-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, FG62RdNTQs5Iz3cIbzV+KThRuvIwDH4fOsH4DYFn97hhfagl2+lH/L0MQgqOKUxo dW1wmUK1OpUW0IU97tYSIQ== 0001025770-03-000028.txt : 20031201 0001025770-03-000028.hdr.sgml : 20031201 20031201165222 ACCESSION NUMBER: 0001025770-03-000028 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20030930 FILED AS OF DATE: 20031201 EFFECTIVENESS DATE: 20031201 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICON FUNDS CENTRAL INDEX KEY: 0001025770 IRS NUMBER: 752676133 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07883 FILM NUMBER: 031030447 BUSINESS ADDRESS: STREET 1: 5299 DTC BOULEVARD STREET 2: SUITE 1200 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 BUSINESS PHONE: 3037901600 MAIL ADDRESS: STREET 1: 5299 DTC BOULEVARD STREET 2: SUITE 1200 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 N-CSR 1 formncsr.txt FORM N-CSR - SEPTEMBER 30, 2003 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER RECEIPT 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) Andra C. Ozols 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: 09/30 Date of reporting period: 09/30/2003 Item 1 - Reports to Stockholders INVESTMENT UPDATE SEPTEMBER 30, 2003 ICON SECTOR AND REGION FUNDS [PHOTO] ANNUAL REPORT [ICON FUNDS LOGOS] Table of Contents
ABOUT THIS REPORT ............................................2 MESSAGE FROM ICON FUNDS ............................................4 MANAGEMENT OVERVIEWS AND SCHEDULES OF INVESTMENTS ............................................6 Sector Funds ICON Consumer Discretionary Fund ............................................6 ICON Energy Fund ...........................................10 ICON Financial Fund ...........................................14 ICON Healthcare Fund ...........................................17 ICON Industrials Fund ...........................................21 ICON Information Technology Fund ...........................................25 ICON Leisure and Consumer Staples Fund ...........................................29 ICON Materials Fund ...........................................32 ICON Telecommunication & Utilities Fund ...........................................35 ICON Short-Term Fixed Income Fund ...........................................38 Region Funds ICON Asia-Pacific Region Fund ...........................................41 ICON North Europe Region Fund ...........................................45 ICON South Europe Region Fund ...........................................49 FINANCIAL STATEMENTS ...........................................54 FINANCIAL HIGHLIGHTS ...........................................62 NOTES TO FINANCIAL STATEMENTS ...........................................71 REPORT OF INDEPENDENT AUDITORS ...........................................77 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) ...........................................78 OTHER INFORMATION (UNAUDITED) ...........................................80
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. 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. Due to market volatility, current performance may differ from the figures shown. Please call 1-800-764-0442 or visit www.iconfunds.com for the most recent returns. - -------------------------------------------------------------------------------- PORTFOLIO DATA - -------------------------------------------------------------------------------- Opinions and forecasts regarding industries, companies and 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 percentage holdings as of September 30, 2003 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 investment methodology does not consider company-specific factors, they may impact a stock's performance, and therefore, Fund performance. In April 2003, Standard & Poor's made revisions to its Global Industry Classification Standard, including changes in industry categories and definitions. The Schedules of Investments reflect these changes. There are risks associated with mutual fund investing, including the risk of loss of principal. An investment in a non-diversified sector or region fund may involve greater risk and volatility than a diversified fund. Investments in foreign securities may entail unique risks, including political, market and currency risks. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity and small market share. 2 - -------------------------------------------------------------------------------- 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 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 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 the indexes. - - The unmanaged Standard & Poor's (S&P) 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 Standard & Poor's. - - The unmanaged NASDAQ Composite ("NASDAQ") Index is a broad-based capitalization-weighted index of all NASDAQ National Market and Small-Cap stocks. - - The unmanaged Morgan Stanley Capital International (MSCI) Europe 15 Index comprises 599 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 Pacific Index comprises stocks traded in the developed markets of the Pacific Basin (Australia, Hong Kong, Japan, Malaysia, New Zealand and Singapore). The capitalization-weighted index is structured 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 Bloomberg European 500 Index measures the weighted average performance in U.S. dollars of the 500 most highly capitalized European companies. - - The unmanaged Merrill Lynch 3-Month U.S. Treasury Bill Index comprises a single issue with a maturity date closest to, but not beyond, three months from the last day of the previous month. The unmanaged Merrill Lynch 6-Month U.S. Treasury Bill Index consists of a single issue with a maturity date closest to, but not beyond, six months from the last day of the previous month. The unmanaged Merrill Lynch 1-Year U.S. Treasury Bill Index consists of a single issue with the longest maturity. The issues in these indexes are replaced on a monthly basis to maintain the characteristics of each respective index. Index returns and statistical data included in this report are provided by Bloomberg, FactSet and Lehman Brothers. 3 Message from ICON Funds - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: [PHOTO] - -------------------------------------------------------------------------------- In looking back over the past 12 months, several statements from previous annual reports provide an interesting insight into the events that unfolded during the period. FEAR, DISGUST AND GREAT BARGAINS To begin, I recall the ICON annual report for the fiscal year ended September 30, 2002. In our letter to shareholders, we remarked that "the current environment has all the characteristics of a market bottom -- fear, disgust, negative news, and great bargains." We went on to say that "we anticipate a broad-based advance when the market emerges from its current cycle." Shortly after that was written, on October 9, 2002, the market indeed hit a bottom, reeling from the emotional stranglehold of impending war and corporate governance scandals. Amid the uncertainty that permeated the landscape, a speculative relief rally took hold during the fourth quarter of 2002. While not the broad advance we were expecting, stocks moved decisively higher though remained widely disconnected from our estimate of fair value for longer than we've experienced. From that October low through September 30, 2003, the S&P 1500 Index, the Funds' primary domestic benchmark, rallied dramatically, gaining an impressive 31.39%. While this reversal was certainly an accurate call by our system, we admit that it was neither clairvoyance nor providence on our part. It was simply the inherent nature of sticking to ICON's valuation discipline. Having calculated in October 2002 that stocks on average were priced 55% below fair value, we thought it best to capitalize on that opportunity and be patient. Although we may have been early, our investment methodology dictated that we be invested to participate. At the same time, it meant we had to look past the headlines and at times take the market's punishment. Other investors chose to wait for the return of clarity and better economic conditions before leaving the sidelines; by then, however, it may have been too late. A MOVE TOWARD FAIR VALUE Following the pre-war jitters that sent the market to yet another low on March 11, 2003, stocks embarked upon a broad six-month rally. However, even in the context of this all-encompassing advance, some sectors were more eager than others. Favored groups, such as Information Technology, Consumer Discretionary, Financials, and Industrials, led the market's ascent. In the natural ebb and flow of business cycles, these moves would be historically consistent with the start of an economic expansion. Yet, if asked whether they were based on the expectation of a recovery or some other triggering event, we would say no. We believe the recent surge in stock prices is nothing more than a move toward fair value. Put another way, we view it as an acknowledgement by many investors that the macro setting was not as discouraging as they initially thought. Stocks were simply oversold, and investors came to realize they were wrong for taking them to extreme lows. [SIDENOTE] "With stocks priced 55% below fair value based on our model, we thought it best to capitalize on that opportunity and be patient." [SIDENOTE] "Stocks were simply oversold, and investors came to realize they were wrong for taking them to extreme lows." 4 While economic conditions have certainly improved in the past year, we do not believe that a strong recovery or boom is necessary to prolong the rally. Our experience tells us it is simply the natural behavior of a rational market. There have been few newsworthy events that have boosted the market since the March 2003 bottom. We do not expect that any are needed for the move toward fair value to continue. RIDING THE THEME As prices resume the march toward fair value, and investors' skepticism gives way to optimism, we may in fact see the return of a momentum mentality. Were this to occur, it would not surprise us to see stocks exceed fair value by the end of the calendar year. At present, however, we believe the market has not gotten ahead of itself and the broad representation of sector and industry leadership makes sense to our system. In the meantime, we expect prices will gradually continue their move toward fair value despite the prognostications of naysayers and the traditional "wall of worry" that resides on Wall Street. Recently, the mutual fund industry has been tarnished by the actions of some brokers and personnel at advisory firms. We find these reports deeply troubling and want you to know ICON's position on the issues facing mutual funds: - - we do not and have not had agreements that permit the illegal practice of buying Fund shares after the market close - we are not aware of any ICON personnel who have participated in timing the Funds - we do not knowingly permit excessive trading in the ICON Funds, and we take aggressive steps to restrict market timing. Only time will tell how the industry will overcome these scandals. You hire us to implement a strict management discipline, and our service staff is equally committed to implementing a rigid system of monitoring the Funds for any sign of activity that would negatively impact shareholders. I'd like to close with a story that characterizes our investment methodology. While making a presentation at an investor seminar some years ago, an attendee commented that the ICON approach to investing seemed much like piloting a plane. When I asked what he meant by that, he observed that take-offs and landings are critical, and in between it is fairly routine. In our system, capturing industry leadership is critical and in between those rotations, we ride the theme. As of this writing, we consider ourselves to be at cruising altitude. We witnessed an unusual market during the past 12 months. Thank you for giving ICON the opportunity to help guide you through it. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, D.B.A. Chairman of the Board of Trustees and Chief Investment Officer of the Adviser [SIDENOTE] "We do not expect that newsworthy events are needed for the move toward fair value to continue." 5 Management Overview ICON CONSUMER DISCRETIONARY FUND A discussion with Robert Straus, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Consumer Discretionary Fund appreciated 16.50% for the one-year period ended September 30, 2003. This compares to a 23.46% return for its sector-specific benchmark, the S&P 1500 Consumer Discretionary Index and a 24.69% return for its broad benchmark, the S&P 1500 Index. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Ongoing concerns about the state of the economy weighed heavily on consumer confidence, even as corporate earnings and gross domestic product continued to trend higher. While stocks sold off sharply in the months preceding the Iraq war, they abruptly reversed course in mid-March 2003 just prior to the onset of military action. With the overhang of war removed, and an acknowledgement of economic recovery mounting, stocks rallied strongly despite widespread skepticism surrounding the veracity of the new bull market. This skepticism was fueled by mixed economic reports, most notably rising unemployment and deflation risks. Nevertheless, as the rally emerged from the lows of March 11 and proceeded to gain steam, many investors remained uncertain in the face of a "jobless" recovery. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Although the Fund produced a positive absolute return during the period, it fell short of its benchmark. The Fund's relative underperformance from the beginning of the fiscal year until March 31, 2003 was attributable to two primary factors. First, there was an absence of clear, sustainable industry leadership within the sector during the first half of the fiscal year, and our system is based on attempting to capture leadership. Second, while a handful of industries within the sector logged positive returns from the market low on October 9, 2002 through the end of March 2003, nearly twice as many suffered setbacks. In this environment, the Fund posted a six-month return of -12.35% for the period ended March 31, 2003 compared to a gain of 0.04% in the S&P 1500 Consumer Discretionary Index. Following the March 11 low, clear industry leadership emerged, providing a more favorable setting for our system. By the end of the fiscal year, 22 of the 23 industries in the Consumer Discretionary sector had advanced. While leadership was broad, the Fund was tilted toward several standouts, including catalog retailers, consumer electronics, homebuilders, computer & electronics retailers, auto manufacturers, and specialty store retailers. The most significant industry adjustment during the fiscal year was a gradual increase in specialty stores from 7.2% of the Fund at the beginning of the period to 24.7% at period-end. Although a concentrated position in one industry, we believed the value and relative strength across this relatively large group (44 of the 207 stocks in the Consumer Discretionary sector are specialty store retailers) warranted the larger weighting. Among the Fund's top individual contributors, recreational vehicle manufacturer Thor Industries Inc. gained 55.60% during the fiscal year. As our most heavily weighted holding in the automobile manufacturers industry, the stock featured strong value, relative strength and management quality ratings. Tractor Supply Co., a retailer of farm supplies, gained 106.5% on strong sales growth, consistent double-digit return on equity, and increasing inventory turnover. Consumer electronics retailer Best Buy Co. Inc. gained 113.0%, having reported its fifth consecutive quarter of 20% or greater return on equity. Moreover, the company maintains a strong balance sheet with twice as much cash as long-term debt. In contrast, household appliance manufacturer Maytag Corp. declined 16% in one day when the company warned in early March of sluggish sales and a higher- than-expected profit shortfall. Meanwhile, J. Jill Group Inc., the women's apparel catalog retailer, fell sharply in mid-July on an analyst downgrade, as did "tween" girls apparel retailer Too Inc., which tumbled in early December on lowered earnings-per-share estimates. At the end of the period, the Fund did not own Maytag and Too, Inc. WHAT IS THE INVESTMENT OUTLOOK FOR THE CONSUMER DISCRETIONARY SECTOR? As investors grow more confident and acknowledge the underlying strength of the U.S. economy, we believe economically sensitive sectors and industries may continue to command attention. Consumer Discretionary issues have been among the leaders since the most recent market low in early March 2003. With corporate earnings on the rise and cost-cutting efforts already in place, these undervalued, cyclically oriented stocks appear poised to continue their march higher. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 97.6% Top 10 Equity Holdings 27.8% Number of Stocks 58 Cash Equivalents 2.5% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Thor Industries, Inc. 4.0% Best Buy Co., Inc. 3.3% Michaels Stores, Inc. 3.1% Winnebago Industries, Inc. 2.6% Dollar Tree Stores, Inc. 2.6% Barnes & Noble, Inc. 2.6% Dollar General Corporation 2.5% Electronics Boutique Holdings Corp. 2.4% Harman International Industries, Incorporated 2.4% Family Dollar Stores, Inc. 2.3% Percentages are based upon net assets. 6 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Specialty Stores 24.7% Apparel Retail 13.0% Automobile Manufacturers 12.2% General Merchandise Stores 11.4% Homebuilding 8.7% Department Stores 6.3% Computer & Electronics Retail 5.7% Home Furnishings 3.2% Consumer Electronics 2.4% Auto Parts & Equipment 1.7%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 7/9/97 - -------------------------------------------------------------------------------- ICON Consumer Discretionary Fund 16.50% 8.93% 3.07% - -------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 23.46% 3.01% 5.13% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 3.57% - --------------------------------------------------------------------------------
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 performances results and the comparative indexes can be found on pages 2 and 3. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON CONSUMER DISCRETIONARY FUND S&P 1500 CONSUMER DISCRETIONARY INDEX S&P 1500 INDEX -------------------------------- ------------------------------------- -------------- 7/9/97 10000 10000 10000 9/30/97 10970 10892 10597 9/30/98 7870 11778 11262 9/30/99 9899 15612 14339 9/30/00 9449 15341 16548 9/30/01 9172 12045 12290 9/30/02 10360 11065 9976 9/30/03 12069 13661 12439
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. 7 Schedule of Investments September 30, 2003 ICON CONSUMER DISCRETIONARY FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 97.6% CONSUMER DISCRETIONARY 96.5% ADVERTISING 1.1% 23,000 Omnicom Group Inc. $ 1,652,550 APPAREL, ACCESSORIES & LUXURY GOODS 1.2% 71,100 Fossil, Inc.(a) 1,727,730 APPAREL RETAIL 13.0% 47,900 Abercrombie & Fitch Co.(a) 1,327,309 65,400 Aeropostale, Inc.(a) 1,769,070 73,400 Chico's FAS, Inc.(a) 2,248,976 109,500 Christopher & Banks Corporation 2,612,670 86,100 The Gap, Inc. 1,474,032 50,500 Jos. A. Bank Clothiers, Inc.(a) 2,220,485 92,100 Limited Brands 1,388,868 134,925 Pacific Sunwear of California, Inc.(a) 2,787,551 47,200 Ross Stores, Inc. 2,189,608 74,000 The TJX Companies, Inc. 1,437,080 - ----------------------------------------------------- 19,455,649 AUTO PARTS & EQUIPMENT 1.7% 37,400 BorgWarner, Inc. 2,537,590 AUTOMOBILE MANUFACTURERS 12.2% 238,800 Ford Motor Company 2,571,876 60,200 General Motors Corporation 2,463,986 201,500 Monaco Coach Corporation(a) 3,334,825 111,800 Thor Industries, Inc. 6,039,436 88,800 Winnebago Industries, Inc. 3,958,704 - ----------------------------------------------------- 18,368,827 CATALOG RETAIL 1.6% 212,700 J. Jill Group Inc.(a) 2,446,050 COMPUTER & ELECTRONICS RETAIL 5.7% 103,900 Best Buy Co., Inc.(a) 4,937,328 128,500 Electronics Boutique Holdings Corp.(a) 3,671,245 - ----------------------------------------------------- 8,608,573 CONSUMER ELECTRONICS 2.4% 37,000 Harman International Industries, Incorporated 3,638,950 DEPARTMENT STORES 6.3% 79,300 Federated Department Stores, Inc. 3,322,670 76,600 The Neiman Marcus Group, Inc.(a) 3,194,220 67,200 Sears, Roebuck and Co. 2,938,656 - ----------------------------------------------------- 9,455,546
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE GENERAL MERCHANDISE STORES 11.4% 106,100 99 Cents Only Stores(a) $ 3,431,274 187,900 Dollar General Corporation 3,758,000 116,600 Dollar Tree Stores, Inc.(a) 3,911,930 88,100 Family Dollar Stores, Inc. 3,514,309 88,000 Tuesday Morning Corporation(a) 2,450,800 - ----------------------------------------------------- 17,066,313 HOMEBUILDING 8.7% 34,100 Centex Corporation 2,655,708 65,800 D.R. Horton, Inc. 2,151,660 39,800 Hovnanian Enterprises, Inc.(a) 2,561,926 38,100 Meritage Corporation(a) 1,800,225 24,900 Pulte Homes, Inc. 1,693,449 29,300 The Ryland Group, Inc. 2,142,123 - ----------------------------------------------------- 13,005,091 HOME FURNISHINGS 3.2% 30,300 Ethan Allen Interiors Inc. 1,090,800 61,100 Furniture Brands International, Inc.(a) 1,472,510 31,100 Mohawk Industries, Inc.(a) 2,218,052 - ----------------------------------------------------- 4,781,362 HOME IMPROVEMENT RETAIL 0.7% 21,300 Lowe's Companies, Inc. 1,105,470 HOUSEHOLD APPLIANCES 1.2% 27,600 Whirlpool Corporation 1,870,452 INTERNET RETAIL 1.4% 39,300 eBay Inc.(a) 2,102,550 SPECIALTY STORES 24.7% 60,000 A.C. Moore Arts & Crafts, Inc.(a) 1,336,800 28,500 AutoZone, Inc.(a) 2,551,605 153,000 Barnes & Noble, Inc.(a) 3,887,730 42,200 Bed Bath & Beyond Inc.(a) 1,612,462 55,600 Carmax, Inc.(a) 1,815,896 37,700 Dick's Sporting Goods, Inc.(a) 1,407,718 48,500 Linens 'n Things, Inc.(a) 1,153,330 114,800 Michaels Stores, Inc. 4,679,248 150,000 PETsMART, Inc. 3,414,000 90,900 The Sports Authority, Inc.(a) 2,859,714 85,100 Staples, Inc.(a) 2,023,678 101,600 Tractor Supply Company(a) 3,333,496 105,000 United Auto Group, Inc.(a) 2,415,000 98,000 West Marine, Inc.(a) 1,866,900 59,500 Zale Corporation(a) 2,642,395 - ----------------------------------------------------- 36,999,972 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 144,822,675
8 SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- INDUSTRIALS 1.1% DIVERSIFIED COMMERCIAL SERVICES 1.1% 61,000 School Specialty, Inc.(a) $ 1,720,810 - ----------------------------------------------------- TOTAL INDUSTRIALS 1,720,810 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $118,340,983) 146,543,485 SHORT-TERM INVESTMENTS 2.5% U.S. GOVERNMENT AGENCIES 1.1% $1,594,000 FHLB Discount Note, 0.850%, 10-1-03 $ 1,594,000 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 1,594,000 VARIABLE RATE DEMAND NOTE 1.4% 2,079,965 American Family Demand Note, 0.741%(#) 2,079,965 - ----------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 2,079,965 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $3,673,965) 3,673,965 - ----------------------------------------------------- TOTAL INVESTMENTS 100.1% (COST $122,014,948) 150,217,450 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.1%) (152,727) - ----------------------------------------------------- NET ASSETS 100.0% $150,064,723 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. 9 Management Overview ICON ENERGY FUND A discussion with J.C. Waller III, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Energy Fund gained 15.71% for the fiscal year ended September 30, 2003, narrowly underperforming the 16.28% gain of its sector-specific benchmark, the S&P 1500 Energy Index and trailing the 24.69% advance of its broad benchmark, the S&P 1500 Index. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Global conditions proved especially challenging during the period, as the Energy sector was riddled with turbulence. Oil exports from war-torn Iraq and strike- hobbled Venezuela dwindled. Unseasonably cold winter weather pressured falling inventories. Production cuts led to summertime gasoline shortages. However, even as prices surged, it seems to have had little effect on investor confidence. Forward earnings estimates were lowered, and the group lagged the move back toward fair value, as investors favored more economically sensitive sectors. Within the group, industry leadership over the one-year period remained relatively consistent. The top-performing industry based on S&P 1500 Energy Index returns was oil & gas refining & marketing & transportation, which assumed and retained its leadership role off the market low of October 9, 2002. Since few constituent companies make up this industry, we tended to hold a mid-level weighting in the Fund, having increased it significantly as the industry demonstrated improving relative strength. Oil & gas equipment & services, also a mid-level weighting, was the second best performing industry, despite sliding over the latter part of the reporting period. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Our measurements of valuation and relative strength led us to make several industry rotations during the period. The most notable of these moves involved the shifting of assets into the integrated oil & gas industry while significantly reducing the Fund's exposure to the oil & gas drilling industry. The increase in the integrated oil & gas weighting benefited from the addition of energy-related American Depository Receipts (ADRs), or dollar-denominated foreign securities, which outperformed both the S&P 1500 Energy Index and the S&P 1500 Integrated Oil & Gas Index. While neither a component nor a reflection of strength within the industry-specific index, these holdings were identified as favorable by our system, thereby warranting their inclusion. Meanwhile, the reduction in oil & gas drilling securities that first occurred between December 2002 and January 2003, continued into July 2003. Despite sporadic spurts during the fiscal year, overall deterioration in relative strength caused the industry to finish at the bottom of the sector. In other moves, several Industrials sector stocks whose businesses are tied to the Energy sector were added during the latter part of the reporting period. Although in aggregate these holdings comprised a small percentage of the Fund's overall weighting, they rapidly pursued their calculated intrinsic value. Furthermore, the Fund accumulated a sizable cash position during the summer months as the Energy sector lagged the extended market advance. Among the stocks that had a measurable impact on Fund performance during the period, Patina Oil & Gas Corp. reported strong results as acquisitions boosted average daily production and earnings per share. The same was true about Petroleo Brasileiro S.A., Brazil's national oil company, whose rising revenues reflected higher prices and production volumes. Ultra Petroleum Corp. also gained, demonstrating similar characteristics, while announcing operational successes in Wyoming and China. Detractors included carrier Knightsbridge Tankers Ltd., which tumbled when a large customer chose not to renew its charters. Meanwhile, Veritas DGC Inc. plummeted when it warned that contract delays would result in surprise losses for the provider of integrated geophysical services. The Fund did not own either of these stocks at the end of the period. WHAT IS THE INVESTMENT OUTLOOK FOR THE ENERGY SECTOR? Although valuations within the Energy sector are attractive, investors have instead focused on more cyclical sectors. Once this value is recognized and the sector takes its turn in the spotlight, our quantitative model indicates that the oil & gas equipment & services and the integrated oil & gas industries may be among the leaders. However, if earnings contract going forward, as has been forecast, valuations and stock prices could suffer. Based on current valuations, the Energy sector appears to be on sale but investors have been reluctant to acknowledge the bargains. We believe it simply is not yet their time. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 88.0% Top 10 Equity Holdings 30.4% Number of Stocks 48 Cash Equivalents 11.7% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Patina Oil & Gas Corporation 5.1% Repsol YPF, S.A. 3.5% Overseas Shipholding Group, Inc. 3.3% Petroleo Brasileiro S.A. 3.3% Cimarex Energy Co. 2.7% Ashland Inc. 2.6% Pogo Producing Company 2.5% PetroKazakhstan Inc. 2.5% TETRA Technologies, Inc. 2.5% Newfield Exploration Company 2.4% Percentages are based upon net assets. 10 - -------------------------------------------------------------------------------- TOP INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Oil & Gas Exploration & Production 28.9% Integrated Oil & Gas 20.1% Oil & Gas Equipment & Services 17.5% Oil & Gas Refining & Marketing & Transportation 13.4% Construction & Engineering 3.3% Oil & Gas Drilling 2.7% Industrial Machinery 2.1%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 11/5/97 - -------------------------------------------------------------------------------- ICON Energy Fund 15.71% 19.03% 7.32% - -------------------------------------------------------------------------------- S&P 1500 Energy Index 16.28% 4.35% 1.69% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 2.84% - --------------------------------------------------------------------------------
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. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON ENERGY FUND S&P 1500 ENERGY INDEX S&P 1500 INDEX ---------------- --------------------- -------------- 11/5/97 10000 10000 10000 9/30/98 6350 8920 10680 9/30/99 8082 10579 13597 9/30/00 13359 12516 15692 9/30/01 12486 10566 11654 9/30/02 13115 9493 9460 9/30/03 15176 11038 11796
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. 11 Schedule of Investments ICON ENERGY FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 88.0% ENERGY 82.6% INTEGRATED OIL & GAS 20.1% 23,300 China Petroleum and Chemical Corporation -- ADR $ 637,954 15,800 ConocoPhillips 865,050 34,400 Marathon Oil Corporation 980,400 15,700 Murphy Oil Corporation 922,375 24,200 Occidental Petroleum Corporation 852,566 13,600 Petro-Canada(f) 528,904 36,500 PetroChina Company Limited -- ADR 1,224,575 66,300 PetroKazakhstan Inc.(a)(f) 1,385,670 80,100 Petroleo Brasileiro S.A. -- ADR 1,836,693 118,900 Repsol YPF, S.A. -- ADR 1,958,283 - ----------------------------------------------------- 11,192,470 OIL & GAS DRILLING 2.7% 19,100 Helmerich & Payne, Inc. 499,274 15,600 Noble Corporation(a)(f) 530,244 25,100 Unit Corporation(a) 472,884 - ----------------------------------------------------- 1,502,402 OIL & GAS EQUIPMENT & SERVICES 17.5% 13,300 BJ Services Company(a) 454,461 81,600 Core Laboratories N.V.(a)(f) 1,146,480 54,400 FMC Technologies, Inc.(a) 1,165,248 37,500 National-Oilwell, Inc.(a) 680,250 29,200 Oceaneering International, Inc.(a) 686,784 35,100 Offshore Logistics, Inc.(a) 712,530 16,600 Schlumberger Limited(f) 803,440 21,200 SEACOR SMIT Inc.(a) 766,804 66,300 TETRA Technologies, Inc.(a) 1,367,106 26,800 Tidewater Inc. 758,440 69,000 Varco International, Inc.(a) 1,166,790 - ----------------------------------------------------- 9,708,333
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE OIL & GAS EXPLORATION & PRODUCTION 28.9% 11,700 Anadarko Petroleum Corporation $ 488,592 112,800 Chesapeake Energy Corporation 1,215,984 76,414 Cimarex Energy Co.(a) 1,497,715 58,900 Comstock Resources, Inc.(a) 786,904 301 Cross Timbers Royalty Trust 6,321 40,500 Denbury Resources Inc.(a) 500,580 46,800 Evergreen Resources, Inc.(a) 1,263,600 33,900 Newfield Exploration Company(a) 1,307,523 21,200 Noble Energy, Inc. 811,960 77,718 Patina Oil & Gas Corporation 2,816,500 30,800 Pogo Producing Company 1,394,624 42,700 Prima Energy Corporation(a) 1,086,715 42,300 Remington Oil & Gas Corporation(a) 767,745 93,300 Ultra Petroleum Corp.(a)(f) 1,301,535 40,700 XTO Energy, Inc. 854,293 - ----------------------------------------------------- 16,100,591 OIL & GAS REFINING & MARKETING & TRANSPORTATION 13.4% 43,800 Ashland Inc. 1,438,830 66,500 Frontier Oil Corporation 977,550 71,200 Overseas Shipholding Group, Inc. 1,840,520 30,400 Sunoco, Inc. 1,222,688 27,300 Teekay Shipping Corporation(f) 1,154,790 21,300 Valero Energy Corporation 815,151 - ----------------------------------------------------- 7,449,529 - ----------------------------------------------------- TOTAL ENERGY 45,953,325 INDUSTRIALS 5.4% CONSTRUCTION & ENGINEERING 3.3% 31,800 Chicago Bridge & Iron Company N.V. -- ADR 863,688 51,100 URS Corporation(a) 991,340 - ----------------------------------------------------- 1,855,028 INDUSTRIAL MACHINERY 2.1% 55,900 Flowserve Corporation(a) 1,134,770 - ----------------------------------------------------- TOTAL INDUSTRIALS 2,989,798 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $40,561,630) 48,943,123 SHORT-TERM INVESTMENTS 11.7% U.S. GOVERNMENT AGENCIES 7.8% $4,345,000 FHLB Discount Note, 0.850%, 10-1-03 4,345,000 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 4,345,000
12 SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- VARIABLE RATE DEMAND NOTE 3.9% $2,145,927 American Family Demand Note, 0.741%(#) $ 2,145,927 - ----------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 2,145,927 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $6,490,927) 6,490,927 - ----------------------------------------------------- TOTAL INVESTMENTS 99.7% (COST $47,052,557) 55,434,050 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.3% 194,981 - ----------------------------------------------------- NET ASSETS 100.0% $55,629,031 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt f Foreign security 13 Management Overview ICON FINANCIAL FUND A discussion with Derek Rollingson, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Financial Fund appreciated 22.35% for the one-year period ended September 30, 2003. This compares to a 25.64% gain for its narrow benchmark, the S&P 1500 Financials Index, and a 24.69% return for its broad-based benchmark, the S&P 1500 Index. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? A difficult first half followed by a more favorable second half characterized the investment environment during the fiscal year. In a broad sense, the detachment of stock prices from financial fundamentals led to a perception of economic stagnation. This was hardly the case as both corporate earnings and gross domestic product demonstrated incremental improvements. Nevertheless, war-related fear and pessimism continued to dominate the market, pushing valuations to depressed levels. A bottom was reached in mid-March 2003 amid anticipation of an economic recovery. As the overhang of war subsided, a broad and sustained rally ensued, driven by sentiment that the worst was finally behind us. Within the Financials sector, a number of industry-specific pressures exacerbated the sense of uncertainty. Exposure to corporate bankruptcies, credit quality concerns, stricter loan-loss guidelines, and increased regulatory scrutiny all weighed heavily on the sector. In contrast, low interest rates continued to provide a boost, as mortgage refinance activity remained strong. A change in the S&P Global Industry Classification Standard resulted in the restructuring of the diversified financial services and banks industries. These changes were welcomed by Fund management and enable us to value industries with greater precision. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Although the Fund was positioned at the outset of the period for a fundamentally driven, quality-led advance, the rally that emerged in October 2002 featured lower-quality, high-debt companies that did not meet our investment criteria. Consequently, the Fund failed to participate in this brief surge, but instead turned a corner when a higher-quality rebound materialized in mid-March 2003. While recouping earlier losses and producing a favorable absolute return, the Fund continued to lag its benchmarks. A sizable early-period weighting in the slumping consumer finance industry also detracted from performance. However, in demonstrating both value and relative strength, an increased industry weighting in consumer finance enabled the Fund to more fully capture its impressive second-half turnaround. In light of the sustained second-half rally, the Fund was increasingly tilted toward industries that possessed attractive value-to-price and relative strength characteristics following the mid-March market low. Based on these measures, the consumer finance industry was increased 22.4% at period-end, while the asset management & custody banks industry rose to 9.5% of the Fund. Lack of leadership led us to pull back the Fund's weighting in the regional banks industry and thrifts & mortgage finance. As for the Fund's measurable contributors to performance, consumer lender Providian Financial Corp. advanced as the company took meaningful steps to lower credit losses and enhance profitability. Pawn shop operator Cash America International Inc. also traded higher as rising loan demand resulted in higher fee and service charge income. Meanwhile, financial services giant Citigroup Inc. benefited from ongoing strength in its global consumer business coupled with signs of a rebound in corporate banking. In contrast, mortgage lender NovaStar Financial Inc. fell amid concerns that rising interest rates would curb refinancing activity. World Acceptance Corp., a firm specializing in small loan consumer finance, also retreated when the company reported an increase in delinquencies. Elsewhere, Dutch insurer ING Groep slid as Wall Street analysts warned of weaker U.S. margins and lower profitability. However, these stocks did not meet the Fund's sell discipline and we continued to own them at period-end. WHAT IS THE INVESTMENT OUTLOOK FOR THE FINANCIAL SECTOR? Although current valuations seem to support further upside potential in the sector, we are keeping a close eye on the asset management & custody banks and investment banking & brokerage industries, both of which appear to be approaching fair value. Nevertheless, we have positioned the Fund to continue to participate in any extended rally by focusing on those industries that continue to model attractive valuation and relative strength metrics. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 99.5% Top 10 Equity Holdings 35.9% Number of Stocks 36 Cash Equivalents 0.4% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 A.G. Edwards, Inc. 4.1% Citigroup Inc. 4.0% J.P. Morgan Chase & Co. 4.0% AmeriCredit Corp. 3.7% Morgan Stanley 3.6% Providian Financial Corporation 3.5% FleetBoston Financial Corporation 3.4% Mellon Financial Corporation 3.3% Investors Financial Services Corp. 3.2% GATX Corporation 3.1% Percentages are based upon net assets. 14 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Consumer Finance 22.4% Investment Banking & Brokerage 10.6% Life & Health Insurance 10.2% Asset Management & Custody Banks 9.5% Regional Banks 7.6% Other Diversified Financial Services 6.6% Specialized Finance 6.0% Diversified Banks 5.8% Property & Casualty Insurance 5.6% Diversified Capital Markets 4.0%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 7/1/97 - -------------------------------------------------------------------------------- ICON Financial Fund 22.35% 12.42% 8.76% - -------------------------------------------------------------------------------- S&P 1500 Financials Index 25.64% 8.03% 7.91% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 3.86% - --------------------------------------------------------------------------------
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. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON FINANCIAL FUND S&P 1500 FINANCIALS INDEX S&P 1500 INDEX ------------------- ------------------------- -------------- 7/1/97 10000 10000 10000 9/30/97 10510 11141 10796 9/30/98 9411 10941 11474 9/30/99 10357 12642 14608 9/30/00 14307 16727 16858 9/30/01 15676 14787 12521 9/30/02 13813 12812 10164 9/30/03 16900 16097 12673
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. 15 Schedule of Investments ICON FINANCIAL FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 99.5% FINANCIAL 99.5% ASSET MANAGEMENT & CUSTODY BANKS 9.5% 141,300 The Bank of New York Company, Inc. $ 4,113,243 141,300 Investors Financial Services Corp. 4,456,602 153,500 Mellon Financial Corporation 4,626,490 - ----------------------------------------------------- 13,196,335 CONSUMER FINANCE 22.4% 502,700 AmeriCredit Corp.(a) 5,177,810 64,900 Capital One Financial Corporation 3,701,896 164,600 Cash America International, Inc. 2,699,440 178,900 CompuCredit Corporation(a) 3,130,750 194,300 First Cash Financial Services, Inc.(a) 3,891,829 183,100 MBNA Corporation 4,174,680 413,400 Providian Financial Corporation(a) 4,873,986 261,500 World Acceptance Corporation(a) 3,543,325 - ----------------------------------------------------- 31,193,716 DIVERSIFIED BANKS 5.8% 157,000 FleetBoston Financial Corporation 4,733,550 79,600 Wachovia Corporation 3,278,724 - ----------------------------------------------------- 8,012,274 DIVERSIFIED CAPITAL MARKETS 4.0% 160,500 J.P. Morgan Chase & Co. 5,509,965 INVESTMENT BANKING & BROKERAGE 10.6% 147,100 A.G. Edwards, Inc. 5,650,111 214,100 Investment Technology Group, Inc.(a) 4,106,438 99,000 Morgan Stanley 4,995,540 - ----------------------------------------------------- 14,752,089 LIFE & HEALTH INSURANCE 10.2% 73,400 Delphi Financial Group, Inc. 3,414,568 101,900 Lincoln National Corporation 3,605,222 281,800 UICI(a) 3,533,772 250,000 UnumProvident Corporation 3,692,500 - ----------------------------------------------------- 14,246,062 MULTI-LINE INSURANCE 2.5% 145,500 Allmerica Financial Corporation(a) 3,464,355 OTHER DIVERSIFIED FINANCIAL SERVICES 6.6% 122,400 Citigroup Inc. 5,570,424 198,000 ING Groep N.V. -- ADR 3,663,000 - ----------------------------------------------------- 9,233,424
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE PROPERTY & CASUALTY INSURANCE 5.6% 58,200 Ambac Financial Group, Inc. $ 3,724,800 75,000 MBIA Inc. 4,122,750 - ----------------------------------------------------- 7,847,550 REAL ESTATE INVESTMENT TRUSTS 1.9% 45,200 Novastar Financial, Inc. 2,597,644 REGIONAL BANKS 7.6% 166,000 The Colonial BancGroup, Inc. 2,397,040 111,400 FirstMerit Corporation 2,756,036 92,600 UCBH Holdings, Inc. 2,798,372 46,300 Zions Bancorporation 2,592,337 - ----------------------------------------------------- 10,543,785 REINSURANCE 3.0% 55,600 Everest Re Group. Ltd.(f) 4,178,896 SPECIALIZED FINANCE 6.0% 143,300 CIT Group Inc. 4,121,308 201,200 GATX Corporation 4,255,380 - ----------------------------------------------------- 8,376,688 THRIFTS & MORTGAGE FINANCE 3.8% 81,500 The PMI Group, Inc. 2,750,625 61,300 Radian Group Inc. 2,721,720 - ----------------------------------------------------- 5,472,345 - ----------------------------------------------------- TOTAL FINANCIAL 138,625,128 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $124,254,414) 138,625,128 SHORT-TERM INVESTMENT 0.4% VARIABLE RATE DEMAND NOTE $501,296 American Family Demand Note, 0.741%# 501,296 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $501,296) 501,296 - ----------------------------------------------------- TOTAL INVESTMENTS 99.9% (COST $124,755,710) 139,126,424 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.1% 134,700 - ----------------------------------------------------- NET ASSETS 100.0% $139,261,124 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt f Foreign security 16 Management Overview ICON HEALTHCARE FUND A discussion with J.C. Waller III, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Healthcare Fund appreciated 18.65% for the fiscal year ended September 30, 2003. The Fund outpaced its narrowly focused benchmark, the S&P 1500 Healthcare Index, which returned 13.03% over the same time period, but fell short of the 24.69% return for its broad-based benchmark, the S&P 1500 Index. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? The ICON Healthcare Fund navigated a host of industry-specific trends during the period, ranging from increased regulatory scrutiny to slowing pharmaceutical sales. On a larger scale, the healthcare group lagged a broad second-half move toward fair value as investors favored more economically sensitive sectors. While the Information Technology, Consumer Discretionary and Industrials sectors led this advance, Healthcare, considered somewhat insulated from the broader macroeconomic environment, finished the reporting period near the bottom. Against this backdrop, biotechnology and pharmaceuticals were the leading industries early in the fiscal year, as managed healthcare and healthcare facilities weakened considerably and were removed from the Fund. While biotechnology remained the clear leader throughout the entire period, pharmaceuticals wavered in strength over the second half amid weakness in ultra-large-cap drug stocks. Subsequently, managed healthcare and healthcare facilities reappeared during this time as increases in relative strength complemented their already attractive valuations. The healthcare supplies industry, composed primarily of smaller-cap issues, proved to be a consistent performer during the reporting period. Smaller names, including those within the pharmaceuticals industry, tended to outperform the broader market during the period. In contrast, healthcare distributors & services encountered difficulties, attributed to concerns over operational practices, and its weighting was scaled back. As part of an S&P industry reclassification, healthcare distributors & services was separated into healthcare distributors and healthcare services on April 1, 2003. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? The Fund benefited from positions in biotechnology and pharmaceuticals, which were among the largest industry weightings for most of the reporting period. As biotechnology experienced a broad move higher throughout the fiscal year, several of the Fund's larger-cap holdings became richly valued and were trimmed on a consistent basis. While proceeds were allocated to industries reporting strong earnings growth, such as managed healthcare and healthcare facilities, small- and mid-cap biotechnology companies continued to be priced below fair value. Even among large-cap pharmaceuticals, relatively smaller issues outperformed. Industry giants, on the other hand, came under increasing pressure and were eliminated from the Fund. Specific stocks that bolstered Fund performance included biopharmaceutical firm Genzyme Corp., which continued to execute on its profitable drug-development business model targeting rare genetic disorders. Meanwhile, a newly streamlined FDA approval process benefited generic drugmaker Mylan Laboratories Inc., as did the launch of several new treatments. Barr Laboratories Inc. also advanced, as its expertise in patent challenges and hard-to-copy pharmaceuticals boosted its robust generic pipeline to more than 30 drugs. In contrast, measurable detractors included specialized drug distributor Accredo Health Inc., which plunged nearly 45% in one day when it lowered its 2003 full-year outlook. Elsewhere, Impath Inc., a supplier of cancer data and analyses, sold off sharply when the company initiated an internal probe into possible accounting irregularities. We subsequently sold both of these stocks when our model indicated other companies showing relative strength. WHAT IS THE INVESTMENT OUTLOOK FOR THE HEALTHCARE SECTOR? Value is widespread in the Healthcare sector but our valuation model indicates it is far from being fully recognized by investors. Although the constituent industries appear to be advancing as a group, some are further along in their move toward fair value. Judging from our fair value methodology, it is highly conceivable that the healthcare sector could participate in a market advance -- not necessarily as a leader or laggard of the broader market, but as a participant nonetheless. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 96.4% Top 10 Equity Holdings 24.2% Number of Stocks 67 Cash Equivalents 3.6% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Barr Laboratories, Inc. 3.1% Mylan Laboratories Inc. 2.8% AdvancePCS 2.7% The Cooper Companies, Inc. 2.6% Forest Laboratories, Inc. 2.3% IDEXX Laboratories, Inc. 2.2% PacifiCare Health Systems, Inc. 2.2% eResearch Technology, Inc. 2.1% Coventry Health Care, Inc. 2.1% Omnicare, Inc. 2.1% Percentages are based upon net assets. 17 - -------------------------------------------------------------------------------- TOP INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Pharmaceuticals 20.8% Managed Health Care 20.5% Health Care Equipment 11.7% Biotechnology 11.0% Health Care Services 10.9% Health Care Facilities 10.7% Health Care Supplies 7.3% Health Care Distributors 3.5%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 2/24/97 - -------------------------------------------------------------------------------- ICON Healthcare Fund 18.65% 11.23% 11.75% - -------------------------------------------------------------------------------- S&P 1500 Healthcare Index 13.03% 2.86% 8.30% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 5.24% - --------------------------------------------------------------------------------
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, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON HEALTHCARE FUND S&P 1500 INDEX S&P 1500 HEALTHCARE INDEX -------------------- -------------- ------------------------- 2/24/97 10000 10000 10000 9/30/97 11780 11933 11169 9/30/98 12224 12682 14703 9/30/99 11571 16147 15192 9/30/00 17976 18634 19880 9/30/01 18585 13839 18850 9/30/02 17540 11234 14975 9/30/03 20812 14008 16927
