 1.69% 1.46% 3.19% 76.28% 10.54 4.83% 371 317 6.84% 1.90% 3.63% 8.57% 37.98% 10.42 9.98% 260 199 2.05% 1.90% 3.48% 3.63% 41.65% 10.00 3.06% 4 4 25.40% 0.76%(e) (20.18)% 4.47% 66.82% 10.15 1.30% 5 2 74.28% 0.84% (69.41)% 4.03% 76.28% 10.51 4.33% 1 1 0.86% 0.86% 4.60% 4.60% 37.98% 15.22 4.35% 104,966 105,521 1.23% 1.23% (0.13)% (0.13)% 148.67% 15.14 18.47% 93,780 69,660 1.27% N/A (0.33)% N/A 136.82% 12.78 14.93% 47,273 43,044 1.33% N/A (0.59)% N/A 116.26% 11.12 17.05% 37,603 34,007 1.39% N/A (0.37)% N/A 188.07% 9.50 (3.23)% 42,232 37,577 1.36% N/A (0.58)% N/A 107.82% 14.52 3.54% 95,842 90,644 2.03% 2.02% (0.91)% (0.91)% 148.67% 14.58 17.49% 78,145 66,561 2.04% N/A (1.10)% N/A 136.82% 12.41 14.06% 53,101 45,114 2.08% N/A (1.34)% N/A 116.26% 10.88 16.24% 35,428 30,459 2.14% N/A (1.12)% N/A 188.07% 9.36 (4.07)% 27,744 19,849 2.11% N/A (1.33)% N/A 107.82% 15.23 4.57% 1,291 1,281 0.99% 0.98% 0.12% 0.12% 148.67% 15.12 18.22% 1,165 229 1.76% N/A (0.94)% N/A 136.82% 12.79 5.97% 36 32 1.12% N/A (0.28)% N/A 116.26% 15.09 (4.49)% 128 40 7.44% 7.43% (5.45)% (5.44)% 148.67% 13.80 0.30% 60,321 56,848 1.47% 1.47%(e) (0.04)% (0.04)% 159.55% 13.88 9.21% 54,347 49,938 1.54% 1.45% (0.57)% (0.48)% 159.35% 13.25 10.53% 42,962 30,305 1.60% 1.45% (0.67)% (0.52)% 167.57% 12.40 24.00% 20,981 14,544 2.07% 1.45% (1.27)% (0.65)% 184.24% 13.39 (0.36)% 2,842 3,254 2.61% 2.23%(e) (1.23)% (0.85)% 159.55% 13.56 8.31% 3,652 2,914 2.80% 2.20% (1.80)% (1.20)% 159.35% 13.06 9.69% 1,964 838 3.89% 2.20% (2.93)% (1.23)% 167.57% 12.32 14.60% 148 50 2.83% 2.20% (2.13)% (1.50)% 184.24% 13.94 0.88% 5 32 3.52% 1.22%(e) (2.14)% 0.15% 159.55% 13.94 9.42% 3 3 53.94% 1.20% (52.97)% (0.23)% 159.35% 13.29 3.34% 3 2 1.12% 1.12% (0.11)% (0.11)% 167.57% 13.80 0.51% 15 5 42.18% 1.47%(e) (40.01)% 0.69% 159.55%
Financial Highlights 75 Financial Highlights (continued)
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS ---------------------------------------- ------------------------------------------ NET ASSET NET NET REALIZED DIVIDENDS DISTRIBUTIONS VALUE, INVESTMENT AND UNREALIZED TOTAL FROM FROM NET FROM NET TOTAL BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT INVESTMENT REALIZED DIVIDENDS AND OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS --------- ---------- -------------- ---------- ---------- ------------- ------------- ICON EQUITY INCOME FUND CLASS I+ Year Ended September 30, 2006 $15.79 $ 0.30 $ 0.29 $ 0.59 $(0.35) $(1.09) $(1.44) Year Ended September 30, 2005 14.33 0.27 1.54 1.81 (0.27) (0.08) (0.35) Year Ended September 30, 2004 12.22 0.31 2.09 2.40 (0.29) - (0.29) September 30, 2002 (inception) to September 30, 2003 10.00 0.25 2.20 2.45 (0.23) - (0.23) CLASS C Year Ended September 30, 2006 15.71 0.15 0.29 0.44 (0.21) (1.09) (1.30) Year Ended September 30, 2005 14.27 0.13 1.54 1.67 (0.15) (0.08) (0.23) Year Ended September 30, 2004 12.21 0.20 2.06 2.26 (0.20) - (0.20) November 8, 2002 (inception) to September 30, 2003 10.63 0.16 1.59 1.75 (0.17) - (0.17) CLASS Z Year Ended September 30, 2006 15.79 0.30 0.29 0.59 (0.35) (1.09) (1.44) Year Ended September 30, 2005 14.33 0.28 1.55 1.83 (0.29) (0.08) (0.37) May 10, 2004 (inception) to September 30, 2004 13.43 0.39 0.70 1.09 (0.19) - (0.19) CLASS A May 31, 2006 (inception) to September 30, 2006 15.04 0.08 (0.01) 0.07 (0.19) - (0.19) ICON LONG/SHORT FUND(D) CLASS I+ Year Ended September 30, 2006 15.99 0.03 1.17 1.20 - - - Year Ended September 30, 2005 13.92 (0.08) 2.65 2.57 - (0.50) (0.50) Year Ended September 30, 2004 12.00 (0.08) 2.16 2.08 - (0.16) (0.16) September 30, 2002 (inception) to September 30, 2003 10.00 (0.07) 2.07 2.00 - - - CLASS C Year Ended September 30, 2006 15.63 (0.13) 1.17 1.04 - - - Year Ended September 30, 2005 13.73 (0.19) 2.59 2.40 - (0.50) (0.50) Year Ended September 30, 2004 11.92 (0.18) 2.15 1.97 - (0.16) (0.16) October 17, 2002 (inception) to September 30, 2003 10.61 (0.15) 1.46 1.31 - - - CLASS Z Year Ended September 30, 2006 16.05 0.11 1.13 1.24 - - - Year Ended September 30, 2005 13.94 (0.05) 2.66 2.61 - (0.50) (0.50) May 6, 2004 (inception) to September 30, 2004 13.99 (0.04) (0.01) (0.05) - - - CLASS A May 31, 2006 (inception) to September 30, 2006 17.52 0.05 (0.39) (0.34) - - -
(x) Calculated using the average share method. * The total return calculation is for the period indicated and excludes any sales charges. (a) Annualized for periods less than a year. (b) Portfolio turnover is calculated at the Fund level and is not annualized. (c) The limitation on expenses for Class Z shares occurred when the Advisor reimbursed the Fund for excise and income taxes incurred during the period (Note 5). These expenses were extraordinary expenses not subject to the contractual expense limitation discussed in Note 2. (d) The Fund's operating expenses, not including dividends on short positions, are contractually limited to 2.30% for Class C, 1.55% for Class I, 1.30% for Class Z and 1.55% for Class A. The ratios in these financial highlights reflect the limitation, including the dividends on short positions. (e) The Fund's operating expenses, not including interest expense, are contractually limited to the amounts discussed in Note 2. The ratios in these financial highlights reflect the limitation, including the interest expense. + The Fund has changed its originally stated inception date of October 1, 2002 to September 30, 2002. The accompanying notes are an integral part of the financial statements. 76 Financial Highlights
RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO AVERAGE NET AVERAGE NET ASSETS(A) ASSETS(A) ------------------------ ------------------------ BEFORE AFTER BEFORE AFTER EXPENSE EXPENSE EXPENSE EXPENSE LIMITATION/ LIMITATION/ LIMITATION/ LIMITATION/ RECOUPMENT RECOUPMENT RECOUPMENT RECOUPMENT AND AND AND AND NET ASSET NET ASSETS, AVERAGE NET TRANSFER TRANSFER TRANSFER TRANSFER VALUE, END OF ASSETS FOR AGENT AGENT AGENT AGENT PORTFOLIO BEGINNING TOTAL PERIOD THE PERIOD EARNINGS EARNINGS EARNINGS EARNINGS TURNOVER OF PERIOD RETURN* (IN THOUSANDS) (IN THOUSANDS) CREDIT CREDIT CREDIT CREDIT RATE(B) --------- ------- -------------- -------------- ----------- ----------- ----------- ----------- --------- $14.94 4.02% $133,835 $130,261 1.23% 1.23%(e) 1.96% 1.96% 162.84% 15.79 12.71% 129,681 131,412 1.27% 1.27% 1.79% 1.79% 143.82% 14.33 19.69% 117,552 88,318 1.35% 1.37% 2.25% 2.23% 51.84% 12.22 24.72% 42,474 25,288 1.72% 1.45% 2.23% 2.30% 35.17% 14.85 3.03% 4,753 4,346 2.29% 2.20%(e) 0.91% 1.00% 162.84% 15.71 11.71% 3,861 3,026 2.53% 2.20% 0.53% 0.86% 143.82% 14.27 18.56% 1,885 1,053 3.47% 2.20% 0.12% 1.40% 51.84% 12.21 16.63% 581 348 2.48% 2.20% 1.10% 1.38% 35.17% 14.94 4.04% 24 23 4.36% 1.20%(e) (1.20)% 1.96% 162.84% 15.79 12.89% 23 20 9.37% 1.20% (6.31)% 1.86% 143.82% 14.33 8.12% 14 12 1.11% 0.97%(c) 2.62% 2.76% 51.84% 14.92 0.46% 19 6 38.36% 1.44%(e) (35.18)% 1.74% 162.84% 17.19 7.50% 168,522 101,365 1.34% 1.45%(e) 0.29% 0.18% 94.62% 15.99 18.69% 53,158 47,211 1.58% 1.58% (0.53)% (0.53)% 112.06% 13.92 17.42% 24,480 14,374 2.15% 1.74% (1.03)% (0.62)% 148.32% 12.00 20.00% 9,726 6,997 3.09% 1.55% (2.20)% (0.66)% 162.25% 16.67 6.65% 26,763 18,567 2.20% 2.30%(e) (0.69)% (0.78)% 94.62% 15.63 17.68% 13,925 8,860 2.37% 2.32% (1.35)% (1.31)% 112.06% 13.73 16.61% 3,716 1,417 3.70% 2.49% (2.57)% (1.35)% 148.32% 11.92 12.35% 269 186 3.84% 2.30% (2.99)% (1.45)% 162.25% 17.29 7.73% 3,306 1,810 1.09% 1.17%(e) 0.69% 0.61% 94.62% 16.05 18.96% 140 89 3.07% 1.33% (2.07)% (0.33)% 112.06% 13.94 (0.36)% 32 29 1.98% 1.76% (0.50)% (0.28)% 148.32% 17.18 (1.94)% 821 196 2.51% 1.54%(e) (0.01)% 0.96% 94.62%
Financial Highlights 77 Notes to Financial Statements September 30, 2006 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Bond Fund ("Bond Fund"), ICON Core Equity Fund ("Core Equity Fund") ICON Covered Call Fund ("Covered Call Fund"), ICON Equity Income Fund ("Equity Income Fund"), and ICON Long/Short Fund ("Long/Short Fund") are series funds (individually a "Fund" and collectively, the "Funds"). The Funds are part of the ICON Funds (the "Trust"), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end investment management company. Each Fund offers four classes of shares, Class I, Class C, Class Z and Class A with the exception of Bond Fund, which offers three classes of shares, Class I, Class C and Class Z. All classes have equal rights as to earnings, assets and voting privileges except that each Class may bear different distribution fees, registration costs and shareholder servicing costs and each Class has exclusive voting rights with respect to its distribution plan. There are currently 12 other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. Each Fund is authorized to issue an unlimited number of no par shares. The investment objective of the Bond Fund is maximum total return. The investment objective of the Core Equity Fund is long-term capital appreciation with a secondary objective of capital preservation. The investment objective of the Covered Call Fund is modest capital appreciation and to maximize realized gains from writing covered call options. The investment objective of the Equity Income Fund is modest capital appreciation and income. The investment objective of the Long/ Short Fund is capital appreciation. The Funds may have elements of risk, including the risk of loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investing in fixed income securities such as bonds involves interest rate risk. When interest rates rise, the value of fixed income securities generally decreases. Additionally, the Bond Fund may invest in medium- and lower-quality debt securities. High-yield bonds involve a greater risk of default and price volatility than U.S. government and other high-quality bonds. The Covered Call Fund invests in call options; call options involve certain risks, such as limited gains and lack of liquidity of the underlying securities, and are not suitable for all investors. The Long/Short Fund invests short in securities; there are risks associated with selling short, including the risk that the Long/Short Fund may have to cover its short position at a higher price than the short sale, resulting in a loss. The Fund's loss on a short sale is potentially unlimited as a loss occurs when the value of a security sold short increases. There are also risks associated with small and mid-cap investing, including limited product lines, less liquidity and small market 78 Notes to Financial Statements share. Investments in foreign securities and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar-denominated transactions as a result of, among other factors, the possibility of lower government supervision and regulation of foreign securities markets and the possibility of political or economic instability. Financial statements of foreign companies are governed by different accounting, auditing, and financial standards than U.S. companies and tend to be less transparent and uniform than in the United States. Many corporate governance standards, which help ensure the integrity of public information in the United States, do not exist in foreign countries. In general, there is less governmental supervision of foreign stock exchanges and securities brokers and issuers. In addition, in the normal course of business, the Funds may enter into various agreements that provide for general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as any potential exposure involves future claims that may be made against each Fund. However, based on experience, the Funds expect the risk of loss to be minimal. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results may differ from these estimates. INVESTMENT VALUATION The Funds' securities and other assets are valued as of the closing price at the close of regular trading on the New York Stock Exchange (the "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by the Funds at the NASDAQ Official Closing Price provided by NASDAQ each business day. The Funds use pricing services to report the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board of Trustees ("Board") or pursuant to procedures approved by the Board. The valuation assigned to fair-valued securities for purposes of Notes to Financial Statements 79 Notes to Financial Statements (continued) calculating a Fund's net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes obtained from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service. The evaluated bid price supplied by the pricing service is a matrix system which considers such factors as security prices, yields, maturities and ratings. Short-term securities with remaining maturities of 60 days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. Currency rates as of the close of the NYSE are used to convert foreign security values into U.S. dollars. The Funds' securities traded in countries outside of the Western Hemisphere are fair valued daily by utilizing the quotations of an independent pricing service, unless the Funds' adviser determines that use of another valuation methodology is appropriate. The purposes of daily fair valuation are to avoid stale prices and to take into account, among other things, any significant events occurring after the close of foreign markets. The pricing service uses statistical analyses and quantitative models to adjust local market prices using factors such as subsequent movements and changes in the prices of indexes, securities and exchange rates in other markets to determine fair value as of the time a Fund calculates its net asset value. The valuation assigned to fair-value securities for purposes of calculating a Fund's net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management has recently begun to evaluate the application of the Statement to the Funds, and is not in a position at this 80 Notes to Financial Statements time to evaluate the significance of its impact, if any, on the Funds' financial statements. REPURCHASE AGREEMENTS Repurchase agreements, if held by the Funds, are fully collateralized by U.S. Government securities and such collateral is in the possession of the Funds' custodian. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements including accrued interest. In the event of default on the obligation to purchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. No repurchase agreements were purchased or sold by the Funds during the year ended September 30, 2006. FOREIGN CURRENCY TRANSLATION The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange daily. Income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Net unrealized appreciation or depreciation on investments and foreign currency translations arise from changes in the value of assets and liabilities, resulting from changes in the exchange rates and changes in market prices of securities held. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may enter into short-term forward foreign currency contracts in connection with planned purchases or sales of securities as a hedge against fluctuations in foreign exchange rates pending the settlement of transactions in foreign securities. A forward foreign currency contract is an agreement between contracting parties to exchange an amount of currency at some future time at an agreed upon rate. These contracts are marked-to-market daily and the related appreciation or depreciation of the contract is presented in the Statements of Assets and Liabilities. Net realized gains and losses on foreign currency transactions Notes to Financial Statements 81 Notes to Financial Statements (continued) represent disposition of foreign currencies, and the difference between the amount recorded at the time of the transaction and the U.S. dollar amount actually received. Any realized gain or loss incurred by the Funds due to foreign currency translation is included in the Statements of Operations. The Funds did not enter into any forward foreign currency contracts during the year ended September 30, 2006. FUTURES CONTRACTS The Funds may invest in financial futures contracts for the purpose of hedging their existing securities or securities they intend to purchase against fluctuations in fair value caused by changes in prevailing markets. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the underlying hedged assets. The Funds held no financial futures contracts during the year ended September 30, 2006. OPTIONS TRANSACTIONS The Covered Call Fund writes (sells) call options as part of its normal investment activities. Each Fund may write (sell) put and call options only if it owns an offsetting position in the underlying security. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. Such liability is subject to off balance sheet risks to the extent of any future increases in market value of the written options. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security, and the proceeds from the sale are increased by the premium originally received. If a written put option is exercised, the cost of the security acquired is decreased by the premium originally received. As a writer of an option, a Fund has no control over whether the underlying securities are subsequently sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security underlying the written option. 82 Notes to Financial Statements Each Fund may also purchase put and call options. When a Fund purchases a put or call option, an amount equal to the premium paid is included in the Fund's Statement of Assets and Liabilities as an investment, and is subsequently marked-to-market to reflect the current market value of the option. If an option expires on the stipulated expiration date or if the Fund enters into a closing sale transaction, a gain or loss is realized. If the Fund exercises a call, the cost of the security acquired is increased by the premium paid for the call. If the Fund exercises a put option, a gain or loss is realized from the sale of the underlying security, and the proceeds from such a sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities. SHORT SALES The Long/Short Fund may engage in short sales (selling securities it does not own) as part of its normal investment activities. These short sales are collateralized by cash equivalents or securities held with the Fund's prime broker and in a segregated account at the Fund's custodian. The collateral required is determined daily by reference to the market value of the short positions. Such collateral for the Fund is held by one broker. Dividend expense on short sales is treated as an expense on the Statement of Operations. Liabilities for securities sold short are reported at market value in the Statement of Assets and Liabilities. Such liabilities are subject to off- balance sheet risk to the extent of any future increases in market value of the securities sold short. The ultimate liability for securities sold short may exceed the liabilities recorded in the Statement of Assets and Liabilities. Liabilities for securities sold short are closed out by purchasing the applicable securities for delivery to the Fund's prime broker. INCOME TAXES The Funds intend to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code and, accordingly, the Funds will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that they intend to make sufficient distributions of net investment income and net realized capital gains. Dividends paid by the Funds from net investment income and distributions of net realized short-term gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Dividends and distributions to shareholders are recorded by the Funds on the ex-dividend/distribution date. The Bond Fund distributes net investment income, if any, to shareholders monthly. The Equity Income Fund distributes net investment income, if any, to shareholders quarterly. Other Funds distribute income, if any, annually. The Funds distribute net realized capital Notes to Financial Statements 83 Notes to Financial Statements (continued) gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. The ICON Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes. Income distributions 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. On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax return to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management has recently begun to evaluate the application of the Interpretation to the Funds and is not in a position at this time to evaluate the significance of its impact, if any, on the Funds' financial statements. INVESTMENT INCOME Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Discounts and premiums on securities purchased are amortized over the life of the respective securities. INVESTMENT TRANSACTIONS Security transactions are accounted for no later than one business day after the trade date. However, for financial reporting purposes, security transactions are accounted for on the trade date. Gains and losses on securities sold are determined on the basis of identified cost. ALLOCATION OF INCOME AND EXPENSES Each class of a Fund's shares bears expenses incurred specifically on its behalf and, in addition, each class bears a portion of general expenses, based upon relative net assets of each class. Expenses which cannot be directly attributed to a specific Fund in the Trust are apportioned between 84 Notes to Financial Statements all Funds in the Trust based upon relative net assets. In calculating the 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 upon the proportion of net assets. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEES ICON Advisers, Inc. ("ICON") serves as investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 0.60% of average daily nets assets of the Bond Fund, 0.75% of average daily net assets of the Core Equity, Covered Call and Equity Income Funds, and 0.85% of average daily net assets of the Long/Short Fund. ICON has contractually agreed to limit its investment advisory fee and/or reimburse certain of the Funds' operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that the Funds' operating expenses do not exceed the following amounts:
CLASS I CLASS C CLASS Z CLASS A -------------------------------------------------------------------------------------- ICON Bond Fund 1.00% 1.60% 0.75% N/A ICON Covered Call Fund 1.45% 2.20% 1.20% 1.45% ICON Equity Income Fund 1.45% 2.20% 1.20% 1.45% ICON Long/Short Fund 1.55% 2.30% 1.30% 1.55%
The Funds' expense limitation will continue in effect until at least January 31, 2016. To the extent ICON reimburses or absorbs fees and expenses, it may seek payment of such amounts for up to three years after the expenses were reimbursed or absorbed. A Fund will make no such payment, however, if the total Fund operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed. As of September 30, 2006 the following amounts were still available for recoupment by ICON based upon their potential expiration dates:
2007 2008 2009 ----------------------------------------------------------------------------------- ICON Bond Fund $15,704 $ 90,804 $102,282 ICON Covered Call Fund 47,944 96,329 42,816 ICON Equity Income Fund 12,875 11,555 6,067 ICON Long/Short Fund -- 3,256 4,219
Notes to Financial Statements 85 Notes to Financial Statements (continued) TRANSFER AGENT, CUSTODY AND ACCOUNTING FEES BISYS Fund Services Ohio, Inc. ("BISYS") is the Fund Accounting Agent for the Funds. For its services, the Trust pays BISYS 0.03% on the first $1.75 billion of net assets, 0.0175% on net assets over $1.75 billion and up to $5 billion, and 0.01% on net assets in excess of $5 billion. Brown Brothers Harriman ("BBH") is the custodian of the Trust's investments. For domestic custody services, the Trust pays BBH 0.0065% on the first $50 million of average net assets and 0.0050% on domestic assets above $50 million, plus certain transaction charges. For foreign custody services, the Trust pays BBH 0.03% on foreign assets plus certain transaction charges. Boston Financial Data Services, Inc. ("BFDS") is the Trust's transfer agent. For these services, the Trust pays an account fee of $13.25 per open account, $7.00 per networked account, $1.80 per closed account, plus certain other transaction and cusip charges. Transfer agent earnings credits are credits received for interest which is a result from overnight balances used by the transfer agent, BFDS, for clearing shareholder transactions. During the year ended September 30, 2006, the Funds received transfer agent earnings credits which are included on the Statement of Operations. ADMINISTRATIVE SERVICES The Trust has entered into an administrative services agreement with ICON pursuant to which ICON oversees the administration of the Trust's business and affairs. As of January 31, 2006, this agreement provides for an annual fee of 0.05% on the Funds' first $1.5 billion of average daily net assets, 0.045% on the next $1.5 billion of average daily net assets, 0.040% on the next $2 billion of average daily net assets and 0.030% on average daily net assets over $5 billion. Prior to that date, this agreement provided for an annual fee to ICON of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. The administrative services agreement provides that ICON will not be liable for any error of judgment, mistake of law, or any loss suffered by the Trust in connection with matters to which the administrative services agreement relates, except for a loss resulting from willful misfeasance, bad faith or negligence by ICON in the performance of its duties. ICON has entered into a sub-administration agreement with BISYS pursuant to which BISYS assists ICON with the administration and business affairs of the Trust. For its services, ICON pays BISYS at an annual rate of 0.025% on the first $1.75 billion of Trust assets and 0.015% on assets above $1.75 billion. 86 Notes to Financial Statements DISTRIBUTION FEES The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") under which the Funds are authorized to compensate the Funds' distributor, ICON Distributors, Inc. ("IDI") (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, Bond Fund Class C shareholders pay an annual 12b-1 and service fee of 0.85% of average daily net assets and Class I shareholders pay an annual 12b-1 fee of 0.25% of average daily net assets. The shareholders of the other Funds pay an annual 12b-1 and service fee of 1.00% of average daily net assets for Class C shares and an annual 12b-1 and service fee of 0.25% of average daily net assets for Class I shares and Class A shares. The total amount paid under the 12b-1 plans by the Funds is shown in the Statement of Operations. RELATED PARTIES Certain Officers and Directors of ICON are also Officers and Trustees of the Funds; however, such Officers and Trustees (with the exception of the Chief Compliance Officer, "CCO") receive no compensation from the Funds. The CCO's salary is paid 90% by the Funds and 10% by the Adviser. For the year ended September 30, 2006, the total related amounts paid by the Trust under this arrangement are included in Other Expenses on the Statements of Operations. Some of the 12b-1 amounts received by IDI, discussed in the Distribution Fees, has been used to offset various shareholder servicing costs incurred by the Adviser. For the year ended September 30, 2006, this amount was $118,178. 3. LINE OF CREDIT The Funds have entered into Lines of Credit agreements with BBH. The maximum borrowing is limited to the lesser of $50 million or 25% of the net asset value in the Fund subject to a maximum borrowing limit by the Trust of $150 million. The ICON Covered Call Fund is limited to the lesser of $50 million or 10% of net asset value. Interest is charged at LIBOR plus Notes to Financial Statements 87 Notes to Financial Statements (continued) 2.00%, which was 7.32% at September 30, 2006. The average interest rate charged for the year ended September 30, 2006 was 6.75%.
AVERAGE BORROWING (10/1/05-9/30/06) ------------------------------------------------------------------------------- ICON Bond Fund $522,432 ICON Core Equity Fund 172,280 ICON Covered Call Fund 480,701 ICON Equity Income Fund** 280,545 ICON Long/Short Fund 134,025
** Fund had outstanding borrowings as of September 30, 2006. 4. OPTIONS CONTRACTS WRITTEN The number of option contracts written and the premiums received by the ICON Covered Call Fund during the year ended September 30, 2006, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED ------------------------------------------------------------------------------------- Options outstanding, beginning of period 13,261 $ 2,471,399 Options written during period 69,223 19,176,827 Options expired during period (1,902) (348,845) Options closed during period (67,366) (19,190,696) Options exercised during period -- -- ------- ------------ Options outstanding, end of period 13,216 $ 2,108,685 ======= ============
5. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryforwards. The tax characteristics of dividends and distributions paid to shareholders during the fiscal year ended September 30, 2006, were as follows:
DISTRIBUTIONS PAID FROM ----------------------- TAX TOTAL ORDINARY NET LONG- TOTAL TAXABLE TAX EXEMPT RETURN OF DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS DISTRIBUTIONS CAPITAL PAID * ------------------------------------------------------------------------------------------------------------ ICON Bond Fund $3,571,906 $ 57,888 $ 3,629,794 $ - $ - $ 3,629,794 ICON Core Equity Fund 16,325 6,819,220 6,835,545 - - 6,835,545 ICON Covered Call Fund - 498,313 498,313 - - 498,313 ICON Equity Income Fund 2,922,978 8,885,673 11,808,651 - - 11,808,651
88 Notes to Financial Statements The tax characteristics of dividends and distributions paid to shareholders during the fiscal year ended September 30, 2005, were as follows:
DISTRIBUTIONS PAID FROM ----------------------- TAX TOTAL ORDINARY NET LONG- TOTAL TAXABLE RETURN OF DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS CAPITAL PAID* --------------------------------------------------------------------------------------------------- ICON Bond Fund $2,799,032 $343,200 $3,142,232 $ - $3,142,232 ICON Covered Call Fund 1,404,286 707,268 2,111,554 53 2,111,607 ICON Equity Income Fund 2,443,441 704,336 3,147,777 - 3,147,777 ICON Long/Short Fund 605,334 845,915 1,451,249 257 1,451,506
* Differences between the financial statement distributions paid and the tax basis distributions paid were a result of accrual based accounting and cash basis accounting used for federal tax reporting purposes. During the year ended September 30, 2006, the following capital loss carryforwards were used: ICON Covered Call Fund $ 621,989 ICON Long/Short Fund 387,875
Net capital losses incurred after October 31 and within the taxable year are deemed to arise on the first business day of the Funds' next taxable year. For the year ended September 30, 2006, the fund deferred to October 1, 2006 post October capital losses:
CAPITAL FUND LOSSES ------------------------------------------------------------------------- ICON Bond Fund $1,454,387
As of September 30, 2006, the components of accumulated earnings (deficit) on a tax basis was as follows:
TOTAL UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ACCUMULATED ORDINARY NET LONG- ACCUMULATED DISTRIBUTIONS CAPITAL AND APPRECIATION EARNINGS FUND INCOME TERM GAINS EARNINGS PAYABLE* OTHER LOSSES (DEPRECIATION)** (DEFICITS) ---------------------------------------------------------------------------------------------------------------------------------- ICON Bond Fund $ 359,180 $ - $ 359,180 $(321,495) $(1,454,387) $ (331,407) $(1,748,109) ICON Core Equity Fund - 13,671,736 13,671,736 - - 14,866,813 28,538,549 ICON Covered Call Fund 2,541,496 - 2,541,496 - - 4,805,864 7,347,360 ICON Equity Income Fund 1,011,737 5,361,318 6,373,055 (692,817) - 11,215,958 16,896,196 ICON Long/ Short Fund 44,891 5,441,647 5,486,538 - - 6,547,893 12,034,431
Notes to Financial Statements 89 Notes to Financial Statements (continued) *Differences between the financial statement distribution payable and the tax basis distribution payable is a result of accrual based accounting and cash basis accounting used for federal tax reporting purposes. **The difference between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales and straddles, recognition of tax unrealized appreciation (depreciation) of passive foreign investment companies and contingent payment debt instruments. As of September 30, 2006, book cost for financial reporting purposes is substantially the same for federal income tax purposes and differs from fair value by net unrealized appreciation/(depreciation) of securities as follows:
UNREALIZED UNREALIZED NET APPRECIATION FUND COST APPRECIATION (DEPRECIATION) (DEPRECIATION) --------------------------------------------------------------------------------------- ICON Bond Fund $ 90,292,928 $ 294,671 $ (626,078) $ (331,407) ICON Core Equity Fund 186,996,027 16,347,942 (1,481,129) 14,866,813 ICON Covered Call Fund 62,318,324 5,368,277 (938,746) 4,699,531 ICON Equity Income Fund 129,044,707 12,255,238 (1,039,280) 11,215,958 ICON Long/Short Fund 188,780,259 11,610,414 (5,062,521) 6,547,893
6. SEGREGATED ACCOUNT AND SHORT SALE COLLATERAL As of September 30, 2006 the ICON Long/Short Fund had securities or cash deposits with the counterparty to the short sales in the amount of $13,572,316 as collateral for the short sales. 90 Notes to Financial Statements Report of Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of the ICON Diversified Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, short securities and written options and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Bond Fund, ICON Core Equity Fund, ICON Covered Call Fund, ICON Equity Income Fund, and ICON Long/Short Fund (five of the portfolios constituting ICON Funds, hereafter referred to as "Funds") at September 30, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Denver, Colorado November 22, 2006 Report of Accounting Firm 91 Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 17 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, and principal occupations are set forth below. The address of the Trustees is 5299 DTC Blvd., Suite 1200, Greenwood Village, CO 80111. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 55, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and served as the Chief Investment Officer (1991 to 2004) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 56. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); General Partner of Chamois Partners, a venture capital company (2004 to present); General Partner of Bergert Properties, a real estate holding company (1997 to present); and General Partner of Pyramid Real Estate Partnership, a real estate development company (1998 to present) and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); Delta Dental of California, an insurance company (2006 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 57. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager, Trinity Investment Management Corporation (1989 to 2001). 92 Trustees and Officers GREGORY KELLAM SCOTT, 58. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was Senior Vice President - Law, General Counsel and Secretary of GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Constituency for Africa (1997 to present) and serves as Executive Director of Indiana Civil Rights Commission (2005-present). Mr. Scott has been appointed to the US State Department's Commission on the African Judiciary (2006-present). R. MICHAEL SENTEL, 58. Mr. Sentel has been a Trustee of the Funds since their inception. Mr. Sentel is a Senior Attorney with the U.S. Department of Education (1996 to present). Mr. Sentel also provides legal representation as a sole practitioner with an emphasis on corporate and transactional law. He served as general counsel to numerous public companies and served on the board of directors of one of these clients. Mr. Sentel began his legal career with the U.S. Securities and Exchange Commission's Division of Enforcement and became a branch chief. Later he served as the section chief for the Professional Liability Section of the Federal Deposit Insurance Corp. with responsibility for the Rocky Mountain Region (1991 to 1994). JONATHAN F. ZESCHIN, 53. Mr. Zeschin has been a Trustee of the Funds since November 2002. Mr. Zeschin is President and Founder of ESSENTIAL Advisers, Inc., a wealth management and investment advisory firm (2000 to present) and was Managing Partner of JZ Partners LLC, a business consulting firm for investment management companies (1998 to present). Mr. Zeschin was previously President of Founders Asset Management LLC, an investment management company (1995 to 1998) and Executive Vice President, INVESCO Funds Group, an investment advisory company (1992 to 1995). Mr. Zeschin was previously a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to 2004); and was previously a Director of the Wasatch Funds (2002 to 2004). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 55. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and served as the Chief Investment Officer (1991 to 2004). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. Trustees and Officers 93 Board of Trustees and Fund Officers (continued) (unaudited) ERIK L. JONSON, 57. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception. Mr. Jonson is also Chief Financial Officer (1996 to present) and Executive Vice President (2004 to present) and was previously Vice President (1998 to 2004) of ICON Advisers; Chief Financial Officer, Secretary and Director (1996 to present) of IM&R; and Executive Vice President (2004 to present) and Treasurer (2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) and Vice President, (2002 to 2004) of IDI; and Executive Vice President and Treasurer of ICON Insurance Agency, Inc. (2004 to present). DONALD SALCITO, 53. Mr. Salcito serves as Vice President and Secretary of the Funds since November 15, 2006. Mr. Salcito is also Executive Vice President and General Counsel (September 2005 to present) of ICON Advisers, Inc.; Director of ICON Management & Research (2005 to present); Executive Vice President, Secretary, General Counsel and Chief Compliance Officer, for ICON Distributors, Inc. (2005 to present); Executive Vice President and Secretary of ICON Insurance Agency, Inc. (2005 to present). Previously he was a Partner in the law firm of Perkins Coie, LLP. (2000-2005). CARRIE M. SCHOFFMAN, 33. Ms. Schoffman serves as Assistant Vice President and Chief Compliance Officer of the Funds (May 2004 to present). She also serves as Chief Compliance Officer of ICON Advisers, Inc. (May 2004 to present). Previously she was a staff accountant with the U.S. Securities and Exchange Commission (2003 to 2004). She also was a Manager (2001 to 2003) and Senior Associate/Associate (1996 to 2001) at PricewaterhouseCoopers LLP. STEPHEN ABRAMS, 43. Mr. Abrams serves as Anti-Money Laundering Officer of the Funds (2005 to present). Mr. Abrams is also Associate General Counsel of ICON Advisors, Inc. (2005 to present). Previously he was a Partner at Perkins Coie, LLP (2004 to 2005) and Associate (2000 to 2004). 94 Trustees and Officers Other Information (unaudited) RENEWAL OF INVESTMENT ADVISORY AGREEMENT In determining to renew the investment advisory agreements between ICON Funds (the "Trust") and ICON Advisers, Inc. ("ICON" or the "Adviser") the Board requested, was provided with and reviewed data with respect to ICON, its personnel, and the services to be provided to each Fund by ICON under the Trust's Investment Advisory Agreement dated October 9, 1996, as amended (related to the Sector, International and Diversified Funds) and under the Trust's Investment Advisory Agreement dated July 9, 2002 and effective October 1, 2002, as amended (related to the U.S. Diversified Funds -- Bond, Covered Call, Equity Income and Long/Short Funds) (collectively, the "Advisory Agreements"). The data included information concerning advisory, distribution and administrative services provided to the Funds by ICON and its related companies; information concerning other businesses of those companies; comparative data related to exchange traded funds versus the Sector Funds; and comparative data obtained from Lipper Analytical Services related to Fund performance and Fund expenses. On August 8, 2006, the Board of Trustees, including all of the Trustees who are not "interested persons" of the Trust (the "Independent Trustees"), approved continuation of the Advisory Agreements with the Adviser for each Fund for an additional one-year term commencing October 1, 2006. The Independent Trustees were represented by independent legal counsel throughout the process. Prior to acting on the matter, the Independent Trustees met separately as a group in private sessions with their independent legal counsel to review and discuss the foregoing information and also met with management to discuss responses to questions raised during the process. In addition, the Independent Trustees received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the agreement. In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed information relating to the Adviser's operations and personnel. Among other things, the Adviser provided biographical information on its professional staff and descriptions of its organizational and management structure. In the course of their deliberations the Board evaluated, among other things, information relating to the investment philosophy, strategies and techniques used in managing each Fund, the qualifications and experience of the Adviser's investment personnel, the Adviser's compliance programs, the Adviser's brokerage practices, including the extent to which the Adviser obtains research through "soft dollar" arrangements with the Funds' brokerage, and the financial and non-financial resources available to provide services required under the Advisory Agreement. Other Information 95 Other Information (continued) (unaudited) In considering the reasonableness of the fee payable to the Adviser for managing each Fund, the Board reviewed, among other things, financial statements of the Adviser and an analysis of the profitability to the Adviser and its affiliates from each Fund over various periods. The analysis identified all revenues and other benefits received by the Adviser and its affiliates from managing each Fund, the costs associated with providing such services and the resulting profitability to the Adviser and its affiliates. The Board considered the current and anticipated asset levels of each Fund and the willingness of the Adviser to waive fees and pay expenses of the Funds from time to time to limit the total expenses of the Funds. The Board concluded that the profitability to the Adviser and its affiliates from their relationship with the Funds is not excessive and that the Adviser is not realizing material benefits from economies of scale that would warrant adjustments to the fees for any Fund at this time. The Board of Trustees concluded that in light of the information provided and analyzed, the fees charged by the Adviser under the Advisory Agreements to each Fund are reasonable. In connection with reviewing data bearing upon the nature, quality, and extent of services furnished by ICON to each Fund, the Board assessed data concerning ICON's staffing, systems and facilities. The Board also assessed ICON's non-Trust business to see whether there are any initiatives that would dilute service to the Trust. It was noted: A. That the breadth and the quality of investment advisory and other services being provided to each Fund are satisfactory, as evidenced in part by the performance record of each Fund compared with the performance records of a peer group of comparable funds; B. That ICON has made significant expenditures in the past year and in prior years to ensure that it has the sophisticated systems and the highly trained personnel necessary for it to be able to continue to provide quality service to the Funds' shareholders, including the dedication of substantial resources to ICON's investment and trading departments; and C. That the Board is satisfied with the research, portfolio management, and trading services, among others, being provided by ICON to the Funds, and is charging fair, reasonable, and competitive fees. In connection with reviewing data bearing upon the costs of services to be provided and profits to be realized by ICON and its related companies from the relationship with the Trust, the Board considered the Lipper comparative data, data concerning ICON's soft-dollar arrangements, costs borne by ICON in providing advisory services to each Fund and the profitability of ICON in light of the estimated profitability analyses which had been provided by ICON, other benefits to ICON from serving as the Funds' adviser, and ICON's financial statements. 96 Other Information With respect to the soft-dollar arrangements the Board assessed all facets of the arrangements including the quality of trade execution. It was noted that ICON receives research assistance from the use of soft dollars generated from Fund portfolio transactions and that such research assists ICON in providing quality investment advisory services to the Funds and other accounts to which it provides advisory services. The Board concluded that the arrangements are consistent with Fund brokerage practices and benefit the Funds and their shareholders. The Board noted that ICON benefits from serving directly as investment adviser and administrative agent, and through its affiliate, as the principal underwriter for the Funds. With respect to the distribution services, the Board noted that proceeds of the Trust's distribution plans pursuant to Rule 12b-1 under the 1940 Act for the International Equity and Diversified Funds are paid to ICON's affiliate and that the distributor has not profited from plan proceeds as all of the proceeds have been or will be used to cover distribution and marketing expenses. In this regard, the Trustees noted that marketing efforts have been successful as evidenced by Fund asset levels. With respect to the administrative fee paid to ICON, the Board reviewed the comparative data related to those services. The Board also considered the compliance experience in these service areas and concluded that the services provided by ICON and its affiliates to the Funds are satisfactory and that the profits derived from providing the services are competitive and reasonable. The Board also noted the risks assumed by ICON in providing investment advisory, distribution and administrative services to each Fund, including the capital commitments which have been made in the past and which continue to be made by ICON to ensure the continuation of the highest quality of service to the Funds is made with the recognition that the Funds' advisory relationship with ICON can be terminated at any time and must be renewed on an annual basis. In making these determinations the Board of Trustees considered the following: 1. In connection with assessing data bearing upon the fairness of fee arrangements, the Board used data from Lipper, Inc. concerning funds of similar size and funds of larger size, as well as data concerning ICON's other clients: A. the advisory fee structures of the Funds were considered in comparison with advisory fees and expense ratios of other similarly managed funds as set forth in the comparative data; B. that contractual advisory fees for the Sector Funds were higher than fees for similar funds; but that the Sector Funds' expense ratios were Other Information 97 Other Information (continued) (unaudited) competitive and in most instances lower than those of similarly managed Funds; C. that the Sector Funds had also imposed breakpoints on the contractual advisory fees and that such fees were reflected in the comparison data; D. that contractual advisory fees for the ICON Asia-Pacific Region and Europe Funds were above the average fees for similar funds; however, the Funds' expense ratios were competitive in light of their size; E. that the contractual advisory fees for the ICON International Equity Fund is below the average of similarly managed funds; F. the contractual advisory fees for the U.S. Diversified Funds were in line with fees for similar funds; and that, with the exception of the ICON Bond Fund and ICON Covered Call Fund, the U.S. Diversified Funds' expense ratios were lower than those of similarly managed Funds. G. the contractual advisory fee for the ICON Core Equity Fund was below the average fee for similar funds; and that its expense ratio was lower than those of similarly managed Funds. H. that, generally the fees paid to ICON for managing other institutional accounts (such as pension plans) are not lower than the fees paid by similarly managed Funds; however, to the extent such fees are lower, it is due to the fact that such accounts are less costly for ICON to manage. I. the advisory and other fees payable by the Funds to ICON are essentially fees which would be similar to those which would have resulted solely from "arm's-length" bargaining, and may well be lower than fees arrived solely from such arm's-length negotiation. 3. In connection the investment performance of the Funds and ICON the Board discussed and noted: 1. Based on the performance information provided by Lipper, Inc., of the thirteen ICON Funds that had a track record of at least five years, ten outperformed their respective peer groups; eight of the sixteen ICON Funds with a track of at least 3 years outperformed their respective peer groups; and 2. In comparing the Sector Funds to the ETFs the sector funds compared favorably over the one, two and three year periods. The Board considered the extent to which economies of scale could be realized as a Fund grows in assets and whether the Fund's fees reflect these economies of scale for the benefit of Fund shareholders. It was noted that each of the Sector Funds had imposed investment advisory fee breakpoints in January 2006 to take into consideration such economies that may be 98 Other Information realized as the Funds increase in assets. Furthermore, ICON has contractually agreed to impose expense limitations on the International Funds and the U.S. Diversified Funds at a cost to ICON. Based on these considerations, among others, the Board, including all of the Independent Trustees, concluded that the continuation of the advisory agreement was in the best interests of each Fund and its shareholders, the services to be performed under the agreement were services required for the operation of the Funds, ICON had provided satisfactory advisory services to the Funds in the past, and the fees for the advisory services which ICON would perform and other benefits from the relationship with the Trust and consistent with fees paid by similar funds, are reasonable in light of the comparative data, and would be within the range of what would have been negotiated at arm's length in light of the circumstances. SUPPLEMENTAL TAX INFORMATION For corporate shareholders, the following percentage of the total ordinary income dividends paid during the fiscal year ended September 30, 2006, qualifies for the corporate dividends received deduction for the following Funds:
DIVIDENDS RECEIVED FUND DEDUCTION ----------------------------------------------------------------------- ICON Core Equity Fund 100% ICON Equity Income Fund 83.40%
For the fiscal year ended September 30, 2006, the following Funds paid qualified dividend income:
FUND AMOUNT ------------------------------------------------------------------------ ICON Core Equity Fund $ 16,325 ICON Equity Income Fund 2,922,979
The Funds designate the following amounts as long-term capital gain distributions qualifying for the maximum 15% income tax rate for individuals:
FUND AMOUNT ------------------------------------------------------------------------ ICON Bond Fund $ 60,888 ICON Core Equity Fund 9,213,880 ICON Covered Call Fund 498,313 ICON Equity Income Fund 9,627,509 ICON Long/Short Fund 1,474,799
PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month-end. Each Other Information 99 Other Information (continued) (unaudited) ICON Fund also files a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q are available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A summarized description of the policies and procedures the ICON Funds use to vote proxies is available free of charge at www.iconadvisers.com or by calling 1-800-764-0442. Information about how the ICON Funds voted proxies related to each Fund's portfolio securities during the 12-month period ended June 30 is available free of charge at www.iconadvisers.com or on the SEC's website at www.sec.gov. FOR MORE INFORMATION This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor. 100 Other Information THIS PAGE INTENTIONALLY LEFT BLANK (ICON FUNDS LOGO) For more information about the ICON Funds, contact us: By Telephone 1-800-764-0442 By Mail ICON Funds P.O. Box 55452 Boston, MA 02205-8165 In Person ICON Funds 5299 DTC Boulevard, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
(ICON LOGO) 1-800-764-0442 www.iconadvisers.com FANN-DIV(9-06) (GLOBE) 2006 Annual Report ICON INTERNATIONAL FUNDS Investment Update ICON ASIA-PACIFIC REGION FUND ICON EUROPE FUND ICON INTERNATIONAL EQUITY FUND (ICON LOGO) STRENGTH IN NUMBERS Table of Contents ABOUT THIS REPORT (UNAUDITED) 2 MESSAGE FROM ICON FUNDS (UNAUDITED) 5 MANAGEMENT OVERVIEW (UNAUDITED) AND SCHEDULE OF INVESTMENTS 10 ICON Asia-Pacific Region Fund 10 ICON Europe Fund 20 ICON International Equity Fund 30 SIX MONTH HYPOTHETICAL EXPENSE EXAMPLE (UNAUDITED) 41 FINANCIAL STATEMENTS 43 FINANCIAL HIGHLIGHTS 50 NOTES TO FINANCIAL STATEMENTS 52 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 64 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 65 OTHER INFORMATION (UNAUDITED) 68
About This Report HISTORICAL RETURNS All total returns mentioned in this report account for the change in a Fund's per-share price and the reinvestment of any dividends, capital gain distributions, and tax return of capital. If your account is set up to receive Fund distributions in cash rather than to reinvest them, your actual return may differ from these figures. The Funds' performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. The Adviser may have reimbursed certain fees or expenses of some of the Funds. If not for these reimbursements, performance would have been lower. Fund results shown, unless otherwise indicated, are at net asset value. If a sales charge (maximum 5.75%) had been deducted, results would have been lower. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconadvisers.com for performance results current to the most recent month-end. PORTFOLIO DATA This report reflects ICON's views, opinions and portfolio holdings as of September 30, 2006, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's holdings as of September 30, 2006 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology primarily considers company-specific factors beyond financial data, various company factors may impact a stock's performance, and therefore, Fund performance. Investments in foreign securities may entail unique risks, including political, market, and currency risks. Financial statements of foreign companies are governed by different accounting, auditing, and financial standards than U.S. companies and tend to be less transparent and uniform than in the United States. Many corporate governance standards, which help ensure the integrity of public information in the United States, do not exist in foreign countries. In general, there is less governmental supervision of foreign stock exchanges and securities 2 About This Report brokers and issuers. The ICON system relies on the integrity of financial statements released to the market as part of our analysis. This Report contains statements regarding industry or sector themes, new market themes, investment outlook, relative strength, value-to-price ratios, and portfolio managers' expectations, beliefs, goals and the like that are based on current expectations, recent individual stock performance relative to current market prices, estimates of company values and other information supplied to the market by the companies we follow. Words such as "expects," "suggests," "anticipates," "targets," "goals," "value," "estimates," variations of such words and similar expressions are intended to identify forward looking statements, which are not statements of historical fact. Forward looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to assess. These risks and uncertainties are based on a number of important factors, including, among others: stock price fluctuations; the integrity and accuracy of historical and projected financial and other information supplied by companies to the public; interest rates; future earnings growth rates, and other factors beyond the control of our portfolio managers. Therefore, actual outcome may differ materially from what is expressed in such forward looking statements. There are risks associated with mutual fund investing, including the loss of principal. The likelihood of loss may be greater if you invest for a shorter period of time. There is no assurance that the investment process will consistently lead to successful results. Investments in foreign securities may entail unique risks, including political, market and currency risks. An investment in a region fund may involve greater risk and volatility than a diversified fund. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. The prospectus contains this and other information about the Funds and is available by visiting www.iconadvisers.com or calling 1-800-764-0442. Please read the prospectus carefully. About This Report 3 About This Report (continued) COMPARATIVE INDEXES The comparative indexes discussed in this report are meant to provide a basis for judging a Fund's performance against specific securities indexes. Each index shown accounts for both change in the security price and reinvestment of dividends and distributions (except as noted), but does not reflect the costs of managing a mutual fund. The total return figures for the Morgan Stanley Capital International (MSCI) indexes assume change in security prices and the deduction of local taxes. The Funds' portfolios may significantly differ in holdings and composition from the indexes. Individuals cannot invest directly in an index. - The unmanaged MSCI Europe Index comprises approximately 600 stocks traded in developed markets from 15 European countries. The capitalization-weighted index attempts to capture at least 60% of investable capitalization in those markets subject to constraints governed by industry representation, maximum liquidity, maximum float, and minimum cross-ownership. - The unmanaged MSCI All Country Pacific Index comprises stocks traded in the developed and emerging markets of the Pacific Basin (Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand). The capitalization-weighted index attempts to capture at least 60% of investable capitalization in those markets subject to constraints governed by industry representation, maximum liquidity, maximum float, and minimum cross-ownership. - The MSCI All Country World Index ex-United States (ACWI ex-U.S.) is a leading unmanaged benchmark of international stock performance. The capitalization-weighted index is representative of the performance of securities of companies located in developed and emerging markets outside of the United States. - The unmanaged Bloomberg European 500 Index measures the weighted average performance in U.S. dollars of the 500 most highly capitalized European companies. Index returns and statistical data included in this report are provided by Bloomberg and FactSet Research Systems. 4 About This Report Message from ICON Funds -------------------------------------------------------------------------------- We were pleased with the Funds' industry tilting early in the period, as value and relative strength pulled us toward cyclical, industrial even commodity-based industries. -------------------------------------------------------------------------------- Dear ICON Shareholder: We realize you are faced with many mutual fund choices as you structure your financial plan, and we appreciate your continued commitment to diversify with one or more of the ICON International Funds. To those shareholders who are receiving their first ICON Funds Annual Report, we welcome you. You may have decided to invest in an ICON International Fund because you were attracted to ICON's value-based, bottom-up investment system, which pursues industries we believe are poised to outperform the broader market. Or perhaps you thought ICON stood out among other managers because we take a quantitative, unemotional, and objective approach. Whether you invest in our International Funds, such as the ICON Europe Fund, our U.S. Diversified Funds, such as the ICON Core Equity Fund, or our Sector Funds, such as the ICON Healthcare Fund, each is powered by ICON's unique systematic discipline. Guided by an investment system that relies primarily on analyzing data, not speculation, we find "strength in numbers," as our firm's slogan declares. THE CYCLICAL MARKET THEME OF THE PAST THREE YEARS During the third calendar quarter of 2006, there was a major shift in market industry leadership. As a result of our industry rotation, you will see many stocks in Funds that were not held in the Semiannual Report as of March 31, 2006. Indeed, there are many companies that have not been owned by the Funds since late 1999 or early 2000. Before describing that rotation, let's review the industry and sector theme of the preceding three years. Most U.S. and international stock market indexes hit a low in early March 2003 and then embarked on a three-year bull market, with the MSCI ACWI ex-U.S. peaking on May 11, 2006. Table #1 shows cumulative performance for Standard & Poor's Composite 1500 Sector Indexes over that period. As you can see, the market leadership over that period was in the cyclical, economically sensitive sectors of Energy, Materials, and Industrials. These sectors include companies whose revenues are very dependent on the ups and downs of the economy. The opposite is true of the lagging sectors; Healthcare, Consumer Staples, and Telecommunication are generally considered to be defensive, recession-proof sectors. On an industry level, a few of the top performing industries over that period included steel, metals & mining, construction materials, oil & gas exploration and homebuilders. These industries tend to be comprised of small- and mid-sized companies. Among the worst performing industries were brewers, pharmaceuticals, systems software, soft drinks and packaged foods, which contrary to the previous leaders, tend to be comprised of large, mature companies. Message from ICON Funds 5 Message from ICON Funds (continued) We are proud of our discipline and our ability to endure volatility when it is required to capture industry leadership. -------------------------------------------------------------------------------- Our system is suggesting a market with new leadership and an entirely new personality. -------------------------------------------------------------------------------- (CRAIG T. CALLAHAN PHOTO) Craig T. Callahan President and Chairman of the Board of Trustees
TABLE 1 CUMULATIVE TOTAL RETURNS 3/11/03 - 5/5/06 S&P 1500 SECTOR INDEX RETURN % --------------------- -------- Energy 158.00 Materials 118.15 Industrials 105.75 Utilities 95.68 Financials 83.86 S&P COMPOSITE 1500 INDEX 79.04 Consumer Discretionary 73.89 Information Technology 68.39 Telecommunication Services 64.17 Consumer Staples 44.01 Health Care 31.64
Data Source: FactSet Research Systems Returns include the reinvestment of dividends and capital gain distributions. We were pleased with the Funds' industry tilting during that period, as value and relative strength pulled us toward cyclical, industrial even commodity- based industries. Looking back, we believe those industries were on sale because investors were incorrectly fearful of a slow or sluggish economy, as investors worried that higher oil prices, war, and terrorism would hurt the economy. As investors realized that cyclical firms were prosperous, stock prices occasionally surged to reflect fair value. From an ICON perspective, price was trying to catch up with fair value, which over a three-year period made for impressive returns in the leading industries. It is interesting to note that the leading industries during that period, being small- and mid-sized cyclical and commodity based, are inherently volatile. 6 Message from ICON Funds While there were outstanding returns to be earned in the "sweet spot" of the market, it required us to be tolerant of volatility and be patient during the unpleasant ride associated with those industries. We do not like volatility at ICON, and we certainly do not seek it, but we are proud of our discipline and our ability to endure it when it is required to capture industry leadership. It is also interesting to note that lower-quality stocks tended to perform better than what many would consider high-quality stocks over that three-year period. At ICON, quality is measured by liquidity, debt, efficiency and consistency, and we tend to favor higher quality stocks. Our preference for high-quality stocks slightly inhibited the Funds' performance. Consistent with our style, however, we leave the potential higher returns associated with speculative and riskier turnaround situations to other investors. ICON DETECTS A NEW MARKET THEME For the first four months of 2006, the same sector and industry themes from the previous three years persisted across the globe, as shown in Table #2, which highlights U.S. sector index returns from January 1, 2006 through the market peak on May 5, 2006.
