-----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, LZPHR6US0qFA3sIp0JfxdnOSTQu06IJQax95i3Ym4KgsVSbzRPA3hnJNH4DJQM28 hnoHgez9F2ylqmj5dLdiew== 0001025770-04-000027.txt : 20040805 0001025770-04-000027.hdr.sgml : 20040805 20040805112324 ACCESSION NUMBER: 0001025770-04-000027 CONFORMED SUBMISSION TYPE: N-CSRS/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20040805 EFFECTIVENESS DATE: 20040805 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-CSRS/A SEC ACT: 1940 Act SEC FILE NUMBER: 811-07883 FILM NUMBER: 04953744 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-CSRS/A 1 formncsra.txt SUPPLEMENT TO SEMI-ANNUAL REPORT-8/5/04 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS/A CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number: 811-07883 ICON FUNDS (Exact name of registrant as specified in charter) 5299 DTC Blvd., Suite 1200 Greenwood Village, CO 80111 (Address of principal executive offices) 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: 03/31/2004 Item 1 - Reports to Stockholders March 31, 2004 Investment Update ICON SECTOR FUNDS Semiannual Report [ICON FUNDS LOGO] Table of Contents
ABOUT THIS REPORT ......................................2 MESSAGE FROM ICON FUNDS ......................................4 MANAGEMENT OVERVIEW AND SCHEDULE OF INVESTMENTS ......................................6 ICON Consumer Discretionary Fund ......................................6 ICON Energy Fund .....................................11 ICON Financial Fund .....................................16 ICON Healthcare Fund .....................................21 ICON Industrials Fund .....................................26 ICON Information Technology Fund .....................................31 ICON Leisure and Consumer Staples Fund .....................................36 ICON Materials Fund .....................................41 ICON Telecommunication & Utilities Fund .....................................45 ICON Short-Term Fixed Income Fund .....................................49 FINANCIAL STATEMENTS .....................................52 FINANCIAL HIGHLIGHTS .....................................60 NOTES TO FINANCIAL STATEMENTS .....................................70
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. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconfunds.com for performance results current to the most recent month-end. - -------------------------------------------------------------------------------- PORTFOLIO DATA - -------------------------------------------------------------------------------- Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's percentage holdings as of March 31, 2004 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology does not consider company-specific factors beyond financial data, 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. There is no assurance that the investment process will consistently lead to successful results. An investment in a sector fund may involve greater risk and volatility than a diversified fund, and the technology sector has been among the most volatile sectors in the market. 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 Funds' portfolios may significantly differ in holdings and composition from the indexes. Individuals cannot invest directly in an index. - - The unmanaged Standard & Poor's (S&P) 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 Merrill Lynch 1-Year U.S. Treasury Bill Index consists of a single issue with the longest maturity. The issue is replaced on a monthly basis to maintain the characteristics of the index. Index returns and statistical data included in this report are provided by Bloomberg and FactSet. 3 Message from ICON Funds - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: [PHOTO] - -------------------------------------------------------------------------------- Last November, I found myself in a somewhat heated TV debate in which I contended that the then eight-month rally in stock prices still had further upside. In taking this decidedly bullish stance, I based my position on the fact that the stocks in the ICON domestic database were priced on average about 15% below our estimate of fair value, and that we expected them to continue in their upward march. Meanwhile my opponent, a respected money manager, voiced a more pessimistic outlook. Armed with a host of fear-based objections, including overheated price/earnings ratios, rising interest rates and sluggish job growth, his intuitive arguments supporting a precipitous decline undoubtedly proved convincing to many investors. Except that he was wrong. THE PRODUCT OF FAULTY REASONING Through mid-March 2004, stocks did in fact continue their move toward fair value, despite these and other concerns. Although Wall Street has been known to climb a wall of worry, the skepticism and doubt expressed by some investors during the advance was likely the product of faulty reasoning. Let's explore some common investor misperceptions: - - STOCKS ARE OVERPRICED BASED ON P/E. Price/earnings ratio is a simplistic measure that fails to consider the impact of interest rates, a key component in calculating the present value of any asset. Value, of course, is not stagnant and can increase or decrease depending on the current interest rate environment. In the current low interest rate setting, we believe it makes sense that stock prices would be higher relative to earnings. Our valuation model considers earnings estimates, but expands beyond this one-dimensional statistic. - - INTEREST RATES WILL HAVE TO RISE. There appears to be a consensus among market observers that short-term interest rates will move higher as the economic recovery gains traction, pressuring earnings and consequently stock prices. The fact is short-term rates play a limited role in our system, which emphasizes the AAA long-term bond yield in its assessment of valuation. With long-term rates experiencing a 20-year secular decline, we find it counterproductive to predict the impact of an increase. That being said, we do not currently see any force capable of reversing this downward trend. [SIDENOTE] Intuitive arguments supporting a decline undoubtedly proved convincing. Except that they were wrong. [SIDENOTE] We remain bullish and believe stock prices are positioned to resume their value-driven advance. 4 - - SLUGGISH JOB GROWTH WILL SLOW CONSUMER SPENDING. While unemployment is near its historical average, investors have sold stocks on the belief that disappointing job growth will slow consumer spending. Having examined various measures of consumer spending going back to the 1960s, I have found no evidence of a direct link between employment and spending. Interestingly enough, the data would seem to suggest that spending has triggered employment, not the other way around. FAVORING CYCLICAL INDUSTRIES Naturally, as evidenced by the market dip in mid-March 2004, it is quite normal for news events to distract investors and interrupt the path back toward fair value. Nevertheless, we remain bullish and believe stock prices are positioned to resume their value-driven advance. Our valuation model suggests that stocks continue to be priced at discounts relative to intrinsic value, and that market action late in the period was merely a temporary setback. This interruption, however, was not without its impact. Since late January 2004, market leadership has lacked a common theme, as top-performing cyclical and economically sensitive sectors such as technology, consumer discretionary, industrials, and materials turned increasingly volatile. At the same time, defensive groups such as healthcare, utilities and consumer staples demonstrated strength amid market pullbacks. We don't expect an economic boom; we think the economic environment is healthy. Nor do we believe the market needs a big news event to be propelled forward. Despite these seemingly short-lived theme reversals, we think it best to continue favoring underpriced cyclical industries, and ride through the occasional turbulence. A NEW NAME Effective January 2004, Meridian Investment Management Corporation, adviser to the ICON Funds, changed its name to ICON Advisers, Inc. More than just a name change, we believe it represents an opportunity for our advisory firm to introduce our story to a wider audience. The name involves many strategic marketing and communications initiatives, including a new website for shareholders like you and financial advisers, which we plan to launch this summer. In closing, we once again experienced a market that defies conventional wisdom. ICON thanks you for the opportunity to help guide you through it. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and Chief Investment Officer of the Adviser [SIDENOTE] Despite short-lived theme reversals and temporary setbacks, our valuation model suggests stocks are still priced below intrinsic value. 5 Management Overview ICON CONSUMER DISCRETIONARY FUND A discussion with Robert Straus, CMT, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Consumer Discretionary Fund appreciated 17.47% for the six-month period ended March 31, 2004, keeping pace with the 17.39% return for its sector-specific benchmark, the S&P 1500 Consumer Discretionary Index, and outperforming the 14.75% return of its broad benchmark, the S&P 1500 Index. Total returns for other periods as of March 31, 2004 are listed on page 8. Although the Fund was able to maintain its edge over both benchmarks, the second half of the period was marred by a sharp, short-term market pullback, which detracted from returns of economically sensitive sectors such as Consumer Discretionary. While the Fund surrendered some gains during this downdraft, our valuation and relative strength readings suggested that market leadership remained concentrated in cyclical industries. As a result, the Fund used the retreat as an opportunity to fortify selected positions. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach views investment style as irrelevant, the Fund benefited from a value bias during the period, as measured on a price-to-earnings (P/E) basis. Whereas short-lived theme reversals lifted more defensive issues during the two-month pullback, underpriced stocks encountered less resistance than more richly valued shares. For the record, the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a value-to-price ratio (V/P) for each industry and security. This is viewed as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Although the Fund's valuation and relative strength readings supported an upward move during the period, pervasive fear continued to dominate the equity landscape. Most prominent was the fear of terrorism, which heightened following several overseas incidents. These events produced harsh sell-offs, and the underlying uncertainty weighed heavily on the markets. Also contributing to investors' anxiety were worries surrounding overheated valuations, stagnant job creation, and the near-term possibility of higher interest rates. Although we do not factor these measures into our investment process, they affected the investment environment the Fund faced. While these perceived concerns fueled skepticism over the sustainability of the economic recovery, the market seemingly refused to acknowledge that a recovery was not only taking place, but was actually gaining traction. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT THE FUND'S PERFORMANCE? With respect to major industry moves during the period, the Fund sold its holdings in the general merchandise stores and computer & electronics retail industries, neither of which showed strong relative performance. Subsequently, value and relative strength were detected in industries such as auto parts & equipment, which was increased significantly, and apparel, accessories & luxury goods. In addition, the Fund trimmed an overweight position in specialty stores, taking the opportunity to lock in profits. [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 100.2% Top 10 Equity Holdings 26.1% Number of Stocks 61 Cash Equivalents 0.8% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Helen of Troy Limited 3.3% Winnebago Industries, Inc. 2.8% Aftermarket Technology Corp. 2.8% Monaco Coach Corporation 2.8% Lear Corporation 2.7% West Marine, Inc. 2.4% Keystone Automotive Industries, Inc. 2.4% BorgWarner, Inc. 2.4% Kenneth Cole Productions, Inc. 2.3% DaimlerChrysler AG 2.2% Percentages are based upon net assets. 6 Several individual Fund holdings contributed significantly to performance during the period, including recreational vehicle manufacturer Monaco Coach Corp. and motor home maker Winnebago Industries, Inc. Both benefited from favorable demand trends and rising order backlog. Elsewhere, automotive original equipment manufacturers (OEM) business, particularly in high-end audio and infotainment systems, continued to drive growth for Harman International Industries, Inc., which added to the Fund's return during the period. When Harman's value/price ratio fell during the period, the company met our sell criteria. In contrast, among the Fund's poorest-performing stocks was video game retailer Electronics Boutique Holdings Corp., which fell on lower hardware sales and was sold from the Fund when the computer & electronics retail industry position was replaced. Structural component manufacturer Tower Automotive, Inc. also declined when the company announced an earnings-per-share loss related to a joint venture. Meanwhile, men's apparel retailer Jos. A. Bank Clothiers, Inc. slid on concerns ranging from inventory and debt levels to negative publicity. WHAT IS THE INVESTMENT OUTLOOK FOR THE CONSUMER DISCRETIONARY SECTOR? Our outlook for the Consumer Discretionary sector is positive, based on the belief that the cyclical theme remains firmly in place. The sector continues to be priced at a discount to its intrinsic worth based on our valuation methodology, suggesting that further upside potential still exists. Given the sector's cyclical orientation, the Fund also stands to benefit from the economic expansion that appears to be taking hold in the U.S. This combination of cyclically oriented, underpriced industries and an expanding domestic economy provides the sector with both the opportunity and the catalyst to outperform the broader market for the foreseeable future. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Our valuation methods led us to overweight small- and mid-capitalization companies, which added to relative performance as large-cap securities underperformed. - - Among the Fund's strongest-performing holdings during the period were Monaco Coach Corp. and Winnebago Industries, Inc. - - Our methodology led us to hold a significant position in specialty stores, and the Fund's holdings in this industry performed strongly relative to the sector-specific Index. - - Conversely, the worst industry performer in the Fund was computer & electronics retail. - - Our stockpicking in the apparel & accessories industry, an overweight position, added to returns. 7 Management Overview (continued) ICON CONSUMER DISCRETIONARY FUND - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Specialty Stores 17.0% Automobile Manufacturers 13.4% Apparel Retail 13.3% Homebuilding 11.8% Auto Parts & Equipment 11.3% Apparel, Accessories & Luxury Goods 8.2% Home Furnishings 5.3% Household Appliances 5.3% Department Stores 4.3% Tobacco 3.9%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 7/9/97 - ------------------------------------------------------------------------------------------ ICON Consumer Discretionary Fund 17.47% 56.14% 7.16% 5.33% - ------------------------------------------------------------------------------------------ S&P 1500 Consumer Discretionary Index 17.39% 44.87% -0.41% 7.27% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 5.43% - ------------------------------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON CONSUMER S&P 1500 CONSUMER DISCRETIONARY FUND DISCRETIONARY INDEX S&P 1500 INDEX ------------------ ------------------- -------------- 7/9/97 10000 10000 10000 3/31/98 11140 13276 12321 3/31/99 10832 16371 14207 3/31/00 10503 17620 16994 3/31/01 9756 13937 13550 3/31/02 13379 14959 13837 3/31/03 9080 11069 10425 3/31/04 14178 16036 14275