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, 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. 18 Schedule of Investments ICON HEALTHCARE FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 96.4% HEALTH CARE 96.4% BIOTECHNOLOGY 11.0% 30,000 Amgen Inc.(a) $ 1,937,700 52,200 Biogen, Inc.(a) 1,990,386 39,800 Chiron Corporation(a) 2,058,854 56,000 Genencor International Inc.(a) 878,640 43,200 Genzyme Corporation(a) 2,000,592 73,000 IDEXX Laboratories, Inc.(a) 3,101,770 172,500 Serologicals Corporation(a) 2,268,375 79,100 Serono SA -- ADR 1,295,658 - ----------------------------------------------------- 15,531,975 HEALTH CARE DISTRIBUTORS 3.5% 82,200 Omnicare, Inc. 2,964,132 83,300 Owens & Minor, Inc. 2,007,530 - ----------------------------------------------------- 4,971,662 HEALTH CARE EQUIPMENT 11.7% 48,600 Becton, Dickinson and Company 1,755,432 35,500 Biosite Incorporated(a) 1,004,650 37,800 Guidant Corporation 1,770,930 37,000 Hillenbrand Industries, Inc. 2,087,540 47,600 Invacare Corporation 1,788,808 69,700 Mentor Corporation 1,589,160 59,300 ResMed Inc.(a) 2,608,014 55,900 Respironics, Inc.(a) 2,338,297 21,700 Stryker Corporation 1,634,227 - ----------------------------------------------------- 16,577,058 HEALTH CARE FACILITIES 10.7% 83,800 Dynacq International, Inc.(a) 1,515,942 83,600 Health Management Associates, Inc. 1,823,316 71,900 LifePoint Hospitals, Inc.(a) 1,729,195 61,400 Manor Care, Inc. 1,842,000 168,800 Province Healthcare Company(a) 2,185,960 60,600 Triad Hospitals, Inc.(a) 1,834,968 74,600 United Surgical Partners International, Inc.(a) 2,111,180 41,000 Universal Health Services, Inc.(a) 2,027,450 - ----------------------------------------------------- 15,070,011
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE HEALTH CARE SERVICES 10.9% 84,300 AdvancePCS(a) $ 3,841,551 111,900 Cross Country Healthcare, Inc.(a) 1,576,671 87,200 eResearch Technology, Inc.(a) 3,023,224 41,300 Express Scripts, Inc.(a) 2,524,669 35,700 Lincare Holdings Inc.(a) 1,306,977 40,100 Pharmaceutical Product Development, Inc.(a) 961,999 42,800 Renal Care Group, Inc.(a) 1,461,620 25,000 SFBC International, Inc.(a) 710,800 - ----------------------------------------------------- 15,407,511 HEALTH CARE SUPPLIES 7.3% 25,800 Arrow International, Inc. 593,400 89,100 The Cooper Companies, Inc. 3,630,825 55,600 Immucor, Inc.(a) 1,498,420 31,000 Ocular Sciences, Inc.(a) 689,440 26,900 Osteotech, Inc.(a) 221,925 72,600 SurModics, Inc.(a) 1,948,584 66,500 Sybron Dental Specialties, Inc.(a) 1,667,155 - ----------------------------------------------------- 10,249,749 MANAGED HEALTH CARE 20.5% 30,000 Aetna Inc. 1,830,900 32,600 Anthem, Inc.(a) 2,325,358 57,000 Centene Corporation(a) 1,732,230 48,300 CIGNA Corporation 2,156,595 56,300 Coventry Health Care, Inc.(a) 2,969,262 64,000 Health Net Inc.(a) 2,026,880 162,600 Humana Inc.(a) 2,934,930 67,900 Oxford Health Plans, Inc.(a) 2,804,949 63,300 PacifiCare Health Systems, Inc.(a) 3,089,040 116,700 Sierra Health Services, Inc.(a) 2,398,185 51,700 UnitedHealth Group Incorporated 2,601,544 27,400 WellPoint Health Networks Inc.(a) 2,111,992 - ----------------------------------------------------- 28,981,865
19 Schedule of Investments (continued) ICON HEALTHCARE FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- PHARMACEUTICALS 20.8% 65,600 aaiPharma Inc.(a) $ 1,121,760 32,400 Abbott Laboratories 1,378,620 63,600 American Pharmaceutical Partners, Inc.(a) 1,993,860 64,550 Barr Laboratories, Inc.(a) 4,402,955 49,100 Biovail Corporation(a)(f) 1,824,065 90,500 Bristol-Myers Squibb Company 2,322,230 63,600 Forest Laboratories, Inc.(a) 3,272,220 16,200 Galen Holdings PLC ADR(f) 737,100 124,800 ICN Pharmaceuticals, Inc. 2,141,568 102,050 Mylan Laboratories Inc. 3,944,233 80,400 Shire Pharmaceuticals Group PLC(a) -- ADR 1,777,644 39,700 Taro Pharmaceutical Industries Ltd.(a)(f) 2,237,492 39,000 Teva Pharmaceutical Industries Ltd. -- ADR 2,230,800 - ----------------------------------------------------- 29,384,547 - ----------------------------------------------------- TOTAL HEALTH CARE 136,174,378 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $109,941,191) 136,174,378 SHORT-TERM INVESTMENTS 3.6% U.S. GOVERNMENT AGENCIES 1.9% $2,713,000 FHLB Discount Note, 0.850%, 10-1-03 2,713,000 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 2,713,000
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE VARIABLE RATE DEMAND NOTE 1.7% $2,315,010 American Family Demand Note, 0.741%(#) $ 2,315,010 - ----------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 2,315,010 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $5,028,010) 5,028,010 - ----------------------------------------------------- TOTAL INVESTMENTS 100.0% (COST $114,969,201) 141,202,388 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.0% 56,503 - ----------------------------------------------------- NET ASSETS 100.0% $141,258,891 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt f Foreign security Dates shown on securities are the due dates of the obligation. 20 Management Overview ICON INDUSTRIALS FUND A discussion with J.C. Waller III, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Industrials Fund appreciated 10.55% for the fiscal year ended September 30, 2003. This compares to a 21.36% return for its narrowly focused benchmark, the S&P 1500 Industrials Index, and a 24.69% return for its broad-based benchmark, the S&P 1500 Index, over the same period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? A difficult first half followed by a more accommodating second half characterized the investment environment for the ICON Industrials Fund. During the initial six months, investors recoiled as economic uncertainty, geopolitical tensions, and a manufacturing recession weighed heavily on cyclical industries. A speculative rally off the market low of early October 2002 also failed to boost the sector as lower-quality issues led the advance. Rationality finally returned to the market in mid-March 2003 when investors concluded that conditions may not have been as dire as they may have originally believed. With anticipation of economic recovery driving the market, the higher-quality companies we favor were attractively priced and poised for the broad second-half surge. On an industry level, airlines were selling at discounts during the period. Because our quality ratings indicated that major airlines continued to struggle, they were not owned in the Fund, though select regional and discount carriers benefited as investors came to recognize their fundamental strength. Due to the relative strength of the smaller air carriers, we included them in the Fund. Trucking experienced a few bumps along the way, but continued to steer toward fair value. Railroads, which showed few signs of life early in the period, accelerated in mid-March 2003 only to lose steam shortly thereafter. Despite unsettling unemployment numbers and talk of a jobless recovery, employment services was a clear leader following the mid-March market low. Absolute declines in employment led many displaced workers back to the classroom, boosting education-related stocks in the diversified commercial services industry. Industrial machinery sold off during the first half but seemed to improve as manufacturing and production data strengthened. Likewise, construction & engineering and construction & farm machinery advanced on second-half jumps in capital spending. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Significant value within the sector led to extremely broad industry representation. Standouts included diversified commercial services, a leader throughout the period as well as the Fund's highest weighted industry at period-end. Education-related stocks, a key industry segment, performed particularly well for the Fund. One notable adjustment was the Fund's increased exposure to industrial machinery, which by period-end had become its second largest weighting. Depressed valuations combined with a pickup in economic activity made for attractive purchasing conditions. Although the Fund's employment services weighting fluctuated during the period, we captured industry gains as investors shrugged off less-than-favorable employment reports, while bidding up shares of smaller companies. Building products and construction & engineering took on larger allocations, having traded at extreme discounts to industry peers. One group, data processing and outsourced services, was reclassified by S&P in April 2003, yet retained a modest weighting in the Fund. Specific contributors to Fund returns included Career Education Corp., a provider of private post-secondary education. The stock surged after the company reported a near doubling of profits and a seven-fold increase in online students. Meanwhile, Graco Inc., a global supplier of fluid-technology products, benefited from recent strength in the housing market. Discount airline JetBlue Airways Corp. also advanced, having maintained impressive growth in a difficult operating environment. Among the Fund's detractors, electronic transaction processor Concord EFS Inc. tumbled when pricing pressures and economic weakness forced the company to entertain buyout offers. Elsewhere, defense contractor Northrop Grumman Corp. retreated after acquisition-related concerns resulted in a lowered earnings outlook. At the end of the reporting period, the Fund did not own these stocks. The Fund suffered by not owning General Electric, which accounts for nearly 25% of the S&P 1500 Industrials Index, and returned 24.43% during the period. WHAT IS THE INVESTMENT OUTLOOK FOR THE INDUSTRIALS SECTOR? We would anticipate leadership to narrow somewhat but to remain in the industries that distinguished themselves as leaders in the second-half market advancement. Assuming the rally proves sustainable, we expect that the disparity between leaders and laggards would increase. As investors recognize these disparities, capital will most likely be reallocated. Given ongoing expansion in the economy, we expect industry rotations to benefit the Industrials sector. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 96.2% Top 10 Equity Holdings 17.9% Number of Stocks 91 Cash Equivalents 2.9% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 University of Phoenix Online 2.3% Corinthian Colleges, Inc. 2.1% Graco Inc. 1.8% Labor Ready, Inc. 1.8% JLG Industries, Inc. 1.7% ITT Educational Services, Inc. 1.7% Career Education Corporation 1.7% York International Corporation 1.6% Flowserve Corporation 1.6% JetBlue Airways Corporation 1.6% Percentages are based upon net assets. 21 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Diversified Commercial Services 17.6% Industrial Machinery 15.0% Building Products 9.1% Construction & Engineering 8.0% Airlines 7.9% Aerospace & Defense 7.1% Employment Services 7.0% Trucking 6.6% Data Processing & Outsourced Services 4.5% Electrical Components & Equipment 3.1%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 5/9/97 - -------------------------------------------------------------------------------- ICON Industrials Fund 10.55% 1.69% 0.77% - -------------------------------------------------------------------------------- S&P 1500 Industrials Index 21.36% 3.45% 3.54% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 5.09% - --------------------------------------------------------------------------------
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, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON INDUSTRIALS FUND S&P 1500 INDUSTRIALS INDEX S&P 1500 INDEX --------------------- -------------------------- -------------- 5/9/97 10000.00 10000.00 10000.00 9/30/97 12400.00 11623.00 11700.00 9/30/98 9663.00 10543.00 12435.00 9/30/99 11295.00 13339.00 15832.00 9/30/00 10807.00 15263.00 18271.00 9/30/01 10207.00 12296.00 13569.00 9/30/02 9501.00 10293.00 11015.00 9/30/03 10505.00 12492.00 13735.00
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. 22 Schedule of Investments ICON INDUSTRIALS FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 96.2% ENERGY 1.1% OIL & GAS EQUIPMENT & SERVICES 1.1% 74,600 Tetra Tech, Inc.(a) $ 1,490,508 - ----------------------------------------------------- TOTAL ENERGY 1,490,508 INDUSTRIALS 90.1% AEROSPACE & DEFENSE 7.1% 110,000 Armor Holdings, Inc.(a) 1,842,500 22,600 Engineered Support Systems, Inc. 1,367,074 169,500 GenCorp. Inc. 1,517,025 20,400 General Dynamics Corporation 1,592,424 67,700 Goodrich Corporation 1,641,048 34,800 L-3 Communications Holdings, Inc.(a) 1,505,100 - ----------------------------------------------------- 9,465,171 AIRLINES 7.9% 197,600 Atlantic Coast Airlines Holdings, Inc.(a) 1,681,576 133,200 ExpressJet Holdings, Inc.(a) 1,838,160 34,400 JetBlue Airways Corporation(a) 2,094,272 155,300 Mesa Air Group, Inc.(a) 1,726,936 35,200 Ryanair Holdings plc(a) -- ADR 1,425,600 101,200 SkyWest, Inc. 1,752,784 - ----------------------------------------------------- 10,519,328 BUILDING PRODUCTS 9.1% 14,200 American Standard Companies Inc.(a) 1,196,350 25,000 American Woodmark Corporation 1,119,000 68,200 ElkCorp. 1,606,792 87,100 Griffon Corporation(a) 1,564,316 65,800 Masco Corporation 1,610,784 36,100 Simpson Manufacturing Co., Inc.(a) 1,476,129 53,800 Universal Forest Products, Inc. 1,305,726 61,600 York International Corporation 2,130,744 - ----------------------------------------------------- 12,009,841 CONSTRUCTION & ENGINEERING 8.0% 48,600 Chicago Bridge & Iron Company N.V. -- ADR 1,319,976 73,600 Dycom Industries, Inc.(a) 1,500,704 37,900 Fluor Corporation 1,414,807 70,300 Granite Construction Incorporated 1,313,204 102,600 Insituform Technologies, Inc.(a) 1,822,176 34,700 Jacobs Engineering Group Inc.(a) 1,564,970 82,700 URS Corporation(a) 1,604,380 - ----------------------------------------------------- 10,540,217
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS 1.9% 14,000 Caterpillar Inc. $ 963,760 31,600 Lindsay Manufacturing Co. 635,160 24,600 Oshkosh Truck Corporation 974,406 - ----------------------------------------------------- 2,573,326 DIVERSIFIED COMMERCIAL SERVICES 17.6% 31,200 Apollo Group, Inc.(a) 2,060,136 42,600 Bright Horizons Family Solutions, Inc.(a) 1,701,870 49,800 Career Education Corporation(a) 2,255,940 32,200 ChoicePoint Inc.(a) 1,078,700 49,300 Corinthian Colleges, Inc.(a) 2,817,988 30,100 Education Management Corporation(a) 1,735,867 42,400 Equifax Inc. 944,248 47,400 ITT Educational Services, Inc.(a) 2,271,408 87,100 Mobile Mini, Inc.(a) 1,681,901 77,700 NCO Group, Inc.(a) 1,814,295 26,200 Portfolio Recovery Associates, Inc.(a) 666,004 55,100 SOURCECORP, Incorporated(a) 1,281,075 45,400 University of Phoenix Online(a) 3,026,818 - ----------------------------------------------------- 23,336,250 ELECTRICAL COMPONENTS & EQUIPMENT 3.1% 30,800 AMETEK, Inc. 1,320,088 23,000 A.O. Smith Corporation 644,230 15,400 Cooper Industries, Ltd.(f) 739,662 21,300 Hubbell Incorporated 777,237 27,700 Regal-Beloit Corporation 565,080 - ----------------------------------------------------- 4,046,297 EMPLOYMENT SERVICES 7.0% 63,200 Administaff, Inc.(a) 561,848 85,300 Gevity HR, Inc. 1,252,204 231,500 Labor Ready, Inc.(a) 2,326,575 33,000 Manpower Inc. 1,224,300 127,900 On Assignment, Inc.(a) 675,312 57,700 Resources Connection, Inc.(a) 1,389,993 179,200 Spherion Corporation(a) 1,247,232 38,500 Volt Information Sciences, Inc.(a) 635,250 - ----------------------------------------------------- 9,312,714
23 Schedule of Investments (continued) ICON INDUSTRIALS FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- INDUSTRIAL MACHINERY 15.0% 28,300 Briggs & Stratton Corporation $ 1,662,908 10,200 Eaton Corporation 903,924 103,200 Flowserve Corporation(a) 2,094,960 63,375 Graco Inc. 2,379,731 31,400 Harsco Corporation 1,207,958 35,300 Ingersoll-Rand Company(f) 1,886,432 200,700 JLG Industries, Inc. 2,312,064 62,700 Kaydon Corporation 1,488,498 63,100 The Manitowoc Company, Inc. 1,368,639 70,600 Reliance Steel & Aluminum Co. 1,566,614 35,200 SPX Corporation(a) 1,593,856 91,600 Stewart & Stevenson Services, Inc. 1,375,832 - ----------------------------------------------------- 19,841,416 MARINE 2.0% 27,400 Alexander & Baldwin, Inc. 770,762 47,800 CP Ships Limited(f) 1,006,190 28,000 Kirby Corporation(a) 803,600 - ----------------------------------------------------- 2,580,552 OFFICE SERVICES & SUPPLIES 2.5% 31,000 Brady Corporation 986,110 23,500 HON INDUSTRIES Inc. 868,560 39,700 United Stationers Inc.(a) 1,496,293 - ----------------------------------------------------- 3,350,963 RAILROADS 2.3% 44,000 CP Railway Limited(f) 1,038,840 25,800 CSX Corporation 754,650 53,500 Genesee & Wyoming Inc.(a) 1,268,485 - ----------------------------------------------------- 3,061,975 TRUCKING 6.6% 38,400 Heartland Express, Inc. 922,368 58,700 Knight Transportation, Inc.(a) 1,479,827 14,800 Landstar System, Inc.(a) 903,096 22,050 Old Dominion Freight Line, Inc.(a) 641,435 72,700 Swift Transportation Co., Inc.(a) 1,649,563 55,400 USF Corporation 1,750,086 61,800 Werner Enterprises, Inc. 1,415,838 - ----------------------------------------------------- 8,762,213 - ----------------------------------------------------- TOTAL INDUSTRIALS 119,400,263
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE INFORMATION TECHNOLOGY 5.0% DATA PROCESSING & OUTSOURCED SERVICES 4.5% 42,100 CSG Systems International, Inc.(a) $ 621,817 31,300 DST Systems, Inc.(a) 1,176,880 88,500 eFunds Corporation(a) 1,092,975 40,000 First Data Corporation 1,598,400 41,600 Fiserv, Inc.(a) 1,508,416 - ----------------------------------------------------- 5,998,488 ELECTRONIC EQUIPMENT MANUFACTURERS 0.5% 53,500 Paxar Corporation(a) 684,800 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 6,683,288 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $112,125,204) 127,574,059 SHORT-TERM INVESTMENT 2.9% VARIABLE RATE DEMAND NOTE $3,824,836 American Family Demand Note, 0.741%(#) 3,824,836 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $3,824,836) 3,824,836 - ----------------------------------------------------- TOTAL INVESTMENTS 99.1% (COST $115,950,040) 131,398,895 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.9% 1,155,418 - ----------------------------------------------------- NET ASSETS 100.0% $132,554,313 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt f Foreign security 24 Management Overview ICON INFORMATION TECHNOLOGY FUND A discussion with Robert Straus, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Information Technology Fund advanced 38.29% for the one-year period ended September 30, 2003, trailing its narrowly focused benchmarks, the S&P 1500 Information Technology Index and the technology-laden Nasdaq Composite Index, which returned 59.69% and 53.15%, respectively, but handily outpacing its broad benchmark, the S&P 1500 Index, which returned 24.69%. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? During the first half of the Fund's fiscal year, fear and pessimism exerted a strong grip on the broad market, and the volatile technology sector bore the brunt. Although prices fell to irrational levels in early October 2002, many of the sector's constituent industries lacked strength. Nevertheless, it was only a matter of time before depressed technology shares began their move back toward fair value. While the sudden and sharp reversal in technology was driven primarily by lower-quality issues that did not meet our investment criteria, we took the opportunity to adjust the Fund's holdings, focusing on the emerging industry leadership our system identified. In late fall and into early winter, we gradually tilted the Fund toward three industries: semiconductors, semiconductor equipment, and Internet software & services. While buying into weakness as these industries subsequently corrected, we were following our disciplined approach of investing in undervalued industries that are demonstrating leadership. This systematic methodology worked to the Fund's advantage when on March 11, 2003, the market bottomed. The technology sector re-emerged as the clear market leader and this time, the Fund participated. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Sometimes, as occurred last fall, the Fund does not capitalize on a swift and sudden rally because the rally features lower-quality stocks that do not meet our investment standards. At that time, the Fund lacked exposure to semiconductor stocks that were driving the advance. Our investment mandate dictates that we screen for well-managed companies with high cash positions and low debt levels. Because of their speculative nature, many stocks that led the Fall 2002 rally simply did not meet our quality screen. In turn, semiconductors, while undervalued, failed to demonstrate longer-term relative strength. That changed in mid to late December 2002, when we began to tilt the Fund toward semiconductor and semiconductor equipment manufacturers, as well as Internet software & service companies. We used pullbacks in December and January to build positions, yet the Fund suffered as prices in these industries continued their decline. However, from the March 11 low to the end of the fiscal year, these groups comprised three of the four top-performing industries as represented by the S&P 1500 Information Technology Index. Individual holdings that contributed to performance included J2 Global Communications Inc., an Internet-based messaging services provider that rose 280.4% during the past 12 months. A strong balance sheet and expanding profit margins bolstered this undervalued company. OmniVision Technologies Inc., a maker of semiconductors for digital cameras, was a strong performer, gaining 540.5% over the period. OmniVision displayed strong sales growth, expanding margins and a cash-rich balance sheet. United Online Inc., a low-cost Internet service provider, demonstrated similar characteristics, while recently turning profitable. Among the Fund's performance detractors, application software provider Verisity Ltd. declined in mid-January on news that first-quarter profit and sales would fall short of analysts' forecasts. WebEx, the Internet-based video conferencing provider, also fell abruptly in mid-January on fears that it was vulnerable to market share losses and profit pressures. At that time, we sold both Verisity and WebEx to allocate assets to stocks that were demonstrating more favorable valuations and relative strength. Video game software provider Activision slid sharply during the fourth quarter amid concerns of slowing industry growth. WHAT IS THE INVESTMENT OUTLOOK FOR THE INFORMATION TECHNOLOGY SECTOR? The sell-off in technology stocks late in September 2003 was likely driven by profit-taking as investors braced for third-quarter earnings. From our perspective, this correction appeared to be little more than a speed bump in what we believe is a sustainable rally. It is important to point out that prices could trade beyond fair value given the tech sector's inherent strength. Our overall valuation measures are based on conservative long-term growth rates. Should technology issues post earnings-per-share growth closer to consensus figures, any move higher could exceed our fair value estimates. In that case, we would continue to hold those industries showing the greatest leadership. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 100.2% Top 10 Equity Holdings 36.5% Number of Stocks 54 Cash Equivalents 0.0% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 j2 Global Communications, Inc. 5.7% United Online, Inc. 4.4% OmniVision Technologies, Inc. 4.4% Silicon Laboratories Inc. 4.0% Marvell Technology Group Ltd. 3.4% UTStarcom, Inc. 3.2% Cognizant Technology Solutions Corporation 3.1% VeriSign, Inc. 2.9% Stratasys, Inc. 2.7% Digital Insight Corporation 2.7% Percentages are based upon net assets. 25 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Semiconductors 25.5% Internet Software & Services 24.7% Application Software 8.7% IT Consulting & Other Services 6.0% Communications Equipment 6.0% Computer Hardware 5.9% Semiconductor Equipment 5.9% Computer Storage & Peripherals 5.7% Electronic Equipment Manufacturers 4.4% Technology Distributors 2.7%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 2/19/97 - -------------------------------------------------------------------------------- ICON Information Technology Fund 38.29% 19.99% 14.01% - -------------------------------------------------------------------------------- S&P 1500 Technology Index 59.69% -0.94% 4.61% - -------------------------------------------------------------------------------- NASDAQ Composite Index 53.15% 1.39% 4.51% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 5.17% - --------------------------------------------------------------------------------
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, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON INFORMATION TECHNOLOGY FUND NASDAQ COMPOSITE INDEX S&P 1500 INDEX -------------------------------- ---------------------- -------------- 2/19/97 10000 10000 10000 9/30/97 12960 12379 11890 9/30/98 9569 12492 12636 9/30/99 21006 20319 16088 9/30/00 33451 27224 18567 9/30/01 22447 11140 13789 9/30/02 17206 8742 11194 9/30/03 23796 13388 13957 S&P 1500 INFORMATION TECHNOLOGY INDEX ------------------------------- 2/19/97 10000 9/30/97 12853 9/30/98 14126 9/30/99 25075 9/30/00 30971 9/30/01 12273 9/30/02 8437 9/30/03 13474
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. 26 Schedule of Investments ICON INFORMATION TECHNOLOGY FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 100.2% INFORMATION TECHNOLOGY 100.2% APPLICATION SOFTWARE 8.7% 60,100 BARRA, Inc.(a) $ 2,254,952 114,700 FactSet Research Systems Inc. 5,086,945 287,800 Jack Henry & Associates, Inc. 5,004,842 55,500 Kronos Incorporated(a) 2,936,505 374,700 Magma Design Automation, Inc.(a) 7,351,614 233,400 Mentor Graphics Corporation(a) 4,091,502 - ----------------------------------------------------- 26,726,360 COMMUNICATIONS EQUIPMENT 6.0% 121,000 Cisco Systems, Inc.(a) 2,371,600 49,000 QLogic Corporation(a) 2,302,020 105,500 SafeNet, Inc.(a) 3,811,715 310,000 UTStarcom, Inc.(a) 9,858,000 - ----------------------------------------------------- 18,343,335 COMPUTER HARDWARE 5.9% 500,000 Cray, Inc.(a) 5,475,000 258,900 Neoware Systems, Inc.(a) 4,419,423 196,800 Stratasys, Inc.(a) 8,387,616 - ----------------------------------------------------- 18,282,039 COMPUTER STORAGE & PERIPHERALS 5.7% 135,000 Avid Technology, Inc.(a) 7,155,000 110,000 SanDisk Corporation(a) 7,011,400 261,000 Western Digital Corporation(a) 3,364,290 - ----------------------------------------------------- 17,530,690 DATA PROCESSING & OUTSOURCED SERVICES 1.4% 159,000 SunGard Data Systems Inc.(a) 4,183,290 ELECTRONIC EQUIPMENT MANUFACTURERS 4.4% 273,600 Nam Tai Electronics, Inc.(f) 7,422,768 150,000 Rofin-Sinar Technologies, Inc.(a) 3,153,000 175,000 Vishay Intertechnology, Inc.(a) 3,066,000 - ----------------------------------------------------- 13,641,768 ELECTRONIC MANUFACTURING SERVICES 1.2% 300,000 CTS Corporation 3,693,000 HOME ENTERTAINMENT SOFTWARE 1.2% 110,000 Take-Two Interactive Software, Inc.(a) 3,757,600
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE INTERNET SOFTWARE & SERVICES 24.7% 416,400 Digital Insight Corporation(a) $ 8,286,360 191,400 Digital River, Inc.(a) 5,238,618 322,900 FindWhat.com(a) 5,582,941 464,600 j2 Global Communications, Inc.(a) 17,575,818 114,500 Netease.com Inc.(a) -- ADR 6,391,390 68,000 SINA Corp(a)f) 2,428,960 111,900 Sohu.com Inc.(a) 3,485,685 391,000 United Online, Inc.(a) 13,602,890 656,700 VeriSign, Inc.(a) 8,858,883 250,000 WebEx Communications, Inc.(a) 4,747,500 - ----------------------------------------------------- 76,199,045 IT CONSULTING & OTHER SERVICES 6.0% 145,000 CACI International Inc.(a) 6,213,250 350,000 CIBER, Inc.(a) 2,660,000 261,000 Cognizant Technology Solutions Corporation(a) 9,516,060 - ----------------------------------------------------- 18,389,310 SEMICONDUCTOR EQUIPMENT 5.9% 125,500 Cabot Microelectronics Corporation(a) 6,981,565 71,600 KLA-Tencor Corporation(a) 3,688,116 229,700 Teradyne, Inc.(a) 4,272,420 306,000 White Electronic Designs Corporation(a) 3,289,500 - ----------------------------------------------------- 18,231,601 SEMICONDUCTORS 25.5% 134,300 Artisan Components, Inc.(a) 2,256,240 456,500 Cypress Semiconductor Corporation(a) 8,070,920 148,300 DSP Group, Inc.(a) 3,695,636 116,100 Intel Corporation 3,195,072 197,900 International Rectifier Corporation(a) 7,409,376 274,000 Marvell Technology Group Ltd.(a)f) 10,343,500 322,100 NVIDIA Corporation(a) 5,124,933 198,000 02Micro International Limited(a)f) 2,861,100 318,700 OmniVision Technologies, Inc.(a) 13,455,514 272,800 Silicon Laboratories Inc.(a) 12,259,632 108,000 Xilinx, Inc.(a) 3,069,360 348,800 Zoran Corporation(a) 6,801,600 - ----------------------------------------------------- 78,542,883 SYSTEMS SOFTWARE 0.9% 105,000 Computer Associates International, Inc. 2,741,550
27 Schedule of Investments (continued) ICON INFORMATION TECHNOLOGY FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- TECHNOLOGY DISTRIBUTORS 2.7% 200,000 Arrow Electronics, Inc.(a) $ 3,678,000 275,000 Avnet, Inc.(a) 4,543,000 - ----------------------------------------------------- 8,221,000 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 308,483,471 - ----------------------------------------------------- TOTAL INVESTMENTS 100.2% (COST $247,182,985) 308,483,471 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.2%) (510,981) - ----------------------------------------------------- NET ASSETS 100.0% $307,972,490 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ADR -- American Depositary Receipt f Foreign security 28 Management Overview ICON LEISURE AND CONSUMER STAPLES FUND A discussion with Derek Rollingson, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Leisure and Consumer Staples Fund advanced 10.89% for the one-year period ended September 30, 2003. At the same time, the Fund's sector-specific benchmarks, the S&P 1500 Consumer Discretionary Index and the S&P 1500 Consumer Staples Index, returned 23.46% and 5.12%, respectively. Although neither index is an ideal comparison individually, together they provide a suitable reference for the Fund's overall performance. The Fund trailed the 24.69% gain for its broad benchmark, the S&P 1500 Index. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Fear and pessimism dominated the first half of the fiscal year, as mounting war concerns and rising unemployment weighed heavily on consumer confidence. Stock prices reflected these pressures, falling sharply below their intrinsic values despite incremental improvements in corporate earnings and gross domestic product. Following the market low of mid-March 2003, stocks improved as the economic outlook brightened and the overhang of war subsided. A broad second-half rally ensued, driven by expectations that the worst was finally behind us. Nevertheless, performance within the Leisure and Consumer Staples sector was highly mixed. Leisure industries demonstrated considerable strength as evidenced by the 40.70% jump in the S&P 1500 Hotels, Resorts & Cruise Lines Index, a 27.82% rise in the S&P 1500 Broadcasting & Cable TV Index, a 23.26% advance in the S&P 1500 Restaurants Index, and a 19.82% gain in the S&P 1500 Personal Products Index. Consolidation and shareholder value proved stabilizing forces for the broadcasting & cable TV industry, whereas hotels, resorts & cruise lines and leisure products received a boost from depressed valuations. Restaurants benefited from the recovering economy. In contrast, Consumer Staples, whose defensive posture benefited the group during the three-year downturn, weakened on speculation that the theme had run its course. This was borne out by lower relative returns for the food retail, drug retail and soft drinks industries. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? The Fund was positioned early in the fiscal period for a fundamentally driven, quality-led rally. However, the rally that emerged in October 2002 featured lower-quality, high-debt companies that did not meet our investment criteria. Consequently, the Fund did not participate in this brief surge, but turned a corner when a higher-quality rebound materialized in mid-March 2003. Although the Fund recouped earlier losses and produced a favorable absolute return, it was unable to compensate for missing the initial advance. In light of this more sustainable second-half rally, the Fund was increasingly tilted toward cyclical industries that have historically led during an economic recovery. Based on relative strength metrics and projected earnings-per-share growth, the hotels, resorts & cruise lines and restaurant industries were increased during the period. Movies & entertainment, which was absent from the Fund at the beginning of the fiscal year, was a meaningful position by period-end. Meanwhile, publishing, tobacco, and packaged foods & meats industries had all been liquidated by the close of the reporting period because they no longer demonstrated relative strength. Leading individual contributors included cruise operator Royal Caribbean Cruises Ltd., which reported better-than-expected earnings amid the war-related travel slowdown. Pool supply distributor SCP Pool Corp. benefited from industry consolidation as well as strong revenue growth and widening profit margins. Direct broadcast satellite provider EchoStar Communications Corp., better known as DISH Network, also moved higher, after achieving positive free cash flow. Elsewhere, fast food giant McDonald's Corp. capitalized on its ambitious turnaround efforts, posting consecutive quarters of positive results. Among the Fund's detractors, specialty stores Toys "R" Us Inc. and Big 5 Sporting Goods Corp. faced a challenging retail environment as well as fierce competition from deep discounters. Supermarket operator and wholesaler distributor Nash-Finch Co. also fell, citing weak retail sales, competitive pressures and profit shortfalls. Even so, these stocks did not reach our sell criteria, and we continued to hold them at the end of the period. WHAT IS THE INVESTMENT OUTLOOK FOR THE LEISURE AND CONSUMER STAPLES SECTOR? Despite strong gains since the mid-March 2003 market low, current valuations support further upside potential within the sector. We believe the Fund is positioned to capitalize on a sustained cyclical rebound, assuming the rally continues. We anticipate ongoing leadership from the hotels, resorts & cruise lines industry, but will keep a close eye on valuations in light of its recent run-up. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 100.1% Top 10 Equity Holdings 34.8% Number of Stocks 37 Cash Equivalents 0.0% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Starwood Hotels & Resorts Worldwide, Inc. 4.0% Marriott International, Inc. 3.9% The Walt Disney Company 3.8% Leapfrog Enterprises, Inc. 3.6% Prime Hospitality Corp. 3.5% SCP Pool Corporation 3.4% BJ's Wholesale Club, Inc. 3.3% CEC Entertainment Inc. 3.2% Callaway Golf Company 3.1% Panera Bread Company 3.0% Percentages are based upon net assets. 29 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Hotels, Resorts & Cruise Lines 19.1% Restaurants 16.4% Leisure Products 15.1% Movies & Entertainment 13.9% Specialty Stores 8.6% Broadcasting & Cable TV 6.4% Food Distributors 5.3% Casinos & Gaming 4.8% Hypermarkets & Super Centers 3.2% Leisure Facilities 2.8%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 5/9/97 - -------------------------------------------------------------------------------- ICON Leisure and Consumer Staples Fund 10.89% 10.25% 10.79% - -------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 23.46% 3.01% 6.25% - -------------------------------------------------------------------------------- S&P 1500 Consumer Staples Index 5.12% 2.24% 3.96% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 5.09% - --------------------------------------------------------------------------------
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, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON LEISURE AND CONSUMER S&P 1500 CONSUMER S&P 1500 CONSUMER STAPLES STAPLES FUND DISCRETIONARY INDEX S&P 1500 INDEX INDEX ------------------------- ------------------- -------------- ------------------------- 5/9/97 10000 10000 10000 10000 9/30/97 11350 11749 11703 10622 9/30/98 11825 12705 12437 11479 9/30/99 13570 16840 15835 12269 9/30/00 14285 16547 18274 12860 9/30/01 14607 12992 13572 12273 9/30/02 17367 11935 11017 12199 9/30/03 19260 14736 13737 12824
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. 30 Schedule of Investments ICON LEISURE AND CONSUMER STAPLES FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 100.1% CONSUMER DISCRETIONARY 11.0% CONSUMER ELECTRONICS 2.4% 20,300 Harman International Industries, Incorporated $ 1,996,505 SPECIALTY STORES 8.6% 87,600 Big 5 Sporting Goods Corporation(a) 1,338,528 66,500 The Sports Authority, Inc.(a) 2,092,090 141,600 Toys "R" Us, Inc.(a) 1,703,448 337,900 Trans World Entertainment Corporation(a) 1,909,135 - ----------------------------------------------------- 7,043,201 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 9,039,706 LEISURE AND CONSUMER STAPLES 89.1% BROADCASTING & CABLE TV 6.4% 37,100 Clear Channel Communications, Inc. 1,420,930 60,300 EchoStar Communications Corporation(a) 2,309,490 76,700 Emmis Communications Corporation(a) 1,547,806 - ----------------------------------------------------- 5,278,226 CASINOS & GAMING 4.8% 54,000 Harrah's Entertainment, Inc. 2,273,940 61,900 Shuffle Master, Inc.(a) 1,682,442 - ----------------------------------------------------- 3,956,382 FOOD DISTRIBUTORS 5.3% 138,700 Nash Finch Company 2,149,850 54,000 Performance Food Group Company(a) 2,199,420 - ----------------------------------------------------- 4,349,270 FOOD RETAIL 2.1% 73,500 SUPERVALU INC. 1,753,710 HOTELS, RESORTS & CRUISE LINES 19.1% 67,300 Carnival Corporation(f) 2,213,497 112,010 Hilton Hotels Corporation 1,816,802 73,700 Marriott International, Inc. 3,171,311 335,300 Prime Hospitality Corp.(a) 2,913,757 82,600 Royal Caribbean Cruises Ltd.(f) 2,321,886 95,100 Starwood Hotels & Resorts Worldwide, Inc. 3,309,480 - ----------------------------------------------------- 15,746,733
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE HYPERMARKETS & SUPER CENTERS 3.2% 138,700 BJ's Wholesale Club, Inc.(a) $ 2,686,619 LEISURE FACILITIES 2.8% 265,700 Bally Total Fitness Holding Corporation(a) 2,298,305 LEISURE PRODUCTS 15.1% 72,800 Action Performance Companies, Inc. 1,779,232 90,500 Brunswick Corporation 2,324,040 178,500 Callaway Golf Company 2,547,195 77,700 Leapfrog Enterprises, Inc.(a) 2,952,600 100,950 SCP Pool Corporation(a) 2,808,429 - ----------------------------------------------------- 12,411,496 MOVIES & ENTERTAINMENT 13.9% 133,700 AOL Time Warner Inc.(a) 2,020,207 77,000 4Kids Entertainment Inc(a) 1,624,700 86,000 Fox Entertainment Group, Inc.(a) 2,407,140 68,200 The News Corporation Limited -- ADR 2,236,960 155,000 The Walt Disney Company 3,126,350 - ----------------------------------------------------- 11,415,357 RESTAURANTS 16.4% 55,900 CBRL Group, Inc. 1,987,804 66,800 CEC Entertainment Inc.(a) 2,618,560 303,600 CKE Restaurants, Inc.(a) 1,958,220 105,000 McDonald's Corporation 2,471,700 60,500 Panera Bread Company(a) 2,481,105 134,400 The Steak n Shake Company(a) 2,002,560 - ----------------------------------------------------- 13,519,949 - ----------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 73,416,047 - ----------------------------------------------------- TOTAL INVESTMENTS 100.1% (COST $70,998,867) 82,455,753 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.1%) (108,440) - ----------------------------------------------------- NET ASSETS 100.0% $82,347,313 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ADR -- American Depositary Receipt f Foreign security 31 Management Overview ICON MATERIALS FUND A discussion with Derek Rollingson, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Materials Fund gained 9.36% for the one-year ended September 30, 2003, trailing its sector benchmark, the S&P 1500 Materials Index, which returned 23.19%, and its broad-based benchmark, the S&P 1500 Index, which gained 24.69%. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Perceived economic stagnation worked against the Materials sector during the first half of the fiscal year, as mounting war concerns and higher energy costs drove lackluster results. However, cautious optimism prevailed during the second half, raising the sector's constituent industries in unison with a broad mid-March 2003 turnaround. As military action in Iraq ended, investors embraced a brighter economic outlook, and the rally extended into late September before cooling slightly. Nevertheless, performance within the sector was mixed, in part due to sluggishness in industrial production. On one hand, the diversified metals & mining industry topped both benchmark indexes, supported by production cuts and expectations of rising demand. Gold also outperformed, as futures hit a seven-year intraday high amid industry consolidation and anticipation of a global recovery. In contrast, pricing pressures and oversupply caused steel to lag. Meanwhile, sector-wide efforts to balance supply and demand factors positioned the group to participate more fully once the economy stabilizes. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Much of the Fund's relative underperformance was attributed to its lack of exposure to gold as well as its sizable weighting in steel. Although gold advanced on strength throughout much of the period, elevated prices convinced us to seek more compelling value elsewhere. That led us to the steel industry, where the Fund was heavily weighted based on its historically high value-to- price ratio. However, valuation discrepancies were widespread, and the Fund was invested across a broad range of industries. For example, aluminum and paper products, each absent from the Fund at the start of the period, grew to 7.4% and 9.7%, respectively, by period-end. Both were added on the basis of valuation and strong performance compared to the broader market. Likewise, construction materials, which was reduced on signs of erosion during the first half, was increased during the second half on renewed strength. Specific stocks that contributed to Fund performance during the 12 months included Florida Rock Industries Inc., a leading producer of construction aggregates and concrete products, which benefited from ongoing strength in new home construction. Specialty packaging provider Chesapeake Corp. also advanced, having raised its profit outlook for 2003 while reporting higher net sales. In addition, paper products giant Georgia-Pacific Corp. beat Wall Street earnings estimates on better-than-expected results in its building products and packaging businesses. Among the Fund's detractors from performance, container manufacturer Crown Holdings Inc. came under pressure as pricing difficulties and higher pension expenses eroded profits. Elsewhere, specialty paper purveyor Glatfelter tumbled upon reporting a 96% drop in second-quarter earnings, forcing it to slash its dividend and cut costs. Steel distributor Ryerson Tull Inc. also retreated as the company struggled with net quarterly losses and lackluster durable goods orders. Despite these factors, the stocks had not reached our sell criteria and we continued to hold them at period-end. WHAT IS THE INVESTMENT OUTLOOK FOR THE MATERIALS SECTOR? In an environment favoring growth-oriented cyclical areas, the Materials sector has lagged in its move back toward fair value. However, as the economic recovery gains traction and industrial production stabilizes, demand throughout much of the sector may accelerate. With that, we may see an overall improvement in the earnings outlook coupled with emerging leadership in the steel and construction materials industries. Given current valuation and relative strength measures for the sector, which point to upside potential, we believe the Fund is positioned to participate. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 99.2% [SIDENOTE] Top 10 Equity Holdings 36.0% Number of Stocks 36 Cash Equivalents 0.6% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2003 Alcoa Inc. 4.3% Crown Holdings, Inc. 4.1% OM Group, Inc. 3.8% Florida Rock Industries, Inc. 3.7% Cabot Corporation 3.7% Sealed Air Corporation 3.7% Texas Industries, Inc. 3.2% Cytec Industries Inc. 3.2% FMC Corporation 3.2% Carpenter Technology Corporation 3.1% Percentages are based upon net assets. 32 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Steel 16.9% Specialty Chemcials 12.7% Construction Materials 12.1% Diversified Chemicals 12.1% Paper Products 11.7% Paper Packaging 8.2% Aluminum 7.4% Metal & Glass Containers 7.2% Precious Metals & Minerals 2.6% Homebuilding 2.3%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 5/5/97 - -------------------------------------------------------------------------------- ICON Materials Fund 9.36% -0.72% -6.33% - -------------------------------------------------------------------------------- S&P 1500 Materials Index 23.19% 3.79% 1.98% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 4.99% - --------------------------------------------------------------------------------
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, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON MATERIALS FUND S&P 1500 MATERIALS INDEX S&P 1500 INDEX ------------------- ------------------------ -------------- 5/5/97 10000 10000 10000 9/30/97 10900 11391 11635 9/30/98 6818 9413 12366 9/30/99 7613 10685 15743 9/30/00 6759 8547 18169 9/30/01 6010 9755 13494 9/30/02 6013 9201 10954 9/30/03 6576 11335 13658
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. 33 Schedule of Investments ICON MATERIALS FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 99.2% CONSUMER DISCRETIONARY 2.3% HOMEBUILDING 2.3% 18,600 Standard Pacific Corp. $ 704,940 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 704,940 INDUSTRIALS 2.3% TRADING COMPANIES & DISTRIBUTORS 2.3% 21,200 Hughes Supply, Inc. 687,940 - ----------------------------------------------------- TOTAL INDUSTRIALS 687,940 MATERIALS 94.6% ALUMINUM 7.4% 24,900 Alcan Inc.(f) 952,674 49,800 Alcoa Inc. 1,302,768 - ----------------------------------------------------- 2,255,442 COMMODITY CHEMICALS 2.1% 49,800 Lyondell Chemical Company 636,444 CONSTRUCTION MATERIALS 12.1% 22,750 Florida Rock Industries, Inc. 1,128,400 18,700 Lafarge North America Inc. 650,760 25,100 Martin Marietta Materials, Inc. 914,895 40,100 Texas Industries, Inc. 986,460 - ----------------------------------------------------- 3,680,515 DIVERSIFIED CHEMICALS 12.1% 39,400 Cabot Corporation 1,123,294 38,200 FMC Corporation(a) 962,640 71,000 Hercules Incorporated(a) 804,430 193,700 Solutia Inc. 772,863 - ----------------------------------------------------- 3,663,227 FOREST PRODUCTS 1.6% 35,700 Louisiana-Pacific Corporation(a) 491,946 METAL & GLASS CONTAINERS 7.2% 185,700 Crown Holdings, Inc.(a) 1,253,475 29,500 Silgan Holdings Inc.(a) 944,000 - ----------------------------------------------------- 2,197,475 PAPER PACKAGING 8.2% 33,100 Chesapeake Corporation 746,074 42,600 Rock-Tenn Company 621,108 23,500 Sealed Air Corporation(a) 1,109,905 - ----------------------------------------------------- 2,477,087 PAPER PRODUCTS 11.7% 22,100 Aracruz Celulose S.A. -- ADR 603,330 99,800 Buckeye Technologies Inc.(a) 907,182 27,000 Georgia-Pacific Corp. 654,480 44,000 Glatfelter 518,320 71,400 Wausau-Mosinee Paper Corporation 871,794 - ----------------------------------------------------- 3,555,106