TABLE 2 CUMULATIVE TOTAL RETURNS 1/1/06 - 5/5/06 S&P 1500 SECTOR INDEX RETURN % --------------------- -------- Energy 18.08 Materials 16.12 Industrials 14.28 Telecommunication Services 11.61 Financials 8.59 S&P COMPOSITE 1500 INDEX 7.57 Consumer Discretionary 5.77 Information Technology 5.01 Utilities 3.82 Consumer Staples 3.61 Health Care (1.97)
Data Source: FactSet Research Systems Returns include the reinvestment of dividends and capital gain distributions. Generally, the same cyclical leadership was at the top and the same defensive sectors were lagging as seen the previous three years. All market and theme peaks are different. This time, the leading industries did not reach the extreme overpricing typical of most peaks. They were headed toward it, but perhaps because of investor concerns and uncertainty, stock prices did not reach lofty extremes. Message from ICON Funds 7 Message from ICON Funds (continued) During the market drop from early May through mid-June 2006, the previous leaders fell the most, which was similar to market corrections seen in 2004 and 2005. Even the brief market bounce in late June was led by the previous cyclical leadership, similar to rebounds in 2004 and 2005. Since the market low on July 17, 2006, the market has experienced a three-month climb with entirely new leadership. The industries that led the previous three-plus years have been sluggish. New leadership in defensive, recession-proof industries has prevailed. In the weeks following that sudden change on July 17, we have sold cyclical industries and gradually invested in new industries as relative strength has met our standards. The combination of value and relative strength has pulled us to mature companies in defensive, steady growth industries such as pharmaceuticals, diversified banks, electric utilities, packaged food & meats, multi-utilities, diversified capital markets, and integrated telecommunication services. This rotation resulted in significant sector shifts in the ICON International Equity Fund, which best represents our system's sector and industry positioning. The Industrials sector was reduced from 16.9% of the Fund on June 30 to 9.3% on September 30. Financials, Health Care, Information Technology and Telecommunication & Utilities were all increased from 18.7%, 7.6%, 6.0% and 11.9%, respectively, to 24.9%, 8.2%, 9.5% and 14.1%. Major rotations occurred throughout the ICON Fund family to capture the new leadership. As mentioned earlier, you will see Fund holdings that are new in the last few months, some not being held since late 1999 or early 2000. The ICON Funds now look very different than they did when they participated in the theme that prevailed in the three and a half years ending this spring. The stocks and industries now owned in the Funds were not leaders over the last three years as they were not preferred by investors but they were not stagnant. They were growing their profits and the underlying value of their firms. Now, we find attractive bargains among them as our estimate of value has grown above the market price. The large, mature companies that have led the recent market advance are heavily weighted in the Funds' market-capitalization weighted benchmarks, so the indexes gained an immediate surge off the July 17 low. The shift in leadership was sudden, but guided by our system, we have rotated industries as they meet our standards of value and relative strength. STAYING TRUE TO THE ICON DISCIPLINE Our system is suggesting a market with new leadership and an entirely new personality. The stocks and industries we expect to lead are not as 8 Message from ICON Funds inherently volatile as those of the previous theme. We do not know how long this new theme will last, but given the price discounts to our estimates of fair value, we expect it may last at least a year. To better position the ICON International Funds for the changing theme that we believe is taking place, we will follow our value-driven process to reduce or eliminate lagging industries and increase positions in the new leading industries. In closing, we are most grateful for the privilege of playing a role in your investment portfolio. In addition to reading this report on your Funds and communicating with your financial adviser, we invite you to visit our website at www.iconadvisers.com for current market updates, up-to-date Fund performance and holdings, and information about your account. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and President of the Adviser Message from ICON Funds 9 Management Overview ICON Asia-Pacific Region Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 97.3% Top 10 Equity Holdings 20.8% Number of Stocks 110 Short-Term Investments 5.0% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Toyota Motor Corp. 3.0% Foxconn International Holdings, Ltd. 2.4% High Tech Computer Corp. 2.1% Canon, Inc. 2.1% Hopson Development Holdings, Ltd. 2.0% Takeda Pharmaceutical Co., Ltd. 1.9% Johnson Health Tech. Co., Ltd. 1.9% Hengan International Group Co., Ltd. 1.8% Tokyo Gas Co., Ltd. 1.8% Mizuho Financial Group, Inc. 1.8% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. The ICON Asia-Pacific Region Fund, Class S appreciated 17.36% for the fiscal year ended September 30, 2006, outperforming its benchmark, the MSCI All Country Pacific Index, which returned 15.19%. Since their inception on May 31, 2006 through September 30, 2006, the Class A shares of the Fund have returned (2.66%) (and (8.28%) with maximum sales charge) vs. the 0.86% total return of the MSCI All Country Pacific Index over the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Asian markets continued to perform better than U.S. stocks during the period. Cyclical Asian industries showed strength for much of the year, and the Fund gained from its concentration in these areas. Due to a significant market reversal, however, cyclical-oriented industries suffered the most during a sell-off in May and June. Most of the Fund's gains in the fiscal year were achieved in the first fiscal quarter, or the final calendar quarter of 2005, with Japan and South Korea leading the way, and consumer and retail-related industries and Industrials stocks faring well. The next quarter was fraught with volatility, however, along with a serious accounting scandal at Livedoor, a Japanese internet company, which collapsed as it came under investigation. The stock dropped about 80% during the holding period. Although the Fund owned Livedoor during the period and suffered losses when it fell, the impact on total return was minor. The summer months were marked by a sharp sell-off in the cyclically-oriented sectors that had previously been leading most Asian markets, such as Materials and Industrials. Then, we saw a new theme emerge during the last three months of the period, with the Telecommunication & Utilities, Health Care, and Information Technology sectors showing strength. Due to this abrupt shift, the Fund's positions in Energy, Materials, and Industrials all suffered, but we patiently monitored our relative strength readings to discern the industry leaders. As a result, the Fund has migrated toward the newly emerging theme and shifted away from cyclicals. A reversal in country leadership occurred as well, in which we saw China and Hong Kong emerge as the early leaders in 2006. Industry leadership in these two countries has resulted in a tilt toward that area. The Fund was diversified among currencies from different countries in the region and benefited specifically from the South Korean won's appreciation relative to the U.S. dollar. In general, though, we believe the effect of currency on the Fund's overall return was negligible. 10 Management Overview (SCOTT SNYDER, CMT PHOTO) Scott Snyder, CFA Portfolio Manager Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. The Fund takes positions in sectors and industries throughout the Asian region that demonstrate the best value and relative strength. During the first three quarters of the period, our system led us to invest in the Materials sector, which contributed the most to the Fund's relative outperformance. In particular, the Fund was aided by its holdings in the diversified metals & mining and gold industries. In the gold industry, our system began seeing decreasing value and relative strength numbers, which allowed us to take gains and trim the position before a drastic price collapse. Several industries in the Information Technology sector, namely computer hardware and communications equipment, showed strong combinations of value and relative strength and contributed handily to the Fund's positive returns. Conversely, the internet software and services industry dropped amidst the Livedoor scandal in Japan, and volatility in the semiconductors industry hindered returns. Exposure to the Industrials sector, primarily the industrial machinery and construction & engineering industries, contributed positively to overall returns. Several stocks in the Fund added to performance during the fiscal year: High Tech Computer, a Taiwanese maker of mobile phone handsets, Zinifex Ltd., the world's largest zinc producer, and Foxconn International Holdings, a Hong Kong communications equipment company. At period-end, the Fund continued to own all three companies. While ICON's stock selection process disregards market capitalization, the Fund's equity holdings had a small- to mid-cap tilt during most of the period. This position was overweight the predominantly large-cap benchmark and helped relative performance as stock selection in this market cap range offered higher returns. Our system did, however, detect a shift toward larger-cap stocks later in the fiscal year. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE ASIA-PACIFIC EQUITY MARKET? A. The ICON system indicates that the Asia-Pacific region remains considerably undervalued. We expect to continue repositioning the Fund to capture the new global market theme, in which larger-cap Financials, Telecommunications & Utilities, Information Technology and Consumer Discretionary companies are leading. While the Fund's country weightings result primarily from our focus on undervalued industries, Taiwan, Singapore, and Hong Kong look attractive, based on our methodology. We continue to seek those industries throughout Asia that show discounts and relative strength according to our analysis. Management Overview 11 Management Overview (continued) ICON Asia-Pacific Region Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - The Materials sector, specifically holdings in the diversified metals & mining industry and an eventual liquidation of the gold industry, helped the Fund outperform its index. - Positions in the computer hardware and communications equipment industry contributed to the Fund's positive returns, but internet software and services and semiconductor stocks lagged. - The Fund's holdings in the Industrials sector, primarily from the industrial machinery and construction & engineering industries, contributed positively to overall returns. 12 Management Overview COUNTRY COMPOSITION September 30, 2006 Japan 48.8% Hong Kong 13.2% Taiwan 12.4% South Korea 10.0% Singapore 6.1% China 3.6% Malaysia 1.4% Indonesia 1.0% Australia 0.8%
Percentages are based upon net assets. SECTOR COMPOSITION September 30, 2006 Information Technology 19.1% Financial 18.2% Consumer Discretionary 13.0% Industrials 12.8% Leisure and Consumer Staples 10.8% Telecommunication and Utilities 8.7% Healthcare 6.7% Materials 5.2% Energy 2.8%
Percentages are based upon net assets. Management Overview 13 Management Overview (continued) ICON Asia-Pacific Region Fund INDUSTRY COMPOSITION September 30, 2006 Diversified Banks 10.9% Automobile Manufacturers 5.0% Real Estate Management & Development 4.7% Semiconductors 4.3% Construction & Farm Machinery & Heavy Trucks 4.0% Electric Utilities 3.7% Computer Hardware 3.6% Pharmaceuticals 3.5% Leisure Products 2.8% Office Electronics 2.8% Education Services 2.8% Electronic Equipment Manufacturers 2.7% Communications Equipment 2.4% Electronic Manufacturing Services 2.4% Wireless Telecommunication Services 2.4% Health Care Distributors 2.3% Packaged Foods & Meats 2.2% Consumer Electronics 2.1% Regional Banks 2.0% Steel 1.9% Personal Products 1.8% Gas Utilities 1.8% Diversified Metals & Mining 1.8% Construction & Engineering 1.8% Electrical Components & Equipment 1.8%
14 Management Overview INDUSTRY COMPOSITION (CONTINUED) September 30, 2006 Railroads 1.8% Photographic Products 1.5% Tire & Rubber 1.5% Soft Drinks 1.2% Oil & Gas Exploration & Production 1.2% Integrated Oil & Gas 1.0% Commercial Printing 1.0% Construction Materials 1.0% Health Care Supplies 0.9% Specialty Stores 0.8% Marine 0.8% Auto Parts & Equipment 0.8% Tobacco 0.8% Industrial Conglomerates 0.7% Oil & Gas Equipment & Services 0.7% Semiconductor Equipment 0.6% Integrated Telecommunication Services 0.6% Diversified Chemicals 0.5% Industrial Machinery 0.5% Property & Casualty Insurance 0.5% Hypermarkets & Super Centers 0.4% Trading Companies & Distributors 0.4% Life & Health Insurance 0.3% Independent Power Producers & Energy Traders 0.3%
Percentages are based upon net assets. Management Overview 15 Management Overview (continued) ICON Asia-Pacific Region Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund - Class S 2/25/97 17.36% 14.37% 3.04% ------------------------------------------------------------------------------------------- MSCI All Country Pacific Index 15.19% 15.71% 3.45% ------------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund - Class A* 5/31/06 N/A N/A (2.66%) ------------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund - Class A (including maximum sales charge of 5.75%)* 5/31/06 N/A N/A (8.28%) ------------------------------------------------------------------------------------------- MSCI All Country Pacific Index* N/A N/A 0.86% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON ASIA - PACIFIC REGION FUND - CLASS S MSCI ALL COUNTRY PACIFIC INDEX --------------------------------- ------------------------------ 2/25/97 9550 9496 11320 11163 9940 9656 9/30/97 8270 7530 8310 7839 7360 7011 6089 6079 9/30/98 7759 7789 8569 8616 9809 9715 10870 10541 9/30/99 13170 12277 11620 12234 10870 11455 10251 10133 9/30/00 9611 8764 9011 8111 8711 8183 6811 6673 9/30/01 6766 6946 6625 7264 6424 7446 5701 6499 9/30/02 6053 6356 5801 5976 6584 6819 7648 8066 9/30/03 8695 8921 9067 10020 8323 9510 8222 9291 9/30/04 9044 10578 9287 10505 9519 10439 11356 12017 9/30/05 13509 13059 13631 13978 13186 13623 9/30/06 13327 13843
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Funds' Class S shares on the Class' inception date of 2/25/97 to a $10,000 investment made in an unmanaged securities index on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends, capital gain distributions and tax return of capital but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 16 Management Overview Schedule of Investments ICON Asia-Pacific Region Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (97.3%) 1,403,000 Advanced Semiconductor Engineering, Inc.(a) $ 1,306,259 26,600 Aeon Co., Ltd. 652,845 19,800 Aeon Mall Co., Ltd. 1,048,211 25,800 Ahresty Corp. 727,269 59,000 Ajinomoto Co., Inc. 635,548 912,000 Angang New Steel Company, Ltd. 723,977 32,000 Asahi Soft Drinks Co., Ltd. 474,353 11,000 Astellas Pharma Inc. 442,912 402,000 Au Optronics Corp. 569,135 39,000 Bridgestone Corp. 789,855 868,000 Bumiputra- Commerce Holdings Bhd. 1,564,768 58,550 Canon, Inc. 3,060,176 133 Central Japan Railway Co. 1,417,521 147,000 Chiba Bank, Ltd. 1,312,232 2,978,000 China Construction Bank 1,287,383 226,000 China Life Insurance Co., Ltd. 441,563 234,000 China Mobile, Ltd. 1,651,116 706,000 China Overseas Land & Investment, Ltd. 543,684 1,336,000 China Petroleum & Chemical Corp. 828,144 1,003,000 China Power International Development Ltd. 410,707 802,000 China Resources Beijing Land 539,912 35,000 Chubu Electric Power Company, Inc. 910,181 2,062,000 CNOOC, Ltd. 1,716,783 239,600 DAH Sing Financial Group 2,157,113 67,300 Daiichi Sankyo Co., Ltd. 1,906,415 50,000 DBS Group Holdings, Ltd. 603,680 213,000 Delta Electronics, Inc. 611,680
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 12,500 Denso Corp. $ 440,099 16,500 Diamond City Co., Ltd. 783,000 167 East Japan Railway Co. 1,168,245 38,400 Elpida Memory, Inc.(a) 1,745,497 645,000 Ezra Holdings Pte., Ltd. 1,208,417 1,168,000 Foxconn International Holdings, Ltd.(a) 3,592,657 12,000 FUJIFILM Holdings Corp. 437,605 138,000 Fujikura, Ltd. 1,512,720 12,600 GS Engineering & Construction Corp. 881,657 1,267,000 Hengan International Group Co., Ltd. 2,719,336 118,800 High Tech Computer Corp. 3,143,801 18,000 Hokkaido Electric Power Co. 436,759 315,349 Hon Hai Precision Industry Co., Ltd. 1,921,337 54,000 Honda Motor Co., Ltd. 1,815,024 1,480,000 Hopson Development Holdings, Ltd. 2,985,189 18,000 Hoya Corp. 678,945 12,400 Hyundai Heavy Industries Co., Ltd. 1,717,118 12,300 Hyundai Mipo Dockyard Co., Ltd. 1,533,528 28,300 Hyundai Steel Co. 986,309 86,900 Industrial Bank of Korea 1,487,593 37,200 Ito En, Ltd. 1,281,707 299 Japan Tobacco, Inc. 1,164,009 16,000 JFE Holdings, Inc. 627,668 1,447,000 Jiangxi Copper Co., Ltd. 1,375,995 482,650 Johnson Health Tech. Co., Ltd. 2,816,083 124,000 Kagara Zinc, Ltd.(a) 490,440 49,000 Kansai Electric Power Co., Inc. 1,129,952 113,000 Keppel Corp., Ltd. 1,050,484
Schedule of Investments 17 Schedule of Investments (continued) ICON Asia-Pacific Region Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 293,000 Kingboard Chemical Holdings, Ltd. $ 1,053,463 36,200 Kobayashi Pharmaceutical Co., Ltd. 1,383,644 81,000 Komatsu, Ltd. 1,401,752 20,200 Kookmin Bank 1,582,737 650,600 KS Energy Services, Ltd. 980,288 12,900 Kyocera Corp. 1,104,077 89,512 Largan Precision Co., Ltd. 1,833,256 158,700 LG Telecom, Ltd.(a) 1,853,296 1,180,000 Li Ning Co., Ltd. 1,346,394 67,000 Matsushita Electric Industrial Co., Ltd. 1,416,993 77,000 Mazda Motor Corp. 467,241 1,060,000 Mega Financial Holding Co., Ltd. 750,178 19,200 Megastudy Co., Ltd. 2,168,576 702,000 Mitac International Corp. 740,027 50,450 Mitsui & Co., Ltd. 643,085 341 Mizuho Financial Group, Inc. 2,647,957 176 Nippon Telegraph & Telephone Corp. 860,536 32,000 Nissha Printing Co., Ltd. 1,450,852 65,700 Nissin Food Products Co., Ltd. 2,092,746 1,058,800 Osim International, Ltd. 1,253,031 612,000 Petrochina Co., Ltd. 658,812 2,052,000 PICC Property and Casualty Co., Ltd.(a) 749,835 485,000 PT Semen Gresik 1,423,910 1,188,000 Raffles Education Corp., Ltd. 1,899,548 725,000 Realtek Semiconductor Corp. 892,442 53,000 Ricoh Co., Ltd. 1,054,762 36,100 Samsung Engineering Co., Ltd. 1,724,106 199,000 Sembcorp Marine, Ltd. 418,032
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 68,000 Sharp Corp. $ 1,167,102 55,300 Shinko Electric Industries Co., Ltd. 1,542,943 180,000 Showa Denko K.K. 777,216 763,000 Siliconware Precision Industries Co. 908,578 201,700 Silitech Technology Corp. 1,087,197 14,500 Sony Corp. 585,672 131,000 Sumitomo Metal Industries, Ltd. 502,873 214 Sumitomo Mitsui Financial Group, Inc. 2,247,471 122,500 Sumitomo Rubber Industries, Ltd. 1,349,675 43,000 Suzuken Co., Ltd. 1,612,517 23,100 Suzuki Motor Corp. 587,033 45,500 Takeda Pharmaceutical Co., Ltd. 2,843,394 18,000 Takeuchi Mfg. Co., Ltd. 836,696 220,600 Tenaga Nasional Berhad 580,339 203,000 The Bank Of Yokohama, Ltd. 1,601,795 97,000 Toho Pharmaceutical Co., Ltd. 1,731,792 82,500 Tokyo Electric Power Co. 2,375,717 12,900 Tokyo Electron, Ltd. 953,738 533,000 Tokyo Gas Co., Ltd. 2,673,141 100,000 Tokyu Land Corp. 949,321 226,000 Toshiba Corp. 1,466,650 34,000 Toyo Suisan Kaisha, Ltd. 490,215 81,600 Toyota Motor Corp. 4,440,971 42,340 TSM Tech Co., Ltd. 760,320 1,345,180 Unimicron Technology Corp. 1,660,882 157,000 United Overseas Bank, Ltd. 1,609,190 88,103 Zinifex, Ltd. 769,659 ------------ TOTAL COMMON STOCKS (COST $130,539,446) 143,428,269
18 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- x SHORT-TERM INVESTMENTS (5.0%) $6,515,885 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06#v $ 6,515,885 830,696 Brown Brothers Harriman Time Deposit - Australian Dollar, 4.60%, 10/02/06#v 830,696 2,316 Brown Brothers Harriman Time Deposit - Hong Kong Dollar, 3.05%, 10/02/06#v 2,316
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- $ 292 Brown Brothers Harriman Time Deposit - New Zealand Dollar, 6.25%, 10/02/06#v $ 292 247 Brown Brothers Harriman Time Deposit - Singapore Dollar, 1.95%, 10/02/06#v 247 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $7,349,436) 7,349,436 TOTAL INVESTMENTS 102.3% (COST $137,888,882) 150,777,705 LIABILITIES LESS OTHER ASSETS (2.3%) (3,308,977) ------------ TOTAL NET ASSETS 100.0% $147,468,728 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. v All securities were fair valued (Note 1) as of September 30, 2006 unless noted with a v. Total value of securities fair valued was $143,428,269. Schedule of Investments 19 Management Overview ICON Europe Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 99.5% Top 10 Equity Holdings 17.1% Number of Stocks 125 Short-Term Investments 1.8% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Nestle S.A. 2.3% Roche Holding AG 1.9% BNP Paribas 1.8% Man Group PLC 1.7% Baloise Holding AG 1.7% Sika AG 1.6% ING Groep N.V. 1.6% UBS AG 1.6% AstraZeneca PLC 1.5% Heineken N.V. 1.4% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Europe Fund, Class S appreciated 27.09% for the fiscal year ended September 30, 2006, outperforming the 22.88% return for the benchmark MSCI Europe Index, and the 19.75% return of the Bloomberg European 500 Index. Since their inception on May 31, 2006 through September 30, 2006, the Class A shares of the Fund have returned 2.12% (and (3.74%) with maximum sales charge) vs. the 6.06% return of the MSCI Europe Index and the 5.94% gain of the Bloomberg European 500 Index over the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Stock markets in Europe continued to lead other regions around the globe during the period, including the United States, but Europe remained in the economic doldrums compared to other major international regions due to high unemployment and slower economic growth. In this setting, the European Central Bank has tightened monetary policy in an effort to curb inflation and is widely expected to continue increasing interest rates through the end of 2006. Even though rates remain low by historical standards, further increases could detract from stock valuations under our system. The Fund began the period with a worldwide pullback in equities in October 2005, but since then, a strong global rally persisted. A cyclical theme, which has been in place for more than three years, was suddenly interrupted by a market shift that emerged midway through 2006. Although we had to wait patiently for market leadership to appear clearly, industries in the Financial, Leisure & Consumer Staples, and Telecommunication & Utilities sectors have led since May. The new market theme also pointed to investor favor for larger-cap stocks, which turned in strong performance in the final fiscal quarter. Although ICON does not utilize market capitalization as an investment criterion, the Fund had a mid- to large-cap tilt based on the its holdings but remained underweight to the predominantly large-cap benchmark. The Fund's relative overweighting of small- and mid-cap stocks, again a consequence of its stock ownership, combined with effective industry and stock selection within large-cap companies helped performance relative to the benchmark. The Fund does not take active currency bets, but was diversified among currencies from different countries in the European region. Currency generally did not contribute appreciably to returns. 20 Management Overview (SCOTT SNYDER PHOTO) Scott Snyder, CFA Portfolio Manager Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. Our objective is to keep the Fund diversified among the sectors and industries throughout the European market that are demonstrating the best value and relative strength. Guided by these parameters, we concentrated the Fund in industries with a more cyclical bent, primarily in the Industrials and Materials sectors, until near the end of the period. As market leadership swung toward more defensive industries, the Fund repositioned to capture the new theme. The Fund's active overweighting in the Industrials sector contributed the most to relative performance in the fiscal period, with holdings in the human resources & employment services and industrial machinery industries performing well while stocks in construction & engineering industry faring more disappointingly. Exposure to the diversified metals & mining and steel industries within the Materials sector also enhanced returns. The Fund held positions in the Energy sector, which experienced a significant pullback over the period, but our system's indication to underweight the poor-performing integrated oil & gas industry added to relative outperformance. While the Financials sector contributed positively to overall performance, the Fund's underweighting of the diversified banks industry detracted from relative performance. Several specific individual holdings that contributed to returns: Vendanta Resources PLC, a British mining company, French maker of oil & gas drilling equipment Vallourec S.A. and Salzigitter AG, Germany's second largest steel producer. The Fund continues to hold Vallourec. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE EUROPEAN EQUITY MARKET? A. The ICON system suggests that Europe has greater value and relative performance than the U.S. and Asian markets. While still showing healthy value, the Materials and Energy sectors have become global laggards in the new emerging theme. To continue capturing the global theme change, we have increased portfolio exposure to larger companies in the Financial, Telecommunications & Utilities, and Consumer Discretionary sectors, which look attractive based on value/price and relative strength. Management Overview 21 Management Overview (continued) ICON Europe Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - A relative overweighting of small- and mid-cap stocks combined with effective industry and stock selection within large-cap companies helped Fund performance relative to the benchmark. - Holdings in the human resources & employment services, industrial machinery, diversified metals & mining and steel industries enhanced returns. - An underweight position in the poor-performing integrated oil & gas industry added to relative performance. 22 Management Overview COUNTRY COMPOSITION September 30, 2006 United Kingdom 22.0% Switzerland 17.5% Germany 13.2% France 12.5% Netherlands 10.0% Spain 4.0% Sweden 3.7% Belgium 3.4% Austria 3.2% Finland 2.8% Italy 1.9% Norway 1.6% Poland 1.4% Denmark 1.0% Portugal 0.5% Hungary 0.4% United States of America 0.4%
Percentages are based upon net assets. SECTOR COMPOSITION September 30, 2006 Financial 29.5% Leisure and Consumer Staples 16.8% Telecommunication and Utilities 13.3% Healthcare 9.6% Industrials 8.4% Materials 7.5% Consumer Discretionary 6.8% Energy 4.7% Information Technology 2.9%
Percentages are based upon net assets. Management Overview 23 Management Overview (continued) ICON Europe Fund INDUSTRY COMPOSITION September 30, 2006 Diversified Banks 14.8% Pharmaceuticals 6.9% Integrated Telecommunication Services 4.2% Multi-Line Insurance 3.9% Electric Utilities 3.8% Diversified Capital Markets 3.8% Packaged Foods & Meats 3.7% Multi-Utilities 2.9% Industrial Machinery 2.7% Household Products 2.6% Oil & Gas Equipment & Services 2.2% Brewers 2.1% Department Stores 2.1% Specialty Chemicals 2.1% Integrated Oil & Gas 2.1% Broadcast & Cable TV 2.0% Tire & Rubber 1.9% Other Diversified Financial Services 1.9% Water Utilities 1.9% Construction Materials 1.8% Food Retail 1.7% Asset Management & Custody Banks 1.7% Tobacco 1.7% Automobile Manufacturers 1.6% Health Care Distributors 1.6% Diversified Metals & Mining 1.5%
24 Management Overview INDUSTRY COMPOSITION (CONTINUED) September 30, 2006 Communications Equipment 1.3% Reinsurance 1.3% Air Freight & Logistics 1.3% Agriculture Products 1.3% Electrical Components & Equipment 1.2% Steel 1.2% Diversified Reits 1.1% Health Care Equipment 1.0% Diversified Commercial & Professional Services 1.0% Systems Software 1.0% Diversified Chemicals 0.9% Auto Parts & Equipment 0.8% Leisure Products 0.8% Human Resource & Employment Services 0.8% Property & Casualty Insurance 0.6% Movies & Entertainment 0.5% Building Products 0.5% Semiconductor Equipment 0.5% Restaurants 0.5% Thrifts & Mortgage Finance 0.5% Heavy Electrical Equipment 0.4% Trucking 0.4% Oil & Gas Storage & Transportation 0.4% Life & Health Insurance 0.3% Electronic Equipment Manufacturers 0.3% Home Improvement Retail 0.3% Aerospace & Defense 0.1%
Percentages are based upon net assets. Management Overview 25 Management Overview (continued) ICON Europe Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Europe Fund - Class S 2/20/97 27.09% 19.70% 10.69% ------------------------------------------------------------------------------------------- MSCI Europe Index 22.88% 15.07% 9.88% ------------------------------------------------------------------------------------------- Bloomberg European 500 Index 19.75% 8.69% 9.10% ------------------------------------------------------------------------------------------- ICON Europe Fund - Class A* 5/31/06 N/A N/A 2.12% ------------------------------------------------------------------------------------------- ICON Europe Fund - Class A (including maximum sales charge of 5.75%)* 5/31/06 N/A N/A (3.74%) ------------------------------------------------------------------------------------------- MSCI Europe Index* N/A N/A 6.06% ------------------------------------------------------------------------------------------- Bloomberg European 500 Index* N/A N/A 5.94% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Fund's name and investment strategy changed effective January 29, 2004. The Fund's past performance may have been different if the current strategy had been in effect. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON EUROPE FUND - CLASS BLOOMBERG EUROPEAN 500 S MSCI EUROPE INDEX INDEX ------------------------ ----------------- ---------------------- 2/20/97 9800 10308 10154 10700 11239 11402 11899 12178 12471 9/30/97 12381 12197 12596 15104 14684 15466 15603 15450 16093 12625 13233 12886 9/30/98 15068 15722 15212 14245 15401 15808 13197 15364 16760 13435 15555 16514 9/30/99 14365 18272 20766 13848 18298 21916 14459 17732 21215 13462 16447 20888 9/30/00 14180 16784 19775 12653 14181 17706 11551 13937 18795 10794 12255 15220 9/30/01 11141 13488 17198 11980 13479 17566 12459 12905 14899 9850 9963 11517 9/30/02 10396 11049 12062 9623 10038 10728 11899 12286 12509 13097 12772 12835 9/30/03 15173 15374 14220 15812 15519 14770 16092 15898 15228 16011 16095 15131 9/30/04 18487 18662 16040 18500 18759 16828 18287 18665 17829 20869 20117 19278 9/30/05 20913 20518 20030 25282 22740 22476 25522 23395 21862 9/30/06 26522 24721 23087
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Funds' Class S shares on the Class' inception date of 2/20/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 26 Management Overview Schedule of Investments ICON Europe Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (99.5%) 34,800 Abb, Ltd. $ 458,627 18,700 ABN ARMO Holding N.V. 545,189 51,300 Acergy S.A.(a) 879,984 18,300 Aegon N.V. 343,077 30,800 Alpha Bank A.E. 821,898 23,300 ASML Holding N.V.(a) 542,546 24,800 AstraZeneca PLC 1,548,761 23,300 Aviva PLC 341,336 17,800 Baloise Holding AG 1,746,451 53,400 Banc Monte Dei Paschi di Seina S.p.A 323,748 46,900 Banco Bilbao Vizcaya Argentaria S.A. 1,084,433 17,800 Banco Popolare di Verona e Novara Scrl 491,845 80,400 Banco Santander Central Hispano, S.A. 1,269,563 7,900 Bank Zachodni WBK S.A. 485,667 113,800 Barclays PLC 1,434,898 18,400 Bayer AG 934,764 29,800 BG Group PLC 362,064 17,500 BNP Paribas 1,880,414 4,720 Boehler - Uddeholm AG 265,660 37,500 Boliden AB 711,724 40,500 BP PLC 442,701 22,400 British American Tobacco PLC 605,758 234,700 BT Group, PLC 1,178,857 21,500 Buzzi Unicem S.p.A 508,508 18,600 Celesio AG 969,012 26,500 Credit Agricole S.A. 1,161,762 23,700 Credit Suisse Group 1,370,859 6,300 Delhaize Group 529,179 7,490 Dem Allianz AG 1,293,212 7,800 Deutsche Bank AG 940,592 25,050 Deutsche Post AG 656,466 2,500 DSV A/S 436,820 9,300 E.ON AG 1,105,456 2,920 Egis 407,977
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 116,000 Energias de Portugal, S.A. $ 502,380 4,300 EVS Broadcast Equipment S.A. 239,637 14,700 Fondiaria - Sai S.p.A. 644,395 15,200 Swedbank AB 451,823 7,700 Fortis 312,319 2,250 Fresenius AG 400,895 20,700 Fugro N.V. 874,306 450 Geberit AG 548,638 43,300 GlaxoSmithKline PLC 1,151,406 31,900 Greene King PLC 539,198 4,000 Groupe Danone 560,908 8,900 Hannover Rueckversicherungs AG(a) 373,968 52,300 HBOS PLC 1,034,038 32,800 Heineken N.V. 1,500,335 2,410 Helvetia Holding AG 755,477 10,000 Henkel KGAA 1,394,428 32,100 Homeserve PLC 998,268 9,750 Iberdrola S.A. 435,327 13,600 InBev N.V. 748,990 38,800 ING Groep N.V. 1,704,909 54,980 Jumbo S.A. 833,889 4,550 KBC Groep N.V. 478,899 28,900 Koninlijke KPN N.V. 368,186 11,000 Kudelski SA 325,262 6,700 Lafarge S.A. 864,185 210,100 Man Group PLC 1,761,807 111,070 Marks & Spencer Group PLC 1,336,070 45,500 Michael Page International PLC 327,432 16,300 Michelin 1,194,189 68,600 National Grid PLC 856,553 6,940 Nestle S.A. 2,418,907 24,920 Next PLC 884,185 8,200 NKT Holding A/S 619,747 9,400 Nobia AB 313,733 18,700 Nokia Oyj 368,322 46,400 Nokian Renkaat Oyj 833,719 68,500 Nordea Bank AB 897,486 22,800 Northern Rock PLC 498,340 24,400 Novartis AG 1,423,973
Schedule of Investments 27 Schedule of Investments (continued) ICON Europe Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 21,500 Nutreco Holding N.V. $ 1,324,997 27,100 Oesterrichische Elekrizitaitswirts AG - Class A 1,310,921 7,800 OPG Groep N.V. 747,821 41,270 Option N.V.(a) 831,315 103,389 Pennon Group PLC 987,035 11,100 Phonak Holding AG 703,379 33,075 Piraeus Bank S.A. 856,471 365 Porsche AG 377,353 40,100 ProsiebenSat.1 Media AG 1,112,684 8,100 Raiffeisen International Bank - Holding AG 863,195 24,700 Ramirent Oyj 1,065,210 31,800 Reckitt Benckiser PLC 1,317,198 6,100 Red Electrica de Espana 236,929 3,950 Renault S.A. 452,383 2,040 Rieter Holding AG 878,628 11,350 Roche Holding AG 1,961,455 725 Rolls Royce Group PLC 6,144 12,050 RWE AG 1,111,401 7,680 Salzgitter AG 720,925 19,000 SBM Offshore N.V. 516,758 4,800 Schneider Electric S.A. 534,506 17,500 Scottish & Southern Energy PLC 430,996 1,360 Sika AG(a) 1,714,035 16,300 Skandinaviska Enskilda Banken AB 438,454 6,565 Societe Generale 1,042,863 8,600 Software AG 525,755 16,400 Stada Arzneimittel AG 838,605 24,440 Suez S.A. 1,073,710 1,190 Sulzer AG 949,669 70,400 Swedish Match AB 1,145,662
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 13,500 Swiss Re $ 1,032,215 67,100 Telefonica S.A. 1,161,425 35,900 Telekom Austria AG 905,270 60,100 Telenor ASA 781,808 42,200 Temenos Group AG(a) 540,042 186,400 Tesco PLC 1,255,852 7,700 ThyssenKrupp AG 258,805 10,200 Titan Cement Co. 483,441 18,800 TNT N.V. 713,241 21,300 Total S.A. 1,396,900 9,300 Tsakos Energy Navigation, Ltd.v 414,780 29,000 TVN S.A.(a) 977,135 27,820 UBS AG 1,663,452 3,420 Umicore S.A. 505,451 5,720 Unibail 1,201,787 36,200 Unilever N.V. 889,861 6,870 USG People N.V. 480,199 22,495 Vacon Oyj 715,678 5,455 Vallourec S.A. 1,271,503 16,100 Vivendi Universal 579,758 10,500 Volkswagen AG 896,701 21,210 Xstrata PLC 875,528 ------------ TOTAL COMMON STOCKS (COST $94,683,805) 104,933,626 SHORT-TERM INVESTMENTS (1.8%) $ 537,929 Brown Brothers Harriman Time Deposit - British Pound, 3.62%, 10/02/06#v 537,929 195 Brown Brothers Harriman Time Deposit - Danish Krone, 2.05%, 10/02/06#v 195 1,378,386 Brown Brothers Harriman Time Deposit - Euro, 1.87%, 10/02/06#v 1,378,386 143 Brown Brothers Harriman Time Deposit - Norwegian Kroner, 1.15%, 10/02/06#v 143
28 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- $ 162 Brown Brothers Harriman Time Deposit - Swedish Krona, 1.25%, 10/02/06#v $ 162 31 Brown Brothers Harriman Time Deposit - Swiss Frank, 1.15%, 10/02/06#v 31 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,916,846) 1,916,846 TOTAL INVESTMENTS 101.3% (COST $96,600,651) 106,850,472 LIABILITIES LESS OTHER ASSETS (1.3)% (1,411,262) ------------ TOTAL NET ASSETS 100.0% $105,439,210 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. v All securities were fair valued (Note 1) as of September 30, 2006 unless noted with a v. Total value of securities fair valued was $104,518,846. Schedule of Investments 29 Management Overview ICON International Equity Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 95.9% Top 10 Equity Holdings 14.9% Number of Stocks 135 Short-Term Investments 3.3% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Nestle S.A. 2.0% Roche Holding AG 1.7% BNP Paribas 1.6% America Movil S.A. de C.V. 1.5% ING Groep N.V. 1.4% AstraZeneca PLC 1.4% Hopson Development Holdings, Ltd. 1.4% Foxconn International Holdings, Ltd. 1.3% Inmet Mining Corp. 1.3% High Tech Computer Corp. 1.3% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. For the fiscal year ended September 30, 2006, the ICON International Equity Fund appreciated 21.20% for Class I shares, 20.09% for Class C shares, and 21.54% for Class Z shares, outpacing the 19.34% return of the MSCI All Country World Index (ACWI) ex-U.S., the Fund's benchmark, over the same period. Since their inception on May 31, 2006 through September 30, 2006, the Class A shares of the Fund have returned (0.73%) (and (6.46%) with maximum sales charge) compared to the 3.84% return of the MSCI ACWI ex.-U.S. during the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Fund benefited from strength in most international regions and outpaced the United States market, with Asia, Europe, and Western Hemisphere regions participating. The Asia-Pacific region led international markets as the fiscal year began, then Europe overtook global leadership for rest of the period. To capture this leadership, the Fund rotated away from Asia-Pacific issues and toward European holdings throughout the year. After a global market contraction in the summer, new industry leadership suddenly emerged, touching off a new market theme. In Europe, our system indicated that the Financials, Leisure & Consumer Staples, and Telecommunications & Utilities sectors were pulling ahead, and in Asia, leadership was showing in the Information Technology and Consumer Discretionary sectors. On the stock level, leadership appeared prominently in large-cap issues late in the second half. In the final quarter of the period, we began to reposition the Fund to capture the aspects of this new theme. While ICON does not utilize market capitalization as an investment consideration, the Fund had a small- to mid-cap emphasis based on its diversified holdings. This tilt was actively overweight to the predominantly large-cap benchmark, and the Fund's relative overweighting of mid-cap stocks, again a consequence of its composition, notably helped relative performance. As an international portfolio, the Fund is diversified among many currencies. Currency moves slightly helped absolute performance, primarily due to European exposure throughout the year. 30 Management Overview (SCOTT SNYDER PHOTO) Scott Snyder, CFA Portfolio Manager Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. Our system pointed us toward cyclical industries, primarily from the Industrials, Materials, and Financial sectors in the first half, and this positioning aided returns. ICON's valuation methodology identified an abrupt market turnaround in which Industrials and Materials industries began to lag in July. We waited patiently for the international markets to clearly indicate the new leading sectors, and after a period of uncertainty, the Financials, Leisure and Consumer Staples, and Telecommunications & Utilities sectors advanced. For a good part of the period, the Industrials sector continued its strong outperformance, and the Fund's active overweighting added the most to performance against the benchmark. Specifically, Asian and European companies in the industrial machinery and human resource & employment services industries provided strong returns. Holdings in the Materials sector were also a bright spot for the Fund, with the diversified metals & mining industry adding robust gains. Within the Energy sector, the Fund's underweight exposure to the integrated oil & gas industry was beneficial, as it is a large constituent of the benchmark and underperformed throughout the year. Several individual Fund holdings contributed notably to returns. Vedanta Resources PLC, a British mining company, gained as higher metal prices led to an upgraded earnings outlook. The profits of Vallourec S.A., a French maker of steel tubing for oil & gas drilling, rose amidst higher worldwide gas production. Finally, High Tech Computer, a Taiwanese maker of mobile phone handsets, benefited from a steady increase in orders. Conversely, Livedoor, a Japanese internet company, collapsed as it came under investigation for a serious accounting scandal. We liquidated the Fund's position in Livedoor but not before its price dropped sharply. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE INTERNATIONAL EQUITY MARKET? A. The major regions around the world are now closer to parity in our overall valuations than in the past couple of years. The ICON system measures healthy value worldwide, with international prices trading at about 25% below our estimate of their intrinsic worth, as of September 30, 2006. We expect leadership to continue in the Financials and Telecommunications & Utilities sectors, primarily from Europe, and in the Information Technology and Consumer Discretionary, where Asian firms are attractive. We continue to be guided by our quantitative metrics to buy those industries showing discounts and relative strength. Management Overview 31 Management Overview (continued) ICON International Equity Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - Strong performance came from an overweight position in the Industrials sector, with companies in the industrial machinery and human resource & employment services industries adding gains. - Holdings in the Materials sector added to returns, particularly those in the diversified metals & mining industry. - Vedanta Resources PLC, Vallourec S.A., and High Tech Computer were the Fund's top individual holdings during the period. 32 Management Overview COUNTRY COMPOSITION September 30, 2006 Japan 16.3% United Kingdom 11.9% Switzerland 9.1% France 8.0% Netherlands 7.0% Germany 6.3% Taiwan 6.1% Hong Kong 5.9% South Korea 4.2% Canada 3.1% Spain 2.8% Austria 2.7% Greece 1.8% Singapore 1.6% Mexico 1.5% Norway 1.4% Sweden 1.2% Italy 1.1% Belgium 1.0% Finland 0.9% Indonesia 0.5% Malaysia 0.5% Denmark 0.4% United States of America 0.4% China 0.2%