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. 8 Schedule of Investments (unaudited) ICON CONSUMER DISCRETIONARY FUND SCHEDULE OF INVESTMENTS March 31, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- COMMON STOCKS 100.2% CONSUMER DISCRETIONARY 94.6% APPAREL, ACCESSORIES & LUXURY GOODS 8.2% 262,000 DHB Industries, Inc.(a) $ 1,930,940 116,100 Fossil, Inc.(a) 3,871,935 133,300 Kenneth Cole Productions, Inc. 4,545,530 58,000 Polo Ralph Lauren Corporation 1,988,240 169,600 Quiksilver, Inc.(a) 3,705,760 - --------------------------------------------------- 16,042,405 APPAREL RETAIL 13.3% 55,000 Abercrombie & Fitch Co. 1,861,200 56,300 Aeropostale, Inc.(a) 2,041,438 94,100 Cache, Inc.(a) 3,102,477 73,400 Chico's FAS, Inc.(a) 3,405,760 86,100 The Gap, Inc. 1,887,312 100,000 Hot Topic, Inc.(a) 2,645,000 103,100 Jos. A. Bank Clothiers, Inc.(a) 3,711,600 70,300 Mothers Work, Inc.(a) 1,873,495 124,400 Ross Stores, Inc. 3,807,884 74,000 The TJX Companies, Inc. 1,817,440 - --------------------------------------------------- 26,153,606 AUTO PARTS & EQUIPMENT 11.3% 368,000 Aftermarket Technology Corp.(a) 5,405,920 54,900 BorgWarner, Inc. 4,657,167 171,500 Keystone Automotive Industries, Inc.(a) 4,692,240 86,000 Lear Corporation 5,328,560 407,000 Tower Automotive, Inc.(a) 2,051,280 - --------------------------------------------------- 22,135,167 AUTOMOBILE MANUFACTURERS 13.4% 105,100 DaimlerChrysler AG(a)f) 4,386,874 251,000 Ford Motor Company 3,406,070 72,600 General Motors Corporation 3,419,460 201,500 Monaco Coach Corporation 5,400,200 159,400 Thor Industries, Inc. 4,281,484 177,600 Winnebago Industries, Inc. 5,535,792 - --------------------------------------------------- 26,429,880 DEPARTMENT STORES 4.3% 79,300 Federated Department Stores, Inc. 4,286,165 76,600 The Neiman Marcus Group, Inc. 4,131,804 - --------------------------------------------------- 8,417,969
- ---------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE HOMEBUILDING 11.8% 68,200 Centex Corporation $ 3,686,892 98,700 D.R. Horton, Inc. 3,496,941 89,600 Hovnanian Enterprises, Inc.(a) 3,866,240 38,100 Meritage Corporation(a) 2,828,925 49,800 Pulte Homes, Inc. 2,768,880 29,300 The Ryland Group, Inc. 2,602,719 85,000 Toll Brothers, Inc.(a) 3,861,550 - --------------------------------------------------- 23,112,147 HOME FURNISHINGS 5.3% 62,500 Ethan Allen Interiors Inc. 2,578,750 133,900 Furniture Brands International, Inc. 4,311,580 39,500 Hooker Furniture Corporation 917,980 31,100 Mohawk Industries, Inc.(a) 2,561,085 - --------------------------------------------------- 10,369,395 HOME IMPROVEMENT RETAIL 0.6% 21,300 Lowe's Companies, Inc. 1,195,569 HOUSEHOLD APPLIANCES 5.3% 146,900 Craftmade International, Inc. 3,975,114 210,300 Helen of Troy Limited(a)f) 6,521,403 - --------------------------------------------------- 10,496,517 INTERNET RETAIL 2.6% 242,000 1-800-FLOWERS.COM, Inc.(a) 2,315,940 39,300 eBay Inc.(a) 2,724,669 - --------------------------------------------------- 5,040,609 SPECIALTY STORES 17.0% 50,100 Advance Auto Parts, Inc.(a) 2,037,567 127,700 Barnes & Noble, Inc.(a) 4,163,020 138,900 Big 5 Sporting Goods Corporation(a) 3,507,225 37,700 Dick's Sporting Goods, Inc.(a) 2,191,878 50,100 O'Reilly Automotive, Inc.(a) 2,006,004 125,100 PETsMART, Inc. 3,410,226 86,200 The Sports Authority, Inc.(a) 3,454,896 66,300 Staples, Inc. 1,683,357 110,200 United Auto Group, Inc. 3,015,072 149,300 West Marine, Inc.(a) 4,755,205 49,600 Zale Corporation(a) 3,052,880 - --------------------------------------------------- 33,277,330 TIRE & RUBBER 1.5% 146,000 Cooper Tire & Rubber Company 2,941,900 - --------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 185,612,494 INFORMATION TECHNOLOGY 1.5% HOME ENTERTAINMENT SOFTWARE 1.5% 77,800 Take-Two Interactive Software, Inc.(a) 2,861,484 - --------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 2,861,484
9 Schedule of Investments (continued) (unaudited) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- LEISURE AND CONSUMER STAPLES 3.9% TOBACCO 3.9% 69,000 Altria Group, Inc. $ 3,757,050 63,000 R.J. Reynolds Tobacco Holdings, Inc. 3,811,500 - --------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 7,568,550 MATERIALS 0.2% CONSTRUCTION MATERIALS 0.2% 1,511 Eagle Materials Inc. 88,922 5,081 Eagle Materials Inc., Class B 296,731 - --------------------------------------------------- TOTAL MATERIALS 385,653 - --------------------------------------------------- TOTAL COMMON STOCKS (COST $153,768,277) 196,428,181 SHORT-TERM INVESTMENTS 0.8% U.S. GOVERNMENT AGENCIES 0.7% $1,441,000 FHLB Discount Note, 0.7500%, 4-1-04 1,441,000 - --------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 1,441,000 VARIABLE RATE DEMAND NOTE 0.1% 191,471 American Family Demand Note, 0.6908%# 191,471 - --------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 191,471 - --------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $1,632,471) 1,632,471 - --------------------------------------------------- TOTAL INVESTMENTS 101.0% (COST $155,400,748) 198,060,652 - --------------------------------------------------- LIABILITIES LESS OTHER ASSETS (1.0%) (1,918,818) - --------------------------------------------------- NET ASSETS 100.0% $196,141,834 - ---------------------------------------------------
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 March 31, 2004. f Foreign security Dates shown on securities are the due dates of the obligation. 10 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 appreciated 32.77% for the six-month period ended March 31, 2004, outpacing the 21.94% return for its sector-specific benchmark, the S&P 1500 Energy Index. The Fund also surpassed its broad benchmark, the S&P 1500 Index, which returned 14.75%. Total returns for other periods as of March 31, 2004 are listed on page 13. Our independent analysis worked in the Fund's favor during the period, as valuation and relative strength readings led us to construct a portfolio that differed considerably from the S&P 1500 Energy Index. Whereas the index emphasized holdings in the integrated oil & gas industry, the Fund was more heavily weighted in industries that led the sector's advance, such as oil & gas refining & marketing & transportation, oil & gas exploration & production, and oil & gas equipment & services. Stock selection also proved rewarding in that the Fund's top performers more than offset its laggards. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach considers investment style irrelevant, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. Although richly valued shares suffered amid winter's two-month cyclical downdraft, underpriced stocks were better positioned to withstand the pullback. For the record, the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. This is viewed as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Broadly speaking, rising prices, favorable supply/demand dynamics, and an improving global economy bolstered the Energy sector during the period. However, given its sweeping global significance, the resurfacing of geopolitical tensions gave rise to supply concerns, which led to several pronounced market sell-offs. Fear was undeniable in the wake of overseas terrorist events. Closer to home, stocks recorded solid gains despite several interruptions. Patience was at a premium as investors were quick to take profits, whether motivated by perceptions of overheated valuations, rising interest rates, or lackluster job growth. While most industries remained underpriced based on our estimate of fair value, market psychology remained decidedly negative even as economic fundamentals and corporate earnings demonstrated incremental improvements. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? During the period, the Fund maintained overweight positions in leading industries such as oil & gas refining & marketing & transportation, oil & gas exploration & production, and oil & gas equipment & services. Much of the Fund's exposure to integrated oil & gas was in the form of ADRs or American depository receipts. Having begun the period at relatively deeper discounts to U.S. stocks, these U.S. dollar-denominated shares of foreign companies generally closed a much wider valuation gap. [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 95.0% Top 10 Equity Holdings 36.5% Number of Stocks 51 Cash Equivalents 8.2% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Ultra Petroleum Corp. 4.6% Patina Oil & Gas Corporation 4.5% Ashland Inc. 3.9% Sunoco, Inc. 3.9% Petroleo Brasileiro S.A. 3.8% National-Oilwell, Inc. 3.5% Cal Dive International, Inc. 3.2% Headwaters Incorporated 3.1% Repsol YPF, S.A. 3.0% Eni S.p.A. 3.0% Percentages are based upon net assets. 11 Management Overview (continued) ICON ENERGY FUND The Fund held a higher-than-normal cash position due to lagging relative strength measures early in the period. While our goal is to keep the Fund fully invested, we are prepared to hold cash if our valuation system is unable to detect opportunities that meet our strict valuation criteria. Among the Fund's individual holdings, companies that generated the greatest contributions to returns during the period were Ultra Petroleum Corp., which soared when analysts upgraded this emerging exploration and production company, and Patina Oil & Gas Corp., which advanced as production gains translated into higher revenues. On the other hand, Fund performance was negatively impacted by equipment manufacturer Hydril, which slumped when an anticipated upturn in drilling failed to materialize. Oil States International, which provides specialty products and services to oil and gas drilling and production companies, had a sharp sell-off after announcing that projected offshore sales would be down sequentially in 2004. WHAT IS THE INVESTMENT OUTLOOK FOR THE ENERGY SECTOR? Although our system continues to indicate leadership in the refining & marketing & transportation and exploration & production industries, overall we believe the sector is fairly valued. Therefore, we do not anticipate significant shifts in industry allocations, and in light of lowered 2005 earnings forecasts, we are hesitant to put excess cash to work. That said, we continue to monitor the situation closely, looking for industries that are exhibiting relative strength and trading below our estimates of fair value. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - The Fund's holdings in small- and mid-cap stocks, determined through our valuation model, contributed to relative performance as they outpaced large-cap securities. - - Among the Fund's strongest-performing holdings during the period were Ultra Petroleum Corp. and Patina Oil & Gas Corp. - - Our methodology led us to hold a significant position in the oil & gas exploration & production industry, and the Fund's holdings in this area performed strongly relative to the sector-specific Index. - - All industry positions in the Fund performed positively in the period. - - Oil States International, Inc. and Hydril negatively impacted performance during the period. - -------------------------------------------------------------------------------- TOP INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Oil & Gas Exploration & Production 25.3% Oil & Gas Equipment & Services 23.7% Integrated Oil & Gas 21.9% Oil & Gas Refining & Marketing & Transportation 15.5% Commodity Chemicals 3.1% Construction & Engineering 2.8% Oil & Gas Drilling 1.6% Industrial Machinery 1.1%
Percentages are based upon net assets. 12 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 11/5/97 - ------------------------------------------------------------------------------------------ ICON Energy Fund 32.77% 48.85% 24.54% 11.57% - ------------------------------------------------------------------------------------------ S&P 1500 Energy Index 21.94% 31.58% 7.32% 4.75% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 4.84% - ------------------------------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON ENERGY FUND S&P 1500 ENERGY INDEX S&P 1500 INDEX ---------------- --------------------- -------------- 11/5/97 10000 10000 10000 3/31/98 9330 9872 11683 3/31/99 6725 9455 13472 3/31/00 11090 11203 16115 3/31/01 15007 11875 12849 3/31/02 16381 12350 13121 3/31/03 13535 10230 9886 3/31/04 20147 13460 13536