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE PRECIOUS METALS & MINERALS 2.6% 127,400 Stillwater Mining Company(a) $ 802,620 SPECIALTY CHEMICALS 12.7% 31,100 Albemarle Corporation 853,695 55,400 A. Schulman, Inc. 879,198 26,400 Cytec Industries Inc.(a) 963,600 78,500 OM Group, Inc.(a) 1,149,240 - ----------------------------------------------------- 3,845,733 STEEL 16.9% 114,700 Allegheny Technologies, Inc. 751,285 44,500 Carpenter Technology Corporation 954,080 39,200 Commercial Metals Company 720,104 48,400 NN, Inc. 622,424 14,600 Nucor Corporation 669,848 95,500 Ryerson Tull, Inc. 744,900 44,600 Steel Dynamics, Inc.(a) 677,474 - ----------------------------------------------------- 5,140,115 - ----------------------------------------------------- TOTAL MATERIALS 28,745,710 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $28,103,715) 30,138,590 SHORT-TERM INVESTMENT 0.6% VARIABLE RATE DEMAND NOTE $171,639 American Family Demand Note, 0.741%(#) 171,639 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $171,639) 171,639 - ----------------------------------------------------- TOTAL INVESTMENTS 99.8% (COST $28,275,354) 30,310,229 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.2% 66,022 - ----------------------------------------------------- NET ASSETS 100.0% $30,376,251 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt f Foreign security 34 Management Overview ICON TELECOMMUNICATION & UTILITIES FUND A discussion with Robert Straus, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Telecommunication & Utilities Fund appreciated 20.36% for the fiscal year ended September 30, 2003. In comparison, the Fund's sector-specific benchmarks, the S&P 1500 Telecommunication Services Index and the S&P 1500 Utilities Index, returned 30.04% and 22.24%, respectively, while its broad benchmark, the S&P 1500, gained 24.69%. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? The Telecommunication & Utilities sector, much like the broader market, rose sharply off the October 2002 market low as investors scooped up deeply discounted, lower-quality issues within the wireless telecommunication services and multi-utilities & unregulated power industries. The focus then shifted to large-capitalization regional operating companies, which rallied on the anticipated passage of sweeping deregulation proposed by the Federal Communications Commission (FCC). However, in an unexpected reversal, the FCC defeated the measure in mid-February 2003, sending the Baby Bells into a tailspin before they stabilized in early- to mid-March. Having seemingly reached a bottom in mid-March, stocks then embarked upon what now appears to be the second leg a new bull market. Despite widespread skepticism, amid the overhang of war and perceived economic uncertainty, Telecommunication & Utilities stocks surged higher. This time, however, the broad rally featured higher-quality companies, with the wireless telecommunication services and multi-utilities & unregulated power industries leading by a wide margin. The more defensive electric, gas and water utilities held up the rear, as the emergent economic recovery favored companies possessing an early-cycle orientation. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? The Fund struggled during the first half of the fiscal year due to leadership among speculative issues that were inconsistent with our investment methodology. Although the Fund was well positioned in the top-performing integrated telecommunication services industry, the market's embrace of distressed companies and the sharp decline in the high-quality Baby Bells prevented the Fund from participating in those gains. The situation was much the same for the multi-utilities & unregulated power industry, where the Fund avoided the questionable stocks that drove performance in the aftermath of the Enron corporate collapse. The second half of the fiscal year saw the Fund steadily increase its exposure to the wireless telecommunication services industry. Based on the group's valuation and relative strength metrics, its allocation grew to 28.6%, making it the largest industry weighting at period-end. Moreover, as the top-performing industry over the six-month period, the aggressive move into this group helped bolster Fund performance. At the same time, the Fund's continued avoidance of lower-quality multi-utilities & unregulated power stocks, as well as a sizable exposure to integrated telecommunication services worked against Fund performance. Despite its healthy bounce off the mid-March low, integrated telecommunication services lagged its related industries. As a result, the group's weighting was reduced and the assets shifted to the more attractive wireless telecommunication services industry. Finally, we continued to maintain a significant weighting in the communications equipment industry. Although technically classified outside the Telecommunication & Utilities sector, the industry is thematically linked to the Fund's investment universe. For that reason, market leadership and compelling valuations warranted its inclusion in the Fund. Specific holdings that contributed to performance included AO VimpelCom, a leading Russia-based wireless services provider, which benefited from strong sales growth and expanding profit margins. Meanwhile, wireless equipment manufacturer UTStarcom Inc. gained on strong handset sales in its core, rapidly growing market of Mainland China. Among the Fund's individual detractors, American Electric Power Company Inc., a leader in the wholesale energy market, fell on the announcement that the utility was cutting its dividend. Elsewhere, local phone giant SBC Communications Inc. retreated due to an increasingly difficult competitive environment for the once-dominant Baby Bell. Nevertheless, SBC did not meet our sell discipline and we continued to own the stock at period-end. WHAT IS THE INVESTMENT OUTLOOK FOR THE TELECOMMUNICATION & UTILITIES SECTOR? The Telecommunication & Utilities sector remains undervalued, as fear and pessimism have kept prices at depressed levels for an extended period. While we expect the sector to participate in any continued march toward fair value, we still do not foresee it emerging as a market leader in the near future. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 99.4% Top 10 Equity Holdings 47.7% Number of Stocks 35 Cash Equivalents 0.4% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Mobile Telesystems 6.5% America Movil S.A. de C.V. 6.2% AO VimpelCom 6.1% Nextel Communications, Inc. 5.1% Golden Telecom, Inc. 4.5% UTStarcom, Inc. 4.4% Sprint Corporation 4.2% Public Service Enterprise Group Incorporated 3.8% j2 Global Communications, Inc. 3.5% Sempra Energy 3.4% Percentages are based upon net assets. 35 - -------------------------------------------------------------------------------- TOP INDUSTRIES September 30, 2003 - -------------------------------------------------------------------------------- Wireless Telecommunication Services 28.6% Integrated Telecommunication Services 20.9% Electric Utilities 16.8% Communications Equipment 10.4% Gas Utilities 9.9% Internet Software & Services 5.4% Multi-Utilities & Unregulated Power 4.8% Data Processing & Outsourced Services 2.6%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 7/9/97 - -------------------------------------------------------------------------------- ICON Telecommunication & Utilities Fund 20.36% 0.21% 6.01% - -------------------------------------------------------------------------------- S&P 1500 Telecommunications Services Index 30.04% -12.49% -4.01% - -------------------------------------------------------------------------------- S&P 1500 Utilities Index 22.24% -1.45% 3.37% - -------------------------------------------------------------------------------- S&P 1500 Index 24.69% 2.01% 3.57% - --------------------------------------------------------------------------------
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, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON TELECOMMUNICATION & S&P 1500 TELECOMMUNICATION UTILITIES FUND S&P 1500 INDEX SERVICES INDEX ------------------------ -------------- -------------------------- 7/9/97 10000 10000 10000 9/30/97 10630 10597 10622 9/30/98 14232 11262 15105 9/30/99 16402 14339 21048 9/30/00 18860 16548 17603 9/30/01 15327 12290 13802 9/30/02 11948 9976 5960 9/30/03 14380 12439 7750 S&P 1500 UTILITIES INDEX ------------------------ 7/9/97 10000 9/30/97 10417 9/30/98 13226 9/30/99 12967 9/30/00 18732 9/30/01 14540 9/30/02 10056 9/30/03 12292
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. 36 Schedule of Investments ICON TELECOMMUNICATION & UTILITIES FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 99.4% INFORMATION TECHNOLOGY 18.4% COMMUNICATIONS EQUIPMENT 10.4% 76,800 Cable Design Technologies Corporation(a) $ 614,400 25,200 InterDigital Communications Corporation(a) 378,000 15,800 QUALCOMM Inc. 658,544 25,000 SafeNet, Inc.(a) 903,250 58,500 UTStarcom, Inc.(a) 1,860,300 - ----------------------------------------------------- 4,414,494 DATA PROCESSING & OUTSOURCED SERVICES 2.6% 48,200 Intrado Inc.(a) 1,097,996 INTERNET SOFTWARE & SERVICES 5.4% 39,600 j2 Global Communications, Inc.(a) 1,498,068 23,600 United Online, Inc.(a) 821,044 - ----------------------------------------------------- 2,319,112 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 7,831,602 TELECOMMUNICATION & UTILITIES 81.0% ELECTRIC UTILITIES 16.8% 56,500 Alliant Energy Corporation 1,243,000 29,700 Black Hills Corporation 916,542 74,400 Cleco Corporation 1,215,696 21,200 FirstEnergy Corp. 676,280 10,400 FPL Group, Inc. 657,280 23,100 Pinnacle West Capital Corporation 820,050 38,700 Public Service Enterprise Group Incorporated 1,625,400 - ----------------------------------------------------- 7,154,248 GAS UTILITIES 9.9% 25,200 Kinder Morgan, Inc. 1,361,052 39,600 Nicor Inc. 1,391,544 48,800 Sempra Energy 1,432,768 - ----------------------------------------------------- 4,185,364 INTEGRATED TELECOMMUNICATION SERVICES 20.9% 9,100 ALLTEL Corporation 421,694 41,800 BellSouth Corporation 989,824 33,600 CenturyTel, Inc. 1,138,704 70,600 Golden Telecom, Inc.(a) 1,930,204 43,000 Philippine Long Distance Telephone Company(a) -- ADR 507,400 48,000 SBC Communications Inc. 1,068,000 117,200 Sprint Corporation 1,769,720 10,100 Telefonos de Mexico SA de CV -- ADR 308,555 23,400 Verizon Communications Inc. 759,096 - ----------------------------------------------------- 8,893,197
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE MULTI-UTILITIES & UNREGULATED POWER 4.8% 28,000 Constellation Energy Group, Inc. $ 1,001,840 57,600 Duke Energy Corporation 1,025,856 - ----------------------------------------------------- 2,027,696 WIRELESS TELECOMMUNICATION SERVICES 28.6% 113,500 America Movil S.A. de C.V. -- ADR 2,622,985 42,600 AO VimpelCom(a) -- ADR 2,592,636 37,300 Mobile Telesystems -- ADR 2,743,415 110,300 Nextel Communications, Inc.(a) 2,174,013 19,600 NII Holdings Inc.(a) 1,172,080 77,000 STET Hellas Telecommunications S.A. -- ADR 863,940 - ----------------------------------------------------- 12,169,069 - ----------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 34,429,574 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $36,235,177) 42,261,176 SHORT-TERM INVESTMENT 0.4% VARIABLE RATE DEMAND NOTE $167,285 American Family Demand Note, 0.741%(#) 167,285 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $167,285) 167,285 - ----------------------------------------------------- TOTAL INVESTMENTS 99.8% (COST $36,402,462) 42,428,461 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.2% 80,733 - ----------------------------------------------------- NET ASSETS 100.0% $42,509,194 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt 37 Management Overview ICON SHORT-TERM FIXED INCOME FUND A discussion with the Portfolio Management Team HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Short-Term Fixed Income Fund returned -0.02% for the one-year period ended September 30, 2003, underperforming its unmanaged benchmarks, the Merrill Lynch Treasury Bill Indexes. In comparison, the Merrill Lynch 3-Month U.S. Treasury Bill Index returned 1.32%, the Merrill Lynch 6-Month U.S. Treasury Bill Index returned 1.45%, and the Merrill Lynch 1-Year U.S. Treasury Bill Index returned 1.82%. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Economic uncertainty, geopolitical tensions, and lackluster business investment pushed short-term interest rates to historical lows during the period. After keeping rates unchanged for most of 2002, the Federal Reserve Board resumed its accommodative monetary policy amid signs that war posed a threat to the subdued recovery. The overnight lending rate was cut by one-half percent in November 2002, and again by one-quarter percent in June 2003, bringing the target rate to a 45-year nadir of 1.00%. Although no further reductions were expected, it was implied that short-term rates could remain at these levels for the foreseeable future. In light of modest economic expansion, job growth concerns and deflation risks, short rates held steady as the fiscal year came to a close. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? The Fund's negative return for the fiscal year was the result of the ongoing decline in short-term interest rates. Using 6-Month U.S. Treasury Bills as an example, yields slid from just over 1.50% at the beginning of the period to a low of 0.811% in June 2003. While trending slightly higher since then, yields for the 6-Month T-Bill remained just over 1.00% at period-end. In keeping with its primary objective of seeking high current income consistent with preservation of capital, the Fund saw limited activity over the past 12 months. Nevertheless, its relative underperformance, while disappointing, was largely unavoidable. With short-term yields already at near-historical lows, and factoring in additional rate cuts of 75 basis points during the period, the Fund's operating expenses had an increasingly profound effect on overall returns. WHAT IS THE INVESTMENT OUTLOOK FOR THE SHORT-TERM FIXED INCOME MARKET? We would expect short-term rates to rise as the economy ultimately improves and investors continue to seek higher rates of return from the stock market. However, given the current low-inflation environment it is unlikely that any increase would be overly dramatic. In hopes of increasing the Fund's yield, we have extended the time to maturity by increasing the Fund's exposure to higher-yielding 2-Year U.S. Treasury Notes. Although the Fund's duration typically ranges from six months to 18 months, this is consistent with ICON's policy of investing in high-quality, short-term securities that offer a prudent combination of income potential and interest rate sensitivity. 38 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 2/7/97 - -------------------------------------------------------------------------------- ICON Short-Term Fixed Income Fund -0.02% 2.40% 3.25% - -------------------------------------------------------------------------------- Merrill Lynch 3-Month T-Bill Index 1.32% 3.84% 4.21% - -------------------------------------------------------------------------------- Merrill Lynch 6-Month T-Bill Index 1.45% 4.12% 4.51% - -------------------------------------------------------------------------------- Merrill Lynch 1-Year T-Bill Index 1.82% 4.53% 4.95% - --------------------------------------------------------------------------------
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 a portion of its advisory fee on any day that income from the Fund's investments is not adequate to cover daily expenses. The Fund's total return would have been lower if this waiver had not been in place. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON SHORT-TERM FIXED INCOME MERRILL LYNCH 3-MONTH U.S. MERRILL LYNCH 6-MONTH U.S. FUND TREASURY BILL TREASURY BILL ---------------------------- -------------------------- -------------------------- 2/7/97 10000 10000 10000 9/30/97 10307 10345 10364 9/30/98 10984 10899 10960 9/30/99 11372 11414 11463 9/30/00 11878 12075 12138 9/30/01 12253 12732 12896 9/30/02 12370 12986 13216 9/30/03 12368 13157 13409 MERRILL LYNCH 1-YEAR U.S. TREASURY BILL ------------------------- 2/7/97 10000 9/30/97 10386 9/30/98 11046 9/30/99 11516 9/30/00 12130 9/30/01 13050 9/30/02 13540 9/30/03 13786
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 2/7/97 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. 39 Schedule of Investments ICON SHORT-TERM FIXED INCOME FUND SCHEDULE OF INVESTMENTS September 30, 2003
PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- U.S. GOVERNMENT AGENCIES 42.6% $2,625,000 Federal Home Loan Bank Discount Note, 0.811%, 10-01-03 $2,625,000 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 2,625,000 U.S. GOVERNMENT OBLIGATIONS 57.2% 2,499,000 U.S. Treasury Note, 3.000%, 2-29-04 2,519,499 1,000,000 U.S. Treasury Note, 2.000%, 8-31-05 1,010,781 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS 3,530,280 - ----------------------------------------------------- TOTAL INVESTMENTS 99.8% (AMORTIZED COST $6,129,746) 6,155,280 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.2% 10,725 - ----------------------------------------------------- NET ASSETS 100.0% $6,166,005 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. Dates shown on each security are due dates of the obligation. 40 Management Overview ICON ASIA-PACIFIC REGION FUND A discussion with J.C. Waller III, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Asia-Pacific Region Fund gained 34.15% for the one-year period ended September 30, 2003, significantly outperforming its benchmark, the MSCI Pacific Index, which returned 20.26% over the same period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Asian markets encountered stiff headwinds during the first half of the fiscal year as Japanese economic malaise, North Korean military posturing, and the SARS epidemic took their toll. China, Hong Kong, and Singapore bore the brunt of the health crisis, with already troubled industries such as airlines, retailing, and lodging exacerbating their decline. While global weakness proved a drag on cyclical sectors throughout the region, New Zealand escaped much of the damage due to the more defensive nature of its economy. The mid-March 2003 resurgence in U.S. and European markets had little impact on the Asia-Pacific region, which continued to struggle before hitting a SARS-related bottom in April. With the subsequent containment of SARS, investors bid shares higher on recognition of improving economic conditions. Japanese technology stocks, in particular, led the advance as encouraging economic reports and long-awaited banking reforms provided a much-needed boost. Also participating were consumer and industrial issues, whose value remained widespread despite the broad-based rally. With stock prices still trading below our estimates of intrinsic value, companies remained committed to enhancing capital flows into the region. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Changing market conditions prompted several noteworthy country rotations during the period. Based on our value-to-price and relative strength measures, weightings in Australia and Hong Kong were bolstered earlier in the period, while positions in Japan, New Zealand and Singapore were trimmed. Once the market rally ensued and leadership shifted to Japan, Hong Kong, and Singapore, the Fund's New Zealand weighting was further reduced. Proceeds were reallocated to Japan and Hong Kong, which stood to benefit from emerging strength in cyclical sectors such as Information Technology, Consumer Discretionary and Industrials. Japanese technology stocks were the clear leader, and the Fund benefited from increased exposure in the sector. In an effort to capture industry leadership, the Fund also invested in American Depository Receipts (ADRs) of some companies operating in the Chinese Internet segment. As the Internet software & services industry demonstrated considerable strength during the second half, these dollar-denominated foreign securities were among the Fund's top performers. Other measurable contributors to performance included Japanese manufacturer NIDEC Corp., which benefited from upbeat sales of precision hard disk drive motors. Meanwhile, Hong Kong-based drugmaker China Pharmaceutical Enterprise & Investment Corp. Ltd. rose on the strength of its substantial operations in Mainland China. Among the Fund's principal detractors, Japanese furniture and household product retailer Shimachu Co. Ltd. retreated amid SARS-related weakness in its chain store operations and when it reached our sell criteria, we sold it from the Fund. Elsewhere, consumer electronics giant Sony Corp. slid as currency rate fluctuations pressured Japanese exporters. The Fund did not own this stock at the end of the reporting period. WHAT IS THE INVESTMENT OUTLOOK FOR THE ASIA-PACIFIC REGION? For investors looking to diversify, the Asia-Pacific Region presents a source of value and leadership. Our quantitative system indicates attractive values across Hong Kong, Japan, and Singapore, with ongoing leadership coming from the economically sensitive Information Technology, Consumer Discretionary, and Industrials sectors. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 100.1% Top 10 Equity Holdings 32.6% Number of Stocks 49 Cash Equivalents 0.2% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Denway Motors Limited 4.4% NIDEC CORPORATION 3.5% OLYMPUS OPTICAL CO., LTD. 3.5% NISSAN MOTOR CO., LTD. 3.4% Sharp Corporation 3.3% CANON INC. 3.1% SHIMANO INC. 2.9% ROHM COMPANY LIMITED 2.9% China Merchants Holdings International Company Limited 2.8% China Pharmaceutical Group Limited 2.8% Percentages are based upon net assets. 41 - -------------------------------------------------------------------------------- TOP COUNTRIES September 30, 2003 - -------------------------------------------------------------------------------- Japan 55.2% Hong Kong 23.8% Singapore 7.0% China 6.4% Australia 6.0% New Zealand 1.7%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 2/25/97 - -------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund 34.15% 4.66% -3.99% - -------------------------------------------------------------------------------- MSCI Pacific Index 20.26% 3.17% -4.61% - --------------------------------------------------------------------------------
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. Total returns for the index for the periods through July 31, 2002 do not include the reinvestment of any dividends or distributions. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON ASIA-PACIFIC REGION FUND MSCI PACIFIC INDEX ----------------------------- ------------------ 2/25/97 10000 10000 9/30/97 9940 9840 9/30/98 6090 6264 9/30/99 10870 10610 9/30/00 10250 10380 9/30/01 6810 6730 9/30/02 5700 6089 9/30/03 7647 7322
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 2/25/97 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. 42 Schedule of Investments ICON ASIA-PACIFIC REGION FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ---------------------------------------------------- COMMON STOCKS (FOREIGN) 100.1% CONSUMER DISCRETIONARY 21.9% APPAREL RETAIL 2.3% 2,000 SHIMAMURA CO., LTD. (JP) $ 140,536 AUTOMOBILE MANUFACTURERS 12.9% 446,000 Denway Motors Limited (HK) 270,694 3,700 HONDA MOTOR CO., LTD. (JP) 148,046 19,200 NISSAN MOTOR CO., LTD. (JP) 207,099 5,400 Toyota Motor Corporation (JP) 158,546 - ---------------------------------------------------- 784,385 CONSUMER ELECTRONICS 3.3% 13,700 Sharp Corporation (JP) 200,506 FOOTWEAR 1.0% 20,000 Yue Yuen Industrial (Holdings) Limited (HK) 59,661 HOUSEHOLD APPLIANCES 1.2% 30,000 Techtronic Industries Company Limited (HK) 73,414 TEXTILES 1.2% 94,000 Fountain Set (Holdings) Limited (HK) 74,046 - ---------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 1,332,548 ENERGY 1.5% INTEGRATED OIL & GAS 1.5% 2,700 PetroChina Company Limited -- ADR 90,585 - ---------------------------------------------------- TOTAL ENERGY 90,585 FINANCIAL 4.9% DIVERSIFIED BANKS 1.6% 12,679 United Overseas Bank Limited (SG) 98,289 MULTI-SECTOR HOLDINGS 1.7% 113,700 Swire Pacific Limited (HK) 102,779 PROPERTY & CASUALTY INSURANCE 1.6% 14,000 QBE Insurance Group Limited (AU) 94,380 - ---------------------------------------------------- TOTAL FINANCIAL 295,448 HEALTH CARE 8.0% HEALTH CARE EQUIPMENT 5.2% 12,157 Fisher & Paykel Appliances Holdings Limited (NZ) 104,338 9,000 OLYMPUS OPTICAL CO., LTD. (JP) 214,295 - ---------------------------------------------------- 318,633 PHARMACEUTICALS 2.8% 523,000 China Pharmaceutical Group Limited (HK) 168,845 - ---------------------------------------------------- TOTAL HEALTH CARE 487,478 INDUSTRIALS 16.2% AIRLINES 1.7% 59,800 Cathay Pacific Airways Limited (HK) 101,162 CONSTRUCTION & FARM MACHINERY 1.4% 16,000 KOMATSU LTD. (JP) 83,355
- ----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE INDUSTRIAL CONGLOMERATES 4.6% 150,000 China Merchants Holdings International Company Limited (HK) $ 172,396 59,000 Shanghai Industrial Holdings Limited (HK) 106,285 - ---------------------------------------------------- 278,681 INDUSTRIAL MACHINERY 3.0% 10,000 KOYO SEIKO CO., LTD. (JP) 93,273 43,000 SUMITOMO HEAVY INDUSTRIES, LTD. (JP)(a) 90,454 - ---------------------------------------------------- 183,727 MARINE 3.9% 190,000 China Shipping Development Company Limited (HK) 93,236 42,000 Kawasaki Kisen Kaisha, Ltd. (JP) 143,239 - ---------------------------------------------------- 236,475 MARINE PORTS & SERVICES 1.6% 16,000 Kamigumi Co., Ltd. (JP) 100,828 - ---------------------------------------------------- TOTAL INDUSTRIALS 984,228 INFORMATION TECHNOLOGY 34.9% COMPUTER HARDWARE 3.9% 350,000 Legend Group Limited (HK) 140,112 13,000 NEC Corporation (JP)(a) 97,749 - ---------------------------------------------------- 237,861 COMPUTER STORAGE & PERIPHERALS 1.6% 9,000 Creative Technology Limited (SG) 98,406 ELECTRONIC EQUIPMENT MANUFACTURERS 8.5% 6,600 ALPS ELECTRIC CO., LTD. (JP) 107,051 900 HIROSE ELECTRIC CO., LTD. (JP) 92,244 1,300 HOYA CORPORATION (JP) 100,658 2,600 NIDEC CORPORATION (JP) 215,745 - ---------------------------------------------------- 515,698 ELECTRONIC MANUFACTURING SERVICES 2.5% 13,200 Venture Corporation Limited (SG) 152,729 INTERNET SOFTWARE & SERVICES 6.8% 3,000 Netease.com Inc. -- ADR(a) 167,460 2,000 SINA CORP(a) (CH) 71,440 2,600 SOFTBANK CORP. (JP) 109,851 2,000 Sohu.com Inc.(a) (CH) 62,300 - ---------------------------------------------------- 411,051 IT CONSULTING & OTHER SERVICES 1.5% 3,200 TIS Inc. (JP) 93,094 OFFICE ELECTRONICS 3.0% 3,800 CANON INC. (JP) 185,723 SEMICONDUCTOR EQUIPMENT 2.4% 2,200 ADVANTEST CORPORATION (JP) 145,925 SEMICONDUCTORS 2.9% 1,350 ROHM COMPANY LIMITED (JP) 175,223
43 Schedule of Investments (continued) ICON ASIA-PACIFIC REGION FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ---------------------------------------------------- SYSTEMS SOFTWARE 1.8% 4,500 FUJI SOFT ABC INCORPORATED (JP) $ 111,579 - ---------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 2,127,289 LEISURE AND CONSUMER STAPLES 5.6% BREWERS 1.3% 13,335 Fraser & Neave Limited (SG) 79,460 HOTELS RESORTS & CRUISE LINES 1.4% 140,000 The Hongkong and Shanghai Hotels, Limited (HK) 84,519 LEISURE PRODUCTS 2.9% 9,300 SHIMANO INC. (JP) 175,652 - ---------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 339,631 MATERIALS 7.1% ALUMINUM 2.3% 41,000 Alumina Limited (AU) 141,529 DIVERSIFIED CHEMICALS 2.1% 15,600 Orica Limited (AU) 126,706 STEEL 2.7% 45,000 NIPPON STEEL CORPORATION (JP) 80,159 97,000 Sumitomo Metal Industries, Ltd. (JP) 85,092 - ---------------------------------------------------- 165,251 - ---------------------------------------------------- TOTAL MATERIALS 433,486 - ---------------------------------------------------- TOTAL COMMON STOCKS (FOREIGN) (COST $4,517,379) 6,090,693
- ----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENT 0.2% $11,427 J.P. Morgan Chase Interest Bearing Demand Deposit Account $ 11,427 - ---------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $11,427) 11,427 - ---------------------------------------------------- TOTAL INVESTMENTS 100.3% (COST $4,528,806) 6,102,120 - ---------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.3%) (17,910) - ---------------------------------------------------- NET ASSETS 100.0% $6,084,210 - ----------------------------------------------------
GUIDE TO UNDERSTANDING FOREIGN HOLDINGS The following abbreviations are used throughout the Schedule of Investments to indicate the country of origin of non-U.S. holdings: AU Australia JP Japan CH China NZ New Zealand HK Hong Kong SG Singapore
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ADR -- American Depositary Receipt 44 Management Overview ICON NORTH EUROPE REGION FUND A discussion with Robert Straus, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON North Europe Region Fund appreciated 42.60% for the one-year period ended September 30, 2003, significantly outpacing its benchmarks, the MSCI Europe 15 Index, which returned 24.16% and the Bloomberg European 500 Index, which gained 11.44% over the same period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? European stocks followed their U.S. counterparts out of the depths of despair last fall, overcoming weakening economic fundamentals, rising unemployment, and waning consumer confidence. The advance was short-lived, however, as markets again retreated amid escalating war concerns. In mid-March 2003, just one day after the U.S. market reached a climactic low, European bourses followed suit. Global markets then rocketed higher on raised hopes that the worst of the three-year downturn was finally behind us -- a sentiment bolstered by a swift victory in Iraq. By the end of the fiscal year, signs of improving economic conditions were beginning to surface throughout the North Europe Region. The major gauge of consumer confidence in Germany, Europe's largest economy, showed steady gains during the second half of the fiscal year. The IFO Business Confidence Index rose for each of the five final months in the reporting period. During the third calendar quarter of 2003, the pace of earnings-per-share upgrades accelerated. While growth in EuroZone gross domestic product remains uninspiring -- it is expected to come in at 0.5% this year -- expectations for next year are encouraging. At the same time, a weaker U.S. dollar could continue to dampen exports as well as corporate profits. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Sector and industry allocation were primary factors in the Fund's outperformance during the period. In the past, country fundamentals played the most critical role in determining where to allocate investment capital. Since the introduction of the Euro currency and in conjunction with an increasingly correlated world economy, we are more cognizant of industry and sector themes that cut across worldwide borders. We have therefore been paying close attention to leading European sectors and industries just as we do in our U.S. investment model. Based on our valuation and relative strength measures, the Information Technology and Consumer Discretionary sectors were the most heavily weighted sectors in our core domestic model during the fiscal year. As such, we saw a similar theme taking hold in European markets coming off the lows last fall and again in the spring. In tilting the Fund toward these sectors throughout the reporting period, we built a position of nearly 53% in these sectors at year-end. Consequently, these sector weights were key drivers in the Fund's strong performance, as was the Fund's significant weighting in the Financials sector. Individual holdings that contributed to positive performance included ASML Holding N.V., the Netherlands-based semiconductor equipment manufacturer, which gained 113.6% for the period on a cyclical rebound in ordering trends. Meanwhile, OM Hex AB, a Swedish company offering technology-based solutions primarily to securities exchanges, rose 193.9% as financial markets experienced higher trading volume during the period. In contrast, Danish brewer Carlsberg A/S encountered unfavorable market conditions, as consumer spending fell in the wake of economic uncertainty. Elsewhere, Finnish pharmaceutical firm Orion Yhtyma Oyj shed more than 20% after the firm halted development of a key drug, which proved ineffective in clinical tests. As of the end of the fiscal year, the Fund did not own either of these lagging stocks. WHAT IS THE INVESTMENT OUTLOOK FOR THE NORTH EUROPE REGION? Not unlike the U.S. market, we believe the North Europe Region remains undervalued as we head into the new fiscal year. Economic conditions continue to show signs of improvement, which should gradually draw pessimistic and fearful investors off the sidelines. In turn, we would expect ongoing strength in economically sensitive sectors, namely Information Technology and Consumer Discretionary. As the global economy strengthens, we would also expect the Industrials sector to exhibit leadership. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 99.3% Top 10 Equity Holdings 39.1% Number of Stocks 51 Cash Equivalents 0.9% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 ASML Holding N.V. 6.0% Amvescap Plc 4.3% ARM Holdings plc 4.3% LogicaCMG plc 4.0% Epcos AG 3.9% Schroders PLC 3.9% OM HEX AB 3.8% Metro AG 3.3% Nokia Oyj 2.9% SAP AG 2.7% Percentages are based upon net assets. The IFO Business Confidence Index is a monthly survey of 7,000 German companies that measures executives' expectations about the economic climate. 45 - -------------------------------------------------------------------------------- TOP COUNTRIES September 30, 2003 - -------------------------------------------------------------------------------- Germany 32.6% United Kingdom 30.6% Netherlands 12.6% Sweden 10.3% Finland 4.3% Belgium 3.2% Norway 2.9% Denmark 2.8%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 2/18/97 - -------------------------------------------------------------------------------- ICON North Europe Region Fund 42.60% 0.56% 3.02% - -------------------------------------------------------------------------------- MSCI Europe 15 Index 24.16% -2.94% 1.55% - -------------------------------------------------------------------------------- Bloomberg European 500 Index 11.44% -0.08% 3.80% - --------------------------------------------------------------------------------
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. Total returns for the MSCI index for the periods through July 31, 2002 do not include the reinvestment of any dividends or distributions. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON NORTH EUROPE REGION FUND BLOOMBERG EUROPEAN 500 INDEX MSCI EUROPE 15 INDEX ----------------------------- ---------------------------- -------------------- 2/18/97 10000.00 10126.00 10000.00 9/30/97 11060.00 12561.40 12053.00 9/30/98 11834.00 15170.00 12850.00 9/30/99 13346.00 20708.50 14826.00 9/30/00 14739.00 19720.30 15418.00 9/30/01 10274.00 17150.20 11224.00 9/30/02 8533.00 12028.50 8915.00 9/30/03 12168.00 12799.70 11069.00
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 2/18/97 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. 46 Schedule of Investments ICON NORTH EUROPE REGION FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS (FOREIGN) 99.3% CONSUMER DISCRETIONARY 14.6% ADVERTISING 1.9% 23,679 WPP Group plc (UK) $ 199,652 APPAREL & ACCESSORIES 1.4% 7,596 Hugo Boss AG (GR) 144,188 AUTOMOBILE MANUFACTURERS 1.1% 3,358 DaimlerChrysler AG (GR) 117,317 CATALOG RETAIL 2.1% 20,782 GU.S. plc (UK) 226,498 CONSUMER ELECTRONICS 2.1% 9,764 Koninklijke (Royal) Philips Electronics N.V. (NE) 221,273 DEPARTMENT STORES 1.3% 5,442 KarstadtQuelle AG (GR) 137,840 HOUSEHOLD APPLIANCES 0.8% 4,032 Electrolux AB (SW) 87,829 SPECIALTY STORES 2.3% 8,509 Douglas Holding AG (GR) 241,684 TIRES & RUBBER 1.6% 5,865 Continental AG (GR) 169,249 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 1,545,530 FINANCIAL 21.5% ASSET MANAGEMENT & CUSTODY BANKS 8.2% 60,539 Amvescap Plc (UK) 458,140 37,022 Schroders PLC (UK) 412,721 - ----------------------------------------------------- 870,861 DIVERSIFIED BANKS 3.5% 16,745 Barclays PLC (UK) 128,459 6,245 Danske Bank A/S (DE) 119,000 3,358 KBC Bankverzekeringsholding (BE) 127,875 - ----------------------------------------------------- 375,334 DIVERSIFIED CAPITAL MARKETS 2.3% 4,043 Deutsche Bank AG (GR) 245,301 LIFE & HEALTH INSURANCE 3.7% 8,349 Aegon N.V. (NE) 97,131 55,813 Legal & General Group plc (UK) 85,541 65,066 Skandia Forsakrings AB (SW) 205,240 - ----------------------------------------------------- 387,912 SPECIALIZED FINANCE 3.8% 40,166 OM HEX AB (SW) 399,822 - ----------------------------------------------------- TOTAL FINANCIAL 2,279,230 HEALTH CARE 3.6% BIOTECHNOLOGY 2.2% 21,000 QIAGEN N.V. (GR)(a) 229,638
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE PHARMACEUTICALS 1.4% 1,895 AstraZeneca PLC (UK) $ 80,031 1,611 Schering AG (GR) 69,791 - ----------------------------------------------------- 149,822 - ----------------------------------------------------- TOTAL HEALTH CARE 379,460 INDUSTRIALS 5.6% AIR FREIGHT & COURIERS 1.2% 6,607 TPG NV (NE) 124,877 AIRLINES 1.8% 14,904 Deutsche Lufthansa AG (GR) 195,260 CONSTRUCTION & FARM MACHINERY 0.8% 3,688 Volvo AB (SW) 85,342 INDUSTRIAL CONGLOMERATES 1.8% 3,093 Siemens AG (GR) 183,700 - ----------------------------------------------------- TOTAL INDUSTRIALS 589,179 INFORMATION TECHNOLOGY 34.3% APPLICATION SOFTWARE 2.7% 2,364 SAP AG (GR) 289,065 COMMUNICATIONS EQUIPMENT 4.8% 100,000 Nera ASA (NW)(a) 192,746 20,255 Nokia Oyj (FI) 311,833 - ----------------------------------------------------- 504,579 ELECTRONIC EQUIPMENT MANUFACTURERS 5.9% 3,087 Barco NV (BE) 207,070 25,009 Epcos AG (GR)(a) 415,020 - ----------------------------------------------------- 622,090 HOME ENTERTAINMENT SOFTWARE 0.9% 42,588 Eidos plc (UK)(a) 94,636 IT CONSULTING & OTHER SERVICES 7.4% 106,619 LogicaCMG plc (UK) 423,357 7,163 TietoEnator Oyj (FI) 144,728 131,636 WM-data AB (SW)(a) 219,524 - ----------------------------------------------------- 787,609 OFFICE ELECTRONICS 1.5% 11,534 Oce N.V. (NE) 159,034 SEMICONDUCTOR EQUIPMENT 6.0% 48,171 ASML Holding N.V. (NE)(a) 631,097 SEMICONDUCTORS 4.3% 281,172 ARM Holdings plc (UK)(a) 457,796 TECHNOLOGY DISTRIBUTORS 0.8% 16,341 Electrocomponents plc (UK) 87,284 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 3,633,190 LEISURE AND CONSUMER STAPLES 11.2% BROADCASTING & CABLE TV 2.6% 103,232 Carlton Communications plc (UK) 276,988 CASINOS & GAMING 1.8% 65,448 Hilton Group plc (UK) 195,452
47 Schedule of Investments ICON NORTH EUROPE REGION FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- HOTELS, RESORTS & CRUISE LINES 2.4% 15,153 TUI AG (GR) $ 251,638 HYPERMARKETS & SUPER CENTERS 3.3% 9,573 Metro AG (GR) 345,595 PUBLISHING 1.1% 7,001 Schibsted ASA (NW) 113,113 - ----------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 1,182,786 MATERIALS 4.1% DIVERSIFIED CHEMICALS 3.1% 3,366 Akzo Nobel N.V. (NE) 104,935 5,247 BASF AG (GR) 228,284 - ----------------------------------------------------- 333,219 INDUSTRIAL GASES 1.0% 2,351 Linde AG (GR) 96,373 - ----------------------------------------------------- TOTAL MATERIALS 429,592 TELECOMMUNICATION & UTILITIES 4.4% INTEGRATED TELECOMMUNICATION 3.4% 6,108 Deutsche Telekom AG (GR)(a) 87,846 5,720 TDC A/S (DE) 175,829 2,149 Tele2 AB (SW)(a) 93,901 - ----------------------------------------------------- 357,576 WATER UTILITIES 1.0% 14,061 AWG plc (UK) 112,716 - ----------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 470,292 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $7,758,166) 10,509,259
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENT 0.9% $93,838 J.P. Morgan Chase Interest Bearing Demand Deposit Account $ 93,838 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $93,838) 93,838 - ----------------------------------------------------- TOTAL INVESTMENTS 100.2% (COST $7,852,004) 10,603,097 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.2%) (15,598) - ----------------------------------------------------- NET ASSETS 100.0% $10,587,499 - -----------------------------------------------------
GUIDE TO UNDERSTANDING FOREIGN HOLDINGS The following abbreviations are used throughout the Schedule of Investments to indicate the country of origin of non-U.S. holdings: BE Belgium NE Netherlands DE Denmark NW Norway FI Finland SW Sweden GR Germany UK United Kingdom
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security 48 Management Overview ICON SOUTH EUROPE REGION FUND A discussion with Derek Rollingson, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON South Europe Region Fund gained 32.97% for the fiscal year ended September 30, 2003, outpacing its benchmark, the MSCI Europe 15 Index, which returned 24.16% and the Bloomberg European 500 Index, which gained 11.44% over the same period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE OVER THE PAST YEAR? Global markets were highly correlated throughout the fiscal year as conditions in the South Europe Region mirrored those of the United States. For much of the period, Eurostat gross domestic product continued to grow at a meager rate, while leading regional markets France and Switzerland struggled with economic contraction. As concerns mounted over rising joblessness, the European Central Bank slashed interest rates to historic lows. At the same time, European currencies surged higher amid widening U.S. budget deficits. Against this difficult backdrop, a swift victory in Iraq raised hopes for a cyclical rebound, offsetting the excessive gloom that had permeated the region. Bolstered by low interest rates, proposed tax cuts, pension overhaul, and structural reforms, signs of economic stabilization began to emerge. However, even as stocks advanced, currency gains threatened to dampen exports as well as dollar-denominated earnings. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Sector and industry allocation were primary factors in the Fund's benchmark-topping performance during the period. In the past, country fundamentals played the most critical role in determining where to allocate investment capital. Since the introduction of the euro currency and in conjunction with an increasingly correlated world economy, we are more cognizant of industry and sector themes cutting across worldwide borders. We have therefore begun to pay careful attention to leading sectors and industries just as we do in our U.S. investment model. Another contributing factor was the impact of currency rate fluctuations. Although currency gains may detract from reported financial results, they can also help boost returns in the underlying equities. The most notable of these fiscal-year gains was realized by the euro, the common currency of the European Monetary Union (EMU), which appreciated 18.14% against the U.S. dollar during the 12 months. Likewise, the Swiss franc also strengthened, registering a 10.57% advance in its exchange rate. Since the Fund does not hedge currency risk, it benefited from direct exposure to these gains. Country performance also benefited, with EMU member France's CAC 40 Index appreciating 36.54% while Switzerland's Swiss Market Index rose 20.30%. On an individual level, measurable contributors to Fund performance included Austrian brewer BBAG Oesterreichische Brau-Beteiligungs AG, which doubled during the period and was sold when the company agreed to be acquired. Meanwhile, Banca Intesa SpA, Italy's largest banking company, reported robust profitability despite an unfavorable economic environment. Financial services provider FinecoGroup SpA also advanced, having benefited from consolidation and deregulation in Italy's banking system. In contrast, economic uncertainty pressured several of the Fund's Swiss holdings, including hotel operator Kuoni Reisen Holding AG and media giant PubliGroupe AG. Losing 35.39% and 31.58%, respectively, these stocks fell victim to slowdowns in travel and advertising spending. Nevertheless, at the end of the period, neither stock had reached our sell discipline and we continued to hold them. WHAT IS THE INVESTMENT OUTLOOK FOR THE SOUTH EUROPE REGION? Signs of economic stabilization have raised our expectations that European markets can participate in a global recovery. Despite the robust gains of the past year, our valuation models continue to detect widespread upside potential, and the markets of South Europe are no exception. Given this more upbeat outlook, and the emergence of relative strength on both a country and industry level, we believe the setting appears poised for a rebound in the South Europe Region. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 91.0% Top 10 Equity Holdings 30.1% Number of Stocks 38 Exchange Traded Funds 3.4% Cash Equivalents 5.4% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Ascom Holding AG 4.0% Charles Voegele Holding AG 3.4% Cap Gemini SA 3.0% Trigano 3.0% Banca Intesa S.p.A 2.9% Sol Melia, S.A. 2.8% Credit Suisse Group 2.8% Marionnaud Parfumeries 2.8% PubliGroupe S.A. 2.7% Unaxis Holding AG 2.7% Percentages are based upon net assets. The CAC 40 Index in France is a narrow-based, modified capitalization-weighted index of 40 companies listed on the Paris Bourse. The Swiss Market Index is a capitalization-weighted index of the largest and most liquid stocks traded on the Electronic Bourse System. 49 - -------------------------------------------------------------------------------- TOP COUNTRIES September 30, 2003 - -------------------------------------------------------------------------------- France 36.9% Switzerland 22.6% Italy 15.9% Spain 11.1% Austria 4.5%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
SINCE ONE FIVE INCEPTION YEAR YEARS 2/20/97 - -------------------------------------------------------------------------------- ICON South Europe Region Fund 32.97% 0.73% 4.17% - -------------------------------------------------------------------------------- MSCI Europe 15 Index 24.16% -2.94% 1.55% - -------------------------------------------------------------------------------- Bloomberg European 500 Index 11.44% -0.08% 3.85% - --------------------------------------------------------------------------------
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. Total returns for the MSCI index for the periods through July 31, 2002 do not include the reinvestment of any dividends or distributions. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON SOUTH EUROPE REGION FUND BLOOMBERG EUROPEAN 500 INDEX MSCI EUROPE 15 INDEX ----------------------------- ---------------------------- -------------------- 2/20/97 10000.00 10154.00 10000.00 9/30/97 11900.00 12596.10 12051.00 9/30/98 12627.00 15212.00 12847.00 9/30/99 13437.00 20765.80 14823.00 9/29/00 13464.00 19774.80 15415.00 9/30/01 10795.00 17197.60 11222.00 9/30/02 9850.00 12061.80 8913.00 9/30/03 13098.00 12835.10 11067.00
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 2/20/97 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. 50 Schedule of Investments ICON SOUTH EUROPE REGION FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS (FOREIGN) 91.0% CONSUMER DISCRETIONARY 15.9% ADVERTISING 2.8% 1,026 PubliGroupe S.A. (SZ)(a) $ 252,499 APPAREL RETAIL 5.4% 2,570 Camaieu (FR) 184,961 7,600 Charles Voegele Holding AG (SZ)(a) 316,811 - ----------------------------------------------------- 501,772 AUTO PARTS & EQUIPMENT 2.4% 6,100 Valeo SA (FR) 222,703 DEPARTMENT STORES 2.5% 2,850 Pinault-Printemps-Redoute SA (FR) 233,987 SPECIALTY STORES 2.8% 6,279 Marionnaud Parfumeries (FR) 257,536 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 1,468,497 FINANCIAL 18.8% DIVERSIFIED BANKS 11.4% 87,945 Banca Intesa S.p.A (IT) 266,283 24,500 Banco Santander Central Hispano SA (SP) 207,709 4,000 BNP Paribas SA (FR) 196,110 18,674 Sanpaolo IMI S.p.A (IT) 186,153 3,000 Societe Generale (FR) 199,837 - ----------------------------------------------------- 1,056,092 DIVERSIFIED CAPITAL MARKETS 4.9% 8,160 Credit Suisse Group (SZ) 261,063 3,444 UBS AG (SZ) 193,246 - ----------------------------------------------------- 454,309 OTHER DIVERSIFIED FINANCIAL SERVICES 2.5% 358,024 FinecoGroup S.p.A (IT)(a) 231,400 - ----------------------------------------------------- TOTAL FINANCIAL 1,741,801 HEALTHCARE 2.4% PHARMACEUTICALS 2.4% 2,667 Roche Holding AG (SZ) 221,139 - ----------------------------------------------------- TOTAL HEALTHCARE 221,139 INDUSTRIALS 17.2% AEROSPACE & DEFENSE 2.4% 8,452 Zodiac SA (FR) 223,333 BUILDING PRODUCTS 1.9% 4,800 Compagnie de Saint-Gobain (FR) 176,471 CONSTRUCTION & ENGINEERING 6.1% 4,250 ACS, Actividades de Construccion y Servicios, S.A. (SP) 180,007 6,400 Fomento de Contrucciones y Contratas S.A. (SP) 197,582 308,147 Impregilo S.p.A (IT) 187,680 - ----------------------------------------------------- 565,269 DIVERSIFIED COMMERCIAL SERVICES 2.0% 11,400 Prosegur, Compania de Seguridad SA (SP)(r) 181,879
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE HIGHWAYS & RAILTRACKS 2.3% 15,318 Autostrade - Concessioni e Construzioni Autostrade S.p.A (IT)(a) $ 215,312 INDUSTRIAL MACHINERY 2.5% 8,100 VA Technologie AG (AT)(a) 233,935 - ----------------------------------------------------- TOTAL INDUSTRIALS 1,596,199 INFORMATION TECHNOLOGY 12.1% COMMUNICATIONS EQUIPMENT 4.0% 55,819 Ascom Holding AG (SZ)(a) 368,999 IT CONSULTING & OTHER SERVICES 3.0% 6,700 Cap Gemini SA (FR)(a) 277,769 SEMICONDUCTOR EQUIPMENT 2.7% 2,100 Unaxis Holding AG (SZ) 248,864 SEMICONDUCTORS 2.4% 9,200 STMicroelectronics N.V. (FR) 222,313 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 1,117,945 LEISURE AND CONSUMER STAPLES 14.7% BROADCASTING & CABLE TV 2.2% 21,884 Mediaset S.p.A (IT) 200,312 FOOD RETAIL 2.0% 2,150 Casino Guichard-Perrachon SA (FR) 190,663 HOTELS, RESORTS & CRUISE LINES 5.3% 810 Kuoni Reisen Holding AG (SZ) 229,396 36,600 Sol Melia, S.A. (SP) 261,702 - ----------------------------------------------------- 491,098 LEISURE PRODUCTS 3.0% 6,950 Trigano (FR) 275,911 MOVIES & ENTERTAINMENT 2.2% 11,687 Vivendi Universal SA (FR)(a) 206,873 - ----------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 1,364,857 MATERIALS 8.0% CONSTRUCTION MATERIALS 5.4% 18,220 Buzzi Unicem S.p.A (IT) 184,597 2,000 Lafarge SA (FR) 129,614 13,000 RHI AG (AT)(a) 183,032 - ----------------------------------------------------- 497,243 STEEL 2.6% 19,600 Arcelor (FR) 238,295 - ----------------------------------------------------- TOTAL MATERIALS 735,538 TELECOMMUNICATION & UTILITIES 1.9% WIRELESS TELECOMMUNICATION SERVICES 1.9% 6,755 Bouygues SA (FR) 177,862 - ----------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 177,862 - ----------------------------------------------------- TOTAL COMMON STOCKS (FOREIGN) (COST $7,374,701) 8,423,838
51 Schedule of Investments (continued) ICON SOUTH EUROPE REGION FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- EXCHANGE-TRADED FUNDS 3.4% 9,100 iShares MSCI France Index Fund $ 155,155 12,800 iShares MSCI Switzerland Index Fund 163,584 - ----------------------------------------------------- TOTAL EXCHANGE-TRADED FUNDS (COST $311,247) 318,739 SHORT-TERM INVESTMENT 5.4% $499,252 J.P. Morgan Chase Interest Bearing Demand Deposit Account, 0.025% 499,252 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $499,252) 499,252 - ----------------------------------------------------- TOTAL INVESTMENTS 99.8% (COST $8,185,200) 9,241,829 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.2% 20,620 - ----------------------------------------------------- NET ASSETS 100.0% $9,262,449 - -----------------------------------------------------