Percentages are based upon net assets. Management Overview 33 Management Overview (continued) ICON International Equity Fund SECTOR COMPOSITION September 30, 2006 Financial 24.9% Telecommunication and Utilities 14.1% Leisure and Consumer Staples 13.7% Information Technology 9.5% Industrials 9.3% Healthcare 8.2% Materials 5.7% Consumer Discretionary 5.7% Energy 4.8%
Percentages are based upon net assets. 34 Management Overview INDUSTRY COMPOSITION September 30, 2006 Diversified Banks 11.8% Pharmaceuticals 4.7% Electric Utilities 3.6% Integrated Telecommunication Services 3.2% Diversified Capital Markets 2.8% Packaged Foods & Meats 2.8% Multi-Utilities 2.8% Automobile Manufacturers 2.5% Wireless Telecommunication Services 2.4% Oil & Gas Equipment & Services 2.4% Real Estate Management & Development 2.3% Health Care Distributors 2.3% Multi-Line Insurance 2.2% Communications Equipment 2.1% Diversified Metals & Mining 2.0% Leisure Products 1.9% Electronic Equipment Manufacturers 1.9% Computer Hardware 1.9% Construction Materials 1.8% Electrical Components & Equipment 1.8% Semiconductors 1.8% Integrated Oil & Gas 1.7% Construction & Farm Machinery & Heavy Trucks 1.7% Household Products 1.5% Air Freight & Logistics 1.5% Other Diversified Financial Services 1.4% Steel 1.3% Asset Management & Custody Banks 1.2% Personal Products 1.2% Brewers 1.1%
Management Overview 35 Management Overview (continued) ICON International Equity Fund INDUSTRY COMPOSITION (CONTINUED) September 30, 2006 Gas Utilities 1.1% Office Electronics 1.1% Railroads 1.1% Education Services 1.1% Broadcast & Cable TV 1.0% Department Stores 1.0% Agriculture Products 1.0% Industrial Machinery 1.0% Food Retail 0.9% Tobacco 0.9% Water Utilities 0.9% Diversified Reits 0.9% Photographic Products 0.9% Electronic Manufacturing Services 0.8% Construction & Engineering 0.8% Reinsurance 0.8% Regional Banks 0.8% Marine 0.7% Property & Casualty Insurance 0.6% Health Care Equipment 0.6% Tire & Rubber 0.6% Health Care Supplies 0.6% Consumer Electronics 0.5% Human Resource & Employment Services 0.5% Restaurants 0.4% Oil & Gas Storage & Transportation 0.4% Trucking 0.4% Specialty Chemicals 0.3% Oil & Gas Exploration & Production 0.3% Gold 0.3%
Percentages are based upon net assets. 36 Management Overview AVERAGE ANNUAL TOTAL RETURN September 30, 2006
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class I 2/6/04 21.20% N/A 18.14% ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S. 19.34% N/A 18.81% ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class C 2/19/04 20.09% N/A 15.39% ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S. 19.34% N/A 17.75% ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class Z 2/18/97 21.54% 19.51% 10.03% ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S. 19.34% 16.38% 7.81% ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class A* 5/31/06 N/A N/A (0.73%) ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class A (including maximum sales charge of 5.75%)* 5/31/06 N/A N/A (6.46%) ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S.* N/A N/A 3.84% -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Fund's name and investment strategy changed effective January 29, 2004. The Fund's past performance would have been different if the current strategy had been in effect. Class Z shares are available only to grandfathered and institutional investors. Class C Total returns exclude applicable sales charges. If sales charges were included, returns would be lower. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON INTERNATIONAL EQUITY FUND CLASS Z MSCI ACWI EX-U.S. ------------------------------ ----------------- 2/18/97 10230.00 10028.00 10570.00 11330.00 11060.00 11225.00 9/30/97 11281.00 10258.00 12900.00 11659.00 13562.00 11486.00 11841.00 9750.00 9/30/98 13001.00 11741.00 12171.00 12019.00 12728.00 12580.00 13354.00 13008.00 9/30/99 15698.00 15370.00 15585.00 15490.00 15159.00 14858.00 14747.00 13647.00 9/30/00 14340.00 13052.00 12239.00 11337.00 12224.00 11322.00 10280.00 9650.00 9/30/01 11145.00 10508.00 11145.00 10680.00 10901.00 10397.00 8538.00 8390.00 9/30/02 9077.00 8966.00 8382.00 8312.00 10684.00 9961.00 12175.00 10826.00 9/30/03 14897.00 12678.00 15742.00 13291.00 15232.00 13199.00 15436.00 13332.00 9/30/04 17589.00 15387.00 17621.00 15438.00 17447.00 15436.00 20619.00 17262.00 9/30/05 23113.00 18020.00 25025.00 19777.00 24509.00 19818.00 9/30/06 25041.00 20599.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class Z shares on the Class' inception date of 2/18/97 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends, capital gain distributions and tax return of capital but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 37 Schedule of Investments ICON International Equity Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (95.9%) 14,180 ABN ARMO Holding N.V. $ 413,411 50,300 Acergy S.A.(a) 862,830 579,000 Advanced Semiconductor Engineering, Inc.(a) 539,077 7,400 Aeon Mall Co., Ltd. 391,756 39,840 Alpha Bank A.E. 1,063,130 898,000 America Movil S.A. de C.V.v 1,773,282 26,500 AstraZeneca PLC 1,654,927 254,000 Au Optronics Corp. 359,603 15,300 Baloise Holding AG 1,501,163 53,000 Banco Bilbao Vizcaya Argentaria S.A. 1,225,479 19,800 Banco Popolare di Verona e Novara Scrl 547,109 69,800 Banco Santander Central Hispano, S.A. 1,102,183 45,800 Barclays PLC 577,489 10,100 Barrick Gold Corp.v 310,276 27,000 BG Group PLC 328,044 18,042 BNP Paribas 1,938,653 5,560 Boehler - Uddeholm AG 312,939 35,500 BP PLC 388,046 26,240 British American Tobacco PLC 709,603 168,000 BT Group, PLC 843,835 299,000 Bumiputra- Commerce Holdings Bhd. 539,016 14,800 Canadian National Railway Co.v 619,150 25,300 Canon, Inc. 1,322,331 18,000 Celesio AG 937,754 446,000 China Overseas Land & Investment, Ltd. 343,460 460,000 China Petroleum & Chemical Corp. 285,139 382,000 CNOOC, Ltd. 318,046 28,450 Credit Agricole S.A. 1,247,250 19,300 Credit Suisse Group 1,116,353 52,000 DAH Sing Financial Group 468,155
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 135,000 Delta Electronics, Inc. $ 387,684 5,500 Deutsche Bank AG 663,239 30,700 Deutsche Post AG 804,531 7,700 Diamond City Co., Ltd. 365,400 2,800 DSV A/S 489,239 10,100 E.ON AG 1,200,549 100 East Japan Railway Co. 699,548 8,800 Elpida Memory, Inc.(a) 400,010 5,170 EVS Broadcast Equipment S.A. 288,121 424,000 Ezra Holdings Pte., Ltd. 794,370 17,600 First Quantum Minerals, Ltd.v 822,751 5,800 Flint Energy Services, Ltd.v(a) 308,970 17,400 Fondiaria - Sai S.p.A. 762,754 17,300 Swedbank AB 514,246 519,000 Foxconn International Holdings, Ltd.(a) 1,596,395 26,300 Fugro N.V. 1,110,833 61,000 Fujikura, Ltd. 668,666 25,200 GlaxoSmithKline PLC 670,102 30,400 Greene King PLC 513,844 29,400 HBOS PLC 581,276 29,300 Heineken N.V. 1,340,237 644,000 Hengan International Group Co., Ltd. 1,382,204 3,200 Henkel KGAA 446,217 59,040 High Tech Computer Corp. 1,562,374 76,000 Hon Hai Precision Industry Co., Ltd. 463,047 11,900 Honda Motor Co., Ltd. 399,977 817,000 Hopson Development Holdings, Ltd. 1,647,904 9,500 Hyundai Mipo Dockyard Co., Ltd. 1,184,433 21,200 Industrial Bank of Korea 362,911 38,700 ING Groep N.V. 1,700,515
38 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 41,700 Inmet Mining Corp.v $ 1,576,950 102 Japan Tobacco, Inc. 397,087 18,000 JFE Holdings, Inc. 706,126 194,340 Johnson Health Tech. Co., Ltd. 1,133,902 35,400 Jumbo S.A. 536,917 163,000 Kingboard Chemical Holdings, Ltd. 586,056 17,900 Kobayashi Pharmaceutical Co., Ltd. 684,178 24,000 Komatsu, Ltd. 415,334 10,200 Kyocera Corp. 872,991 7,550 Lafarge S.A. 973,820 51,923 Largan Precision Co., Ltd. 1,063,401 96,500 LG Telecom, Ltd.(a) 1,126,925 552,000 Li Ning Co., Ltd. 629,839 173,400 Man Group PLC 1,454,058 28,000 Matsushita Electric Industrial Co., Ltd. 592,176 11,500 Megastudy Co., Ltd. 1,298,887 75 Mizuho Financial Group, Inc. 582,395 80,400 National Grid PLC 1,003,890 6,840 Nestle S.A. 2,384,052 33,350 Next PLC 1,183,290 42 Nippon Telegraph & Telephone Corp. 205,355 29,200 Nissin Food Products Co., Ltd. 930,109 69,600 Nordea Bank AB 911,899 18,500 Nutreco Holding N.V. 1,140,114 27,150 Oesterrichische Elekrizitaitswirts AG - Class A 1,313,340 6,600 OPG Groep N.V. 632,771 29,520 Option N.V.(a) 594,631 115,881 Pennon Group PLC 1,106,294 11,700 Phonak Holding AG 741,399 42,900 ProsiebenSat.1 Media AG 1,190,377 198,000 PT Semen Gresik 581,308 6,900 Raiffeisen International Bank - Holding AG 735,315
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 614,000 Realtek Semiconductor Corp. $ 755,806 32,800 Reckitt Benckiser PLC 1,358,619 4,000 Renault S.A. 458,109 11,909 Roche Holding AG 2,058,061 12,250 RWE AG 1,129,848 23,800 Sampo Oyj 495,475 20,000 Samsung Engineering Co., Ltd. 955,184 19,600 SBM Offshore N.V. 533,077 4,000 Schneider Electric S.A. 445,421 24,600 Scottish & Southern Energy PLC 605,857 182,000 Sembcorp Marine, Ltd. 382,321 14,000 Shinko Electric Industries Co., Ltd. 390,618 85,692 Silitech Technology Corp. 461,894 26,700 Suez S.A. 1,172,997 45 Sumitomo Mitsui Financial Group, Inc. 472,599 67,800 Sumitomo Rubber Industries, Ltd. 747,004 12,100 Swiss Re 925,170 19,800 Takeda Pharmaceutical Co., Ltd. 1,237,345 60,800 Telefonica S.A. 1,052,379 35,200 Telekom Austria AG 887,618 58,700 Telenor ASA 763,596 165,600 Tesco PLC 1,115,713 115,000 The Bank Of Yokohama, Ltd. 907,421 17,200 ThyssenKrupp AG 578,110 11,950 Titan Cement Co. 566,384 24,240 TNT N.V. 919,626 62,400 Toho Pharmaceutical Co., Ltd. 1,114,059 41,200 Tokyo Electric Power Co. 1,186,419 269,000 Tokyo Gas Co., Ltd. 1,349,108 110,000 Toshiba Corp. 713,856 15,750 Total S.A. 1,032,919
Schedule of Investments 39 Schedule of Investments (continued) ICON International Equity Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 28,400 Toyota Motor Corp. $ 1,545,632 11,000 Tsakos Energy Navigation, Ltd.v 490,600 25,780 UBS AG 1,541,474 2,400 Umicore S.A. 354,703 5,250 Unibail 1,103,038 419,730 Unimicron Technology Corp. 518,237 72,000 United Overseas Bank, Ltd. 737,973 7,810 USG People N.V. 545,903 17,430 Vacon Oyj 554,535 4,900 Vallourec S.A. 1,142,138 6,200 Volkswagen AG 529,480 2,400 Zurich Financial Services AG 589,418 ------------ TOTAL COMMON STOCKS (COST $103,704,884) 113,882,766 SHORT-TERM INVESTMENTS (3.3%) $1,961,333 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06#v 1,961,333 703 Brown Brothers Harriman Time Deposit - Australian Dollar, 4.60%, 10/02/06#v 703 624,443 Brown Brothers Harriman Time Deposit - British Pound, 3.615%, 10/02/06#v 624,443 241 Brown Brothers Harriman Time Deposit - Canadian Dollar, 3.00%, 10/02/06#v 241 124 Brown Brothers Harriman Time Deposit - Danish Krone, 2.05%, 10/02/06#v 124
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- $1,296,047 Brown Brothers Harriman Time Deposit - Euro, 1.87%, 10/02/06#v 1,296,047 793 Brown Brothers Harriman Time Deposit - Hong Kong Dollar, 3.05%, 10/02/06#v 793 2 Brown Brothers Harriman Time Deposit - Japanese Yen .01%, 10/02/06#v 2 60 Brown Brothers Harriman Time Deposit - Norwegian Kroner, 1.15%, 10/02/06# v 60 104 Brown Brothers Harriman Time Deposit - Singapore Dollar, 1.95%, 10/02/06# v 104 70 Brown Brothers Harriman Time Deposit - Swedish Krona, 1.25%, 10/02/06# v 70 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $3,883,920) 3,883,920 TOTAL INVESTMENTS 99.2% (COST $107,588,804) 117,766,686 OTHER ASSETS AND LIABILITIES 0.8% 969,618 ------------ TOTAL NET ASSETS 100.0% $118,736,304 ============
The accompanying notes are an integral part of this Schedule of Investments. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. v All securities were fair valued (Note 1) as of September 30, 2006 unless noted with a v. Total value of securities fair valued was $107,980,787. 40 Schedule of Investments Six Month Hypothetical Expense Example September 30, 2006 (unaudited) EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the various ICON Funds and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/06 - 9/30/06). ACTUAL EXPENSES The first line in the table for each Fund provides information about actual account values and actual expenses. The Example includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example does not include client specific fees, such as the $10 fee charged to IRA accounts, or the $15 fee charged for wire redemptions. You may use this information, 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 for each Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table for each Fund 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 costs 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 the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. Expense Example 41 Six Month Hypothetical Expense Example (continued) September 30, 2006 (unaudited)
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/06 9/30/06 4/1/06-9/30/06* 4/1/06-9/30/06 -------------------------------------------------------------------------------------------------- ICON ASIA-PACIFIC REGION FUND -------------------------------------------------------------------------------------------------- CLASS S -------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 977.80 $ 6.99 1.41% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.93 7.13 (5% return before expenses) -------------------------------------------------------------------------------------------------- CLASS A -------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 973.40 5.97 1.81% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.95 6.11 (5% return before expenses) -------------------------------------------------------------------------------------------------- ICON EUROPE FUND -------------------------------------------------------------------------------------------------- CLASS S -------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,049.10 7.60 1.48% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.58 7.49 (5% return before expenses) -------------------------------------------------------------------------------------------------- CLASS A -------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,021.70 6.22 1.84% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.85 6.21 (5% return before expenses) -------------------------------------------------------------------------------------------------- ICON INTERNATIONAL EQUITY FUND -------------------------------------------------------------------------------------------------- CLASS I -------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,000.00 8.47 1.69% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,016.53 8.54 (5% return before expenses) -------------------------------------------------------------------------------------------------- CLASS C -------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 995.80 12.76 2.55% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,012.22 12.86 (5% return before expenses) -------------------------------------------------------------------------------------------------- CLASS Z -------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,000.70 7.02 1.40% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.98 7.08 (5% return before expenses) -------------------------------------------------------------------------------------------------- CLASS A -------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 993.00 5.96 1.79% -------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.00 6.04 (5% return before expenses) --------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six month expense ratio annualized, multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. Information shown for Class A shares reflects values using expense ratios and rates of return for the period May 31, 2006 (date of commencement of operations) through September 30, 2006. As such, the expense ratio is annualized, multiplied by the average account value of the period of operation, multiplied by 122/365 to reflect the actual period. Total returns exclude applicable sales charges. If sales charges were included (maximum 5.75%), returns would be lower. 42 Expense Example Statements of Assets and Liabilities September 30, 2006
ICON ICON ASIA-PACIFIC ICON INTERNATIONAL REGION FUND EUROPE FUND EQUITY FUND ------------- ------------- ------------- ASSETS Investments, at cost $137,888,882 $ 96,600,651 $107,588,804 ------------ ------------ ------------ Investments, at value 150,777,705 106,850,472 117,766,686 Cash 850,951 - 118,415 Receivables: Fund shares sold 622,681 660,476 1,143,630 Investments sold 1,667,019 117,751 667,439 Interest 4,153 1,186 2,569 Dividends 365,547 60,175 152,108 Expense reimbursements by Advisor 584 569 5,485 Foreign tax reclaims - 89,603 49,236 Other assets 51,090 27,778 32,259 ------------ ------------ ------------ Total Assets 154,339,730 107,808,010 119,937,827 ------------ ------------ ------------ LIABILITIES Payables: Due to custodian bank - 282,847 - Interest 5,241 3,511 1,894 Investments bought 6,486,592 1,941,568 892,569 Fund shares redeemed 189,226 9,691 131,318 Advisory fees 119,915 84,531 95,374 Accrued distribution fees 5 4 24,660 Fund accounting fees 5,237 4,409 4,772 Transfer agent fees 6,573 2,647 4,821 Administration fees 5,700 3,938 4,463 Trustee fees 3,373 2,371 2,680 Accrued expenses 49,140 33,283 38,972 ------------ ------------ ------------ Total Liabilities 6,871,002 2,368,800 1,201,523 ------------ ------------ ------------ NET ASSETS - ALL SHARE CLASSES $147,468,728 $105,439,210 $118,736,304 ============ ============ ============ NET ASSETS - CLASS S# $147,444,424 $105,409,613 $ - ============ ============ ============ NET ASSETS - CLASS I $ - $ - $ 76,453,918 ============ ============ ============ NET ASSETS - CLASS C $ - $ - $ 13,898,881 ============ ============ ============ NET ASSETS - CLASS Z $ - $ - $ 28,295,025 ============ ============ ============ NET ASSETS - CLASS A $ 24,304 $ 29,597 $ 88,480 ============ ============ ============ NET ASSETS CONSIST OF Paid-in capital $141,798,543 $ 93,028,494 $102,767,488 Accumulated undistributed net investment income/(loss) (270,114) 366,659 10,385 Accumulated undistributed net realized gain/(loss) from investments (6,339,289) 2,176,795 6,303,394 Accumulated net realized gain/(loss) from foreign currency translations (602,454) (383,968) (522,545) Unrealized appreciation/(depreciation): on investments and other assets and liabilities denominated in foreign currency 12,882,042 10,251,230 10,177,582 ------------ ------------ ------------ NET ASSETS $147,468,728 $105,439,210 $118,736,304 ============ ============ ============ Shares outstanding (unlimited shares authorized, no par value) Class S# 11,179,011 5,602,424 - Class I - - 5,118,017 Class C - - 967,626 Class Z - - 1,877,698 Class A 1,844 1,575 5,875 Net asset value (offering and redemption price per share) Class S# $ 13.19 $ 18.82 $ - Class I $ - $ - $ 14.94 Class C $ - $ - $ 14.36 Class Z $ - $ - $ 15.07 Class A $ 13.18 $ 18.79 $ 15.06 Class A maximum offering price (100%/(100%-maximum sales charge) of net asset value adjusted to the nearest cent per share $ 13.98 $ 19.94 $ 15.98
# Class S was formerly the only class in the Fund. Multi-class operations commenced May 31, 2006. The accompanying notes are an integral part of the financial statements. Financial Statements 43 Statements of Operations For the year ended September 30, 2006
ICON ICON ASIA-PACIFIC ICON INTERNATIONAL REGION FUND EUROPE FUND EQUITY FUND ------------ ------------ ------------- INVESTMENT INCOME Interest $ 90,564 $ 102,101 $ 107,101 Dividends 2,131,592 1,703,791 1,811,237 Foreign taxes withheld (184,828) (197,201) (181,026) ---------- ----------- ----------- Total Investment Income 2,037,328 1,608,691 1,737,312 ---------- ----------- ----------- EXPENSES Advisory fees 1,303,863 608,320 780,711 Distribution fees: Class I - - 117,750 Class C - - 75,172 Class A 8 6 11 Fund accounting fees 61,050 42,612 50,145 Transfer agent fees 81,028 31,078 53,669 Custody fees 154,417 110,946 124,151 Administration fees 60,395 28,082 36,119 Registration fees 40,855 20,416 26,787 Insurance expense 1,102 1,281 1,558 Trustee fees and expenses 12,088 7,754 9,177 Interest expense 62,677 14,095 9,430 Other expenses 107,142 57,591 61,717 ---------- ----------- ----------- Total expenses before expense (reimbursement)/recoupment and transfer agent earnings credit 1,884,625 922,181 1,346,397 ---------- ----------- ----------- Transfer agent earnings credit (2,322) (1,547) (1,788) Expense (reimbursement)/recoupment by Adviser due to expense limitation agreement (722) (709) (12,627) ---------- ----------- ----------- Net Expenses 1,881,581 919,925 1,331,982 ---------- ----------- ----------- NET INVESTMENT INCOME (LOSS) 155,747 688,766 405,330 ---------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Net realized gain/(loss) from investment transactions 1,094,030 2,724,355 6,781,431 Net realized gain/(loss) from foreign currency translations (569,787) (286,266) (454,070) Change in unrealized net appreciation/(depreciation) on investments & foreign currency translations 6,454,824 6,903,602 4,534,281 ---------- ----------- ----------- Net realized and unrealized gain/(loss) on investments 6,979,067 9,341,691 10,861,642 ---------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $7,134,814 $10,030,457 $11,266,972 ========== =========== ===========
The accompanying notes are an integral part of the financial statements. 44 Financial Statements THIS PAGE INTENTIONALLY LEFT BLANK Statements of Changes in Net Assets
ICON ASIA-PACIFIC REGION FUND ---------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 155,747 $ 45,287 Net realized gain/(loss) from investment transactions 1,094,030 1,927,462 Net realized gain/(loss) from foreign currency translations (569,787) (32,667) Change in net unrealized appreciation/(depreciation) on investments and foreign currency translations 6,454,824 4,738,359 ------------- ------------ Net increase/(decrease) in net assets resulting from operations 7,134,814 6,678,441 ------------- ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class S# (85,846) (26,459) Class I - - Class C - - Class Z - - Class A - - Net realized gains Class S# - - Class I - - Class C - - Class Z - - Class A - - ------------- ------------ Net decrease from dividends and distributions (85,846) (26,459) ------------- ------------ FUND SHARE TRANSACTIONS Shares sold Class S# 221,387,084 39,085,269 Class I - - Class C - - Class Z - - Class A 24,469 - Reinvested dividends and distributions Class S# 80,516 26,163 Class I - - Class C - - Class Z - - Class A - - Shares repurchased Class S# (129,793,185) (14,089,724) Class I - - Class C - - Class Z - - Class A (26) - ------------- ------------ Net increase/(decrease) from fund share transactions 91,698,858 25,021,708 ------------- ------------ Total net increase/(decrease) in net assets 98,747,826 31,673,690 NET ASSETS Beginning of period 48,720,902 17,047,212 ------------- ------------ End of period $ 147,468,728 $ 48,720,902 ============= ============
46 Financial Statements
ICON EUROPE FUND ICON INTERNATIONAL EQUITY FUND --------------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ----------------------- ------------------ ------------------ ------------------ $ 688,766 $ 85,751 $ 405,330 $ 80,075 2,724,355 2,088,483 6,781,431 2,007,770 (286,266) (97,702) (454,070) (68,475) 6,903,602 1,925,390 4,534,281 4,346,469 ------------ ----------- ------------ ----------- 10,030,457 4,001,922 11,266,972 6,365,839 ------------ ----------- ------------ ----------- - - - - - - (24,881) - - - - - - - (50,351) - - - - - (1,340,887) - - - - - (1,143,374) (422,167) - - (134,889) (37,935) - - (934,778) (1,003,360) - - - - ------------ ----------- ------------ ----------- (1,340,887) - (2,288,273) (1,463,462) ------------ ----------- ------------ ----------- 117,006,017 19,527,704 - - - - 68,838,279 10,807,776 - - 12,648,559 1,464,926 - - 13,277,909 5,520,800 29,478 - 88,208 - 1,336,067 - - - - - 1,133,191 407,049 - - 130,198 36,352 - - 983,433 994,866 - - - - (44,864,637) (8,112,955) - - - - (13,588,831) (1,176,471) - - (915,055) (248,111) - - (5,302,946) (2,942,011) (36) - (29) - ------------ ----------- ------------ ----------- 73,506,889 11,414,749 77,292,916 14,865,176 ------------ ----------- ------------ ----------- 82,196,459 15,416,671 86,271,615 19,767,553 23,242,751 7,826,080 32,464,689 12,697,136 ------------ ----------- ------------ ----------- $105,439,210 $23,242,751 $118,736,304 $32,464,689 ============ =========== ============ ===========
Financial Statements 47 Statements of Changes in Net Assets (continued)
ICON ASIA-PACIFIC REGION FUND ---------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ------------------ ------------------ TRANSACTIONS IN FUND SHARES Shares sold Class S# 17,006,822 3,865,936 Class I - - Class C - - Class Z - - Class A 1,846 - Reinvested dividends and distributions Class S# 6,233 2,994 Class I - - Class C - - Class Z - - Class A - - Shares repurchased Class S# (10,164,560) (1,624,763) Class I - - Class C - - Class Z - - Class A (2) - ------------ ----------- Net increase/(decrease) 6,850,339 2,244,167 ------------ ----------- Shares outstanding beginning of period 4,330,516 2,086,349 ------------ ----------- Shares outstanding end of period 11,180,855 4,330,516 ============ =========== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities) Purchase of securities $291,355,445 $53,438,824 Proceeds from sales of securities 202,024,877 30,360,825 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ (270,114) $ 15,964 ============ ===========
# Class S was formerly the only class in the Fund. Multi-class operations commenced May 31, 2006. The accompanying notes are an integral part of the financial statements. 48 Financial Statements
ICON EUROPE FUND ICON INTERNATIONAL EQUITY FUND --------------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 SEPTEMBER 30, 2006 SEPTEMBER 30, 2005 ----------------------- ------------------ ------------------ ------------------ 6,577,613 1,406,104 - - - - 4,778,664 953,897 - - 892,329 131,856 - - 987,753 481,231 1,577 - 5,877 - 91,261 - - - - - 84,133 37,655 - - 9,984 3,420 - - 72,522 91,777 - - - - (2,549,057) (574,107) - - - - (935,489) (104,200) - - (64,198) (23,141) - - (372,280) (260,880) (2) - (2) - ------------ ----------- ------------ ----------- 4,121,392 831,997 5,459,293 1,311,615 ------------ ----------- ------------ ----------- 1,482,607 650,610 2,509,923 1,198,308 ------------ ----------- ------------ ----------- 5,603,999 1,482,607 7,969,216 2,509,923 ============ =========== ============ =========== $133,003,344 $33,678,756 $168,974,479 $41,768,432 60,122,066 24,639,660 98,308,045 28,810,442 $ 366,659 $ (35,841) $ 10,385 $ (4,090) ============ =========== ============ ===========
Financial Statements 49 Financial Highlights
INCOME FROM INVESTMENT OPERATIONS ----------------------------------------- NET ASSET NET NET REALIZED VALUE, INVESTMENT AND UNREALIZED TOTAL FROM BEGINNING INCOME/ GAINS/ (LOSSES) INVESTMENT OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS --------- ---------- --------------- ---------- ICON ASIA-PACIFIC REGION FUND CLASS S# Year Ended September 30, 2006 $11.25 $0.02 $1.93 $1.95 Year Ended September 30, 2005 8.17 0.03 3.08 3.11 Year Ended September 30, 2004 7.62 0.02 0.55 0.57 Year Ended September 30, 2003 5.68 0.04 1.90 1.94 Year Ended September 30, 2002 6.81 (0.19) (0.91) (1.10) CLASS A May 31, 2006 (inception) to September 30, 2006 13.54 0.04 (0.40) (0.36) ICON EUROPE FUND CLASS S# Year Ended September 30, 2006 15.68 0.20 3.80 4.00 Year Ended September 30, 2005 12.03 0.07 3.58 3.65 Year Ended September 30, 2004 9.84 (0.04) 2.23 2.19 Year Ended September 30, 2003 7.40 (0.02) 2.46 2.44 Year Ended September 30, 2002 8.13 (0.04) (0.67) (0.71) CLASS A May 31, 2006 (inception) to September 30, 2006 18.40 (0.02) 0.41 0.39 ICON INTERNATIONAL EQUITY FUND CLASS I Year Ended September 30, 2006 12.91 0.09 2.57 2.66 Year Ended September 30, 2005 10.59 0.04 3.25 3.29 February 6, 2004 (inception) to September 30, 2004 10.96 0.04 (0.41) (0.37) CLASS C Year Ended September 30, 2006 12.53 (0.03) 2.48 2.45 Year Ended September 30, 2005 10.55 (0.14) 3.09 2.95 February 19, 2004 (inception) to September 30, 2004 11.29 (0.02) (0.72) (0.74) CLASS Z Year Ended September 30, 2006 13.00 0.09 2.63 2.72 Year Ended September 30, 2005 10.60 0.06 3.31 3.37 Year Ended September 30, 2004 8.41 0.01 2.24 2.25 Year Ended September 30, 2003 5.96 0.06 2.45 2.51 Year Ended September 30, 2002 7.24 0.04 (1.25) (1.21) CLASS A May 31, 2006 (inception) to September 30, 2006 15.17 0.03 (0.14) (0.11) LESS DIVIDENDS AND DISTRIBUTIONS ------------------------------------------------------- DIVIDENDS DISTRIBUTIONS TOTAL FROM NET FROM NET DIVIDENDS INVESTMENT REALIZED RETURN AND INCOME GAINS OF CAPITAL DISTRIBUTIONS ---------- ------------- ---------- ------------- ICON ASIA-PACIFIC REGION FUND CLASS S# Year Ended September 30, 2006 $(0.01) $ - $ - $(0.01) Year Ended September 30, 2005 (0.03) - - (0.03) Year Ended September 30, 2004 (0.02) - - (0.02) Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - - (0.03) (0.03) CLASS A May 31, 2006 (inception) to September 30, 2006 - - - - ICON EUROPE FUND CLASS S# Year Ended September 30, 2006 - (0.86) - (0.86) Year Ended September 30, 2005 - - - - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 (0.02) - - (0.02) CLASS A May 31, 2006 (inception) to September 30, 2006 - - - - ICON INTERNATIONAL EQUITY FUND CLASS I Year Ended September 30, 2006 (0.01) (0.62) - (0.63) Year Ended September 30, 2005 - (0.97) - (0.97) February 6, 2004 (inception) to September 30, 2004 - - - - CLASS C Year Ended September 30, 2006 - (0.62) - (0.62) Year Ended September 30, 2005 - (0.97) - (0.97) February 19, 2004 (inception) to September 30, 2004 - - - - CLASS Z Year Ended September 30, 2006 (0.03) (0.62) - (0.65) Year Ended September 30, 2005 - (0.97) - (0.97) Year Ended September 30, 2004 (0.06) - - (0.06) Year Ended September 30, 2003 - (0.06) - (0.06) Year Ended September 30, 2002 (0.04) - (0.03) (0.07) CLASS A May 31, 2006 (inception) to September 30, 2006 - - - -
(x) Calculated using the average share method. * The total return calculation is for the period indicated and excludes any sales charges. # Class S was formerly the only class in the Fund. Multi-class operations commenced May 31, 2006. (a) Annualized for periods less than a year. (b) Portfolio turnover is calculated at the Fund level and is not annualized. (c) The Fund's operating expenses, not including interest expense, are contractually limited to the amounts discussed in Note 2. The ratios in these financial highlights reflect the limitation, including the interest expense. The accompanying notes are an integral part of the financial statements. 50 Financial Highlights
RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME/(LOSS) TO AVERAGE AVERAGE NET ASSETS(a) NET ASSETS(a) ------------------------- ------------------------- BEFORE AFTER BEFORE AFTER EXPENSE EXPENSE EXPENSE EXPENSE LIMITATION/ LIMITATION/ LIMITATION/ LIMITATION/ NET RECOUPMENT RECOUPMENT RECOUPMENT RECOUPMENT ASSET AVERAGE NET AND TRANSFER AND TRANSFER AND TRANSFER AND TRANSFER VALUE, NET ASSETS, ASSETS FOR THE AGENT AGENT AGENT AGENT PORTFOLIO END OF TOTAL END OF PERIOD PERIOD (IN EARNINGS EARNINGS EARNINGS EARNINGS TURNOVER PERIOD RETURN* (IN THOUSANDS) THOUSANDS) CREDIT CREDIT CREDIT CREDIT RATE(b) ------- ------- -------------- -------------- ------------ ------------ ------------ ------------ --------- $13.19 17.36% $147,444 $130,654 1.44% 1.44% 0.12% 0.12% 159.51% 11.25 38.12% 48,721 15,225 1.93% N/A 0.30% N/A 185.84% 8.17 7.51% 17,047 14,976 1.91% N/A 0.20% N/A 58.62% 7.62 34.15% 6,084 6,683 1.98% N/A 0.68% N/A 81.44% 5.68 (16.29)% 6,927 12,142 1.66% N/A (0.23)% N/A 14.43% 13.18 (2.66)% 24 9 25.78% 1.81%(c) (23.09)% 0.88% 159.51% 18.82 27.09% 105,409 61,054 1.51% 1.51% 1.13% 1.13% 100.62% 15.68 30.34% 23,243 16,665 1.85% N/A 0.51% N/A 153.55% 12.03 22.26% 7,826 7,230 2.24% N/A (0.38)% N/A 78.57% 9.84 32.97% 9,262 6,774 1.87% N/A (0.29)% N/A 101.37% 7.40 (8.76)% 4,619 5,706 2.14% N/A (0.42)% N/A 12.26% 18.79 2.12% 30 7 33.40% 1.84%(c) (31.86)% (0.30)% 100.62% 14.94 21.20% 76,454 47,266 1.71% 1.71%(c) 0.59% 0.59% 129.31% 12.91 32.90% 15,376 7,921 2.02% 1.97% 0.27% 0.32% 139.23% 10.59 (3.38)% 3,211 1,960 2.32% N/A 0.44% N/A 117.74% 14.36 20.09% 13,899 7,550 2.76% 2.54%(c) (0.39)% (0.18)% 129.31% 12.53 29.56% 1,622 643 4.52% 3.51% (2.23)% (1.22)% 139.23% 10.55 (6.55)% 183 162 3.06% N/A (0.16)% N/A 117.74% 15.07 21.54% 28,295 23,485 1.41% 1.40%(c) 0.60% 0.61% 129.31% 13.00 33.57% 15,466 12,184 1.68% 1.68% 0.51% 0.51% 139.23% 10.60 26.79% 9,303 10,063 1.98% N/A 0.03% N/A 117.74% 8.41 42.60% 10,587 8,571 2.00% N/A 0.88% N/A 98.91% 5.96 (16.94)% 8,222 13,347 1.72% N/A 0.48% N/A 91.99% 15.06 (0.73)% 88 13 19.13% 1.79%(c) (16.62)% 0.72% 129.31%
Financial Highlights 51 Notes to Financial Statements September 30, 2006 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Asia-Pacific Region Fund ("Asia-Pacific Region Fund"), ICON Europe Fund ("Europe Fund") and ICON International Equity Fund ("International Equity Fund") are series funds (individually a "Fund" and collectively, the "Funds"). The Funds are part of the ICON Funds (the "Trust"), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end investment management company. The Asia-Pacific Region Fund and the Europe Fund offer two classes of shares, Class S and Class A. The International Equity Fund offers four classes of shares, Class I, Class C, Class Z and Class A. All classes have equal rights as to earnings, assets and voting privileges except that each Class may bear different distribution fees, registration costs and shareholder servicing costs and each Class has exclusive voting rights with respect to its distribution plan. There are 14 other active funds within the Trust. Those Funds are covered by separate prospectuses and shareholder reports. Each Fund is authorized to issue an unlimited number of no par shares. The Funds primarily invest in foreign securities; the Asia-Pacific Region Fund and Europe Fund primarily invest in companies whose principal business activities fall within specific regions. The investment objective of each Fund is long-term capital appreciation. The Funds may have elements of risk, including the loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investments in foreign securities and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar-denominated transactions as a result of, among other factors, the possibility of lower government supervision and regulation of foreign securities markets and the possibility of political or economic instability. Financial statements of foreign companies are governed by different accounting, auditing, and financial standards than U.S. companies and tend to be less transparent and uniform than in the United States. Many corporate governance standards, which help ensure the integrity of public information in the United States, do not exist in foreign countries. In general, there is less governmental supervision of foreign stock exchanges and securities brokers and issuers. There are also risks associated with small-and mid-cap investing, including limited product lines, less liquidity, and small market share. In addition, in the normal course of business, the Funds may enter into various agreements that provide for general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as any potential 52 Notes to Financial Statements exposure involves future claims that may be made against each Fund. However, based on experience, the Funds expect the risk of loss to be minimal. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results may differ from these estimates. INVESTMENT VALUATION The Funds' securities and other assets are valued at the closing price at the close of the regular trading session of the New York Stock Exchange (the "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that (a) securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by the Funds at the NASDAQ Official Closing Price provided by NASDAQ each business day; and (b) foreign securities in the Funds traded in countries outside of the Western Hemisphere are fair valued daily based on procedures established by the Funds' Board of Trustees ("Board") to avoid stale prices and to take into account, among other things, any significant events occurring after the close of a foreign market in those regions. The Funds use pricing services to report the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board or pursuant to procedures approved by the Board. The valuation assigned to fair-valued securities for purposes of calculating a Fund's net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service. The evaluated bid price supplied by Notes to Financial Statements 53 Notes to Financial Statements (continued) the pricing service is a matrix system which considers such factors as security prices, yields, maturities and ratings. Short-term securities with remaining maturities of 60 days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. Currency rates as of the close of the NYSE are used to convert foreign security values into U.S. dollars. The Funds securities traded in countries outside of the Western Hemisphere are fair valued daily by utilizing the quotations of an independent pricing service, unless the Funds' adviser determines that use of another valuation methodology is appropriate. The pricing service uses statistical analyses and quantitative models to adjust local market prices using factors such as subsequent movements and changes in the prices of indexes and securities and exchange rates in other markets to determine fair value as of the time a Fund calculates its net asset value. The valuation assigned to fair-valued securities for purposes of calculating a Fund's net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management has recently begun to evaluate the application of the Statement to the Funds, and is not in a position at this time to evaluate the significance of its impact, if any, on the Funds' financial statements. REPURCHASE AGREEMENTS Repurchase agreements, if held by the Funds, are fully collateralized by U.S. Government securities and such collateral is in the possession of the Funds' custodian. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements including accrued interest. In the event of default on the obligation to repurchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. No repurchase agreements 54 Notes to Financial Statements were purchased or sold by the Funds during the year ended September 30, 2006. FOREIGN CURRENCY TRANSLATION The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange daily. Income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Net unrealized appreciation or depreciation on investments and foreign currency translations arise from changes in the value of assets and liabilities, resulting from changes in the exchange rates and changes in market prices of securities held. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may enter into short-term forward foreign currency contracts in connection with planned purchases or sales of securities as a hedge against fluctuations in foreign exchange rates pending the settlement of transactions in foreign securities. A forward foreign currency contract is an agreement between contracting parties to exchange an amount of currency at some future time at an agreed upon rate. These contracts are marked-to-market daily and the related appreciation or depreciation of the contract is presented in the Statements of Assets and Liabilities. Net realized gains and losses on foreign currency transactions represent disposition of foreign currencies, and the difference between the amount recorded at the time of the transaction and the U.S. dollar amount actually received. Any realized gain or loss incurred by the Funds due to foreign currency translation is included in the Statements of Operations. The Funds did not enter into any foreign currency contracts during the year ended September 30, 2006. FUTURES CONTRACTS The Funds may invest in financial futures contracts for the purpose of hedging their existing securities or securities they intend to purchase against fluctuations in fair value caused by changes in prevailing markets. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain Notes to Financial Statements 55 Notes to Financial Statements (continued) percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the underlying hedged assets. The Funds held no financial futures contracts during the year ended September 30, 2006. OPTIONS TRANSACTIONS Each Fund may write call and put options on any security in which it may invest. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security, and the proceeds from the sale are increased by the premium originally received. If a written put option is exercised, the cost of the security acquired is decreased by the premium originally received. As a writer of an option, the Fund has no control over whether the underlying securities are subsequently sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security underlying the written option. Each Fund may also purchase put and call options on any security in which it may invest. When a Fund purchases a call or put option, an amount equal to the premium paid is included in the Fund's Statement of Assets and Liabilities as an investment, and is subsequently marked-to-market to reflect the current market value of the option. If an option expires on the stipulated expiration date or if the Fund enters into a closing sale transaction, a gain or loss is realized. If the Fund exercises a call, the cost of the security acquired is increased by the premium paid for the call. If the Fund exercises a put option, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities. The Funds did not enter into any option transactions during the year ended September 30, 2006. 56 Notes to Financial Statements INCOME TAXES The Funds intend to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code and, accordingly, the Funds will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that they intend to make sufficient distributions of net investment income and net realized capital gains. Dividends received by shareholders of the Funds which are derived from foreign source income and foreign taxes paid by the Funds are to be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Funds. Dividends paid by the Funds from net investment income and distributions of net realized short-term gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Dividends and distributions to shareholders are recorded by the Funds on the ex-dividend/distribution date. The Funds distribute net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. The ICON Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes. Income distributions 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. On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax return to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management has recently begun to evaluate the application of the Interpretation to the Funds, and is not in a position at this time to evaluate the significance of its impact, if any, on the Funds' financial statements. INVESTMENT INCOME Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Certain Notes to Financial Statements 57 Notes to Financial Statements (continued) dividends from foreign securities are recorded as soon as the Funds are informed of the dividend if such information is obtained subsequent to the ex-dividend date. Discounts and premiums on securities purchased are amortized over the life of the respective securities. INVESTMENT TRANSACTIONS Security transactions are accounted for no later than one business day after the trade date. However, for financial reporting purposes, security transactions are accounted for on the trade date. Gains and losses on securities sold are determined on the basis of identified cost. ALLOCATION OF INCOME AND EXPENSES Each class of a Fund's shares bears expenses incurred specifically on its behalf and, in addition, each class bears a portion of general expenses, based upon relative net assets of each class. Expenses which cannot be directly attributed to a specific Fund in the Trust are apportioned between all Funds based upon relative net assets. In calculating the net asset value of the shares in the various classes of the Funds, investment income, realized and unrealized gains and losses and expenses other than class-specific expenses are allocated daily to each class of shares based upon the proportion of net assets. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEES ICON Advisers, Inc. ("ICON") serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 1.00% of each Fund's average daily net assets. ICON has contractually agreed to limit its investment advisory fee and/or reimburse certain of the Funds' operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that the Funds' operating expenses do not exceed the following amounts:
CLASS S CLASS I CLASS C CLASS Z CLASS A -------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund -- N/A N/A N/A 1.80% ICON Europe Fund -- N/A N/A N/A 1.80% ICON International Equity Fund N/A 1.80% 2.55% 1.55% 1.80%
The expense limitations will continue in effect until at least January 29, 2016. To the extent ICON reimburses or absorbs fees and expenses, it may seek payment of such amounts for up to three years after the expenses were reimbursed or absorbed. A Fund will make no such payment, however, if the 58 Notes to Financial Statements total Fund operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed. As of September 30, 2006 the following amounts were still available for recoupment by ICON based upon their potential expiration dates:
2007 2008 2009 ------------------------------------------------------------------------------------ ICON Asia-Pacific Region Fund $ -- $ -- $ 722 ICON Europe Fund -- -- 709 ICON International Equity Fund -- 10,556 12,627
TRANSFER AGENT, CUSTODY AND ACCOUNTING FEES BISYS Fund Services Ohio, Inc. ("BISYS") is the Fund Accounting Agent for the Funds. For its services, the Trust pays BISYS 0.03% on the first $1.75 billion of net assets, 0.0175% on net assets over $1.75 billion and up to $5 billion, and 0.01% on net assets in excess of $5 billion. Brown Brothers Harriman ("BBH") is the custodian of the Trust's investments. For domestic custody services, the Trust pays BBH 0.0065% on the first $50 million of average net assets and 0.0050% on domestic assets above $50 million, plus certain transaction charges. For foreign custody services, the Trust pays BBH 0.03% on foreign assets plus certain transaction charges. Boston Financial Data Services, Inc. ("BFDS") is the Trust's transfer agent. For these services, the Trust pays an account fee of $13.25 per open account, $7.00 per networked account, $1.80 per closed account, plus certain other transaction and cusip charges. Transfer agent earnings credits are credits received for interest which is a result from overnight balances used by the transfer agent, BFDS, for clearing shareholder transactions. During the year ended September 30, 2006, the Funds received transfer agent earnings credits which are included on the Statement of Operations. ADMINISTRATIVE SERVICES The Trust has entered into an administrative services agreement with ICON pursuant to which ICON oversees the administration of the Trust's business and affairs. As of January 31, 2006, this agreement provides for an annual fee of 0.05% on the Funds' first $1.5 billion of average daily net assets, 0.045% on the next $1.5 billion of average daily net assets, 0.040% on the next $2 billion of average daily net assets and 0.030% on average daily net assets over $5 billion. Prior to that date, this agreement provided for an annual fee to ICON of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. The administrative services agreement provides that ICON will not be liable Notes to Financial Statements 59 Notes to Financial Statements (continued) for any error of judgment, mistake of law, or any loss suffered by the Trust in connection with matters to which the administrative services agreement relates, except for a loss resulting from willful misfeasance, bad faith or negligence by ICON in the performance of its duties. ICON has entered into a sub-administration agreement with BISYS pursuant to which BISYS assists ICON with the administration and business affairs of the Trust. For its services, ICON pays BISYS at an annual rate of 0.025% on the first $1.75 billion of Trust assets and 0.015% on assets above $1.75 billion. DISTRIBUTION FEES The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") under which the Funds are authorized to compensate the Funds' distributor, ICON Distributors, Inc. ("IDI") (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, Class I and Class A shareholders of the International Equity Fund and Class A shareholders of the Asia-Pacific Region Fund and Europe Fund pay an annual 12b-1 and service fee of 0.25% of average daily net assets. The Class C shareholders of the International Equity Fund pay an annual 12b-1 and service fee of 1.00% of average daily net assets. RELATED PARTIES Certain Officers and Directors of ICON are also Officers and Trustees of the Funds; however, such Officers and Trustees (with the exception of the Chief Compliance Officer, "CCO") receive no compensation from the Funds. The CCO's salary is paid 90% by the Funds and 10% by the Adviser. For the year ended September 30, 2006, the total related amounts paid by the Trust under this agreement are included in Other Expenses on the Statement of Operations. Some of the 12b-1 amounts received by IDI, discussed in the Distribution Fees, have been used to offset various Shareholder servicing costs incurred by the Adviser. For the year ended September 30, 2006, the amount was $4,379. 60 Notes to Financial Statements 3. LINE OF CREDIT The Funds have entered into Lines of Credit agreements with BBH. The maximum borrowing is limited to the lesser of $50 million or 25% of the net asset value in the Fund subject to a maximum borrowing limit by the Trust of $150 million. Interest is charged at LIBOR plus 2.00% which was 7.32% at September 30, 2006. The average interest rate charged for the year ended September 30, 2006 was 6.75%. All Funds had outstanding borrowings as of September 30, 2006.
AVERAGE BORROWING (10/1/05--9/30/06) -------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $1,937,249 ICON Europe Fund 2,276,909 ICON International Equity Fund 623,795
4. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryforwards. The tax components of capital shown in the following tables represent losses or deductions the Funds may be able to offset against income and gains recognized in future years and post October loss deferrals. The accumulated losses noted in the following tables represent net capital loss carryforwards as of September 30, 2006 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions.
AMOUNT EXPIRATION DATE ------------------------------------------------------------------------------------ ICON Asia-Pacific Region Fund $1,351,390 September 30, 2007 3,254,268 September 30, 2009 1,330,946 September 30, 2010 952,529 September 30, 2011
During the year ended September 30, 2006 the ICON Asia-Pacific Region Fund utilized capital loss carryforwards of $898,474. For the year ended September 30, 2006, the ICON Asia-Pacific Region Fund will elect to defer post October currency losses of $569,787. Notes to Financial Statements 61 Notes to Financial Statements (continued) The tax characteristics of dividends paid to shareholders during the fiscal year ended September 30, 2006, were as follows:
DISTRIBUTIONS PAID FROM --------------------- TOTAL ORDINARY NET LONG- TOTAL TAXABLE DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS PAID --------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $85,846 $ - $ 85,846 $ 85,846 ICON Europe Fund - 1,340,887 1,340,887 1,340,887 ICON International Equity Fund 952,037 1,336,236 2,288,273 2,288,273
The tax characteristics of dividends paid to shareholders during the fiscal year ended September 30, 2005, were as follows:
DISTRIBUTIONS PAID FROM --------------------- TOTAL ORDINARY NET LONG- TOTAL TAXABLE DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS PAID --------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $26,459 $ - $ 26,459 $ 26,459 ICON International Equity Fund 66,857 1,396,605 1,463,462 1,463,462
As of September 30, 2006, the components of accumulated earnings (deficit) on a tax basis was as follows:
TOTAL UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ACCUMULATED ORDINARY NET LONG- ACCUMULATED CAPITAL AND APPRECIATION EARNINGS FUND INCOME TERM GAINS EARNINGS OTHER LOSSES (DEPRECIATION)* (DEFICITS) ----------------------------------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $ 327,318 $ - $ 327,318 $(7,458,920) $12,801,787 $ 5,670,185 ICON Europe Fund 1,255,908 999,124 2,255,032 - 10,155,684 12,410,716 ICON International Equity Fund 3,376,711 2,430,502 5,807,213 - 10,161,603 15,968,816
*The differences between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales and recognition of tax unrealized appreciation (depreciation) of passive foreign investment companies. The aggregate gross unrealized appreciation and depreciation of securities held by the Funds and the total cost of securities for federal tax purposes as of September 30, 2006, are noted below. Unrealized appreciation 62 Notes to Financial Statements (depreciation) in the table below exclude appreciation (depreciation) on foreign currency transactions.
UNREALIZED UNREALIZED NET APPRECIATION FUND COST APPRECIATION (DEPRECIATION) (DEPRECIATION) --------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $137,969,136 $16,000,210 $(3,191,641) $12,808,569 ICON Europe Fund 96,696,197 11,127,081 (972,805) 10,154,276 ICON International Equity Fund 107,604,783 11,938,649 (1,776,746) 10,161,903
Notes to Financial Statements 63 Report of Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of the ICON International Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Asia-Pacific Region Fund, ICON Europe Fund, and ICON International Equity Fund (three of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Denver, Colorado November 20, 2006 64 Report of Accounting Firm Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 17 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, and principal occupations are set forth below. The address of the Trustees is 5299 DTC Blvd., Suite 1200, Greenwood Village, CO 80111. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 55, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and served as the Chief Investment Officer (1991 to 2004) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 56. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); General Partner of Bergert Properties, a real estate holding company (1997 to present); and General Partner of Pyramid Real Estate Partnership, a real estate development company (1998 to present); General Partner of Chamois Partners, a venture capital company (2004 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); Delta Dental of California, an insurance company (2006 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 57. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager, Trinity Investment Management Corporation (1989 to 2001). Trustees and Officers 65 Board of Trustees and Fund Officers (continued) (unaudited) GREGORY KELLAM SCOTT, 58. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was Senior Vice President - Law, General Counsel and Secretary of GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Constituency for Africa (1997 to present) and serves as Executive Director of Indiana Civil Rights Commission (2005-present). Mr. Scott has been appointed to the US State Department's Commission on the African Judiciary (2006-present). R. MICHAEL SENTEL, 58. Mr. Sentel has been a Trustee of the Funds since their inception. Mr. Sentel is a Senior Attorney with the U.S. Department of Education (1996 to present). Mr. Sentel also provides legal representation as a sole practitioner with an emphasis on corporate and transactional law. He served as general counsel to numerous public companies and served on the board of directors of one of these clients. Mr. Sentel began his legal career with the U.S. Securities and Exchange Commission's Division of Enforcement and became a branch chief. Later he served as the section chief for the Professional Liability Section of the Federal Deposit Insurance Corp. with responsibility for the Rocky Mountain Region (1991 to 1994). JONATHAN F. ZESCHIN, 53. Mr. Zeschin has been a Trustee of the Funds since November 2002. Mr. Zeschin is President and Founder of ESSENTIAL Advisers, Inc., a wealth management and investment advisory firm (2000 to present) and was Managing Partner of JZ Partners LLC, a business consulting firm for investment management companies (1998 to present). Mr. Zeschin was previously President of Founders Asset Management LLC, an investment management company (1995 to 1998) and Executive Vice President, INVESCO Funds Group, an investment advisory company (1992 to 1995). Mr. Zeschin was previously a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to 2004); and was previously a Director of the Wasatch Funds (2002 to 2004). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 55. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and served as the Chief Investment Officer (1991 to 2004). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. 66 Trustees and Officers ERIK L. JONSON, 57. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception. Mr. Jonson is also Chief Financial Officer (1996 to present) and Executive Vice President (2004 to present) and was previously Vice President (1998 to 2004) of ICON Advisers; Chief Financial Officer, Secretary and Director (1996 to present) of IM&R; and Executive Vice President (2004 to present) and Treasurer (2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) and Vice President, (2002 to 2004) of IDI; and Executive Vice President and Treasurer of ICON Insurance Agency, Inc. (2004 to present). DONALD SALCITO, 53. Mr. Salcito serves as Vice President and Secretary of the Funds since November 15, 2006. Mr. Salcito is also Executive Vice President and General Counsel (September 2005 to present) of ICON Advisers, Inc.; Director of ICON Management & Research (2005 to present); Executive Vice President, Secretary, General Counsel and Chief Compliance Officer, for ICON Distributors, Inc. (2005 to present); Executive Vice President and Secretary of ICON Insurance Agency, Inc. (2005 to present). Previously he was a Partner in the law firm of Perkins Coie, LLP. (2000-2005). CARRIE M. SCHOFFMAN, 33. Ms. Schoffman serves as Assistant Vice President and Chief Compliance Officer of the Funds (May 2004 to present). She also serves as Chief Compliance Officer of ICON Advisers, Inc. (May 2004 to present). Previously she was a staff accountant with the U.S. Securities and Exchange Commission (2003 to 2004). She also was a Manager (2001 to 2003) and Senior Associate/Associate (1996 to 2001) at PricewaterhouseCoopers LLP. STEPHEN ABRAMS, 43. Mr. Abrams serves as Anti-Money Laundering Officer of the Funds (2005 to present). Mr. Abrams is also Associate General Counsel of ICON Advisers, Inc. (2005 to present). Previously he was a Partner at Perkins Coie, LLP (2004-2005) and Associate (2000 to 2004). Trustees and Officers 67 Other Information (unaudited) RENEWAL OF INVESTMENT ADVISORY AGREEMENT In determining to renew the investment advisory agreements between ICON Funds (the "Trust") and ICON Advisers, Inc. ("ICON" or the "Adviser") the Board requested, was provided with and reviewed data with respect to ICON, its personnel, and the services to be provided to each Fund by ICON under the Trust's Investment Advisory Agreement dated October 9, 1996, as amended (related to the Sector, International and Diversified Funds) and under the Trust's Investment Advisory Agreement dated July 9, 2002 and effective October 1, 2002, as amended (related to the U.S. Diversified Funds - Bond, Covered Call, Equity Income and Long/Short Funds) (collectively, the "Advisory Agreements"). The data included information concerning advisory, distribution and administrative services provided to the Funds by ICON and its related companies; information concerning other businesses of those companies; comparative data related to exchange traded funds versus the Sector Funds; and comparative data obtained from Lipper Analytical Services related to Fund performance and Fund expenses. On August 8, 2006, the Board of Trustees, including all of the Trustees who are not "interested persons" of the Trust (the "Independent Trustees"), approved continuation of the Advisory Agreements with the Adviser for each Fund for an additional one-year term commencing October 1, 2006. The Independent Trustees were represented by independent legal counsel throughout the process. Prior to acting on the matter, the Independent Trustees met separately as a group in private sessions with their independent legal counsel to review and discuss the foregoing information and also met with management to discuss responses to questions raised during the process. In addition, the Independent Trustees received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the agreement. In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed information relating to the Adviser's operations and personnel. Among other things, the Adviser provided biographical information on its professional staff and descriptions of its organizational and management structure. In the course of their deliberations the Board evaluated, among other things, information relating to the investment philosophy, strategies and techniques used in managing each Fund, the qualifications and experience of the Adviser's investment personnel, the Adviser's compliance programs, the Adviser's brokerage practices, including the extent to which the Adviser obtains research through "soft dollar" arrangements with the Funds' brokerage, and the financial and non-financial resources available to provide services required under the Advisory Agreement. 68 Other Information In considering the reasonableness of the fee payable to the Adviser for managing each Fund, the Board reviewed, among other things, financial statements of the Adviser and an analysis of the profitability to the Adviser and its affiliates from each Fund over various periods. The analysis identified all revenues and other benefits received by the Adviser and its affiliates from managing each Fund, the costs associated with providing such services and the resulting profitability to the Adviser and its affiliates. The Board considered the current and anticipated asset levels of each Fund and the willingness of the Adviser to waive fees and pay expenses of the Funds from time to time to limit the total expenses of the Funds. The Board concluded that the profitability to the Adviser and its affiliates from their relationship with the Funds is not excessive and that the Adviser is not realizing material benefits from economies of scale that would warrant adjustments to the fees for any Fund at this time. The Board of Trustees concluded that, in light of the information provided and analyzed, the fees charged by the Adviser under the Advisory Agreements to each Fund are reasonable. In connection with reviewing data bearing upon the nature, quality, and extent of services furnished by ICON to each Fund, the Board assessed data concerning ICON's staffing, systems and facilities. The Board also assessed ICON's non-Trust business to see whether there are any initiatives that would dilute service to the Trust. It was noted: A. That the breadth and the quality of investment advisory and other services being provided to each Fund are satisfactory, as evidenced in part by the performance record of each Fund compared with the performance records of a peer group of comparable funds; B. That ICON has made significant expenditures in the past year and in prior years to ensure that it has the sophisticated systems and the highly trained personnel necessary for it to be able to continue to provide quality service to the Funds' shareholders, including the dedication of substantial resources to ICON's investment and trading departments; and C. That the Board is satisfied with the research, portfolio management, and trading services, among others, being provided by ICON to the Funds, and is charging fair, reasonable, and competitive fees. In connection with reviewing data bearing upon the costs of services to be provided and profits to be realized by ICON and its related companies from the relationship with the Trust, the Board considered the Lipper comparative data, data concerning ICON's soft-dollar arrangements, costs borne by ICON in providing advisory services to each Fund and the profitability of ICON in light of the estimated profitability analyses which had been provided by ICON, other benefits to ICON from serving as the Funds' adviser, and ICON's financial statements. Other Information 69 Other Information (continued) (unaudited) With respect to the soft-dollar arrangements the Board assessed all facets of the arrangements including the quality of trade execution. It was noted that ICON receives research assistance from the use of soft dollars generated from Fund portfolio transactions and that such research assists ICON in providing quality investment advisory services to the Funds and other accounts to which it provides advisory services. The Board concluded that the arrangements are consistent with Fund brokerage practices and benefit the Funds and their shareholders. The Board noted that ICON benefits from serving directly as investment adviser and administrative agent, and through its affiliate, as the principal underwriter for the Funds. With respect to the distribution services, the Board noted that proceeds of the Trust's distribution plans pursuant to Rule 12b-1 under the 1940 Act for the International Funds and Diversified Funds are paid to ICON's affiliate and that the distributor has not profited from plan proceeds as all of the proceeds have been or will be used to cover distribution and marketing expenses. In this regard, the Trustees noted that marketing efforts have been successful as evidenced by Fund asset levels. With respect to the administrative fee paid to ICON, the Board reviewed the comparative data related to those services. The Board also considered the compliance experience in these service areas and concluded that the services provided by ICON and its affiliates to the Funds are satisfactory and that the profits derived from providing the services are competitive and reasonable. The Board also noted the risks assumed by ICON in providing investment advisory, distribution and administrative services to each Fund, including the capital commitments which have been made in the past and which continue to be made by ICON to ensure the continuation of the highest quality of service to the Funds is made with the recognition that the Funds' advisory relationship with ICON can be terminated at any time and must be renewed on an annual basis. In making these determinations the Board of Trustees considered the following: 1. In connection with assessing data bearing upon the fairness of fee arrangements, the Board used data from Lipper, Inc. concerning funds of similar size and funds of larger size, as well as data concerning ICON's other clients: A. the advisory fee structures of the Funds were considered in comparison with advisory fees and expense ratios of other similarly managed funds as set forth in the comparative data; B. that contractual advisory fees for the Sector Funds were higher than fees for similar funds; but that the Sector Funds' expense ratios were 70 Other Information competitive and in most instances lower than those of similarly managed Funds; C. that the Sector Funds had also imposed breakpoints on the contractual advisory fees and that such fees were reflected in the comparison data; D. that contractual advisory fees for the ICON Asia-Pacific Region and Europe Funds were above the average fees for similar funds; however, the Funds' expense ratios were competitive in light of their size; E. that the contractual advisory fees for the ICON International Equity Fund is below the average of similarly managed funds; F. the contractual advisory fees for the U.S. Diversified Funds were in line with fees for similar funds; and that, with the exception of the ICON Bond Fund and ICON Covered Call Fund, the U.S. Diversified Funds' expense ratios were lower than those of similarly managed Funds. G. the contractual advisory fee for the ICON Core Equity Fund was below the average fee for similar funds; and that its expense ratio was lower than those of similarly-managed Funds. H. that, generally the fees paid to ICON for managing other institutional accounts (such as pension plans) are not lower than the fees paid by similarly managed Funds; however, to the extent such fees are lower, it is due to the fact that such accounts are less costly for ICON to manage. I. the advisory and other fees payable by the Funds to ICON are essentially fees which would be similar to those which would have resulted solely from "arm's-length" bargaining, and may well be lower than fees arrived solely from such arm's-length negotiation. 3. In connection the investment performance of the Funds and ICON the Board discussed and noted: 1. Based on the performance information provided by Lipper, Inc., of the thirteen ICON Funds that had a track record of at least five years, ten outperformed their respective peer groups; eight of the sixteen ICON Funds with a track of at least 3 years outperformed their respective peer groups; and 2. In comparing the Sector Funds to the ETFs the sector funds compared favorably over the one, two and three year periods. The Board considered the extent to which economies of scale could be realized as a Fund grows in assets and whether the Fund's fees reflect these economies of scale for the benefit of Fund shareholders. It was noted that each of the Sector Funds had imposed investment advisory fee breakpoints in January 2006 to take into consideration such economies that may be Other Information 71 Other Information (continued) (unaudited) realized as the Funds increase in assets. Furthermore, ICON has contractually agreed to impose expense limitations on the International Funds and the U.S. Diversified Funds at a cost to ICON. Based on these considerations, among others, the Board, including all of the Independent Trustees, concluded that the continuation of the advisory agreement was in the best interests of each Fund and its shareholders, the services to be performed under the agreement were services required for the operation of the Funds, ICON had provided satisfactory advisory services to the Funds in the past, and the fees for the advisory services which ICON would perform and other benefits from the relationship with the Trust and consistent with fees paid by similar funds, are reasonable in light of the comparative data, and would be within the range of what would have been negotiated at arm's length in light of the circumstances. SUPPLEMENTAL TAX INFORMATION For corporate shareholders, the following percentage of the total ordinary income dividends paid during the fiscal year ended September 30, 2006, qualifies for the corporate dividends received deduction for the following Funds:
FUND DIVIDENDS RECEIVED DEDUCTION ----------------------------------------------------------------------------------- ICON International Equity Fund 0.06%
For the fiscal year ended September 30, 2006, the following Funds paid qualified dividend income:
FUND AMOUNT ---------------------------------------------------------------------- ICON Asia-Pacific Region Fund $ 85,846 ICON International Equity Fund 796,670
The Funds designate the following amounts as long-term capital gain distributions qualifying for the maximum 15% income tax rate for individuals:
FUND AMOUNT ------------------------------------------------------------------------ ICON Europe Fund $2,070,045 ICON International Equity Fund $1,617,356
72 Other Information PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month end. Each ICON Fund also files a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q are available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A summarized description of the policies and procedures the ICON Funds use to vote proxies is available free of charge at www.iconadvisers.com or by calling 1-800-764-0442. Information about how the ICON Funds voted proxies related to each Fund's portfolio securities during the 12-month period ended June 30 is available free of charge at www.iconadvisers.com or on the SEC's website at www.sec.gov. FOR MORE INFORMATION This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor 73 THIS PAGE INTENTIONALLY LEFT BLANK (ICON FUNDS LOGO) For more information about the ICON Funds, contact us: By Telephone 1-800-764-0442 By Mail ICON Funds P.O. Box 55452 Boston, MA 02205-8165 In Person ICON Funds 5299 DTC Boulevard, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
(ICON LOGO) 1-800-764-0442 www.iconadvisers.com FANN-INTL(9-06) (GRAPHIC) 2006 Annual Report ICON SECTOR FUNDS Investment Update ICON CONSUMER DISCRETIONARY FUND ICON ENERGY FUND ICON FINANCIAL FUND ICON HEALTHCARE FUND ICON INDUSTRIALS FUND ICON INFORMATION TECHNOLOGY FUND ICON LEISURE AND CONSUMER STAPLES FUND ICON MATERIALS FUND ICON TELECOMMUNICATION & UTILITIES FUND (ICON LOGO) STRENGTH IN NUMBERS Table of Contents ABOUT THIS REPORT (UNAUDITED) 2 MESSAGE FROM ICON FUNDS (UNAUDITED) 5 MANAGEMENT OVERVIEW (UNAUDITED) AND SCHEDULE OF INVESTMENTS 10 ICON Consumer Discretionary Fund 10 ICON Energy Fund 16 ICON Financial Fund 23 ICON Healthcare Fund 29 ICON Industrials Fund 35 ICON Information Technology Fund 42 ICON Leisure and Consumer Staples Fund 49 ICON Materials Fund 54 ICON Telecommunication & Utilities Fund 59 SIX MONTH HYPOTHETICAL EXPENSE EXAMPLE (UNAUDITED) 66 FINANCIAL STATEMENTS 68 FINANCIAL HIGHLIGHTS 76 NOTES TO FINANCIAL STATEMENTS 80 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 91 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 92 OTHER INFORMATION (UNAUDITED) 95
(RECYCLE LOGO) About This Report HISTORICAL RETURNS All total returns mentioned in this report account for the change in a Fund's per-share price and the reinvestment of any dividends, capital gain distributions, and tax return of capital. If your account is set up to receive Fund distributions in cash rather than to reinvest them, your actual return may differ from these figures. The Funds' performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Fund results shown, unless otherwise indicated, are at net asset value. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconadvisers.com for performance results current to the most recent month-end. PORTFOLIO DATA This report reflects ICON's views, opinions, and portfolio holdings as of September 30, 2006, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security, or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's holdings as of September 30, 2006 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology primarily considers financial data, various company factors may impact a stock's performance, and therefore, Fund performance. The ICON system relies on the integrity of financial statements released to the market as part of our analysis. This Report contains statements regarding industry or sector themes, new market themes, investment outlook, relative strength, value-to-price ratios, and portfolio managers' expectations, beliefs, goals and the like that are based on current expectations, recent individual stock performance relative to current market prices, estimates of company values and other information supplied to the market by the companies we follow. Words such as "expects," "suggests," "anticipates," "targets," "goals," "value," "estimates," variations of such words and similar expressions are intended to identify forward looking statements, which are not statements of 2 About This Report historical fact. Forward looking statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to assess. These risks and uncertainties are based on a number of important factors, including, among others: stock price fluctuations; the integrity and accuracy of historical and projected financial and other information supplied by companies to the public; interest rates; future earnings growth rates, and other factors beyond the control of our portfolio managers. Therefore, actual outcome may differ materially from what is expressed in such forward looking statements. There are risks associated with mutual fund investing, including the loss of principal. The likelihood of loss may be greater if you invest for a shorter period of time. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investments in foreign securities may entail unique risks, including political, market and currency risks. The prospectus contains this and other information about the Funds and is available by visiting www.iconadvisers.com or calling 1-800-764-0442. Please read the prospectus carefully. About This Report 3 COMPARATIVE INDEXES The comparative indexes discussed in this report are meant to provide a basis for judging the Funds' performance against specific securities indexes. Each index shown accounts for both change in security price and reinvestment of dividends and distributions (except as noted), but does not reflect the costs of managing a mutual fund. The Funds' portfolios may significantly differ in holdings and composition from the indexes. Individuals cannot invest directly in an index. - The unmanaged Standard & Poor's (S&P) Composite 1500 Index ("S&P Composite 1500 Index") is a broad-based capitalization-weighted index comprising 1,500 stocks of large-cap, mid-cap, and small-cap U.S. companies. - The capitalization-weighted S&P 1500 Sector and Industry Indexes are based on specific classifications determined by S&P. - The unmanaged NASDAQ Composite ("NASDAQ") Index is a broad-based capitalization-weighted index of all NASDAQ National Market and Small-Cap stocks. Index returns and statistical data included in this report are provided by Bloomberg and FactSet Research Systems. 4 About This Report Message from ICON Funds -------------------------------------------------------------------------------- We were pleased with the Funds' industry tilting early in the period, as value and relative strength pulled us toward cyclical, industrial even commodity-based industries. -------------------------------------------------------------------------------- Dear ICON Shareholder: We realize you are faced with many mutual fund choices as you structure your financial plan, and we appreciate your continued commitment to diversify with one or more of the ICON Sector Funds. To those shareholders who are receiving their first ICON Funds Annual Report, we welcome you. You may have decided to invest in an ICON Sector Fund because you were attracted to ICON's value-based, bottom-up investment system, which pursues industries we believe are poised to outperform the broader market. Or perhaps you thought ICON stood out among other managers because we take a quantitative, unemotional, and objective approach. Whether you invest in our Sector Funds, such as the ICON Healthcare Fund, our International Funds, such as the ICON Asia-Pacific Region Fund, or our U.S. Diversified Funds, such as the ICON Core Equity Fund, each is powered by ICON's unique systematic discipline. Guided by an investment system that relies primarily on analyzing data, not speculation, we find "strength in numbers," as our firm's slogan declares. THE CYCLICAL MARKET THEME OF THE PAST THREE YEARS During the third calendar quarter of 2006, there was a major shift in market industry leadership. As a result of our industry rotation, you will see many stocks in Funds that were not held in the Semiannual Report as of March 31, 2006. Indeed, there are many companies that have not been owned by the Funds since late 1999 or early 2000. Before describing that rotation, let's review the industry and sector theme of the preceding three years. Most domestic stock market indexes hit a low on March 11, 2003 and then embarked on a three-year bull market, hitting a peak on May 5, 2006. Table #1 shows cumulative performance for Standard & Poor's Composite 1500 Sector Indexes over that period. As you can see, the market leadership over that period was in the cyclical, economically sensitive sectors of Energy, Materials, and Industrials. These sectors include companies whose revenues are very dependent on the ups and downs of the economy. The opposite is true of the lagging sectors; Healthcare, Consumer Staples, and Telecommunication are generally considered to be defensive, recession-proof sectors. On an industry level, a few of the top performing industries over that period included steel, metals & mining, construction materials, oil & gas exploration and homebuilders. These industries tend to be comprised of small- and mid-sized companies. Among the worst performing industries were brewers, pharmaceuticals, systems software, soft drinks and packaged foods, which contrary to the previous leaders, tend to be comprised of large, mature companies. Message from ICON Funds 5 Message from ICON Funds (continued) -------------------------------------------------------------------------------- (CRAIG T. CALLAHAN PHOTO) Craig T. Callahan President and Chairman of the Board of Trustees Our system is suggesting a market with new leadership and an entirely new personality. -------------------------------------------------------------------------------- We are proud of our discipline and our ability to endure volatility when it is required to capture industry leadership.
TABLE 1 CUMULATIVE TOTAL RETURNS 3/11/03 - 5/5/06 S&P 1500 SECTOR INDEX RETURN % --------------------- -------- Energy 158.00 Materials 118.15 Industrials 105.75 Utilities 95.68 Financials 83.86 S&P COMPOSITE 1500 INDEX 79.04 Consumer Discretionary 73.89 Information Technology 68.39 Telecommunication Services 64.17 Consumer Staples 44.01 Health Care 31.64
Data Source: FactSet Research Systems Returns include the reinvestment of dividends and capital gain distributions. We were pleased with the Funds' industry tilting during that period, as value and relative strength pulled us toward cyclical, industrial even commodity- based industries. Looking back, we believe those industries were on sale because investors were incorrectly fearful of a slow or sluggish economy, as investors worried that higher oil prices, war, and terrorism would hurt the economy. As investors realized that the economy was growing and cyclical firms were prosperous, stock prices occasionally surged to reflect fair value. From an ICON perspective, price was trying to catch up with fair value, which over a three-year period made for impressive returns in the leading industries. 6 Message from ICON Funds It is interesting to note that the leading industries during that period, being small- and mid-sized cyclical and commodity based, are inherently volatile. While there were outstanding returns to be earned in the "sweet spot" of the market, it required us to be tolerant of volatility and be patient during the unpleasant ride associated with those industries. We do not like volatility at ICON, and we certainly do not seek it, but we are proud of our discipline and our ability to endure it when it is required to capture industry leadership. It is also interesting to note that lower-quality stocks tended to perform better than what many would consider high-quality stocks over that three-year period. At ICON, quality is measured by liquidity, debt, efficiency and consistency, and we tend to favor higher quality stocks. Our preference for high-quality stocks slightly inhibited the Funds' performance. Consistent with our style, however, we leave the potential higher returns associated with speculative and riskier turnaround situations to other investors. ICON DETECTS A NEW MARKET THEME For the first four months of 2006, the same sector and industry themes from the previous three years persisted, as shown in Table #2, which highlights sector index returns from January 1, 2006 through the market peak on May 5, 2006.