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. 13 Schedule of Investments (unaudited) ICON ENERGY FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- COMMON STOCKS 95.0% ENERGY 88.0% INTEGRATED OIL & GAS 21.9% 30,900 China Petroleum and Chemical Corporation -- ADR $ 1,183,470 15,800 ConocoPhillips 1,102,998 34,400 Eni S.p.A. -- ADR 3,472,680 50,000 Marathon Oil Corporation 1,683,500 35,900 Occidental Petroleum Corporation 1,653,195 43,100 Petro-Canada (f) 1,889,935 15,100 PetroChina Company Limited -- ADR 771,610 121,100 PetroKazakhstan Inc. (f) 3,411,387 134,000 Petroleo Brasileiro S.A.(a) -- ADR 4,489,000 167,400 Repsol YPF, S.A. -- ADR 3,483,594 85,400 Suncor Energy, Inc. (f) 2,335,690 - --------------------------------------------------- 25,477,059 OIL & GAS DRILLING 1.6% 19,100 Helmerich & Payne, Inc. 547,215 15,600 Noble Corporation(a) (f) 599,352 25,100 Unit Corporation(a) 688,242 - --------------------------------------------------- 1,834,809 OIL & GAS EQUIPMENT & SERVICES 23.7% 142,400 Cal Dive International, Inc.(a) 3,678,192 81,600 Core Laboratories N.V.(a) (f) 1,729,920 63,500 FMC Technologies, Inc.(a) 1,716,405 51,800 Hydril(a) 1,357,160 117,000 Maverick Tube Corporation(a) 2,755,350 145,200 National-Oilwell, Inc.(a) 4,106,256 88,700 Oceaneering International, Inc.(a) 2,700,915 35,100 Offshore Logistics, Inc.(a) 809,055 152,100 Oil States International, Inc.(a) 2,044,224 34,200 SEACOR Holdings Inc.(a) 1,404,936 109,100 Superior Energy Services, Inc.(a) 1,099,728 77,400 TETRA Technologies, Inc.(a) 2,022,462 34,900 Tidewater Inc. 981,737 69,000 Varco International, Inc.(a) 1,242,690 - --------------------------------------------------- 27,649,030
- ---------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE OIL & GAS EXPLORATION & PRODUCTION 25.3% 24,200 Anadarko Petroleum Corporation $ 1,255,012 112,800 Chesapeake Energy Corporation 1,511,520 103,714 Cimarex Energy Co.(a) 2,997,335 119,300 Comstock Resources, Inc.(a) 2,370,491 108,000 Denbury Resources Inc.(a) 1,820,880 50,200 Evergreen Resources, Inc.(a) 1,724,370 48,900 Newfield Exploration Company(a) 2,343,777 21,200 Noble Energy, Inc. 998,520 198,836 Patina Oil & Gas Corporation 5,219,445 42,700 Prima Energy Corporation(a) 1,475,285 56,600 Remington Oil & Gas Corporation(a) 1,117,850 176,800 Ultra Petroleum Corp.(a)(f) 5,305,768 50,875 XTO Energy, Inc. 1,284,085 - --------------------------------------------------- 29,424,338 OIL & GAS REFINING & MARKETING & TRANSPORTATION 15.5% 97,400 Ashland Inc. 4,528,126 119,500 Frontier Oil Corporation 2,315,910 79,000 Overseas Shipholding Group, Inc. 2,883,500 30,400 Sunoco, Inc. 1,896,352 65,500 Teekay Shipping Corporation (f) 4,512,950 32,500 Valero Energy Corporation 1,948,700 - --------------------------------------------------- 18,085,538 - --------------------------------------------------- TOTAL ENERGY 102,470,774 INDUSTRIALS 3.9% CONSTRUCTION & ENGINEERING 2.8% 48,000 Chicago Bridge & Iron Company N.V. -- ADR 1,335,840 68,100 URS Corporation(a) 1,959,918 - --------------------------------------------------- 3,295,758 INDUSTRIAL MACHINERY 1.1% 60,300 Flowserve Corporation(a) 1,263,285 - --------------------------------------------------- TOTAL INDUSTRIALS 4,559,043 MATERIALS 3.1% COMMODITY CHEMICALS 3.1% 142,700 Headwaters Incorporated(a) 3,655,974 - --------------------------------------------------- TOTAL MATERIALS 3,655,974 - --------------------------------------------------- TOTAL COMMON STOCKS (COST $83,452,927) 110,685,791 SHORT-TERM INVESTMENTS 8.2% U.S. GOVERNMENT AGENCIES 7.0% $8,152,000 FHLB Discount Note, 0.7500%, 4-1-04 8,152,000 - --------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 8,152,000
14 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- VARIABLE RATE DEMAND NOTE 1.2% 1,351,345 American Family Demand Note, 0.6908%# $ 1,351,345 - --------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 1,351,345 - --------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $9,503,345) 9,503,345 - --------------------------------------------------- TOTAL INVESTMENTS 103.2% (COST $92,956,272) 120,189,136 - --------------------------------------------------- LIABILITIES LESS OTHER ASSETS (3.2%) (3,708,290) - --------------------------------------------------- NET ASSETS 100.0% $116,480,846 - ---------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security Dates shown on securities are the due dates of the obligation. 15 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 24.53% for the six-month period ended March 31, 2004, outpacing the 17.78% return of its sector-specific benchmark, the S&P 1500 Financials Index, and also surpassing the 14.75% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of March 31, 2004 are listed on page 18. In focusing on underpriced industries demonstrating relative market strength, the Fund was able to avert the pressures that came to bear on more economically sensitive sectors. Although our overall readings indicated that a recovery-based theme remained in place, a two-month cyclical downdraft in early 2004 and subsequent theme reversals lifted more defensive-oriented industries. Improving credit quality also played a key role as a recovering economy alleviated concerns linked to perceived default rates. With short-term interest rates still at 45-year lows, and longer-term rates slowly moderating to historical levels, the absence of undue effects benefited the Fund. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach views investment style as irrelevant, the Fund profited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. While short-lived theme reversals boosted defensive issues during the winter correction, underpriced shares encountered less resistance than those viewed to be more richly valued. The Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We believe this to be more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Stocks recorded solid gains during the period even as investor sentiment remained noticeably pessimistic. Amid steady advances in economic and company fundamentals, markets were often driven by misperceptions of overheated valuations, rising interest rates and lackluster job growth. Nevertheless, the Fund's valuation and relative strength readings continued to support an upward trend, particularly as the recovery demonstrated signs of sustainability. What our system could not account for was the reigniting of tensions surrounding terrorism and world unrest. While economically sensitive sectors bore the brunt of sharp downturns in the wake of overseas terrorist events, so-called all-weather sectors such as Financials were better positioned to withstand these event-driven sell-offs. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? The Fund's relative outperformance can be attributed to its sizable exposure to consumer finance, its largest industry weighting, as well as to contributions from the real estate investment trust and life & health insurance industries. Consumer finance, in particular, benefited as lower-than-anticipated default rates eased credit concerns. The investment banking & brokerage industry was significantly reduced when it exceeded fair value following a run-up earlier in the period. At [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 100.2% Top 10 Equity Holdings 29.1% Number of Stocks 49 Cash Equivalents 0.0% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) J.P. Morgan Chase & Co. 3.9% American International Group, Inc. 3.3% Investors Financial Services Corp. 3.0% Loews Corporation 2.8% First Cash Financial Services, Inc. 2.8% AmeriCredit Corp. 2.8% Novastar Financial, Inc. 2.7% IndyMac Bancorp, Inc. 2.6% Bank One Corporation 2.6% Allmerica Financial Corporation 2.6% Percentages are based upon net assets. 16 the same time, declining relative strength limited the Fund's exposure to regional banks, while lack of leadership led us to trim asset management & custody banks by half. Among the Fund's leading individual performance contributors, auto finance company AmeriCredit Corp. posted better-than-expected earnings as credit quality improvements allowed the company to shave its loan loss reserves. Subprime mortgage lender NovaStar Financial Inc., which operates as a real estate investment trust, also reported strong earnings-per-share gains in addition to announcing a 2-for-1 stock split. Pawnshop operator First Cash Financial Services Inc. also added significantly to Fund returns as it capitalized on its retail orientation to boost earnings. Fund performance was negatively impacted by title insurance provider Stewart Information Services Corp., whose stock price retreated as higher mortgage rates curbed refinancing activity. A decline in loan originations also hurt mortgage banker Washington Mutual, Inc., which warned of contracting margins. Transaction services provider Investment Technology Group Inc. fell on reports of lower trading volumes. All were ultimately sold as their relative strength declined. WHAT IS THE INVESTMENT OUTLOOK FOR THE FINANCIALS SECTOR? Looking ahead, our system indicates notable value and prospective leadership across the entire insurance group, including multi-line insurance, life & health insurance and property & casualty insurance. Based on our readings, we have increased each of these weightings, with multi-line insurance, which had little representation at the beginning of the period, rising to 12.8% of the Fund at period-end. At the same time, we continue to detect weakness in regional banks and diversified banks, prompting us to limit the Fund's exposure to these industries. Nevertheless, regional banks may be close to turning a corner and for that reason, we will continue to watch the industry closely. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - The Fund favored small- and mid-cap stocks, which contributed to relative performance as they outperformed large-cap securities. - - Among the Fund's strongest-performing holdings during the period were AmeriCredit Corp. and NovaStar Financial, Inc. - - Our methodology led us to hold an overweight position in the consumer finance industry, and the Fund's holdings in this industry performed strongly relative to the sector-specific Index. - - Though slightly underweight vs. the Index, real estate investment trusts contributed significantly to returns. - - The industry holdings indicated by our valuation readings all performed positively for the period. 17 Management Overview (continued) ICON FINANCIAL FUND - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Consumer Finance 17.2% Multi-Line Insurance 12.8% Thrift & Mortgage Finance 11.6% Property & Casualty Insurance 8.7% Diversified Banks 7.3% Life & Health Insurance 6.8% Regional Banks 6.3% Insurance Brokers 6.1% Reinsurance 5.2% Asset Management & Custody Banks 4.7%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 7/1/97 - ------------------------------------------------------------------------------------------ ICON Financial Fund 24.53% 61.74% 12.12% 11.66% - ------------------------------------------------------------------------------------------ S&P 1500 Financials Index 17.78% 45.54% 5.96% 9.94% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 5.71% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON FINANCIAL FUND S&P 1500 FINANCIALS INDEX S&P 1500 INDEX ------------------- ------------------------- -------------- 7/1/97 10000 10000 10000 3/31/98 12002 13426 12552 3/31/99 11877 14190 14474 3/31/00 11343 13923 17314 3/31/01 15598 15435 13804 3/31/02 17626 16526 14097 3/31/03 13012 13027 10621 3/31/04 21045 18958 14543
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. 18 Schedule of Investments (unaudited) ICON FINANCIAL FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------- COMMON STOCKS 100.2% FINANCIAL 100.2% ASSET MANAGEMENT & CUSTODY BANKS 4.7% 98,700 The Bank of New York Company, Inc. $ 3,109,050 129,600 Investors Financial Services Corp. 5,355,072 - -------------------------------------------------- 8,464,122 CONSUMER FINANCE 17.2% 296,000 AmeriCredit Corp.(a) 5,040,880 40,300 Capital One Financial Corporation 3,039,829 172,300 Cash America International, Inc. 3,971,515 85,100 CompuCredit Corporation(a) 1,799,014 151,000 First Cash Financial Services, Inc.(a) 5,078,130 158,000 MBNA Corporation 4,365,540 383,300 Metris Companies Inc.(a) 3,081,732 225,200 Providian Financial Corporation(a) 2,950,120 92,600 World Acceptance Corporation(a) 1,806,626 - -------------------------------------------------- 31,133,386 DIVERSIFIED BANKS 7.3% 87,500 Bank One Corporation 4,770,500 77,200 Comerica Incorporated 4,193,504 91,200 Wachovia Corporation 4,286,400 - -------------------------------------------------- 13,250,404 DIVERSIFIED CAPITAL MARKETS 3.9% 169,500 J.P. Morgan Chase & Co. 7,110,525 INSURANCE BROKERS 6.1% 144,800 Aon Corporation 4,041,368 81,400 Arthur J. Gallagher & Co. 2,651,198 115,000 Hilb, Rogal and Hamilton Company 4,381,500 - -------------------------------------------------- 11,074,066 INVESTMENT BANKING & BROKERAGE 1.7% 30,100 The Goldman Sachs Group, Inc. 3,140,935 LIFE & HEALTH INSURANCE 6.8% 98,400 AmerUs Group Co. 3,970,440 97,950 Delphi Financial Group, Inc. 4,115,859 91,400 Lincoln National Corporation 4,325,048 - -------------------------------------------------- 12,411,347