GUIDE TO UNDERSTANDING FOREIGN HOLDINGS The following abbreviations are used throughout the Schedule of Investments to indicate the country of origin of non-U.S. holdings: AT Austria FR France IT Italy SP Spain SZ Switzerland The accompanying notes are an integral part of the financial statements. (a) Non-income producing security (r) Restricted security Date acquired 9-11-03 Cost $175,265 52 THIS PAGE INTENTIONALLY LEFT BLANK 53 Statements of Assets and Liabilities
------------------ -------------- -------------- -------------- -------------- SEPTEMBER 30, 2003 ICON ICON ICON ICON ICON CONSUMER ENERGY FINANCIAL HEALTHCARE INDUSTRIALS DISCRETIONARY FUND FUND FUND FUND FUND ------------------ -------------- -------------- -------------- -------------- ASSETS Investments, at cost $122,014,948 $47,052,557 $124,755,710 $114,969,201 $115,950,040 ------------------ -------------- -------------- -------------- -------------- Investments, at value 150,217,450 55,434,050 139,126,424 141,202,388 131,398,895 Cash - 954 - - 1,458 Receivables: Fund shares sold 480,368 286,098 318,079 357,188 331,467 Investments sold - - - - 1,003,389 Interest 260 1,357 481 1,431 1,645 Dividends 63,398 69,999 117,630 30,387 63,042 Other assets 11,167 5,215 12,632 10,130 6,650 ------------------ -------------- -------------- -------------- -------------- Total Assets 150,772,643 55,797,673 139,575,246 141,601,524 132,806,546 ------------------ -------------- -------------- -------------- -------------- LIABILITIES Payables: Due to custodian bank - - - - - Fund shares redeemed 478,292 67,431 100,779 127,030 48,686 Advisory fees 129,082 45,934 116,471 115,990 111,453 Fund accounting, custodial and transfer agent fees 44,426 16,183 40,865 40,024 36,906 Administration fees 6,443 2,295 5,821 5,806 5,577 Distributions due to shareholders - - - - - Accrued expenses 49,677 36,799 50,186 53,783 49,611 ------------------ -------------- -------------- -------------- -------------- Total Liabilities 707,920 168,642 314,122 342,633 252,233 ------------------ -------------- -------------- -------------- -------------- NET ASSETS $150,064,723 $55,629,031 $139,261,124 $141,258,891 $132,554,313 ================== ============== ============== ============== ============== Shares outstanding (unlimited shares authorized, no par value) 12,728,806 4,060,830 12,920,873 11,504,849 15,066,823 Net asset value (offering price and redemption price per share) $ 11.79 $ 13.70 $ 10.78 $ 12.28 $ 8.80
The accompanying notes are an integral part of the financial statements. 54
--------------- -------------- -------------- ----------------- ---------------- -------------- -------------- ICON ICON LEISURE ICON ICON ICON ICON ICON INFORMATION AND CONSUMER MATERIALS TELECOMMUNICATION SHORT-TERM FIXED ASIA-PACIFIC NORTH EUROPE TECHNOLOGY FUND STAPLES FUND FUND & UTILITIES FUND INCOME FUND REGION FUND REGION FUND --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- $247,182,985 $70,998,867 $28,275,354 $36,402,462 $6,129,746 $4,528,806 $ 7,852,004 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 308,483,471 82,455,753 30,310,229 42,428,461 6,155,280 6,102,120 10,603,097 - - - - 81 - - 1,341,413 227,636 125,898 126,453 34,175 538 7,909 1,263,580 - - - - - - 351 237 129 81 8,088 60 42 22,680 26,076 12,962 66,091 - 15,965 28,098 19,097 7,261 4,430 3,354 825 707 669 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 311,130,592 82,716,963 30,453,648 42,624,440 6,198,449 6,119,390 10,639,815 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 1,278,378 82,132 - - - - - 1,395,938 151,502 15,288 35,129 6,041 7,325 12,163 273,299 70,701 25,708 35,746 3,302 5,714 9,570 90,077 24,290 8,852 12,257 1,776 3,576 6,419 13,654 3,531 1,284 1,787 254 285 478 - - - - 2,714 - - 106,756 37,494 26,265 30,327 18,357 18,280 23,686 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 3,158,102 369,650 77,397 115,246 32,444 35,180 52,316 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- $307,972,490 $82,347,313 $30,376,251 $42,509,194 $6,166,005 $6,084,210 $10,587,499 =============== ============== ============== ================= ================ ============== ============== 37,238,836 6,632,517 4,895,495 7,476,448 675,595 797,931 1,259,354 $ 8.27 $ 12.42 $ 6.20 $ 5.69 $ 9.13 $ 7.62 $ 8.41 -------------- ICON SOUTH EUROPE REGION FUND -------------- $8,185,200 -------------- 9,241,829 - 48,877 - 76 11,850 641 -------------- 9,303,273 -------------- - 7,220 7,529 4,733 377 - 20,965 -------------- 40,824 -------------- $9,262,449 ============== 941,153 $ 9.84
55 Statements of Operations
------------------ -------------- -------------- -------------- -------------- FOR THE YEAR ENDED SEPTEMBER 30, 2003 ICON ICON ICON ICON ICON CONSUMER ENERGY FINANCIAL HEALTHCARE INDUSTRIALS DISCRETIONARY FUND FUND FUND FUND FUND ------------------ -------------- -------------- -------------- -------------- INVESTMENT INCOME Interest $ 8,288 $ 36,852 $ 15,913 $ 25,052 $ 21,713 Dividends 723,481 803,173 2,444,610 573,574 539,320 Foreign taxes withheld - (10,066) (2,290) (1,015) (3,098) ------------------ -------------- -------------- -------------- -------------- Total Investment Income 731,769 829,959 2,458,233 597,611 557,935 ------------------ -------------- -------------- -------------- -------------- EXPENSES Advisory fees 1,187,927 748,361 1,310,268 1,200,639 703,766 Fund accounting, custodial and transfer agent fees 192,253 115,697 209,282 192,507 118,773 Administration fees 53,985 33,862 59,408 54,543 32,843 Audit fees 18,948 11,908 20,897 19,154 11,247 Registration fees 31,124 26,184 24,913 28,606 23,850 Legal fees 13,195 8,637 14,019 13,193 8,055 Insurance expense 15,420 6,247 5,012 3,156 8,157 Trustee fees and expenses 9,674 6,029 9,086 8,566 5,939 Shareholder reports 30,546 25,780 33,861 33,562 16,775 Interest expense 19,369 12,702 4,236 4,161 5,035 Other expenses 93,466 53,718 64,280 53,932 74,284 ------------------ -------------- -------------- -------------- -------------- Total Expenses 1,665,907 1,049,125 1,755,262 1,612,019 1,008,724 Fees waived (Note 2) - - - - - ------------------ -------------- -------------- -------------- -------------- Net expenses 1,665,907 1,049,125 1,755,262 1,612,019 1,008,724 ------------------ -------------- -------------- -------------- -------------- NET INVESTMENT INCOME (LOSS) (934,138) (219,166) 702,971 (1,014,408) (450,789) ------------------ -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from investment transactions (3,833,114) (5,971,578) 557,118 (6,819,268) (6,100,761) Net realized gain/(loss) from foreign currency translations - - - - - Change in unrealized net appreciation/ (depreciation): on securities 24,416,611 15,279,562 26,857,798 24,785,530 15,072,214 on other assets and liabilities denominated in foreign currency - - - - - ------------------ -------------- -------------- -------------- -------------- Net realized and unrealized gain/(loss) on investments 20,583,497 9,307,984 27,414,916 17,966,262 8,971,453 ------------------ -------------- -------------- -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $19,649,359 $ 9,088,818 $28,117,887 $16,951,854 $ 8,520,664 ================== ============== ============== ============== ==============
The accompanying notes are an integral part of the financial statements. 56
--------------- -------------- -------------- ----------------- ---------------- -------------- -------------- ICON ICON LEISURE ICON ICON ICON ICON ICON INFORMATION AND CONSUMER MATERIALS TELECOMMUNICATION SHORT-TERM FIXED ASIA-PACIFIC NORTH EUROPE TECHNOLOGY FUND STAPLES FUND FUND & UTILITIES FUND INCOME FUND REGION FUND REGION FUND --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- $ 27,215 $ 7,418 $ 4,921 $ 6,563 $122,590 $ - $ - 342,077 700,930 841,499 1,838,496 - 201,246 284,261 (8,858) (785) (18,516) (6,319) - (23,185) (37,723) --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 360,434 707,563 827,904 1,838,740 122,590 178,061 246,538 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 1,902,446 809,237 401,496 532,023 47,087 66,809 85,690 316,803 129,405 63,754 82,421 11,255 18,234 23,175 86,751 36,691 18,164 24,087 3,285 3,033 3,896 30,427 12,894 6,386 8,469 1,155 1,065 1,367 27,047 24,186 21,048 21,854 14,327 15,371 15,853 19,625 9,060 4,580 6,066 784 734 913 15,421 7,276 3,622 1,388 1,079 578 469 12,573 6,325 3,347 4,035 535 510 646 38,616 23,045 13,298 18,365 2,364 2,330 2,484 11,190 12,447 19,578 17,609 - 2,645 2,177 114,835 49,914 35,972 33,881 21,597 21,223 34,387 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 2,575,734 1,120,480 591,245 750,198 103,468 132,532 171,057 - - - - (232) - - --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 2,575,734 1,120,480 591,245 750,198 103,236 132,532 171,057 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- (2,215,300) (412,917) 236,659 1,088,542 19,354 45,529 75,481 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 3,753,887 (1,107,203) (3,456,930) (2,316,365) - 745,694 120,749 - - - - - (1,457) 3,777 69,595,068 9,588,234 5,930,581 9,090,560 (23,336) 868,576 2,996,803 - - - - - (56) 750 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- 73,348,955 8,481,031 2,473,651 6,774,195 (23,336) 1,612,757 3,122,079 --------------- -------------- -------------- ----------------- ---------------- -------------- -------------- $71,133,655 $ 8,068,114 $ 2,710,310 $ 7,862,737 $ (3,982) $1,658,286 $3,197,560 =============== ============== ============== ================= ================ ============== ============== -------------- ICON SOUTH EUROPE REGION FUND -------------- $ 1,037 124,971 (19,003) -------------- 107,005 -------------- 67,723 18,204 3,081 1,082 14,159 750 635 478 1,962 - 18,755 -------------- 126,829 - -------------- 126,829 -------------- (19,824) -------------- 558,317 691 1,567,835 234 -------------- 2,127,077 -------------- $2,107,253 ==============
57 Statements of Changes in Net Assets
------------------------------- ------------------------------- ICON CONSUMER ICON DISCRETIONARY FUND ENERGY FUND ------------------------------- ------------------------------- Year Ended September 30, Year Ended September 30, 2003 2002 2003 2002 -------------- -------------- -------------- -------------- OPERATIONS Net investment income/(loss) $ (934,138) $ (898,691) $ (219,166) $ (437,299) Net realized gain/(loss) from investment transactions (3,833,114) (8,076,438) (5,971,578) (3,519,879) Change in unrealized appreciation/(depreciation) on securities and foreign currency translations 24,416,611 15,403,956 15,279,562 (2,560,175) -------------- -------------- -------------- -------------- Net increase/(decrease) in net assets resulting from operations 19,649,359 6,428,827 9,088,818 (6,517,353) -------------- -------------- -------------- -------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - - (72,001) Net realized gains - - - - Return of capital - - - - -------------- -------------- -------------- -------------- Net decrease from dividends and distributions - - - (72,001) -------------- -------------- -------------- -------------- FUND SHARE TRANSACTIONS Shares sold 74,163,195 186,031,641 43,780,341 150,788,537 Reinvested dividends and distributions - - - 67,141 Shares repurchased (65,388,174) (177,895,611) (101,459,945) (76,991,391) -------------- -------------- -------------- -------------- Net increase/(decrease) from fund share transactions 8,775,021 8,136,030 (57,679,604) 73,864,287 -------------- -------------- -------------- -------------- Total net increase/(decrease) in net assets 28,424,380 14,564,857 (48,590,786) 67,274,933 NET ASSETS Beginning of period 121,640,343 107,075,486 104,219,817 36,944,884 -------------- -------------- -------------- -------------- End of period $150,064,723 $ 121,640,343 $ 55,629,031 $104,219,817 -------------- -------------- -------------- -------------- NET ASSETS CONSIST OF Paid-in capital $145,945,175 $ 138,104,292 $ 61,272,499 $119,165,040 Accumulated undistributed net investment income/(loss) - - - - Accumulated undistributed net realized gain/(loss) from investments (24,082,954) (20,249,840) (14,024,961) (8,047,154) Unrealized appreciation/(depreciation): on securities 28,202,502 3,785,891 8,381,493 (6,898,069) -------------- -------------- -------------- -------------- Net Assets $150,064,723 $ 121,640,343 $ 55,629,031 $104,219,817 ============== ============== ============== ============== TRANSACTIONS IN FUND SHARES Shares sold 7,144,559 14,730,684 3,435,224 11,313,498 Reinvested dividends and distributions - - - 5,402 Shares repurchased (6,440,247) (14,658,786) (8,177,227) (5,788,706) -------------- -------------- -------------- -------------- Net increase/(decrease) 704,312 71,898 (4,742,003) 5,530,194 Shares outstanding beginning of period 12,024,494 11,952,596 8,802,833 3,272,639 -------------- -------------- -------------- -------------- Shares outstanding end of period 12,728,806 12,024,494 4,060,830 8,802,833 ============== ============== ============== ============== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $215,314,229 $ 234,764,135 $ 30,459,479 $ 97,284,181 Proceeds from sales of securities 209,236,884 228,264,566 93,961,245 18,435,223
The accompanying notes are an integral part of the financial statements. 58
------------------------------- ------------------------------- ------------------------------- ICON ICON ICON FINANCIAL FUND HEALTHCARE FUND INDUSTRIALS FUND ------------------------------- ------------------------------- ------------------------------- Year Ended September 30, Year Ended September 30, Year Ended September 30, 2003 2002 2003 2002 2003 2002 -------------- -------------- -------------- -------------- -------------- -------------- $ 702,971 $ (35,681) $ (1,014,408) $ (462,004) $ (450,789) $ (260,974) 557,118 (6,058,331) (6,819,268) (2,786,767) (6,100,761) (18,881,122) 26,857,798 (8,960,768) 24,785,530 (382,447) 15,072,214 6,158,770 -------------- -------------- -------------- -------------- -------------- -------------- 28,117,887 (15,054,780) 16,951,854 (3,631,218) 8,520,664 (12,983,326) -------------- -------------- -------------- -------------- -------------- -------------- (399,824) - - - - - - (9,102,759) - (1,940,710) - - - - - (183,886) - - -------------- -------------- -------------- -------------- -------------- -------------- (399,824) (9,102,759) - (2,124,596) - - -------------- -------------- -------------- -------------- -------------- -------------- 76,466,734 116,964,494 116,684,705 130,471,687 90,962,271 122,524,084 392,348 8,842,462 - 2,048,942 - - (75,431,900) (45,851,844) (85,408,913) (67,379,434) (30,848,064) (121,946,720) -------------- -------------- -------------- -------------- -------------- -------------- 1,427,182 79,955,112 31,275,792 65,141,195 60,114,207 577,364 -------------- -------------- -------------- -------------- -------------- -------------- 29,145,245 55,797,573 48,227,646 59,385,381 68,634,871 (12,405,962) 110,115,879 54,318,306 93,031,245 33,645,864 63,919,442 76,325,404 -------------- -------------- -------------- -------------- -------------- -------------- $139,261,124 $110,115,879 $141,258,891 $ 93,031,245 $132,554,313 $ 63,919,442 -------------- -------------- -------------- -------------- -------------- -------------- $129,994,648 $128,569,890 $124,911,335 $ 94,649,951 $147,100,304 $ 87,436,886 290,474 - - - - - (5,394,712) (5,966,927) (9,885,631) (3,066,363) (29,994,846) (23,894,085) 14,370,714 (12,487,084) 26,233,187 1,447,657 15,448,855 376,641 -------------- -------------- -------------- -------------- -------------- -------------- $139,261,124 $110,115,879 $141,258,891 $ 93,031,245 $132,554,313 $ 63,919,442 ============== ============== ============== ============== ============== ============== 8,155,031 11,396,392 10,595,794 11,850,102 10,993,513 12,073,210 42,462 837,354 - 183,268 - - (7,737,576) (4,283,511) (8,078,236) (5,953,546) (3,954,112) (12,973,529) -------------- -------------- -------------- -------------- -------------- -------------- 459,917 7,950,235 2,517,558 6,079,824 7,039,401 (900,319) 12,460,956 4,510,721 8,987,291 2,907,467 8,027,422 8,927,741 -------------- -------------- -------------- -------------- -------------- -------------- 12,920,873 12,460,956 11,504,849 8,987,291 15,066,823 8,027,422 ============== ============== ============== ============== ============== ============== $188,775,243 $112,577,055 $126,928,736 $107,971,251 $119,495,145 $ 106,211,157 184,312,033 42,550,278 99,893,688 45,095,971 64,553,264 101,137,669 ------------------------------- ICON INFORMATION TECHNOLOGY FUND ------------------------------- Year Ended September 30, 2003 2002 -------------- -------------- $ (2,215,300) $ (2,070,695) 3,753,887 (94,791,287) 69,595,068 36,951,449 -------------- -------------- 71,133,655 (59,910,533) -------------- -------------- - - - - - - -------------- -------------- - - -------------- -------------- 267,777,926 372,980,609 - - (106,562,014) (356,298,439) -------------- -------------- 161,215,912 16,682,170 -------------- -------------- 232,349,567 (43,228,363) 75,622,923 118,851,286 -------------- -------------- $ 307,972,490 $ 75,622,923 -------------- -------------- $ 342,120,062 $ 183,119,450 - - (95,448,058) (99,201,945) 61,300,486 (8,294,582) -------------- -------------- $ 307,972,490 $ 75,622,923 ============== ============== 39,746,545 39,461,468 - - (15,146,622) (42,052,819) -------------- -------------- 24,599,923 (2,591,351) 12,638,913 15,230,264 -------------- -------------- 37,238,836 12,638,913 ============== ============== $ 453,451,611 $ 360,985,881 293,739,149 345,744,077
59 Statements of Changes in Net Assets (continued)
----------------------------- ----------------------------- ----------------------------- ICON LEISURE AND ICON ICON TELECOMMUNICATION & CONSUMER STAPLES FUND MATERIALS FUND UTILITIES FUND ----------------------------- ----------------------------- ----------------------------- Year Ended September 30, Year Ended September 30, Year Ended September 30, 2003 2002 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ------------- ------------- OPERATIONS Net investment income/(loss) $ (412,917) $ (476,102) $ 236,659 $ 105,771 $ 1,088,542 $ 359,364 Net realized gain/(loss) from investment transactions (1,107,203) 401,865 (3,456,930) (2,529,707) (2,316,365) (5,419,221) Net realized gain/(loss) from foreign currency translations - - - - - - Change in unrealized appreciation/(depreciation) on securities and foreign currency translations 9,588,234 2,499,224 5,930,581 (3,098,987) 9,090,560 (1,670,200) ------------- ------------- ------------- ------------- ------------- ------------- Net increase/(decrease) in net assets resulting from operations 8,068,114 2,424,987 2,710,310 (5,522,923) 7,862,737 (6,730,057) ------------- ------------- ------------- ------------- ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - (93,225) (142,573) (888,104) (166,008) Return of capital - - - - - - ------------- ------------- ------------- ------------- ------------- ------------- Net decrease from dividends and distributions - - (93,225) (142,573) (888,104) (166,008) ------------- ------------- ------------- ------------- ------------- ------------- FUND SHARE TRANSACTIONS Shares sold 39,239,478 140,737,296 14,151,946 70,609,621 28,972,038 73,160,431 Reinvested dividends and distributions - - 92,665 142,060 886,340 165,833 Shares repurchased (53,301,166) (95,983,544) (45,505,812) (35,265,418) (60,690,304) (16,600,992) ------------- ------------- ------------- ------------- ------------- ------------- Net increase/(decrease) from fund share transactions (14,061,688) 44,753,752 (31,261,201) 35,486,263 (30,831,926) 56,725,272 ------------- ------------- ------------- ------------- ------------- ------------- Total net increase/(decrease) in net assets (5,993,574) 47,178,739 (28,644,116) 29,820,767 (23,857,293) 49,829,207 NET ASSETS Beginning of period 88,340,887 41,162,148 59,020,367 29,199,600 66,366,487 16,537,280 ------------- ------------- ------------- ------------- ------------- ------------- End of period $ 82,347,313 $ 88,340,887 $ 30,376,251 $ 59,020,367 $ 42,509,194 $ 66,366,487 ------------- ------------- ------------- ------------- ------------- ------------- NET ASSETS CONSIST OF Paid-in capital $ 72,364,340 $ 86,838,945 $ 49,280,564 $ 80,541,765 $ 44,661,874 $ 75,493,800 Accumulated undistributed net investment income/(loss) - - 178,021 34,587 559,802 359,364 Accumulated undistributed net realized gain/(loss) from investments (1,473,913) (366,710) (21,117,209) (17,660,279) (8,738,481) (6,422,116) Accumulated net realized gain/(loss) from foreign currency translations - - - - - - Unrealized appreciation/(depreciation): on securities 11,456,886 1,868,652 2,034,875 (3,895,706) 6,025,999 (3,064,561) on other assets and liabilities denominated in foreign currency - - - - - - ------------- ------------- ------------- ------------- ------------- ------------- Net Assets $ 82,347,313 $ 88,340,887 $ 30,376,251 $ 59,020,367 $ 42,509,194 $ 66,366,487 ============= ============= ============= ============= ============= ============= TRANSACTIONS IN FUND SHARES Shares sold 3,467,652 11,016,203 2,446,314 10,267,215 5,787,036 14,210,465 Reinvested dividends and distributions - - 15,406 21,822 174,133 27,141 Shares repurchased (4,724,938) (7,497,090) (7,953,735) (5,022,326) (12,373,258) (3,020,382) ------------- ------------- ------------- ------------- ------------- ------------- Net increase/(decrease) (1,257,286) 3,519,113 (5,492,015) 5,266,711 (6,412,089) 11,217,224 Shares outstanding beginning of period 7,889,803 4,370,690 10,387,510 5,120,799 13,888,537 2,671,313 ------------- ------------- ------------- ------------- ------------- ------------- Shares outstanding end of period 6,632,517 7,889,803 4,895,495 10,387,510 7,476,448 13,888,537 ============= ============= ============= ============= ============= ============= PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $112,992,030 $120,197,753 $ 52,868,818 $ 65,920,440 $ 83,676,470 $ 86,033,626 Proceeds from sales of securities 125,691,402 75,940,055 80,253,664 32,913,425 114,328,699 28,626,267 Purchases of long-term U.S. government securities - - - - - - Proceeds from sales of long-term U.S. government securities - - - - - -
The accompanying notes are an integral part of the financial statements. 60
------------------------------ ------------------------------ ------------------------------ ICON SHORT-TERM ICON ASIA-PACIFIC ICON NORTH EUROPE FIXED INCOME FUND REGION FUND REGION FUND ------------------------------ ------------------------------ ------------------------------ Year Ended September 30, Year Ended September 30, Year Ended September 30, 2003 2002 2003 2002 2003 2002 ------------- ------------- ------------- ------------- ------------- ------------- $ 19,354 $ 39,436 $ 45,529 $ (27,574) $ 75,481 $ 63,605 - (3,820) 745,694 (1,521,036) 120,749 (1,986,214) - - (1,457) (4,976) 3,777 (2,705) (23,336) 48,870 868,520 2,635,195 2,997,553 2,022,875 ------------- ------------- ------------- ------------- ------------- ------------- (3,982) 84,486 1,658,286 1,081,609 3,197,560 97,561 ------------- ------------- ------------- ------------- ------------- ------------- (20,760) (49,945) - - (84,595) (50,812) - - - (39,502) - (50,523) ------------- ------------- ------------- ------------- ------------- ------------- (20,760) (49,945) - (39,502) (84,595) (101,335) ------------- ------------- ------------- ------------- ------------- ------------- 23,499,482 255,440,821 6,269,616 275,462,846 10,203,582 229,035,353 20,010 61,365 - 39,097 84,466 100,688 (24,993,710) (268,209,859) (8,770,250) (289,291,282) (11,035,500) (235,105,995) ------------- ------------- ------------- ------------- ------------- ------------- (1,474,218) (12,707,673) (2,500,634) (13,789,339) (747,452) (5,969,954) ------------- ------------- ------------- ------------- ------------- ------------- (1,498,960) (12,673,132) (842,348) (12,747,232) 2,365,513 (5,973,728) 7,664,965 20,338,097 6,926,558 19,673,790 8,221,986 14,195,714 ------------- ------------- ------------- ------------- ------------- ------------- $ 6,166,005 $ 7,664,965 $ 6,084,210 $ 6,926,558 $ 10,587,499 $ 8,221,986 ------------- ------------- ------------- ------------- ------------- ------------- $ 6,144,408 $ 7,618,626 $14,398,301 $ 16,898,935 $ 10,269,565 $ 11,025,148 (117) 1,289 39,163 (4,909) - (3,022) (3,820) (3,820) (9,207,477) (9,954,628) (1,759,346) (1,876,090) - - (719,035) (717,578) (674,563) (678,340) 25,534 48,870 1,573,314 704,738 2,751,093 (245,710) - - (56) - 750 - ------------- ------------- ------------- ------------- ------------- ------------- $ 6,166,005 $ 7,664,965 $ 6,084,210 $ 6,926,558 $ 10,587,499 $ 8,221,986 ============= ============= ============= ============= ============= ============= 2,570,121 28,068,293 879,754 41,283,013 1,344,165 30,479,121 2,181 6,734 - 5,801 13,781 13,231 (2,733,550) (29,463,335) (1,302,144) (42,957,850) (1,478,885) (31,072,840) ------------- ------------- ------------- ------------- ------------- ------------- (161,248) (1,388,308) (422,390) (1,669,036) (120,939) (580,488) 836,843 2,225,151 1,220,321 2,889,357 1,380,293 1,960,781 ------------- ------------- ------------- ------------- ------------- ------------- 675,595 836,843 797,931 1,220,321 1,259,354 1,380,293 ============= ============= ============= ============= ============= ============= $ - $ - $ 5,375,821 $ 1,257,757 $ 8,232,853 $ 10,090,144 - - 7,711,768 5,312,778 8,866,056 12,984,070 1,005,625 2,500,562 - - - - - - - - - - ------------------------------ ICON SOUTH EUROPE REGION FUND ------------------------------ Year Ended September 30, 2003 2002 ------------- ------------- $ (19,824) $ (24,109) 558,317 (624,140) 691 (136,138) 1,568,069 480,804 ------------- ------------- 2,107,253 (303,583) ------------- ------------- - (13,920) - - ------------- ------------- - (13,920) ------------- ------------- 21,160,657 15,771,813 - 13,904 (18,624,601) (18,245,944) ------------- ------------- 2,536,056 (2,460,227) ------------- ------------- 4,643,309 (2,777,730) 4,619,140 7,396,870 ------------- ------------- $ 9,262,449 $ 4,619,140 ------------- ------------- $ 10,282,481 $ 7,901,710 - (136,811) (1,722,482) (2,279,449) (354,413) (355,104) 1,056,629 (511,206) 234 - ------------- ------------- $ 9,262,449 $ 4,619,140 ============= ============= 2,507,561 1,875,759 - 1,655 (2,190,470) (2,162,806) ------------- ------------- 317,091 (285,392) 624,062 909,454 ------------- ------------- 941,153 624,062 ============= ============= $ 8,271,751 $ 643,683 6,013,474 1,404,254 - - - -
61 Financial Highlights
------------------------------------------------------------- ICON CONSUMER DISCRETIONARY FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- Net asset value, beginning of period $ 10.12 $ 8.96 $ 9.23 $ 9.67 $ 7.87 --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.08) (0.06) (0.01) (0.02) - Net realized and unrealized gains/(losses) on investments 1.75 1.22 (0.26) (0.42) 2.04 --------- --------- --------- --------- --------- Total from investment operations 1.67 1.16 (0.27) (0.44) 2.04 --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - - - Distributions from net realized gains - - - - (0.24) --------- --------- --------- --------- --------- Total distributions - - - - (0.24) --------- --------- --------- --------- --------- Net asset value, end of period $ 11.79 $ 10.12 $ 8.96 $ 9.23 $ 9.67 ========= ========= ========= ========= ========= Total return 16.50% 12.95% (2.93)% (4.55)% 25.78% Net assets, end of period (in thousands) $150,065 $121,640 $107,075 $40,894 $54,351 Average net assets for the period (in thousands) 118,834 184,174 78,281 46,246 58,294 Ratio of expenses to average net assets 1.40% 1.29% 1.37% 1.35% 1.35% Ratio of net investment income/(loss) to average net assets (0.79)% (0.49)% (0.10)% (0.27)% (0.46)% Portfolio turnover rate 174.51% 128.06% 88.20% 88.44% 27.83%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 62
--------------------------------------------------------- ICON ENERGY FUND --------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 11.84 $ 11.29 $ 13.19 $ 7.98 $ 6.35 --------- --------- --------- --------- --------- (0.04) (0.08) 0.07 0.04 0.01 1.90 0.65 (0.76) 5.17 1.69 --------- --------- --------- --------- --------- 1.86 0.57 (0.69) 5.21 1.70 --------- --------- --------- --------- --------- - (0.02) (0.09) - (0.07) - - (1.12) - - --------- --------- --------- --------- --------- - (0.02) (1.21) - (0.07) --------- --------- --------- --------- --------- $ 13.70 $ 11.84 $ 11.29 $ 13.19 $ 7.98 ========= ========= ========= ========= ========= 15.71% 5.03% (6.53)% 65.29% 27.28% $55,629 $104,220 $36,945 $44,294 $19,230 74,883 71,434 49,195 29,564 13,801 1.40% 1.35% 1.39% 1.36% 1.45% (0.29)% (0.61)% 0.54% 0.43% (0.26)% 42.53% 26.30% 134.77% 123.70% 34.41% --------------------------------------------------------- ICON FINANCIAL FUND --------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 8.84 $ 12.04 $ 12.26 $ 8.99 $ 9.37 --------- --------- --------- --------- --------- 0.05 (0.01) 0.06 0.11 0.02 1.92 (1.08) 1.13 3.28 1.05 --------- --------- --------- --------- --------- 1.97 (1.09) 1.19 3.39 1.07 --------- --------- --------- --------- --------- (0.03) - (1.41) (0.12) (0.06) - (2.11) - - (1.39) --------- --------- --------- --------- --------- (0.03) (2.11) (1.41) (0.12) (1.45) --------- --------- --------- --------- --------- $ 10.78 $ 8.84 $ 12.04 $ 12.26 $ 8.99 ========= ========= ========= ========= ========= 22.35% (11.88)% 9.57% 38.14% 10.05% $139,261 $110,116 $54,318 $100,404 $ 5,483 131,042 60,904 59,425 43,690 10,415 1.34% 1.36% 1.41% 1.33% 1.58% 0.54% (0.06)% 0.51% 1.14% 0.09% 142.77% 69.58% 174.41% 28.99% 53.29%
63 Financial Highlights (continued)
------------------------------------------------------------- ICON HEALTHCARE FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- Net asset value, beginning of period $ 10.35 $ 11.57 $ 11.93 $ 7.98 $ 11.39 --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.09) (0.12) (0.10) (0.08) - Net realized and unrealized gains/(losses) on investments 2.02 (0.49) 0.51 4.34 (0.25) --------- --------- --------- --------- --------- Total from investment operations 1.93 (0.61) 0.41 4.26 (0.25) --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - - - Distributions from net realized gains - (0.56) (0.77) (0.31) (3.16) Return of capital - (0.05) - - - --------- --------- --------- --------- --------- Total distributions - (0.61) (0.77) (0.31) (3.16) --------- --------- --------- --------- --------- Net asset value, end of period $ 12.28 $ 10.35 $ 11.57 $ 11.93 $ 7.98 ========= ========= ========= ========= ========= Total return 18.65% (5.63)% 3.39% 55.35% (5.34)% Net assets, end of period (in thousands) $141,259 $93,031 $33,646 $49,066 $24,550 Average net assets for the period (in thousands) 120,068 44,042 35,981 38,688 29,272 Ratio of expenses to average net assets 1.34% 1.39% 1.45% 1.38% 1.40% Ratio of net investment income/(loss) to average net assets (0.84)% (1.05)% (0.98)% (0.74)% (0.83)% Portfolio turnover rate 85.52% 104.90% 145.08% 115.05% 85.99%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 64
------------------------------------------------------------- ICON INDUSTRIALS FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 7.96 $ 8.55 $ 9.07 $ 10.31 $ 9.45 --------- --------- --------- --------- --------- (0.05) (0.02) (0.02) 0.03 0.01 0.89 (0.57) (0.48) (0.47) 1.63 --------- --------- --------- --------- --------- 0.84 (0.59) (0.50) (0.44) 1.64 --------- --------- --------- --------- --------- - - (0.02) - (0.02) - - - (0.80) (0.76) - - - - - --------- --------- --------- --------- --------- - - (0.02) (0.80) (0.78) --------- --------- --------- --------- --------- $ 8.80 $ 7.96 $ 8.55 $ 9.07 $ 10.31 ========= ========= ========= ========= ========= 10.55% (6.90)% (5.55)% (4.32)% 16.89% $132,554 $ 63,919 $76,325 $22,068 $21,004 70,382 107,335 55,928 21,220 24,387 1.43% 1.30% 1.38% 1.38% 1.41% (0.64)% (0.24)% (0.16)% 0.34% 0.10% 90.49% 99.22% 72.65% 72.90% 47.97% ------------------------------------------------------------- ICON INFORMATION TECHNOLOGY FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 5.98 $ 7.80 $ 22.13 $ 19.00 $ 9.20 --------- --------- --------- --------- --------- (0.08) (0.10) (0.10) (0.05) - 2.37 (1.72) (4.03) 9.62 10.58 --------- --------- --------- --------- --------- 2.29 (1.82) (4.13) 9.57 10.58 --------- --------- --------- --------- --------- - - - - - - - (10.20) (6.44) (0.78) - - - - - --------- --------- --------- --------- --------- - - (10.20) (6.44) (0.78) --------- --------- --------- --------- --------- $ 8.27 $ 5.98 $ 7.80 $ 22.13 $ 19.00 ========= ========= ========= ========= ========= 38.29% (23.33)% (32.90)% 59.24% 119.53% $307,972 $ 75,623 $118,851 $46,689 $55,126 190,287 189,972 99,875 56,279 66,977 1.35% 1.31% 1.37% 1.35% 1.37% (1.16)% (1.09)% (0.90)% (0.23)% (1.06)% 155.39% 190.09% 70.32% 137.69% 31.75%
65 Financial Highlights (continued)
------------------------------------------------------------- ICON LEISURE AND CONSUMER STAPLES FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- Net asset value, beginning of period $ 11.20 $ 9.42 $ 9.24 $ 12.05 $ 11.79 --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.06) (0.07) (0.05) 0.01 0.10 Net realized and unrealized gains/(losses) on investments 1.28 1.85 0.26 0.25 1.61 --------- --------- --------- --------- --------- Total from investment operations 1.22 1.78 0.21 0.26 1.71 --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - (0.01) - (0.27) Distributions from net realized gains - - (0.02) (3.07) (1.18) --------- --------- --------- --------- --------- Total distributions - - (0.03) (3.07) (1.45) --------- --------- --------- --------- --------- Net asset value, end of period $ 12.42 $ 11.20 $ 9.42 $ 9.24 $ 12.05 ========= ========= ========= ========= ========= Total return 10.89% 18.90% 2.26% 5.27% 14.76% Net assets, end of period (in thousands) $82,347 $88,341 $41,162 $ 7,765 $31,559 Average net assets for the period (in thousands) 80,928 86,202 41,086 18,029 40,054 Ratio of expenses to average net assets 1.38% 1.34% 1.40% 1.51% 1.38% Ratio of net investment income/(loss) to average net assets (0.51)% (0.55)% (0.50)% 0.13% (0.12)% Portfolio turnover rate 139.54% 90.43% 148.23% 24.50% 49.22%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 66
------------------------------------------------------------- ICON MATERIALS FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 5.68 $ 5.70 $ 6.49 $ 7.31 $ 6.58 --------- --------- --------- --------- --------- 0.03 0.02 0.02 0.03 0.02 0.50 (0.01) (0.74) (0.85) 0.74 --------- --------- --------- --------- --------- 0.53 0.01 (0.72) (0.82) 0.76 --------- --------- --------- --------- --------- (0.01) (0.03) (0.07) - (0.03) - - - - - --------- --------- --------- --------- --------- (0.01) (0.03) (0.07) - (0.03) --------- --------- --------- --------- --------- $ 6.20 $ 5.68 $ 5.70 $ 6.49 $ 7.31 ========= ========= ========= ========= ========= 9.36% 0.06% (11.07)% (11.22)% 11.65% $30,376 $59,020 $29,200 $18,162 $26,373 40,156 45,917 24,544 23,620 17,145 1.47% 1.36% 1.47% 1.41% 1.45% 0.59% 0.23% 0.40% 0.42% 0.16% 130.01% 74.55% 91.28% 91.76% 118.29% ------------------------------------------------------------- ICON TELECOMMUNICATION & UTILITIES FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 4.78 $ 6.19 $ 8.13 $10.04 $14.17 --------- --------- --------- --------- --------- 0.10 0.10 0.09 0.20 0.83 0.87 (1.45) (1.52) 0.99 1.18 --------- --------- --------- --------- --------- 0.97 (1.35) (1.43) 1.19 2.01 --------- --------- --------- --------- --------- (0.06) (0.06) (0.11) (0.16) (1.02) - - (0.40) (2.94) (5.12) --------- --------- --------- --------- --------- (0.06) (0.06) (0.51) (3.10) (6.14) --------- --------- --------- --------- --------- $ 5.69 $ 4.78 $ 6.19 $ 8.13 $10.04 ========= ========= ========= ========= ========= 20.36% (22.05)% (18.74)% 14.99% 15.25% $42,509 $66,366 $16,537 $8,619 $7,129 53,219 20,196 13,554 7,231 9,825 1.41% 1.50% 1.54% 1.53% 1.59% 2.05% 1.78% 1.22% 2.43% 1.84% 158.24% 137.81% 46.10% 41.86% 18.85%
67 Financial Highlights (continued)
------------------------------------------------------------- ICON SHORT-TERM FIXED INCOME FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- Net asset value, beginning of period $ 9.16 $ 9.14 $ 9.14 $ 9.15 $ 9.79 --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.02 0.05 0.26 0.39 0.43 Net realized and unrealized gains/(losses) on investments (0.02) (0.00) 0.02 0.02 (0.12) --------- --------- --------- --------- --------- Total from investment operations - 0.05 0.28 0.41 0.31 --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.03) (0.03) (0.28) (0.39) (0.65) Distributions from net realized gains - - - (0.03) (0.30) Return of capital - - - - - --------- --------- --------- --------- --------- Total distributions (0.03) (0.03) (0.28) (0.42) (0.95) --------- --------- --------- --------- --------- Net asset value, end of period $ 9.13 $ 9.16 $ 9.14 $ 9.14 $ 9.15 ========= ========= ========= ========= ========= Total return (0.02)% 0.96% 3.15% 4.45% 3.54% Net assets, end of period (in thousands) $6,166 $7,665 $20,338 $5,386 $5,111 Average net assets for the period (in thousands) 7,255 7,643 6,276 5,367 4,658 Ratio of expenses to average net assets 1.42%+ 1.35%+ 1.52% 1.52% 1.06%++ Ratio of net investment income/(loss) to average net assets 0.27%+ 0.52%+ 2.85% 4.16% 4.42%++ Portfolio turnover rate 0.00% 0.00% 0.00% 53.26% 53.22%
(x) Calculated using the average share method ++ Includes change in accounting estimate; see notes. If this change had not been made, the ratio of expenses to average net assets would have been 1.48% and the ratio of net investment income to average net assets would have been 4.00%. + Includes advisory fees waiver (Note 2). If this waiver had not been made, the ratio of expenses to average net assets would have been 1.43% in 2003 and 1.41% in 2002 and the ratio of net investment income to average net assets would have been 0.26% in 2003 and 0.58% in 2002. The accompanying notes are an integral part of the financial statements. 68
--------------------------------------------------------- ICON ASIA-PACIFIC REGION FUND --------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 5.68 $ 6.81 $ 10.25 $ 10.87 $ 6.09 --------- --------- --------- --------- --------- 0.04 (0.19) 0.07 0.03 (0.01) 1.90 (0.91) (3.51) (0.65) 4.79 --------- --------- --------- --------- --------- 1.94 (1.10) (3.44) (0.62) 4.78 --------- --------- --------- --------- --------- - - - - - - - - - - - (0.03) - - - --------- --------- --------- --------- --------- - (0.03) - - - --------- --------- --------- --------- --------- $ 7.62 $ 5.68 $ 6.81 $ 10.25 $ 10.87 ========= ========= ========= ========= ========= 34.15% (16.29)% (33.56)% (5.70)% 78.49% $6,084 $ 6,927 $19,684 $25,710 $33,564 6,683 12,142 18,749 32,629 29,191 1.98% 1.66% 1.70% 1.53% 1.59% 0.68% (0.23)% 0.75% 0.24% (0.57)% 81.44% 14.43% 55.58% 101.88% 62.82% --------------------------------------------------------- ICON NORTH EUROPE REGION FUND --------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- $ 5.96 $ 7.24 $ 11.79 $ 11.74 $ 11.63 --------- --------- --------- --------- --------- 0.06 0.04 0.09 0.04 (0.05) 2.45 (1.25) (3.31) 1.21 1.51 --------- --------- --------- --------- --------- 2.51 (1.21) (3.22) 1.25 1.46 --------- --------- --------- --------- --------- - (0.04) - - (0.17) (0.06) - (1.33) (1.20) (1.18) - (0.03) - - - --------- --------- --------- --------- --------- (0.06) (0.07) (1.33) (1.20) (1.35) --------- --------- --------- --------- --------- $ 8.41 $ 5.96 $ 7.24 $ 11.79 $ 11.74 ========= ========= ========= ========= ========= 42.60% (16.94)% (30.29)% 10.43% 12.78% $10,587 $ 8,222 $14,196 $33,315 $23,971 8,571 13,347 18,204 29,412 30,993 2.00% 1.72% 1.65% 1.52% 1.59% 0.88% 0.48% 0.97% 0.30% 0.25% 98.91% 91.99% 41.67% 34.24% 50.36%
69 Financial Highlights (continued)
------------------------------------------------------------- ICON SOUTH EUROPE REGION FUND ------------------------------------------------------------- Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- Net asset value, beginning of period $ 7.40 $ 8.13 $10.14 $10.12 $11.87 --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.02) (0.04) 0.05 0.02 0.02 Net realized and unrealized gains/(losses) on investments 2.46 (0.67) (2.06) - 1.06 --------- --------- --------- --------- --------- Total from investment operations 2.44 (0.71) (2.01) 0.02 1.08 --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - (0.02) - - (0.03) Distributions from net realized gains - - - - (2.80) --------- --------- --------- --------- --------- Total distributions - (0.02) - - (2.83) --------- --------- --------- --------- --------- Net asset value, end of period $ 9.84 $ 7.40 $ 8.13 $10.14 $10.12 ========= ========= ========= ========= ========= Total return 32.97% (8.76)% (19.82)% 0.20% 6.41% Net assets, end of period (in thousands) $9,262 $4,619 $7,397 $6,560 $5,298 Average net assets for the period (in thousands) 6,774 5,706 7,935 7,109 8,107 Ratio of expenses to average net assets* 1.87% 2.14% 1.96% 1.80% 1.81% Ratio of net investment income/(loss) to average net assets* (0.29)% (0.42)% 0.55% 0.18% (0.53)% Portfolio turnover rate 101.37% 12.26% 84.49% 62.17% 70.65%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 70 Notes to Financial Statements SEPTEMBER 30, 2003 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Consumer Discretionary Fund ("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"), ICON Telecommunication & Utilities Fund ("Telecomm & Utilities Fund"), (collectively, the "Domestic Funds"), and ICON Asia-Pacific Region Fund ("Asia-Pacific Region Fund"), ICON North Europe Region Fund ("N. Europe Region Fund"), ICON South Europe Region Fund ("S. Europe Region Fund") (collectively, the "International Funds") and ICON Short-Term Fixed Income Fund ("Short-Term Fixed Income 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, which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment management company. There are five other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. The Domestic and International Funds invest primarily in securities of companies whose principal business activities fall within specific industries or regions. The Short-Term Fixed Income Fund invests primarily in short-term U.S. Treasury and U.S. Government Agency instruments. Each Fund is authorized to issue an unlimited number of no par shares. The investment objective of the Domestic and International Funds is to provide long-term capital appreciation. The investment objective of the Short-Term Fixed Income Fund is to seek high current income consistent with the preservation of capital. The Funds may have elements of risk, including the risk of loss of principal. An investment in a non-diversified sector or region fund may involve greater risk and volatility than a diversified fund. Investments in foreign securities may entail unique risks, including political, market and currency risks. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity and small market share. 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 could differ from these estimates. 71 Notes to Financial Statements (continued) Investment Valuation. The Funds' securities and other assets are valued at the close of the regular trading session of the New York Stock Exchange (the "Exchange") (normally 4 p.m. Eastern time) each day the Exchange is open. A security listed or traded primarily on a securities exchange or in the over-the-counter market is valued at its last sale price on the exchange or market where it is principally traded. Lacking any sales that day, the security is valued at the current closing bid price or based on quotes from dealers making a market for the security if the closing bid price is not available. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the sum of the closing bid and closing ask prices. The market value of individual securities held by the Funds is determined by using pricing services that provide market prices to other mutual funds or, as needed, by obtaining market quotations from independent broker/dealers. Securities and assets for which quotations are not readily available are valued at fair value determined in good faith pursuant to consistently applied procedures established by the Trust's Board of Trustees. Short-term securities with remaining maturities of 60 days or less are generally valued at amortized cost or original cost plus accrued interest, both of which approximate market value. London closing quotes for exchange rates are used to convert foreign security values into U.S. dollars. 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. There were no repurchase agreements purchased or sold by the Funds during the year ended September 30, 2003. 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. Forward Foreign Currency Contracts. The International 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 with 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 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 at fiscal year-end. Net unrealized appreciation or depreciation on investments and foreign currency translations arise from changes in the value of assets and liabilities, including investments in securities at fiscal year-end, resulting from changes in the exchange rates and changes in market prices of securities held. 72 Options Transactions. Each Fund (other than the Short-Term Fixed Income Fund) may write put and call options only if it, among other things, (i) owns an offsetting position in the underlying security or (ii) maintains cash or other liquid assets in an amount equal to or greater than its obligation under the option. 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, 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. 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 a sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities. 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 gain. (See Note 6 -- Tax Matter.) 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 Short-Term Fixed Income Fund distributes net investment income, if any, monthly. The Funds distribute net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles generally accepted in the United States of America. 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 will be recorded as soon as the Funds are informed of the dividend if such information is obtained subsequent to the ex-dividend date. Investment Transactions. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 73 Notes to Financial Statements (continued) Expenses. Expenses which cannot be directly attributed to a specific fund in the Trust are apportioned between all funds based upon relative net assets. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Investment Advisory Fees. Meridian Investment Management Corporation ("Meridian") serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. Meridian receives a monthly management fee that is computed daily at an annual rate of 1.00% of the Domestic and International Funds' average net assets and 0.65% of the Short-Term Fixed Income Fund's average net assets. Due to the current low interest rates on the investments in the Short-Term Fixed Income Fund, Meridian has contractually agreed to waive its advisory fee on any day the income from these investments is not adequate to cover the Short-Term Fixed Income Fund's daily expenses. Meridian waived advisory fees of $232 for the period ended September 30, 2003. Transfer Agent, Custody and Accounting Fees. U.S. Bank N.A. ("U.S. Bank") and U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provide domestic custodial services, transfer agent services and fund accounting for the Funds. The Funds pay a fund accounting fee at an annual rate of 0.1025% on the Trust's first $500 million of average daily net assets, 0.0875% on the next $500 million of average daily net assets, and 0.05% on the balance of average daily net assets in excess of $1 billion for these services. Transfer agency and domestic custody are paid at an annual rate of 0.065% on the Trust's first $500 million of daily average net assets, 0.06% on the next $1 billion of average daily net assets, and 0.05% on the balance of average daily net assets in excess of $1.5 billion. The Funds also pay for various out-of-pocket costs incurred by U.S. Bancorp that are estimated to be 0.02% of average daily net assets. On behalf of the International Funds, U.S. Bancorp has entered into an agreement with JP Morgan Chase Co. ("Chase") to provide international custodial services. The International Funds pay an annual rate of 0.125% of average daily net assets plus a per trade transaction cost for these custodial services. Administrative Services The Trust has entered into an administrative services agreement with Meridian. This agreement provided for an annual fee of 0.05% on the Funds' first $500 million of average daily net assets and 0.04% on average daily net assets in excess of $500 million for the period October 1, 2002 to August 31, 2003. For the period starting September 1, 2003 the agreement provides for an annual fee of 0.05% on the first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. Related Parties. Certain officers and directors of Meridian are also officers and trustees of the Funds; however, such officers and trustees receive no compensation from the Funds. 3. 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 carryovers as of September 30, 2003 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions. These carryovers expire between September 30, 2007 and September 30, 2011. 74 In 2003, the Funds noted below incurred "post October" losses during the period from November 1, 2002 through September 30, 2003. These losses will be deferred for tax purposes and recognized in the year ending September 30, 2004.