TABLE 2 CUMULATIVE TOTAL RETURNS 1/1/06 - 5/5/06 S&P 1500 SECTOR INDEX RETURN % --------------------- -------- Energy 18.08 Materials 16.12 Industrials 14.28 Telecommunication Services 11.61 Financials 8.59 S&P COMPOSITE 1500 INDEX 7.57 Consumer Discretionary 5.77 Information Technology 5.01 Utilities 3.82 Consumer Staples 3.61 Health Care (1.97)
Data Source: FactSet Research Systems Returns include the reinvestment of dividends and capital gain distributions. Generally, the same cyclical leadership was at the top and the same defensive sectors were lagging as seen the previous three years. All market and theme peaks are different. This time, the leading industries did not reach the extreme overpricing typical of most peaks. They were headed toward it, but perhaps because of investor concerns and uncertainty over terrorism, oil prices, and even mid-term elections, stock prices did not reach lofty extremes. During the market drop from early May through mid-June 2006, the previous leaders fell the most, which was similar to market corrections seen in 2004 and 2005. Even the brief market bounce in late June was led by the previous Message from ICON Funds 7 Message from ICON Funds (continued) cyclical leadership, similar to rebounds in 2004 and 2005. Since the market low on July 17, 2006, the market has experienced a three-month climb with entirely new leadership. The industries that led the previous three-plus years have been sluggish. New leadership in defensive, recession-proof industries has prevailed. In the weeks following that sudden change on July 17, we have sold cyclical industries and gradually invested in new industries as relative strength has met our standards. The combination of value and relative strength has pulled us to mature companies in defensive, steady growth industries such as pharmaceuticals, diversified banks, systems software, computer hardware, household products, communications equipment and broadcasting & cable TV. To illustrate the magnitude of the industry rotation in the third calendar quarter of 2006, 12 of the largest 22 holdings in the ICON Core Equity Fund were new additions in the third quarter. As of September 30, 2006, those 12 new stocks comprised about 23% of that Fund. This rotation resulted in significant sector shifts in the ICON Core Equity Fund, which best represents our system's sector and industry positioning. The Industrials sector was reduced from 18.0% of the Fund on June 30 to 3.7% on September 30. Financials, Health Care, Information Technology and Telecommunication & Utilities were all increased from 18.9%, 5.8%, 13.7% and 2.5%, respectively, to 24.8%, 14.5%, 18.2% and 9.0%. Major rotations occurred throughout the ICON Fund family to capture the new leadership. As mentioned earlier, you will see Fund holdings that are new in the last few months, some not being held since late 1999 or early 2000. They include IBM, Microsoft, Intel, Procter & Gamble, General Electric, Oracle, Cisco Systems, Bank of America, Wells Fargo, JP Morgan Chase, AIG, Johnson & Johnson, Merck, Pfizer, Hewlett Packard, and Comcast Corp. The ICON Funds now look very different than they did when they participated in the theme that prevailed in the three and a half years ending this spring. The stocks and industries now owned in the Funds were not leaders over the last three years as they were not preferred by investors but they were not stagnant. They were growing their profits and the underlying value of their firms. Now, we find attractive bargains among them as our estimate of value has grown above the market price. The large, mature companies that have led the recent market advance are heavily weighted in the Funds' market-capitalization weighted benchmarks, so the indexes gained an immediate surge off the July 17 low. The shift in leadership was sudden, but guided by our system, we have rotated industries as they meet our standards of value and relative strength. 8 Message from ICON Funds STAYING TRUE TO THE ICON DISCIPLINE Our system is suggesting a market with new leadership and an entirely new personality. The stocks and industries we expect to lead are not as inherently volatile as those of the previous theme. We do not know how long this new theme will last, but given the price discounts to our estimates of fair value, we expect it may last at least a year. To better position the ICON Sector Funds for the changing theme that we believe is taking place, we will follow our value-driven process to reduce or eliminate lagging industries and increase positions in the new leading industries. In closing, we are most grateful for the privilege of playing a role in your investment portfolio. In addition to reading this report on your Funds and communicating with your financial adviser, we invite you to visit our website at www.iconadvisers.com for current market updates, up-to-date Fund performance and holdings, and information about your account. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and President of the Adviser Message from ICON Funds 9 Management Overview ICON Consumer Discretionary Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 100.6% Top 10 Equity Holdings 35.4% Number of Stocks 68 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Comcast Corp. - Class A 6.4% Target Corp. 4.5% Kohl's Corp. 4.1% Nike, Inc. - Class B 3.4% General Motors Corp. 3.4% TJX Cos., Inc. 3.2% V.F. Corp. 3.0% Harley-Davidson, Inc. 2.7% J.C. Penney Co., Inc. 2.4% Federated Department Stores, Inc. 2.3% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. For the fiscal year ended September 30, 2006, the Fund's sector-specific benchmark, the S&P 1500 Consumer Discretionary Index, returned 7.38%, and its broad benchmark, the S&P Composite 1500 Index, gained 10.32%. The ICON Consumer Discretionary Fund trailed both benchmarks, appreciating 6.20% during the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. During the first three fiscal quarters, oil and other commodity prices rose sharply, and Consumer Discretionary issues lagged the broad market as investors seemed reluctant to participate in the sector. The prevailing sentiment appeared to be that inflationary pressures and rising short-term interest rates would crimp consumer spending, which, in turn, would dampen profits for retail, home, and auto-related issues. Earnings of companies within the sector remained healthy, and no significant slow down in consumer spending materialized during the period. Overall, however, the sector lagged in the S&P 1500 Index as other sectors, including Telecommunication, Financials, and Materials, led the market higher. During the final fiscal quarter, as oil prices and interest rates declined, investors began to recognize the value that we had been seeing build within the sector. This reversal was part of a broad market theme change that featured larger-cap, more mature industries. After we detected the theme shift in May, we patiently waited for our relative strength measurements to point to clear industry leaders, but a lack of sustainable leadership among the 26 industries in the sector made conditions difficult for our investment style. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. Our objective is to position the Fund in those industries with the best combinations of value and relative strength. During the period, we found value and strength in the footwear, automobile manufacturers, and department stores industries, which accounted for the majority of the Fund's overall performance. The Fund was hindered by exposure to the housewares & specialties, home furnishers, and homebuilders industries. Homebuilders generally declined on concerns that the Federal Reserve's series of interest rate hikes would curb demand for housing. This same premise appeared to 10 Management Overview (ROBERT STRAUS PHOTO) Robert Straus, CMT Portfolio Manager cause investors to avoid what we perceived to be undervalued home furnishers, which also suffered. Within the motorcycle manufacturers industry Harley Davidson was among the market leaders based on relative strength. In the department stores industry, Kohl's Corp. and JC Penney Co., Inc. outperformed the broader market. All three companies were among the Fund's top holdings at year-end. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE CONSUMER DISCRETIONARY SECTOR? A. The Consumer Discretionary sector is among the most undervalued sectors of the nine we track, and investors seem to be taking notice. Underlying fundamentals of consumer-related companies continue to remain strong. Barring any such sharp sustained rise in inflation and interest rates, we believe the undervalued Consumer Discretionary sector is positioned to be a market leader in the new theme that we believe began in the spring. PERFORMANCE HIGHLIGHTS September 30, 2006 - The Consumer Discretionary sector lagged in the S&P 1500 Index as other sectors, including Telecommunication, Financials, and Materials, led the market higher. - The Fund received positive performance from the footwear, automobile manufacturers, and department stores industries. - Exposure to the housewares & specialties, home furnishers, and homebuilders industries hurt returns as investors worried that interest rate hikes would curb demand for housing. Management Overview 11 INDUSTRY COMPOSITION September 30, 2006 Apparel Accessories & Luxury Goods 11.4% Specialty Stores 10.4% General Merchandise Stores 9.4% Department Stores 8.8% Broadcast & Cable TV 8.6% Footwear 8.0% Automobile Manufacturers 8.0% Apparel Retail 5.4% Soft Drinks 4.7% Consumer Electronics 2.9% Home Furnishing Retail 2.8% Motorcycle Manufacturers 2.7% Tire & Rubber 2.4% Home Improvement Retail 2.2% Home Building 2.1% Packaged Foods & Meats 1.9% Brewers 1.6% Automotive Retail 1.4% Household Products 1.3% Household Appliances 1.3% Photographic Products 1.2% Housewares & Specialties 1.0% Computer & Electronics Retail 0.6% Leisure Products 0.5%
Percentages are based upon net assets. 12 Management Overview AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 7/9/97 ----------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund 6.20% 10.04% 4.34% ----------------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 7.38% 8.37% 6.58% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 6.47% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The performance of the S&P 1500 Consumer Discretionary Index includes the reinvestment of dividends and capital gain distributions beginning on January 1, 2002. Additional information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON CONSUMER S&P 1500 CONSUMER S&P COMPOSITE 1500 DISCRETIONARY FUND DISCRETIONARY INDEX INDEX ------------------ ------------------- ------------------ 7/9/97 10000.00 10000.00 10000.00 9/30/97 10970.00 10892.00 10597.00 9810.00 11268.00 10852.00 11141.00 13276.00 12321.00 10851.00 14327.00 12620.00 9/30/98 7870.00 11778.00 11262.00 10360.00 15109.00 13709.00 10033.00 16371.00 14207.00 11067.00 17232.00 15312.00 9/30/99 9900.00 15612.00 14339.00 10852.00 18199.00 16485.00 10504.00 17620.00 16994.00 9797.00 16082.00 16554.00 9/30/00 9449.00 15341.00 16548.00 9603.00 14752.00 15338.00 9757.00 13937.00 13550.00 11364.00 15401.00 14440.00 9/30/01 9173.00 12045.00 12290.00 12121.00 14467.00 13705.00 13380.00 14959.00 13837.00 13605.00 13358.00 12059.00 9/30/02 10360.00 11065.00 9976.00 9807.00 11319.00 10786.00 9080.00 11069.00 10425.00 11414.00 13277.00 12064.00 9/30/03 12069.00 13661.00 12439.00 13769.00 15642.00 13976.00 14178.00 16036.00 14275.00 14095.00 15910.00 14523.00 9/30/04 13000.00 15725.00 14251.00 14535.00 17895.00 15624.00 14208.00 17079.00 15313.00 14751.00 17108.00 15576.00 9/30/05 13932.00 16766.00 16168.00 14123.00 17039.00 16511.00 15272.00 17653.00 17312.00 14477.00 17231.00 17014.00 9/30/06 14794.00 18003.00 17836.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 7/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 13 Schedule of Investments ICON Consumer Discretionary Fund September 30, 2006
SHARES VALUE --------------------------------------------- COMMON STOCKS (100.6%) 123,400 99 Cents Only Stores(a) $ 1,459,822 117,700 A.C. Moore Arts & Crafts, Inc.(a) 2,239,831 9,700 Abercrombie & Fitch Co. 673,956 11,000 AutoZone, Inc.(a) 1,136,300 35,700 Bed Bath & Beyond, Inc.(a) 1,365,882 82,600 Big 5 Sporting Goods Corp. 1,883,280 26,900 Borders Group, Inc. 548,760 37,500 Bridgestone Corp. - ADR 1,515,056 12,700 Cache, Inc.(a) 227,203 16,800 Centex Corp. 884,016 64,100 Coca-Cola Enterprises, Inc. 1,335,203 25,900 Columbia Sportswear Co.(a) 1,445,997 191,300 Comcast Corp. - Class A(a) 7,049,405 42,600 Cooper Tire & Rubber Co. 428,556 42,300 Craftmade International, Inc. 724,599 17,900 Crocs, Inc.(a) 607,705 33,600 DaimlerChrysler AG - ADR 1,678,656 34,800 Dick's Sporting Goods, Inc.(a) 1,584,096 79,500 Dollar Tree Stores, Inc.(a) 2,461,320 10,500 EchoStar Communications Corp. - Class A(a) 343,770 53,600 Family Dollar Stores, Inc. 1,567,264 58,800 Federated Department Stores, Inc. 2,540,748 14,000 Fomento Economico Mexicano, S.A. de C.V. - ADR 1,357,160 64,200 Ford Motor Co. 519,378 38,000 Fuji Photo Film - ADR 1,385,480 14,500 GameStop Corp. - Class A(a) 671,060 113,300 General Motors Corp. 3,768,358 21,300 Gildan Activewear, Inc. - Class A(a) 1,032,198 10,600 Guess, Inc.(a) 514,418 48,500 Harley-Davidson, Inc. 3,043,375
SHARES VALUE --------------------------------------------- 13,900 Haverty Furniture Cos., Inc. $ 221,705 77,500 Heineken N.V. - ADR 1,770,875 10,800 Henkel KGaA - ADR 1,506,133 59,100 Honda Motor Co., Ltd. - ADR 1,987,533 38,600 J.C. Penney Co., Inc. 2,639,854 107,100 Jo-Ann Stores, Inc.(a) 1,790,712 53,900 K-Swiss, Inc. 1,620,234 10,800 Kellwood Co. 311,364 70,700 Kohl's Corp.(a) 4,589,844 63,600 Liz Claiborne, Inc. 2,512,836 15,200 Lowe's Cos., Inc. 426,512 80,200 Matsushita Electric Industrial Co., Ltd. -ADR 1,694,626 25,100 Men's Wearhouse 933,971 24,200 Nestle S.A. - ADR 2,116,290 43,100 Nike, Inc. - Class B 3,776,422 53,700 Perry Ellis International, Inc.(a) 1,658,256 61,900 PetsMart, Inc. 1,717,725 57,400 Phillips-Van Heusen Corp. 2,397,598 44,400 Pulte Homes, Inc. 1,414,584 51,200 Rent-A-Center, Inc.(a) 1,499,648 57,600 Sharp Corp. - ADR 996,480 66,650 Staples, Inc. 1,621,595 19,900 Steinway Musical Instruments, Inc.(a) 557,200 34,250 Steven Madden, Ltd. 1,343,970 120,400 Stride Rite Corp. 1,680,784 89,600 Target Corp. 4,950,400 110,600 The DIRECTV Group, Inc.(a) 2,176,608 48,100 The Goodyear Tire & Rubber Co.(a) 697,450 33,900 The Home Depot, Inc. 1,229,553 69,700 The Pepsi Bottling Group, Inc. 2,474,350 13,900 The Sherwin- Williams Co. 775,342 13,500 The Stanley Works 672,975 128,300 TJX Cos., Inc. 3,596,249 17,700 United Auto Group, Inc. 414,180 25,200 Universal Electronics, Inc.(a) 478,800 44,900 V.F. Corp. 3,275,455
14 Schedule of Investments
SHARES VALUE --------------------------------------------- 27,900 Winnebago Industries, Inc. $ 875,502 37,200 Yankee Candle Co., Inc. 1,088,844 ------------ TOTAL INVESTMENT (COST $101,509,519) 100.6% 111,485,311 LIABILITIES LESS OTHER ASSETS (0.6)% (693,240) ------------ TOTAL NET ASSETS 100.0% $110,792,071 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. ADR American Depositary Receipt. Schedule of Investments 15 Management Overview ICON Energy Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 93.2% Top 10 Equity Holdings 30.3% Number of Stocks 60 Short-Term Investments 6.8% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Petrochina Co., Ltd. - ADR 3.4% Grant Prideco, Inc. 3.4% National-OilWell Varco, Inc. 3.3% Petroleo Brasileiro S.A. - ADR 3.2% Helix Energy Solutions Group, Inc. 3.2% Transocean, Inc. 3.0% Nabors Industries, Ltd. 2.8% Diamond Offshore Drilling, Inc. 2.8% Marathon Oil Corp. 2.7% Weatherford International, Ltd. 2.5% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Energy Fund declined (2.81%) for the fiscal year ended September 30, 2006, underperforming the 2.47% return of its sector-specific benchmark, the S&P 1500 Energy Index, and the 10.32% gain of its broad benchmark, the S&P Composite 1500 Index. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Fund was influenced by significant activity in the Energy sector during the period. Crude oil prices, as represented by the West Texas Intermediate Cushing Crude Oil Spot Price Index, were down (5.03%) in the year ended September 30, 2006. After reaching highs in July and August, crude prices fell steadily as inventories remained higher than five-year averages. From a geopolitical perspective, Iran's and North Korea's nuclear proliferation threats added volatility during the period. The Fund was outperforming its narrow benchmark by more than 10% until mid-May 2006, when we saw the Energy sector experience a significant shift in industry leadership. From the start of the fiscal year until May 2006, the oil & gas equipment & services industries were the leaders, and the Fund's overweight position in this area boosted returns. However, following a sharp correction in mid-May, larger integrated oil & gas industries started to emerge as sector leaders, rapidly outperforming the more narrowly-focused industries that had been performing well in the Fund. The large integrated oil & gas companies, involved in both upstream and downstream operations, seemed to be less affected by the drop in crude oil prices. Although the ICON system identified the shift in leadership, the Fund's relative performance suffered when new leadership emerged in integrated oil & gas companies, which make up more than half of the sector benchmark and were a smaller position in the Fund. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. Our systematic approach focuses on selecting industries for the Fund based on value and strength. In the first half of the period, the Fund's industry composition benefited returns, then later, a market reversal caused a swift change in leadership, and the Fund sacrificed some gains as the ICON system patiently waited for market clarity. Based on our valuation measures, the Fund took a significantly overweight position in the oil & gas equipment & services and oil & gas drilling industries early in the period, and they were large contributors to 16 Management Overview (J.C. WALLER III, PORTFOLIO MANAGER PHOTO) J.C. Waller, III Portfolio Manager first-half performance. The integrated oil & gas industry, in which the Fund was heavily underweighted, posted a negative return during the first half of the reporting period, aiding Fund performance relative to the S&P 1500 Energy Index. In addition, the Fund's lack of exposure to Exxon Mobil Corporation, the world's largest integrated oil company, and a stalwart of the S&P 1500 Energy Index, helped in the first half of the period. In mid-May 2006, however, industries that had helped Fund performance early in the fiscal year, including coal & consumable fuels, oil & gas drilling, and oil & gas exploration & production, began to decline. Coal & consumable fuel stocks were eliminated from the Fund as we saw the industry's relative strength weaken, but we kept the Fund significantly overweight in the oil & gas equipment & services and oil & gas drilling industries, as our analysis indicated an abundant amount of value. Even though the integrated oil & gas industry demonstrated strong returns, we held an underweight position in this group as it makes up approximately 54.4% of the sector-specific benchmark. Additionally, our analysis indicated that the integrated oil & gas industry did not possess as much value as other segments of the Energy sector. After being absent from the Fund since mid-2005, stocks from the oil & gas storage & transportation industry were added as our system revealed that their combination of value and strength suggested potential leadership within the sector. Even though some new companies in the industry had re-emerged as leaders, the industry's lackluster performance overall made a negligible contribution to returns. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE ENERGY SECTOR? A. A pullback in crude oil prices and energy stocks has left the Energy sector somewhat out of favor, but we see tremendous value in the sector. The generally healthy earnings of energy companies combined with a sharp correction in prices have led to this sector being valued at about 40% below our estimate of intrinsic value. Even though we are detecting bargains in the oil & gas drilling, coal & consumable fuels, and oil & gas equipment & services industries, we are closely monitoring our relative strength metrics for signs of weakness. World events could swiftly change the direction of crude and energy stocks, but with the fundamentals of finance as our guide, we will continue to seek the best values for the Fund. Management Overview 17 Management Overview (continued) ICON Energy Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - A steep decline in crude oil prices negatively influenced the Fund during the period, while geopolitical uncertainties added to volatility in the sector. - The Fund responded to a significant market theme reversal, in which larger-cap integrated oil & gas companies emerged as leaders, but it did not carry as large a position in this industry as its narrow benchmark, hampering relative returns. - Coal & consumable fuel stocks weakened during the period and were eliminated from the Fund. The Bloomberg West Texas Intermediate Cushing Crude Oil Spot Price Index represents the price of crude oil per barrel in U.S. dollars. 18 Management Overview INDUSTRY COMPOSITION September 30, 2006 Oil & Gas Equipment & Services 26.8% Oil & Gas Drilling 24.4% Integrated Oil & Gas 19.8% Oil & Gas Exploration & Production 15.7% Oil & Gas Storage & Transportation 6.5%
Percentages are based upon net assets. Management Overview 19 Management Overview (continued) ICON Energy Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 11/5/97 ----------------------------------------------------------------------------------------- ICON Energy Fund (2.81%) 23.82% 15.60% ----------------------------------------------------------------------------------------- S&P 1500 Energy Index 2.47% 18.61% 10.74% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 6.08% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 [LINE GRAPH]
S&P COMPOSITE 1500 ICON ENERGY FUND S&P 1500 ENERGY INDEX INDEX ---------------- --------------------- ------------------ 11/5/97 10000.00 10000.00 10000.00 9100.00 9432.00 10291.00 9330.00 9872.00 11683.00 8630.00 9603.00 11967.00 9/30/98 6350.00 8920.00 10680.00 5723.00 8937.00 13000.00 6726.00 9455.00 13472.00 8164.00 10671.00 14520.00 9/30/99 8083.00 10579.00 13597.00 8600.00 10702.00 15632.00 11092.00 11203.00 16115.00 11872.00 11539.00 15698.00 9/30/00 13361.00 12516.00 15692.00 15363.00 12651.00 14545.00 15010.00 11875.00 12849.00 14202.00 12096.00 13693.00 9/30/01 12488.00 10566.00 11654.00 14856.00 11245.00 12997.00 16385.00 12350.00 13121.00 14823.00 11769.00 11435.00 9/30/02 13117.00 9493.00 9460.00 14004.00 10190.00 10228.00 13539.00 10230.00 9886.00 14857.00 10988.00 11440.00 9/30/03 15178.00 11038.00 11796.00 18580.00 12737.00 13253.00 20154.00 13460.00 13536.00 21649.00 14547.00 13772.00 9/30/04 24165.00 16142.00 13514.00 25672.00 16862.00 14816.00 28840.00 19815.00 14521.00 29882.00 20283.00 14771.00 9/30/05 37406.00 24205.00 15332.00 36433.00 22554.00 15657.00 40700.00 24551.00 16416.00 41408.00 25628.00 16134.00 9/30/06 36356.00 24803.00 16913.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 11/5/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 20 Management Overview Schedule of Investments ICON Energy Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (93.2%) 250,000 Acergy SA - ADR(a) $ 4,267,500 169,400 Anadarko Petroleum Corp. 7,424,802 100,000 Apache Corp. 6,320,000 430,000 Atwood Oceanics, Inc.(a) 19,337,100 175,000 Berry Petroleum Co. - Class A 4,928,000 70,000 BP PLC - ADR 4,590,600 375,000 Cameron International Corp.(a) 18,116,250 425,000 Chesapeake Energy Corp. 12,316,500 300,000 Chevron Corp. 19,458,000 250,000 China Petroleum and Chemical Corp. - ADR 15,480,000 100,000 CNOOC, Ltd. - ADR 8,329,000 200,000 Comstock Resources, Inc.(a) 5,430,000 150,000 ConocoPhillips 8,929,500 300,000 Diamond Offshore Drilling, Inc. 21,711,000 125,000 Drill-Quip, Inc.(a) 8,460,000 325,000 El Paso Corp. 4,433,000 300,000 ENSCO International, Inc. 13,149,000 200,000 FMC Technologies, Inc.(a) 10,740,000 125,000 Frontline, Ltd. 4,813,750 150,000 General Maritime Corp. 5,487,000 125,000 GlobalSantaFe Corp. 6,248,750 700,000 Grant Prideco, Inc.(a) 26,621,000 750,000 Helix Energy Solutions Group, Inc.(a) 25,050,000 500,000 Helmerich & Payne, Inc. 11,515,000 125,000 Hornbeck Offshore Services, Inc.(a) 4,187,500 125,000 Knightsbridge Tankers, Ltd. 3,227,500
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 325,000 Lone Star Technologies, Inc.(a) $ 15,723,500 175,000 Lufkin Industries, Inc. 9,261,000 275,050 Marathon Oil Corp. 21,151,345 750,000 Nabors Industries, Ltd.(a) 22,312,500 450,000 National-OilWell Varco, Inc.(a) 26,347,500 450,000 Newpark Resources, Inc.(a) 2,398,500 180,000 Noble Corp. 11,552,400 150,000 Nordic American Tanker Shipping, Ltd. 5,220,000 375,000 Oil States International, Inc.(a) 10,312,500 125,000 Overseas Shipholding Group, Inc. 7,721,250 625,000 Parker Drilling Co.(a) 4,425,000 600,000 Patterson-UTI Energy, Inc. 14,256,000 400,000 Petro-Canada - ADR 16,132,000 250,000 Petrochina Co., Ltd. - ADR 26,912,500 300,000 Petroleo Brasileiro S.A. - ADR 25,149,000 150,000 Precision Drilling Corp. 4,623,000 450,000 Pride International, Inc.(a) 12,339,000 600,000 Range Resources Corp. 15,144,000 50,000 Repsol YPF S.A. - ADR 1,491,500 350,000 Rowan Cos., Inc. 11,070,500 260,000 Royal Dutch Shell - Class A - ADR 17,186,000 125,000 Ship Finance International, Ltd. 2,487,500 725,000 Superior Energy Services, Inc.(a) 19,038,500
Schedule of Investments 21 Schedule of Investments (continued) ICON Energy Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 575,000 TETRA Technologies, Inc.(a) $ 13,892,000 500,000 The Williams Companies, Inc. 11,935,000 275,000 Tidewater, Inc. 12,152,250 325,000 Transocean, Inc.(a) 23,799,750 125,000 Tsakos Energy Navigation, Ltd. 5,575,000 375,000 Ultra Petroleum Corp.(a) - ADR 18,041,250 350,000 Unit Corp.(a) 16,089,500 125,000 W&T Offshore, Inc. 3,651,250 250,000 W-H Energy Services, Inc.(a) 10,367,500 474,998 Weatherford International, Ltd.(a) 19,816,917 400,033 XTO Energy, Inc. 16,853,390 ------------ TOTAL COMMON STOCKS (COST $551,414,377) 734,999,554
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SHORT-TERM INVESTMENTS (6.8%) $53,581,761 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# $ 53,581,761 ------------ TOTAL SHORT-TERM INVESTMENT (COST $53,581,761) 53,581,761 TOTAL INVESTMENTS 100.0% (COST $604,996,138) 788,581,315 LIABILITIES LESS OTHER ASSETS (0.0)% (215,071) ------------ TOTAL NET ASSETS 100.0% $788,366,244 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. 22 Schedule of Investments Management Overview ICON Financial Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 99.9% Top 10 Equity Holdings 36.2% Number of Stocks 57 Short-Term Investments 4.6% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Bank of America Corp. 4.9% JPMorgan Chase & Co. 4.9% American International Group, Inc. 4.2% Morgan Stanley 3.9% The Goldman Sachs Group, Inc. 3.7% Merrill Lynch & Co., Inc. 3.1% UBS AG - ADR 3.0% ING Group N.V. - ADR 2.9% Fannie Mae 2.8% Freddie Mac 2.8% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Financial Fund gained 15.53% for the fiscal year ended September 30, 2006, underperforming the 19.93% return of its sector-specific benchmark, the S&P 1500 Financials Index, but outpacing the 10.32% return of its broad benchmark, the S&P Composite 1500 Index. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Primarily, the Fund was underweight in the other diversified financial services and regional banks industries, which were top contributors to the benchmark return. Poor stock selection within the diversified banks and thrift & mortgage finance industries also reduced returns. Secondly, the increased pace of initial public offerings (IPOs) early in 2006 ignited stocks from the investment banking & brokerage industry, but as the year progressed, IPOs slowed and the industry suffered, hampering the Fund. Late in the fiscal year, a new market theme began to emerge, featuring generally large-capitalization companies and those that benefited from an increase in trading profit. After a period of uncertain industry and company leadership, bellwether companies finally started to dominate the Financial sector after a market low in late July. While the Fund discerned this shift, the lack of clear leadership dictated that we patiently monitor the ICON system for definitive relative strength indicators. During this ambiguous period, the Fund gave up some gains against the benchmark. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. As always, the Fund's industry composition and underlying stock holdings are steered by our valuation readings. By the close of the period, the Fund had gone from having minimal exposure to the other diversified financial services industry to a 15.5% position at period-end, as it showed increasing value. Although this industry represented a significant portion of the Fund, it was underweight vs. the index, which worked against returns. Certain investment industry regulations restrict the Fund from investing heavily in companies that derive revenue from investment and brokerage services and asset management. Companies in this industry, such as JPMorgan Chase & Co., Bank of America Corporation, and Citigroup, Inc., comprise a significant portion of the S&P Financials Index, but due to regulatory limits, the Fund was incapable of fully benefiting from their strong performance in the fiscal year. Management Overview 23 Management Overview (continued) ICON Financial Fund (DEREK ROLLINGSON PHOTO) Derek Rollingson Portfolio Manager The Fund's holdings in the consumer finance and life & health insurance industries were decreased throughout the period based on declining relative strength. These industries were positive contributors to Fund performance while held in the portfolio. Although the thrift and mortgage finance industry gained during the period, poor performance by selected stocks in the Fund detracted from overall returns. However, the Fund's lag in thrifts and mortgage stocks was offset somewhat by the strong showing of holdings in the investment banking & brokerage industry. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE FINANCIAL SECTOR? A. Our value/price readings indicate there is value remaining in the Financial sector, and it continues to demonstrate the second-highest relative strength readings among all the sectors we study. We are maintaining the Fund's exposure to the other diversified financial services and investment banking & brokerage industries, which our analysis indicates are poised to lead as Financial stocks participate in the new market theme. PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund's underweight position in the other diversified financial services industry worked against relative returns as large companies such as Citigroup, JPMorgan Chase, and Bank of America surged late in the period. - IPO activity early in 2006 aided the Fund's investment banking & brokerage holdings, but as IPOs cooled, the industry lagged then later regained traction with increased profit from trading activity. - The Fund's lag in thrifts and mortgage finance stocks was offset somewhat by the strong showing of holdings in the investment banking & brokerage industry. 24 Management Overview INDUSTRY COMPOSITION September 30, 2006 Investment Banking & Brokerage 17.0% Other Diversified Financial Services 15.5% Diversified Banks 14.0% Asset Management & Custody Banks 9.8% Diversified Capital Markets 8.2% Multi-Line Insurance 7.0% Thrifts & Mortgage Insurance 6.1% Life & Health Insurance 5.6% Mortgage Reits 5.1% Consumer Finance 5.1% Property & Casualty Insurance 3.4% Real Estate Management & Development 1.7% Reinsurance 1.4%
Percentages are based upon net assets. Management Overview 25 Management Overview (continued) ICON Financial Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 7/1/97 ----------------------------------------------------------------------------------------- ICON Financial Fund 15.53% 10.93% 11.03% ----------------------------------------------------------------------------------------- S&P 1500 Financials Index 19.93% 10.10% 9.89% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 6.67% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 [LINE GRAPH]
S&P 1500 FINANCIALS S&P COMPOSITE 1500 ICON FINANCIAL FUND INDEX INDEX ------------------- ------------------- ------------------ 7/1/97 10000 10000 10000 9/30/97 10510 11141 10796 10526 12020 11056 12003 13426 12552 12294 13821 12857 9/30/98 9411 10941 11474 11267 13265 13967 11878 14190 14474 12442 14931 15600 9/30/99 10357 12642 14608 11074 13668 16795 11342 13923 17314 11366 13526 16865 9/30/00 14307 16727 16858 16613 17081 15626 15598 15435 13804 17694 16730 14711 9/30/01 15675 14787 12521 17047 15904 13963 17625 16526 14097 16375 15375 12285 9/30/02 13812 12812 10164 14014 13719 10988 13011 13027 10621 16193 15404 12291 9/30/03 16899 16097 12673 19659 18038 14238 21045 18958 14543 20714 18507 14796 9/30/04 21046 18637 14519 23264 20187 15917 21736 18903 15601 22127 19777 15869 9/30/05 22788 19945 16472 23834 21511 16821 25491 22334 17637 25126 22245 17334 9/30/06 26327 23920 18171
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 7/1/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 26 Management Overview Schedule of Investments ICON Financial Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (99.9%) 66,800 A.G. Edwards, Inc. $ 3,559,104 126,200 American Capital Strategies, Ltd. 4,981,114 235,300 American International Group, Inc. 15,590,978 116,600 Ameriprise Financial, Inc. 5,468,540 131,900 Ameritrade Holdings Corp. 2,486,315 409,500 Anthracite Capital, Inc. 5,266,170 210,200 Banco Bilbao Vizcaya Argentaria, S.A. - ADR 4,861,926 327,600 Banco Santander Central Hispano SA - ADR 5,172,804 340,300 Bank of America Corp. 18,229,871 61,800 Bank of Ireland - ADR 4,868,604 94,800 BNP Paribas - ADR 5,094,742 214,800 Cash America International, Inc. 8,394,384 75,900 China Life Insurance Co., Ltd. - ADR 5,932,344 202,200 Citigroup, Inc. 10,043,274 43,800 Comerica, Inc. 2,493,096 166,100 Credit Suisse Group - ADR 9,625,495 78,300 Deutsche Bank AG - ADR 9,450,810 25,900 Everest Re Group, Ltd. 2,526,027 183,100 Fannie Mae 10,237,121 153,900 Freddie Mac 10,208,187 76,500 Franklin Resources, Inc. 8,089,875 114,100 Horace Mann Educators Corp. 2,194,143 76,500 HSBC Holdings PLC - ADR 7,002,045 174,100 ICICI Bank, Ltd. - ADR 5,346,611 246,700 ING Group N.V. - ADR 10,849,866 103,400 iStar Financial, Inc. 4,311,780 74,800 Jones Lang LaSalle, Inc. 6,393,904
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 386,300 JPMorgan Chase & Co. $ 18,140,648 66,000 Lehman Brothers Holdings, Inc. 4,874,760 52,500 Lincoln National Corp. 3,259,200 146,400 Loews Corp. 5,548,560 190,700 MCG Capital Corp. 3,114,131 130,700 Mellon Financial Corp. 5,110,370 145,100 Merrill Lynch & Co., Inc. 11,349,722 147,400 MetLife, Inc. 8,354,632 380,100 MFA Mortgage Investments, Inc. 2,831,745 196,900 Morgan Stanley 14,355,979 231,200 Newcastle Investment Corp. 6,337,192 151,600 Philadelphia Consolidated Holding Corp.(a) 6,030,648 37,900 Protective Life Corp. 1,733,925 64,900 Provident Financial Holdings, Inc. 1,956,086 18,400 Prudential Financial, Inc. 1,403,000 46,600 RenaissanceRe Holdings, Ltd. 2,590,960 43,200 State Street Corp. 2,695,680 105,800 The Allstate Corp. 6,636,834 186,400 The Bank of New York Co., Inc. 6,572,464 38,100 The Bear Stearns Cos., Inc. 5,337,810 149,400 The Charles Schwab Corp. 2,674,260 49,000 The First Marblehead Corp. 3,393,740 80,100 The Goldman Sachs Group, Inc. 13,550,516 29,800 The Hartford Financial Services Group, Inc. 2,585,150 283,600 TradeStation Group, Inc.(a) 4,273,852 187,200 UBS AG - ADR 11,102,832 75,900 US Bancorp 2,521,398
Schedule of Investments 27 Schedule of Investments (continued) ICON Financial Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 100,300 Wachovia Corp. $ 5,596,740 238,600 Wells Fargo & Co. 8,632,548 154,700 World Acceptance Corp.(a) 6,803,706 ------------ TOTAL COMMON STOCKS (COST $330,343,646) 368,048,218
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SHORT-TERM INVESTMENTS (4.6%) $17,061,761 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# $ 17,061,761 ------------ TOTAL SHORT-TERM INVESTMENT (COST $17,061,761) 17,061,761 TOTAL INVESTMENTS (COST $347,405,407) 104.5% 385,109,979 LIABILITIES LESS OTHER ASSETS (4.5)% (16,496,187) ------------ TOTAL NET ASSETS 100.0% $368,613,792 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. 28 Schedule of Investments Management Overview ICON Healthcare Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 96.4% Top 10 Equity Holdings 27.8% Number of Stocks 67 Short-Term Investments 5.6% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Johnson & Johnson, Inc. 3.5% AmerisourceBergen Corp. 3.5% Henry Schein, Inc. 2.9% McKesson HBOC, Inc. 2.9% Celgene Corp. 2.7% Eli Lilly & Co. 2.6% Forest Laboratories, Inc. 2.5% Merck & Co., Inc. 2.4% AstraZeneca PLC - ADR 2.4% Mylan Laboratories, Inc. 2.4% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. In the Fund's fiscal year ended September 30, 2006, the S&P 1500 Health Care Index gained 6.92%, and the Fund's broad benchmark, the S&P Composite 1500 Index, returned 10.32%. The ICON Healthcare Fund underperformed both indexes, appreciating 1.56% for the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Performance within the Health Care sector ebbed and flowed during the reporting period. Early on, the economic setting appeared to favor more economically sensitive sectors and industries, leaving the Health Care sector behind. As the reporting period continued, fears of an economic slowdown persisted, and Health Care stocks improved after a significant market theme reversal that began in mid-May. The Fund followed a similar pattern of performance. From the beginning of the period through the last part of March 2006, the Fund trended higher as cyclical industries led. Then, from late March through mid-July, the Fund lagged, finally starting to rise after the value we associated with the sector evidently began to be realized. Even so, this late lift was not enough to outperform the benchmarks. The Fund's 12-month results were influenced by several factors. From an industry perspective, large-cap pharmaceuticals had largely been ignored by investors during most of the period. But, starting in July, this industry started to move higher at a faster pace than others within the sector. The pharmaceuticals group was the best-performing industry in the S&P 1500 Health Care Index for the period and is the index's largest industry weighting on a market capitalization basis. Although pharmaceuticals was the Fund's largest industry weighting during the period, it was still underweight vs. the index's 46% position. This relative underweight position and weak stock performance worked against Fund returns. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. For much of the reporting period, the ICON system indicated that smaller cap cyclical industries were poised to be the market leaders, and even though they were on the lower end of our quality ratings, the Fund was tilted toward these areas based on attractive valuations. When our system detected a market shift featuring a larger-cap defensive theme, we began to gradually reposition the Fund toward these new leaders. Clear industry leadership was slow to emerge, however, and the Fund missed some gains as we patiently waited for the ambiguity to ease. Management Overview 29 Management Overview (continued) ICON Healthcare Fund (J.C. WALLER III PHOTO) J.C. Waller, III Portfolio Manager As mentioned, underweighted exposure to the strong-performing pharmaceuticals industry hindered returns. While we continually increased the Fund's position in this industry as it showed dominance, the Fund's holdings did not compete well with the Index. An overweight position in the health care services industry proved beneficial during the period, but it was not enough to overcome the negative effects of poor first-half industry performance from the Fund's healthcare equipment and pharmaceuticals holdings. However, strong stock performance within the biotechnology industry helped offset some of the losses from the Fund's weak smaller-cap pharmaceuticals issues, which were largely eliminated from the Fund due to what we perceived to be declining relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE HEALTH CARE SECTOR? A. Value within the Health Care sector remains widespread in our opinion, and our valuations indicate Health Care is a bargain relative to other sectors of the market. If forecasts for a slowing economy prove to be true, it would be logical for the Health Care sector to be a beneficiary with its more defensive nature. As we continue to pursue the new market theme that we saw materialize in the final three months of the fiscal year, our numbers are indicating leadership in companies that happen to be larger-cap and recession-proof. PERFORMANCE HIGHLIGHTS September 30, 2006 - A market shift featuring a larger-cap defensive theme motivated a significant repositioning in the Fund's composition, and performance suffered while we awaited clear industry leadership. - The Fund lagged its benchmarks due to a relative underweight position and weak stock performance in the pharmaceuticals industry. - Poor first-half industry performance from health care equipment and smaller cap pharmaceuticals was a drag on returns. 30 Management Overview INDUSTRY COMPOSITION September 30, 2006 Pharmaceuticals 28.9% Health Care Distributors 14.0% Health Care Services 12.7% Biotechnology 9.0% Managed Health Care 8.4% Health Care Facilities 8.3% Health Care Equipment 6.8% Life Science Tools & Services 3.7% Health Care Supplies 2.0% Health Care Technology 1.4% Drug Retail 0.8% Specialized Consumer Services 0.4%
Percentages are based upon net assets. Management Overview 31 AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 2/24/97 ----------------------------------------------------------------------------------------- ICON Healthcare Fund 1.56% 10.74% 12.49% ----------------------------------------------------------------------------------------- S&P 1500 Health Care Index 6.92% 2.67% 8.31% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 7.54% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 [LINE GRAPH]
S&P 1500 HEALTH CARE S&P COMPOSITE 1500 ICON HEALTHCARE FUND INDEX INDEX -------------------- -------------------- ------------------ 2/24/97 10000.00 10000.00 10000.00 9460.00 8940.00 9368.00 11080.00 11104.00 10981.00 9/30/97 11780.00 11169.00 11933.00 11644.00 11995.00 12221.00 13319.00 14014.00 13874.00 13813.00 14945.00 14211.00 9/30/98 12224.00 14703.00 12682.00 13427.00 16953.00 15438.00 13500.00 17464.00 15999.00 13863.00 16807.00 17243.00 9/30/99 11571.00 15192.00 16147.00 13938.00 15787.00 18564.00 15234.00 16050.00 19137.00 17042.00 19693.00 18642.00 9/30/00 17976.00 19880.00 18634.00 19936.00 21802.00 17272.00 18731.00 18405.00 15258.00 20498.00 18659.00 16261.00 9/30/01 18585.00 18850.00 13839.00 19303.00 19285.00 15434.00 19845.00 19189.00 15582.00 19524.00 16124.00 13580.00 9/30/02 17540.00 14975.00 11234.00 17523.00 15629.00 12146.00 17337.00 15824.00 11740.00 20236.00 17535.00 13585.00 9/30/03 20812.00 16927.00 14008.00 22981.00 18382.00 15738.00 23895.00 18439.00 16075.00 24777.00 18954.00 16354.00 9/30/04 23201.00 17940.00 16048.00 27102.00 18998.00 17594.00 27934.00 18932.00 17244.00 29598.00 19748.00 17540.00 9/30/05 30483.00 20115.00 18207.00 30871.00 20421.00 18593.00 32198.00 20762.00 19495.00 30060.00 19707.00 19159.00 9/30/06 30956.00 21506.00 20085.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 2/24/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 32 Management Overview Schedule of Investments ICON Healthcare Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- COMMON STOCKS (96.4%) 200,000 Adams Respiratory Therapeutics, Inc.(a) $ 7,318,000 25,000 Alliance Imaging, Inc.(a) 195,250 150,000 Alpharma, Inc. - Class A 3,508,500 100,000 Amedisys, Inc.(a) 3,967,000 500,000 AmerisourceBergen Corp. 22,600,000 150,000 Amgen, Inc.(a) 10,729,500 225,000 AMN Healthcare Services, Inc.(a) 5,343,750 250,000 AstraZeneca PLC - ADR 15,625,000 250,000 Barr Pharmaceuticals, Inc.(a) 12,985,000 100,000 Biogen Idec, Inc.(a) 4,468,000 225,000 Biovail Corp. - ADR 3,429,000 150,000 Cambrex Corp. 3,106,500 225,000 Cardinal Health, Inc. 14,791,500 225,000 Caremark Rx, Inc. 12,750,750 400,000 Celgene Corp.(a) 17,320,000 125,000 Cerner Corp.(a) 5,675,000 125,000 CIGNA Corp. 14,540,000 250,000 Community Health Systems, Inc.(a) 9,337,500 150,000 Coventry Health Care, Inc.(a) 7,728,000 150,000 CVS Corp. 4,818,000 225,000 DaVita, Inc.(a) 13,020,750 250,000 Dr. Reddy's Laboratories, Ltd. - ADR 3,955,000 81,500 Edwards Lifesciences Corp.(a) 3,797,085 300,000 Eli Lilly & Co. 17,100,000 300,000 Emdeon Corp.(a) 3,513,000 175,000 Fisher Scientific International, Inc.(a) 13,692,000 325,000 Forest Laboratories, Inc.(a) 16,448,250