- --------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE MULTI-LINE INSURANCE 12.8% 134,400 Allmerica Financial Corporation(a) $ 4,643,520 135,000 American Financial Group, Inc. 4,027,050 82,700 American International Group, Inc. 5,900,645 54,700 Hartford Financial Services Group, Inc. 3,484,390 86,000 Loews Corporation 5,079,160 - -------------------------------------------------- 23,134,765 OTHER DIVERSIFIED FINANCIAL SERVICES 3.6% 52,100 Citigroup Inc. 2,693,570 170,500 ING Groep N.V. -- ADR 3,759,525 - -------------------------------------------------- 6,453,095 PROPERTY & CASUALTY INSURANCE 8.7% 79,500 ACE Limited(f) 3,391,470 38,500 The Allstate Corporation 1,750,210 115,510 Fidelity National Financial, Inc. 4,574,196 53,900 MBIA Inc. 3,379,530 63,500 SAFECO Corporation 2,741,295 - -------------------------------------------------- 15,836,701 REAL ESTATE INVESTMENT TRUSTS 2.7% 74,400 Novastar Financial, Inc. 4,906,680 REGIONAL BANKS 6.3% 190,500 The Colonial BancGroup, Inc. 3,524,250 67,700 FirstMerit Corporation 1,763,585 61,800 Irwin Financial Corporation 1,667,364 111,200 UCBH Holdings, Inc. 4,452,448 - -------------------------------------------------- 11,407,647 REINSURANCE 5.2% 39,800 Everest Re Group, Ltd.(f) 3,400,512 73,200 Scottish Re Group Limited(f) 1,770,708 48,600 Transatlantic Holdings, Inc. 4,238,406 - -------------------------------------------------- 9,409,626 SPECIALIZED FINANCE 1.6% 76,300 CIT Group Inc. 2,903,215 THRIFTS & MORTGAGE FINANCE 11.6% 71,000 Astoria Financial Corporation 2,700,130 45,700 Countrywide Financial Corporation 4,382,630 35,700 Freddie Mac 2,108,442 132,200 IndyMac Bancorp, Inc. 4,797,538 94,700 New Century Financial Corporation 4,598,632 66,600 The PMI Group, Inc. 2,488,176 - -------------------------------------------------- 21,075,548 - -------------------------------------------------- TOTAL FINANCIAL 181,712,062 - -------------------------------------------------- TOTAL COMMON STOCKS (COST $151,780,814) 181,712,062
19 Schedule of Investments (continued) (unaudited) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------- SHORT-TERM INVESTMENT 0.0% VARIABLE RATE DEMAND NOTE $ 8,263 American Family Demand Note, 0.6908%# $ 8,263 - -------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $8,263) 8,263 - -------------------------------------------------- TOTAL INVESTMENTS 100.2% (COST $151,789,077) 181,720,325 - -------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.2%) (356,398) - -------------------------------------------------- NET ASSETS 100.0% $181,363,927 - --------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security 20 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 14.82% for the six-month period ended March 31, 2004, beating the 8.94% return of its sector-specific benchmark, the S&P 1500 Healthcare Index, and keeping pace with its broad benchmark, the S&P 1500 Index, which gained 14.75%. Total returns for other periods as of March 31, 2004 are listed on page 23. The Fund's flexibility and our focus on underpriced industries demonstrating market strength worked in the Fund's favor during the period. Although our overall valuation and relative strength readings during the period led us to believe that a recovery-based theme remained in place, a two-month cyclical pullback in early 2004 and subsequent theme reversals lifted more defensive-minded areas. By charting a less volatile path than its cyclical counterparts, the Fund benefited. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach does not consider investment style, the Fund's balance between growth and value mirrored the broader market during the period, as measured on a price-to-earnings (P/E) basis. Nevertheless, the Fund detected a higher level of pricing discrepancy than was evident by means of traditional metrics. It is important to note that the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Solid gains during the period did little to counter a market psychology that had turned decidedly pessimistic. Fundamentals aside, profit taking was fast and furious, often driven by dubious perceptions of overheated valuations, rising interest rates, and lackluster job growth. However, even as investors chose to overlook compelling signs to the contrary, the fact remained that the economy, in our view, had not only stabilized, but was now beginning to accelerate. Adding to the uncertainty, though, was the underpinning of terrorism, which re-emerged in the wake of overseas terrorist events. While economically sensitive industries bore the brunt of the cyclical downturn, so-called all-weather sectors such as Healthcare relied upon defensive tendencies as insulation against event-driven sell-offs. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? The Fund's significant outperformance relative to its sector-specific benchmark can be attributed to overweight positions in managed health care and health care services, in addition to judicious exposure to selected biotechnology stocks. Gains in managed health care reflected improved execution and mounting consolidation, while health care services benefited from revenue growth and favorable demographic trends. Avoidance of large-cap pharmaceuticals, a core component of the Fund's sector-specific index, also worked to the Fund's advantage given [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 97.8% Top 10 Equity Holdings 22.3% Number of Stocks 72 Cash Equivalents 5.6% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Aetna Inc. 2.5% DaVita, Inc. 2.4% Community Health Systems, Inc. 2.3% LifePoint Hospitals, Inc. 2.2% Renal Care Group, Inc. 2.2% Province Healthcare Company 2.2% United Surgical Partners International, Inc. 2.2% Sierra Health Services, Inc. 2.2% UnitedHealth Group Incorporated 2.1% NDCHealth Corporation 2.0% Percentages are based upon net assets. 21 Management Overview (continued) ICON HEALTHCARE FUND concerns surrounding patent expirations, generic competition and Medicare reimbursement. Meanwhile, health care facilities came under intense pressure as hospital operators faced a growing number of challenges ranging from case management demands to unpaid bills. In light of weakening relative strength, the group was slightly trimmed with the proceeds going toward managed health care and health care distributors. The top contributors to Fund performance during the period included managed health care providers Sierra Health Services, which provides workers compensation insurance, and Aetna Inc. and PacifiCare Health Systems, Inc., both of which reported strong enrollment and earning-per-share trends. Returns suffered most from companies including hospital operator Dynacq Healthcare Inc., which faced regulatory scrutiny over its accounting practices and was subsequently sold when its relative strength weakened. Drug delivery holding Biovail Corp. fared no better, facing a regulator inquiry of its own while posting disappointing financial results. Its downdraft led us to sell the Fund's shares. Lincare Holdings Inc, a leading provider of respiratory therapy services, also declined, as expectations of lower Medicare reimbursement rates pressured the stock. These stocks, except for Lincare Holdings, were sold as relative strength weakened. We continued to own Lincare as it remains attractively valued and appears to have overcome its recent weakness. WHAT IS THE INVESTMENT OUTLOOK FOR THE HEALTHCARE SECTOR? We anticipate that the Healthcare sector will continue in its move toward fair value, driven by current leaders managed health care and health care services, as well as emerging leaders health care distributors and health care equipment. Although current valuation and relative strength measures bode well for these industries, we are less optimistic about large-cap pharmaceuticals and large-cap biotechnology, both of which appear either fairly valued or overpriced, while lagging the broader market. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Valuation directed us to smaller capitalization companies, which aided relative performance as they outperformed large-cap securities. - - Among the Fund's strongest-performing holdings during the period were Sierra Health Services Inc. and PacifiCare Health Systems, Inc. - - Our methodology led us to hold a significant position in the best-performing managed health care industry, and this overweighting contributed to returns. - - The Fund benefited from not owning large-cap pharmaceutical companies, which lagged. - -------------------------------------------------------------------------------- TOP INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Health Care Services 23.8% Managed Health Care 18.2% Health Care Facilities 13.1% Pharmaceuticals 11.8% Health Care Equipment 10.3% Biotechnology 8.2% Health Care Distributors 6.3% Health Care Supplies 6.1%
Percentages are based upon net assets. 22 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 2/24/97 - ------------------------------------------------------------------------------------------ ICON Healthcare Fund 14.82% 37.83% 12.10% 13.06% - ------------------------------------------------------------------------------------------ S&P 1500 Healthcare Index 8.94% 16.52% 1.09% 9.01% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 6.92% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
S&P 1500 HEALTHCARE ICON HEALTHCARE FUND INDEX S&P 1500 INDEX -------------------- ------------------- -------------- 2/24/97 10000 10000 10000 3/31/97 9460 8940 9368 3/31/98 13319 14014 13874 3/31/99 13500 17464 15999 3/31/00 15234 16050 19137 3/31/01 18730 18405 15258 3/31/02 19844 19189 15582 3/31/03 17336 15824 11740 3/31/04 23894 18439 16075
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 2/24/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 23 Schedule of Investments (unaudited) ICON HEALTHCARE FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- COMMON STOCKS 97.8% HEALTH CARE 97.8% BIOTECHNOLOGY 8.2% 118,600 Affymetrix, Inc.(a) $ 4,002,750 85,200 Cephalon, Inc.(a) 4,882,812 56,000 Genencor International Inc.(a) 745,360 34,000 IDEXX Laboratories, Inc.(a) 1,933,580 151,200 QLT Inc.(a)f) 3,861,648 172,500 Serologicals Corporation(a) 3,519,000 107,100 Serono SA -- ADR 1,648,269 - ------------------------------------------------- 20,593,419 HEALTH CARE DISTRIBUTORS 6.3% 36,200 Cardinal Health, Inc. 2,494,180 64,400 Henry Schein, Inc.(a) 4,599,448 106,300 Omnicare, Inc. 4,712,279 184,500 Priority Healthcare Corporation(a) 3,928,005 - ------------------------------------------------- 15,733,912 HEALTH CARE EQUIPMENT 10.3% 48,600 Becton, Dickinson and Company 2,356,128 79,200 Biosite Incorporated(a) 2,532,024 88,800 CONMED Corporation(a) 2,623,152 54,400 Hillenbrand Industries, Inc. 3,693,216 47,600 Invacare Corporation 2,148,664 69,700 Mentor Corporation 2,097,970 81,300 ResMed Inc.(a) 3,673,947 81,100 Respironics, Inc.(a) 4,381,022 27,600 Stryker Corporation 2,443,428 - ------------------------------------------------- 25,949,551 HEALTH CARE FACILITIES 13.1% 113,700 AmSurg Corp.(a) 2,582,127 206,500 Community Health Systems Inc.(a) 5,746,895 174,900 LifePoint Hospitals, Inc.(a) 5,656,266 92,700 Manor Care, Inc. 3,271,383 347,300 Province Healthcare Company(a) 5,522,070 77,600 Triad Hospitals, Inc.(a) 2,391,632 161,100 United Surgical Partners International, Inc.(a) 5,467,734 53,100 Universal Health Services, Inc. 2,446,317 - ------------------------------------------------- 33,084,424
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE HEALTH CARE SERVICES 23.8% 171,600 American Healthways, Inc.(a) $ 4,190,472 54,500 Cerner Corporation(a) 2,462,855 120,500 Cross Country Healthcare, Inc.(a) 2,006,325 127,000 DaVita, Inc.(a) 6,064,250 124,500 Dendrite International, Inc.(a) 1,992,000 58,500 eResearch Technology, Inc.(a) 1,640,925 67,900 Express Scripts, Inc.(a) 5,064,661 81,000 ICON plc(a) -- ADR 2,861,730 130,200 Laboratory Corporation of America Holdings(a) 5,110,350 97,700 Lincare Holdings Inc.(a) 3,069,734 189,300 NDCHealth Corporation 5,139,495 65,100 Pediatrix Medical Group, Inc.(a) 4,101,300 118,000 Pharmaceutical Product Development, Inc.(a) 3,515,220 59,100 Quest Diagnostics Incorporated 4,895,253 121,100 Renal Care Group, Inc.(a) 5,541,536 73,000 SFBC International, Inc.(a) 2,172,480 - ------------------------------------------------- 59,828,586 HEALTH CARE SUPPLIES 6.1% 88,600 Arrow International, Inc. 2,648,254 89,100 The Cooper Companies, Inc. 4,811,400 74,100 ICU Medical, Inc.(a) 2,250,417 155,400 Immucor, Inc.(a) 2,815,848 31,000 Ocular Sciences, Inc.(a) 903,650 26,900 Osteotech, Inc.(a) 173,505 66,500 Sybron Dental Specialties, Inc.(a) 1,812,125 - ------------------------------------------------- 15,415,199
24 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- MANAGED HEALTH CARE 18.2% 70,100 Aetna Inc. $ 6,289,372 41,200 Anthem, Inc.(a) 3,734,368 77,000 Centene Corporation(a) 2,355,430 63,900 CIGNA Corporation 3,771,378 108,700 Coventry Health Care, Inc.(a) 4,601,271 58,100 Humana Inc.(a) 1,105,062 104,000 Oxford Health Plans, Inc. 5,080,400 126,600 PacifiCare Health Systems, Inc.(a) 5,007,030 149,600 Sierra Health Services, Inc.(a) 5,445,440 80,900 UnitedHealth Group Incorporated 5,213,196 27,400 WellPoint Health Networks Inc.(a)() 3,115,928 - ------------------------------------------------- 45,718,875 PHARMACEUTICALS 11.8% 32,400 Abbott Laboratories 1,331,640 63,600 American Pharmaceutical Partners, Inc.(a) 2,985,384 96,825 Barr Pharmaceuticals, Inc.(a) 4,444,267 90,500 Bristol-Myers Squibb Company 2,192,815 63,600 Forest Laboratories, Inc.(a) 4,555,032 21,200 Galen Holdings PLC -- ADR 1,300,620 153,075 Mylan Laboratories Inc. 3,479,395 157,600 Shire Pharmaceuticals Group PLC(a) -- ADR 4,638,168 39,700 Taro Pharmaceutical Industries Ltd.(a)f) 2,302,203 39,000 Teva Pharmaceutical Industries Ltd. -- ADR 2,472,990 - ------------------------------------------------- 29,702,514 - ------------------------------------------------- TOTAL HEALTH CARE 246,026,480 - ------------------------------------------------- TOTAL COMMON STOCKS (COST $200,580,100) 246,026,480