ACCUMULATED POST OCTOBER CAPITAL LOSSES DEFERRALS ICON Consumer Discretionary $(23,539,098) $ 0 ICON Energy Fund (8,047,287) (5,865,468) ICON Financial Fund (Note 6) (3,207,869) 0 ICON Healthcare Fund (3,187,635) (6,683,043) ICON Industrials Fund (24,988,739) (4,972,388) ICON Information Technology Fund (94,440,205) 0 ICON Leisure and Consumer Staples Fund (1,473,913) 0 ICON Materials Fund (20,433,121) (362,259) ICON Telecommunication & Utilities Fund (6,262,905) (2,441,985) ICON Short-Term Fixed Income Fund (3,820) 0 ICON Asia-Pacific Region Fund (9,769,168) 0 ICON North Europe Region Fund (2,433,905) 0 ICON South Europe Fund (2,076,909) 0
The difference between book and tax net appreciation and depreciation of investments is wash sale loss deferrals and corporate actions. The Financial Fund, the Materials Fund, and the Asia-Pacific Region Fund had significant wash sale deferrals of $2,186,843, $321,830, and $138,690 respectively. The aggregate composition by Fund of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2003 are as follows:
FEDERAL TAX UNREALIZED UNREALIZED NET APPRECIATION COST APPRECIATION DEPRECIATION (DEPRECIATION) ICON Consumer Discretionary Fund $122,558,803 $31,878,117 $ (4,219,470) $27,658,647 ICON Energy Fund 47,164,763 9,023,342 (754,054) 8,269,288 ICON Financial Fund 126,942,553 14,931,416 (2,747,545) 12,183,871 ICON Healthcare Fund 114,984,157 29,028,837 (2,810,606) 26,218,231 ICON Industrials Fund 115,983,759 18,944,664 (3,529,528) 15,415,136 ICON Information Technology Fund 248,190,837 71,201,124 (10,908,490) 60,292,634 ICON Leisure and Consumer Staples Fund 70,998,867 12,863,782 (1,406,896) 11,456,886 ICON Materials Fund 28,597,184 2,851,075 (1,138,030) 1,713,045 ICON Telecommunication & Utilities Fund 36,436,052 6,922,286 (929,877) 5,992,409 ICON Short-Term Fixed Income Fund 6,129,746 25,534 -- 25,534 ICON Asia-Pacific Region Fund 4,667,496 1,501,912 (67,344) 1,434,568 ICON North Europe Region Fund 7,852,004 2,777,680 (25,837) 2,751,843 ICON South Europe Region Fund 8,185,200 1,230,289 (173,426) 1,056,863
75 Notes to Financial Statements (continued) The tax composition of distributions from ordinary income and return of capital for the year ended September 30, 2003 were as follows:
ORDINARY INCOME RETURN OF DISTRIBUTIONS CAPITAL ICON Financial Fund $399,824 -- ICON Materials Fund 93,225 -- ICON North Europe Region Fund 76,465 $8,130 ICON Short-Term Fixed Income Fund 20,760 -- ICON Telecommunication & Utilities Fund 888,104 --
4. CHANGE IN ACCOUNTING ESTIMATE The ICON Short-Term Fixed Income Fund had an estimated net overaccrual of expenses of approximately $157,000 as of September 30, 1997, which was not material to the financial statements as of that date. However, due to the substantial decrease in the net assets of the Fund during the year ended September 30, 1998, the net estimated remaining overaccrual of $127,000 became material to the financial statements of the Fund. The Fund determined that it received a net benefit due to this estimated overaccrual and has identified and reimbursed shareholders who provided the benefit. During the year ended September 30, 1999, as the shareholders who provided the benefit were being identified, and as a result of additional information, a change in the estimate reduced the amount to $57,539, which was paid to shareholders in the year ended September 30, 2000. This was accounted for as a change in accounting estimate. 5. OPTIONS CONTRACTS WRITTEN The number of option contracts written and the premiums received by the ICON Information Technology Fund during the 12 months ended September 30, 2003, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED Options outstanding, beginning of period 300 $ 78,697 Options written during period - - Options expired during period - - Options closed during period - - Options exercised during period (300) $(78,697) ---- -------- Options outstanding, end of period 0 $ 0 ==== ========
6. TAX MATTER -- FINANCIAL FUND For the year ended September 30, 2002 the Financial Fund ("Fund") did not qualify as a Regulated Investment Company ("RIC"), under Subchapter M of the Internal Revenue Code but no income tax expense resulted because the Fund incurred ordinary and capital losses for that year. The Fund requalified as a RIC in the year ended September 30, 2003, and therefore incurred no income tax expense. 76 Report of Independent Auditors TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE ICON 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, ICON Telecommunication & Utilities Fund, ICON Short-Term Fixed Income Fund, ICON Asia-Pacific Region Fund, ICON North Europe Region Fund, and ICON South Europe Region Fund (thirteen of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2003, 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 ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2003 by correspondence with the custodians, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP /s/ PricewaterhouseCoopers LLP Denver, Colorado November 12, 2003 77 Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 18 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, addresses and principal occupations are set forth below. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 52, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception in 1996. Dr. Callahan also serves as President (1998 to present) and Chief Investment Officer (1991 to present) of Meridian Investment Management Corporation ("Meridian"), 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 Meridian Clearing Corporation ("MCC"), the Funds' Distributor. Dr. Callahan also serves as the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of Meridian Management & Research Corporation ("MM&R"), the parent company of Meridian and MCC. INDEPENDENT TRUSTEES GLEN F. BERGERT, 53. 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); 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); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 56. 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). 78 GREGORY KELLAM SCOTT, 54. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott is Senior Vice President -- Law, General Counsel and Secretary, GenCorp, Inc., a multinational technology-based manufacturing company (2002 to present). Mr. Scott was previously 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). R. MICHAEL SENTEL, 55. 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 FDIC with responsibility for the Rocky Mountain Region (1991-1994). JONATHAN F. ZESCHIN, 50. 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 2002). 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 is also a Director of the Wasatch Funds (2002 to present); and a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to present). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 52. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as Meridian's President (1998 to present) and Chief Investment Officer (1991 to present). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of MCC. Dr. Callahan is also the Chief Investment Officer and Director (1994 to present), and was previously Secretary/ Treasurer (1994 to 1998) of MM&R. ERIK L. JONSON, 54. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception in 1996. Mr. Jonson is also Chief Financial Officer (1996 to present) and Vice President (1998 to present) of Meridian; Chief Financial Officer, Secretary and Director (1996 to present) of MM&E; and Vice President and Treasurer (March 2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) of MCC. ANDRA C. OZOLS, 42. Ms. Ozols has been a Vice President and Secretary of the Funds since March 2002. She previously served in that capacity in 1998. Ms. Ozols is also Vice President, General Counsel and Secretary (March 2002 to present and January 1998 to October 1998) of Meridian; Vice President and Secretary (March 2002 to present) of MCC and Director (June 2003 to present) of MM&R. Ms. Ozols was previously Vice President (1999 to 2002) and Assistant General Counsel (October 1998 to February 2002) of Founders Asset Management LLC; and was previously a Branch Chief (1993 to 1995) and Enforcement Attorney (1990 to 1995 and 1996 to 1998) with the U.S. Securities and Exchange Commission. The Trustees and Officers of the Funds may be contacted at 5299 DTC Boulevard, Suite 1200, Greenwood Village, Colorado 80111. Additional information about the Funds' Trustees and Officers is available in the Funds' Statement of Additional Information, which can be obtained free of charge by calling 1-800-764-0442. 79 Other Information (unaudited) PROXY VOTING BY THE FUNDS A description of the policies and procedures that the Funds use to determine how to vote proxies related to portfolio securities can be obtained free of charge by calling 1-800-764-0442 or by visiting www.iconfunds.com or www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities will be available free of charge no later than August 31, 2004 by calling 1-800-764-0442 or by visiting www.iconfunds.com or www.sec.gov. 80 [ICON FUNDS LOGOS] FOR MORE INFORMATION ABOUT THE ICON FUNDS, CONTACT US: BY TELEPHONE 1-800-764-0442 BY MAIL ICON Funds P.O. Box 701 Milwaukee, WI 53201-0701 IN PERSON ICON Funds 5299 DTC Boulevard, Suite 1200 Greenwood Village, CO 80111 BY E-MAIL ICON@mimcorp.com ON THE INTERNET www.iconfunds.com This report is for the general information of the Funds' shareholders. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. Please call 1-800-764-0442 or visit www.iconfunds.com for a current prospectus, which contains more complete information, including charges, expenses, share classes, and risks. Please read the prospectus carefully before you invest or send money. Meridian Clearing Corp., Distributor. I-117-SEC - -------------------------------------------------------------------------------- INVESTMENT UPDATE SEPTEMBER 30, 2003 ICON CORE EQUITY FUND [PHOTO] ANNUAL REPORT [ICON FUNDS LOGOS] Table of Contents
ABOUT THIS REPORT ............................................2 MESSAGE FROM ICON FUNDS ............................................4 MANAGEMENT OVERVIEW ............................................6 SCHEDULE OF INVESTMENTS ............................................8 FINANCIAL STATEMENTS ...........................................11 FINANCIAL HIGHLIGHTS ...........................................13 NOTES TO FINANCIAL STATEMENTS ...........................................14 REPORT OF INDEPENDENT AUDITORS ...........................................17 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) ...........................................18 OTHER INFORMATION (UNAUDITED) ...........................................20
About This Report - -------------------------------------------------------------------------------- HISTORICAL RETURNS - -------------------------------------------------------------------------------- All total returns mentioned in this report account for the change in the Fund's per-share price and the reinvestment of any dividends and capital gain distributions. 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 Fund's performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 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. Due to market volatility, current performance may differ from the figures shown. Please call 1-800-764-0442 or visit www.iconfunds.com for the most recent returns. - -------------------------------------------------------------------------------- PORTFOLIO DATA - -------------------------------------------------------------------------------- Opinions and forecasts regarding industries, companies and 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. The Fund's percentage holdings as of September 30, 2003 are included in the Schedule of Investments. In April 2003, Standard & Poor's made revisions to its Global Industry Classification Standard, including changes in industry categories and definitions. The Schedule of Investments reflects these changes. Certain companies' stock performance during the period is mentioned in the Management Overview. While ICON's investment methodology does not consider company-specific factors, they may impact a stock's performance, and therefore, Fund performance. There are risks associated with mutual fund investing including the risk of loss of principal. An investment concentrated in sectors and industries may involve greater risk and volatility than a diversified investment. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity and small market share. Investments in foreign securities may entail unique risks, including political, market, and currency risks. 2 - -------------------------------------------------------------------------------- COMPARATIVE INDEX - -------------------------------------------------------------------------------- The comparative index discussed in this report is meant to provide a basis for judging the Fund's performance against a specific securities index. The 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 Fund's portfolio may significantly differ in holdings and composition from the index. Individuals cannot invest directly in the index. The unmanaged Standard & Poor's SuperComposite 1500 (S&P 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of large-cap, mid-cap, and small-cap U.S. companies. This report also includes certain industry performance which is based on the returns of the capitalization-weighted S&P 1500 Sector and Industry Indexes. These Industry Indexes are based on specific classifications determined by Standard & Poor's. Index returns and statistical data included in this report are provided by Bloomberg. 3 Message from ICON Funds - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: [PHOTO] - -------------------------------------------------------------------------------- In looking back over the past 12 months, several statements from previous annual reports provide an interesting insight into the events that unfolded during the period. FEAR, DISGUST AND GREAT BARGAINS To begin, I recall the ICON annual report for the fiscal year ended September 30, 2002. In our letter to shareholders, we remarked that "the current environment has all the characteristics of a market bottom -- fear, disgust, negative news, and great bargains." We went on to say that "we anticipate a broad-based advance when the market emerges from its current cycle." Shortly after that was written, on October 9, 2002, the market indeed hit a bottom, reeling from the emotional stranglehold of impending war and corporate governance scandals. Amid the uncertainty that permeated the landscape, a speculative relief rally took hold during the fourth quarter of 2002. While not the broad advance we were expecting, stocks moved decisively higher though remained widely disconnected from our estimate of fair value for longer than we've experienced. From that October low through September 30, 2003, the S&P 1500 Index, the Funds' primary domestic benchmark, rallied dramatically, gaining an impressive 31.39%. While this reversal was certainly an accurate call by our system, we admit that it was neither clairvoyance nor providence on our part. It was simply the inherent nature of sticking to ICON's valuation discipline. Having calculated in October 2002 that stocks on average were priced 55% below fair value, we thought it best to capitalize on that opportunity and be patient. Although we may have been early, our investment methodology dictated that we be invested to participate. At the same time, it meant we had to look past the headlines and at times take the market's punishment. Other investors chose to wait for the return of clarity and better economic conditions before leaving the sidelines; by then, however, it may have been too late. A MOVE TOWARD FAIR VALUE Following the pre-war jitters that sent the market to yet another low on March 11, 2003, stocks embarked upon a broad six-month rally. However, even in the context of this all-encompassing advance, some sectors were more eager than others. Favored groups, such as Information Technology, Consumer Discretionary, Financials, and Industrials, led the market's ascent. In the natural ebb and flow of business cycles, these moves would be historically consistent with the start of an economic expansion. Yet, if asked whether they were based on the expectation of a recovery or some other triggering event, we would say no. We believe the recent surge in stock prices is nothing more than a move toward fair value. Put another way, we view it as an acknowledgement by many investors that the macro setting was not as discouraging as they initially thought. Stocks were simply oversold, and investors came to realize they were wrong for taking them to extreme lows. [SIDENOTE] "With stocks priced 55% below fair value based on our model, we thought it best to capitalize on that opportunity and be patient." [SIDENOTE] "Stocks were simply oversold, and investors came to realize they were wrong for taking them to extreme lows." 4 While economic conditions have certainly improved in the past year, we do not believe that a strong recovery or boom is necessary to prolong the rally. Our experience tells us it is simply the natural behavior of a rational market. There have been few newsworthy events that have boosted the market since the March 2003 bottom. We do not expect that any are needed for the move toward fair value to continue. RIDING THE THEME As prices resume the march toward fair value, and investors' skepticism gives way to optimism, we may in fact see the return of a momentum mentality. Were this to occur, it would not surprise us to see stocks exceed fair value by the end of the calendar year. At present, however, we believe the market has not gotten ahead of itself, and the broad representation of sector and industry leadership makes sense to our system. In the meantime, we expect prices will gradually continue their move toward fair value despite the prognostications of naysayers and the traditional "wall of worry" that resides on Wall Street. Recently, the mutual fund industry has been tarnished by the actions of some brokers and personnel at advisory firms. We find these reports deeply troubling and want you to know ICON's position on the issues facing mutual funds: - - we do not and have not had agreements that permit the illegal practice of buying Fund shares after the market close - - we are not aware of any ICON personnel who have participated in timing the Funds - - we do not knowingly permit excessive trading in the ICON Funds, and we take aggressive steps to restrict market timing. Only time will tell how the industry will overcome these scandals. You hire us to implement a strict management discipline, and our service staff is equally committed to implementing a rigid system of monitoring Fund activity for any sign of activity that would negatively impact shareholders. I'd like to close with a story that characterizes our investment methodology. While making a presentation at an investor seminar some years ago, an attendee commented that the ICON approach to investing seemed much like piloting a plane. When I asked what he meant by that, he observed that take-offs and landings are critical, and in between it is fairly routine. In our system, capturing industry leadership is critical and in between those rotations, we ride the theme. As of this writing, we consider ourselves to be at cruising altitude. We witnessed an unusual market during the past 12 months. Thank you for giving ICON the opportunity to help guide you through it. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, D.B.A. Chairman of the Board of Trustees and Chief Investment Officer of the Adviser [SIDENOTE] "We do not expect that newsworthy events are needed for the move toward fair value to continue." 5 Management Overview ICON CORE EQUITY FUND A discussion with the Portfolio Management Team HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Core Equity Fund, Class I rose 17.05% for the fiscal year ended September 30, 2003, while its Class C shares appreciated 16.24%. Although we were pleased with the Fund's absolute returns, performance fell short of the Fund's benchmark, the S&P 1500 Index, which returned 24.69% over the same time period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? The market experienced two distinct themes during the reporting period. The first, a speculative eight-week surge off the market low of early October 2002, featured lower-quality companies that were inconsistent with the Fund's investment methodology. For that reason, the Fund was not positioned to capture what at the time appeared to be unsustainable gains. A pullback between December 2002 and early-March 2003 confirmed these assumptions as industry leadership proved both intermittent and fear-based. Amid the market bottom of mid-March, geopolitical concerns inexplicably transformed into cautious optimism. In the absence of a triggering event, a second theme emerged as a broad market rally ensued. This time, however, the advance was driven by higher-quality companies and emphasized economically sensitive sectors such as Information Technology, Consumer Discretionary and Financials. As victory in Iraq enabled war-fixated investors to acknowledge improving economic fundamentals, the rally extended into late September before cooling slightly. Against this backdrop, value was widespread within the market, reaching record highs by our calculations during the fall 2002 and spring 2003 periods. While the Fund emphasized economically sensitive sectors demonstrating both value and relative strength, shifts in market themes were sudden and swift. Consequently, a broad positioning was maintained in an attempt to capture leadership wherever it emerged. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Our goal is to keep the Core Equity Fund diversified among sectors and industries. Although positioned for a broad rally, the Fund was adjusted slightly following the October 2002 market low to increase its exposure to economically sensitive sectors. January 2003 saw a more significant shift as Energy and Healthcare were substantially reduced while Information Technology and Consumer Discretionary were more heavily weighted. By March 2003, leadership had further concentrated as relative strength finally emerged across a number of cyclical industries, including consumer finance, diversified financial services, Internet software & services, semiconductors and specialty stores. These rotations proved advantageous for the Fund as cyclical stocks rallied on post-war optimism and a brighter economic outlook. With this resurgence in cyclical stocks following the mid-March market bottom, the Energy sector lagged in the move back toward fair value and was removed from the Fund. Numerous challenges dampened investor interest, even as energy prices surged late in the period. Healthcare also encountered difficulties, ranging from increased regulatory scrutiny to slowing pharmaceutical sales. Fortunately, the Fund maintained limited exposure to the sector, which at period-end centered on the increasingly attractive managed healthcare industry. Measurable individual contributors to Fund performance for the period included OmniVision Technologies, Inc., a maker of semiconductor imaging devices. The company easily topped Wall Street earnings and revenue forecasts while raising its outlook on strong demand. Meanwhile, audio equipment manufacturer Harman International Industries Inc. advanced as it continued to gain market share in its automotive platforms. Among the Fund's performance laggards, discount lodging provider Hotels.com trimmed its near-term guidance, citing lower sales and higher marketing costs. Elsewhere, Web security firm Internet Security Systems Inc., tumbled after missing Wall Street consensus estimates on lower revenue. By the end of the period, both of these stocks had been sold. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC MARKET? Despite robust gains in the market during the period, valuation readings still point to a sizable gap between stock prices and fair value. Assuming this gap continues to close, leadership may come from the economically sensitive Consumer Discretionary and Industrials sectors, which continue to demonstrate relative strength against the broader market. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 98.7% Top 10 Equity Holdings 17.3% Number of Stocks 86 Cash Equivalents 1.4% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Michaels Stores, Inc. 1.9% Labor Ready, Inc. 1.8% Dollar Tree Stores, Inc. 1.8% j2 Global Communications, Inc. 1.8% Providian Financial Corporation 1.7% Citigroup Inc. 1.7% University of Phoenix Online 1.7% JetBlue Airways Corporation 1.7% Georgia-Pacific Corp. 1.6% Stratasys, Inc. 1.6% Percentages are based upon net assets. 6 - -------------------------------------------------------------------------------- SECTOR COMPOSITION September 30, 2003 - -------------------------------------------------------------------------------- Consumer Discretionary 21.3% Information Technology 20.4% Industrials 19.2% Financial 16.8% Leisure and Consumer Staples 8.4% Materials 5.2% Healthcare 4.2% Telecommunication & Utilities 3.2%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
INCEPTION ONE FIVE SINCE DATE YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Core Equity Fund - Class I 10/12/00 17.05% N/A 4.43% - ------------------------------------------------------------------------------------------ S&P 1500 Index 24.69% N/A -6.72% - ------------------------------------------------------------------------------------------ ICON Core Equity Fund - Class C 11/27/00 16.24% N/A 3.84% - ------------------------------------------------------------------------------------------ S&P 1500 Index 24.69% N/A -6.72% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative index can be found on pages 2 and 3. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON CORE EQUITY FUND - CLASS I S&P 1500 INDEX ------------------------------- -------------- 10/12/00 10000 10000 3/31/01 10810 8861 9/30/01 10040 8037 3/31/02 13234 9049 9/30/02 9717 6525 3/31/03 8715 6818 9/30/03 11374 8135
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. 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. The Fund also offers Class C shares. These figures do not reflect the charges applicable to Class C shares of the Fund. Applying these charges would result in lower returns. 7 Schedule of Investments SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 98.7% CONSUMER DISCRETIONARY 21.3% APPAREL RETAIL 4.4% 18,500 Abercrombie & Fitch Co.(a) $ 512,635 23,100 Chico's FAS, Inc.(a) 707,784 25,300 Christopher & Banks Corporation 603,658 16,200 Jos. A. Bank Clothiers, Inc.(a) 712,314 32,100 Pacific Sunwear of California, Inc.(a) 663,186 - ----------------------------------------------------- 3,199,577 AUTOMOBILE MANUFACTURERS 1.2% 19,500 Winnebago Industries, Inc. 869,310 CATALOG RETAIL 0.8% 51,800 J. Jill Group Inc.(a) 595,700 COMPUTER & ELECTRONICS RETAIL 1.8% 14,100 Best Buy Co., Inc.(a) 670,032 22,200 Electronics Boutique Holdings Corp.(a) 634,254 - ----------------------------------------------------- 1,304,286 CONSUMER ELECTRONICS 1.6% 11,700 Harman International Industries, Incorporated 1,150,695 DEPARTMENT STORES 1.0% 17,000 Federated Department Stores, Inc. 712,300 GENERAL MERCHANDISE STORES 1.8% 39,300 Dollar Tree Stores, Inc.(a) 1,318,515 HOMEBUILDING 1.9% 9,500 Centex Corporation 739,860 10,300 Hovnanian Enterprises, Inc.(a) 663,011 - ----------------------------------------------------- 1,402,871 INTERNET RETAIL 1.5% 20,300 eBay Inc.(a) 1,086,050 SPECIALTY STORES 5.3% 6,100 AutoZone, Inc.(a) 546,133 33,500 Michaels Stores, Inc. 1,365,460 22,400 The Sports Authority, Inc.(a) 704,704 28,900 United Auto Group, Inc.(a) 664,700 14,700 Zale Corporation(a) 652,827 - ----------------------------------------------------- 3,933,824 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 15,573,128 FINANCIAL 16.8% ASSET MANAGEMENT & CUSTODY BANKS 1.1% 28,000 The Bank of New York Company, Inc. 815,080
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE CONSUMER FINANCE 5.6% 97,400 AmeriCredit Corp.(a) $ 1,003,220 20,000 Capital One Financial Corporation 1,140,800 35,200 First Cash Financial Services, Inc.(a) 705,056 105,700 Providian Financial Corporation(a) 1,246,203 - ----------------------------------------------------- 4,095,279 DIVERSIFIED BANKS 1.1% 26,600 FleetBoston Financial Corporation 801,990 DIVERSIFIED CAPITAL MARKETS 1.3% 28,300 J.P. Morgan Chase & Co. 971,539 INVESTMENT BANKING & BROKERAGE 2.1% 11,700 Lehman Brothers Holdings Inc. 808,236 14,800 Morgan Stanley 746,808 - ----------------------------------------------------- 1,555,044 LIFE & HEALTH INSURANCE 1.9% 18,800 Lincoln National Corporation 665,144 49,200 UnumProvident Corporation 726,684 - ----------------------------------------------------- 1,391,828 OTHER DIVERSIFIED FINANCIAL SERVICES 1.7% 27,100 Citigroup Inc. 1,233,321 PROPERTY & CASUALTY INSURANCE 1.2% 15,800 MBIA Inc. 868,526 THRIFTS & MORTGAGE FINANCE 0.8% 15,600 The PMI Group, Inc. 526,500 - ----------------------------------------------------- TOTAL FINANCIAL 12,259,107 HEALTHCARE 4.2% MANAGED HEALTH CARE 4.2% 20,300 Coventry Health Care, Inc.(a) 1,070,622 62,100 Humana Inc.(a) 1,120,905 18,200 PacifiCare Health Systems, Inc.(a) 888,160 - ----------------------------------------------------- 3,079,687 - ----------------------------------------------------- TOTAL HEALTHCARE 3,079,687 INDUSTRIALS 19.2% AIRLINES 4.4% 74,100 ExpressJet Holdings, Inc.(a) 1,022,580 19,900 JetBlue Airways Corporation(a) 1,211,512 55,500 SkyWest, Inc. 961,260 - ----------------------------------------------------- 3,195,352 CONSTRUCTION & ENGINEERING 4.7% 31,700 Chicago Bridge & Iron Company N.V. -- ADR 860,972 24,600 Fluor Corporation 918,318 16,400 Jacobs Engineering Group Inc.(a) 739,640 47,000 URS Corporation(a) 911,800 - ----------------------------------------------------- 3,430,730
8 SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- DIVERSIFIED COMMERCIAL SERVICES 7.4% 15,900 Apollo Group, Inc.(a) $ 1,049,877 26,000 Career Education Corporation(a) 1,177,800 18,800 Corinthian Colleges, Inc.(a) 1,074,608 15,200 Education Management Corporation(a) 876,584 18,300 University of Phoenix Online(a) 1,220,061 - ----------------------------------------------------- 5,398,930 EMPLOYMENT SERVICES 2.7% 23,000 Gevity HR, Inc. 337,640 131,500 Labor Ready, Inc.(a) 1,321,575 13,400 Resources Connection, Inc(a) 322,806 - ----------------------------------------------------- 1,982,021 - ----------------------------------------------------- TOTAL INDUSTRIALS 14,007,033 INFORMATION TECHNOLOGY 20.4% APPLICATION SOFTWARE 0.9% 35,200 Magma Design Automation, Inc.(a) 690,624 COMMUNICATIONS EQUIPMENT 3.0% 26,700 Cisco Systems, Inc.(a) 523,320 20,200 SafeNet, Inc.(a) 729,826 30,400 UTStarcom, Inc.(a) 966,720 - ----------------------------------------------------- 2,219,866 COMPUTER HARDWARE 3.0% 59,300 Neoware Systems, Inc.(a) 1,012,251 27,700 Stratasys, Inc.(a) 1,180,574 - ----------------------------------------------------- 2,192,825 COMPUTER STORAGE & PERIPHERALS 1.1% 15,000 Avid Technology, Inc.(a) 795,000 INTERNET SOFTWARE & SERVICES 6.4% 32,700 Digital Insight Corporation(a) 650,730 29,100 FindWhat.com(a) 503,139 34,100 j2 Global Communications, Inc.(a) 1,290,003 14,700 Sohu.com Inc.(a) 457,905 28,900 United Online, Inc.(a) 1,005,431 36,000 Websense, Inc.(a) 765,720 - ----------------------------------------------------- 4,672,928 IT CONSULTING & OTHER SERVICES 1.5% 30,700 Cognizant Technology Solutions Corporation(a) 1,119,322 SEMICONDUCTOR EQUIPMENT 0.9% 11,200 Cabot Microelectronics Corporation(a) 623,056 SEMICONDUCTORS 3.6% 18,200 International Rectifier Corporation(a) 681,408 26,400 OmniVision Technologies, Inc.(a) 1,114,608 41,000 Zoran Corporation(a) 799,500 - ----------------------------------------------------- 2,595,516 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 14,909,137
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE LEISURE AND CONSUMER STAPLES 8.4% BROADCASTING & CABLE TV 1.2% 23,100 EchoStar Communications Corporation(a) $ 884,730 CASINOS & GAMING 0.9% 15,500 Harrah's Entertainment, Inc. 652,705 HOTELS, RESORTS & CRUISE LINES 2.0% 72,100 Prime Hospitality Corp.(a) 626,549 30,200 Royal Caribbean Cruises Ltd.(f) 848,922 - ----------------------------------------------------- 1,475,471 LEISURE PRODUCTS 1.4% 40,200 Action Performance Companies, Inc. 982,488 MOVIES & ENTERTAINMENT 2.0% 26,100 Fox Entertainment Group, Inc.(a) 730,539 36,400 The Walt Disney Company 734,188 - ----------------------------------------------------- 1,464,727 RESTAURANTS 0.9% 16,600 CEC Entertainment Inc.(a) 650,720 - ----------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 6,110,841 MATERIALS 5.2% METAL & GLASS CONTAINERS 1.0% 103,600 Crown Holdings, Inc.(a) 699,300 PAPER PRODUCTS 1.6% 48,800 Georgia-Pacific Corp. 1,182,912 SPECIALTY CHEMICALS 0.6% 12,200 Cytec Industries Inc.(a) 445,300 STEEL 2.0% 96,800 Allegheny Technologies, Inc. 634,040 37,100 Carpenter Technology Corporation 795,424 - ----------------------------------------------------- 1,429,464 - ----------------------------------------------------- TOTAL MATERIALS 3,756,976 TELECOMMUNICATION & UTILITIES 3.2% WIRELESS TELECOMMUNICATION SERVICES 3.2% 32,500 America Movil S.A. de C.V. -- ADR 751,075 13,600 AO VimpelCom(a) -- ADR 827,696 39,200 Nextel Communications, Inc.(a) 772,632 - ----------------------------------------------------- 2,351,403 - ----------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 2,351,403 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $62,065,121) 72,047,312
9 Schedule of Investments (continued) SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- SHORT-TERM INVESTMENT 1.4% $1,014,382 American Family Demand Note, 0.741%# $ 1,014,382 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $1,014,382) 1,014,382 - ----------------------------------------------------- TOTAL INVESTMENTS 100.1% (COST $63,079,503) 73,061,694 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.1%) (30,714) - ----------------------------------------------------- NET ASSETS 100.0% $73,030,980 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt (f) Foreign security 10 Financial Statements STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003 ASSETS Investments, at cost $63,079,503 -------------- Investments, at value 73,061,694 Cash 951 Receivables: Fund shares sold 115,936 Interest 504 Dividends 28,942 Other assets 5,981 -------------- Total Assets 73,214,008 -------------- LIABILITIES Payables: Fund shares redeemed 45,123 Advisory fees 46,736 Accrued distribution fees 38,438 Fund accounting, custodial and transfer agent fees 14,935 Administration fees 3,107 Accrued expenses 34,689 -------------- Total Liabilities 183,028 -------------- Net Assets -- all share classes $73,030,980 -------------- Net Assets -- Class I $37,603,252 -------------- Net Assets -- Class C $35,427,728 -------------- Shares outstanding (unlimited shares authorized, no par value) Class I 3,380,149 Class C 3,256,158 Net asset value (offering price and redemption price per share) Class I $ 11.12 Class C $ 10.88
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003 INVESTMENT INCOME Interest $ 7,621 Dividends 650,113 -------------- Total Investment Income 657,734 -------------- EXPENSES Advisory fees 483,554 Distribution fees: Class I 85,613 Class C 304,612 Fund accounting, custodial and transfer agent fees 77,710 Administration fees 29,253 Audit fees 17,500 Registration fees 26,784 Legal fees 6,726 Insurance expense 4,510 Trustee fees and expenses 5,036 Shareholder reports 20,742 Interest expense 7,421 Other expenses 56,183 -------------- Total Expenses 1,125,644 -------------- NET INVESTMENT LOSS (467,910) -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized loss from investment transactions (3,558,157) Change in net unrealized appreciation on securities 13,315,101 -------------- Net realized and unrealized gain on investments 9,756,944 -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,289,034 ==============
The accompanying notes are an integral part of the financial statements. 11 Financials Statements (continued) STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 ------------------ ------------------ OPERATIONS Net investment loss $ (467,910) $ (480,772) Net realized loss from investment transactions (3,558,157) (10,021,608) Change in unrealized appreciation on securities 13,315,101 443,874 ------------------ ------------------ Net increase (decrease) in net assets resulting from operations 9,289,034 (10,058,506) ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net capital gains - (1,006,043) ------------------ ------------------ Net decrease from dividends and distributions - (1,006,043) ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold Class I 15,777,863 34,716,434 Class C 17,459,010 31,557,074 Reinvested dividends and distributions Class I - 721,301 Class C - 258,376 Shares repurchased Class I (25,007,736) (11,255,160) Class C (14,463,137) (4,542,647) ------------------ ------------------ Net (decrease)/increase from fund share transactions (6,234,000) 51,455,378 ------------------ ------------------ Total net increase in net assets 3,055,034 40,390,829 ------------------ ------------------ NET ASSETS Beginning of period 69,975,946 29,585,117 ------------------ ------------------ End of period $ 73,030,980 $ 69,975,946 ------------------ ------------------ NET ASSETS CONSIST OF Paid-in capital $ 76,607,158 $ 83,333,008 Accumulated undistributed net investment loss - - Accumulated undistributed net realized loss from investments (13,558,369) (10,024,152) Unrealized appreciation/(depreciation) on securities 9,982,191 (3,332,910) ------------------ ------------------ Net Assets $ 73,030,980 $ 69,975,946 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold Class I 1,599,134 3,071,043 Class C 1,836,853 2,737,279 Reinvested dividends and distributions Class I - 59,809 Class C - 21,603 Shares repurchased Class I (2,665,419) (1,000,690) Class C (1,544,876) (428,625) ------------------ ------------------ Net (decrease)/increase (774,308) 4,460,419 ------------------ ------------------ Shares outstanding beginning of period 7,410,615 2,950,196 ------------------ ------------------ Shares outstanding end of period 6,636,307 7,410,615 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $121,427,409 $111,655,519 Proceeds from sales of securities 129,023,828 60,207,796
The accompanying notes are an integral part of the financial statements. 12 Financial Highlights
CLASS I CLASS I CLASS I CLASS C CLASS C FOR THE YEAR FOR THE YEAR FOR THE PERIOD FOR THE YEAR FOR THE YEAR ENDED ENDED OCTOBER 12, 2000 ENDED ENDED SEPTEMBER 30, SEPTEMBER 30, (INCEPTION) TO SEPTEMBER 30, SEPTEMBER 30, 2003 2002 SEPTEMBER 30, 2001 2003 2002 ------------- ------------- ------------------ ------------- ------------- Net asset value, beginning of period $ 9.50 $ 10.04 $ 10.00 $ 9.36 $ 9.98 ------------- ------------- ------------------ ------------- ------------- INCOME FROM INVESTMENT OPERATIONS Net investment loss(x) (0.04) (0.07) (0.05) (0.11) (0.15) Net realized and unrealized gains/(losses) on investments 1.66 (0.20) 0.09 1.63 (0.20) ------------- ------------- ------------------ ------------- ------------- Total from investment operations 1.62 (0.27) 0.04 1.52 (0.35) ------------- ------------- ------------------ ------------- ------------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 0.00 0.00 0.00 Distributions from net realized gains 0.00 (0.27) 0.00 0.00 (0.27) ------------- ------------- ------------------ ------------- ------------- Total distributions 0.00 (0.27) 0.00 0.00 (0.27) ------------- ------------- ------------------ ------------- ------------- Net asset value, end of period $ 11.12 $ 9.50 $ 10.04 $ 10.88 $ 9.36 ============= ============= ================== ============= ============= Total return 17.05% (3.23)% 0.40%(b) 16.24% (4.07)% Net assets, end of period (in thousands) $37,603 $42,232 $23,261 $35,428 $27,744 Average net assets for the period (in thousands) $34,007 $37,577 $23,802 $30,459 $19,849 Ratio of expenses to average net assets 1.39% 1.36% 1.60%* 2.14% 2.11% Ratio of net investment loss to average net assets (0.37)% (0.58)% (0.36)%* (1.12)% (1.33)% Portfolio turnover rate 188.07% 107.82% 124.61%(a) 188.07% 107.82% CLASS C FOR THE PERIOD NOVEMBER 28, 2000 (INCEPTION) TO SEPTEMBER 30, 2001 ------------------ Net asset value, beginning of period $ 10.62 ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment loss(x) (0.10) Net realized and unrealized gains/(losses) on investments (0.54) ------------------ Total from investment operations (0.64) ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 Distributions from net realized gains 0.00 ------------------ Total distributions 0.00 ------------------ Net asset value, end of period $ 9.98 ================== Total return (0.20)%(b) Net assets, end of period (in thousands) $ 6,324 Average net assets for the period (in thousands) $ 2,920 Ratio of expenses to average net assets 2.23%* Ratio of net investment loss to average net assets (1.24)%* Portfolio turnover rate 124.61%(a)
* Annualized for periods less than a year (x) Calculated using the average share method (a) Portfolio turnover is calculated at the Fund level and therefore represents the period October 12, 2000 (inception) to September 30, 2001. (b) Since the Fund was in existence for less than one year in 2001, the total return calculation is for the period indicated. 13 Notes to Financial Statements SEPTEMBER 30, 2003 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Core Equity Fund (the "Fund") is a series fund 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 Fund commenced operations on October 12, 2000 and offers two classes of shares. There are currently 17 other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. The Fund is authorized to issue an unlimited number of no par shares. The investment objective of the Fund is to provide long-term capital appreciation with a secondary objective of capital preservation. The Fund may have elements of risk, including the risk of loss of principal. Additionally, an investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity and small market share. Investments in foreign securities may entail unique risks, including political, market, and currency risks. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its 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 could differ from these estimates. Investment Valuation. The Fund's securities and other assets are valued at the close of the regular trading session of the New York Stock Exchange (the "Exchange") (normally 4 p.m. Eastern time) each day the Exchange is open. A security listed or traded primarily on a securities exchange or in the over-the-counter market is valued at its last sale price on the exchange or market where it is principally traded. Lacking any sales that day, the security is valued at the current closing bid price or based on quotes from dealers making a market for the security if the closing bid price is not available. The market value of individual securities held by the Fund is determined by using pricing services that provide market prices to other mutual funds or, as needed, by obtaining market quotations from independent broker/dealers. Securities and assets for which quotations are not readily available are valued at fair value determined in good faith pursuant to consistently applied procedures established by the Trust's Board of Trustees. Short-term securities with remaining maturities of 60 days or less are generally valued at amortized cost or original cost plus accrued interest, both of which approximate market value. London closing quotes for exchange rates are used to convert foreign security values into U.S. dollars. Repurchase Agreements. Repurchase agreements, if held by the Fund, are fully collateralized by U.S. Government securities and such collateral is in the possession of the Fund's 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 Fund has 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 Fund during the year ended September 30, 2003. 14 Income Taxes. The Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and, accordingly, the Fund will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that it intends to make sufficient distributions of net investment income and net realized capital gain. Dividends paid by the Fund 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 Fund on the ex-dividend/distribution date. The Fund distributes net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles generally accepted in the United States of America. 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. Investment Transactions. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Expenses. Each class of the 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 attributable 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. Meridian Investment Management Corporation ("Meridian") serves as the investment adviser to the Fund and is responsible for managing the Fund's portfolios of securities. Meridian receives a monthly management fee that is computed daily at an annual rate of 0.75% of the Fund's average daily net assets. Transfer Agent, Custody and Accounting Fees. U.S. Bank N.A. ("U.S. Bank") and U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provide domestic custodial services, transfer agent services and fund accounting for the Fund. The Trust pays a fee for transfer agent and custody services at an annual rate of 0.065% on the Trust's first $500 million of average daily net assets, 0.06% on the next $1.5 billion of average daily net assets, and 0.05% on the average daily net assets in excess of $2 billion. The Trust pays a minimum fee for fund accounting of $37,500 on the first $100 million of average daily net assets, 0.0125% on the next $200 million and 0.0075% on the average daily net assets in excess of $300 million. The Trust also pays for various out-of-pocket costs incurred by U.S. Bancorp that are estimated to be 0.02% of the average daily net assets. Administrative Services. The Trust has entered into an administrative services agreement with Meridian. This agreement provided for an annual fee of 0.05% on the Trust's first $500 million of average daily net assets and 0.04% on average daily net assets in excess of $500 million for the period October 1, 2002 to August 31, 2003 and 0.05% on the Trust's first $1.5 billion of average daily net assets and 0.045% on the average daily net assets in excess of $1.5 billion for the period starting September 1, 2003. 15 Notes to Financial Statements (continued) Distribution Fees. The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") under which the Fund is authorized to compensate the Fund's distributor, Meridian Clearing Corp. ("MCC") (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, Class C shareholders pay an annual 12b-1 and service fee of 1.00% of average daily net assets and Class I shareholders pay an annual 12b-1 fee of 0.25% of average daily net assets. For the year ended September 30, 2003 the total amounts paid or payable to MCC pursuant to the 12b-1 Plan were $304,612 on the Class C shares and $85,613 on the Class I shares. Related parties. Certain officers and directors of Meridian and MCC are also officers and trustees of the Funds; however, such officers and trustees receive no compensation from the Funds. 3. 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 difference between book and tax net appreciation or depreciation of investment is wash sale loss deferrals and corporate actions. The aggregate composition of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2003 are as follows: Federal Tax Cost $63,079,503 Unrealized Appreciation $11,965,773 Unrealized Depreciation $(1,983,582) Net Appreciation $ 9,982,191
The tax components of capital shown in the table below represent: (1) losses or deductions the portfolio may be able to offset against income and gains recognized in future years, and (2) post October loss deferrals. Accumulated capital losses noted below represent net capital loss carryovers as of September 30, 2003 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions. These carryovers expire on September 30, 2010 and 2011. In 2003, the portfolio incurred "post October" losses during the period from November 1, 2002 through September 30, 2003. These losses will be deferred for tax purposes and recognized in the year ending September 30, 2004. Accumulated Capital Losses $(11,898,396) Post October Deferrals $ (1,659,973)