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- 50,000 Genentech, Inc.(a) $ 4,135,000 100,000 Genzyme Corp.(a) 6,747,000 150,000 Gilead Sciences, Inc.(a) 10,305,000 208,500 Healthways, Inc.(a) 9,299,100 375,000 Henry Schein, Inc.(a) 18,802,500 200,000 Humana, Inc.(a) 13,218,000 300,000 Immucor, Inc.(a) 6,723,000 200,000 Inventiv Health, Inc.(a) 6,406,000 350,000 Johnson & Johnson, Inc. 22,729,000 325,000 K-V Pharmaceutical Co.(a) 7,702,500 500,000 King Pharmaceuticals, Inc.(a) 8,515,000 125,000 Laboratory Corp. of America Holdings(a) 8,196,250 200,000 LifeCell Corp.(a) 6,444,000 150,000 Lifepoint Hospitals, Inc.(a) 5,298,000 100,000 Lincare Holdings, Inc.(a) 3,464,000 280,000 Manor Care, Inc. 14,638,400 200,000 Martek Biosciences Corp.(a) 4,302,000 75,000 Matthews International Corp. - Class A 2,760,750 350,000 McKesson HBOC, Inc. 18,452,000 200,000 MedcoHealth Solutions, Inc.(a) 12,022,000 375,000 Merck & Co., Inc. 15,712,500 775,000 Mylan Laboratories, Inc. 15,600,750 200,000 Owens & Minor, Inc. 6,578,000 550,000 Pfizer, Inc. 15,598,000 100,000 Possis Medical, Inc.(a) 985,000
Schedule of Investments 33 Schedule of Investments (continued) ICON Healthcare Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- 475,000 PSS World Medical, Inc.(a) $ 9,495,250 200,000 Psychiatric Solutions, Inc.(a) 6,818,000 125,000 Quest Diagnostics, Inc. 7,645,000 180,000 ResMed, Inc.(a) 7,245,000 200,000 Respironics, Inc.(a) 7,722,000 150,000 Sciele Pharma, Inc.(a) 2,826,000 250,000 Stryker Corp. 12,397,500 225,000 Teva Pharmaceutical Industries, Ltd. - ADR 7,670,250 175,000 Thermo Electron Corp.(a) 6,882,750 100,000 United Surgical Partners International, Inc.(a) 2,483,000 225,000 UnitedHealth Group, Inc. 11,070,000
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- 250,000 Universal Health Services, Inc. - Class B $ 14,982,500 100,000 Wellpoint, Inc.(a) 7,705,000 200,000 Wyeth 10,168,000 175,000 Zimmer Holdings, Inc.(a) 11,812,500 ------------ TOTAL COMMON STOCKS (COST $539,402,020) 623,318,835 SHORT-TERM INVESTMENTS (5.6%) $36,047,065 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# 36,047,065 ------------ TOTAL SHORT TERM INVESTMENT (COST $36,047,065) 36,047,065 TOTAL INVESTMENTS 102.0% (COST $575,449,085) 659,365,900 LIABILITIES LESS OTHER ASSETS (2.0)% (13,163,851) ------------ TOTAL NET ASSETS 100.0% $646,202,049 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt 34 Schedule of Investments Management Overview ICON Industrials Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 94.8% Top 10 Equity Holdings 38.1% Number of Stocks 70 Short-Term Investments 3.3% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 General Electric Co. 15.2% Lockheed Martin Corp. 3.0% Ryder System, Inc. 3.0% Bristow Group, Inc. 2.8% Kirby Corp. 2.7% Northrop Grumman Corp. 2.6% Alaska Air Group, Inc. 2.4% General Dynamics Corp. 2.3% Gol-Linhas Aereas Inteligentes S.A. - ADR 2.1% Raytheon Co. 2.0% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. For the Fund's fiscal year ended September 30, 2006, its sector-specific benchmark, the S&P 1500 Industrials Index, gained 12.11%, and its broad benchmark, the S&P Composite 1500 Index, returned 10.32%. The ICON Industrials Fund fell behind both benchmarks with a 7.49% return. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. For much of the fiscal year, the Fund took advantage of the cyclical theme that has been in place since March 2003, outperforming both its broad and narrow benchmarks, even through a steep sell-off from mid-May to mid-June 2006. After three years of solid economic growth that greatly benefited economically sensitive industries such as those in the Industrials sector, we saw a sharp reversal begin in May that brought about a new theme featuring defensive industries. Very quickly, many top-performing industries that are more impacted by the ups and downs of the economy, especially transportation-related industries, became some of the worst performers in the sector. We watched our system closely during this period, waiting for our relative strength metrics to confirm the true industry leaders. As we gained more confidence that a new theme was indeed taking hold, we gradually moved away from cyclical holdings into more mature, recession-proof stocks. We saw more defensive industries, such as commercial printing, environmental & facilities services, and diversified commercial & professional services, emerge as the new industry leaders. While the ICON system's rigorous focus on valuation identified the new theme, the Fund missed some upside as we waited for leadership to develop clearly. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. A strong point of the ICON system is its ability to recognize relative strength and to apply its method of rotating out of weak industries into those with improving relative strength. In July, our system began to distinguish that a new defensive theme was emerging, but we patiently waited for clarity from our relative strength readings to point to the new leading industries. As we gradually repositioned the Fund's holdings into the larger, more mature companies that represented relative strength, performance suffered. Management Overview 35 Management Overview (continued) ICON Industrials Fund Overall performance during the period was hampered by the Fund's underweight exposure to General Electric (GE), which makes up more than 23% of the S&P 1500 Industrials Index. GE is part of the industrial conglomerates industry, which our relative strength measures have placed near the bottom of all industries for much of the year. Beginning in early August, GE rallied with other larger-cap names in the sector, gaining 9% in just two months. Strong late-period performance and GE's significant weighting in the sector-specific index worked against relative returns. The Fund's selection of stocks in the aerospace & defense industry, which contributed the most to the total return of the S&P 1500 Industrials Index, was a factor in the Fund's relative underperformance. While the Fund's average position in the industry was only slightly underweight the benchmark, our valuation discipline did not point us toward stronger-performing large-cap names such as Boeing and Lockheed Martin until very late in the period when the market was favoring more mature companies. Finally, the Fund's overweighting in the building products industry hindered performance. Although this industry showed attractive valuations and strength from September 2005 through early May 2006, investor fears, particularly concerns over a potential housing slump, negatively impacted this industry and detracted the most from the Fund's total return. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE INDUSTRIALS SECTOR? A. Although we currently see the greatest value in economically sensitive industries such as trucking and building products, we are finding the best combination of relative strength and value in more defensive industries such as commercial printing, environmental & facilities services, and diversified commercial & professional services. Using our valuation system, we plan to continue increasing exposure to the defensive industries that we see beginning to show leadership within the sector while keeping our eye on stocks with the best valuations. 36 Management Overview (TODD BURCHETT PHOTO) Todd Burchett Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund lagged because of underweight exposure to General Electric, which contributed substantially to the benchmark's return but had poor relative strength for most of the period, according to our analysis. - The Fund repositioned into stronger-performing larger-cap names in the aerospace & defense industry late in the period but underweight positions caused relative performance to lag. - Investor concerns about the housing market negatively impacted the Fund's overweight position in the building products industry. Management Overview 37 Management Overview (continued) ICON Industrials Fund INDUSTRY COMPOSITION September 30, 2006 Aerospace & Defense 23.5% Industrial Conglomerates 15.2% Industrial Machinery 12.1% Oil & Gas Storage & Transportation 8.4% Marine 6.7% Airlines 6.0% Diversified Commercial & Professional Services 4.1% Trucking 3.0% Environmental & Facilities Services 2.9% Oil & Gas Equipment & Services 2.8% Commercial Printing 2.6% Construction & Farm Machinery & Heavy Trucks 2.5% Railroads 1.6% Motorcycle Manufacturers 1.5% Electrical Components & Equipment 1.4% Air Freight & Logistics 0.5%
Percentages are based upon net assets. 38 Management Overview AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 5/9/97 ----------------------------------------------------------------------------------------- ICON Industrials Fund 7.49% 9.81% 5.34% ----------------------------------------------------------------------------------------- S&P 1500 Industrials Index 12.11% 8.95% 6.99% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 7.48% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The performance of the S&P 1500 Industrials Index includes the reinvestment of dividends and capital gains distributions beginning on January 1, 2002. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
S&P 1500 INDUSTRIALS S&P COMPOSITE 1500 ICON INDUSTRIALS FUND INDEX INDEX --------------------- -------------------- ------------------ 5/9/97 10000.00 10000.00 10000.00 10790.00 10956.00 10767.00 9/30/97 12400.00 11623.00 11700.00 11605.00 11509.00 11982.00 12995.00 12970.00 13604.00 11819.00 12459.00 13934.00 9/30/98 9662.00 10543.00 12435.00 12226.00 12465.00 15137.00 11503.00 12572.00 15687.00 13080.00 14186.00 16907.00 9/30/99 11295.00 13339.00 15832.00 11402.00 14537.00 18202.00 11068.00 14412.00 18764.00 10568.00 14190.00 18278.00 9/30/00 10805.00 15263.00 18271.00 11888.00 15228.00 16935.00 10706.00 13632.00 14961.00 12055.00 15157.00 15943.00 9/30/01 10205.00 12296.00 13569.00 12079.00 14343.00 15133.00 13164.00 14377.00 15278.00 12114.00 12531.00 13315.00 9/30/02 9500.00 10293.00 11015.00 9536.00 10852.00 11909.00 8462.00 10266.00 11511.00 9680.00 11879.00 13320.00 9/30/03 10504.00 12492.00 13735.00 12032.00 14340.00 15431.00 12127.00 14277.00 15761.00 12807.00 15482.00 16035.00 9/30/04 12556.00 15376.00 15735.00 14466.00 17028.00 17251.00 14155.00 16729.00 16908.00 14023.00 16279.00 17198.00 9/30/05 15158.00 16832.00 17852.00 15640.00 17672.00 18230.00 18241.00 19190.00 19115.00 18117.00 19115.00 18786.00 9/30/06 16292.00 18871.00 19693.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 5/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 39 Schedule of Investments ICON Industrials Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (94.8%) 40,000 AAR Corp.(a) $ 953,600 60,000 AGCO Corp.(a) 1,521,000 67,000 Alaska Air Group, Inc.(a) 2,548,680 17,500 Alliant Techsystems, Inc.(a) 1,418,550 30,000 American Commercial Lines, Inc.(a) 1,783,500 38,300 AMR Corp.(a) 886,262 66,800 Barnes Group, Inc. 1,173,008 85,000 Bristow Group, Inc.(a) 2,924,000 9,000 British Airways PLC - ADR(a) 720,180 6,000 Canadian National Railway Co. - ADR 251,640 10,000 Canadian Pacific Railway, Ltd. - ADR 497,400 25,000 Ceradyne, Inc.(a) 1,027,250 15,000 Cintas Corp. 612,450 10,000 Consolidated Graphics, Inc.(a) 601,700 17,000 CSX Corp. 558,110 50,000 Curtiss-Wright Corp. 1,517,500 20,000 Danaher Corp. 1,373,400 50,000 Double Hull Tankers, Inc. 687,500 10,000 Dover Corp. 474,400 26,000 DRS Technologies, Inc. 1,135,420 22,000 Dun & Bradstreet Corp.(a) 1,649,780 25,000 Dynamex, Inc.(a) 518,750 20,000 Eaton Corp. 1,377,000 25,000 Ennis, Inc. 541,250 14,000 Equifax, Inc. 513,940 75,000 Excel Maritime Carriers, Ltd.(a) 888,750 15,000 Franklin Electric Co., Inc. 797,100 25,000 Frontline, Ltd. 962,750 32,000 Gardner Denver, Inc.(a) 1,058,560
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 34,000 General Dynamics Corp. $ 2,436,780 457,300 General Electric Co. 16,142,690 30,000 General Maritime Corp. 1,097,400 65,000 Gol - Linhas Aereas Inteligentes S.A. - ADR 2,232,750 25,000 Harley-Davidson, Inc. 1,568,750 10,000 Harsco Corp. 776,500 61,700 Healthcare Services Group, Inc. 1,552,372 15,000 HEICO Corp. 514,500 14,800 IDEX Corp. 637,140 28,000 Ingersoll Rand Co., Ltd. - Class A 1,063,440 20,000 Kaydon Corp. 740,400 90,000 Kirby Corp.(a) 2,819,700 25,000 Knightsbridge Tankers, Ltd. 645,500 15,000 L-3 Communications Holdings, Inc. 1,174,950 19,000 Lincoln Electric Holdings, Inc. 1,034,550 37,500 Lockheed Martin Corp. 3,227,250 40,000 Moog, Inc.-Class A(a) 1,386,400 40,000 Northrop Grumman Corp. 2,722,800 50,000 OMI Corp. 1,085,500 30,000 Overseas Shipholding Group, Inc. 1,853,100 20,000 PACCAR, Inc. 1,140,400 10,000 Parker Hannifin Corp. 777,300 25,000 Precision Castparts Corp. 1,579,000 50,000 Quintana Maritime, Ltd. 512,500 50,000 R.R. Donnelley & Sons Co. 1,648,000 45,000 Raytheon Co. 2,160,450 15,000 Regal-Beloit Corp. 652,500
40 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 50,000 Republic Services, Inc. $ 2,010,500 61,100 Ryder System, Inc. 3,157,648 50,000 Seaspan Corp. 1,124,000 30,000 Ship Finance International, Ltd. 597,000 20,000 Teekay Shipping Corp. 822,200 25,000 Teledyne Technologies, Inc.(a) 990,000 15,000 The Middleby Corp.(a) 1,155,900 40,000 Timken Co. 1,191,200 25,000 Tsakos Energy Navigation, Ltd. 1,115,000 5,000 Union Pacific Corp. 440,000 20,000 United Industrial Corp. 1,070,000 25,000 United Technologies Corp. 1,583,750
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 15,000 Waste Connections, Inc.(a) $ 568,650 15,000 Waste Management, Inc. 550,200 ------------ TOTAL COMMON STOCKS (COST $91,587,836) 100,532,100 SHORT-TERM INVESTMENTS (3.3%) $3,471,837 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# 3,471,837 ------------ TOTAL SHORT-TERM INVESTMENT (COST $3,471,837) 3,471,837 TOTAL INVESTMENTS 98.1% (COST $95,059,673) 104,003,937 OTHER ASSETS LESS LIABILITIES 1.9% 2,010,713 ------------ TOTAL NET ASSETS 100.0% $106,014,650 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. Schedule of Investments 41 Management Overview ICON Information Technology Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 100.2% Top 10 Equity Holdings 59.1% Number of Stocks 54 Short-Term Investments 2.5% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Microsoft Corp. 12.3% Intel Corp. 7.8% Cisco Systems, Inc. 7.0% International Business Machines Corp. 6.3% Google, Inc. - Class A 5.8% Hewlett-Packard Co. 5.6% Oracle Corp. 4.7% Motorola, Inc. 3.5% Texas Instruments, Inc. 3.3% Apple Computer, Inc. 2.8% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Information Technology Fund gained 0.23% in the fiscal year ended September 30, 2006, trailing its narrow benchmarks, the S&P 1500 Information Technology Index and the NASDAQ Composite Index, which returned 4.35% and 5.84%, respectively, and also underperforming its broad benchmark, the S&P Composite 1500 Index, which returned 10.32%. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. As the Fund entered the fiscal period, domestic technology stocks were trading about 10% below our calculation of their intrinsic value and keeping pace with the broader market rally. Technology gains continued through April 2006 as strong corporate earnings seemed to prevail over investor concerns regarding rising oil and commodity prices and higher interest rates. In early May, however, a market shift occurred. Investors sold the more economically sensitive sectors that we had seen dominate the past three- and-a-half years in favor of more defensive issues. The small- and mid-cap cyclical stocks that had led the market became some of the worst performers, and more mature, stable companies from the large-cap segment of the market advanced, with an emphasis on industries that are less tied to the ups and downs of the economy. For a number of weeks, definitive market leadership was hard to discern, and we waited for our relative strength metrics to confirm the emerging industry leaders. As our system validated the emergence of a new theme, we gradually moved the Fund away from cyclical holdings into more mature, recession-proof stocks. While the ICON valuation system identified the new theme, the Fund's relative performance suffered significantly in the third and fourth fiscal quarters due to its underweighting in large capitalization stocks, which comprise a large portion of the S&P 1500 Information Technology Index and outperformed. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. The period was marked by a lack of clear and persistent industry leadership in the sector, a difficult setting for our value-driven industry rotation strategy. Because our quantitative analysis did not identify definitive combinations of industry value and relative strength for most of the year, the Fund did not take an aggressively high weighting or tilt significantly toward any one of the 15 industries we track in the sector. 42 Management Overview (ROBERT STRAUS, CMT PHOTO) Robert Straus, CMT Portfolio Manager Entering the period, the ICON system did not perceive significant industry discrepancies in the sector with respect to valuation. The Fund did not carry as large a weighting in Cisco Systems, Inc. as the benchmark due to our valuation readings. Since Cisco performed strongly during the period, as did other large-cap technology companies, the Fund's underweight position undermined relative performance. Within the Fund's industry composition, absolute performance was most hindered by exposure to the communications equipment, application software, and semiconductors industries. The systems software group also hurt relative performance, primarily due to the Fund's underweight position in Microsoft, which is classified in this industry. When our systematic approach picked up on the thematic move into larger cap names during the final fiscal quarter, we moved aggressively into the larger cap technology stocks such as Microsoft. By the end of the period, Microsoft made up 12.3% of the Fund's net assets, trading at about a 20% discount to our estimate of its intrinsic worth. Nevertheless, the relative underweighting in this stock adversely affected returns. Among the industries that contributed the most to absolute performance were IT consulting & services, systems software, and computer hardware. The internet software & services industry helped both absolute and relative performance, particularly when the Fund avoided Yahoo, which comprises 2.1% of the benchmark and declined approximately 25.3% for the period. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE INFORMATION TECHNOLOGY SECTOR? A. We continue to believe that the rally in the Information Technology sector has the potential to remain in place, based on our overall valuation of the group. We also expect the larger cap blue chip companies such as Microsoft, Intel, and Cisco to continue to lead the sector due to their strong combinations of value and relative strength. Accordingly, we have tilted the Fund toward this segment as our metrics have guided us. Management Overview 43 Management Overview (continued) ICON Information Technology Fund PERFORMANCE HIGHLIGHTS September 30, 2006 - A lack of clear and persistent industry leadership following a market reversal in mid-May made for a difficult setting for the Fund. - Relative performance suffered from an underweighting in large capitalization stocks, which comprise a large portion of the S&P 1500 Information Technology Index and performed strongly in the third and fourth fiscal quarters. - Performance was most hindered by exposure to the communications equipment, application software, semiconductors, and systems software industries. 44 Management Overview INDUSTRY COMPOSITION September 30, 2006 Systems Software 18.7% Semiconductors 18.7% Computer Hardware 17.9% Communications Equipment 16.6% Internet Software & Services 6.3% IT Consulting & Other Services 6.0% Office Electronics 4.6% Integrated Telecommunication Services 2.9% Semiconductor Equipment 2.3% Data Processing & Outsourced Services 1.5% Electronic Manufacturing Services 1.4% Electronic Equipment Manufacturers 1.2% Computer Storage & Peripherals 0.9% Technology Distributors 0.8% Application Software 0.4%
Percentages are based upon net assets. Management Overview 45 AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 2/19/97 ----------------------------------------------------------------------------------------- ICON Information Technology Fund 0.23% 2.25% 10.05% ----------------------------------------------------------------------------------------- S&P 1500 Information Technology Index 4.35% 5.76% 5.17% ----------------------------------------------------------------------------------------- NASDAQ Composite Index 5.84% 9.16% 5.85% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 7.49% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
S&P 1500 ICON INFORMATION INFORMATION NASDAQ COMPOSITE S&P COMPOSITE 1500 TECHNOLOGY FUND TECHNOLOGY INDEX INDEX INDEX ---------------- ---------------- ---------------- ------------------ 2/19/97 10000.00 10000.00 10000.00 10000.00 9210.00 9036.00 8949.00 9334.00 10850.00 10958.00 10580.00 10941.00 9/30/97 12961.00 12853.00 12379.00 11890.00 10432.00 11312.00 11546.00 12176.00 11524.00 13581.00 13511.00 13824.00 11088.00 14584.00 13960.00 14160.00 9/30/98 9569.00 14126.00 12492.00 12636.00 13975.00 19383.00 16188.00 15382.00 15490.00 21379.00 18185.00 15941.00 19901.00 24062.00 19862.00 17181.00 9/30/99 21008.00 25075.00 20319.00 16088.00 29493.00 34155.00 30129.00 18496.00 36190.00 38844.00 33868.00 19068.00 33516.00 35387.00 29387.00 18574.00 9/30/00 33456.00 30971.00 27224.00 18567.00 33646.00 21169.00 18322.00 17209.00 28149.00 16075.00 13657.00 15203.00 32236.00 18117.00 16051.00 16202.00 9/30/01 22449.00 12273.00 11140.00 13789.00 29269.00 16476.00 14507.00 15378.00 29699.00 15416.00 13738.00 15525.00 23079.00 11450.00 10903.00 13530.00 9/30/02 17208.00 8437.00 8742.00 11194.00 17151.00 10296.00 9972.00 12101.00 15568.00 10196.00 10030.00 11697.00 20892.00 12127.00 12147.00 13536.00 9/30/03 23798.00 13474.00 13388.00 13957.00 25210.00 15226.00 15035.00 15681.00 25411.00 14887.00 14982.00 16016.00 24059.00 15249.00 15402.00 16295.00 9/30/04 22736.00 13698.00 14287.00 15990.00 26190.00 15568.00 16411.00 17530.00 23340.00 14420.00 15106.00 17181.00 23831.00 14661.00 15570.00 17477.00 9/30/05 25039.00 15563.00 16314.00 18141.00 25154.00 15815.00 16760.00 18525.00 26678.00 16615.00 17829.00 19424.00 24376.00 15090.00 16579.00 19090.00 9/30/06 25095.00 16240.00 17267.00 20012.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 2/19/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 46 Management Overview Schedule of Investments ICON Information Technology Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (100.2%) 627,200 Advanced Semiconductor Engineering, Inc. - ADR(a) $ 2,929,024 154,100 Altera Corp.()(a) 2,832,358 26,800 Amphenol Corp. - Class A 1,659,724 20,100 Anixter International, Inc. 1,135,047 87,100 Apple Computer, Inc.()(a) 6,709,313 137,100 Applied Materials, Inc. 2,430,783 67,600 AT&T, Inc. 2,201,056 14,500 Brother Industries, Ltd. - ADR 1,823,784 11,800 BT Group PLC - ADR 596,726 99,450 Canon, Inc. - ADR 5,200,241 740,400 Cisco Systems, Inc.(a) 17,029,200 66,700 Cognizant Technology Solutions Corp.(a) 4,939,802 34,900 Convergys Corp.(a) 720,685 198,900 Corning, Inc.(a) 4,855,149 229,700 Dell, Inc.(a) 5,246,348 33,700 Diebold, Inc. 1,466,961 40,500 eBay, Inc.(a) 1,148,580 182,700 EMC Corp.(a) 2,188,746 42,600 Fiserv, Inc.(a) 2,006,034 39,700 Global Imaging Systems, Inc.(a) 876,179 34,800 Google, Inc. - Class A(a) 13,986,120 54,700 Harris Corp. 2,433,603 372,500 Hewlett-Packard Co. 13,667,025 9,900 High Tech Computer Corp. - GDR 1,039,500 275,700 Hon Hai Precision Industry Co., Ltd. - GDRv 3,382,849 115,400 Infosys Technologies, Ltd. - ADR 5,508,042 918,200 Intel Corp. 18,887,374 185,400 International Business Machines Corp. 15,191,676
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 28,000 KLA-Tencor Corp. $ 1,245,160 11,300 Mastercard, Inc. - Class A(a) 794,955 17,700 MEMC Electronic Materials, Inc.(a) 648,351 30,500 Mentor Graphics Corp.(a) 429,440 7,100 Mettler-Toledo International, Inc.(a) 469,665 1,093,500 Microsoft Corp. 29,885,355 338,800 Motorola, Inc. 8,470,000 26,700 National Semiconductor Corp. 628,251 56,800 Nokia Corp. - ADR 1,118,392 642,600 Oracle Corp.(a) 11,399,724 109,400 Qualcomm, Inc. 3,976,690 22,100 Research in Motion, Ltd.(a) 2,268,786 12,800 Rogers Corp.(a) 790,400 11,500 SAP AG - ADR 569,250 108,700 Satyam Computer Services, Ltd. - ADR 4,205,603 54,900 Silicon Image, Inc.(a) 698,328 614,857 Siliconware Precision Industries Co. - ADR 3,658,399 31,800 Standard Microsystems Corp.(a) 903,756 187,700 Symantec Corp.(a) 3,994,256 573,562 Taiwan Semiconductor Manufacturing Co., Ltd. - ADR 5,506,195 66,900 Telenor ASA - ADR 2,605,086 35,100 Tessera Technology, Inc.(a) 1,220,778 236,800 Texas Instruments, Inc. 7,873,600 52,000 Trident Microsystems, Inc.(a) 1,209,520 44,300 Verizon Communications, Inc. 1,644,859 261,700 Xerox Corp.(a) 4,072,052 ------------ TOTAL COMMON STOCKS (Cost $215,377,302) 242,378,780
Schedule of Investments 47 Schedule of Investments (continued) ICON Information Technology Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SHORT-TERM INVESTMENTS (2.5%) $6,174,683 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# $ 6,174,683 ------------ TOTAL SHORT-TERM INVESTMENT (COST $6,174,683) 6,174,683 TOTAL INVESTMENTS (COST $221,551,985) 102.7% 248,553,463 LIABILITIES LESS OTHER ASSETS (2.7)% (6,565,009) ------------ TOTAL NET ASSETS 100.0% $241,988,454 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. GDR Global Depositary Receipt. v Security was fair valued as of September 30, 2006. Total value of the security was $3,382,849. 48 Schedule of Investments Management Overview ICON Leisure and Consumer Staples Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 100.2% Top 10 Equity Holdings 33.2% Number of Stocks 57 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Procter & Gamble Co. 5.2% Comcast Corp. - Class A 4.2% Altria Group, Inc. 4.0% The Pepsi Bottling Group, Inc. 3.3% The DIRECTV Group, Inc. 3.0% McDonald's Corp. 2.9% Coca-Cola Enterprises, Inc. 2.8% Kroger Co. 2.7% Bunge, Ltd. 2.6% The Walt Disney Co. 2.5% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Leisure and Consumer Staples Fund gained 0.11% for the fiscal year ended September 30, 2006, trailing its sector-specific benchmarks, the S&P 1500 Consumer Staples Index and the S&P 1500 Consumer Discretionary Index, which returned 10.98% and 7.38%, respectively. Although neither index is an ideal comparison, together they provide a suitable reference for the Fund's overall performance in its sectors. Additionally, the Fund fell short of its broad benchmark, the S&P Composite 1500 Index, which returned 10.32% over the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Beginning in mid-May, the small- and mid-cap cyclical stocks that we saw dominate the first three years of the bull market rapidly became some of the worst performers in virtually every sector, but clear leadership was elusive. We watched our system closely during this time of ambiguity, waiting for our relative strength metrics to confirm the true industry leaders. As we gained more confidence that the new theme was indeed taking hold, we gradually moved away from cyclical holdings into more mature, recession-proof stocks. While the ICON system's rigorous focus on valuation identified the new theme, the Fund missed some upside as we waited for leadership to develop clearly. In addition, the Fund suffered from poor performance within several industries, including packaged foods & meats, personal products, and food distributors, and from severe declines among several specific holdings. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. On an industry basis, strong relative performance in the agricultural products, hotels, resorts & cruise lines, soft drinks, and restaurant industries was not enough to overcome the Fund's exposure to industries that were plagued by stock-specific declines, namely packaged foods & meats, personal products, and food distributors. During the fiscal year, the Fund's performance was significantly hampered by the poor showing of four individual holdings. Although these stocks initially met our valuation and relative strength criteria, their abysmal market performance caused meaningful losses to the Fund. - Inventure Group Inc., which makes snack chips, dips, and store brand snack foods, lost 30% in one day when it announced negative earnings Management Overview 49 Management Overview (continued) ICON Leisure and Consumer Staples Fund (DEREK ROLLINGSON PHOTO) Derek Rollingson Portfolio Manager and an intent to acquire licenses for Mrs. Field's, a maker of brownies, cookies, pretzels, and other baked goods. - Spectrum Brands Inc., which sells rechargeable and hearing aid batteries and is the No. 3 battery maker in the United States, lost 28% in one day after it lowered earnings guidance. - Wholesale food distributor Nash-Finch Company also fell drastically after missing earnings per share estimates by 58%. - The Fund's returns were further weakened by disappointing performance from United Natural Foods, Inc. and Parlux Fragrances, Inc. All stocks mentioned above were liquidated from the Fund during the period. The Fund's underweight position in companies such as Wal-Mart Stores, Inc. was also a detractor to relative performance. Wal-Mart accounts for nearly 10% of the S&P Consumer Staples Index and gained almost 14% during the last 12 months, but we held a smaller position due to what we believed was a less than optimal combination of value and relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE LEISURE AND CONSUMER STAPLES SECTORS? A. The average Leisure and Consumer Staples stock in ICON's database is trading well below our estimate of fair value, so we are encouraged from a sector valuation perspective. We continue to make adjustments to the Fund in an effort to capture the new market theme that emerged in the final three months of the period. Specifically, we are being guided by the ICON system to reduce exposure to the food distributors industry, based on declining relative strength, and to increase the Fund's position in the broadcasting & cable TV industry, which we see demonstrating value. PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund responded late in the period to the significant market reversal that began in May, but gave up some gains while it waited for clarity in industry leadership. - Positions in the poor-performing packaged foods & meats, personal products, and food distributors industries caused the Fund to lag its benchmark. - An underweight position in larger companies such as Wal-Mart Stores, Inc. was a detractor to relative performance. 50 Management Overview INDUSTRY COMPOSITION September 30, 2006 Broadcast & Cable TV 15.4% Packaged Foods & Meats 12.4% Soft Drinks 9.8% Movies & Entertainment 6.6% Household Products 5.9% Restaurants 5.6% Personal Products 5.4% Food Retail 5.1% Agriculture Products 4.2% Tobacco 4.0% Publishing 3.8% Hotels, Resorts & Cruise Lines 3.6% Hypermarkets & Super Centers 3.2% Specialty Stores 2.9% Drug Retail 2.4% Distillers & Vintners 1.9% Leisure Products 1.8% Computer Hardware 1.5% Internet Software & Services 1.5% Food Distributors 1.3% Motorcycle Manufacturers 1.0% Construction & Farm Machinery & Heavy Trucks 0.9%
Percentages are based upon net assets. Management Overview 51 Management Overview (continued) ICON Leisure and Consumer Staples Fund AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 5/9/97 ----------------------------------------------------------------------------------------- ICON Leisure and Consumer Staples Fund 0.11% 10.12% 9.60% ----------------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 7.38% 8.37% 7.32% ----------------------------------------------------------------------------------------- S&P 1500 Consumer Staples Index 10.98% 7.14% 6.02% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 7.48% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The performance of the S&P 1500 Consumer Discretionary Index includes the reinvestment of dividends and capital gain distributions beginning on January 1, 2002. Additional information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON LEISURE AND CONSUMER STAPLES S&P 1500 CONSUMER S&P 1500 CONSUMER S&P COMPOSITE 1500 FUND DISCRETIONARY INDEX STAPLES INDEX INDEX ---------------- ------------------- ----------------- ------------------ 5/9/97 10000.00 10000.00 10000.00 10000.00 10440.00 10706.00 10532.00 10769.00 9/30/97 11350.00 11749.00 10622.00 11703.00 11555.00 12154.00 11706.00 11985.00 12688.00 14320.00 12925.00 13606.00 12347.00 15454.00 13400.00 13937.00 9/30/98 11826.00 12705.00 11479.00 12437.00 13616.00 16298.00 14093.00 15140.00 14416.00 17659.00 13631.00 15689.00 15440.00 18587.00 13776.00 16910.00 9/30/99 13571.00 16840.00 12269.00 15835.00 13002.00 19631.00 13169.00 18205.00 12647.00 19006.00 12188.00 18768.00 13559.00 17347.00 12880.00 18282.00 9/30/00 14286.00 16547.00 12860.00 18274.00 14871.00 15912.00 13891.00 16938.00 15042.00 15034.00 12860.00 14963.00 17058.00 16612.00 13581.00 15946.00 9/30/01 14609.00 12992.00 12273.00 13572.00 18594.00 15605.00 12863.00 15136.00 21074.00 16136.00 14032.00 15281.00 20035.00 14409.00 13625.00 13317.00 9/30/02 17369.00 11935.00 12199.00 11017.00 16795.00 12210.00 12350.00 11911.00 16129.00 11940.00 11560.00 11513.00 18595.00 14322.00 12639.00 13323.00 9/30/03 19262.00 14736.00 12824.00 13737.00 21387.00 16872.00 13864.00 15434.00 22999.00 17298.00 14683.00 15764.00 23512.00 17161.00 14784.00 16038.00 9/30/04 22504.00 16962.00 13930.00 15738.00 25211.00 19303.00 15074.00 17254.00 25627.00 18422.00 15205.00 16911.00 24876.00 18454.00 15159.00 17202.00 9/30/05 23632.00 18085.00 15611.00 17855.00 22656.00 18379.00 15666.00 18234.00 24351.00 19041.00 15951.00 19118.00 22887.00 18586.00 16412.00 18789.00 9/30/06 23659.00 19419.00 17326.00 19697.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 5/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 52 Management Overview Schedule of Investments ICON Leisure And Consumer Staples Fund September 30, 2006
SHARES VALUE --------------------------------------------- COMMON STOCKS (100.2%) 35,000 4Kids Entertainment, Inc.(a) $ 577,500 52,900 A.C. Moore Arts & Crafts, Inc.(a) 1,006,687 24,700 AGCO Corp.(a) 626,145 18,500 Alberto-Culver Co. 935,915 35,500 Altria Group, Inc. 2,717,525 94,800 American Italian Pasta Co.(a) 737,544 24,300 BJ's Wholesale Club, Inc.(a) 709,074 31,000 Bunge, Ltd. 1,796,450 73,100 Cablevision Systems Corp. - Class A 1,660,101 22,300 Carnival Corp. 1,048,769 9,700 Central Garden & Pet Co.(a) 468,122 15,400 Chattem, Inc.(a) 540,848 27,800 Clear Channel Communications, Inc. 802,030 90,600 Coca-Cola Enterprises, Inc. 1,887,198 77,200 Comcast Corp. - Class A(a) 2,844,820 59,100 ConAgra Foods, Inc. 1,446,768 28,100 Constellation Brands, Inc.(a) 808,718 32,600 Corn Products International, Inc. 1,060,804 50,100 CVS Corp. 1,609,212 25,800 Dean Foods Co.(a) 1,084,116 21,400 Dick's Sporting Goods, Inc.(a) 974,128 43,200 EchoStar Communications Corp. - Class A(a) 1,414,368 14,900 Fomento Economico Mexicano, S.A. de C.V. - ADR 1,444,406 2,500 Google, Inc. - Class A(a) 1,004,750 81,500 Gruma S.A. - ADR 986,150 23,200 Grupo Televisa S.A. - ADR 493,232 10,800 Harley-Davidson, Inc. 677,700
SHARES VALUE --------------------------------------------- 28,400 Hewlett-Packard Co. $ 1,041,996 21,200 Hilton Hotels Corp. 590,420 30,500 Hormel Foods Corp. 1,097,390 21,300 Jack In the Box, Inc.(a) 1,111,434 12,700 Kellogg Co. 628,904 79,000 Kroger Co. 1,828,060 20,200 Marriott International, Inc. - Class A 780,528 63,000 Mattel, Inc. 1,241,100 50,800 McDonald's Corp. 1,987,296 177,400 Mediacom Communications Corp.(a) 1,263,088 12,400 Meredith Corp. 611,692 23,000 MGP Ingredients, Inc. 489,210 33,500 NBTY, Inc.(a) 980,545 12,700 Nestle S.A. - ADR 1,110,615 51,900 News Corp. - Class A 1,019,835 37,200 O'Charley's, Inc.(a) 705,684 16,700 PepsiCo, Inc. 1,089,842 57,600 Procter & Gamble Co. 3,570,048 106,300 Rentrak Corp.(a) 1,213,946 55,400 Safeway, Inc. 1,681,390 39,500 Scholastic Corp.(a) 1,230,425 17,500 Smithfield Foods, Inc.(a) 472,850 54,100 Spartan Stores, Inc. 914,290 102,900 The DIRECTV Group, Inc.(a) 2,025,072 63,400 The Pepsi Bottling Group, Inc. 2,250,700 54,900 The Walt Disney Co. 1,696,959 17,800 Thompson Corp. 717,340 53,900 Tyson Foods, Inc. - Class A 855,932 27,700 USANA Health Sciences, Inc.(a) 1,235,143 29,900 Wal-Mart Stores, Inc. 1,474,668 ----------- TOTAL INVESTMENTS (COST $63,734,199) 100.2% 68,279,482 LIABILITIES LESS OTHER ASSETS (0.2)% (143,442) ----------- TOTAL NET ASSETS 100.0% $68,136,040 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. ADR American Depositary Receipt Schedule of Investments 53 Management Overview ICON Materials Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 100.5% Top 10 Equity Holdings 42.3% Number of Stocks 41 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 E.I. du Pont de Nemours and Co. 7.1% Praxair, Inc. 5.4% Air Products & Chemical, Inc. 4.3% Myers Industries, Inc. 4.1% Hercules, Inc. 3.8% PPG Industries, Inc. 3.8% OM Group, Inc. 3.7% International Flavors & Fragrances, Inc. 3.6% Spartech Corp. 3.3% Pactiv Corp. 3.2% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Materials Fund gained 11.17% for the fiscal year ended September 30, 2006, outpacing the 10.32% return of its broad benchmark, the S&P Composite 1500 Index, but underperforming the 16.52% return of its sector-specific benchmark, the S&P 1500 Materials Index. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Materials sector experienced a volatile 12 months. At the outset of the reporting period, the ICON system measured the sector at 14% below our estimate of fair value, indicating widespread value. Following a significant rally in the spring, driven by the rising price of steel and aluminum, the sector began moving toward fair value. Materials stocks then declined in the last half of the period, finishing considerably undervalued by 18%, according to our calculations. The Fund's overweight position in the steel industry played a large role in its relative underperformance. For more than three years, our analysis has indicated that steel has both value and relative strength so the Fund held a sizeable weighting, but in the second half of the period, the industry declined sharply. Finally, the Fund's relative performance was also hindered by its overweight position in the gold industry. The gold industry suffered significant losses during the month of September. At the time of the price collapse, our system indicated both value and relative strength in gold, and the Fund held a substantial position. Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. The Fund relies on the ICON valuation system to determine industry composition, based on how our model measures overpricing and underpricing throughout the sector. Guided by valuation, the Fund's overweight and underweight positions in several industries influenced performance. An overweight position and skillful stock selection in the specialty chemicals industry contributed positively as holdings such as OM Group, Inc., (3.7% of the Fund at year-end) which produces metal-based specialty chemicals for the aerospace, automotive, computer, construction, and consumer electronics industries, performed well. The Fund's overweight position in the diversified metals & mining industry also boosted overall performance. 54 Management Overview (DEREK ROLLINGSON PHOTO) Derek Rollingson Portfolio Manager While the Fund lagged its sector benchmark, we were able to avoid additional losses by not owning poor-performing forest stocks such as Louisiana-Pacific Corporation and Weyerhaeuser Company during the fiscal year. Although ICON's investment process is multi-cap and essentially indifferent to market capitalization when selecting stocks, the Fund's composition may be situated in a particular market cap range as a result of its holdings. As it was with the Materials Fund, a larger position in small-cap stocks within the steel industry detracted from performance when large-cap steel companies were better able to withstand the industry slump. In addition, the Fund's underweight position coupled with unfavorable stock selection in the fertilizers & agricultural chemicals industry thwarted returns as this industry performed well in the benchmark. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE MATERIALS SECTOR? A. We continue to evaluate bargains in the Materials sector as a whole. Given that we believe there is ample value, we are focusing on relative strength measures to determine exactly which industries may lead in the future. Specialty chemicals, metal & glass containers, and commodity chemicals are particularly attractive. Our analysis concludes that the steel industry theme of the previous three years has lost some momentum as indicated by our relative strength measurements, and we are currently reducing the Fund's exposure in the industry. As our system has detected increased value and relative strength in larger capitalization stocks, the diversified chemicals industry has become more attractive. PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund's overweight positions in the steel and gold industries helped in the first half but were largely responsible for its relative underperformance during the second half of the fiscal year. - An underweight position coupled with unfavorable stock selection in the fertilizers & agricultural chemicals industry hampered returns. - A lack of exposure to poor-performing forest products stocks helped the Fund avoid significant losses as the industry struggled. Management Overview 55 Management Overview (continued) ICON Materials Fund INDUSTRY COMPOSITION September 30, 2006 Specialty Chemicals 23.8% Diversified Chemicals 22.7% Metal & Glass Containers 11.4% Industrial Gases 9.6% Steel 9.1% Commodity Chemicals 7.0% Paper Packaging 6.1% Diversified Metals & Mining 3.5% Precious Metals & Minerals 3.1% Gold 2.8% Paper Products 1.4%
Percentages are based upon net assets. 56 Management Overview AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 5/5/97 ----------------------------------------------------------------------------------------- ICON Materials Fund 11.17% 17.40% 3.16% ----------------------------------------------------------------------------------------- S&P 1500 Materials Index 16.52% 13.25% 6.56% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 7.41% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
S&P COMPOSITE 1500 ICON MATERIALS FUND S&P 1500 MATERIALS INDEX INDEX ------------------- ------------------------ ------------------ 5/5/97 10000.00 10000.00 10000.00 9730.00 10749.00 10707.00 9/30/97 10900.00 11391.00 11635.00 7606.00 10466.00 11916.00 8632.00 11582.00 13528.00 7586.00 11142.00 13857.00 9/30/98 6819.00 9413.00 12366.00 6800.00 9795.00 15053.00 6571.00 9728.00 15599.00 8060.00 11660.00 16813.00 9/30/99 7612.00 10685.00 15743.00 8372.00 11807.00 18100.00 7352.00 10523.00 18660.00 7092.00 9136.00 18176.00 9/30/00 6758.00 8547.00 18169.00 6400.00 10572.00 16841.00 6063.00 10046.00 14877.00 6643.00 11050.00 15855.00 9/30/01 6011.00 9755.00 13494.00 7062.00 11031.00 15048.00 8036.00 12210.00 15193.00 7814.00 11922.00 13241.00 9/30/02 6013.00 9201.00 10954.00 6184.00 10214.00 11842.00 5675.00 9429.00 11447.00 6322.00 10707.00 13246.00 9/30/03 6576.00 11335.00 13658.00 8449.00 13972.00 15345.00 8555.00 13824.00 15673.00 9098.00 14315.00 15946.00 9/30/04 9642.00 14914.00 15648.00 10914.00 16307.00 17155.00 10946.00 16578.00 16813.00 10593.00 15154.00 17103.00 9/30/05 12055.00 15598.00 17752.00 12472.00 17045.00 18129.00 14539.00 18563.00 19008.00 14333.00 18336.00 18681.00 9/30/06 13402.00 18175.00 19583.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 5/5/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 57 Schedule of Investments ICON Materials Fund September 30, 2006
SHARES VALUE --------------------------------------------- COMMON STOCKS (100.5%) 47,300 Agnico-Eagle Mines, Ltd. $ 1,472,449 86,600 Air Products & Chemical, Inc. 5,747,642 112,900 AK Steel Holding Corp.(a) 1,370,606 51,500 Albemarle Corp. 2,797,995 53,500 Ashland, Inc. 3,412,230 76,000 Ball Corp. 3,074,200 74,600 Barrick Gold Corp. - ADR 2,291,712 31,700 BASF AG - ADR 2,539,170 100,000 Bemis Co., Inc. 3,286,000 218,400 Buckeye Technologies, Inc.(a) 1,856,400 126,400 Chesapeake Corp. 1,808,784 153,500 Compania de Minas Buenaventura S.A.u. - ADR 4,144,500 53,000 Cytec Industries, Inc. 2,946,270 83,800 Dow Chemical Co. 3,266,524 224,500 E.I. du Pont de Nemours and Co. 9,617,580 82,200 Ferro Corp. 1,461,516 25,000 FMC Corp. 1,601,750 31,900 Freeport-McMoran Copper & Gold, Inc. - Class B 1,698,994 66,600 Georgia Gulf Corp. 1,826,172 31,000 Greif, Inc. - Class A 2,483,410 324,700 Hercules, Inc.(a) 5,120,519 124,300 International Flavors & Fragrances, Inc. 4,914,822