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENTS 5.6% U.S. GOVERNMENT AGENCIES 4.8% $12,017,000 FHLB Discount Note, 0.7500%, 4-1-04 $ 12,017,000 - ------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 12,017,000 - ------------------------------------------------- VARIABLE RATE DEMAND NOTE 0.8% 2,017,623 American Family Demand Note, 0.6908%# 2,017,623 - ------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 2,017,623 - ------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $14,034,623) 14,034,623 - ------------------------------------------------- TOTAL INVESTMENTS 103.4% (COST $214,614,723) 260,061,103 - ------------------------------------------------- LIABILITIES LESS OTHER (8,464,592) ASSETS (3.4%) - ------------------------------------------------- NET ASSETS 100.0% $251,596,511 - -------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security Dates shown on securities are the due dates of the obligation. 25 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 gained 15.45% for the six-month period ended March 31, 2004, outperforming its sector-specific benchmark, the S&P 1500 Industrials Index, and its broad benchmark, the S&P 1500 Index, which returned 14.29% and 14.75%, respectively. Total returns for longer periods are listed on page 28. While capturing solid gains early in the period, the Fund later relinquished a portion of that advance amid a two-month cyclical downturn. The effects of this winter pullback were most pronounced among economically sensitive sectors, as temporary theme reversals lifted more defensive-oriented industries. Despite the apparent tug of war, our valuation and relative strength readings suggested longer-term leadership favored cyclical groups, such as the Industrials sector, which have possessed considerable leverage to a reviving economy. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach views investment style as irrelevant, the Fund came under pressure due to its growth bias during the reporting period, as measured on a traditional price-to-earnings (P/E) basis. Whereas our valuation readings viewed much of the sector as underpriced, traditional measures such as P/E pegged it as fairly valued, and thus vulnerable to a sell-off. The Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. This is viewed as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Despite solid gains during the period, market psychology remained decidedly negative. Driven by macroeconomic factors such as perceptions of overheated valuations, rising interest rates, and lackluster job growth, investors appeared impatient and eager to take profits. While these and other concerns fueled skepticism regarding the strength and sustainability of the recovery, economic fundamentals and corporate earnings continued to demonstrate incremental improvements. Further exacerbating market uncertainty was the underlying fear of terrorism, which resurfaced in the wake of international terrorist events. Rising energy costs, a byproduct of these tensions, were seen as a detriment to manufacturing and transportation-related industries, while erratic government spending continued to plague aerospace & defense. At the same time, employment services and building products persevered, even as employment and consumer confidence data remained mixed. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? The Fund's outperformance relative to its benchmarks can be attributed to an overweighting in employment services, which proved resilient in its march toward fair value. In contrast, airlines were scaled back considerably as rising fuel prices and pricing pressures contributed to weakness. Diversified commercial services was also trimmed when several education stocks experienced accreditation issues, while data processing services, which was reclassified by S&P as part of the Technology sector, was sold on declining relative strength. [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 99.1% Top 10 Equity Holdings 24.6% Number of Stocks 74 Cash Equivalents 0.7% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Armor Holdings, Inc. 3.3% Labor Ready, Inc. 2.7% URS Corporation 2.5% Apollo Group, Inc. 2.5% Terex Corporation 2.4% The Manitowoc Company, Inc. 2.4% Granite Construction Incorporated 2.3% Reliance Steel & Aluminum Co. 2.2% York International Corporation 2.2% Gevity HR, Inc. 2.1% Percentages are based upon net assets. 26 Furthermore, lack of exposure to industrial conglomerates Tyco International Ltd. and General Electric Company worked against Fund performance. Tyco, which comprised 4.26% of the S&P 1500 Industrials Index, returned 40.36% during the period, while GE, which accounted for nearly 24% of the sector-specific index, returned 3.68%. Neither stock was judged suitable for investment according to our valuation and relative strength measures. Measurable contributions to performance were made by Armor Holdings, Inc., a leading maker of specialized security products, which announced two new contracts totaling $40 million. Employment services firm Gevity HR, Inc. also advanced, having reported organizational changes that boosted client growth, as did Resources Connection Inc., which posted a 47% jump in quarterly revenue. Metals processor Reliance Steel & Aluminum rallied strongly, citing higher metal prices and rising demand. Fund performance suffered from airline stocks including Ryanair Holdings PLC, JetBlue Airways Corp., and Mesa Air Group, Inc., after they struggled over higher fuel costs and intense pricing competition. All companies were sold when the Fund's exposure to airlines was pared. Infrastructure service provider MasTec, Inc. tumbled when the company delayed filing of its Form 10-K (annual operations report) with the Securities and Exchange Commission. Relative strength suffered during the resulting sell-off, and we liquidated the stock. WHAT IS THE INVESTMENT OUTLOOK FOR THE INDUSTRIALS SECTOR? Although defensive names rebounded during the cyclical pullback of early 2004, we believe this to be a temporary theme reversal. On the basis of valuation and relative strength, we anticipate that economically sensitive sectors such as Industrials will regain their status as market leaders, particularly as the recovery proves sustainable. While the Fund's top-performing employment services industry now appears to be fairly valued, we still see potential upside in building products, diversified commercial services and defense-related issues. However, as other emerging leadership appears unclear at this time, we will continue to monitor the situation closely. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Valuation led us to invest in smaller capitalization companies, which contributed positively to relative performance as large-cap securities underperformed. - - Among the Fund's strongest-performing holdings during the period were Armor Holdings Inc. and Gevity HR, Inc. - - Our methodology led us to hold a significant position in the employment services industry, and the Fund's holdings in this area performed strongly relative to the sector-specific Index. - - The Fund's overweighting in airlines, a lagging industry, hindered returns. 27 Management Overview (continued) ICON INDUSTRIALS FUND - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Industrial Machinery 15.1% Building Products 14.3% Aerospace & Defense 12.4% Construction & Engineering 10.2% Diversified Commercial Services 10.2% Employment Services 10.2% Railroads 7.0% Construction, Farm Machinery & Heavy Trucks 5.3% Trucking 4.7% Electrical Components & Equipment 4.1%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 5/9/97 - ------------------------------------------------------------------------------------------ ICON Industrials Fund 15.45% 43.30% 1.06% 2.84% - ------------------------------------------------------------------------------------------ S&P 1500 Industrials Index 14.29% 39.07% 2.58% 5.30% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 6.82% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON INDUSTRIALS FUND S&P 1500 INDUSTRIALS INDEX S&P 1500 INDEX --------------------- -------------------------- -------------- 5/9/97 10000 10000 10000 3/31/98 12996 12970 13604 3/31/99 11503 12572 15687 3/31/00 11069 14412 18764 3/31/01 10708 13632 14961 3/31/02 13167 14377 15278 3/31/03 8464 10266 11511 3/31/04 12129 14277 15761
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. 28 Schedule of Investments (unaudited) ICON INDUSTRIALS FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- COMMON STOCKS 99.1% INDUSTRIALS 99.1% AEROSPACE & DEFENSE 12.4% 169,900 Armor Holdings, Inc.(a) $ 5,623,690 52,800 Curtiss-Wright Corporation 2,474,736 50,400 Engineered Support Systems, Inc. 2,459,016 261,300 GenCorp. Inc. 2,829,879 22,900 General Dynamics Corporation 2,045,657 107,200 Goodrich Corporation 3,009,104 43,000 L-3 Communications Holdings, Inc. 2,557,640 - --------------------------------------------------- 20,999,722 AIRLINES 0.7% 64,300 SkyWest, Inc. 1,237,132 BUILDING PRODUCTS 14.3% 14,200 American Standard Companies Inc.(a) 1,615,250 25,000 American Woodmark Corporation 1,661,500 110,200 ElkCorp. 2,985,318 143,600 Griffon Corporation(a) 3,101,760 103,000 Masco Corporation 3,135,320 89,000 NCI Building Systems, Inc.(a) 2,087,940 64,600 Simpson Manufacturing Co., Inc. 3,162,170 92,000 Universal Forest Products, Inc. 2,839,120 93,500 York International Corporation 3,675,485 - --------------------------------------------------- 24,263,863 CONSTRUCTION & ENGINEERING 10.2% 61,000 Chicago Bridge & Iron Company N.V. - ADR 1,697,630 88,400 Dycom Industries, Inc.(a) 2,344,368 51,000 Fluor Corporation 1,973,190 161,500 Granite Construction Incorporated 3,838,855 93,900 Insituform Technologies, Inc.(a) 1,467,657 154,400 The Shaw Group Inc.(a) 1,673,696 149,700 URS Corporation(a) 4,308,366 - --------------------------------------------------- 17,303,762 CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS 5.3% 14,000 Caterpillar Inc. 1,106,980 38,300 Lindsay Manufacturing Co. 922,264 51,800 Oshkosh Truck Corporation 2,885,260 109,000 Terex Corporation(a) 4,029,730 - --------------------------------------------------- 8,944,234
- ---------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE DIVERSIFIED COMMERCIAL SERVICES 10.2% 31,200 Apollo Group, Inc.(a) $ 2,686,632 42,600 Bright Horizons Family Solutions, Inc.(a) 2,009,016 32,200 ChoicePoint Inc.(a) 1,224,566 42,400 Equifax Inc. 1,094,768 26,200 Portfolio Recovery Associates, Inc.(a) 705,828 137,300 Rollins, Inc. 3,538,221 63,100 SOURCECORP, Incorporated(a) 1,672,150 49,400 University of Phoenix Online 4,298,788 - --------------------------------------------------- 17,229,969 ELECTRICAL COMPONENTS & EQUIPMENT 4.1% 79,000 AMETEK, Inc. 2,025,560 50,200 A.O. Smith Corporation 1,453,290 34,800 Cooper Industries, Ltd.(f) 1,989,864 21,300 Hubbell Incorporated 854,769 27,700 Regal-Beloit Corporation 553,446 - --------------------------------------------------- 6,876,929 EMPLOYMENT SERVICES 10.2% 111,800 Administaff, Inc.(a) 1,948,674 124,500 Gevity HR, Inc. 3,635,400 338,200 Labor Ready, Inc.(a) 4,572,464 278,900 On Assignment, Inc.(a) 1,559,051 43,500 Resources Connection, Inc.(a) 1,919,177 271,700 Spherion Corporation(a) 2,779,491 33,500 Volt Information Sciences, Inc.(a) 818,740 - --------------------------------------------------- 17,232,997 INDUSTRIAL CONGLOMERATES 1.3% 41,000 Textron Inc. 2,179,150 INDUSTRIAL MACHINERY 15.1% 28,300 Briggs & Stratton Corporation 1,909,401 20,400 Eaton Corporation 1,146,276 140,500 Flowserve Corporation(a) 2,943,475 95,063 Graco Inc. 2,767,269 31,400 Harsco Corporation 1,428,700 49,000 Ingersoll-Rand Company(f) 3,314,850 109,500 Kaydon Corporation 3,014,535 134,900 The Manitowoc Company, Inc. 3,990,342 106,500 Reliance Steel & Aluminum Co. 3,743,475 91,600 Stewart & Stevenson Services, Inc. 1,339,192 - --------------------------------------------------- 25,597,515 MARINE 1.1% 27,400 Alexander & Baldwin, Inc. 906,392 28,000 Kirby Corporation(a) 946,120 - --------------------------------------------------- 1,852,512
29 Schedule of Investments (continued) (unaudited) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- OFFICE SERVICES & SUPPLIES 2.5% 48,700 Brady Corporation $ 1,854,496 55,500 United Stationers Inc.(a) 2,336,550 - --------------------------------------------------- 4,191,046 RAILROADS 7.0% 68,600 CP Railway Limited(f) 1,658,748 93,200 CSX Corporation 2,823,028 111,000 Genesee & Wyoming Inc.(a) 2,741,700 141,000 Norfolk Southern Corporation 3,114,690 131,800 RailAmerica, Inc.(a) 1,588,190 - --------------------------------------------------- 11,926,356 TRUCKING 4.7% 58,700 Knight Transportation, Inc.(a) 1,407,626 29,600 Landstar System, Inc.(a) 1,211,824 22,050 Old Dominion Freight Line, Inc.(a) 743,085 72,700 Swift Transportation Co., Inc.(a) 1,248,259 55,400 USF Corporation 1,895,788 77,250 Werner Enterprises, Inc. 1,463,887 - --------------------------------------------------- 7,970,469 - --------------------------------------------------- TOTAL INDUSTRIALS 167,805,656 - --------------------------------------------------- TOTAL COMMON STOCKS (COST $134,883,839) 167,805,656 SHORT-TERM INVESTMENTS 0.7% U.S. GOVERNMENT AGENCIES 0.5% $846,000 FHLB Discount Note, 0.7500%, 4-1-04 846,000 - --------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 846,000