16 Report of Independent Auditors TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF ICON FUNDS: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Core Equity Fund (one of the portfolios constituting ICON Funds, hereafter referred to as the "Fund") at September 30, 2003, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2003 by correspondence with the custodian, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP /s/ PricewaterhouseCoopers LLP Denver, Colorado November 12, 2003 17 Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 18 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, addresses and principal occupations are set forth below. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 52, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception in 1996. Dr. Callahan also serves as President (1998 to present) and Chief Investment Officer (1991 to present) of Meridian Investment Management Corporation ("Meridian"), 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 Meridian Clearing Corporation ("MCC"), the Funds' Distributor. Dr. Callahan also serves as the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of Meridian Management & Research Corporation ("MM&R"), the parent company of Meridian and MCC. INDEPENDENT TRUSTEES GLEN F. BERGERT, 53. 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); 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); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 56. 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). 18 GREGORY KELLAM SCOTT, 54. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott is Senior Vice President -- Law, General Counsel and Secretary, GenCorp, Inc., a multinational technology-based manufacturing company (2002 to present). Mr. Scott was previously 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). R. MICHAEL SENTEL, 55. 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 FDIC with responsibility for the Rocky Mountain Region (1991-1994). JONATHAN F. ZESCHIN, 50. 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 2002). 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 is also a Director of the Wasatch Funds (2002 to present); and a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to present). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 52. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as Meridian's President (1998 to present) and Chief Investment Officer (1991 to present). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of MCC. Dr. Callahan is also the Chief Investment Officer and Director (1994 to present), and was previously Secretary/ Treasurer (1994 to 1998) of MM&R. ERIK L. JONSON, 54. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception in 1996. Mr. Jonson is also Chief Financial Officer (1996 to present) and Vice President (1998 to present) of Meridian; Chief Financial Officer, Secretary and Director (1996 to present) of MM&R; and Vice President and Treasurer (March 2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) of MCC. ANDRA C. OZOLS, 42. Ms. Ozols has been a Vice President and Secretary of the Funds since March 2002. She previously served in that capacity in 1998. Ms. Ozols is also Vice President, General Counsel and Secretary (March 2002 to present and January 1998 to October 1998) of Meridian; Vice President and Secretary (March 2002 to present) of MCC and Director (June 2003 to present) of MM&R. Ms. Ozols was previously Vice President (1999 to 2002) and Assistant General Counsel (October 1998 to February 2002) of Founders Asset Management LLC; and was previously a Branch Chief (1993 to 1995) and Enforcement Attorney (1990 to 1995 and 1996 to 1998) with the U.S. Securities and Exchange Commission. The Trustees and Officers of the Funds may be contacted at 5299 DTC Boulevard, Suite 1200, Greenwood Village, Colorado 80111. Additional information about the Funds' Trustees and Officers is available in the Funds' Statement of Additional Information, which can be obtained free of charge by calling 1-800-764-0442. 19 Other Information (unaudited) PROXY VOTING BY THE FUND A description of the policies and procedures that the Fund uses to determine how to vote proxies related to portfolio securities can be obtained free of charge by calling 1-800-764-0442 or by visiting www.iconfunds.com or www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities will be available free of charge no later than August 31, 2004 by calling 1-800-764-0442 or by visiting www.iconfunds.com or www.sec.gov. 20 [ICON FUNDS LOGOS] FOR MORE INFORMATION ABOUT THE ICON FUNDS, CONTACT US: BY TELEPHONE 1-800-764-0442 BY MAIL ICON Funds P.O. Box 701 Milwaukee, WI 53201-0701 IN PERSON ICON Funds 5299 DTC Boulevard, Suite 1200 Greenwood Village, CO 80111 BY E-MAIL ICON@mimcorp.com ON THE INTERNET www.iconfunds.com This report is for the general information of the Fund's shareholders. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. Please call 1-800-764-0442 or visit www.iconfunds.com for a current prospectus, which contains more complete information, including charges, expenses, share classes, and risks. Please read the prospectus carefully before you invest or send money. Meridian Clearing Corp., Distributor. I-118-CEQ - -------------------------------------------------------------------------------- INVESTMENT UPDATE SEPTEMBER 30, 2003 ICON BOND FUND [PHOTO] ANNUAL REPORT [ICON FUNDS LOGOS] Table of Contents
ABOUT THIS REPORT ............................................2 MESSAGE FROM ICON FUNDS ............................................4 MANAGEMENT OVERVIEW ............................................6 SCHEDULE OF INVESTMENTS ............................................8 FINANCIAL STATEMENTS ...........................................10 FINANCIAL HIGHLIGHTS ...........................................12 NOTES TO FINANCIAL STATEMENTS ...........................................13 REPORT OF INDEPENDENT AUDITORS ...........................................16 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) ...........................................17 OTHER INFORMATION (UNAUDITED) ...........................................19
About This Report - -------------------------------------------------------------------------------- HISTORICAL RETURNS - -------------------------------------------------------------------------------- All total returns mentioned in this report account for the change in the Fund's per-share price and the reinvestment of any dividends and capital gains distributions. 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 Fund's performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 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. Due to market volatility, current performance may differ from the figures shown. Please call 1-800-764-0442 or visit www.iconfunds.com for the most recent returns. - -------------------------------------------------------------------------------- PORTFOLIO DATA - -------------------------------------------------------------------------------- Opinions and forecasts regarding industries, companies and 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. The Fund's percentage holdings as of September 30, 2003 are included in the Schedule of Investments. There are risks associated with mutual fund investing, including the risk of loss of principal. The Fund may invest in medium- and lower-quality debt securities. These high-yield bonds involve a greater risk of default and price volatility than U.S. Government and other high-quality bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which will affect net asset value. Investments in foreign securities may entail unique risks, including political, market, and currency risks. 2 - -------------------------------------------------------------------------------- COMPARATIVE INDEX - -------------------------------------------------------------------------------- The comparative index discussed in this report is meant to provide a basis for judging the Fund's performance against a specific securities index. The benchmark 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 Fund's portfolio may significantly differ in holdings and composition from the index. Individuals cannot invest directly in the index. The unmanaged Lehman Brothers 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 and Lehman Brothers. 3 Message from ICON Funds - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: [PHOTO] - -------------------------------------------------------------------------------- A year has passed since the launch of the ICON Bond Fund, and we are pleased to report that this alternative for increasingly difficult and volatile markets has exceeded expectations. Not by guessing where interest rates or the economy are headed. Rather, by employing a disciplined methodology of sector rotation and strict valuation analysis. In viewing the bond market as one asset class, we rotate around the duration and quality grid, selling sectors that appear overpriced and buying those that appear underpriced. Looking back over the fiscal year, several statements from the ICON Bond Fund semiannual report for the six-month period ended March 31, 2003 provide an interesting insight into the events that later unfolded. THE BENEFICIARY OF PESSIMISM At the time, we commented that "the bond market was the beneficiary of the pessimism, uncertainty and fear that permeated the investment community." With investors fixated on impending war and perceived economic stagnation, stock and bond prices became detached from intrinsic value. While stocks were trading as high as 55% below our estimate of fair value, U.S. Treasury securities were in the midst of a flight-to-quality rally that boosted their valuations to lofty levels. Corporate bonds, meanwhile, had languished amid economic and default concerns. We went on to say that "by favoring the comfort of government bonds, investors were allowing corporate and lower-quality bonds to be priced at discounts to our estimate of fair value." However, as stocks rebounded off the market lows of October 2002 and March 2003, Treasuries bid a hasty retreat. In contrast, lower-grade corporate bonds mirrored relief-based advances in the stock market. One other observation from the semiannual report bears mentioning. "Yet even in the context of this rotation-driven rally, the mispriced corporate sector appeared much more eager in its surge back toward fair value." This surge was no more apparent than in the second half of the fiscal year. As the end of military action in Iraq gave way to a brighter economic outlook, corporate bonds strengthened in light of better-than-expected company profits and rising stock prices. While this reversal was certainly an accurate call by our system, we admit that it was neither clairvoyance nor providence on our part. It was simply the inherent nature of sticking to ICON's valuation discipline. [SIDENOTE] "With investors fixated on impending war and perceived economic stagnation, stock and bond prices became detached from intrinsic value." 4 A MOVE TOWARD FAIR VALUE We believe the recent surge in corporate bond prices is nothing more than a move toward fair value. Put another way, we view it as an acknowledgement by many investors that the macro setting was not as discouraging as they initially thought. Corporate and high-yield bonds were simply oversold, and investors came to realize they were wrong for taking them to extreme lows. While economic conditions have certainly improved in the past year, we do not believe that a strong recovery or boom is necessary to prolong the rally. Our experience tells us it is simply the natural behavior of a rational market. There have been few newsworthy events that have boosted the market since the March 2003 bottom. We do not expect that any are needed for the move toward fair value to continue. RECENT PRESS ON MUTUAL FUNDS Recently, the mutual fund industry has been tarnished by the actions of some brokers and personnel at advisory firms. We find these reports deeply troubling and want you to know ICON's position on the issues facing mutual funds: - - we do not and have not had agreements that permit the illegal practice of buying Fund shares after the market close - - we are not aware of any ICON personnel who have participated in timing the Funds - - we do not knowingly permit excessive trading in the ICON Funds, and we take aggressive steps to restrict market timing. Only time will tell how the industry will overcome these scandals. You hire us to implement a strict management discipline, and our service staff is equally committed to implementing a rigid system of monitoring the Fund for any sign of activity that would negatively impact shareholders. RIDING THE THEME I'd like to close with a story that characterizes our investment methodology. While making a presentation at an investor seminar some years ago, an attendee commented that the ICON approach to investing seemed much like piloting a plane. When I asked what he meant by that, he observed that take-offs and landings are critical, and in between it is fairly routine. In our system, capturing sector leadership is critical and in between those rotations, we ride the theme. As of this writing, we consider ourselves to be at cruising altitude. We witnessed an unusual market during the past 12 months. Thank you for giving ICON the opportunity to help guide you through it. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, D.B.A. Chairman of the Board of Trustees and Chief Investment Officer of the Adviser [SIDENOTE] "The recent surge in corporate bond prices is an acknowledgement by many investors that the macro setting was not as discouraging as they initially thought." 5 Management Overview ICON BOND FUND A discussion with Derek Rollingson, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? For the fiscal year ended September 30, 2003, the ICON Bond Fund, Class I climbed 8.19% versus a one-year return of 7.12% for its benchmark, the Lehman Brothers U.S. Universal Index. Moreover, the Fund's Class C shares appreciated 9.98% since their October 21, 2002 inception, while the Index returned 8.96% over the same time period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? A seesaw rotation marked the first half of the fiscal year, as investors shifted between the safety of U.S. Treasuries and the higher yields of corporate bonds. In both cases, robust demand propelled prices higher, sending yields lower across the entire maturity spectrum. Despite mostly favorable conditions for government and agency securities, signs emerged that the rally may have run its course. Amid growing concern that an improving economic and geopolitical outlook could produce a sharp reversal in the overbought Treasury market, lower-quality investment-grade bonds and high-yield debt enjoyed a strong resurgence, benefiting from wider yield spreads. As the second half got underway, investors continued to abandon Treasuries in light of better-than-expected corporate earnings and higher stock prices. Higher-yielding fixed-income securities assumed leadership before retreating abruptly in late June 2003, as the bond market reacted to a disappointing reduction in the overnight lending rate. Nevertheless, rates remained near historic lows until late June, when a spate of positive economic reports exacerbated the sell-off, pushing Treasury yields dramatically higher before moderating later in the period. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Early in the reporting period our valuation model indicated a significant pricing disconnect in the corporate bond market, particularly within the lower-quality investment-grade and high-yield debt sectors. The Fund purchased these issues within its investment limitations at sizable discounts to historical averages. However, the Fund was early in rotating from overvalued government and agency bonds to more attractively valued corporate credits. As Treasuries rallied amid stock market weakness, corporate bonds backpedaled, causing a drag on performance. Despite this near-term setback, our valuation and relative strength readings continued to suggest that corporates were poised to outperform going forward. Higher-yielding corporate bonds outpaced government issues, coinciding with a sustained post-war surge in stocks and a tightening of credit spreads. This upward move was not without its bumps as corporates retreated in unison with the July spike in the 10-year Treasury yield. However, the bond market rebounded strongly in August and September as investors capitalized on attractive valuations, improving credit fundamentals, and declining default risk. WHAT IS THE INVESTMENT OUTLOOK FOR THE BOND MARKET? Although improving economic conditions have pushed bond yields off their historical lows, we believe the current low-inflation environment could very well support sustainable growth without a corresponding rise in interest rates. While higher yields paid by lower-quality investment-grade and high-yield corporate bonds could offset the dilutive effects of rising rates, we have taken steps to lessen our interest rate exposure by shortening the Fund's average duration. Under these conditions, and based on our model, it is our belief that corporate bonds may outperform their government counterparts for the foreseeable future. [SIDENOTE] PORTFOLIO COMPOSITION September 30, 2003 Corporate Bonds 67.5% Convertible Bonds 1.8% U.S. Government 9.7% U.S. Agency 10.2% Investment Grade+ 75.6% High-Yield/High-Risk+ 24.4% Equities 1.0% Short-Term Investments 8.5% + Percentages are based upon total bond holdings. Percentages are based upon net assets. [SIDENOTE] PORTFOLIO HIGHLIGHTS September 30, 2003 Number of Bonds 78 Number of Equities 1 Weighted average maturity* 10.37 years Weighted average duration* 6.07 years 30-Day Current Yield (after expense limitation) 3.75% 30-Day Current Yield (before expense limitation) 3.17% * Excluding cash and equivalents. Yield will fluctuate. 6 - -------------------------------------------------------------------------------- TOP 10 BOND HOLDINGS September 30, 2003 - -------------------------------------------------------------------------------- U.S. Treasury, 5.000%, 2-15-11 2.8% Tennessee Valley Authority, 5.625%, 1-18-11 2.2% Federal National Mortgage Association (FNMA) Notes, 7.125%, 1-15-30 2.2% Owens-Illinois Inc. Senior Notes, 8.100%, 5-15-07 2.1% Computer Associates International Inc. Senior Notes, 6.375%, 4-15-05 2.1% U.S. Treasury, 4.875%, 2-15-12 1.8% Ford Motor Company Notes, 7.450%, 7-16-31 1.8% Hertz Corp. Senior Notes, 7.625%, 6-1-12 1.8% PSEG Power LLC Guaranteed, 6.950%, 6-1-12 1.7% U.S. Treasury, 6.625%, 5-15-07 1.6%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
INCEPTION ONE FIVE SINCE DATE YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------- ICON Bond Fund - Class I 10/1/02 8.19% N/A 8.19% - ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 7.12% N/A 7.12% - ------------------------------------------------------------------------------------------- ICON Bond Fund - Class C 10/21/02 N/A N/A 9.98% - ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index N/A N/A 8.96% - -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative index can be found on pages 2 and 3. The Adviser has agreed to limit a portion of the Fund's expenses if they exceed the designated cap. The Fund's total return would have been lower if this expense limitation had not been in place. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON BOND FUND - CLASS I LEHMAN BROTHERS U.S. UNIVERSAL INDEX ------------------------ ------------------------------------ 10/1/02 10000 10000 12/31/02 10053 10199 3/31/03 10245 10383 6/30/03 10854 10703 9/30/03 10819 10712
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 10/1/02 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 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. The Fund also offers Class C shares. These figures do not reflect the charges applicable to Class C shares of the Fund. Applying these charges would result in lower returns. 7 Schedule of Investments SCHEDULE OF INVESTMENTS September 30, 2003
PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- BONDS 89.2% CORPORATE BONDS 67.5% $ 450,000 Allied Waste North America Inc. Guaranteed, 10.000%, 8-1-09 $ 487,688 372,000 AT&T Corporation Notes, 7.750%, 3-1-07 421,480 450,000 AT&T Wireless Services Inc. Senior Notes, 8.750%, 3-1-31 556,578 500,000 Boeing Co. Debentures, 8.750%, 8-15-21 632,070 350,000 Capital One Financial Corp. Senior Notes, 6.875%, 2-1-06 380,716 400,000 Capital One Financial Corp. Notes, 6.500%, 7-30-04 414,240 391,000 Cendant Corp. Senior Notes, 7.375%, 1-15-13 450,771 525,000 CITGroup Inc. Senior Notes, 7.750%, 4-2-12 623,105 400,000 Comcast Corp. Notes, 8.875%, 5-1-17 521,136 500,000 Comcast Corp. Notes, 6.200%, 11-15-08 552,559 800,000 Computer Associates International Inc. Senior Notes, 6.375%, 4-15-05 844,000 300,000 Cox Communications Inc. Notes, 7.750%,11-1-10 358,317 500,000 CSC Holdings Inc. Senior Notes, 7.250%, 7-15-08 498,750 600,000 Echostar Communications Corp. Senior Notes, 9.375%, 2-1-09 639,750 260,000 FairFax Financial Holdings Notes, 7.375%, 3-15-06(f) 260,000 6,000 First American Corp. Debentures, 7.550%, 4-1-28 6,617 783,000 Ford Motor Company Notes, 7.450%, 7-16-31 722,111 350,000 Ford Motor Credit Co. Notes, 7.375%, 10-28-09 373,066 185,000 GTE North Inc. Debentures, 6.940%, 4-15-28 198,788 300,000 The Gap Inc. Notes, 10.550%, 12-15-08 360,750 350,000 The Gap Inc. Notes, 6.900%, 9-15-07 376,250 410,000 General Electric Capital Corp. Notes, 6.750%, 3-15-32 462,689 354,000 General Electric Capital Corp. Notes, 7.375%, 1-19-10 420,375 600,000 General Motors Acceptance Co. Notes, 6.125%, 8-28-07 634,360 537,000 General Motors Acceptance Co. Notes, 7.200%, 1-15-11 565,857 240,000 Georgia-Pacific Corp. Notes, 8.875%, 5-15-31 241,200 350,000 Georgia-Pacific Corp. Debentures, 7.375%, 12-1-25 309,750 300,000 Goldman Sachs Group Inc. Notes, 6.600%, 1-15-12 339,541
- -----------------------------------------------------
PRINCIPAL AMOUNT MARKET VALUE $ 600,000 Halliburton Company Notes, 6.000%, 8-1-06 $ 621,000 680,000 Hertz Corp. Senior Notes, 7.625%, 6-1-12 711,198 300,000 Hilton Hotels Corp. Senior Notes, 7.500%, 12-15-17 304,500 500,000 Household Finance Corp. Senior Unsubordinated, 5.875%, 2-1-09 548,271 400,000 JC Penney Co. Inc. Debentures, 7.950%, 4-1-17 422,000 455,000 J.P. Morgan Chase & Co. Subordinated Notes, 6.750%, 8-15-08 522,950 500,000 Liberty Media Corp. Debentures, 8.250%, 2-1-30 578,843 250,000 Marsh Supermarket Inc. Guaranteed, 8.875%, 8-1-07 235,000 500,000 Mediacom Broadband LLC Guaranteed, 11.000%, 7-15-13 526,250 500,000 Morgan Stanley Notes, 7.250%, 4-1-32 584,072 500,000 Motorola Inc. Debentures, 6.500%, 11-15-28 481,875 440,000 News American Holdings Inc. Debentures, 7.750%, 2-1-24 514,851 300,000 News America Holdings Guaranteed, 8.150%, 10-17-36 368,864 575,000 Nextel Communications Inc. Senior Notes, 9.375%, 11-15-09 623,875 829,000 Owens-Illinois Inc. Senior Notes, 8.100%, 5-15-07 850,761 345,000 Pep Boys Manny Moe & Jack Notes, 7.000%, 6-1-05 350,175 300,000 Phillips Petroleum Notes, 8.750%, 5-25-10 380,954 600,000 PSEG Power LLC Guaranteed, 6.950%, 6-1-12 677,329 350,000 Royal Caribbean Cruises Ltd. Senior Notes, 6.750%, 3-15-08(f) 353,500 382,000 SBC Communications Inc. Notes, 6.250%, 3-15-11 426,724 160,000 SEMCO Energy Senior Notes, 8.000%, 6-30-16 158,400 300,000 Sears Roebuck & Co. Notes, 6.500%, 12-1-28 309,030 305,000 Sears Roebuck & Co. Notes, 6.700%, 4-15-12 345,939 300,000 Starwood Hotels & Resorts Worldwide Inc. Guaranteed, 7.875%, 5-1-12 328,500 515,000 Tesoro Petroleum Corp. Guaranteed, 9.000%, 7-1-08 502,125 399,000 Time Warner Inc. Debentures, 7.570%, 2-1-24 448,336 350,000 Toys R Us Inc. Notes, 7.625%, 8-1-11 381,053 250,000 Tyco International Ltd. Guaranteed, 6.125%, 11-1-08(f) 261,250 560,000 Verizon New Jersey Inc. Debentures, 5.875%, 1-17-12 607,899
8 SCHEDULE OF INVESTMENTS September 30, 2003
PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- w$ 300,000 Winn Dixie Stores Inc. Guaranteed, 8.875%, 4-1-08 $ 310,500 300,000 Wisconsin Power & Light Co. Notes, 7.000%, 6-15-07 338,815 - ----------------------------------------------------- TOTAL CORPORATE BONDS 26,727,353 CONVERTIBLE BONDS 1.8% 223,000 GTECH Holdings Corp., 1.750%, 12-15-21 $ 359,588 400,000 Providian Financial Corp., 3.250%, 8-15-05 374,000 - ----------------------------------------------------- TOTAL CONVERTIBLE BONDS 733,588 U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS 19.9% 200,000 Federal Farm Credit Bank Notes, 5.900%, 7-21-08 225,231 255,000 Federal Farm Credit Bank Notes, 5.900%, 8-4-08 287,264 210,000 Federal Home Loan Bank (FHLB), 5.945%, 7-28-08 236,658 450,000 Federal Home Loan Bank (FHLB), 5.875%, 2-15-11 497,915 588,000 Federal Home Loan Mortgage Corporation (FHLMC) Notes, 5.125%, 7-15-12 625,095 700,000 Federal National Mortgage Association (FNMA) Notes, 7.125%, 1-15-30 859,651 300,000 Private Export Funding Guaranteed, 6.490%, 7-15-07 341,857 800,000 Tennessee Valley Authority, 5.625%, 1-18-11 885,623 390,000 Tennessee Valley Authority Notes, 6.875%, 12-15-43 409,710 669,000 U.S. Treasury, 4.875%, 2-15-12 724,009 1,000,000 U.S. Treasury, 5.000%, 2-15-11 1,096,562 500,000 U.S. Treasury, 5.750%, 8-15-10 572,441 559,000 U.S. Treasury, 6.625%, 5-15-07 643,789 321,000 U.S. Treasury, 8.750%, 5-15-17 461,362 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS 7,867,167 - ----------------------------------------------------- TOTAL BONDS (COST $33,522,261) 35,328,108 SHARES MARKET VALUE - ----------------------------------------------------- W COMMON STOCKS 1.0% FINANCIAL 1.0% REAL ESTATE INVESTMENT TRUSTS 7,000 Novastar Financial Inc. $ 402,290 - ----------------------------------------------------- TOTAL FINANCIAL 402,290 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $346,620) 402,290 PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- W SHORT-TERM INVESTMENTS 8.5% U.S. GOVERNMENT AGENCIES 2.3% $ 892,000 Federal Home Loan Bank (FHLB) Discount Note, 0.850%, 10-1-03 $ 892,000 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 892,000 SHORT-TERM CORPORATE BONDS 2.6% 72,000 CMS Energy Corp. Senior Notes, 6.750%, 1-15-04 72,000 400,000 Ford Motor Credit Co. Senior Notes, 5.750%, 2-23-04 406,540 550,000 Xerox Corp. Notes, 5.500%, 11-15-03 551,375 - ----------------------------------------------------- TOTAL SHORT-TERM CORPORATE BONDS 1,029,915 VARIABLE RATE DEMAND NOTE 3.6% 1,443,253 American Family Demand Note, 0.741%# 1,443,253 - ----------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 1,443,253 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $3,358,253) 3,365,168 - ----------------------------------------------------- TOTAL INVESTMENTS 98.7% (COST $37,227,134) 39,095,566 - ----------------------------------------------------- OTHER ASSETS LESS LIABILITIES 1.3% 502,415 - ----------------------------------------------------- NET ASSETS 100.0% $39,597,981 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. # Variable rate demand notes 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, 2003. (f) Foreign security Dates shown on each security are due dates of the obligations. 9 Financial Statements STATEMENT OF ASSETS AND LIABILITIES
SEPTEMBER 30, 2003 ASSETS Investments, at cost $37,227,134 -------------- Investments, at value 39,095,566 Receivables: Fund shares sold 267,431 Interest 609,209 Expense reimbursement by Adviser 14,990 Other assets 3,703 -------------- Total Assets 39,990,899 -------------- LIABILITIES Payables: Fund shares redeemed 147,920 Advisory fees 19,144 Accrued distribution fees 8,104 Fund accounting, custodial and transfer agent fees 11,137 Administration fees 1,598 Distributions due to shareholders 141,779 Accrued expenses 63,236 -------------- Total Liabilities 392,918 -------------- Net Assets -- all share classes $39,597,981 -------------- Net Assets -- Class I $39,338,262 -------------- Net Assets -- Class C $ 259,719 -------------- Shares outstanding (unlimited shares authorized, no par value) Class I 3,777,832 Class C 24,914 Net asset value (offering price and redemption price per share) Class I $ 10.41 Class C $ 10.42
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2003 INVESTMENT INCOME Interest $1,802,362 Dividends 37,500 -------------- Total Investment Income 1,839,862 -------------- EXPENSES Advisory fees 202,155 Distribution fees: Class I 84,670 Class C 1,603 Fund accounting, custodial and transfer agent fees 63,890 Administration fees 15,399 Audit fees 21,019 Registration fees 27,810 Legal fees 3,334 Insurance expense 335 Trustee fees and expenses 1,950 Shareholder reports 20,034 Interest expense 3,119 Other expenses 43,918 -------------- Total expenses 489,236 Expense reimbursement by Adviser (50,621) -------------- Net Expenses 438,615 -------------- NET INVESTMENT INCOME 1,401,247 -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized loss from investment transactions (294,006) Change in net unrealized appreciation on securities 1,868,432 -------------- Net realized and unrealized gain on investments 1,574,426 -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,975,673 ==============
The accompanying notes are an integral part of the financial statements. 10 STATEMENT OF CHANGES IN NET ASSETS
FOR THE YEAR OCTOBER 1, 2002* (INCEPTION) TO SEPTEMBER 30, 2003 ------------------ OPERATIONS Net investment income $ 1,401,247 Net realized loss from investment transactions (294,006) Change in unrealized appreciation on securities 1,868,432 ------------------ Net increase in net assets resulting from operations 2,975,673 ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (1,394,730) ------------------ Net decrease from dividends and distributions (1,394,730) ------------------ FUND SHARE TRANSACTIONS Shares sold Class I 56,519,622 Class C 372,769 Reinvested dividends and distributions Class I 1,384,911 Class C 7,462 Shares repurchased Class I (20,136,882) Class C (130,844) ------------------ Net increase from fund share transactions 38,017,038 ------------------ Total net increase in net assets 39,597,981 NET ASSETS Beginning of period - ------------------ End of period $ 39,597,981 ------------------ NET ASSETS CONSIST OF Paid-in capital $ 38,017,038 Accumulated undistributed net investment income 12,040 Accumulated undistributed net realized loss from investments (299,529) Unrealized appreciation on securities 1,868,432 ------------------ Net Assets $ 39,597,981 ================== TRANSACTIONS IN FUND SHARES Shares sold Class I 5,630,081 Class C 36,999 Reinvested dividends and distributions Class I 135,559 Class C 726 Shares repurchased Class I (1,987,808) Class C (12,811) ------------------ Net increase 3,802,746 ------------------ Shares outstanding beginning of period - ------------------ Shares outstanding end of period 3,802,746 ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ 32,843,432 Proceeds from sales of securities 4,586,062 Purchases of long-term U.S. government securities 14,995,428 Proceeds from sales of long-term U.S. government securities 8,399,209
* The offering of Class I shares commenced on October 1, 2002 and Class C shares on October 21, 2002. The accompanying notes are an integral part of the financial statements. 11 Financial Highlights
CLASS I CLASS C FOR THE YEAR FOR THE PERIOD OCTOBER 1, 2002 OCTOBER 21, 2002 (INCEPTION) TO (INCEPTION) TO SEPTEMBER 30, 2003 SEPTEMBER 30, 2003 ------------------ ------------------ Net asset value, beginning of period $ 10.00 $ 9.79 ------------------ ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment income(x) 0.42 0.37 Net realized and unrealized gains on investments 0.38 0.60 ------------------ ------------------ Total from investment operations 0.80 0.97 ------------------ ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.39) (0.34) Distributions from net realized gains 0.00 0.00 ------------------ ------------------ Total distributions (0.39) (0.34) ------------------ ------------------ Net asset value, end of period $ 10.41 $10.42 ================== ================== Total return 8.19% 9.98%(b) Net assets, end of period (in thousands) $39,338 $ 260 Average net assets for the period (in thousands) $33,787 $ 199 Ratio of expenses to average net assets* Before expense waiver 1.45% 2.05% After expense waiver 1.30% 1.90% Ratio of net investment income to average net assets* Before expense waiver 4.01% 3.48% After expense waiver 4.16% 3.63% Portfolio turnover rate 41.65%(a) 41.65%(a)
* Annualized for periods less than a year (a) Portfolio turnover is calculated at the Fund level and therefore represents the year October 1, 2002 (inception) to September 30, 2003. (b) The total return calculation is for the period indicated. (x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 12 Notes to Financial Statements SEPTEMBER 30, 2003 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Bond Fund (the "Bond Fund" or "Fund") is a series fund of the ICON Funds (the "Trust"), a Massachusetts business trust, which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment management company. The Bond Fund commenced operations on October 1, 2002 and offers two classes of shares. There are currently 17 other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. The Fund is authorized to issue an unlimited number of no par shares. The investment objective of the Fund is maximum total return. The Fund may have elements of risk, including the risk of loss of principal. Additionally, the Bond Fund may invest in medium- and lower-quality debt securities. These high-yield bonds involve a greater risk of default and price volatility than U.S. Government and other high-quality bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which will affect net asset value. Investments in foreign securities may entail unique risks, including political, market, and currency risks. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its 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 could differ from these estimates. Investment Valuation. The Fund's securities and other assets are valued at the close of the regular trading session of the New York Stock Exchange (the "Exchange") (normally 4 p.m. Eastern time) each day the Exchange is open. A security listed or traded primarily on a securities exchange or in the over-the-counter market is valued at its last sale price on the exchange or market where it is principally traded. 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 or by a pricing service approved by the Trust's Board of Trustees. The market value of individual securities held by the Fund is determined by using pricing services that provide market prices to other mutual funds or, as needed, by obtaining market quotations from independent broker/dealers. Securities and assets for which quotations are not readily available are valued at fair value as determined in good faith pursuant to consistently applied procedures established by the Trust's Board. Short-term securities with remaining maturities of 60 days or less are generally valued at amortized cost or original cost plus accrued interest, both of which approximate market value. Repurchase Agreements. Repurchase agreements, if held by the Fund, are fully collateralized by U.S. Government securities and such collateral is in the possession of the Fund's 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 Fund has 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 Fund during the year ended September 30, 2003. 13 Notes to Financial Statements (continued) Income Taxes. The Fund intends to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code and, accordingly, the Fund will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that it intends to make sufficient distributions of net investment income and net realized capital gain. Dividends paid by the Fund 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 Fund on the ex-dividend/distribution date. The Fund distributes net investment income, if any, monthly to shareholders, and net realized capital gains, if not offset by capital loss carryovers if any, to shareholders at least annually. Income distributions and capital gain distributions are determined in accordance with income tax regulations which may differ from generally accepted accounting principles generally accepted in the United States of America. 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. Investment Transactions. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. Expenses. Each class of the 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 attributable 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. Meridian Investment Management Corporation ("Meridian") serves as investment adviser to the Fund and is responsible for managing the Fund's portfolio of investments. Meridian receives a monthly management fee that is computed daily at an annual rate of 0.60% of the Fund's average daily net assets. For the period ended September 30, 2003, Meridian contractually agreed to limit its investment advisory fee and/or reimburse the Fund's operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that the Fund's operating expenses do not exceed 1.90% for Class C and 1.30% for Class I. To the extent Meridian 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. The Fund will make no such payment, however, if the total annual Fund operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed. For the year or period ended September 30, 2003, Meridian reimbursed/absorbed $50,359 on the Class I shares and $262 on the Class C shares. These expenses are subject to recovery by Meridian based on a rolling three-year period. Transfer Agency, Custody and Accounting Fees. U.S. Bank N.A. ("U.S. Bank") and U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provide domestic custodial services, transfer agent services and fund accounting for the Fund. For these services the Trust pays a fee for transfer agent and custody services at an annual rate of 0.065% on the first $500 million of average daily net assets, 0.06% on the next $1 billion of average daily net assets, and 0.05% on the daily average net assets in excess of $1.5 billion. The Fund pays a minimum fee for fund accounting of $39,000 on the first $100 million of average daily net assets, 0.025% on the next $200 million of average daily net assets and 0.0125% on the daily average net assets in excess of $300 million. The Trust also pays for various out-of-pocket costs incurred by U.S. Bancorp that are estimated to be 0.02% of average daily net assets. 14 Administrative Services. The Trust has entered into an administrative services agreement with Meridian. This agreement provided for an annual fee of 0.05% on the Trust's first $500 million of average daily net assets and 0.04% on average daily net assets in excess of $500 million for the period October 1, 2002 to August 31, 2003, and 0.05% on the Trust's first $1.5 billion of average daily net assets and 0.045% on the average daily net assets in excess of $1.5 billion for the period starting September 1, 2003. Distribution Fees. The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") under which the Fund is authorized to compensate the Fund's distributor, Meridian Clearing Corp. ("MCC") (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, 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. For the year ended September 30, 2003 the total amounts paid or payable to MCC by the Fund pursuant to the 12b-1 Plan were $84,670 on the Class I shares and $1,603 on the Class C shares. Related Parties. Certain officers and directors of Meridian and MCC are also officers and/or trustees of the Trust; however such officers and trustees receive no compensation from the Funds. 3. 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. All distributions to date have been from net investment income. The aggregate composition for the Fund of unrealized capital appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2003 are as follows: Federal Tax Cost $37,229,445 Unrealized Appreciation $ 1,979,755 Unrealized Depreciation $ (113,634) Net Appreciation $ 1,866,121
Accumulated capital losses of $716 represent net capital loss carryovers as of September 30, 2003 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions. This carryover will expire on September 30, 2011. The Fund incurred "post October" losses during the period November 1, 2002 through September 30, 2003. These losses of $296,502 will be deferred for tax purposes and recognized in the year ending September 30, 2004. The distributions from ordinary income for the year ended September 30, 2003 were $1,394,730. 15 Report of Independent Auditors TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE ICON FUNDS: In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, and the related statement 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 (one of the portfolios constituting ICON Funds, hereafter referred to as the "Fund") at September 30, 2003, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the year from October 1, 2002 (commencement of operations) through September 30, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at September 30, 2003 by correspondence with the custodian, provides a reasonable basis for our opinion. PricewaterhouseCoopers LLP /s/ PricewaterhouseCoopers LLP Denver, Colorado November 12, 2003 16 Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 18 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, addresses and principal occupations are set forth below. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 52, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception in 1996. Dr. Callahan also serves as President (1998 to present) and Chief Investment Officer (1991 to present) of Meridian Investment Management Corporation ("Meridian"), 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 Meridian Clearing Corporation ("MCC"), the Funds' Distributor. Dr. Callahan also serves as the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of Meridian Management & Research Corporation ("MM&R"), the parent company of Meridian and MCC. INDEPENDENT TRUSTEES GLEN F. BERGERT, 53. 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); 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); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 56. 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). 17 Board of Trustees and Fund Officers (continued) (unaudited) GREGORY KELLAM SCOTT, 54. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott is Senior Vice President -- Law, General Counsel and Secretary, GenCorp, Inc., a multinational technology-based manufacturing company (2002 to present). Mr. Scott was previously 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). R. MICHAEL SENTEL, 55. 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 FDIC with responsibility for the Rocky Mountain Region (1991-1994). JONATHAN F. ZESCHIN, 50. 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 2002). 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 is also a Director of the Wasatch Funds (2002 to present); and a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to present). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 52. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as Meridian's President (1998 to present) and Chief Investment Officer (1991 to present). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of MCC. Dr. Callahan is also the Chief Investment Officer and Director (1994 to present), and was previously Secretary/ Treasurer (1994 to 1998) of MM&R. ERIK L. JONSON, 54. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception in 1996. Mr. Jonson is also Chief Financial Officer (1996 to present) and Vice President (1998 to present) of Meridian; Chief Financial Officer, Secretary and Director (1996 to present) of MM&R; and Vice President and Treasurer (March 2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) of MCC. ANDRA C. OZOLS, 42. Ms. Ozols has been a Vice President and Secretary of the Funds since March 2002. She previously served in that capacity in 1998. Ms. Ozols is also Vice President, General Counsel and Secretary (March 2002 to present and January 1998 to October 1998) of Meridian; Vice President and Secretary (March 2002 to present) of MCC and Director (June 2003 to present) of MM&R. Ms. Ozols was previously Vice President (1999 to 2002) and Assistant General Counsel (October 1998 to February 2002) of Founders Asset Management LLC; and was previously a Branch Chief (1993 to 1995) and Enforcement Attorney (1990 to 1995 and 1996 to 1998) with the U.S. Securities and Exchange Commission. The Trustees and Officers of the Funds may be contacted at 5299 DTC Boulevard, Suite 1200, Greenwood Village, Colorado 80111. Additional information about the Funds' Trustees and Officers is available in the Funds' Statement of Additional Information, which can be obtained free of charge by calling 1-800-764-0442. 18 Other Information (unaudited) QUALIFIED DIVIDEND INCOME Of the amount distributed in the fiscal year ending September 30, 2003 for the Bond Fund, 2.67% represents qualified dividend income. PROXY VOTING BY THE ICON FUNDS A description of the policies and procedures that the Funds use to determine how to vote proxies related to portfolio securities can be obtained free of charge by calling 1-800-764-0442 or by visiting www.iconfunds.com or www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities will be available free of charge no later than August 31, 2004 by calling 1-800-764-0442 or by visiting www.iconfunds.com or www.sec.gov. 19 THIS PAGE INTENTIONALLY LEFT BLANK [ICON FUNDS LOGOS] FOR MORE INFORMATION ABOUT THE ICON FUNDS, CONTACT US: BY TELEPHONE 1-800-764-0442 BY MAIL ICON Funds P.O. Box 701 Milwaukee, WI 53201-0701 IN PERSON ICON Funds 5299 DTC Boulevard, Suite 1200 Greenwood Village, CO 80111 BY E-MAIL ICON@mimcorp.com ON THE INTERNET www.iconfunds.com This report is for the general information of the Fund's shareholders. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. Please call 1-800-764-0442 or visit www.iconfunds.com for a current prospectus, which contains more complete information, including charges, expenses, share classes, and risks. Please read the prospectus carefully before you invest or send money. Meridian Clearing Corp., Distributor. I-119-BOND - -------------------------------------------------------------------------------- INVESTMENT UPDATE SEPTEMBER 30, 2003 ICON SPECIALTY FUNDS [PHOTO] ANNUAL REPORT [ICON FUNDS LOGOS] Table of Contents
ABOUT THIS REPORT ...................................................2 MESSAGE FROM ICON FUNDS ...................................................4 MANAGEMENT OVERVIEWS AND SCHEDULES OF INVESTMENTS ...................................................7 Specialty Funds ICON Covered Call Fund ...................................................7 ICON Equity Income Fund ..................................................15 ICON Long/Short Fund ..................................................20 FINANCIAL STATEMENTS ..................................................25 FINANCIAL HIGHLIGHTS ..................................................28 NOTES TO FINANCIAL STATEMENTS ..................................................29 REPORT OF INDEPENDENT AUDITORS ..................................................34 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) ..................................................35 OTHER INFORMATION (UNAUDITED) ..................................................37