SHARES VALUE --------------------------------------------- 94,600 Lubrizol Corp. $ 4,326,058 58,500 Macdermid, Inc. 1,908,270 324,900 Myers Industries, Inc. 5,523,300 103,100 NOVA Chemicals Corp. - ADR 3,166,201 113,400 OM Group, Inc.(a) 4,982,796 63,200 Oregon Steel Mills, Inc.(a) 3,088,584 153,600 Pactiv Corp.(a) 4,365,312 55,100 Posco - ADR 3,577,643 75,700 PPG Industries, Inc. 5,077,956 123,200 Praxair, Inc. 7,288,512 219,400 RPM International, Inc. 4,166,406 28,600 Sealed Air Corp. 1,547,832 143,600 Sensient Technologies Corp. 2,810,252 49,400 Sonoco Products Co. 1,661,816 33,100 Southern Copper Corp. 3,061,750 167,300 Spartech Corp. 4,478,621 159,027 Steel Technologies, Inc. 3,121,700 68,300 The Valspar Corp. 1,816,780 64,200 Worthington Industries, Inc. 1,095,252 ------------ TOTAL INVESTMENTS (COST $127,001,158) 100.5% 135,804,286 LIABILITIES LESS OTHER ASSETS (0.5)% (706,947) ------------ TOTAL NET ASSETS 100.0% $135,097,339 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. ADR American Depositary Receipt. 58 Schedule of Investments Management Overview ICON Telecommunication & Utilities Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2006 Equities 99.4% Top 10 Equity Holdings 41.7% Number of Stocks 97 Short-Term Investments 0.3% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2006 Verizon Communications, Inc. 9.6% AT&T, Inc. 6.9% BellSouth Corp. 5.9% Telefonica S.A. - ADR 3.6% China Mobile, Ltd. - ADR 3.4% BT Group PLC - ADR 3.2% America Movil S.A. de C.V. - ADR 2.3% Telenor ASA - ADR 2.3% France Telecom S.A. - ADR 2.3% Telefonos de Mexico S.A. de C.V. - ADR 2.2% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Telecommunication & Utilities Fund appreciated 7.56% for the fiscal year ended September 30, 2006, underperforming the 25.41% return of S&P 1500 Telecommunication Services Index, but outperforming the 4.67% return of the S&P 1500 Utilities Index. Although neither sector-specific benchmark is an ideal comparison, together they provide a suitable reference for the Fund's overall performance in its sectors. Additionally, the Fund trailed its broad benchmark, the S&P Composite 1500 Index, which returned 10.32% over the same period. Total returns for other periods as of September 30, 2006 appear in the subsequent pages of this Fund's Management Overview. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Fund underwent a large shift in composition since the last fiscal year, in which its average weight in Telecommunications industries increased and its average exposure to Utilities was reduced. Overall, this tilt toward Telecommunications issues over Utilities holdings accounted for the Fund's return. The change in Fund composition was successful for several reasons. First, the relatively high dividend yield stocks within the Utilities sector tend to be negatively correlated with movements in longer term government bond yields. These yields were very volatile during the period, leading to a rough ride for the Utilities sector, which fell as yields rose. The sector rose sharply since late June as government bonds yields dropped but this was not enough to overtake the strong performance of the Telecommunication sector. Secondly, increased merger and acquisition activity led to large gains for many Telecom stocks. In the last 12 months, SBC acquired AT&T, Inc., formed the new AT&T, and then announced its intention to acquire BellSouth Corporation. Sprint announced its acquisition of Nextel Partners, while Verizon Communications, Inc. completed its acquisition of MCI. (As of September 30, 2006, the Fund owned Verizon, AT&T, BellSouth, and Sprint Nextel Corporation). Additionally, large-cap telecom stocks benefited from a flight to quality as investors began to fear a slowing economy and sought bellwether stocks in industries less affected by an economic downturn. Finally, we believe investors started recognizing the deep value in telecom stocks, which had been beaten down following the bursting of the tech bubble in 2000 and have since failed to catch up to the overall market. Management Overview 59 Management Overview (continued) ICON Telecommunication & Utilities Fund Q. HOW DID THE FUND'S COMPOSITION AFFECT PERFORMANCE? A. As mentioned, the Fund's larger position in Telecom stocks and decreased weighting in Utilities made the biggest difference in overall performance. Throughout the period, the Fund's heavy average weighting of approximately 32% in the integrated telecommunication services industry served it well and was the largest contributor to its total return. Nevertheless, the Fund lagged the S&P 1500 Telecommunication Index primarily because it was underweight in companies such as Verizon, Bell South, and AT&T, which make up more than 67% of the index and each gained more than 15% over the fiscal period. The Fund's position in the wireless telecommunication services industry also proved to be beneficial for performance. Our underweight holding in Sprint, less than 1% of the Fund on average, and broad diversification among 17 domestic and international companies in this industry added to returns. Holdings in the electric utilities, multi-utilities, water utilities, and independent power producers & energy traders industries did not play a significant part in the Fund's total return. Although the Utilities sector gained traction in mid-June, a generally underweighted position in this sector, an average exposure of just over 40% of the Fund, proved to be the biggest advantage for the Fund. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE TELECOMMUNICATION & UTILITIES SECTORS? A. Our analysis of the Telecommunication and Utilities sectors still indicates widespread value. Under our system, the industries showing the greatest value have also shown the best relative strength and price performance recently. Although we continue to be guided by our valuation discipline, we believe that over the long term, the Fund will be well-positioned by having broad exposure to the integrated telecommunication and wireless telecommunication services industries. 60 Management Overview (TODD BURCHETT PHOTO) Todd Burchett Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2006 - The Fund benefited from a significant shift in composition, in which Telecommunication industries were overweighted. - Although the Fund's large weightings in the integrated telecommunication services and wireless telecommunication services industries served it well, the Fund still lagged the S&P 1500 Telecommunication Index due to an underweight position in strong-performing large-cap companies such as Verizon, Bell South, and AT&T. - Utilities industries contributed little to the Fund's total return, even though they gained traction late in the period. Management Overview 61 Management Overview (continued) ICON Telecommunication & Utilities Fund INDUSTRY COMPOSITION September 30, 2006 Integrated Telecommunication Services 49.4% Multi-Utilities 13.8% Electric Utilities 11.9% Wireless Telecommunication Services 11.2% Communications Equipment 5.1% Independent Power Producers & Energy Traders 2.6% Water Utilities 1.3% Gas Utilities 1.1% Electronic Equipment Manufacturers 1.0% Broadcast & Cable TV 0.8% Aerospace & Defense 0.5% Technology Distributors 0.5% Electronic Manufacturing Services 0.2%
Percentages are based upon net assets. 62 Management Overview AVERAGE ANNUAL TOTAL RETURN September 30, 2006
SINCE INCEPTION 1 YEAR 5 YEARS 7/9/97 ----------------------------------------------------------------------------------------- ICON Telecommunication & Utilities Fund 7.56% 8.49% 9.47% ----------------------------------------------------------------------------------------- S&P 1500 Telecommunications Services Index 25.41% (2.01%) 2.42% ----------------------------------------------------------------------------------------- S&P 1500 Utilities Index 4.67% 7.66% 8.39% ----------------------------------------------------------------------------------------- S&P Composite 1500 Index 10.32% 7.73% 6.47% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2006 (LINE GRAPH)
ICON S&P 1500 TELECOMMUNICATION TELECOMMUNICATIONS S&P 1500 UTILITIES S&P COMPOSITE 1500 & UTILITIES FUND SERVICES INDEX INDEX INDEX ----------------- ------------------ ------------------ ------------------ 7/9/97 10000.00 10000.00 10000.00 10000.00 9/30/97 10630.00 10622.00 10417.00 10597.00 12253.00 12707.00 12118.00 10852.00 13800.00 14982.00 12775.00 12321.00 13528.00 14391.00 12766.00 12620.00 9/30/98 14231.00 15105.00 13226.00 11262.00 15927.00 19374.00 13625.00 13709.00 15110.00 20000.00 12192.00 14207.00 16924.00 22672.00 13518.00 15312.00 9/30/99 16401.00 21048.00 12967.00 14339.00 17026.00 23189.00 12330.00 16485.00 15958.00 22888.00 13585.00 16994.00 16306.00 19688.00 14281.00 16554.00 9/30/00 18858.00 17603.00 18732.00 16548.00 19039.00 14272.00 19530.00 15338.00 15995.00 14014.00 18172.00 13550.00 16564.00 13868.00 17309.00 14440.00 9/30/01 15327.00 13802.00 14540.00 12290.00 15596.00 12458.00 14271.00 13705.00 15322.00 10537.00 14813.00 13837.00 14173.00 8052.00 12587.00 12059.00 9/30/02 11948.00 5960.00 10056.00 9976.00 12737.00 8181.00 10542.00 10786.00 11625.00 7010.00 10216.00 10425.00 14077.00 8534.00 12283.00 12064.00 9/30/03 14380.00 7750.00 12292.00 12439.00 15985.00 8776.00 13319.00 13976.00 17289.00 9219.00 13956.00 14275.00 16215.00 9133.00 13832.00 14523.00 9/30/04 16906.00 9723.00 14699.00 14251.00 18497.00 10515.00 16403.00 15624.00 18497.00 9715.00 17175.00 15313.00 20075.00 10055.00 18792.00 15576.00 9/30/05 21420.00 9944.00 20094.00 16168.00 20542.00 9913.00 18900.00 16511.00 22076.00 11343.00 18864.00 17312.00 21535.00 11261.00 19881.00 17014.00 9/30/06 23038.00 12470.00 21032.00 17836.00
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 7/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 63 Schedule of Investments ICON Telecommunication & Utilities Fund September 30, 2006
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS (99.4%) 5,000 Allegheny Energy, Inc.(a) $ 200,850 15,000 Allete, Inc. 651,750 10,000 Alliant Energy Corp. 357,300 26,500 Alltel Corp. 1,470,750 5,000 Ameren Corp. 263,950 69,500 America Movil S.A. de C.V. - ADR 2,736,215 20,000 America Telecom S.A. de C.V. - ADR(a) 270,940 20,000 American Electric Power Co., Inc. 727,400 10,000 American States Water Co. 382,500 12,500 Amphenol Corp. - Class A 774,125 10,000 Anixter International, Inc. 564,700 253,000 AT&T, Inc. 8,237,680 6,000 Atmos Energy Corp. 171,300 39,375 BCE, Inc. - ADR 1,066,669 165,700 BellSouth Corp. 7,083,675 10,000 Benchmark Electronics, Inc.(a) 268,800 75,000 BT Group PLC - ADR 3,792,750 8,500 California Water Service Group 313,905 33,600 CenterPoint Energy, Inc. 481,152 115,000 China Mobile, Ltd. - ADR 4,065,250 100,000 Cisco Systems, Inc.(a) 2,300,000 8,500 Cleco Corp. 214,540 10,000 CMS Energy Corp.(a) 144,400 25,000 Comcast Corp. - Class A(a) 921,250 30,000 Companhia de Saneamento Basico de Estado de Sao Paulo - ADR 903,000 7,000 Companhia Energetica de Minas Gerais - ADR 274,750
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 12,500 Compania Anonima Nacional Telefonos de Venezuela - ADR $ 237,500 17,000 Consolidated Edison Company of New York, Inc. 785,400 10,600 Constellation Energy Group 627,520 25,000 Corning, Inc.(a) 610,250 5,000 CPFL Energia S.A. - ADR 192,150 66,500 Deutsche Telekom AG - ADR 1,055,355 25,000 Dominion Resources, Inc. of Virginia 1,912,250 14,000 DTE Energy Co. 581,140 28,600 Duke Energy Corp. 863,720 20,100 Edison International 836,964 12,000 Embarq Corp. 580,440 5,000 Energen Corp. 209,350 10,000 Energy East Corp. 237,200 15,000 Entergy Corp. 1,173,450 5,000 Equitable Resources, Inc. 174,900 30,000 Exelon Corp. 1,816,200 10,000 First Energy Corp. 558,600 36,000 FPL Group, Inc. 1,620,000 116,800 France Telecom S.A. - ADR 2,722,608 15,000 Golden Telecom, Inc. 453,750 12,500 Harris Corp. 556,125 20,000 Huaneng Power International, Inc. - ADR 578,400 150,000 Koninklijke (Royal) KPN N.V. - ADR 1,914,000 30,000 Korea Electric Power Corp. - ADR 586,500 72,000 KT Corp. - ADR 1,545,840 7,500 Lockheed Martin Corp. 645,450 32,000 MDU Resources Group, Inc. 714,880 35,000 Motorola, Inc. 875,000 35,000 National Grid PLC - ADR 2,194,150
64 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 10,000 NICE Systems, Ltd. - ADR(a) $ 276,700 15,000 NII Holdings, Inc.(a) 932,400 25,000 NiSource, Inc. 543,500 7,500 Nstar 250,200 85,000 Partner Communications Co., Ltd. - ADR 831,300 22,200 Pepco Holdings, Inc. 536,574 30,800 PG&E Corp. 1,282,820 50,000 Philippine Long Distance Telephone Co. - ADR 2,178,000 15,000 Pinnacle West Capital Corp. 675,750 15,000 PNM Resources, Inc. 413,550 31,000 PPL Corp. 1,019,900 6,000 Progress Energy, Inc. 272,280 45,000 PT Telekomunikasi Indonesia - ADR 1,627,200 5,000 Public Service Enterprise Group, Inc. 305,950 50,000 Puget Energy, Inc. 1,136,500 40,000 Qualcomm, Inc. 1,454,000 7,500 Questar Corp. 613,275 7,500 Rogers Corp.(a) 463,125 13,000 RWE AG - ADR 1,201,200 5,000 SCANA Corp. 201,350 20,000 Scottish Power PLC - ADR 971,200 17,000 Sempra Energy 854,250 56,000 Southern Co. 1,929,760 5,000 Southern Union Co. 132,050 30,000 Sprint Nextel Corp. 514,500 56,000 Swisscom AG - ADR 1,869,840
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- 12,000 TECO Energy, Inc. $ 187,800 46,000 Telecom Italia S.p.A. - ADR 1,303,180 17,500 Telecomunicacoes de Sao Paulo S.A. - ADR 390,600 82,266 Telefonica S.A. - ADR 4,262,201 104,500 Telefonos de Mexico S.A. de C.V. - ADR 2,673,110 50,000 Telekom Austria AG - ADR 2,517,000 70,000 Telenor ASA - ADR 2,725,800 23,100 Telus Corp. 1,292,907 15,000 Tim Participacoes S.A. - ADR 417,750 30,000 TXU Corp. 1,875,600 5,000 Vectren Corp. 134,250 310,500 Verizon Communications, Inc. 11,528,865 22,500 Windstream Corp. 296,775 7,000 Wisconsin Energy Corp. 301,980 7,000 WPS Resources Corp. 347,410 40,000 Xcel Energy, Inc. 826,000 ------------ TOTAL COMMON STOCKS (COST $109,610,620) 119,067,095 SHORT-TERM INVESTMENTS (0.3%) $ 386,860 Brown Brothers Harriman Time Deposit, 4.63%, 10/02/06# 386,860 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $386,860) 386,860 TOTAL INVESTMENTS 99.7% ($109,997,480) 119,453,955 OTHER ASSETS LESS LIABILITIES 0.3% 308,067 ------------ TOTAL NET ASSETS 100.0% $119,762,022 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2006. ADR American Depositary Receipt. Schedule of Investments 65 Six Month Hypothetical Expense Example September 30, 2006 (unaudited) EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the various ICON Funds and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/06 - 9/30/06). ACTUAL EXPENSES The first line in the table for each Fund provides information about actual account values and actual expenses. The Example includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example does not include client specific fees, such as the $10 fee charged to IRA accounts, or the $15 fee charged for wire redemptions. You may use this information, 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 for each Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table for each Fund 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 costs 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 the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. 66 Expense Example
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/06 9/30/06 4/1/06-9/30/06* 4/1/06-9/30/06 ------------------------------------------------------------------------------------------------ ICON CONSUMER DISCRETIONARY FUND ------------------------------------------------------------------------------------------------ Actual Expenses $1,000.00 $ 968.80 $6.51 1.32% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,018.38 6.68 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON ENERGY FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 893.20 5.51 1.16% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,019.18 5.87 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON FINANCIAL FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 1,032.80 6.01 1.18% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,019.08 5.97 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON HEALTHCARE FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 961.40 5.95 1.21% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,018.93 6.12 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON INDUSTRIALS FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 893.20 6.07 1.28% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,018.58 6.48 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON INFORMATION TECHNOLOGY FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 940.70 6.23 1.28% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,018.58 6.48 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON LEISURE AND CONSUMER STAPLES FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 971.50 6.97 1.41% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,017.93 7.13 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON MATERIALS FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 921.80 6.36 1.32% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,018.38 6.68 (5% return before expenses) ------------------------------------------------------------------------------------------------ ICON TELECOMMUNICATION & UTILITIES FUND ------------------------------------------------------------------------------------------------ Actual Expenses 1,000.00 1,043.60 6.92 1.35% ------------------------------------------------------------------------------------------------ Hypothetical Example 1,000.00 1,018.23 6.83 (5% return before expenses) ------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six month expense ratio annualized, multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. Expense Example 67 Statements of Assets and Liabilities September 30, 2006
ICON CONSUMER ICON ICON ICON DISCRETIONARY FUND ENERGY FUND FINANCIAL FUND HEALTHCARE FUND ------------------ ------------ -------------- --------------- ASSETS Investments, at cost $101,509,519 $604,996,138 $347,405,407 $575,449,085 ------------ ------------ ------------ ------------ Investments, at value 111,485,311 788,581,315 385,109,979 659,365,900 Cash - - - - Receivables: Fund shares sold 40,903 729,037 1,899,789 2,283,709 Investments sold 7,979,986 - 4,960,497 - Interest - 13,634 4,341 9,172 Dividends 100,591 1,133,964 580,202 207,750 Other assets 35,497 104,093 47,103 70,760 ------------ ------------ ------------ ------------ Total Assets 119,642,288 790,562,043 392,601,911 661,937,291 ------------ ------------ ------------ ------------ LIABILITIES Payables: Due to custodian bank 733,069 - - - Interest 31,489 2,040 1,357 - Fund shares redeemed 122,351 1,333,978 433,281 669,441 Investments bought 7,819,623 - 23,191,632 14,418,085 Advisory fees 102,131 669,750 282,783 501,891 Fund accounting fees 2,800 17,232 7,107 12,866 Transfer agent fees 8,827 37,799 11,039 33,672 Administration fees 4,842 32,762 13,324 24,244 Trustee fees 3,003 19,820 7,883 14,127 Accrued expenses 22,082 82,418 39,713 60,916 ------------ ------------ ------------ ------------ Total Liabilities 8,850,217 2,195,799 23,988,119 15,735,242 ------------ ------------ ------------ ------------ NET ASSETS $110,792,071 $788,366,244 $368,613,792 $646,202,049 ============ ============ ============ ============ NET ASSETS CONSIST OF Paid-in Capital $103,627,457 $536,479,124 $314,588,693 $518,851,969 Accumulated undistributed net investment income/(loss) - (167,659) 2,917,574 - Accumulated undistributed net realized gain/(loss) from investments (2,811,178) 68,469,602 13,402,953 43,433,265 Accumulated net realized gain/(loss) from foreign currency translations - - - - Unrealized appreciation/(depreciation) on investments 9,975,792 183,585,177 37,704,572 83,916,815 ------------ ------------ ------------ ------------ NET ASSETS $110,792,071 $788,366,244 $368,613,792 $646,202,049 ============ ============ ============ ============ Shares outstanding (unlimited shares authorized, no par value) 9,149,571 24,732,761 25,480,651 36,002,492 Net Asset Value (offering price and redemption price per share) $ 12.11 $ 31.88 $ 14.47 $ 17.95
The accompanying notes are an integral part of the financial statements. 68 Financial Statements
ICON ICON LEISURE AND ICON ICON INFORMATION CONSUMER ICON TELECOMMUNICATION INDUSTRIALS FUND TECHNOLOGY FUND STAPLES FUND MATERIALS FUND & UTILITIES FUND ---------------- --------------- ------------- -------------- ----------------- $ 95,059,673 $221,551,985 $63,734,199 $127,001,158 $109,997,480 ------------ ------------ ----------- ------------ ------------ 104,003,937 248,553,463 68,279,482 135,804,286 119,453,955 7,204 3,935 - - 13,662 55,183 193,134 37,092 216,883 157,947 4,378,153 482,369 - 10,341,432 811,061 883 1,571 - - 98 123,847 46,142 52,762 105,072 130,063 29,197 36,454 22,453 33,708 24,689 ------------ ------------ ----------- ------------ ------------ 108,598,404 249,317,068 68,391,789 146,501,381 120,591,475 ------------ ------------ ----------- ------------ ------------ - - 82,405 6,602,937 - 31,040 2,983 1,292 10,415 - 140,798 258,986 84,384 332,596 94,167 2,265,604 6,817,739 - 4,275,569 613,250 102,534 184,919 56,078 130,308 85,693 2,935 4,875 1,604 3,405 2,393 9,646 15,152 8,799 13,608 8,183 5,000 8,893 2,629 6,173 4,033 3,060 5,065 1,581 3,814 2,277 23,137 30,002 16,977 25,217 19,457 ------------ ------------ ----------- ------------ ------------ 2,583,754 7,328,614 255,749 11,404,042 829,453 ------------ ------------ ----------- ------------ ------------ $106,014,650 $241,988,454 $68,136,040 $135,097,339 $119,762,022 ============ ============ =========== ============ ============ $ 69,252,268 $266,992,654 $63,881,153 $113,430,551 $102,451,769 16,029 - - 1,107,075 1,157,941 27,802,089 (52,005,678) (293,180) 11,778,919 6,695,837 - - 2,784 (22,334) - 8,944,264 27,001,478 4,545,283 8,803,128 9,456,475 ------------ ------------ ----------- ------------ ------------ $106,014,650 $241,988,454 $68,136,040 $135,097,339 $119,762,022 ============ ============ =========== ============ ============ 8,019,151 27,752,586 7,397,595 11,577,790 15,644,423 $ 13.22 $ 8.72 $ 9.21 $ 11.67 $ 7.66
Financial Statements 69 Statements of Operations For the year ended September 30, 2006
ICON CONSUMER ICON ICON ICON DISCRETIONARY FUND ENERGY FUND FINANCIAL FUND HEALTHCARE FUND ------------------ ------------- -------------- --------------- INVESTMENT INCOME Interest $ 136,238 $ 628,875 $ 131,600 $ 996,387 Dividends 1,218,563 8,896,095 5,965,725 3,275,941 Foreign taxes withheld - - - (11,869) ----------- ------------- ----------- ------------ Total Investment Income 1,354,801 9,524,970 6,097,325 4,260,459 ----------- ------------- ----------- ------------ EXPENSES Advisory fees 1,564,008 9,287,053 2,638,665 6,630,783 Fund accounting fees 39,951 226,606 65,144 161,267 Transfer agent fees 106,336 446,721 130,963 405,775 Administration fees 72,419 440,133 122,527 310,595 Registration fees 26,410 55,898 26,219 46,036 Insurance expense 11,753 42,140 13,328 32,110 Trustee fees and expenses 11,599 66,495 21,000 46,820 Interest expense 157,502 130,543 45,911 6,165 Other expenses 79,301 383,819 120,898 289,886 ----------- ------------- ----------- ------------ Total expenses before transfer agent earnings credit 2,069,279 11,079,408 3,184,655 7,929,437 Transfer agent earnings credit (2,854) (14,736) (4,903) (9,659) ----------- ------------- ----------- ------------ Net Expenses 2,066,425 11,064,672 3,179,752 7,919,778 ----------- ------------- ----------- ------------ NET INVESTMENT INCOME (LOSS) (711,624) (1,539,702) 2,917,573 (3,659,319) ----------- ------------- ----------- ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from investment transactions (1,974,252) 97,201,478 19,921,934 58,118,854 Net realized gain/(loss) from foreign currency translations - - - - Change in unrealized appreciation/(depreciation) on investments (2,215,040) (135,974,290) 14,885,101 (45,909,243) ----------- ------------- ----------- ------------ Net realized and unrealized gain/(loss) on investments (4,189,292) (38,772,812) 34,807,035 12,209,611 ----------- ------------- ----------- ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $(4,900,916) $ (40,312,514) $37,724,608 $ 8,550,292 =========== ============= =========== ============
The accompanying notes are an integral part of the financial statements. 70 Financial Statements
ICON ICON LEISURE AND ICON ICON INFORMATION CONSUMER ICON TELECOMMUNICATION INDUSTRIALS FUND TECHNOLOGY FUND STAPLES FUND MATERIALS FUND & UTILITIES FUND ---------------- --------------- ------------ -------------- ----------------- $ 85,829 $ 95,599 $ 28,509 $ 115,680 $ 86,697 1,944,481 1,628,930 397,054 3,004,926 2,301,804 (2,968) (22,544) - (2,331) (2,498) ------------ ----------- --------- ----------- ------------ 2,027,342 1,701,985 425,563 3,118,275 2,386,003 ------------ ----------- --------- ----------- ------------ 2,171,220 2,634,865 504,505 1,531,465 773,299 54,784 65,353 15,271 39,055 21,266 113,800 183,263 107,323 171,046 100,657 100,857 122,395 23,390 71,009 35,975 28,452 34,027 27,914 28,289 23,683 13,599 19,013 7,193 7,234 7,101 14,951 18,674 6,934 14,054 7,303 97,437 97,816 13,108 21,584 31,477 90,002 125,287 72,186 107,741 67,630 ------------ ----------- --------- ----------- ------------ 2,685,102 3,300,693 777,824 1,991,477 1,068,391 (2,769) (3,536) (1,017) (2,610) (1,363) ------------ ----------- --------- ----------- ------------ 2,682,333 3,297,157 776,807 1,988,867 1,067,028 ------------ ----------- --------- ----------- ------------ (654,991) (1,595,172) (351,244) 1,129,408 1,318,975 ------------ ----------- --------- ----------- ------------ 52,064,019 2,580,097 (110,039) 20,331,914 13,921,397 - - 2,784 (22,334) - (34,755,918) (5,472,197) 452,764 (8,247,321) (12,032,876) ------------ ----------- --------- ----------- ------------ 17,308,101 (2,892,100) 345,509 12,062,259 1,888,521 ------------ ----------- --------- ----------- ------------ $ 16,653,110 $(4,487,272) $ (5,735) $13,191,667 $ 3,207,496 ============ =========== ========= =========== ============
Financial Statements 71 Statements of Changes in Net Assets
ICON CONSUMER DISCRETIONARY FUND ICON ENERGY FUND ------------------------------- --------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2006 2005 2006 2005 -------------- ------------- --------------- -------------- OPERATIONS Net investment income/(loss) $ (711,624) $ (947,312) $ (1,539,702) $ 2,256,526 Net realized gain/(loss) from investment transactions (1,974,252) 21,149,069 97,201,478 22,940,745 Change in unrealized appreciation/(depreciation) on investments (2,215,040) (9,621,489) (135,974,290) 259,958,925 ------------- ------------ -------------- -------------- Net increase/(decrease) in net assets resulting from operations (4,900,916) 10,580,268 (40,312,514) 285,156,196 ------------- ------------ -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - (2,256,525) - Net realized gains (15,842,362) - (23,251,426) - ------------- ------------ -------------- -------------- Net decrease from dividends and distributions (15,842,362) - (25,507,951) - ------------- ------------ -------------- -------------- FUND SHARE TRANSACTIONS Shares sold 169,800,249 50,107,439 381,970,561 711,655,180 Reinvested dividends and distributions 15,740,469 - 24,368,155 - Shares repurchased (223,427,131) (43,187,689) (561,109,848) (275,467,439) ------------- ------------ -------------- -------------- Net increase/(decrease) from fund share transactions (37,886,413) 6,919,750 (154,771,132) 436,187,741 ------------- ------------ -------------- -------------- Total net increase/(decrease) in net assets (58,629,691) 17,500,018 (220,591,597) 721,343,937 NET ASSETS Beginning of period 169,421,762 151,921,744 1,008,957,841 287,613,904 ------------- ------------ -------------- -------------- End of period $ 110,792,071 $169,421,762 $ 788,366,244 $1,008,957,841 ============= ============ ============== ============== TRANSACTIONS IN FUND SHARES Shares sold 13,890,840 3,605,400 11,049,736 27,585,644 Reinvested dividends and distributions 1,362,806 - 760,300 - Shares repurchased (18,549,943) (3,120,303) (16,964,736) (10,886,604) ------------- ------------ -------------- -------------- Net increase/(decrease) (3,296,297) 485,097 (5,154,700) 16,699,040 Shares outstanding beginning of period 12,445,868 11,960,771 29,887,461 13,188,421 ------------- ------------ -------------- -------------- Shares outstanding end of period 9,149,571 12,445,868 24,732,761 29,887,461 ============= ============ ============== ============== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities) Purchase of securities $ 269,340,097 $270,228,278 $ 213,408,134 $ 565,978,887 Proceeds from sales of securities 323,712,014 263,033,052 408,025,665 155,874,919 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - $ (167,659) $ 2,256,526 ============= ============ ============== ==============
72 Financial Statements
ICON FINANCIAL FUND ICON HEALTHCARE FUND ICON INDUSTRIALS FUND ------------------------------- ------------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2006 2005 2006 2005 2006 2005 -------------- -------------- -------------- -------------- -------------- ------------- $ 2,917,573 $ 1,894,706 $ (3,659,319) $ (3,785,078) $ (654,991) $ (664,614) 19,921,934 15,015,457 58,118,854 10,569,614 52,064,019 28,540,115 14,885,101 (4,980,248) (45,909,243) 96,973,294 (34,755,918) 6,079,683 ------------- ------------- ------------- ------------- ------------- ------------- 37,724,608 11,929,915 8,550,292 103,757,830 16,653,110 33,955,184 ------------- ------------- ------------- ------------- ------------- ------------- (1,744,311) (400,204) - - - - (16,113,682) (14,368,848) (10,591,515) (877,529) (6,835,273) - ------------- ------------- ------------- ------------- ------------- ------------- (17,857,993) (14,769,052) (10,591,515) (877,529) (6,835,273) - ------------- ------------- ------------- ------------- ------------- ------------- 225,592,853 160,151,652 403,323,627 513,075,619 70,147,062 116,314,931 17,760,399 14,495,645 9,893,314 842,844 6,801,064 - (105,489,351) (149,318,334) (447,733,008) (219,709,399) (197,386,921) (143,327,765) ------------- ------------- ------------- ------------- ------------- ------------- 137,863,901 25,328,963 (34,516,067) 294,209,064 (120,438,795) (27,012,834) ------------- ------------- ------------- ------------- ------------- ------------- 157,730,516 22,489,826 (36,557,290) 397,089,365 (110,620,958) 6,942,350 210,883,276 188,393,450 682,759,339 285,669,974 216,635,608 209,693,258 ------------- ------------- ------------- ------------- ------------- ------------- $ 368,613,792 $ 210,883,276 $ 646,202,049 $ 682,759,339 $ 106,014,650 $ 216,635,608 ============= ============= ============= ============= ============= ============= 16,117,798 12,078,196 22,417,731 30,887,090 5,011,944 9,680,063 1,353,679 1,066,641 557,019 53,243 543,216 - (7,698,732) (11,535,456) (25,034,402) (13,735,740) (14,600,539) (12,555,300) ------------- ------------- ------------- ------------- ------------- ------------- 9,772,745 1,609,381 (2,059,652) 17,204,593 (9,045,379) (2,875,237) 15,707,906 14,098,525 38,062,144 20,857,551 17,064,530 19,939,767 ------------- ------------- ------------- ------------- ------------- ------------- 25,480,651 15,707,906 36,002,492 38,062,144 8,019,151 17,064,530 ============= ============= ============= ============= ============= ============= $ 526,674,690 $ 334,005,678 $ 394,109,360 $ 493,069,662 $ 188,989,372 $ 131,854,781 404,037,325 321,445,227 446,505,389 216,184,507 319,518,181 161,003,971 $ 2,917,574 $ 1,744,312 $ - $ - $ 16,029 $ 16,028 ============= ============= ============= ============= ============= =============
Financial Statements 73 Statements of Changes in Net Assets (continued)
ICON INFORMATION TECHNOLOGY FUND ------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, 2006 2005 -------------- ------------- OPERATIONS: Net investment income/(loss) $ (1,595,172) $ (2,393,338) Net realized gain/(loss) from investment transactions 2,580,097 9,986,052 Net realized gain/(loss) from foreign currency translations - - Change in net unrealized appreciation/(depreciation) on investments (5,472,197) 12,306,795 ------------- ------------- Net increase/(decrease) in net assets resulting from operations (4,487,272) 19,899,509 ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - Return of Capital - - ------------- ------------- Net decrease from dividends and distributions - - ------------- ------------- FUND SHARE TRANSACTIONS Shares sold 175,022,474 183,518,365 Reinvested dividends and distributions - - Shares repurchased (148,620,178) (227,596,847) ------------- ------------- Net increase/(decrease) from fund share transactions 26,402,296 (44,078,482) ------------- ------------- Total net increase/(decrease) in net assets 21,915,024 (24,178,973) NET ASSETS: Beginning of period 220,073,430 244,252,403 ------------- ------------- End of period $ 241,988,454 $ 220,073,430 ============= ============= TRANSACTIONS IN FUND SHARES Shares sold 20,144,351 22,003,840 Reinvested dividends and distributions - - Shares repurchased (17,698,365) (27,607,984) ------------- ------------- Net increase/(decrease) 2,445,986 (5,604,144) Shares outstanding beginning of period 25,306,600 30,910,744 ------------- ------------- Shares outstanding end of period 27,752,586 25,306,600 ============= ============= PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities) Purchase of securities $ 432,267,414 $ 395,041,638 Proceeds from sales of securities 406,207,512 442,915,109 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ============= =============
The accompanying notes are an integral part of the financial statements. 74 Financial Statements
ICON LEISURE AND ICON TELECOMMUNICATION & CONSUMER STAPLES FUND ICON MATERIALS FUND UTILITIES FUND ------------------------------- -------------------------------- ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2006 2005 2006 2005 2006 2005 ------------- -------------- -------------- -------------- ------------- ------------- $ (351,244) $ (451,588) $ 1,129,408 $ 333,419 $ 1,318,975 $ 1,905,415 (110,039) 12,701,511 20,331,914 28,105,684 13,921,397 10,867,997 2,784 - (22,334) - - - 452,764 (9,663,969) (8,247,321) (7,049,729) (12,032,876) 12,025,488 ------------ ------------- ------------- ------------- ------------ ------------ (5,735) 2,585,954 13,191,667 21,389,374 3,207,496 24,798,900 ------------ ------------- ------------- ------------- ------------ ------------ - - (236,508) (163,349) (1,880,275) (767,065) (9,538,955) (13,572,229) (9,051,351) - (9,640,653) - (34,857) - - - - - ------------ ------------- ------------- ------------- ------------ ------------ (9,573,812) (13,572,229) (9,287,859) (163,349) (11,520,928) (767,065) ------------ ------------- ------------- ------------- ------------ ------------ 42,533,627 156,682,191 150,400,169 89,687,347 74,670,691 93,654,010 8,013,754 13,378,405 8,769,250 160,788 11,345,862 762,535 (20,242,047) (194,686,497) (127,545,242) (151,343,125) (78,591,644) (59,123,198) ------------ ------------- ------------- ------------- ------------ ------------ 30,305,334 (24,625,901) 31,624,177 (61,494,990) 7,424,909 35,293,347 ------------ ------------- ------------- ------------- ------------ ------------ 20,725,787 (35,612,176) 35,527,985 (40,268,965) (888,523) 59,325,182 47,410,253 83,022,429 99,569,354 139,838,319 120,650,545 61,325,363 ------------ ------------- ------------- ------------- ------------ ------------ $ 68,136,040 $ 47,410,253 $ 135,097,339 $ 99,569,354 $119,762,022 $120,650,545 ============ ============= ============= ============= ============ ============ 4,626,945 12,172,021 12,578,419 8,775,257 10,006,996 12,890,779 900,421 1,067,710 825,717 15,794 1,644,205 106,947 (2,093,062) (14,999,963) (10,637,952) (15,426,293) (10,581,608) (7,698,688) ------------ ------------- ------------- ------------- ------------ ------------ 3,434,304 (1,760,232) 2,766,184 (6,635,242) 1,069,593 5,299,038 3,963,291 5,723,523 8,811,606 15,446,848 14,574,830 9,275,792 ------------ ------------- ------------- ------------- ------------ ------------ 7,397,595 3,963,291 11,577,790 8,811,606 15,644,423 14,574,830 ============ ============= ============= ============= ============ ============ $129,436,793 $ 261,063,086 $ 286,596,817 $ 132,449,934 $166,415,855 $149,329,103 109,381,086 299,173,481 262,570,119 191,074,580 169,449,797 113,156,179 $ - $ - $ 1,107,075 $ 236,509 $ 1,157,941 $ 1,719,241 ============ ============= ============= ============= ============ ============
Financial Statements 75 Financial Highlights
INCOME FROM INVESTMENT OPERATIONS ---------------------------------------- NET ASSET NET NET REALIZED VALUE, INVESTMENT AND UNREALIZED TOTAL FROM BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS --------- ---------- -------------- ---------- ICON CONSUMER DISCRETIONARY FUND Year Ended September 30, 2006 $13.61 $(0.06) $ 0.79 $ 0.73 Year Ended September 30, 2005 12.70 (0.08) 0.99 0.91 Year Ended September 30, 2004 11.79 (0.05) 0.96 0.91 Year Ended September 30, 2003 10.12 (0.08) 1.75 1.67 Year Ended September 30, 2002 8.96 (0.06) 1.22 1.16 ICON ENERGY FUND Year Ended September 30, 2006 33.76 (0.06) (0.89) (0.95) Year Ended September 30, 2005 21.81 0.10 11.85 11.95 Year Ended September 30, 2004 13.70 (0.04) 8.15 8.11 Year Ended September 30, 2003 11.84 (0.04) 1.90 1.86 Year Ended September 30, 2002 11.29 (0.08) 0.65 0.57 ICON FINANCIAL FUND Year Ended September 30, 2006 13.43 0.15 1.84 1.99 Year Ended September 30, 2005 13.36 0.13 0.99 1.12 Year Ended September 30, 2004 10.78 0.04 2.60 2.64 Year Ended September 30, 2003 8.84 0.05 1.92 1.97 Year Ended September 30, 2002 12.04 (0.01) (1.08) (1.09) ICON HEALTHCARE FUND Year Ended September 30, 2006 17.94 (0.10) 0.38 0.28 Year Ended September 30, 2005 13.70 (0.14) 4.42 4.28 Year Ended September 30, 2004 12.28 (0.14) 1.56 1.42 Year Ended September 30, 2003 10.35 (0.09) 2.02 1.93 Year Ended September 30, 2002 11.57 (0.12) (0.49) (0.61) ICON INDUSTRIALS FUND Year Ended September 30, 2006 12.70 (0.04) 0.97 0.93 Year Ended September 30, 2005 10.52 (0.04) 2.22 2.18 Year Ended September 30, 2004 8.80 (0.05) 1.77 1.72 Year Ended September 30, 2003 7.96 (0.05) 0.89 0.84 Year Ended September 30, 2002 8.55 (0.02) (0.57) (0.59) LESS DIVIDENDS AND DISTRIBUTIONS ------------------------------------------------------- DIVIDENDS DISTRIBUTIONS TOTAL FROM NET FROM NET DIVIDENDS INVESTMENT REALIZED RETURN AND INCOME GAINS OF CAPITAL DISTRIBUTIONS ---------- ------------- ---------- ------------- ICON CONSUMER DISCRETIONARY FUND Year Ended September 30, 2006 $ - $(2.23) $ - $(2.23) Year Ended September 30, 2005 - - - - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - - - - ICON ENERGY FUND Year Ended September 30, 2006 (0.08) (0.85) - (0.93) Year Ended September 30, 2005 - - - - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 (0.02) - - (0.02) ICON FINANCIAL FUND Year Ended September 30, 2006 (0.09) (0.86) - (0.95) Year Ended September 30, 2005 (0.03) (1.02) - (1.05) Year Ended September 30, 2004 (0.06) - - (0.06) Year Ended September 30, 2003 (0.03) - - (0.03) Year Ended September 30, 2002 - (2.11) - (2.11) ICON HEALTHCARE FUND Year Ended September 30, 2006 - (0.27) - (0.27) Year Ended September 30, 2005 - (0.04) - (0.04) Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - (0.56) (0.05) (0.61) ICON INDUSTRIALS FUND Year Ended September 30, 2006 - (0.41) - (0.41) Year Ended September 30, 2005 - - - - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - - - -
76 Financial Highlights
RATIO OF NET NET ASSET AVERAGE RATIO OF INVESTMENT VALUE, NET ASSETS, NET ASSETS EXPENSES INCOME/(LOSS) PORTFOLIO END OF TOTAL END OF PERIOD FOR THE PERIOD TO AVERAGE TO AVERAGE TURNOVER PERIOD RETURN (IN THOUSANDS) (IN THOUSANDS) NET ASSETS NET ASSETS RATE --------- ------ -------------- -------------- ---------- ------------- --------- $12.11 6.20% $ 110,792 $156,240 1.32% (0.46)% 173.83% 13.61 7.17% 169,422 167,635 1.25% (0.57)% 157.94% 12.70 7.72% 151,922 178,011 1.31% (0.38)% 120.63% 11.79 16.50% 150,065 118,834 1.40% (0.79)% 174.51% 10.12 12.95% 121,640 184,174 1.29% (0.49)% 128.06% 31.88 (2.81)% 788,366 947,108 1.17% (0.16)% 22.86% 33.76 54.79% 1,008,958 602,922 1.21% 0.37% 27.51% 21.81 59.20% 287,614 127,920 1.35% (0.20)% 13.42% 13.70 15.71% 55,629 74,883 1.40% (0.29)% 42.53% 11.84 5.03% 104,220 71,434 1.35% (0.61)% 26.30% 14.47 15.53% 368,614 264,297 1.20% 1.10% 153.47% 13.43 8.29% 210,883 188,864 1.26% 1.00% 170.75% 13.36 24.53% 188,393 162,121 1.32% 0.34% 114.50% 10.78 22.35% 139,261 131,042 1.34% 0.54% 142.77% 8.84 (11.88)% 110,116 60,904 1.36% (0.06)% 69.58% 17.95 1.56% 646,202 667,967 1.19% (0.55)% 61.37% 17.94 31.39% 682,759 463,813 1.22% (0.82)% 47.88% 13.70 11.56% 285,670 244,742 1.29% (1.04)% 52.72% 12.28 18.65% 141,259 120,068 1.34% (0.84)% 85.52% 10.35 (5.63)% 93,031 44,042 1.39% (1.05)% 104.90% 13.22 7.49% 106,015 216,819 1.24% (0.30)% 89.38% 12.70 20.72% 216,636 196,295 1.24% (0.34)% 67.25% 10.52 19.55% 209,693 179,657 1.29% (0.47)% 45.77% 8.80 10.55% 132,554 70,382 1.43% (0.64)% 90.49% 7.96 (6.90)% 63,919 107,335 1.30% (0.24)% 99.22%
Financial Highlights 77 Financial Highlights (continued)
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS ---------------------------------------- --------------------------------------- NET ASSET NET NET REALIZED DIVIDENDS DISTRIBUTIONS TOTAL VALUE, INVESTMENT AND UNREALIZED TOTAL FROM FROM NET FROM NET DIVIDENDS BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT INVESTMENT REALIZED RETURN AND OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS INCOME GAINS OF CAPITAL DISTRIBUTIONS --------- ---------- -------------- ---------- ---------- ------------- ---------- ------------- ICON INFORMATION TECHNOLOGY FUND Year Ended September 30, 2006 $ 8.70 $(0.05) $ 0.07 $ 0.02 $ - $ - $ - $ - Year Ended September 30, 2005 7.90 (0.08) 0.88 0.80 - - - - Year Ended September 30, 2004 8.27 (0.08) (0.29) (0.37) - - - - Year Ended September 30, 2003 5.98 (0.08) 2.37 2.29 - - - - Year Ended September 30, 2002 7.80 (0.10) (1.72) (1.82) - - - - ICON LEISURE AND CONSUMER STAPLES FUND Year Ended September 30, 2006 11.96 (0.07) (0.01) (0.08) - (2.67) -(a) (2.67) Year Ended September 30, 2005 14.51 (0.06) 0.94 0.88 - (3.43) - (3.43) Year Ended September 30, 2004 12.42 (0.04) 2.13 2.09 - - - - Year Ended September 30, 2003 11.20 (0.06) 1.28 1.22 - - - - Year Ended September 30, 2002 9.42 (0.07) 1.85 1.78 - - - - ICON MATERIALS FUND Year Ended September 30, 2006 11.30 0.09 1.09 1.18 (0.02) (0.79) - (0.81) Year Ended September 30, 2005 9.05 0.03 2.23 2.26 (0.01) - - (0.01) Year Ended September 30, 2004 6.20 0.01 2.87 2.88 (0.03) - - (0.03) Year Ended September 30, 2003 5.68 0.03 0.50 0.53 (0.01) - - (0.01) Year Ended September 30, 2002 5.70 0.02 (0.01) 0.01 (0.03) - - (0.03) ICON TELECOMMUNICATION & UTILITIES FUND Year Ended September 30, 2006 8.28 0.13 0.37 0.50 (0.18) (0.94) - (1.12) Year Ended September 30, 2005 6.61 0.14 1.61 1.75 (0.08) - - (0.08) Year Ended September 30, 2004 5.69 0.07 0.92 0.99 (0.07) - - (0.07) Year Ended September 30, 2003 4.78 0.10 0.87 0.97 (0.06) - - (0.06) Year Ended September 30, 2002 6.19 0.10 (1.45) (1.35) (0.06) - - (0.06)
(x) Calculated using the average share method. The accompanying notes are an integral part of the financial statements. (a) Amount less than $0.005. 78 Financial Highlights
RATIO OF NET NET ASSET AVERAGE NET RATIO OF INVESTMENT VALUE, NET ASSETS, ASSETS EXPENSES INCOME/(LOSS)TO PORTFOLIO END OF TOTAL END OF PERIOD FOR THE PERIOD TO AVERAGE AVERAGE NET TURNOVER PERIOD RETURN (IN THOUSANDS) (IN THOUSANDS) NET ASSETS ASSETS RATE --------- ------ -------------- -------------- ---------- --------------- --------- $ 8.72 0.23% $241,988 $263,546 1.25% (0.61)% 155.39% 8.70 10.13% 220,073 264,222 1.29% (0.91)% 152.16% 7.90 (4.47)% 244,252 282,062 1.31% (0.91)% 189.67% 8.27 38.29% 307,972 190,287 1.35% (1.16)% 155.39% 5.98 (23.33)% 75,623 189,972 1.31% (1.09)% 190.09% 9.21 0.11% 68,136 50,507 1.54% (0.70)% 215.75% 11.96 5.01% 47,410 99,988 1.30% (0.45)% 271.72% 14.51 16.83% 83,022 104,515 1.33% (0.31)% 148.43% 12.42 10.89% 82,347 80,928 1.38% (0.51)% 139.54% 11.20 18.90% 88,341 86,202 1.34% (0.55)% 90.43% 11.67 11.17% 135,097 153,244 1.30% 0.74% 176.89% 11.30 25.04% 99,569 101,971 1.31% 0.33% 128.01% 9.05 46.61% 139,838 68,497 1.37% 0.13% 59.48% 6.20 9.36% 30,376 40,156 1.47% 0.59% 130.01% 5.68 0.06% 59,020 45,917 1.36% 0.23% 74.55% 7.66 7.56% 119,762 77,327 1.38% 1.71% 209.50% 8.28 26.70% 120,651 101,129 1.26% 1.88% 112.91% 6.61 17.57% 61,325 54,232 1.37% 1.07% 108.81% 5.69 20.36% 42,509 53,219 1.41% 2.05% 158.24% 4.78 (22.05)% 66,366 20,196 1.50% 1.78% 137.81%