- ---------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE VARIABLE RATE DEMAND NOTE 0.2% 291,599 American Family Demand Note, 0.6908%# $ 291,599 - --------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $1,137,599) 1,137,599 - --------------------------------------------------- TOTAL INVESTMENTS 99.8% (COST $136,021,438) 168,943,255 - --------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.2% 335,348 - --------------------------------------------------- NET ASSETS 100.0% $169,278,603 - ---------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security Dates shown on securities are the due dates of the obligation. 30 Management Overview ICON INFORMATION TECHNOLOGY FUND A discussion with Robert Straus, CMT, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Information Technology Fund gained 6.77% for the six-month period ended March 31, 2004, trailing its narrow benchmarks, the S&P 1500 Information Technology Index and the NASDAQ Composite Index, which returned 10.49% and 11.91%, respectively, while also lagging its broad benchmark, the S&P 1500 Index, which returned 14.75%. Total returns for other periods as of March 31, 2004 are listed on page 33. Several factors converged during the period, leading to the Fund's underperformance. Based on our valuation and relative strength readings, the Fund held sizable weightings in semiconductor-related and Internet software & services stocks going into the fourth quarter of 2003. Although these industries had served the Fund well, concerns that expectations had exceeded fundamentals led to a round of profit-taking. A sharp, short-term market pullback then followed in the first quarter of 2004, with cyclical sectors such as Information Technology feeling the brunt of the pullback. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Nevertheless, the Fund suffered from a growth bias during the period, as measured on a traditional price-to-earnings (P/E) basis. Whereas our methodology and valuation readings viewed much of the sector as slightly underpriced, traditional measures such as P/E pegged the sector as richly valued, leaving it vulnerable to a sell-off. For the record, the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. This is viewed as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? An underlying backdrop of fear permeated the equity markets during the period, eroding earlier advances that made sense to our system. In particular, geopolitical tensions resurfaced, characterized by severe downturns in the wake of overseas terrorist activity. Although we do not consider macroeconomic factors in our investment process, conflicting economic data further exacerbated market uncertainty, as investors grappled with reports of stagnant job creation and expectations of higher interest rates. All the same, Wall Street climbed this "wall of worry," conceding that an economic recovery was perhaps taking shape, yet as the same time questioning its very sustainability. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT THE FUND'S PERFORMANCE? Our valuation metrics did not support the fourth-quarter freefall in technology stocks; however, semiconductors and Internet software & services weakened considerably amid profit-taking and fear-based selling. A corresponding decline in relative strength compelled us to significantly pare back both industries. In their place, we added to technology distributors, which offered an attractive combination of value and relative strength. Another industry that our system identified as attractive was wireless telecommunications, a truly global industry that had been out of favor [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 100.2% Top 10 Equity Holdings 27.8% Number of Stocks 57 Cash Equivalents 0.0% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Ingram Micro Inc. 3.9% OmniVision Technologies, Inc. 3.1% Global Imaging Systems, Inc. 3.0% Silicon Laboratories 3.0% Activision, Inc. 2.6% Cognizant Technology Solutions Corporation 2.5% Tech Data Corporation 2.5% Mobile Telesystems 2.4% AO VimpelCom 2.4% Sonic Solutions 2.4% Percentages are based upon net assets. 31 Management Overview (continued) ICON INFORMATION TECHNOLOGY FUND for several years. Despite its classification in the Telecommunication Services sector, we initiated a position on the basis of its close relationship to the Information Technology sector. Turning to individual securities, measurable detractors to Fund performance included j2 Global Communications, Inc, a provider of value-added messaging and communications services, which saw an unexpected drop in third-quarter 2003 revenues. Meanwhile, Internet access provider United Online Inc. slid when the company encountered competitive pricing pressures. When our system indicated that its strength relative to other companies in that industry was sliding, we sold the stock. In contrast, software company SS&C Technologies, Inc., a leader in financial and investment applications, reported impressive quarterly results and contributed to performance. However, as its value/price ratio fell later in the period, the company reached our sell criteria. Entertainment software provider Activision, Inc. was also a significant contributor to performance, driven by strong sales among its core titles. WHAT IS THE INVESTMENT OUTLOOK FOR THE INFORMATION TECHNOLOGY SECTOR? Value has become less widespread, forcing investors to carefully choose stocks in the cyclically oriented Information Technology sector. With that in mind, we see opportunities in the technology distributors and wireless telecommunications industries, which we believe stand to strengthen as the economic recovery gathers steam. Given their recent emergence, we anticipate that they will assume sector leadership in the months ahead. As such, the portfolio has been positioned to capture these themes should they unfold. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Although valuation directed us to smaller capitalization companies, the Fund's bias toward small- and mid-cap stocks produced mixed results. - - Among the Fund's strongest-performing holdings during the period were SS&C Technologies, Inc. and Activision, Inc. - - Our methodology led us to hold a significant position in technology distributors, and the Fund's holdings in this industry performed strongly relative to the sector-specific Index. - - Conversely, our valuation readings indicated poor strength in the computer hardware and communications equipment industries. Though the Fund underweighted these areas, they had a negative impact during the period. - - Strong stock selection within the home entertainment software industry added to Fund returns. 32 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Wireless Telecommunication Services 19.5% Technology Distributors 17.7% Semiconductors 13.3% Communications Equipment 9.2% IT Consulting & Other Services 8.1% Electronic Equipment Manufacturers 7.1% Internet Software & Services 6.3% Home Entertainment Software 5.6% Data Processing & Outsourced Services 4.7% Application Software 4.2%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 2/19/97 - ------------------------------------------------------------------------------------------ ICON Information Technology Fund 6.77% 63.22% 10.41% 14.02% - ------------------------------------------------------------------------------------------ S&P 1500 Information Technology Index 10.49% 46.00% -6.98% 5.76% - ------------------------------------------------------------------------------------------ NASDAQ Composite Index 11.91% 49.38% -3.80% 5.85% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 6.85% - ------------------------------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON INFORMATION S&P 1500 INFORMATION NASDAQ COMPOSITE TECHNOLOGY FUND TECHNOLOGY INDEX S&P 1500 INDEX INDEX ---------------- -------------------- -------------- ---------------- 2/18/97 10000 10000 10000 10000 3/31/97 9210 9036 9334 8949 3/31/98 11524 13581 13824 13511 3/31/99 15489 21379 15941 18185 3/31/00 36187 38844 19068 33868 3/31/01 28145 16075 15203 13657 3/31/02 26699 15416 15525 13738 3/31/03 15569 10196 11697 10029 3/31/04 25411 14887 16016 14982
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. 33 Schedule of Investments (unaudited) ICON INFORMATION TECHNOLOGY FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------- COMMON STOCKS 100.2% INFORMATION TECHNOLOGY 80.7% APPLICATION SOFTWARE 4.2% 282,700 Magma Design Automation, Inc.(a) $ 5,911,257 405,000 Sonic Solutions(a) 7,678,800 - -------------------------------------------------- 13,590,057 COMMUNICATIONS EQUIPMENT 9.2% 423,500 Adaptec, Inc.(a) 3,709,860 510,300 Cable Design Technologies Corporation(a) 4,837,644 121,000 Cisco Systems, Inc.(a) 2,845,920 181,200 Comverse Technology, Inc.(a) 3,286,968 280,000 Ditech Communications Corporation(a) 4,667,600 219,000 NICE Systems Ltd.(a) -- ADR 5,207,820 305,500 SpectraLink Corporation 5,202,665 - -------------------------------------------------- 29,758,477 DATA PROCESSING & OUTSOURCED SERVICES 4.7% 64,800 Affiliated Computer Services, Inc.(a) 3,363,120 135,500 Computer Sciences Corporation(a) 5,464,715 107,000 StarTek, Inc. 3,888,380 90,900 SunGard Data Systems Inc.(a) 2,490,660 - -------------------------------------------------- 15,206,875 ELECTRONIC EQUIPMENT MANUFACTURERS 7.1% 426,000 Fargo Electronics(a) 4,813,800 114,800 Mettler-Toledo International Inc.(a) 5,097,120 194,460 Nam Tai Electronics, Inc.(f) 4,941,229 161,700 Rofin-Sinar Technologies, Inc.(a) 4,826,745 138,800 Vishay Intertechnology, Inc.(a) 2,961,992 - -------------------------------------------------- 22,640,886 ELECTRONIC MANUFACTURING SERVICES 2.2% 543,100 CTS Corporation 7,082,024 HOME ENTERTAINMENT SOFTWARE 5.6% 522,600 Activision, Inc.(a) 8,267,532 195,000 Take-Two Interactive Software, Inc.(a) 7,172,100 128,800 THQ Inc.(a) 2,605,624 - -------------------------------------------------- 18,045,256
- --------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE INTERNET SOFTWARE & SERVICES 6.3% 262,700 Digital Insight Corporation(a) $ 5,443,144 161,000 FindWhat.com(a) 3,485,650 177,000 j2 Global Communications, Inc.(a) 3,996,660 250,000 WebEx Communications, Inc.(a) 7,432,500 - -------------------------------------------------- 20,357,954 IT CONSULTING & OTHER SERVICES 8.1% 350,000 CIBER, Inc.(a) 3,850,000 177,900 Cognizant Technology Solutions Corporation(a) 8,049,975 320,600 Forrester Research, Inc.(a) 6,075,370 352,600 Lionbridge Technologies, Inc.(a) 3,430,798 403,800 MPS Group, Inc.(a) 4,490,256 - -------------------------------------------------- 25,896,399 OFFICE ELECTRONICS 2.3% 519,000 Xerox Corporation(a) 7,561,830 SEMICONDUCTORS 13.3% 367,600 Advanced Micro Devices, Inc.(a) 5,966,148 287,100 Cypress Semiconductor Corporation(a) 5,876,937 168,100 Marvell Technology Group Ltd.(a)f) 7,572,905 214,500 O2Micro International Limited(a)f) 3,695,835 369,100 OmniVision Technologies, Inc.(a) 10,080,121 182,400 Silicon Laboratories Inc.(a) 9,645,312 - -------------------------------------------------- 42,837,258 TECHNOLOGY DISTRIBUTORS 17.7% 565,800 Agilysys, Inc. 6,733,020 166,000 Anixter International Inc.(a) 4,689,500 197,800 Arrow Electronics, Inc.(a) 5,035,988 283,800 Avnet, Inc.(a) 6,950,262 308,000 CellStar Corporation(a) 3,234,000 294,800 Global Imaging Systems, Inc.(a) 9,793,256 688,800 Ingram Micro Inc.(a) 12,467,280 196,500 Tech Data Corporation(a) 8,044,710 - -------------------------------------------------- 56,948,016 - -------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 259,925,032
34 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------- TELECOMMUNICATION & UTILITIES 19.5% WIRELESS TELECOMMUNICATION SERVICES 19.5% 175,000 America Movil S.A. de C.V. -- ADR $ 6,763,750 74,000 AO VimpelCom(a) -- ADR 7,695,260 190,000 China Mobile (Hong Kong) Limited -- ADR 2,791,100 59,000 Mobile Telesystems -- ADR 7,758,500 190,000 Nextel Communications, Inc.(a) 4,698,700 425,000 Partner Communications Company Ltd. -- ADR 3,378,750 207,000 SK Telecom Co., Ltd. -- ADR 4,409,100 350,000 STET Hellas Telecommunications S.A. -- ADR 7,140,000 163,500 Telemig Celular Participacoes S.A. -- ADR 6,392,850 207,000 Turkcell Iletisim Hizmetleri A.S.(a) -- ADR 7,400,250 117,700 United States Cellular Corporation(a) 4,549,105 - -------------------------------------------------- 62,977,365 - -------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 62,977,365 - -------------------------------------------------- TOTAL COMMON STOCKS (COST $288,258,957) 322,902,397
- --------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENT 0.0% VARIABLE RATE DEMAND NOTE $ 6,110 American Family Demand Note, 0.6908%# $ 6,110 - -------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $6,110) 6,110 - -------------------------------------------------- TOTAL INVESTMENTS 100.2% (COST $288,265,067) 322,908,507 - -------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.2%) (734,914) - -------------------------------------------------- NET ASSETS 100.0% $322,173,593 - --------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security 35 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 gained 19.40% for the six-month period ended March 31, 2004, outpacing its sector-specific benchmarks, the S&P 1500 Consumer Discretionary Index and the S&P 1500 Consumer Staples Index, which returned 17.39% and 14.50%, respectively. Although neither index is an ideal comparison individually, together they provide a suitable reference for the Fund's overall performance. Additionally, the Fund outperformed its broad benchmark, the S&P 1500 Index, which returned 14.75% over the same time period. Total returns for other periods as of March 31, 2004 are listed on page 38. Having begun the period tilted toward economically sensitive industries within the Leisure sector, the Fund benefited from market leadership that emphasized a cyclical recovery. Although the economy continued to show steady improvement going into January, this theme was interrupted amid a sharp, two-month downdraft that signaled a shift in strength to more defensive-oriented areas. Against a backdrop of short-term theme reversals, the Fund's exposure to Consumer Staples industries was more than doubled on the basis of emerging strength relative to the broader market. This rotation, though modest, helped to offset a cyclical decline as the period came to a close. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Nevertheless, the Fund's initial growth bias, as measured on a simplistic price-to-earnings (P/E) basis, turned style-neutral by period-end, with virtually equal exposure to growth and value holdings. Whereas defensive issues managed to sidestep the cyclical downturn, underpriced shares also encountered less resistance. We do not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We believe this to be more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Seemingly negative market trends could not conceal the fact that stocks fared rather well during the period. Although economic fundamentals and corporate earnings both made considerable headway, investors wrongly focused on interest rate fears, job growth concerns and consumer spending worries. Our system saw things differently, as valuation and relative strength readings continued to support an upward move, particularly as the recovery gained traction. What our system does not detect are geopolitical events such as the flaring of tensions surrounding terrorism and world unrest. However, even as overseas terrorist events produced broad-based market sell-offs, consumers proved resilient, as did consumer-related industries. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? Concentrated weightings in Leisure industries such as hotels, resorts & cruise lines and restaurants and strength in specialty stores contributed to the Fund's relative outperformance. Although we continue to see leadership in these industries, selected companies within hotels, resorts & cruise lines exceeded fair value and were liquidated, significantly reducing the Fund's [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 99.7% Top 10 Equity Holdings 29.3% Number of Stocks 48 Cash Equivalents 2.1% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Brunswick Corporation 3.4% CEC Entertainment Inc. 3.2% Callaway Golf Company 3.1% PepsiCo, Inc. 3.0% The Walt Disney Company 2.9% Ruby Tuesday, Inc. 2.8% RC2 Corporation 2.8% CKE Restaurants, Inc. 2.7% Royal Caribbean Cruises Ltd. 2.7% Harrah's Entertainment, Inc. 2.7% Percentages are based upon net assets. 36 exposure to those industries. Meanwhile, we bolstered the Fund's Consumer Staples exposure, initiating positions in packaged foods & meats and household products, while adding to holdings in food distributors. As for industry detractors, Internet software & services weakened considerably amid fourth-quarter profit taking, while food retail and drug retail reflected ongoing margin concerns and competitive pricing pressures. Among the Fund's leading individual performance contributors, cruise operator Royal Caribbean Cruises Ltd. advanced on record bookings, while raising its full-year outlook. Recreation leader Brunswick Corp. also traded higher, having increased its fourth-quarter earnings guidance. Music retailer Trans World Entertainment Corp. gained after reversing a prior-year loss, while food wholesaler Nash Finch Co. garnered investor interest in its move toward fair value. Certain companies turned in decidedly disappointing returns and hampered Fund returns. Specifically, shares of LeapFrog Enterprises Inc. plummeted after a series of forecasting missteps damaged the educational toymaker's credibility. Meanwhile, Winn-Dixie Stores, Inc. tumbled when the supermarket operator missed consensus earnings estimates and suspended its dividend. NASCAR collectibles marketer Action Performance Companies, Inc. also struggled as continued weakness in die-cast sales hurt revenues. All were ultimately sold on declining relative strength. WHAT IS THE INVESTMENT OUTLOOK FOR THE LEISURE AND CONSUMER STAPLES SECTOR? Going forward, we see an ideal environment for continued economic expansion, that being sustainable growth with low interest rates. Furthermore, we see demonstrable leadership across many of the Fund's constituent industries, including restaurants and food distributors. Given the presence of continued value in the overall market based on our methodology, we anticipate that the Leisure and Consumer Staples sector can capitalize on that leadership and participate in any sustained growth of the economic recovery. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Our valuation model directed us to small- and mid-capitalization companies, and the Fund's overweighting of these stocks aided relative performance as large-cap securities lagged. - - Among the Fund's strongest-performing holdings during the period were Royal Caribbean Cruises Ltd. and Brunswick Corp. - - Our methodology led us to hold significant positions in leisure products and hotels, resorts & cruise lines, and the Fund's holdings in these industries performed strongly relative to the sector-specific Index. - - Exposure to Internet software & services had a negative impact on Fund performance. - - Stock selection in the photographic products and leisure facilities industries hampered returns. 37 Management Overview (continued) ICON LEISURE AND CONSUMER STAPLES FUND - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Restaurants 16.4% Leisure Products 14.1% Hotels, Resorts & Cruise Lines 7.0% Specialty Stores 6.7% Food Distributors 6.0% Tobacco 5.1% Packaged Foods & Meats 5.0% Movies & Entertainment 4.7% Softdrinks 4.6% Casinos & Gaming 4.5%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 5/9/97 - ------------------------------------------------------------------------------------------ ICON Leisure and Consumer Staples Fund 19.40% 42.60% 9.79% 12.84% - ------------------------------------------------------------------------------------------ S&P 1500 Consumer Discretionary Index 17.39% 44.87% -0.41% 8.27% - ------------------------------------------------------------------------------------------ S&P 1500 Consumer Staples Index 14.50% 27.02% 1.50% 5.73% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 6.83% - ------------------------------------------------------------------------------------------
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 January 1, 2002. Additional information about these performance results and the comparative indexes can be found on pages 2 and 3. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON LEISURE AND CONSUMER STAPLES S&P 1500 CONSUMER S&P 1500 CONSUMER FUND DISCRETIONARY INDEX STAPLES INDEX S&P 1500 INDEX ---------------- ------------------- ----------------- -------------- 5/9/97 10000 10000 10000 10000 3/31/98 12687 14320 12925 13606 3/31/99 14414 17659 13631 15689 3/31/00 12646 19006 12188 18768 3/31/01 15041 15034 12860 14963 3/31/02 21073 16136 14032 15281 3/31/03 16127 11940 11559 11513 3/31/04 22996 17298 14683 15764
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. 38 Schedule of Investments (unaudited) ICON LEISURE AND CONSUMER STAPLES FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- COMMON STOCKS 99.7% CONSUMER DISCRETIONARY 6.7% SPECIALTY STORES 6.7% 103,800 Big 5 Sporting Goods Corporation(a) $ 2,620,950 66,500 The Sports Authority, Inc.(a) 2,665,320 212,800 Trans World Entertainment Corporation(a) 2,017,344 - ------------------------------------------------- 7,303,614 - ------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 7,303,614 FINANCIAL 2.6% MULTI-LINE INSURANCE 2.6% 45,300 Loews Corporation 2,675,418 - ------------------------------------------------- TOTAL FINANCIAL 2,675,418 INFORMATION TECHNOLOGY 1.7% HOME ENTERTAINMENT SOFTWARE 1.7% 51,500 Take-Two Interactive Software, Inc.(a) 1,894,170 - ------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 1,894,170 LEISURE AND CONSUMER STAPLES 88.7% BROADCASTING & CABLE TV 3.4% 59,900 Cablevision Systems New York Group(a) 1,370,512 49,100 Hearst-Argyle Television, Inc. 1,320,299 131,400 Mediacom Communications Corporation(a) 1,053,828 - ------------------------------------------------- 3,744,639 CASINOS & GAMING 4.5% 54,000 Harrah's Entertainment, Inc. 2,964,060 41,200 Shuffle Master, Inc.(a) 1,915,388 - ------------------------------------------------- 4,879,448 DISTILLERS & VINTERS 1.9% 55,900 The Robert Mondavi Corporation(a) 2,113,579 DRUG RETAIL 1.7% 51,600 CVS Corporation 1,821,480 FOOD DISTRIBUTORS 6.0% 105,900 Nash Finch Company 2,507,712 341,544 Spartan Stores, Inc.(a) 1,536,948 51,200 United Natural Foods, Inc.(a) 2,462,208 - ------------------------------------------------- 6,506,868 FOOD RETAIL 3.8% 86,600 Alberston's, Inc. 1,918,190 73,500 SUPERVALU INC. 2,244,690 - ------------------------------------------------- 4,162,880
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE HOTELS, RESORTS & CRUISE LINES 7.0% 54,800 Carnival Corporation(f) $ 2,461,068 193,500 Prime Hospitality Corp.(a) 2,202,030 67,300 Royal Caribbean Cruises Ltd.(f) 2,967,930 - ------------------------------------------------- 7,631,028 HOUSEHOLD PRODUCTS 3.6% 41,900 Energizer Holdings, Inc.(a) 1,956,311 30,600 Kimberly-Clark Corporation 1,930,860 - ------------------------------------------------- 3,887,171 HYPERMARKETS & SUPER CENTERS 1.8% 79,300 BJ's Wholesale Club, Inc.(a) 2,018,185 LEISURE PRODUCTS 14.1% 90,500 Brunswick Corporation 3,695,115 178,500 Callaway Golf Company 3,387,930 108,600 JAKKS Pacific, Inc.(a) 1,629,000 250,300 Meade Instruments Corp.(a) 1,011,212 110,200 RC2 Corporation(a) 3,030,500 70,550 SCP Pool Corporation(a) 2,628,693 - ------------------------------------------------- 15,382,450 MOVIES & ENTERTAINMENT 4.7% 110,800 Metro-Goldwyn-Mayer Inc.(a) 1,927,920 128,500 The Walt Disney Company 3,211,215 - ------------------------------------------------- 5,139,135 PACKAGED FOODS & MEATS 5.0% 52,900 Dean Foods Company(a) 1,766,860 29,200 J & J Snack Foods Corp.(a) 1,319,256 131,800 Tyson Foods, Inc. 2,378,990 - ------------------------------------------------- 5,465,106 PERSONAL PRODUCTS 3.5% 25,300 Avon Products, Inc. 1,919,511 52,200 NBTY, Inc.(a) 1,940,796 - ------------------------------------------------- 3,860,307 PHOTOGRAPHIC PRODUCTS 1.6% 67,900 Eastman Kodak Company 1,776,943 RESTAURANTS 16.4% 55,900 CBRL Group, Inc. 2,215,876 100,200 CEC Entertainment Inc.(a) 3,476,940 303,600 CKE Restaurants, Inc.(a) 3,005,640 177,500 Luby's, Inc.(a) 1,056,125 90,300 McDonald's Corporation 2,579,871 94,400 Ruby Tuesday, Inc. 3,034,960
39 Schedule of Investments (continued) (unaudited) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- 134,400 The Steak n Shake Company(a) $ 2,587,200 - ------------------------------------------------- 17,956,612 SOFTDRINKS 4.6% 74,800 Coca-Cola Enterprises Inc. 1,807,916 60,700 PepsiCo, Inc. 3,268,695 - ------------------------------------------------- 5,076,611 TOBACCO 5.1% 49,600 Altria Group, Inc. 2,700,720 46,800 R.J. Reynolds Tobacco Holdings, Inc. 2,831,400 - ------------------------------------------------- 5,532,120 - ------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 96,954,562 - ------------------------------------------------- TOTAL COMMON STOCKS (COST $87,652,809) 108,827,764 SHORT-TERM INVESTMENTS 2.1% U.S. GOVERNMENT AGENCIES 0.8% $ 849,000 FHLB Discount Note, 0.7500%, 4-1-04 849,000 - ------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 849,000 - ------------------------------------------------- VARIABLE RATE DEMAND NOTE 1.3% 1,494,175 American Family Demand Note, 0.6908%# 1,494,175 - ------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 1,494,175 - ------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $2,343,175) 2,343,175 - ------------------------------------------------- TOTAL INVESTMENTS 101.8% (COST $89,995,984) 111,170,939 - ------------------------------------------------- LIABILITIES LESS OTHER (1,972,271) ASSETS (1.8%) - ------------------------------------------------- NET ASSETS 100.0% $109,198,668 - -------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security Dates shown on securities are the due dates of the obligation. 40 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 30.09% for the six-month period ended March 31, 2004, outpacing the 21.95% for its sector-specific benchmark, the S&P 1500 Materials Index, as well as the 14.75% return of its broad benchmark, the S&P 1500 Index. Total returns for longer periods are listed on the following page. Total returns for other periods as of March 31, 2004 are listed on page 43. Although the broad market fell victim to a two-month cyclical pullback in early 2004, the Materials sector fared better than its economically sensitive counterparts. Rising global demand for steel and the declining U.S. dollar offset the removal of tariffs, while the housing boom continued to support construction materials. Specialty chemicals, also continued to demonstrate leadership despite the mounting cost of raw materials. Economic revival, ranging from modest improvement in the U.S. to robust expansion in China, worked to the Fund's benefit as positive trends emerged in manufacturing and infrastructure development. Consolidation also played an increasing role, boosting pricing power across several industries. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach views investment style as irrelevant, as measured on a traditional price-to-earnings (P/E) basis, the Fund maintained a slight growth bias during the period. Whereas issues generally considered growth-oriented encountered significant resistance, our valuation readings would most likely classify many of these shares as underpriced. We have never utilized P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We believe this to be more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Investors grappled with a host of misperceptions during the period but still bid shares higher. Although our overall readings indicated that a recovery-based theme remained in place, fears of overheated valuations, rising interest rates and stagnant job creation sent the market into a cyclical downturn, lifting more defensive issues. Nevertheless, a trend toward sustainable GDP growth continued to justify an upward move even as negative sentiment clouded the environment. Our system does not account for event-driven sell-offs that surfaced in the wake of terrorist activities and geopolitical unrest. However, even as these events produced temporary disruptions, markets proved resilient in attempting to establish levels of support. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? Strong gains were registered by the steel industry, the Fund's largest industry weighting, followed by contributions from construction materials, specialty chemicals and precious metals & minerals. While significant industry rotations were limited during the period, the Fund made two notable additions, initiating new positions in fertilizers & agricultural chemicals and commodity chemicals. Both were added on the basis of valuation and improving relative strength. [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 99.3% Top 10 Equity Holdings 33.1% Number of Stocks 44 Cash Equivalents 0.3% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Alcoa Inc. 4.4% FMC Corporation 3.6% IMC Global Inc. 3.4% Headwaters Incorporated 3.4% Millennium Chemicals Inc. 3.2% OM Group, Inc. 3.2% Stillwater Mining Company 3.1% Alcan Inc. 3.1% A.M. Castle & Co. 3.0% Silgan Holdings Inc. 2.7% Percentages are based upon net assets. 