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 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. 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. Due to market volatility, current performance may differ from the figures shown. Please call 1-800-764-0442 or visit www.iconfunds.com for the most recent returns. - -------------------------------------------------------------------------------- PORTFOLIO DATA - -------------------------------------------------------------------------------- Opinions and forecasts regarding industries, companies and 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 percentage holdings as of September 30, 2003 are included in each Fund's Schedule of Investments. In April 2003, Standard & Poor's made revisions to its Global Industry Classification Standard, including changes in industry categories and definitions. The Schedules of Investments reflect these changes. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's investment methodology does not consider company-specific factors, they may impact a stock's performance, and therefore, Fund performance. There are risks associated with mutual fund investing, including the risk of loss of principal. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity and small market share. There are risks associated with selling short, including the risk that the Fund may have to cover its short position at a higher price than the short price, resulting in a loss. Call options involve certain risks and are not suitable for all investors. Investments in foreign securities may entail unique risks, including political, market, and currency risks. The Funds may invest in medium-and lower-quality debt securities. These high-yield bonds involve a greater risk of default and price volatility than U.S. Government and other high-quality bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which will affect net asset value. 2 - -------------------------------------------------------------------------------- COMPARATIVE INDEX - -------------------------------------------------------------------------------- The comparative index discussed in this report is meant to provide a basis for judging the Funds' performance against a specific securities index. The 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 the index. The unmanaged Standard & Poor's SuperComposite 1500 (S&P 1500) Index is a broad-based capitalization-weighted index comprising 1,500 stocks of large-cap, mid-cap, and small-cap U.S. companies. This report also includes certain industry performance which is based on the returns of the capitalization-weighted S&P 1500 Industry Indexes. These Industry Indexes are based on specific industry classifications determined by Standard & Poor's and include the reinvestment of dividends and capital gain distributions. Index returns and statistical data included in this report are provided by Bloomberg. 3 Message from ICON Funds - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: [PHOTO] - -------------------------------------------------------------------------------- A year has come and gone since the launch of the ICON Specialty Funds, and we are pleased to report that these alternatives for the new market paradigm have lived up to expectations. Each has participated in market upside while helping to shield investors from downside risk. In fact, ICON Covered Call Fund and ICON Equity Income Fund kept pace with the broader market. ICON Long/Short Fund, on the other hand, was limited in its ability to profit from downside movement, although we have confidence in the Fund's fundamental methodology over the long term. In looking back over the past 12 months, several statements from previous ICON annual reports provide an interesting insight into the events that unfolded during the period and how they affected these new funds. FEAR, DISGUST AND GREAT BARGAINS To begin, I recall the ICON annual report for the fiscal year ended September 30, 2002. In our letter to shareholders, we remarked that "the current environment has all the characteristics of a market bottom -- fear, disgust, negative news, and great bargains." We went on to say that "we anticipate a broad-based advance when the market emerges from its current cycle." Shortly after that was written and just following the Funds' opening, on October 9, 2002, the market indeed hit a bottom, reeling from the emotional stranglehold of impending war and corporate governance scandals. Amid the uncertainty that permeated the landscape, a speculative relief rally took hold during the fourth quarter of 2002. While not the broad advance we were expecting, stocks moved decisively higher though remained widely disconnected from our estimate of fair value for longer than we've experienced. From that October low through September 30, 2003, the S&P 1500 Index, the Funds' primary domestic benchmark, rallied dramatically, gaining an impressive 31.39%. While this reversal was certainly an accurate call by our system, we admit that it was neither clairvoyance nor providence on our part. It was simply the inherent nature of sticking to ICON's valuation discipline. Having calculated in October 2002 that stocks on average were priced 55% below fair value, we thought it best to capitalize on that opportunity and be patient. Although we may have been early, our investment methodology dictated that we be invested to participate. At the same time, it meant we had to look past the headlines and at times take the market's punishment. Other investors chose to wait for the return of clarity and better economic conditions before leaving the sidelines; by then, however, it may have been too late. [SIDENOTE] "With stocks priced 55% below fair value, based on our model, we thought it best to capitalize on that opportunity and be patient." [SIDENOTE] "Stocks were simply oversold, and investors came to realize they were wrong for taking them to extreme lows." 4 A MOVE TOWARD FAIR VALUE Following the pre-war jitters that sent the market to yet another low on March 11, 2003, stocks embarked upon a broad six-month rally. However, even in the context of this all-encompassing advance, some sectors were more eager than others. Favored groups, such as Information Technology, Consumer Discretionary, Financials, and Industrials, led the market's ascent. In the natural ebb and flow of business cycles, these moves would be historically consistent with the start of an economic expansion. Yet, if asked whether they were based on the expectation of a recovery or some other triggering event, we would say no. We believe the recent surge in stock prices is nothing more than a move toward fair value. Put another way, we view it as an acknowledgement by many investors that the macro setting was not as discouraging as they initially thought. Stocks were simply oversold, and investors came to realize they were wrong for taking them to extreme lows. While economic conditions have certainly improved in the past year, we do not believe that a strong recovery or boom is necessary to prolong the rally. Our experience tells us it is simply the natural behavior of a rational market. There have been few newsworthy events that have boosted the market since the March 2003 bottom. We do not expect that any are needed for the move toward fair value to continue. RIDING THE THEME As prices resume the march toward fair value, and investors' skepticism gives way to optimism, we may in fact see the return of a momentum mentality. Were this to occur, it would not surprise us to see stocks exceed fair value by the end of the calendar year. At present, however, we believe the market has not gotten ahead of itself, and the broad representation of sector and industry leadership makes sense to our system. In the meantime, we expect prices will gradually continue their move toward fair value despite the prognostications of naysayers and the traditional "wall of worry" that resides on Wall Street. Recently, the mutual fund industry has been tarnished by the actions of some brokers and personnel at advisory firms. We find these reports deeply troubling and want you to know ICON's position on the issues facing mutual funds: - - we do not and have not had agreements that permit the illegal practice of buying Fund shares after the market close - - we are not aware of any ICON personnel who have participated in timing the Funds - - we do not knowingly permit excessive trading in the ICON Funds, and we take aggressive steps to restrict market timing. Only time will tell how the industry will overcome these scandals. You hire us to implement a strict management discipline, and our service staff is equally committed to implementing a rigid system of monitoring the Funds for any sign of activity that would negatively impact shareholders. [SIDENOTE] "We do not expect that newsworthy events are needed for the move toward fair value to continue." 5 Message from ICON Funds (continued) I'd like to close with a story that characterizes our investment methodology. While making a presentation at an investor seminar some years ago, an attendee commented that the ICON approach to investing seemed much like piloting a plane. When I asked what he meant by that, he observed that take-offs and landings are critical, and in between it is fairly routine. In our system, capturing industry leadership is critical and in between those rotations, we ride the theme. As of this writing, we consider ourselves to be at cruising altitude. We witnessed an unusual market during the past 12 months. Thank you for giving ICON the opportunity to help guide you through it. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, D.B.A. Chairman of the Board of Trustees and Chief Investment Officer of the Adviser 6 Management Overview ICON COVERED CALL FUND A discussion with Robert Straus, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Covered Call Fund, Class I gained 24.00% for the fiscal year ended September 30, 2003, keeping pace with the 24.69% return of it benchmark, the S&P 1500 Index. The Fund's Class C shares also fared well, appreciating 14.60% since their November 21, 2002 inception, while the Index returned 11.59% over the same period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Ongoing concerns about the state of the economy weighed heavily on investor confidence, even as corporate earnings and gross domestic product continued to trend higher. Amid perceived economic uncertainty and mounting war fears, stock prices fell to irrational levels in early October 2002 and again in mid-March 2003. The October low quickly reversed itself, yet was driven by speculative issues that did not meet our investment criteria. Although the Fund did not participate in this lower-quality advance, it was well positioned for the broad mid-March bounce that preceded the U.S.-led invasion of Iraq. Ultimately, the end of combat helped to restore clarity in the marketplace. With the fear of war removed, and investors acknowledging an economic recovery, stocks continued to rally despite widespread skepticism surrounding the veracity of the new bull market. This skepticism was fueled by mixed economic data, most notably rising unemployment and deflation risks. Nevertheless, as stocks climbed off the lows of March 11, 2003 and steadily gained steam, many investors remained on the sidelines, fretting over reports of a "jobless" recovery. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Significant stock market fluctuations translated into higher premiums as investors bid option prices higher. Against this highly volatile backdrop, rising premiums worked to the benefit of option writers as buyers anticipated that the underlying stock would rise above its strike price prior to expiration. Because our valuation model indicated that the market was so profoundly undervalued during much of the period, calls were written with an emphasis on capturing as much upside potential as possible, while still collecting sufficient option income to provide a modest amount of downside cushion. To that end, not only was our call writing strategy successful in easing relative volatility, it also captured the gains registered by the broader market. The Fund's narrow underperformance over the course of the fiscal year was directly related to the sharp second-half move toward fair value. When the market advances rapidly, stock prices can rocket through their strike prices, often at the expense of upside opportunity. Although this trade-off comes as no surprise, the ceiling it imposes can limit the Fund's ability to fully participate in a dramatic rally. At the same time, a disciplined call writing strategy may enhance stock market returns during sideways markets, while providing a level of downside cushion in declining markets. Stock selection on a sector and company level also contributed to the Fund's strong performance. The Fund was heavily tilted toward economically sensitive sectors such as Information Technology and Consumer Discretionary, which led in the post-war rally. Individual contributors to Fund performance included Internet messaging services provider J2 Global Communications, which benefited from its strong balance sheet, expanding profit margins and attractive valuations. SanDisk Corp. also advanced, driven by high demand for its flash memory storage products. Among the Fund's performance laggards, packaged foods company Interstate Bakeries Corp. faced a difficult operating environment as rising costs pressured profitability. Likewise, agricultural chemical producer IMC Global Inc. also struggled, citing sharply higher raw material costs. Both of these stocks were liquidated from the Fund. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC MARKET? Based on our valuation readings, the market still retains considerable upside potential. In light of this, we continue to emphasize capital appreciation in the Fund's underlying securities while generating reasonable premium income. Should stock prices rise to a level that approaches fair value, we would anticipate a shift in strategy that would increasingly focus on capturing higher option premiums. Either way, the income the Fund derives from writing covered call options serves to enhance prospective realized gains while offsetting potential downside risk. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 100.0% Top 10 Equity Holdings 17.1% Number of Stocks 90 Number of Calls Outstanding 75 Cash Equivalents 0.8% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Electronics Boutique Holdings Corp. 2.0% J.P. Morgan Chase & Co. 1.9% United Online, Inc. 1.8% Alcoa Inc. 1.7% University of Phoenix Online 1.7% Capital One Financial Corporation 1.6% j2 Global Communications, Inc. 1.6% SanDisk Corporation 1.6% Career Education Corporation 1.6% Cognizant Technology Solutions Corporation 1.6% Percentages are based upon net assets. 7 Management Overview (continued) ICON COVERED CALL FUND - -------------------------------------------------------------------------------- SECTOR COMPOSITION September 30, 2003 - -------------------------------------------------------------------------------- Consumer Discretionary 23.4% Information Technology 21.8% Industrials 20.6% Financial 15.2% Health Care 6.7% Leisure and Consumer Staples 5.5% Materials 3.4% Telecommunication & Utilities 3.4%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
INCEPTION ONE FIVE SINCE DATE YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Covered Call Fund - Class I 10/1/02 24.00% N/A 24.00% - ------------------------------------------------------------------------------------------ S&P 1500 Index 24.69% N/A 24.69% - ------------------------------------------------------------------------------------------ ICON Covered Call Fund - Class C 11/21/02 N/A N/A 14.60% - ------------------------------------------------------------------------------------------ S&P 1500 Index N/A N/A 11.59% - ------------------------------------------------------------------------------------------
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 a portion of the Fund's expenses if they exceed the designated cap. The Fund's total return would have been lower if this expense limitation had not been in place. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON COVERED CALL FUND - CLASS I S&P 1500 INDEX -------------------------------- -------------- 10/1/02 10000 10000 12/31/02 10490 10811 3/31/03 10050 10450 6/30/03 11770 12093 9/30/03 12400 12469
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 10/1/02 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 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. The Fund also offers Class C charges. These figures do not reflect the charges applicable on Class C shares of the Fund. Applying these charges would result in lower returns. 8 Schedule of Investments ICON COVERED CALL FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 100.0% CONSUMER DISCRETIONARY 23.4% APPAREL RETAIL 2.2% 11,000 Aeropostale, Inc.(a) $ 297,550 6,900 Christopher & Banks Corporation 164,634 - ----------------------------------------------------- 462,184 AUTOMOBILE MANUFACTURERS 2.3% 5,500 Thor Industries, Inc. 297,110 4,500 Winnebago Industries, Inc. 200,610 - ----------------------------------------------------- 497,720 COMPUTER & ELECTRONICS RETAIL 3.2% 5,000 Best Buy Co., Inc.(a) 237,600 15,000 Electronics Boutique Holdings Corp.(a) 428,550 - ----------------------------------------------------- 666,150 DEPARTMENT STORES 1.2% 6,000 Federated Department Stores, Inc. 251,400 GENERAL MERCHANDISE STORES 1.7% 5,500 Dollar Tree Stores, Inc.(a) 184,525 6,500 Tuesday Morning Corporation(a) 181,025 - ----------------------------------------------------- 365,550 HOMEBUILDING 2.1% 3,100 Centex Corporation 241,428 3,000 Hovnanian Enterprises, Inc.(a) 193,110 - ----------------------------------------------------- 434,538 HOME IMPROVEMENT RETAIL 1.2% 5,000 Lowe's Companies, Inc. 259,500 INTERNET RETAIL 1.3% 5,000 eBay Inc.(a) 267,500 SPECIALTY STORES 8.2% 4,700 Cost Plus, Inc.(a) 173,900 8,800 Guitar Center, Inc.(a) 283,008 6,700 Michaels Stores, Inc. 273,092 9,900 PETsMART, Inc. 225,324 7,700 Sharper Image Corporation(a) 178,255 7,000 The Sports Authority, Inc.(a) 220,220 6,100 Tractor Supply Company(a) 200,141 3,900 Zale Corporation(a) 173,199 - ----------------------------------------------------- 1,727,139 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 4,931,681
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE FINANCIAL 15.2% ASSET MANAGEMENT & CUSTODY BANKS 1.3% 9,000 Mellon Financial Corporation $ 271,260 CONSUMER FINANCE 5.5% 6,000 Capital One Financial Corporation 342,240 12,500 CompuCredit Corporation(a) 218,750 10,000 First Cash Financial Services, Inc.(a) 200,300 9,000 MBNA Corporation 205,200 17,500 Providian Financial Corporation(a) 206,325 - ----------------------------------------------------- 1,172,815 DIVERSIFIED CAPITAL MARKETS 1.9% 11,500 J.P. Morgan Chase & Co. 394,795 INVESTMENT BANKING & BROKERAGE 3.8% 7,500 A.G. Edwards, Inc. 288,075 3,000 The Bear Stearns Companies Inc. 224,400 15,000 Investment Technology Group, Inc.(a) 287,700 - ----------------------------------------------------- 800,175 LIFE & HEALTH INSURANCE 1.2% 7,100 Lincoln National Corporation 251,198 OTHER DIVERSIFIED FINANCIAL SERVICES 1.5% 7,000 Citigroup Inc. 318,570 - ----------------------------------------------------- TOTAL FINANCIAL 3,208,813 HEALTH CARE 6.7% BIOTECHNOLOGY 1.5% 20,000 QLT Inc.(a)(f) 319,400 HEALTH CARE FACILITIES 0.5% 6,300 Dynacq International, Inc.(a) 113,967 HEALTH CARE SERVICES 2.0% 7,600 eResearch Technology, Inc.(a) 263,492 5,500 SFBC International, Inc.(a) 156,376 - ----------------------------------------------------- 419,868 MANAGED HEALTH CARE 2.7% 3,700 Coventry Health Care, Inc.(a) 195,138 4,300 Oxford Health Plans, Inc.(a) 177,633 4,000 PacifiCare Health Systems, Inc.(a) 195,200 - ----------------------------------------------------- 567,971 - ----------------------------------------------------- TOTAL HEALTH CARE 1,421,206 INDUSTRIALS 20.6% AEROSPACE & DEFENSE 1.8% 3,000 Engineered Support Systems, Inc. 181,470 2,500 General Dynamics Corporation 195,150 - ----------------------------------------------------- 376,620 AIRLINES 3.3% 13,400 ExpressJet Holdings, Inc.(a) 184,920 4,000 JetBlue Airways Corporation(a) 243,520 25,400 Mesa Air Group, Inc.(a) 282,448 - ----------------------------------------------------- 710,888
9 Schedule of Investments (continued) ICON COVERED CALL FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- CONSTRUCTION & ENGINEERING 2.7% 10,000 Dycom Industries, Inc.(a) $ 203,900 9,000 Granite Construction Incorporated 168,120 4,300 Jacobs Engineering Group Inc.(a) 193,930 - ----------------------------------------------------- 565,950 CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS 2.7% 6,000 Cummins Inc. 266,580 7,500 Oshkosh Truck Corporation 297,075 - ----------------------------------------------------- 563,655 DIVERSIFIED COMMERCIAL SERVICES 4.5% 7,300 Career Education Corporation(a) 330,690 4,500 Corinthian Colleges, Inc.(a) 257,220 5,500 University of Phoenix Online(a) 366,685 - ----------------------------------------------------- 954,595 ELECTRICAL COMPONENTS & EQUIPMENT 0.9% 4,500 Roper Industries, Inc. 195,975 EMPLOYMENT SERVICES 2.0% 8,400 Gevity HR, Inc. 123,312 16,700 Labor Ready, Inc.(a) 167,835 5,300 Resources Connection, Inc.(a) 127,677 - ----------------------------------------------------- 418,824 INDUSTRIAL MACHINERY 2.7% 10,000 Flowserve Corporation(a) 203,000 3,500 Ingersoll-Rand Company(f) 187,040 12,000 Stewart & Stevenson Services, Inc. 180,240 - ----------------------------------------------------- 570,280 - ----------------------------------------------------- TOTAL INDUSTRIALS 4,356,787 INFORMATION TECHNOLOGY 21.8% APPLICATION SOFTWARE 1.8% 4,000 FactSet Research Systems Inc. 177,400 10,000 Magma Design Automation, Inc.(a) 196,200 - ----------------------------------------------------- 373,600 COMMUNICATIONS EQUIPMENT 0.9% 5,800 UTStarcom, Inc.(a) 184,440 COMPUTER HARDWARE 0.8% 10,200 Neoware Systems, Inc.(a) 174,114 COMPUTER STORAGE & PERIPHERALS 2.7% 4,500 Avid Technology, Inc.(a) 238,500 5,300 SanDisk Corporation(a) 337,822 - ----------------------------------------------------- 576,322 ELECTRONIC EQUIPMENT MANUFACTURERS 1.0% 7,700 Nam Tai Electronics, Inc.(f) 208,901
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE INTERNET SOFTWARE & SERVICES 6.7% 10,000 Digital Insight Corporation(a) $ 199,000 11,000 FindWhat.com(a) 190,190 9,000 j2 Global Communications, Inc.(a) 340,470 5,600 Netease.com Inc.(a) -- ADR 312,592 11,000 United Online, Inc.(a) 382,690 - ----------------------------------------------------- 1,424,942 IT CONSULTING & OTHER SERVICES 1.6% 9,000 Cognizant Technology Solutions Corporation(a) 328,140 SEMICONDUCTOR EQUIPMENT 0.9% 3,700 KLA-Tencor Corporation(a) 190,587 SEMICONDUCTORS 4.4% 6,000 Integrated Circuit Systems, Inc.(a) 180,240 7,500 International Rectifier Corporation(a) 280,800 5,100 OmniVision Technologies, Inc.(a) 215,322 5,500 Silicon Laboratories Inc.(a) 247,170 - ----------------------------------------------------- 923,532 TECHNOLOGY DISTRIBUTORS 1.0% 12,800 Avnet, Inc.(a) 211,456 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 4,596,034 LEISURE AND CONSUMER STAPLES 5.5% CASINOS & GAMING 1.3% 10,000 Shuffle Master, Inc.(a) 271,800 HOTELS, RESORTS & CRUISE LINES 2.3% 5,200 Carnival Corporation(f) 171,028 11,000 Royal Caribbean Cruises Ltd.(f) 309,210 - ----------------------------------------------------- 480,238 LEISURE PRODUCTS 1.0% 5,500 Leapfrog Enterprises, Inc.(a) 209,000 RESTAURANTS 0.9% 5,000 Panera Bread Company(a) 205,050 - ----------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 1,166,088 MATERIALS 3.4% ALUMINUM 1.7% 14,100 Alcoa Inc. 368,856 DIVERSIFIED METALS & MINING 0.7% 4,200 Freeport-McMoRan Copper & Gold, Inc. 139,020 PAPER PRODUCTS 1.0% 9,000 Georgia-Pacific Corp. 218,160 - ----------------------------------------------------- TOTAL MATERIALS 726,036
10 SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- TELECOMMUNICATION & UTILITIES 3.4% WIRELESS TELECOMMUNICATION SERVICES 3.4% 4,900 AO VimpelCom(a) -- ADR $ 298,214 3,000 Mobile Telesystems -- ADR 220,650 10,000 Nextel Communications, Inc.(a) 197,100 - ----------------------------------------------------- 715,964 - ----------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 715,964 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $18,595,752) 21,122,609
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- SHORT-TERM INVESTMENT 0.8% $179,131 American Family Demand Note, 0.741%(#) $ 179,131 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $179,131) 179,131 - ----------------------------------------------------- TOTAL INVESTMENTS 100.8% (COST $18,774,883) 21,301,740 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.8%) (172,793) - ----------------------------------------------------- NET ASSETS 100.0% $21,128,947 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security (#) Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt (f) Foreign security - -------------------------------------------------------------------------------- SCHEDULE OF WRITTEN OPTIONS September 30, 2003 - --------------------------------------------------------------------------------
CONTRACTS UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE (100 SHARES PER CONTRACT) MARKET VALUE - --------------------------------------------------------------------------------------------------- CALL OPTIONS Alcoa Inc. Expiration November 2003, Exercise Price $30.00 75 $ 2,063 AO VimpelCom Expiration October 2003, Exercise Price $60.00 49 12,985 Avid Technology, Inc. Expiration November 2003, Exercise Price $65.00 25 1,688 Avnet, Inc. Expiration November 2003, Exercise Price $20.00 45 563 The Bear Stearns Companies Inc. Expiration October 2003, Exercise Price $80.00 15 338 Best Buy Co., Inc. Expiration November 2003, Exercise Price $60.00 35 263 Capital One Financial Corporation Expiration December 2003, Exercise Price $75.00 40 1,100 Career Education Corporation Expiration October 2003, Exercise Price $50.00 43 1,720 Carnival Corporation Expiration November 2003, Exercise Price $37.50 20 250 Centex Corporation Expiration November 2003, Exercise Price $85.00 31 4,805 Christopher & Banks Corporation Expiration December 2003, Exercise Price $35.00 25 313 Citigroup Inc. Expiration October 2003, Exercise Price $47.50 35 963 Cognizant Technology Solutions Corporation Expiration October 2003, Exercise Price $40.00 30 2,325
11 Schedule of Investments (continued) ICON COVERED CALL FUND SCHEDULE OF WRITTEN OPTIONS September 30, 2003
CONTRACTS UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE (100 SHARES PER CONTRACT) MARKET VALUE - --------------------------------------------------------------------------------------------------- Corinthian Colleges, Inc. Expiration November 2003, Exercise Price $65.00 45 $ 2,813 Cost Plus, Inc. Expiration October 2003, Exercise Price $40.00 20 350 Coventry Health Care, Inc. Expiration November 2003, Exercise Price $60.00 37 1,758 Cummins Inc. Expiration November 2003, Exercise Price $50.00 30 2,025 Dollar Tree Stores, Inc. Expiration November 2003, Exercise Price $37.50 35 1,838 Dycom Industries, Inc. Expiration December 2003, Exercise Price $25.00 50 1,375 eBay Inc. Expiration October 2003, Exercise Price $57.50 50 2,625 Electronics Boutique Holdings Corp. Expiration October 2003, Exercise Price $30.00 115 8,912 Engineered Support Systems, Inc. Expiration October 2003, Exercise Price $65.00 20 1,650 eResearch Technology, Inc. Expiration November 2003, Exercise Price $37.50 40 9,800 ExpressJet Holdings, Inc. Expiration November 2003, Exercise Price $15.00 54 2,565 FactSet Research Systems Inc. Expiration October 2003, Exercise Price $50.00 30 525 Federated Department Stores, Inc. Expiration November 2003, Exercise Price $47.50 45 1,463 FindWhat.com Expiration October 2003, Exercise Price $25.00 75 938 Flowserve Corporation Expiration October 2003, Exercise Price $22.50 35 438 Freeport-McMoRan Copper & Gold, Inc. Expiration October 2003, Exercise Price $35.00 15 488 General Dynamics Corporation Expiration November 2003, Exercise Price $90.00 25 500 Georgia-Pacific Corp. Expiration October 2003, Exercise Price $25.00 30 1,650 Granite Construction Incorporated Expiration October 2003, Exercise Price $20.00 30 375 Guitar Center, Inc. Expiration October 2003, Exercise Price $35.00 88 1,320 Hovnanian Enterprises, Inc. Expiration October 2003, Exercise Price $60.00 30 15,450 Ingersoll-Rand Company Expiration December 2003, Exercise Price $65.00 25 437 Integrated Circuit Systems, Inc. Expiration November 2003, Exercise Price $40.00 40 700 International Rectifier Corporation Expiration December 2003, Exercise Price $55.00 50 625
12 SCHEDULE OF WRITTEN OPTIONS September 30, 2003
CONTRACTS UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE (100 SHARES PER CONTRACT) MARKET VALUE - --------------------------------------------------------------------------------------------------- Investment Technology Group, Inc. Expiration October 2003, Exercise Price $20.00 75 $ 3,562 j2 Global Communications, Inc. Expiration October 2003, Exercise Price $50.00 60 1,350 Jacobs Engineering Group Inc. Expiration November 2003, Exercise Price $50.00 25 812 JetBlue Airways Corporation Expiration November 2003, Exercise Price $70.00 30 2,550 J.P. Morgan Chase & Co. Expiration November 2003, Exercise Price $37.50 55 2,200 KLA-Tencor Corporation Expiration November 2003, Exercise Price $65.00 20 600 Leapfrog Enterprises, Inc. Expiration November 2003, Exercise Price $45.00 30 1,725 Lincoln National Corporation Expiration October 2003, Exercise Price $35.00 71 6,922 Lowe's Companies, Inc. Expiration October 2003, Exercise Price $55.00 50 1,875 Magma Design Automation, Inc. Expiration November 2003, Exercise Price $25.00 50 1,125 MBNA Corporation Expiration November 2003, Exercise Price $25.00 30 1,050 Mesa Air Group, Inc. Expiration October 2003, Exercise Price $12.50 85 1,912 Michaels Stores, Inc. Expiration November 2003, Exercise Price $50.00 45 562 Nam Tai Electronics, Inc. Expiration October 2003, Exercise Price $30.00 37 4,440 Neoware Systems, Inc. Expiration October 2003, Exercise Price $20.00 102 2,805 Netease.com Inc. Expiration November 2003, Exercise Price $70.00 30 6,375 Nextel Communications, Inc. Expiration November 2003, Exercise Price $22.50 33 1,732 OmniVision Technologies, Inc. Expiration November 2003, Exercise Price $60.00 35 1,312 Oxford Health Plans, Inc. Expiration November 2003, Exercise Price $45.00 43 4,192 PacifiCare Health Systems, Inc. Expiration November 2003, Exercise Price $60.00 30 825 Panera Bread Company Expiration November 2003, Exercise Price $50.00 20 350 Providian Financial Corporation Expiration November 2003, Exercise Price $12.50 130 7,475 QLT Inc. Expiration November 2003, Exercise Price $20.00 75 2,437 Roper Industries, Inc. Expiration October 2003, Exercise Price $45.00 45 1,912
13 Schedule of Investments (continued) ICON COVERED CALL FUND SCHEDULE OF WRITTEN OPTIONS September 30, 2003
CONTRACTS UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE (100 SHARES PER CONTRACT) MARKET VALUE - --------------------------------------------------------------------------------------------------- Royal Caribbean Cruises Ltd. Expiration November 2003, Exercise Price $35.00 40 $ 500 SanDisk Corporation Expiration November 2003, Exercise Price $80.00 30 2,775 Sharper Image Corporation Expiration October 2003, Exercise Price $30.00 77 770 Shuffle Master, Inc. Expiration November 2003, Exercise Price $30.00 50 3,875 Silicon Laboratories Inc. Expiration November 2003, Exercise Price $60.00 35 612 The Sports Authority, Inc. Expiration November 2003, Exercise Price $35.00 70 3,325 Stewart & Stevenson Services, Inc. Expiration October 2003, Exercise Price $17.50 120 1,500 Thor Industries, Inc. Expiration October 2003, Exercise Price $60.00 35 1,137 Tractor Supply Company Expiration October 2003, Exercise Price $37.50 31 697 United Online, Inc. Expiration December 2003, Exercise Price $50.00 40 2,500 University of Phoenix Online Expiration November 2003, Exercise Price $75.00 15 1,838 UTStarcom, Inc. Expiration October 2003, Exercise Price $45.00 58 435 Winnebago Industries, Inc. Expiration November 2003, Exercise Price $55.00 25 437 Zale Corporation Expiration October 2003, Exercise Price $50.00 20 250 - --------------------------------------------------------------------------------------------------- TOTAL OPTIONS WRITTEN (PREMIUMS RECEIVED $241,662) 3,334 $170,747
The accompanying notes are an integral part of the financial statements. 14 Management Overview ICON EQUITY INCOME FUND A discussion with the Portfolio Management Team HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? For the fiscal year ended September 30, 2003, the ICON Equity Income Fund, Class I advanced 24.72%, competitive with its benchmark, the S&P 1500 Index, which returned 24.69%. The Fund's C shares also performed strongly, appreciating 16.63% since their November 8, 2002 inception and outpacing the Index, which returned 13.05% over the same period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? Fear and pessimism dominated the first half of the fiscal year, as mounting war concerns and rising unemployment weighed heavily on investor confidence. Stock prices reflected these pressures, falling sharply below their intrinsic values despite incremental improvements in corporate earnings and gross domestic product. Following the market bottom of mid-March 2003, stocks reversed course as the overhang of war subsided and investors acknowledged the brighter economic outlook. A broad second-half rally ensued, driven by expectations that the worst was finally behind us. Dividend activity played a key role in this rebound as a growing number of companies raised their payouts, seeking to cushion volatility and enhance returns. In the aftermath of accounting scandals and the three-year bear market, investors applauded these moves. However, added incentive came in the form of the May 2003 passage of the Jobs and Growth Tax Relief Act, which lowered the maximum tax on dividends to 15% from personal income rates as high as 38.6%. With this barrier removed, companies moved quickly to initiate new dividend programs or improve existing ones. For example, software giant Microsoft Corp. (not owned by the Fund at period-end), which had traditionally shunned dividends, declared its first payout in January 2003 and doubled it in September. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? As the Fund took shape during its first year of operation, the portfolio was heavily weighted toward dividend-yielding common stocks followed to a lesser degree by preferred stocks and convertible bonds. Within the common stock allocation, the Consumer Discretionary sector commanded significant exposure given its depressed valuations. However, as fear-based selling permeated the market during the first half of the fiscal year, sustainable industry leadership within the sector proved fleeting. While a handful of industries logged positive returns, nearly twice as many suffered setbacks. In contrast, a rotation into the Information Technology sector starting in January came amid increasingly favorable conditions and worked to the Fund's advantage. Nevertheless, dividend-yielding stocks are the exception rather than the rule within the Information Technology sector, even among the highest-quality companies. Recognizing this fact, the Fund was tilted toward the Consumer Discretionary sector and more recently the Industrials sector, where we have seen increasing growth potential. Following the March market bottom, clear industry leadership emerged within the Consumer Discretionary sector, providing a more favorable setting for our system. By period-end, 22 of the 23 constituent industries had advanced. Meanwhile, a brighter economic outlook provided a boost for the highly cyclical Industrials sector, where value remained widespread. Individual holdings that contributed to Fund performance included footwear manufacturer and retailer Brown Shoe Company Inc., whose efforts to improve operations led to significant margin expansion. PerkinElmer Inc., a supplier of scientific instruments, also gained, having benefited from consolidation and cost reductions. Elsewhere, heavy equipment maker Caterpillar Inc. capitalized on an improved pricing environment and projected upturn in heavy-duty truck sales. Among the Fund's performance detractors, local phone giant SBC Communications Inc. retreated due to an increasingly difficult competitive environment for the once-dominant Baby Bell. Specialty printer Deluxe Corp. also fell, as demand and pricing came under pressure. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC MARKET? Despite impressive gains since the mid-March bottom, current valuations continue to support further upside potential in the broader market. The Fund is positioned to capitalize on a sustained cyclical recovery. With our valuation and relative strength readings pointing to earnings-per-share expansion, in addition to the more favorable tax environment, we believe the outlook for dividend-yielding stocks remains positive. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 94.1% Common Stocks 83.1% Preferred Stocks 4.9% Convertible Preferred Stocks 6.1% Top 10 Equity Holdings 14.9% Number of Stocks 101 Bonds & Cash Equivalents 6.0% Convertible Corporate Bonds 4.3% Cash Equivalents 1.7% Number of Bonds 5 Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 Ford Motor Company 1.9% General Motors Corporation 1.5% Goodrich Corporation, 8.300%, 9-30-25 -- Preferred 1.5% Nash Finch Company 1.5% PerkinElmer, Inc. 1.5% StarTek, Inc. 1.4% Toy "R" Us, Inc., 6.250%, 8-16-05 -- Preferred 1.4% Stewart & Stevenson Services, Inc. 1.4% J.P. Morgan Chase & Co. 1.4% Goodrich Corporation 1.4% Percentages are based upon net assets. 15 Management Overview (continued) ICON EQUITY INCOME FUND - -------------------------------------------------------------------------------- SECTOR COMPOSITION September 30, 2003 - -------------------------------------------------------------------------------- Industrials 18.3% Financial 14.0% Consumer Discretionary 13.8% Information Technology 11.4% Leisure and Consumer Staples 8.0% Materials 5.8% Telecommunication & Utilities 5.2% Health Care 4.3% Energy 2.3%
Percentages are based upon common stock positions and net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
INCEPTION ONE FIVE SINCE DATE YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Equity Income Fund - Class I 10/1/02 24.72% N/A 24.72% - ------------------------------------------------------------------------------------------ S&P 1500 Index 24.69% N/A 24.69% - ------------------------------------------------------------------------------------------ ICON Equity Income Fund - Class C 11/8/02 N/A N/A 16.63% - ------------------------------------------------------------------------------------------ S&P 1500 Index N/A N/A 13.05% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative index can be found on pages 2 and 3. The Adviser has agreed to limit a portion of the Fund's expenses if they exceed the designated cap. The Fund's total return would have been lower if this expense limitation had not been in place. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON EQUITY INCOME FUND - CLASS I S&P 1500 INDEX --------------------------------- -------------- 10/1/02 10000 10000 12/31/02 10819 10811 3/31/03 10091 10450 6/30/03 12073 12093 9/30/03 12482 12469
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 10/1/02 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 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. The Fund also offers Class C shares. These figures do not reflect the charges applicable to Class C shares of the Fund. Applying these charges would result in lower returns for investors. 16 Schedule of Investments ICON EQUITY INCOME FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 83.1% CONSUMER DISCRETIONARY 13.8% ADVERTISING 0.9% 29,000 The Interpublic Group of Companies, Inc.(a) $ 409,480 APPAREL ACCESSORIES & LUXURY GOODS 1.1% 7,900 Kellwood Company 264,255 5,600 V.F. Corporation 217,896 - ----------------------------------------------------- 482,151 APPAREL RETAIL 1.7% 15,900 The Cato Corporation 320,703 26,500 Limited Brands 399,620 - ----------------------------------------------------- 720,323 AUTOMOBILE MANUFACTURERS 3.5% 76,700 Ford Motor Company 826,059 16,300 General Motors Corporation 667,159 - ----------------------------------------------------- 1,493,218 DEPARTMENT STORES 1.1% 10,500 Sears, Roebuck and Co. 459,165 DISTRIBUTORS 0.4% 4,800 Genuine Parts Company 153,504 FOOTWEAR 0.5% 7,000 Brown Shoe Company, Inc. 221,900 HOUSEHOLD APPLIANCES 2.5% 13,000 Maytag Corporation 324,610 10,800 Snap-on Incorporated 298,620 6,700 Whirlpool Corporation 454,059 - ----------------------------------------------------- 1,077,289 SPECIALTY STORES 0.9% 25,800 The Pep Boys-Manny, Moe & Jack 394,740 TIRES & RUBBER 1.2% 7,100 Bandag, Incorporated 239,483 18,700 Cooper Tire & Rubber Company (f) 296,769 - ----------------------------------------------------- 536,252 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 5,948,022 ENERGY 2.3% INTEGRATED OIL & GAS 0.7% 5,300 ConocoPhillips 290,175 OIL & GAS REFINING & MARKETING & TRANSPORTATION 1.6% 10,600 Ashland Inc. 348,210 8,900 Sunoco, Inc. 357,958 - ----------------------------------------------------- 706,168 - ----------------------------------------------------- TOTAL ENERGY 996,343 FINANCIAL 14.0% ASSET MANAGEMENT & CUSTODY BANKS 0.8% 12,600 The Bank of New York Company, Inc. 366,786
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE DIVERSIFIED BANKS 1.0% 14,000 FleetBoston Financial Corporation $ 422,100 DIVERSIFIED CAPITAL MARKETS 1.4% 17,100 J.P. Morgan Chase & Co. 587,043 INSURANCE BROKERS 1.0% 20,500 Aon Corporation 427,425 INVESTMENT BANKING & BROKERAGE 2.5% 14,800 A.G. Edwards, Inc. 568,468 10,400 Morgan Stanley 524,784 - ----------------------------------------------------- 1,093,252 LIFE & HEALTH INSURANCE 2.1% 12,000 Lincoln National Corporation 424,560 31,100 Presidential Life Corporation 470,543 - ----------------------------------------------------- 895,103 OTHER DIVERSIFIED FINANCIAL SERVICES 2.1% 11,500 Citigroup Inc. 523,365 20,900 ING Groep N.V. -- ADR 386,650 - ----------------------------------------------------- 910,015 PROPERTY & CASUALTY INSURANCE 0.8% 10,300 Old Republic International Corporation 340,827 REAL ESTATE INVESTMENT TRUSTS 1.7% 4,400 General Growth Properties, Inc. 315,480 7,300 Novastar Financial, Inc. 419,531 - ----------------------------------------------------- 735,011 THRIFTS & MORTGAGE FINANCE 0.6% 7,650 GreenPoint Financial Corp. 228,429 - ----------------------------------------------------- TOTAL FINANCIAL 6,005,991 HEALTHCARE 4.3% HEALTH CARE DISTRIBUTORS 1.1% 20,500 Owens & Minor, Inc. 494,050 HEALTH CARE FACILITIES 1.2% 17,400 Manor Care, Inc. 522,000 PHARMACEUTICALS 2.0% 11,200 Bristol-Myers Squibb Company 287,392 32,200 ICN Pharmaceuticals, Inc. 552,552 - ----------------------------------------------------- 839,944 - ----------------------------------------------------- TOTAL HEALTHCARE 1,855,994 INDUSTRIALS 18.3% AEROSPACE & DEFENSE 1.4% 24,200 Goodrich Corporation 586,608 AIR FREIGHT & LOGISTICS 0.9% 13,700 Ryder System, Inc. 401,684 BUILDING PRODUCTS 2.4% 19,400 Masco Corporation 474,912 16,000 York International Corporation 553,440 - ----------------------------------------------------- 1,028,352
17 Schedule of Investments (continued) ICON EQUITY INCOME FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS 1.9% 7,300 Caterpillar Inc. $ 502,532 20,400 Federal Signal Corporation 303,960 - ----------------------------------------------------- 806,492 DIVERSIFIED COMMERCIAL SERVICES 0.8% 8,700 Deluxe Corporation 349,218 ELECTRICAL COMPONENTS & EQUIPMENT 3.3% 8,300 Cooper Industries, Ltd. 398,649 7,000 Emerson Electric Co. 368,550 8,700 Hubbell Incorporated 317,463 7,900 Roper Industries, Inc. 344,045 - ----------------------------------------------------- 1,428,707 EMPLOYMENT SERVICES 1.3% 38,900 Gevity HR, Inc. 571,052 INDUSTRIAL CONGLOMERATES 1.0% 14,600 General Electric Company 435,226 INDUSTRIAL MACHINERY 3.6% 8,400 Briggs & Stratton Corporation 493,584 11,100 Harsco Corporation 427,017 40,700 Stewart & Stevenson Services, Inc. 611,314 - ----------------------------------------------------- 1,531,915 MARINE 0.9% 14,000 Alexander & Baldwin, Inc. 393,820 TRADING COMPANIES & DISTRIBUTORS 0.8% 16,800 Applied Industrial Technologies, Inc. 333,816 - ----------------------------------------------------- TOTAL INDUSTRIALS 7,866,890 INFORMATION TECHNOLOGY 11.4% APPLICATION SOFTWARE 2.2% 11,300 FactSet Research Systems Inc. 501,155 27,100 Jack Henry & Associates, Inc. 471,269 - ----------------------------------------------------- 972,424 COMPUTER HARDWARE 1.3% 27,900 Hewlett-Packard Company 540,144 DATA PROCESSING & OUTSOURCED SERVICES 2.7% 26,400 Electronic Data Systems Corporation 533,280 19,300 StarTek, Inc. 617,600 - ----------------------------------------------------- 1,150,880 ELECTRONIC EQUIPMENT MANUFACTURERS 1.5% 41,900 PerkinElmer, Inc. 641,489 SEMICONDUCTOR EQUIPMENT 2.5% 17,500 Applied Materials, Inc.(a) 317,275 5,000 Cabot Microelectronics Corporation(a) 278,150 28,300 Helix Technology Corporation 463,271 - ----------------------------------------------------- 1,058,696
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE SEMICONDUCTORS 1.3% 19,700 Intel Corporation $ 542,144 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 4,905,777 LEISURE AND CONSUMER STAPLES 8.0% CASINOS & GAMING 1.0% 10,900 Mandalay Resort Group 431,749 FOOD DISTRIBUTORS 1.5% 42,200 Nash Finch Company 654,100 FOOD RETAIL 1.0% 17,100 SUPERVALU INC. 408,006 HOTELS, RESORTS & CRUISE LINES 2.4% 19,300 Royal Caribbean Cruises Ltd.(f) 542,523 14,200 Starwood Hotels & Resorts Worldwide, Inc. 494,160 - ----------------------------------------------------- 1,036,683 LEISURE PRODUCTS 1.1% 33,700 Callaway Golf Company 480,899 PUBLISHING 1.0% 9,500 Dow Jones & Company, Inc. 449,825 - ----------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 3,461,262 MATERIALS 5.8% ALUMINUM 0.7% 11,500 Alcoa Inc. 300,840 COMMODITY CHEMICALS 0.9% 13,700 Lyondell Chemical Company 175,086 21,200 Methanex Corporation(f) 198,432 - ----------------------------------------------------- 373,518 FERTILIZERS & AGRICULTURAL CHEMICALS 0.6% 10,200 Monsanto Company 244,188 PAPER PRODUCTS 3.0% 19,200 Aracruz Celulose S.A. -- ADR 524,160 19,700 Georgia-Pacific Corp. 477,528 11,900 MeadWestvaco Corporation 303,450 - ----------------------------------------------------- 1,305,138 SPECIALTY CHEMICALS 0.6% 21,600 RPM International, Inc. 282,096 - ----------------------------------------------------- TOTAL MATERIALS 2,505,780 TELECOMMUNICATION & UTILITIES 5.2% ELECTRIC UTILITIES 1.9% 13,100 Alliant Energy Corporation 288,200 9,500 Great Plains Energy Incorporated 288,040 9,100 IDACORP, Inc. 232,050 - ----------------------------------------------------- 808,290 GAS UTILITIES 0.9% 6,900 Atmos Energy Corporation 165,186 5,700 Peoples Energy Corporation 235,866 - ----------------------------------------------------- 401,052
18 SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- INTEGRATED TELECOMMUNICATION SERVICES 1.9% 8,500 ALLTEL Corporation $ 415,565 6,300 SBC Communications Inc. 140,175 16,600 Sprint Corporation 250,660 - ----------------------------------------------------- 806,400 MULTI-UTILITIES & UNREGULATED POWER 0.5% 10,300 Energy East Corporation 231,029 - ----------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 2,246,771 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $31,981,856) 35,792,830 PREFERRED STOCKS 4.9% 12,200 Ambac Financial Group, Inc., 7.000%, 10-17-51 324,642 6,600 Bank One Capital Corporation, 8.000%, 1-30-31 182,160 25,700 Goodrich Corporation, 8.300%, 9-30-25 656,378 16,000 MBNA Corporation, 7.500%, Series A 405,600 71,800 Sprint Corporation 547,834 - ----------------------------------------------------- TOTAL PREFERRED STOCKS (COST $2,170,584) 2,116,614 CONVERTIBLE PREFERRED STOCKS 6.1% 16,200 Ameren Corporation, 9.750%, 5-15-05 451,170 16,300 CenturyTel, Inc., 6.875%, 5-15-05 451,510 4,200 Chesapeake Energy Corporation, 6.750%, 12-31-49 317,730 5,700 Emmis Communications Corporation, 6.250%, 12-31-49, Series A 250,800 4,300 KeySpan Corporation, 8.750%, 5-16-05 224,890 10,500 Sempra Energy, 8.500%, 5-17-05 289,800 15,700 Toy "R" Us, Inc., 6.250%, 8-16-05 617,010 - ----------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (COST $2,401,463) 2,602,910
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE CONVERTIBLE CORPORATE BONDS 4.3% $100,000 Amerisource Health Corporation, 5.000%, 12-1-07 $ 117,875 500,000 Echostar Communications Corporation, 4.875%, 1-01-07 509,375 600,000 International Rectifier Corporation, 4.250%, 7-15-07 571,500 230,000 Providian Financial Corporation, 3.250%, 8-15-05 215,050 425,000 The Walt Disney Company, 2.125%, 4-15-23 434,031 - ----------------------------------------------------- TOTAL CONVERTIBLE CORPORATE BONDS (COST $1,883,929) 1,847,831 SHORT-TERM INVESTMENT 1.7% 709,220 American Family Demand Note, 0.741%(#) 709,220 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $709,220) 709,220 - ----------------------------------------------------- TOTAL INVESTMENTS 100.1% (COST $39,147,052) 43,069,405 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.1%) (13,848) - ----------------------------------------------------- NET ASSETS 100.0% $43,055,557 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security (#) Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt (f) Foreign security Dates shown on each security are due dates of the obligation. 19 Management Overview ICON LONG/SHORT FUND A discussion with J.C. Waller III, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Long/Short Fund, Class I appreciated 20.00% for the fiscal year ended September 30, 2003, compared to a 24.69% return for its benchmark, the S&P 1500 Index. The Fund's Class C shares also appreciated, having risen 12.35% since their October 17, 2002 inception, while the Index returned 18.86% over the same period. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST YEAR? The market experienced two distinct themes during the reporting period. The first, a speculative eight-week surge off the market low of early October 2002, featured lower-quality companies that were inconsistent with the Fund's investment methodology. Accordingly, the Fund was not positioned to capture what appeared to be unsustainable gains. A pullback between December 2002 and early-March 2003 confirmed these assumptions as industry leadership proved both intermittent and fear-based. Amid the market bottom of mid-March, geopolitical concerns inexplicably transformed into cautious optimism. In the absence of a triggering event, a second theme emerged as a broad market rally ensued. This time, however, the extended advance was driven by higher-quality companies and emphasized economically sensitive sectors such as Information Technology, Consumer Discretionary, and Financials. Against this backdrop, value was widespread within the market, reaching record highs by our calculations during the fall 2002 and spring 2003 periods. While the Fund emphasized economically sensitive sectors that were demonstrating both value and relative strength, shifts in market themes were sudden and swift. Consequently, a broad positioning was maintained in an attempt to capture leadership wherever it emerged. For these reasons, the Fund found few opportunities to short positions during the period. Because our shorting strategy emphasizes industries that possess neither value nor relative strength, current market conditions did not favor extensive short allocations. Although the Fund held on average approximately 4% of invested assets in short positions, by period-end the actual short weighting had declined to less than 1%. The Fund is not market neutral; the proportion of long and short positions in the Fund depends on the availability of underpriced and overpriced industries and our evaluation of market conditions. WHAT FACTORS CONTRIBUTED TO THE FUND'S PERFORMANCE? Although positioned for an anticipated broad rally at its October 2002 inception, the Fund was adjusted slightly following the October 9 market low to boost its exposure to economically sensitive sectors. January 2003 saw a more significant shift as Energy and Healthcare were substantially reduced while Information Technology and Consumer Discretionary were more heavily weighted. By March 2003, leadership had further concentrated as relative strength emerged across an increasing number of cyclical industries, including asset management & custody banks, consumer finance, investment banking & brokerage, Internet software & services, hotels, resorts & cruise lines, and specialty stores. These rotations proved advantageous for the Fund as cyclical stocks rallied on post-war optimism and a brighter economic outlook. With the resurgence in cyclical stocks following the mid-March market bottom, several industries within the Financials and Information Technology sectors became richly valued and were reduced. Proceeds were then redirected to the Industrials sector, which featured discounted valuations and newfound strength. In contrast, Energy lagged in its move back toward fair value and was removed from the Fund. Healthcare also encountered difficulties, yet maintained a moderate weighting centered on the increasingly attractive managed healthcare industry. Stocks that made measurable contributions to Fund performance over the period included Internet messaging services provider J2 Global Communications Inc. A strong balance sheet and expanding profit margins bolstered this undervalued company. Meanwhile, United Online Inc, a low-cost Internet service provider, demonstrated similar characteristics, while recently turning profitable. Among the Fund's performance laggards, Web security firm Internet Security Systems Inc. tumbled after missing Wall Street revenue estimates. Weakness in corporate technology spending pressured networking systems manufacturer Black Box Corp. and the stocks were subsequently removed from the Fund. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC MARKET? Valuation readings indicate an ongoing and sizable gap between stock prices and fair value. Assuming this gap continues to close, leadership may likely come from the underpriced Consumer Discretionary and Industrials sectors. As for the Fund's short positions, our system has identified few short-selling candidates; the exception being several richly valued industries within the Financials and Information Technology sectors. However, should current market conditions persist, opportunities could become more plentiful. [SIDENOTE] PORTFOLIO PROFILE September 30, 2003 Equities 92.7% Top 10 Equity Holdings 17.2% Number of Stocks 80 Cash Equivalents 7.4% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS September 30, 2003 j2 Global Communications, Inc. 2.0% International Rectifier Corporation 1.9% J.P. Morgan Chase & Co. 1.9% Swift Transportation Co., Inc. 1.7% Thor Industries, Inc. 1.7% Silicon Laboratories Inc. 1.6% Capital One Financial Corporation 1.6% Harman International Industries, Incorporated 1.6% Humana Inc. 1.6% Williams-Sonoma, Inc. 1.6% Percentages are based upon net assets. 20 - -------------------------------------------------------------------------------- SECTOR COMPOSITION September 30, 2003 - -------------------------------------------------------------------------------- Consumer Discretionary 22.1% Industrials 16.9% Financial 14.1% Information Technology 13.6% Health Care 10.2% Leisure and Consumer Staples 9.0% Materials 5.8% Telecommunication & Utilities 1.0%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of September 30, 2003 - --------------------------------------------------------------------------------
INCEPTION ONE FIVE SINCE DATE YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Long/Short Fund - Class I 10/1/02 20.00% N/A 20.00% - ------------------------------------------------------------------------------------------ S&P 1500 Index 24.69% N/A 24.69% - ------------------------------------------------------------------------------------------ ICON Long/Short Fund-Class C 10/17/02 N/A N/A 12.35% - ------------------------------------------------------------------------------------------ S&P 1500 Index N/A N/A 18.86% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative index can be found on pages 2 and 3. The Adviser has agreed to limit a portion of the Fund's expenses if they exceed the designated cap. The Fund's total return would have been lower if this expense limitation had not been in place. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through September 30, 2003 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON LONG/SHORT FUND - CLASS I S&P 1500 INDEX ------------------------------ -------------- 10/1/02 10000 10000 12/31/02 9760 10811 3/31/03 8880 10450 6/30/03 11039 12093 9/30/03 12000 12469