Financial Highlights 79 Notes to Financial Statements September 30, 2006 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Consumer Discretionary Fund ("Consumer Discretionary Fund"), ICON Energy Fund ("Energy Fund"), ICON Financial Fund ("Financial Fund"), ICON Healthcare Fund ("Healthcare Fund"), ICON Industrials Fund ("Industrials Fund"), ICON Information Technology Fund ("Information Technology Fund"), ICON Leisure and Consumer Staples Fund ("Leisure and Consumer Staples Fund"), ICON Materials Fund ("Materials Fund"), and ICON Telecommunication & Utilities Fund ("Telecommunication & Utilities Fund") are series funds (individually a "Fund" and collectively, the "Funds"). The Funds are part of the ICON Funds (the "Trust"), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment management company. There are eight other active Funds within the Trust. Those Funds are covered by separate prospectuses and shareholder reports. The Funds invest primarily in securities of companies whose principal business activities fall within specific industries and sectors. Each Fund is authorized to issue an unlimited number of no par shares. The investment objective of each of Fund is to provide long-term capital appreciation. The Funds may have elements of risk, including the loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment in a non-diversified sector fund may involve greater risk and volatility than a diversified fund. Investments in foreign securities and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar-denominated transactions as a result of, among other factors, the possibility of lower government supervision and regulation of foreign securities markets and the possibility of political or economic instability. Financial statements of foreign companies are governed by different accounting, auditing, and financial standards than U.S. companies and tend to be less transparent and uniform than in the United States. Many corporate governance standards, which help ensure the integrity of public information in the United States, do not exist in foreign countries. In general, there is less governmental supervision of foreign stock exchanges and securities brokers and issuers. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity and small market share. In addition, in the normal course of business, the Funds may enter into various agreements that provide for general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as any potential exposure involves future claims that may be made against each Fund. However, based on experience, the Funds expect the risk of loss to be minimal. 80 Notes to Financial Statements The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results may differ from these estimates. INVESTMENT VALUATION The Funds' securities and other assets are valued at the closing price at the close of the regular trading session of the New York Stock Exchange (the "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by the Funds at the NASDAQ Official Closing Price provided by NASDAQ each business day. The Funds use pricing services to report the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is considered inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board of Trustees ("Board") or pursuant to procedures approved by the Board. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than 60 days are valued in accordance with the evaluated bid price supplied by the pricing service. The evaluated bid price supplied by the pricing service is a matrix system which considers such factors as security prices, yields, maturities and ratings. Short-term securities with remaining maturities of 60 days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. Currency rates as of the close of the NYSE are used to convert foreign security values into U.S. dollars. The Funds' securities traded in countries outside of the Western Hemisphere are fair valued daily by utilizing the quotations of an independent pricing service, unless the Funds' adviser determines that use of another valuation methodology is appropriate. The purposes of daily fair valuation are to avoid stale prices and to take into account, among other things, any significant Notes to Financial Statements 81 Notes to Financial Statements (continued) events occurring after the close of foreign markets. The pricing service uses statistical analyses and quantitative models to adjust local market prices using factors such as subsequent movements and changes in the prices of indexes and securities and exchange rates in other markets to determine fair value as of the time a Fund calculates its net asset value. The valuation assigned to fair-valued securities for purposes of calculating a Fund's net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. In September 2006, the Financial Accounting Standards Board (FASB) issued Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value Measurements." This standard establishes a single authoritative definition of fair value, sets out a framework for measuring fair value and requires additional disclosures about fair value measurements. SFAS No. 157 applies to fair value measurements already required or permitted by existing standards. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. The changes to current generally accepted accounting principles from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value measurements. Management has recently begun to evaluate the application of the Statement to the Funds, and is not in a position at this time to evaluate the significance of its impact, if any, on the Funds' financial statements. REPURCHASE AGREEMENTS Repurchase agreements, if held by the Funds, are fully collateralized by U.S. Government securities and such collateral is in the possession of the Funds' custodian. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements including accrued interest. In the event of default on the obligation to repurchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. No repurchase agreements were purchased or sold by the Funds during the year ended September 30, 2006. FOREIGN CURRENCY TRANSLATION The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange daily. Income and expenses are translated into U.S. dollars at the 82 Notes to Financial Statements prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Net unrealized appreciation or depreciation on investments and foreign currency translations arise from changes in the value of assets and liabilities, resulting from changes in the exchange rates and changes in market prices of securities held. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may enter into short-term forward foreign currency contracts in connection with planned purchases or sales of securities as a hedge against fluctuations in foreign exchange rates pending the settlement of transactions in foreign securities. A forward foreign currency contract is an agreement between contracting parties to exchange an amount of currency at some future time at an agreed upon rate. These contracts are marked-to-market daily and the related appreciation or depreciation of the contract is presented in the Statements of Assets and Liabilities. Net realized gains and losses on foreign currency transactions represent disposition of foreign currencies, and the difference between the amount recorded at the time of the transaction and the U.S. dollar amount actually received. Any realized gain or loss incurred by the Funds due to foreign currency translation is included in the Statements of Operations. The Funds did not enter into any foreign currency contracts during the year ended September 30, 2006. FUTURES CONTRACTS The Funds may invest in financial futures contracts for the purpose of hedging their existing securities or securities they intend to purchase against fluctuations in fair value caused by changes in prevailing markets. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions change unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the Notes to Financial Statements 83 Notes to Financial Statements (continued) underlying hedged assets. The Funds held no financial futures contracts during the year ended September 30, 2006. OPTIONS TRANSACTIONS Each Fund may write call and put options on any security in which it may invest. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security, and the proceeds from the sale are increased by the premium originally received. If a written put option is exercised, the cost of the security acquired is decreased by the premium originally received. As a writer of an option, the Fund has no control over whether the underlying securities are subsequently sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security underlying the written option. As a writer of an option, a Fund has no control over whether the underlying securities are subsequently sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security underlying the written option. Each Fund may also purchase put and call options on any security in which it may invest. When a Fund purchases a call or put option, an amount equal to the premium paid is included in the Fund's Statement of Assets and Liabilities as an investment, and is subsequently marked-to-market to reflect the current market value of the option. If an option expires on the stipulated expiration date or if the Fund enters into a closing sale transaction, a gain or loss is realized. If the Fund exercises a call, the cost of the security acquired is increased by the premium paid for the call. If the Fund exercises a put option, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities. The Funds did not enter into any option transactions during the year ended September 30, 2006. INCOME TAXES The Funds intend to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code and, accordingly, the Funds will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that they intend to make sufficient distributions of net investment income and net realized capital gains. 84 Notes to Financial Statements Dividends received by shareholders of the Funds which are derived from foreign source income and foreign taxes paid by the Funds are to be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Funds. Dividends paid by the Funds from net investment income and distributions of net realized short-term gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Dividends and distributions to shareholders are recorded by the Funds on the ex-dividend/distribution date. The Funds distribute net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. The ICON Funds may utilize equalization accounting for tax purposes and designate earnings and profits, including net realized gains distributed to shareholders on redemption of shares, as part of the dividends paid deduction for income tax purposes. Income distributions 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. On July 13, 2006, the Financial Accounting Standards Board ("FASB") released FASB Interpretation No. 48 "Accounting for Uncertainty in Income Taxes" ("FIN 48"). FIN 48 provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements. FIN 48 requires the evaluation of tax positions taken or expected to be taken in the course of preparing the Funds' tax return to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is required for fiscal years beginning after December 15, 2006 and is to be applied to all open tax years as of the effective date. Management has recently begun to evaluate the application of the Interpretation to the Funds, and is not in a position at this time to evaluate the significance of its impact, if any, on the Funds' financial statements. INVESTMENT INCOME Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Certain dividends from foreign securities are recorded as soon as the Funds are informed of the dividend if such information is obtained subsequent to the ex-dividend date. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Notes to Financial Statements 85 Notes to Financial Statements (continued) INVESTMENT TRANSACTIONS Security transactions are accounted for no later than one business day after the trade date. However, for financial reporting purposes, security transactions are accounted for on the trade date. Gains and losses on securities sold are determined on the basis of identified cost. ALLOCATION OF INCOME AND EXPENSES Expenses which cannot be directly attributed to a specific Fund in the Trust are apportioned between all Funds in the Trust based upon relative net assets. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEES ICON Advisers, Inc. ("ICON") serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. Effective January 31, 2006, the Funds are obligated to pay ICON management fees computed daily at an annual rate of 1.00% of the first $500 million of average daily net assets, 0.95% on the next $250 million, 0.925% on the next $750 million, 0.90% on the next $3.5 billion, and 0.875% on average daily net assets over $5 billion. Prior to that date, ICON received a monthly management fee that was computed daily at an annual rate of 1.00% of the Funds' average daily net assets. TRANSFER AGENT, CUSTODY AND ACCOUNTING FEES BISYS Fund Services Ohio, Inc. ("BISYS") is the Fund Accounting Agent for the Funds. For its services, the Trust pays BISYS 0.03% on the first $1.75 billion of average net assets, 0.0175% on the average net assets over $1.75 billion and up to $5 billion, and 0.01% on average net assets in excess of $5 billion. Brown Brothers Harriman ("BBH") is the custodian of the Trust's investments. For domestic custody services, the Trust pays BBH 0.0065% on the first $50 million of average net assets and 0.0050% on domestic assets above $50 million, plus certain transaction charges. For foreign custody services, the Trust pays BBH 0.03% on foreign assets plus certain transaction charges. Boston Financial Data Services, Inc. ("BFDS") is the Trust's transfer agent. For these services, the Trust pays an account fee of $13.25 per open account, $7.00 per networked account, $1.80 per closed account, plus certain other transaction and cusip charges. 86 Notes to Financial Statements Transfer agent earnings credits are credits received for interest which is a result from overnight balances used by the transfer agent, BFDS, for clearing shareholder transactions. During the year ended September 30, 2006, the Funds received transfer agent earnings credits which are included on the Statement of Operations. ADMINISTRATIVE SERVICES The Trust has entered into an administrative services agreement with ICON pursuant to which ICON oversees the administration of the Trust's business and affairs. As of January 31, 2006, this agreement provides for an annual fee of 0.05% on the Funds' first $1.5 billion of average daily net assets, 0.045% on the next $1.5 billion of average daily net assets, 0.040% on the next $2 billion of average daily net assets and 0.030% on average daily net assets over $5 billion. Prior to that date, this agreement provided for an annual fee to ICON of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. The administrative services agreement provides that ICON will not be liable for any error of judgment, mistake of law, or any loss suffered by the Trust in connection with matters to which the administrative services agreement relates, except for a loss resulting from willful misfeasance, bad faith or negligence by ICON in the performance of its duties. ICON has entered into a sub-administration agreement with BISYS pursuant to which BISYS assists ICON with the administration and business affairs of the Trust. For its services, ICON pays BISYS at an annual rate of 0.025% on the first $1.75 billion of Trust assets and 0.015% on assets above $1.75 billion. RELATED PARTIES Certain Officers and Directors of ICON are also Officers and Trustees of the Funds; however, such Officers and Trustees (with the exception of the Chief Compliance Officer, "CCO") receive no compensation from the Funds. The CCO's salary is paid 90% by the Funds and 10% by the Adviser. For the year ended September 30, 2006, the total related amounts paid by the Trust under this arrangement are included in Other Expenses on the Statements of Operations. Notes to Financial Statements 87 Notes to Financial Statements (continued) 3. LINE OF CREDIT The Funds have entered into Lines of Credit agreements with BBH. The maximum borrowing is limited to the lesser of $50 million or 25% of the net asset value in the Fund subject to a maximum borrowing limit by the Trust of $150 million. Interest is charged at LIBOR plus 2.00%, which was 7.32% at September 30, 2006. The average interest rate charged for the year ended September 30, 2006 was 6.75%.
AVERAGE BORROWING (10/1/05-9/30/06) ------------------------------------------------------------------------------- ICON Consumer Discretionary Fund** $3,851,246 ICON Energy Fund** 7,638,061 ICON Financial Fund** 1,756,078 ICON Healthcare Fund 2,854,811 ICON Industrials Fund** 4,181,363 ICON Information Technology Fund** 2,585,079 ICON Leisure and Consumer Staples Fund** 408,158 ICON Materials Fund** 1,484,756 ICON Telecommunication & Utilities Fund 1,928,028
**Fund had outstanding borrowings as of September 30, 2006. 4. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryovers. The tax components of capital shown in the following tables represent losses or deductions the Funds may be able to offset against income and gains recognized in future years and post October loss deferrals. The accumulated losses noted in the following tables represent net capital loss carryforwards as of September 30, 2006 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions. The ICON Information Technology Fund has a capital loss carryforward of $51,670,054, which expires in 2011. The ICON Leisure and Consumer Staples Fund has a capital loss carryforward of $92,773, which expires in 2014. Net capital losses incurred after October 31 and within the taxable year are deemed to arise on the first business day of the Funds' next taxable year. For the year ended September 30, 2006, the ICON Consumer Discretionary Fund and ICON Leisure and Consumer Staples Fund deferred $2,665,204 and $134,547, respectively. 88 Notes to Financial Statements The tax characteristics of dividends paid to shareholders during the fiscal year ended September 30, 2006, were as follows:
DISTRIBUTIONS PAID FROM ------------------------ TAX TOTAL ORDINARY NET LONG- TOTAL TAXABLE RETURN OF DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS CAPITAL PAID --------------------------------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund $ - $15,842,362 $15,842,362 $ - $15,842,362 ICON Energy Fund 4,296,329 21,211,622 25,507,951 -- 25,507,951 ICON Financial Fund 2,441,494 15,416,499 17,857,993 - 17,857,993 ICON Healthcare Fund - 10,591,515 10,591,515 - 10,591,515 ICON Industrials Fund - 6,835,273 6,835,273 - 6,835,273 ICON Leisure and Consumer Staples Fund - 9,538,955 9,538,955 34,857 9,573,812 ICON Materials Fund 236,508 9,051,351 9,287,859 - 9,287,859 ICON Telecommunication & Utilities Fund 2,571,472 8,949,456 11,520,928 - 11,520,928
The tax characteristics of dividends and distributions paid to shareholders during the fiscal year ended September 30, 2005, were as follows:
DISTRIBUTIONS PAID FROM ------------------------ TOTAL ORDINARY NET LONG- TOTAL TAXABLE DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS PAID -------------------------------------------------------------------------------------------------------------- ICON Financial Fund $4,850,731 $ 9,918,321 $14,769,052 $14,769,052 ICON Healthcare Fund - 877,529 877,529 877,529 ICON Leisure and Consumer Staples Fund 698,297 12,873,932 13,572,229 13,572,229 ICON Materials Fund 163,349 - 163,349 163,349 ICON Telecommunication & Utilities Fund 767,065 - 767,065 767,065
During the year ended September 30, 2006, the following capital loss carryforwards were used:
AMOUNT -------------------------------------------------------------------------- ICON Information Technology Fund $ 2,815,699
Notes to Financial Statements 89 Notes to Financial Statements (continued) As of September 30, 2006, the components of accumulated earnings (deficit) on a tax basis was as follows:
TOTAL UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ACCUMULATED ORDINARY NET LONG- ACCUMULATED CAPITAL AND APPRECIATION EARNINGS FUND INCOME TERM GAINS EARNINGS OTHER LOSSES (DEPRECIATION)* (DEFICITS) ----------------------------------------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund $ -- $ -- $ -- $ (2,665,204) $ 9,829,818 $ 7,164,614 ICON Energy Fund 4,022,979 64,453,385 68,476,364 -- 183,410,756 251,887,120 ICON Financial Fund 5,772,024 10,760,520 16,532,544 -- 37,492,555 54,025,099 ICON Healthcare Fund -- 43,433,266 43,433,266 -- 83,916,814 127,350,080 ICON Industrials Fund 9,908,129 17,893,960 27,802,089 -- 8,960,293 36,762,382 ICON Information Technology Fund -- -- -- (51,670,054) 26,665,854 (25,004,200) ICON Leisure and Consumer Staples Fund -- -- -- (227,322) 4,482,209 4,254,887 ICON Materials Fund 6,831,143 6,032,690 12,863,833 -- 8,802,955 21,666,788 ICON Telecommunication & Utilities Fund 2,742,256 5,129,258 7,871,514 -- 9,438,739 17,310,253
*The differences between the book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to tax deferral of losses on wash sales and recognition of tax unrealized appreciation (depreciation) of passive foreign investment companies. As of September 30, 2006, book cost for financial reporting purposes is substantially the same for federal income tax purposes and differs from market value by net unrealized appreciation/(depreciation) of securities as follows:
UNREALIZED UNREALIZED NET APPRECIATION FUND COST APPRECIATION (DEPRECIATION) (DEPRECIATION) --------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund $101,655,493 $11,141,915 $(1,312,097) $ 9,829,818 ICON Energy Fund 605,170,559 203,359,155 (19,948,399) 183,410,756 ICON Financial Fund 347,617,424 38,193,425 (700,870) 37,492,555 ICON Healthcare Fund 575,449,086 96,584,179 (12,667,365) 83,916,814 ICON Industrials Fund 95,043,644 10,538,737 (1,578,444) 8,960,293 ICON Information Technology Fund 221,887,609 28,756,333 (2,090,479) 26,665,854 ICON Leisure and Consumer Staples Fund 63,797,273 4,997,764 (515,555) 4,482,209 ICON Materials Fund 127,001,331 11,077,010 (2,274,055) 8,802,955 ICON Telecommunication & Utilities Fund 110,015,216 10,023,133 (584,394) 9,438,739
90 Notes to Financial Statements Report of Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of the ICON Sector Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Consumer Discretionary Fund, ICON Energy Fund, ICON Financial Fund, ICON Healthcare Fund, ICON Industrials Fund, ICON Information Technology Fund, ICON Leisure and Consumer Staples Fund, ICON Materials Fund, and ICON Telecommunication & Utilities Fund (nine of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2006, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with 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 are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2006 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Denver, Colorado November 20, 2006 Report of Accounting Firm 91 Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 17 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, and principal occupations are set forth below. The address of the Trustees is 5299 DTC Blvd., Suite 1200, Greenwood Village, CO 80111. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 55. Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and served as the Chief Investment Officer (1991 to 2004) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Director (1994 to present), and was previously Secretary/Treasurer (1994 lo 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 56. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); General Partner of Bergert Properties, a real estate holding company (1997 to present); and General Partner of Pyramid Real Estate Partnership, a real estate development company (1998 to present) General Partner of Chamois Partners, a venture capital company (2004 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 lo 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); Delta Dental of California, an insurance company (2006 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 57. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager, Trinity Investment Management Corporation (1989 to 2001). 92 Trustees and Officers GREGORY KELLAM SCOTT, 58. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was Senior Vice President - Law, General Counsel and Secretary of GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Constituency for Africa (1997 to present) and serves as Executive Director of Indiana Civil Rights Commission (2005-present). Mr. Scott has been appointed to the US State Department's Commission on the African Judiciary (2006-present). R. MICHAEL SENTEL, 58. Mr. Sentel has been a Trustee of the Funds since their inception. Mr. Sentel is a Senior Attorney with the U.S. Department of Education (1996 to present). Mr. Sentel also provides legal representation as a sole practitioner with an emphasis on corporate and transactional law. He served as general counsel to numerous public companies and served on the board of directors of one of these clients. Mr. Sentel began his legal career with the U.S. Securities and Exchange Commission's Division of Enforcement and became a branch chief. Later he served as the section chief for the Professional Liability Section of the Federal Deposit Insurance Corp. with responsibility for the Rocky Mountain Region (1991 to 1994). JONATHAN F. ZESCHIN, 53. Mr. Zeschin has been a Trustee of the Funds since November 2002. Mr. Zeschin is President and Founder of ESSENTIAL Advisers, Inc., a wealth management and investment advisory firm (2000 to present) and was Managing Partner of JZ Partners LLC, a business consulting firm for investment management companies (1998 to present). Mr. Zeschin was previously President of Founders Asset Management LLC, an investment management company (1995 to 1998) and Executive Vice President, INVESCO Funds Group, an investment advisory company (1992 to 1995). Mr. Zeschin was previously a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to 2004); and was previously a Director of the Wasatch Funds (2002 to 2004). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 55. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and served as the Chief Investment Officer (1991 to 2004). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. Trustees and Officers 93 Board of Trustees and Fund Officers (continued) (unaudited) ERIK L. JONSON, 57. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception. Mr. Jonson is also Chief Financial Officer (1996 to present) and Executive Vice President (2004 to present) and was previously Vice President (1998 to 2004) of ICON Advisers; Chief Financial Officer, Secretary and Director (1996 to present) of IM&R; and Executive Vice President (2004 to present) and Treasurer (2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) and Vice President, (2002 to 2004) of IDI; and Executive Vice President and Treasurer of ICON Insurance Agency, Inc. (2004 to present). DONALD SALCITO, 53. Mr. Salcito serves as Vice President and Secretary of the Funds since November 15, 2006. Mr. Salcito is also Executive Vice President and General Counsel (September 2005 to present) of ICON Advisers, Inc.; Director of ICON Management & Research (2005 to present); Executive Vice President, Secretary, General Counsel and Chief Compliance Officer, for ICON Distributors, Inc. (2005 to present); Executive Vice President and Secretary of ICON Insurance Agency, Inc. (2005 to present). Previously he was a Partner in the law firm of Perkins Coie, LLP. (2000-2005). CARRIE M. SCHOFFMAN, 33. Ms. Schoffman serves as Assistant Vice President and Chief Compliance Officer of the Funds (May 2004 to present). She also serves as Chief Compliance Officer of ICON Advisers, Inc. (May 2004 to present). Previously she was a staff accountant with the U.S. Securities and Exchange Commission (2003 to 2004). She also was a Manager (2001 to 2003) and Senior Associate/Associate (1996 to 2001) at PricewaterhouseCoopers LLP. STEPHEN ABRAMS, 43. Mr. Abrams serves as Anti-Money Laundering Officer of the Funds (2005 to present). Mr. Abrams is also Associate General Counsel of ICON Advisers, Inc. (2005 to present). Previously he was a Partner at Perkins Coie, LLP (2004-2005) and Associate (2000 to 2004). 94 Trustees and Officers Other Information (unaudited) RENEWAL OF INVESTMENT ADVISORY AGREEMENT In determining to renew the investment advisory agreements between ICON Funds (the "Trust") and ICON Advisers, Inc. ("ICON" or the "Adviser") the Board requested, was provided with and reviewed data with respect to ICON, its personnel, and the services to be provided to each Fund by ICON under the Trust's Investment Advisory Agreement dated October 9, 1996, as amended (related to the Sector, International and Diversified Funds) and under the Trust's Investment Advisory Agreement dated July 9, 2002 and effective October 1, 2002, as amended (related to the U.S. Diversified Funds - Bond, Covered Call, Equity Income and Long/Short Funds) (collectively, the "Advisory Agreements"). The data included information concerning advisory, distribution and administrative services provided to the Funds by ICON and its related companies; information concerning other businesses of those companies; comparative data related to exchange traded funds versus the Sector Funds; and comparative data obtained from Lipper Analytical Services related to Fund performance and Fund expenses. On August 8, 2006, the Board of Trustees, including all of the Trustees who are not "interested persons" of the Trust (the "Independent Trustees"), approved continuation of the Advisory Agreements with the Adviser for each Fund for an additional one-year term commencing October 1, 2006. The Independent Trustees were represented by independent legal counsel throughout the process. Prior to acting on the matter, the Independent Trustees met separately as a group in private sessions with their independent legal counsel to review and discuss the foregoing information and also met with management to discuss responses to questions raised during the process. In addition, the Independent Trustees received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the agreement. In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed information relating to the Adviser's operations and personnel. Among other things, the Adviser provided biographical information on its professional staff and descriptions of its organizational and management structure. In the course of their deliberations the Board evaluated, among other things, information relating to the investment philosophy, strategies and techniques used in managing each Fund, the qualifications and experience of the Adviser's investment personnel, the Adviser's compliance programs, the Adviser's brokerage practices, including the extent to which the Adviser obtains research through "soft dollar" arrangements with the Funds' brokerage, and the financial and non-financial resources available to provide services required under the Advisory Agreement. In considering the reasonableness of the fee payable to the Adviser for managing each Fund, the Board reviewed, among other things, financial Other Information 95 Other Information (unaudited) (continued) statements of the Adviser and an analysis of the profitability to the Adviser and its affiliates from each fund over various periods. The analysis identified all revenues and other benefits received by the Adviser and its affiliates from managing each Fund, the costs associated with providing such services and the resulting profitability to the Adviser and its affiliates. The Board considered the current and anticipated asset levels of each Fund and the willingness of the Adviser to waive fees and pay expenses of the Funds from time to time to limit the total expenses of the Funds. The Board concluded that the profitability to the Adviser and its affiliates from their relationship with the Funds is not excessive and that the Adviser is not realizing material benefits from economies of scale that would warrant adjustments to the fees for any Fund at this time. The Board of Trustees concluded that, in light of the information provided and analyzed, the fees charged by the Adviser under the Advisory Agreements to each Fund are reasonable. In connection with reviewing data bearing upon the nature, quality, and extent of services furnished by ICON to each Fund, the Board assessed data concerning ICON's staffing, systems and facilities. The Board also assessed ICON's non-Trust business to see whether there are any initiatives that would dilute service to the Trust. It was noted: A. That the breadth and the quality of investment advisory and other services being provided to each Fund are satisfactory, as evidenced in part by the performance record of each Fund compared with the performance records of a peer group of comparable funds; B. That ICON has made significant expenditures in the past year and in prior years to ensure that it has the sophisticated systems and the highly trained personnel necessary for it to be able to continue to provide quality service to the Funds' shareholders, including the dedication of substantial resources to ICON's investment and trading departments; and C. That the Board is satisfied with the research, portfolio management, and trading services, among others, being provided by ICON to the Funds, and is charging fair, reasonable, and competitive fees. In connection with reviewing data bearing upon the costs of services to be provided and profits to be realized by ICON and its related companies from the relationship with the Trust, the Board considered the Lipper comparative data, data concerning ICON's soft-dollar arrangements, costs borne by ICON in providing advisory services to each Fund and the profitability of ICON in light of the estimated profitability analyses which had been provided by ICON, other benefits to ICON from serving as the Funds' adviser, and ICON's financial statements. 96 Other Information With respect to the soft-dollar arrangements the Board assessed all facets of the arrangements including the quality of trade execution. It was noted that ICON receives research assistance from the use of soft dollars generated from Fund portfolio transactions and that such research assists ICON in providing quality investment advisory services to the Funds and other accounts to which it provides advisory services. The Board concluded that the arrangements are consistent with Fund brokerage practices and benefit the Funds and their shareholders. The Board noted that ICON benefits from serving directly as investment adviser and administrative agent, and through its affiliate, as the principal underwriter for the Funds. With respect to the distribution services, the Board noted that proceeds of the Trust's distribution plans pursuant to Rule 12b-1 under the 1940 Act for the International Funds and Diversified Funds are paid to ICON's affiliate and that the distributor has not profited from plan proceeds as all of the proceeds have been or will be used to cover distribution and marketing expenses. In this regard, the Trustees noted that marketing efforts have been successful as evidenced by Fund asset levels. With respect to the administrative fee paid to ICON, the Board reviewed the comparative data related to those services. The Board also considered the compliance experience in these service areas and concluded that the services provided by ICON and its affiliates to the Funds are satisfactory and that the profits derived from providing the services are competitive and reasonable. The Board also noted the risks assumed by ICON in providing investment advisory, distribution and administrative services to each Fund, including the capital commitments which have been made in the past and which continue to be made by ICON to ensure the continuation of the highest quality of service to the Funds is made with the recognition that the Funds' advisory relationship with ICON can be terminated at any time and must be renewed on an annual basis. In making these determinations the Board of Trustees considered the following: 1. In connection with assessing data bearing upon the fairness of fee arrangements, the Board used data from Lipper, Inc. concerning funds of similar size and funds of larger size, as well as data concerning ICON's other clients: A. the advisory fee structures of the Funds were considered in comparison with advisory fees and expense ratios of other similarly managed funds as set forth in the comparative data; B. that contractual advisory fees for the Sector Funds were higher than fees for similar funds; but that the Sector Funds' expense ratios were Other Information 97 Other Information (unaudited) (continued) competitive and in most instances lower than those of similarly managed Funds; C. that the Sector Funds had also imposed breakpoints on the contractual advisory fees and that such fees were reflected in the comparison data; D. that contractual advisory fees for the ICON Asia-Pacific Region and Europe Funds were above the average fees for similar funds; however, the Funds' expense ratios were competitive in light of their size; E. that the contractual advisory fees for the ICON International Equity Fund is below the average of similarly managed funds; F. the contractual advisory fees for the U.S. Diversified Funds were in line with fees for similar funds; and that, with the exception of the ICON Bond Fund and ICON Covered Call Fund, the U.S. Diversified Funds' expense ratios were lower than those of similarly managed Funds. G. the contractual advisory fee for the ICON Core Equity Fund was below the average fee for similar funds; and that its expense ratio was lower than those of similarly managed Funds. H. that, generally the fees paid to ICON for managing other institutional accounts (such as pension plans) are not lower than the fees paid by similarly managed Funds; however, to the extent such fees are lower, it is due to the fact that such accounts are less costly for ICON to manage. I. the advisory and other fees payable by the Funds to ICON are essentially fees which would be similar to those which would have resulted solely from "arm's-length" bargaining, and may well be lower than fees arrived solely from such arm's-length negotiation. 3. In connection the investment performance of the Funds and ICON the Board discussed and noted: 1. Based on the performance information provided by Lipper, Inc., of the thirteen ICON Funds that had a track record of at least five years, ten outperformed their respective peer groups; eight of the sixteen ICON Funds with a track of at least 3 years outperformed their respective peer groups; and 2. In comparing the Sector Funds to the ETFs the sector funds compared favorably over the one, two and three year periods. The Board considered the extent to which economies of scale could be realized as a Fund grows in assets and whether the Fund's fees reflect these economies of scale for the benefit of Fund shareholders. It was noted that each of the Sector Funds had imposed investment advisory fee breakpoints in January 2006 to take into such consideration economies that may be 98 Other Information realized as the Funds increase in assets. Furthermore, ICON has contractually agreed to impose expense limitations on the International Equity and the U.S. Diversified Funds at a cost to ICON. Based on these considerations, among others, the Board, including all of the Independent Trustees, concluded that the continuation of the advisory agreement was in the best interests of each Fund and its shareholders, the services to be performed under the agreement were services required for the operation of the Funds, ICON had provided satisfactory advisory services to the Funds in the past, and the fees for the advisory services which ICON would perform and other benefits from the relationship with the Trust and consistent with fees paid by similar funds, are reasonable in light of the comparative data, and would be within the range of what would have been negotiated at arm's length in light of the circumstances. SUPPLEMENTAL TAX INFORMATION For corporate shareholders, the following percentage of the total ordinary income dividends paid during the fiscal year ended September 30, 2006, qualifies for the corporate dividends received deduction for the following Funds:
DIVIDENDS RECEIVED FUND DEDUCTION ----------------------------------------------------------------------- ICON Energy Fund 47.48% ICON Financial Fund 30.43 ICON Materials Fund 59.33 ICON Telecommunication & Utilities Fund 34.34
For the fiscal year ended September 30, 2006, the following Funds paid qualified dividend income:
FUND AMOUNT ------------------------------------------------------------------------ ICON Energy Fund $2,039,804 ICON Financial Fund 1,562,104 ICON Materials Fund 236,508 ICON Telecommunication & Utilities Fund 2,171,894
Other Information 99 Other Information (unaudited) (continued) The Funds designate the following amounts as long-term capital gain distributions qualifying for the maximum 15% income tax rate for individuals:
FUND AMOUNT ------------------------------------------------------------------------- ICON Consumer Discretionary Fund $15,892,849 ICON Energy Fund 39,939,678 ICON Financial Fund 18,246,523 ICON Healthcare Fund 25,254,521 ICON Industrials Fund 26,788,242 ICON Leisure and Consumer Staples Fund 9,538,955 ICON Materials Fund 16,103,378 ICON Telecommunication & Utilities Fund 12,150,153
100 Other Information PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month end. Each ICON Fund also files a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q are available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A summarized description of the policies and procedures the ICON Funds use to vote proxies is available free of charge at www.iconadvisers.com or by calling 1-800-764-0442. Information about how the ICON Funds voted proxies related to each Fund's portfolio securities during the 12-month period ended June 30 is available free of charge at www.iconadvisers.com or on the SEC's website at www.sec.gov. FOR MORE INFORMATION This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor 101 THIS PAGE INTENTIONALLY LEFT BLANK (ICON FUNDS LOGO) For more information about the ICON Funds, contact us: By Telephone 1-800-764-0442 By Mail ICON Funds P.O. Box 55452 Boston, MA 02205-8165 In Person ICON Funds 5299 DTC Boulevard, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
(ICON LOGO) 1-800-764-0442 www.iconadvisers.com FANN-SEC(9-06) ITEM 2. CODE OF ETHICS. During the period covered by the report, with respect to the registrant's code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. 3(a)(1) The registrant's board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee. 3(a)(2) The audit committee financial experts are Glen F Bergert, Jonathan F. Zeschin, and R. Michael Sentel, who are "independent" for purposes of this Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fiscal year ended 9/30/06
Registrant Covered Entities 1 ---------- ------------------ (a) Audit Fees 2 $304,000 N/A (b) Non-Audit Fees (c) Tax Fees 3 $18,000 $60,000 (d) Total Non-Audit Fees $18,000 $60,000
Fiscal year ended 9/30/05
Registrant Covered Entities 1 ---------- ------------------ (a) Audit Fees 2 $298,250 N/A (b) Non-Audit Fees (c) Tax Fees 3 $ 64,300 $34,650 All Other Fees 4 -- $28,400 (d) Total Non-Audit Fees $ 64,300 $63,050
1. Covered Entities include ICON Advisers, Inc. ("ICON Advisers"), investment adviser and administrator to the Registrant, as well as ICON Advisers' affiliated entities. 2. "Audit Fees" represents fees for performing an audit of the Registrant's annual financial statements or services that are normally provided by the independent accountants in connection with statuatory and regulatory filings. 3. "Tax Fees" represent fees for tax return preparation, excise distribution calculations, quarterly tax compliance reviews, and tax planning and tax advice services provided in connection with the preparation and review of the Registrant's tax returns. ICON Advisers pays $1,000 under its Administration Agreement with the Registrant. 4. "All Other Fees" paid by the Registrant in fiscal year 2005 were related to multi-class issues. (e)(1) The Audit Committee of the Registrant's Board of Trustees ("Board") is required to review and pre-approve all services to be provided by the independent accountants to the Registrant and Covered Entities to determine whether the services performed by the independent accountants impair their independence from the Registrant. The Audit Committee has delegated preapproval authority to the Chairman of the Audit Committee, subject to review and ratification by the full Audit Committee. (e)(2) All of the principal accountants' hours spent on auditing the Registrant's financial statements were attributed to work performed by full-time permanent employees of the independent accountants. 100% of the non-audit services provided by the independent accountants to either the Registrant or the Covered Entities were pre-approved by the Audit Committee. (f) Not applicable. (g) The Audit Committee of the Registrant's Board has considered whether the provision of services other than audit services performed by the independent accountants to the Registrant and Covered Entities is compatible with maintaining the independent accountants' independence in performing audit services. 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 principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b)There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) The Code of ethics that is the subject of the disclosure required by item 2 is furnished herewith. (a)(2) Certifications pursuant to Rule 30a-2(a) are furnished herewith. (a)(3) Not applicable. (b) Certifications pursuant to Rule 30a-2(b) are furnished 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) ICON FUNDS By (Signature and Title)* /s/ Craig T. Callahan ------------------------------------------------------ Craig T. Callahan, President and Chief Executive Officer (Principal Executive Officer) Date December 1, 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 (Signature and Title)* /s/ Craig T. Callahan ------------------------------------------------------ Craig T. Callahan, President and Chief Executive Officer (Principal Executive Officer) Date December 1, 2006 By (Signature and Title)* /s/ Erik L. Jonson ------------------------------------------------------ Erik L. Jonson, Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Date December 1, 2006 * Print the name and title of each signing officer under his or her signature.