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 10/1/02 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 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. The Fund also offers Class C shares. These figures do not reflect the charges applicable to Class C shares of the Fund. Applying these charges would lower returns. 21 Schedule of Investments ICON LONG/SHORT FUND SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- COMMON STOCKS 92.7% CONSUMER DISCRETIONARY 22.1% APPAREL RETAIL 2.4% 4,900 Christopher & Banks Corporation $ 116,914 6,000 Pacific Sunwear of California, Inc.(a) 123,960 - ----------------------------------------------------- 240,874 AUTOMOBILE MANUFACTURERS 3.7% 5,100 Monaco Coach Corporation(a) 84,405 3,100 Thor Industries, Inc. 167,462 2,700 Winnebago Industries, Inc. 120,366 - ----------------------------------------------------- 372,233 COMPUTER & ELECTRONICS RETAIL 1.4% 3,000 Best Buy Co., Inc.(a) 142,560 CONSUMER ELECTRONICS 1.6% 1,600 Harman International Industries, Incorporated 157,360 DEPARTMENT STORES 0.9% 2,200 The Neiman Marcus Group, Inc.(a) 91,740 GENERAL MERCHANDISE STORES 3.3% 3,100 99 Cents Only Stores(a) 100,254 3,600 Dollar Tree Stores, Inc.(a) 120,780 2,700 Family Dollar Stores, Inc. 107,703 - ----------------------------------------------------- 328,737 INTERNET RETAIL 1.2% 2,200 eBay Inc.(a) 117,700 SPECIALTY STORES 7.6% 3,300 Barnes & Noble, Inc.(a) 83,853 3,200 Michaels Stores, Inc. 130,432 5,700 PETsMART, Inc. 129,732 4,500 The Sports Authority, Inc.(a) 141,570 3,400 Tractor Supply Company(a) 111,554 5,800 Williams-Sonoma, Inc.(a) 156,484 - ----------------------------------------------------- 753,625 - ----------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 2,204,829 FINANCIAL 14.1% ASSET MANAGEMENT & CUSTODY BANKS 1.2% 1,300 The Bank of New York Company, Inc. 37,843 2,700 Mellon Financial Corporation 81,378 - ----------------------------------------------------- 119,221 CONSUMER FINANCE 5.0% 2,800 Capital One Financial Corporation 159,712 4,800 First Cash Financial Services, Inc.(a) 96,144 5,600 MBNA Corporation 127,680 10,200 Providian Financial Corporation(a) 120,258 - ----------------------------------------------------- 503,794 DIVERSIFIED BANKS 0.8% 2,500 FleetBoston Financial Corporation 75,375
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE DIVERSIFIED CAPITAL MARKETS 1.9% 5,600 J.P. Morgan Chase & Co. $ 192,248 INVESTMENT BANKING & BROKERAGE 2.1% 2,800 A.G. Edwards, Inc. 107,548 2,100 Morgan Stanley 105,966 - ----------------------------------------------------- 213,514 LIFE & HEALTH INSURANCE 0.9% 7,500 UICI(a) 94,050 OTHER DIVERSIFIED FINANCIAL SERVICES 1.3% 2,800 Citigroup Inc. 127,428 THRIFTS & MORTGAGE FINANCE 0.9% 2,800 New York Community Bancorp, Inc. 88,228 - ----------------------------------------------------- TOTAL FINANCIAL 1,413,858 HEALTH CARE 10.2% HEALTH CARE FACILITIES 4.3% 6,600 Health Management Associates, Inc. 143,946 10,400 Province Healthcare Company(a) 134,680 5,500 United Surgical Partners International, Inc.(a) 155,650 - ----------------------------------------------------- 434,276 MANAGED HEALTH CARE 5.9% 1,200 Anthem, Inc.(a) 85,596 2,400 Coventry Health Care, Inc.(a) 126,576 3,300 Health Net Inc.(a) 104,511 8,700 Humana Inc.(a) 157,035 2,200 PacifiCare Health Systems, Inc.(a) 107,360 - ----------------------------------------------------- 581,078 - ----------------------------------------------------- TOTAL HEALTH CARE 1,015,354 INDUSTRIALS 16.9% AIRLINES 3.5% 8,200 ExpressJet Holdings, Inc.(a) 113,160 2,200 JetBlue Airways Corporation(a) 133,936 6,200 SkyWest, Inc. 107,384 - ----------------------------------------------------- 354,480 CONSTRUCTION & ENGINEERING 3.4% 2,800 Fluor Corporation 104,524 5,900 Insituform Technologies, Inc.(a) 104,784 6,800 URS Corporation(a) 131,920 - ----------------------------------------------------- 341,228 DIVERSIFIED COMMERCIAL SERVICES 4.2% 3,000 Career Education Corporation(a) 135,900 2,400 Corinthian Colleges, Inc.(a) 137,184 2,200 University of Phoenix Online(a) 146,674 - ----------------------------------------------------- 419,758 EMPLOYMENT SERVICES 3.4% 6,500 Gevity HR, Inc. 95,420 13,100 Labor Ready, Inc.(a) 131,655 15,900 Spherion Corporation(a) 110,664 - ----------------------------------------------------- 337,739
22 SCHEDULE OF INVESTMENTS September 30, 2003
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ----------------------------------------------------- TRUCKING 2.4% 7,500 Swift Transportation Co., Inc.(a) $ 170,175 3,100 Werner Enterprises, Inc. 71,021 - ----------------------------------------------------- 241,196 - ----------------------------------------------------- TOTAL INDUSTRIALS 1,694,401 INFORMATION TECHNOLOGY 13.6% APPLICATION SOFTWARE 1.8% 4,100 Magma Design Automation, Inc.(a) 80,442 5,800 Mentor Graphics Corporation(a) 101,674 - ----------------------------------------------------- 182,116 COMMUNICATIONS EQUIPMENT 1.6% 2,900 InterDigital Communications Corporation(a) 43,500 3,700 UTStarcom, Inc.(a) 117,660 - ----------------------------------------------------- 161,160 INTERNET SOFTWARE & SERVICES 5.7% 6,500 FindWhat.com(a) 112,385 5,200 j2 Global Communications, Inc.(a) 196,716 3,600 Sohu.com Inc.(a) 112,140 4,300 United Online, Inc.(a) 149,597 - ----------------------------------------------------- 570,838 SEMICONDUCTORS 4.5% 5,200 International Rectifier Corporation(a) 194,688 5,400 NVIDIA Corporation(a) 85,919 3,600 Silicon Laboratories Inc.(a) 161,784 - ----------------------------------------------------- 442,391 - ----------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 1,356,505 LEISURE AND CONSUMER STAPLES 9.0% FOOD RETAIL 1.1% 4,400 SUPERVALU INC 104,984 HOTELS, RESORTS & CRUISE LINES 4.4% 2,700 Carnival Corporation(f) 88,803 2,900 Marriott International, Inc. 124,787 3,600 Royal Caribbean Cruises Ltd.(f) 101,196 3,700 Starwood Hotels & Resorts Worldwide, Inc. 128,760 - ----------------------------------------------------- 443,546 MOVIES & ENTERTAINMENT 1.9% 2,800 Fox Entertainment Group, Inc.(a) 78,372 5,500 The Walt Disney Company 110,935 - ----------------------------------------------------- 189,307 RESTAURANTS 1.6% 2,200 CEC Entertainment Inc.(a) 86,240 5,300 The Steak n Shake Company(a) 78,970 - ----------------------------------------------------- 165,210 - ----------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 903,047 MATERIALS 5.8% ALUMINUM 0.8% 3,100 Alcoa Inc. 81,096
- -----------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE METAL & GLASS CONTAINERS 1.1% 16,300 Crown Holdings, Inc.(a) $ 110,025 PAPER PACKAGING 0.7% 1,600 Sealed Air Corporation(a) 75,568 STEEL 3.2% 13,900 Allegheny Technologies, Inc. 91,045 5,300 Carpenter Technology Corporation 113,632 8,400 NN, Inc. 108,024 - ----------------------------------------------------- 312,701 - ----------------------------------------------------- TOTAL MATERIALS 579,390 TELECOMMUNICATION & UTILITIES 1.0% WIRELESS TELECOMMUNICATION SERVICES 1.0% 1,600 AO VimpelCom(a) -- ADR 97,376 - ----------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 97,376 - ----------------------------------------------------- TOTAL COMMON STOCKS (COST $7,712,111) 9,264,760 SHORT-TERM INVESTMENTS 7.4% U.S. GOVERNMENT OBLIGATIONS 3.6% $251,000 FHLB Discount Note, 0.895%, 12-30-03 250,379 112,000 U.S. Treasury Bill, 0.796%, 12-11-03(b) 111,805 - ----------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $362,274) 362,184 VARIABLE RATE DEMAND NOTE 3.8% 375,391 American Family Demand Note, 0.741%(#) 375,391 - ----------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE (COST $375,391) 375,391 - ----------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $737,665) 737,575 - ----------------------------------------------------- TOTAL INVESTMENTS 100.1% (COST $8,449,776) 10,002,335 - ----------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.1%) (7,678) - ----------------------------------------------------- NET ASSETS 100.0% $ 9,994,657 - -----------------------------------------------------
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security (b) Security is pledged with broker as collateral for investment securities sold short # Variable rate demand notes 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, 2003. ADR -- American Depositary Receipt f Foreign security 23 Schedule of Investments (continued) ICON LONG/SHORT FUND - -------------------------------------------------------------------------------- SCHEDULE OF SHORT SECURITIES September 30, 2003 - --------------------------------------------------------------------------------
SHORT SECURITIES SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------------------------------------------------------- Colgate-Palmolive Company 1,400 $78,246 - -------------------------------------------------------------------------------------------------- TOTAL SHORT SECURITIES (PROCEEDS OF $72,802) 1,400 $78,246
The accompanying notes are an integral part of the financial statements. 24 Statements of Assets and Liabilities
-------------- -------------- -------------- SEPTEMBER 30, 2003 ICON ICON ICON COVERED CALL EQUITY INCOME LONG/SHORT FUND FUND FUND ------------ -------------- -------------- ASSETS Investments, at cost $18,774,883 $39,147,052 $ 8,449,776 -------------- -------------- -------------- Investments, at value 21,301,740 43,069,405 10,002,335 Cash - - 116 Receivables: Fund shares sold 53,026 251,576 71,542 Investments sold 29,301 - - Interest 67 19,343 80 Dividends 5,315 55,601 3,809 Deposits for short sales - - 48,536 Expense reimbursements by Adviser 19,171 16,533 16,695 Other assets 1,396 2,472 659 -------------- -------------- -------------- Total Assets 21,410,016 43,414,930 10,143,772 -------------- -------------- -------------- LIABILITIES Options written, at value (premiums received of $241,662, $0 and $0, respectively) 170,747 - - Common stocks sold short, at value (proceeds of $0, $0 and $72,802, respectively) - - 78,246 Payables: Due to custodian bank - 2,222 - Fund shares redeemed 30,106 53,287 16,832 Advisory fees 13,313 26,867 6,972 Accrued distribution fees 4,524 9,318 2,212 Fund accounting, custodial and transfer agent fees 8,915 10,541 7,627 Administration fees 888 1,790 411 Distributions due to shareholders - 183,619 - Accrued expenses 52,576 71,729 36,815 -------------- -------------- -------------- Total Liabilities 281,069 359,373 149,115 -------------- -------------- -------------- NET ASSETS - ALL SHARE CLASSES $21,128,947 $43,055,557 $ 9,994,657 ============== ============== ============== NET ASSETS - CLASS I $20,980,984 $42,474,380 $ 9,725,838 ============== ============== ============== NET ASSETS - CLASS C $ 147,963 $ 581,177 $ 268,819 ============== ============== ============== Shares outstanding (unlimited shares authorized, no par value) Class I 1,692,216 3,474,395 810,315 Class C 12,014 47,601 22,544 Net asset value (offering price and redemption price per share) Class I $ 12.40 $ 12.22 $ 12.00 Class C $ 12.32 $ 12.21 $ 11.92
The accompanying notes are an integral part of the financial statements. 25 Statements of Operations
-------------- -------------- -------------- FOR THE YEAR ENDED SEPTEMBER 30, 2003 ICON ICON ICON COVERED CALL EQUITY INCOME LONG/SHORT FUND FUND FUND -------------- -------------- -------------- INVESTMENT INCOME Interest $ 8,802 $ 66,994 $ 5,754 Dividends 107,670 859,107 58,708 -------------- -------------- -------------- Total Investment Income 116,472 926,101 64,462 -------------- -------------- -------------- EXPENSES Advisory fees 108,512 190,412 60,488 Distribution fees: Class I 36,487 63,516 17,511 Class C 434 3,178 1,796 Fund accounting, custodial and transfer agent fees 51,706 51,434 47,120 Administration fees 6,635 11,636 3,248 Audit fees 17,273 30,267 8,460 Registration fees 26,960 27,820 26,336 Legal fees 1,470 2,528 19,165 Insurance expense 126 223 60 Trustee fees and expenses 874 1,466 433 Shareholder reports 12,883 20,451 6,618 Interest expense 368 42 2,291 Other expenses 36,785 36,942 27,599 -------------- -------------- -------------- Total expenses before expense reimbursement and dividends on short positions 300,513 439,915 221,125 Expense reimbursement by Adviser (90,063) (69,536) (109,309) Dividends on short positions - - 1,154 -------------- -------------- -------------- Net Expenses 210,450 370,379 112,970 -------------- -------------- -------------- NET INVESTMENT INCOME (LOSS) (93,978) 555,722 (48,508) -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investment transactions 1,447,182 444,788 (149,305) Written options (933,240) 46,224 - Securities sold short - - (23,584) -------------- -------------- -------------- Total net realized gain/(loss) 513,942 491,012 (172,889) -------------- -------------- -------------- Change in net unrealized appreciation/(depreciation) on securities, written options and securities sold short 2,597,772 3,922,353 1,547,115 -------------- -------------- -------------- Net realized and unrealized gain on investments 3,111,714 4,413,365 1,374,226 -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $3,017,736 $4,969,087 $1,325,718 ============== ============== ==============
The accompanying notes are an integral part of the financial statements. 26 Statements of Changes in Net Assets
------------------ ------------------ ------------------ ICON ICON ICON COVERED CALL FUND EQUITY INCOME FUND LONG/SHORT FUND ------------------ ------------------ ------------------ For the year For the year For the year October 1, 2002* October 1, 2002* October 1, 2002* (inception) to (inception) to (inception) to September 30, 2003 September 30, 2003 September 30, 2003 ------------------ ------------------ ------------------ OPERATIONS Net investment income/(loss) $ (93,978) $ 555,722 $ (48,508) Net realized gain/(loss) from investment transactions, written options and securities sold short 513,942 491,012 (172,889) Change in unrealized appreciation/(depreciation) on securities, written options and securities sold short 2,597,772 3,922,353 1,547,115 ------------------ ------------------ ------------------ Net increase in net assets resulting from operations 3,017,736 4,969,087 1,325,718 ------------------ ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - (555,767) - ------------------ ------------------ ------------------ Net decrease from dividends and distributions - (555,767) - ------------------ ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold Class I 21,535,397 44,637,115 10,958,821 Class C 177,231 637,549 436,593 Reinvested dividends and distributions Class I - 528,515 - Class C - 4,458 - Shares repurchased Class I (3,564,680) (7,026,892) (2,533,670) Class C (36,737) (138,508) (192,805) ------------------ ------------------ ------------------ Net increase from fund share transactions 18,111,211 38,642,237 8,668,939 ------------------ ------------------ ------------------ Total net increase in net assets 21,128,947 43,055,557 9,994,657 NET ASSETS Beginning of period - - - ------------------ ------------------ ------------------ End of period $21,128,947 $43,055,557 $ 9,994,657 ------------------ ------------------ ------------------ NET ASSETS CONSIST OF Paid-in capital $18,111,211 $38,642,237 $ 8,620,431 Accumulated undistributed net investment income (loss) - 14,605 - Accumulated undistributed net realized gain/(loss) from investments 419,964 476,362 (172,889) Unrealized appreciation on securities, written options and securities sold short 2,597,772 3,922,353 1,547,115 ------------------ ------------------ ------------------ Net Assets $21,128,947 $43,055,557 $ 9,994,657 ================== ================== ================== TRANSACTIONS IN FUND SHARES Shares sold Class I 2,020,657 4,069,794 1,055,319 Class C 15,317 60,013 42,776 Reinvested dividends and distributions Class I - 47,549 - Class C - 405 - Shares repurchased Class I (328,441) (642,948) (245,004) Class C (3,303) (12,817) (20,232) ------------------ ------------------ ------------------ Net increase 1,704,230 3,521,996 832,859 ------------------ ------------------ ------------------ Shares outstanding beginning of period - - - ------------------ ------------------ ------------------ Shares outstanding end of period 1,704,230 3,521,996 832,859 ================== ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities and written options) Purchase of securities (including short sale transactions) $45,565,265 $47,049,615 $19,387,249 Proceeds from sales of securities (including short sale transactions) 28,417,692 9,058,288 11,575,765
* The offering of Class I shares of the Funds commenced on October 1, 2002 and Class C shares on November 21, 2002, November 8, 2002 and October 17, 2002, respectively. The accompanying notes are an integral part of the financial statements. 27 Financial Highlights
--------------------------------------- --------------------------------------- ICON COVERED CALL FUND ICON EQUITY INCOME FUND --------------------------------------- --------------------------------------- Class I Class C Class I Class C For the year For the period For the year For the period October 1, 2002 November 21, 2002 October 1, 2002 November 8, 2002 (inception) to (inception) to (inception) to (inception) to September 30, 2003 September 30, 2003 September 30, 2003 September 30, 2003 ------------------ ------------------ ------------------ ------------------ Net asset value, beginning of period $ 10.00 $ 10.75 $ 10.00 $10.63 ------------------ ------------------ ------------------ ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.07) (0.17) 0.25 0.16 Net realized and unrealized gains on investments 2.47 1.74 2.20 1.59 ------------------ ------------------ ------------------ ------------------ Total from investment operations 2.40 1.57 2.45 1.75 ------------------ ------------------ ------------------ ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 (0.23) (0.17) ------------------ ------------------ ------------------ ------------------ Total distributions 0.00 0.00 (0.23) (0.17) ------------------ ------------------ ------------------ ------------------ Net asset value, end of period $ 12.40 $ 12.32 $ 12.22 $12.21 ================== ================== ================== ================== Total return 24.00% 14.60%(b) 24.72% 16.63%(b) Net assets, end of period (in thousands) $20,981 $ 148 $42,474 $ 581 Average net assets for the period (in thousands) $14,544 $ 50 $25,288 $ 348 Ratio of expenses to average net assets* Before expense waiver 2.07% 2.83% 1.72% 2.48% After expense waiver 1.45% 2.20% 1.45% 2.20% Ratio of net investment income/(loss) to average net assets* Before expense waiver (1.27)% (2.13)% 1.93% 1.10% After expense waiver (0.65)% (1.50)% 2.20% 1.38% Portfolio turnover rate 184.24%(a) 184.24%(a) 35.17%(a) 35.17%(a) --------------------------------------- ICON LONG/SHORT FUND --------------------------------------- Class I Class C For the year For the period October 1, 2002 October 17, 2002 (inception) to (inception) to September 30, 2003 September 30, 2003 ------------------ ------------------ Net asset value, beginning of period $ 10.00 $ 10.61 ------------------ ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.07) (0.15) Net realized and unrealized gains on investments 2.07 1.46 ------------------ ------------------ Total from investment operations 2.00 1.31 ------------------ ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 ------------------ ------------------ Total distributions 0.00 0.00 ------------------ ------------------ Net asset value, end of period $ 12.00 $ 11.92 ================== ================== Total return 20.00% 12.35%(b) Net assets, end of period (in thousands) $ 9,726 $ 269 Average net assets for the period (in thousands) $ 6,997 $ 186 Ratio of expenses to average net assets* Before expense waiver 3.09% 3.84% After expense waiver 1.55% 2.30% Ratio of net investment income/(loss) to average net assets* Before expense waiver (2.20)% (2.99)% After expense waiver (0.66)% (1.45)% Portfolio turnover rate 162.25%(a) 162.25%(a)
* Annualized for periods less than a year (a) Portfolio turnover is calculated at the Fund level and therefore represents the year October 1, 2002 (Fund inception) to September 30, 2003. (b) The total return calculation is for the period indicated. (x) Calculated using the average share method 28 Notes to Financial Statements SEPTEMBER 30, 2003 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The 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, which is registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment management company. The Funds commenced operations on October 1, 2002 and offer two classes of shares. There are currently 15 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 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. Additionally, call options involve certain risks and are not suitable for all investors. There are risks associated with selling short, including the risk that the Fund may have to cover its short position at a higher price than the short sale, resulting in a loss. High-yield bonds involve a greater risk of default and price volatility than U.S. Government and other high-quality bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which will affect net asset value. There are also risks associated with small and mid-cap investing, including limited product lines, less liquidity and small market share. 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 could differ from these estimates. Investment Valuation. The Funds' securities and other assets are valued at the close of the regular trading session of the New York Stock Exchange (the "Exchange") (normally 4 p.m. Eastern time) each day the Exchange is open. A security listed or traded primarily on a securities exchange or in the over-the-counter market is valued at its last sale price on the exchange or market where it is principally traded. 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 or by a pricing service approved by the Trust's Board of Trustees. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the sum of the closing bid and closing ask prices. The market value of individual securities held by the Funds is determined by using pricing services that provide market prices to other mutual funds or, as needed, by obtaining market quotations from independent broker/dealers. Securities and assets for which quotations are not readily available are valued at fair value determined in good faith pursuant to consistently applied procedures established by the Trust's Board. Short-term securities with remaining maturities of 60 days or less are generally valued at amortized cost or original cost plus accrued interest, both of which approximate market value. London closing quotes for exchange rates are used to convert foreign security values into U.S. dollars. 29 Notes to Financial Statements (continued) 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 repurchases agreements were purchased or sold by the Fund during the year ended September 30, 2003. Options Transactions. Each Fund may write put and call options only if it, among other things, (i) owns an offsetting position in the underlying security or (ii) maintains cash or other liquid assets in an amount equal to or greater than its obligation under the option. 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, 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. 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. 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 gain. 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 Equity Income Fund distributes net investment income, if any, to shareholders quarterly. The Funds distribute net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from generally accepted accounting principles generally accepted in the United States of America. 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. 30 Investment Transactions. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. 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 in the Trust based upon relative net assets. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Investment Advisory Fees. Meridian Investment Management Corporation ("Meridian") serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. Meridian receives a monthly management fee that is computed daily at an annual rate of 0.75% of average daily net assets on the Covered Call and Equity Income Funds and 0.85% on the Long/Short Fund. For the year ended September 30, 2003, Meridian contractually agreed to limit its investment advisory fee and/or reimburse 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 2.20% for Class C and 1.45% for Class I for the ICON Covered Call Fund and the ICON Equity Income Fund and 2.30% for Class C and 1.55% for Class I for the ICON Long/Short Fund. To the extent Meridian 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. For the year or period ended September 30, 2003, Meridian reimbursed/ absorbed $89,744 on the Class I shares and $319 on the Class C shares for the ICON Covered Call Fund, $68,745 on the Class I shares and $791 on the Class C shares for the ICON Equity Income Fund, and $106,558 on the Class I shares and $2,751 on the Class C shares for the ICON Long/Short Fund, respectively. These expenses are subject to recovery by Meridian based on a rolling three-year period. 31 Notes to Financial Statements (continued) Transfer Agent, Custody and Accounting Fees. U.S. Bank N.A. ("U.S. Bank") and U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provide domestic custodial services, transfer agent services and fund accounting for the Funds. For these services the Trust pays a fee for transfer agent and custody services at an annual rate of 0.065% on the first $500 million of average daily net assets, 0.06% on the next $ 1 billion of average daily net assets, and 0.05% on the average daily net assets in excess of $1.5 billion. The Funds pay a minimum fee for fund accounting of $39,000 (on each Fund) on the first $100 million of average net assets, 0.025% on the next $200 million of average daily net assets and 0.0125% on the daily average net assets in excess of $300 million. The Trust also pays for various out-of-pocket costs incurred by U.S. Bancorp that are estimated to be 0.02% of average daily net assets. Administrative Services. The Trust has entered into an administrative services agreement with Meridian. This agreement provided for an annual fee of 0.05% on the Trust's first $500 million of average daily net assets and 0.04% on average daily net assets in excess of $500 million for the period October 1, 2002 to August 31, 2003 and 0.05% on average daily net assets up to $1.5 billion and 0.045% on the average daily net assets in excess of $1.5 billion for the period beginning on September 1, 2003. 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, Meridian Clearing Corp. ("MCC") (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, Class C shareholders pay an annual 12b-1 and service fee of 1.00% of average daily net assets and Class I shareholders pay an annual 12b-1 fee of 0.25% of average daily net assets. For the year or period ended September 30, 2003 the total amounts paid or payable to MCC pursuant to the 12b-1 Plan were $36,487 on the Class I shares and $434 on the Class C shares of the Covered Call Fund, $63,516 on the Class I shares and $3,178 on the Class C shares of the Equity Income Fund and $17,511 on the Class I shares and $1,796 on the Class C shares of the Long/ Short Fund. Related parties. Certain officers and directors of Meridian and MCC are also officers and trustees of the Funds; however, such officers and trustees receive no compensation from the Funds. 3. OPTIONS CONTRACTS WRITTEN The number of option contracts written and the premiums received by the ICON Covered Call Fund during the period ended September 30, 2003, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED Options outstanding, beginning of period - - Options written during period 27,231 $ 2,573,355 Options expired during period (9,835) (776,869) Options closed during period (11,305) (1,241,354) Options exercised during period (2,757) (313,470) ------- ----------- Options outstanding, end of period 3,334 $ 241,662 ======= ===========
32 The number of option contracts written and the premiums received by the ICON Equity Income Fund during the period ended September 30, 2003, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED Options outstanding, beginning of period - - Options written during period 300 $ 46,224 Options expired during period (300) (46,224) Options closed during period - - Options exercised during period - - ---- -------- Options outstanding, end of period - $ - ==== ========
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 aggregate composition by Fund of unrealized capital appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2003 are as follows:
ICON ICON ICON COVERED CALL EQUITY INCOME LONG/SHORT FUND FUND FUND Federal Tax Cost $18,971,709 $38,161,196 $8,449,776 Unrealized Appreciation $ 3,213,269 $ 4,918,410 $1,737,072 Unrealized Depreciation $ (812,323) $(1,010,201) $ (189,957) Net Appreciation $ 2,400,946 $ 3,908,209 $1,547,115
Accumulated capital losses in the Long/Short Fund represent net capital loss carryovers as of September 30, 2003 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions. This carryover in the amount of $445 will expire on September 30, 2011. The Long/Short Fund also incurred "post October" losses during the period from November 1, 2002 through September 30, 2003. These losses of $172,444 will be deferred for tax purposes and recognized in the year ending September 30, 2004. The distributions from ordinary income for the Equity Income Fund for the year ended September 30, 2003 were $555,767. 33 Report of Independent Auditors TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF THE ICON 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 Covered Call Fund, ICON Equity Income Fund, and ICON Long/Short Fund (three of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2003, and the results of each of their operations, the changes in each of their net assets and the financial highlights for the year from October 1, 2002 (commencement of operations) through September 30, 2003, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these financial statements in accordance with auditing standards generally accepted in the United States of America, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit, which included confirmation of securities at September 30, 2003 by correspondence with the custodian and brokers, and the application of alternative auditing procedures where securities purchased had not been received, provides a reasonable basis for the opinion expressed above. PricewaterhouseCoopers LLP /s/ PricewaterhouseCoopers LLP Denver, Colorado November 12, 2003 34 Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 18 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, addresses and principal occupations are set forth below. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 52, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception in 1996. Dr. Callahan also serves as President (1998 to present) and Chief Investment Officer (1991 to present) of Meridian Investment Management Corporation ("Meridian"), 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 Meridian Clearing Corporation ("MCC"), the Funds' Distributor. Dr. Callahan also serves as the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of Meridian Management & Research Corporation ("MM&R"), the parent company of Meridian and MCC. INDEPENDENT TRUSTEES GLEN F. BERGERT, 53. 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); 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); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 56. 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). 35 Board of Trustees and Fund Officers (continued) GREGORY KELLAM SCOTT, 54. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott is Senior Vice President -- Law, General Counsel and Secretary, GenCorp, Inc., a multinational technology-based manufacturing company (2002 to present). Mr. Scott was previously 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). R. MICHAEL SENTEL, 55. 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 FDIC with responsibility for the Rocky Mountain Region (1991-1994). JONATHAN F. ZESCHIN, 50. 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 2002). 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 is also a Director of the Wasatch Funds (2002 to present); and a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to present). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 52. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as Meridian's President (1998 to present) and Chief Investment Officer (1991 to present). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of MCC. Dr. Callahan is also the Chief Investment Officer and Director (1994 to present), and was previously Secretary/ Treasurer (1994 to 1998) of MM&R. ERIK L. JONSON, 54. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception in 1996. Mr. Jonson is also Chief Financial Officer (1996 to present) and Vice President (1998 to present) of Meridian; Chief Financial Officer, Secretary and Director (1996 to present) of MM&R; and Vice President and Treasurer (March 2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) of MCC. ANDRA C. OZOLS, 42. Ms. Ozols has been a Vice President and Secretary of the Funds since March 2002. She previously served in that capacity in 1998. Ms. Ozols is also Vice President, General Counsel and Secretary (March 2002 to present and January 1998 to October 1998) of Meridian; Vice President and Secretary (March 2002 to present) of MCC and Director (June 2003 to present) of MM&R. Ms. Ozols was previously Vice President (1999 to 2002) and Assistant General Counsel (October 1998 to February 2002) of Founders Asset Management LLC; and was previously a Branch Chief (1993 to 1995) and Enforcement Attorney (1990 to 1995 and 1996 to 1998) with the U.S. Securities and Exchange Commission. The Trustees and Officers of the Funds may be contacted at 5299 DTC Boulevard, Suite 1200, Greenwood Village, Colorado 80111. Additional information about the Funds' Trustees and Officers is available in the Funds' Statement of Additional Information, which can be obtained free of charge by calling 1-800-764-0442. 36 Other Information (unaudited) QUALIFYING DIVIDEND INCOME Of the amount distributed in the fiscal year ended September 30, 2003 for the Equity Income Fund, 67.76% represents qualified dividend income. PROXY VOTING BY THE FUNDS A description of the policies and procedures that the Funds use to determine how to vote proxies related to portfolio securities can be obtained free of charge by calling 1-800-764-0442, or by visiting www.iconfunds.com, or www.sec.gov. Information regarding how the Funds voted proxies relating to portfolio securities will be available free of charge no later than August 31, 2004 by calling 1-800-764-0442 or by visiting www.iconfunds.com or www.sec.gov. 37 THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK [ICON FUNDS LOGOS] FOR MORE INFORMATION ABOUT THE ICON FUNDS, CONTACT US: BY TELEPHONE 1-800-764-0442 BY MAIL ICON Funds P.O. Box 701 Milwaukee, WI 53201-0701 IN PERSON ICON Funds 5299 DTC Boulevard, Suite 1200 Greenwood Village, CO 80111 BY E-MAIL ICON@mimcorp.com ON THE INTERNET www.iconfunds.com This report is for the general information of the Funds' shareholders. This report is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. Please call 1-800-764-0442 or visit www.iconfunds.com for a current prospectus, which contains more complete information, including charges, expenses, share classes, and risks. Please read the prospectus carefully before you invest or send money. Meridian Clearing Corp., Distributor. I-120-SPEC - -------------------------------------------------------------------------------- Item 2. Code of Ethics. (a) Code of Ethics. ICON Funds ("Registrant") has adopted a code of ethics ("Code"), as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer. A copy of the Code is filed as an exhibit to this Form N-CSR. (b) Amendments. During the period covered by the report, no amendments were made to the provisions of the Code. (c) Waivers. During the period covered by the report, the Registrant has not granted any express or implicit waivers from the provisions of the Code. (d) Not applicable. (e)(1) A copy of the Code is filed as Exhibit EX-99.CODE ETH to this Form N-CSR. Copies of the Code will also be made available free of charge upon request, by writing ICON Funds at P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling 1-800-764-0442. Item 3. Audit Committee Financial Expert. ICON Funds Board of Trustees has determined that each member of ICON Funds' Audit Committee is an "audit committee financial expert," as defined in Item 3 to Form N-CSR. The members of the Audit Committee include Glen F. Bergert, Chairman; R. Michael Sentel and Jonathan F. Zeschin, who are all "independent" under the standards set forth in Item 3 to Form N-CSR. Item 4. Principal Accountant Fees and Services. Not Applicable. Item 5. Audit Committee of Listed Registrants. Not applicable. Items 6. [Reserved] Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. [Reserved] Item 9. Controls and Procedures. (a) The Registrant's Principal Executive Officer and Principal Financial Officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) provide reasonable assurances that material information relating to the Registrant is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report (b) There was no change in the Registrant's internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act) that occurred during the Registrant's most recently ended second fiscal half-year that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. Item 10. Exhibits. (a)(1) Code of Ethics for Principal Executive Officer and Principal Financial Officer pursuant to Item 2 of Form N-CSR is filed and attached hereto as EX-99.CODE ETH. (a)(2) Separate certifications for the Registrant's Principal Executive Officer and Principal Financial Officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, as amended, are attached as EX99.CERT. (b) A certification of the Registrant's Principal Executive Officer and Principal Financial Officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached as EX99.906CERT. 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. ICON Funds By: /s/ Craig T. Callahan -------------------------------------- Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) Date: December 1, 2003 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By: /s/ Craig T. Callahan --------------------------------------- Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) Date: December 1, 2003 By: /s/ Erik L. Jonson ---------------------------------------- Erik L. Jonson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: December 1, 2003 EX-99.CODE ETH 3 exh99codeeth.txt EXHIBIT 99 - CODE OF ETHICS EXHIBIT 99.CODE ETH ICON FUNDS CODE OF ETHICS FOR PRINICIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS I. Covered Officers/Purpose of Code ICON Funds, a Massachusetts business trust (the "Trust") is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "Investment Company Act"). This Code of Ethics ("Code") for the Trust and its series funds (collectively, the "Funds" and each a "Fund") applies to the Trust's Principal Executive Officer and Principal Financial Officer (the "Covered Officers" each of whom are set forth in Exhibit A) for the purpose of promoting: o Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; o Full, fair, accurate, timely and understandable disclosure in reports and documents that the Trust files with, or submits to, the Securities and Exchange Commission ("SEC") and in other public communications made by or on behalf of the Funds; o Compliance with applicable laws and governmental rules and regulations; o The prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and o Accountability for adherence to the Code. Each Covered Officer should adhere to a high standard of business ethics and should be sensitive to situations that may give rise to actual as well as apparent conflicts of interest. II. Covered Officers Should Ethically Handle Actual and Apparent Conflicts of Interest A "conflict of interest" occurs when a Covered Officer's private interests interfere with the interests of, or his service to, the Trust. For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Trust. Certain conflicts of interest arise out of the relationships between Covered Officers and the Trust and are already subject to conflict of interest provisions in the Investment Company Act and the Investment Advisers Act of 1940, as amended (the "Investment Advisers Act"). For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property) with the Funds because of their status as "affiliated persons". Compliance programs and procedures of the Trust and the Trust's investment adviser, transfer agent, fund accounting service provider, administrative service provider, and principal underwriter (each a "Service Provider") are designed to prevent, or identify and correct, violations of these provisions. This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code. Although typically not presenting an opportunity for improper personal benefit, conflicts may arise from, or as a result of, the contractual relationship between the Trust and a Service Provider. As a result, this Code recognizes that Covered Officers will, in the normal course of their duties (whether formally for the Trust or for a Service Provider, or for both), be involved in establishing policies and implementing decisions which will have different effects on a Service Provider and the Trust. The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Trust and a Service Provider and is consistent with the performance by the Covered Officers of their duties as officers of the Trust. Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically. Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act. The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive. The overarching principle is that the personal interest of the Covered Officer should not be placed improperly before the interests of the Trust. Each Covered Officer must: o Not use his personal influence or personal relationships to improperly influence investment decisions or financial reporting by the Funds whereby the Covered Officer would benefit personally to the detriment of the Funds; o Not cause the Trust to take action, or fail to take action, for the individual personal benefit of the Covered Officer rather than the benefit of the Funds; and o Not use material non-public knowledge of portfolio transactions made or contemplated for a Fund to trade personally or cause others to trade personally in contemplation of the market effect of such transactions. Certain material conflict of interest situations require written pre-approval from the Trust's Audit Committee or its designated representative. Examples of material conflict of interest situations requiring pre-approval include: o Service as a director on the board of any public company; o The receipt of any non-nominal gifts; o The receipt of any entertainment from any company with which the Trust has current or prospective business dealings unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any question of impropriety; o Any ownership interest in, or any consulting or employment relationship with, any of the Trust's Service Providers or any affiliated person thereof; and 2 o A direct or indirect financial interest in commissions, transaction charges or spreads paid by a Fund for effecting portfolio transactions or for selling or redeeming shares other than an interest arising from the Covered Officer's employment, such as compensation or equity ownership. The Trust's Independent Trustees will be provided a list of any such written pre-approvals in connection with the next regularly scheduled Board meeting. III. Disclosure and Compliance o Each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Trust; o Each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Funds to others, whether within or outside the Trust, including to the Trust's Board of Trustees ("Board") and auditors, and to governmental regulators and self-regulatory organizations; o Each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers of the Trust and officers and employees of the Service Providers with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Trust files with, or submits to, the SEC and in other public communications made by or on behalf of the Funds; and o It is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. IV. Reporting and Accountability Each Covered Officer must: o Upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read and understands the Code; o Annually thereafter affirm to the Board that he has complied with the requirements of the Code; o Not retaliate against any other Covered Officer, other officer of the Trust, any employee of a Service Provider or any of their affiliated persons for reports of potential violations that are made in good faith; and o Notify the Trust's Audit Committee or its designated representative promptly if he knows of any violation of this Code. Failure to do so is itself a violation of this Code. The Trust's Audit Committee, directly or through its designated representative, is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation. However, any waivers of any provision of this Code will be considered by the Independent Trustees. 3 The Trust will follow the following procedures in investigating and enforcing this Code: o The Trust's Audit Committee will take all appropriate action to investigate any reported potential violations; o If, after such investigation, the Audit Committee believes that no violation has occurred, the Audit Committee is not required to take any further action; o Any matter that the Audit Committee believes is a violation will be reported to the Independent Trustees; o If the Independent Trustees concur that a violation has occurred, they will inform the Covered Officer and consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of a Service Provider or its board; or a recommendation to dismiss the Covered Officer; o The Independent Trustees will be responsible for granting waivers, as appropriate; and o Any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules. V. Other Policies and Procedures This Code shall be the sole code of ethics adopted by the Trust for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder. Insofar as other policies or procedures of the Trust, a Service Provider, or other service providers govern or purport to govern the behavior or activities of Covered Officers, they are superceded by this Code to the extent that they overlap or conflict with the provisions of this Code. The Code of Ethics under Rule 17j-1 under the Investment Company Act is a separate requirement applying to the Covered Officers and others, and is not part of this Code. VI. Amendments Except as to Exhibit A, this Code may not be amended except in written form, which is specifically approved or ratified by a majority vote of the Board, including a majority of Independent Trustees. VII. Confidentiality All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly. Except as otherwise required by law or this Code, such matters shall not be disclosed to anyone other than the Board, officers of the Trust, Trust counsel and counsel for a Service Provider. 4 VIII. Internal Use The Code is intended solely for the internal use by the Trust and does not constitute an admission, by or on behalf of any Trust, as to any fact, circumstance, or legal conclusion. Date: August 12, 2003 5 EXHIBIT A Persons Covered by this Code of Ethics Craig T. Callahan, Principal Executive Officer of ICON Funds Erik L. Jonson, Principal Financial Officer of ICON Funds 6 Date: August 12, 2003 EX-99.CERT 4 exh99cert.txt EXHIBIT 99 - CALLAHAN/JONSON CERTIFICATIONS EXHIBIT 99.CERT I, Craig T. Callahan, certify that: 1. I have reviewed this report on Form N-CSR of ICON Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based upon such evaluation; and c. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 1, 2003 By: /s/ Craig T. Callahan ------------------------------------ Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) I, Erik L. Jonson, certify that: 1. I have reviewed this report on Form N-CSR of ICON Funds; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The Registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Evaluated the effectiveness of the Registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based upon such evaluation; and c. Disclosed in this report any change in the Registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The Registrant's other certifying officer and I have disclosed to the Registrant's auditors and the audit committee of the Registrant's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: December 1, 2003 By: /s/ Erik L. Jonson --------------------------------------- Erik L. Jonson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) EX-99.906 5 exh99906cert.txt EXHIBIT 99.906 - CALLAHAN/JONSON CERTIFICATIONS EXHIBIT 99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the attached Report of ICON Funds (the "Trust") on Form N-CSR to be filed with the Securities and Exchange Commission (the "Report"), each of the undersigned officers of the Trust does hereby certify that, to the best of such officer's knowledge: 1. The Report fully complies with the requirements of 13(a) or 15(d) of the Securities Exchange Act of 1934; and 2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Trust as of, and for, the periods presented in the Report. By: /s/ Craig T. Callahan ------------------------------------ Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) Date: December 1, 2003 By: /s/ Erik L. Jonson ------------------------------------- Erik L. Jonson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) This certification is being furnished solely pursuant to 18 U.S.C. ss.1350 and is not being filed as a part of the Report or as a separate disclosure document. A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Trust and will be retained by the Trust and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----