41 Management Overview (continued) ICON MATERIALS FUND Negative industry performance was driven by diversified metals & mining and industrial machinery, although the downside in both cases was minimized due to the Fund's limited exposure. By period-end, industrial machinery, technically classified in the Industrials sector, had been removed from the Fund while diversified metals & mining represented a narrow weighting. The Fund registered top performance from OM Group, Inc., a leading producer of metal-based specialty chemicals, and Stillwater Mining Company, the sole domestic producer of palladium and platinum, both of which benefited from favorable supply/demand factors and surging precious metal prices. Allegheny Technologies Inc. gained after announcing double-digit price increases for its specialty steel and titanium alloy products. Diversified chemical supplier FMC Corp. also advanced, having guided earnings estimates higher on stronger-than expected pesticide sales. Returns during the period were hampered by aluminum producer Commonwealth Industries, Inc., which gave back gains when it reported a drop in 2003 net sales, reflecting lower shipments. Wellman Inc., the leading U.S. producer of polyester fibers and plastic resins, warned of wider-than-expected losses due to weakness in polyester resin margins. Precision ball bearing manufacturer NN, Inc. also struggled, as dramatic increases in steel prices diluted earnings. All three stocks were sold from the Fund after they no longer exhibited relative strength. WHAT IS THE INVESTMENT OUTLOOK FOR THE MATERIALS SECTOR? Going forward, our system indicates ongoing leadership in specialty chemicals, but also detects emerging strength in commodity chemicals and metal & glass containers. On the other hand, we believe steel may have exceeded fair value and have taken steps to trim the Fund's exposure. While sector-wide readings reflect the overpriced nature of certain industries, others, as mentioned above, are poised to assume leadership. Therefore, we foresee continued strength as this highly cyclical group benefits from sustainable economic expansion. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Our valuation methods led us to overweight small- and mid-capitalization companies, which added to relative performance as large-cap securities lagged. - - Among the Fund's strongest-performing holdings during the period were OM Group Inc. and Stillwater Mining Co. - - Our methodology led us to hold a significant position in steel, the best-performing industry in the Index. - - Conversely, our valuation readings indicated weakness in the diversified metals & mining industry. Though the Fund's exposure was limited in this area, it had a negative impact during the period. - - Our stockpicking in the precious metals and minerals industry, a slightly overweight position, added to returns. 42 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Steel 19.1% Specialty Chemicals 12.7% Construction Materials 12.0% Commodity Chemicals 10.5% Diversified Chemicals 10.3% Aluminum 9.6% Paper Products 7.0% Fertilizers & Agricultural Chemicals 5.4% Metal & Glass Containers 4.3% Precious Metals & Minerals 3.1%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 5/5/97 - ------------------------------------------------------------------------------------------ ICON Materials Fund 30.09% 50.76% 5.42% -2.23% - ------------------------------------------------------------------------------------------ S&P 1500 Materials Index 21.95% 46.61% 7.28% 4.80% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 0.09% 6.73% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON MATERIALS FUND S&P 1500 MATERIALS INDEX S&P 1500 INDEX ------------------- ------------------------ -------------- 5/5/97 10000 10000 10000 3/31/98 8632 11582 13528 3/31/99 6571 9728 15599 3/31/00 7352 10523 18660 3/31/01 6063 10046 14877 3/31/02 8036 12210 15193 3/31/03 5675 9429 11447 3/31/04 8556 13824 15673
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. 43 Schedule of Investments (unaudited) ICON MATERIALS FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------- COMMON STOCKS 99.3% INDUSTRIALS 2.4% TRADING COMPANIES & DISTRIBUTORS 2.4% 26,000 Hughes Supply, Inc. $ 1,362,400 - -------------------------------------------------- TOTAL INDUSTRIALS 1,362,400 MATERIALS 96.9% ALUMINUM 9.6% 39,200 Alcan Inc.(f) 1,755,768 72,600 Alcoa Inc. 2,518,494 123,200 IMCO Recycling Inc.(a) 1,160,544 - -------------------------------------------------- 5,434,806 COMMODITY CHEMICALS 10.5% 74,500 Headwaters Incorporated(a) 1,908,690 95,000 Lyondell Chemical Company 1,409,800 70,300 Methanex Corporation(f) 787,360 123,000 Millennium Chemicals Inc.(a) 1,837,620 - -------------------------------------------------- 5,943,470 CONSTRUCTION MATERIALS 12.0% 32,700 Cemex S.A. de C.V. -- ADR 975,114 39,200 CRH plc -- ADR 805,168 26,275 Florida Rock Industries, Inc. 1,107,491 32,100 Lafarge North America Inc. 1,304,865 25,100 Martin Marietta Materials, Inc. 1,158,616 40,100 Texas Industries, Inc. 1,449,615 - -------------------------------------------------- 6,800,869 DIVERSIFIED CHEMICALS 10.3% 39,400 Cabot Corporation 1,292,320 26,600 The Dow Chemical Company 1,071,448 33,100 Eastman Chemical Company 1,412,708 47,900 FMC Corporation(a) 2,051,078 - -------------------------------------------------- 5,827,554 DIVERSIFIED METALS & MINING 0.9% 13,300 Freeport-McMoRan Copper & Gold, Inc. 519,897 FERTILIZERS & AGRICULTURAL CHEMICALS 5.4% 133,600 IMC Global Inc.(a) 1,910,480 18,100 The Scotts Company(a) 1,161,115 - -------------------------------------------------- 3,071,595 METAL & GLASS CONTAINERS 4.3% 77,300 Myers Industries, Inc. 950,790 32,900 Silgan Holdings Inc.(a) 1,504,517 - -------------------------------------------------- 2,455,307 PAPER PACKAGING 2.0% 94,300 Caraustar Industries, Inc.(a) 1,098,595
- --------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE PAPER PRODUCTS 7.0% 35,100 Aracruz Celulose S.A. -- ADR $ 1,342,575 86,500 Buckeye Technologies Inc.(a) 896,140 27,000 Georgia-Pacific Corp. 909,630 25,000 Schweitzer-Mauduit International, Inc. 807,500 - -------------------------------------------------- 3,955,845 PRECIOUS METALS & MINERALS 3.1% 112,800 Stillwater Mining Company(a) 1,770,960 SPECIALTY CHEMICALS 12.7% 31,200 Albemarle Corporation 904,800 48,100 Cambrex Corporation 1,293,890 164,300 Crompton Corporation 1,048,234 40,800 Ferro Corporation 1,066,920 44,400 Great Lakes Chemical Corporation 1,058,940 60,200 OM Group, Inc.(a) 1,830,080 - -------------------------------------------------- 7,202,864 STEEL 19.1% 185,400 A.M. Castle & Co.(a) 1,676,016 26,800 Carpenter Technology Corporation 881,184 39,200 Commercial Metals Company 1,248,128 14,600 Nucor Corporation 897,608 26,900 Quanex Corporation 1,142,981 89,000 Ryerson Tull, Inc. 1,165,010 55,700 Steel Dynamics, Inc.(a) 1,380,246 71,100 Steel Technologies Inc. 1,373,652 55,800 Worthington Industries, Inc. 1,069,686 - -------------------------------------------------- 10,834,511 - -------------------------------------------------- TOTAL MATERIALS 54,916,273 - -------------------------------------------------- TOTAL COMMON STOCKS (COST $45,436,357) 56,278,673 SHORT-TERM INVESTMENT 0.3% VARIABLE RATE DEMAND NOTE 0.3% $147,901 American Family Demand Note, 0.6908%(#) 147,901 - -------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $147,901) 147,901 - -------------------------------------------------- TOTAL INVESTMENTS 99.6% (COST $45,584,258) 56,426,574 - -------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.4% 247,083 - -------------------------------------------------- NET ASSETS 100.0% $56,673,657 - --------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security 44 Management Overview ICON TELECOMMUNICATION & UTILITIES FUND A discussion with Robert Straus, CMT, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Telecommunication & Utilities Fund advanced 20.24% for the six-month period ended March 31, 2004, outpacing its narrow benchmarks, the S&P 1500 Telecommunication Services Index and the S&P 1500 Utilities Index, which returned 18.95% and 13.54%, respectively, and also topping its broad benchmark, the S&P 1500 Index, which returned 14.75%. Total returns for other periods as of March 31, 2004 are listed on page 47. The Fund's emphasis on telecommunications-related issues, most notably within the wireless telecommunications services industry, enhanced Fund performance during the period. Wireless stocks, in particular, benefited from a sharp rise in capital spending as providers boosted capacity to meet pent-up demand. Having been out of favor for several years, the industry was also able to sidestep fear-based profit-taking in the closely related Information Technology sector during the fourth quarter of 2003, as well as a severe downdraft that roiled cyclical stocks during the first quarter of 2004. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach considers the style grid irrelevant, the Fund profited from a value bias during the period, as measured on a simplistic price-to-earnings (P/E) basis. Although value was widespread throughout the sector, relative strength was limited to the wireless industry. For the record, the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. This is viewed as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Despite solid equity returns over the course of the period, investors appeared easily distracted by perceived economic disappointments. While job growth fell short of expectations, payrolls steadily increased and unemployment remained relatively low by historical standards. Productivity gains led to higher corporate profits and interest rate fears proved unwarranted. Although these incremental improvements appeared to support a sustainable economic recovery, equity markets surrendered earlier gains on valuation concerns and a resurfacing of geopolitical tensions. While stock prices remained underpriced based on our estimate of fair value, investors retreated in the wake of overseas terrorist events. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT THE FUND'S PERFORMANCE? Against this backdrop, the Fund maintained an underweight position in utilities, instead emphasizing telecommunications-related issues. In doing so, however, we trimmed Fund exposure to the integrated telecommunication services and communications equipment industries, while nearly doubling holdings in wireless stocks, which our system judged to be the clear leader. Wireless stocks comprised a larger-than-usual industry weighting within the Fund at period- [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 99.5% Top 10 Equity Holdings 38.6% Number of Stocks 43 Cash Equivalents 0.0% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) America Movil S.A. de C.V. 5.3% Mobile Telesystems 5.1% Turkcell Iletisim Hizmetleri A.S. 4.6% Philippine Long Distance Telephone Company 3.8% Alliant Energy Corporation 3.7% STET Hellas Telecommunications 3.5% AO VimpelCom 3.2% Duke Energy Corporation 3.2% Tele Nordeste Celular Participacoes S.A. 3.1% Golden Telecom, Inc. 3.1% Percentages are based upon net assets. 45 Management Overview (continued) end, with 12 companies. By focusing on this emerging theme, which enjoyed worldwide strength during the period, the Fund captured much of the sector's upside, allowing it to outperform its respective benchmarks during the six-month period. This heavy weighting benefited Fund returns as performance was aided the most by three overseas wireless telecommunications services companies. The American Depositary Receipts (ADRs) of Russia-based Mobile Telesystems traded at a significant discount to projected five-year annualized earnings. Also benefiting from renewed investor interest were Mexico's America Movil S.A. de C.V. and Turkey's Turkcell Iletisim Hizmetleri A.S., as the ADRs of both companies realized strong growth in their respective countries. Among the Fund's poorest performing stocks, messaging services provider j2 Global Communications, Inc. fell on unexpectedly weak performance in its Web and corporate channels. As j2's relative strength weakened, we sold the stock. Meanwhile, shares of Intrado Inc., a supplier of emergency response support services, declined on revenue growth concerns. Although a weaker performer, we continued to own Intrado at period-end due to . WHAT IS THE INVESTMENT OUTLOOK FOR THE TELECOMMUNICATION & UTILITIES SECTORS? Based on our valuation and relative strength readings, we are increasingly optimistic about the wireless telecommunication services industry, and less so about integrated telecommunication services, communications equipment and utilities. Wireless companies, in our view, possess solid growth potential driven by strong worldwide demand that has been largely untapped. As such, the Fund could maintain or perhaps increase its global exposure to the wireless telecom industry in the coming months. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Our methodology led us to hold a significant position in the wireless telecommunications services industry, and the Fund's holdings in this industry were among the strongest performers relative to Index during the period. - - Among the Fund's strongest-performing individual holdings during the period were ADRs of Mobile Telesystems, America Movil S.A. de C.V., and Turkcell Iletisim Hizmetleri A.S., all foreign wireless telecom services companies. - - Our exposure to two communications-related stocks in the Internet software and services industry contributed negatively to returns. - - Although valuation directed us to smaller capitalization companies, the Fund's bias produced mixed results. - - Exposure to the communications equipment industry added to Fund returns. 46 - -------------------------------------------------------------------------------- TOP 10 INDUSTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Wireless Telecommunication Services 38.0% Electric Utilities 19.1% Integrated Telecommunication Services 12.4% Multi-Utilities & Unregulated Power 8.6% Construction & Engineering 6.0% Gas Utilities 4.4% Communications Equipment 4.0% Oil & Gas Exploration & Production 2.1% Building Products 1.9% Data Processing & Outsourced Services 1.6%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 7/9/97 - ----------------------------------------------------------------------------------------- ICON Telecommunication & Utilities Fund 20.24% 48.73% 2.73% 8.48% - ----------------------------------------------------------------------------------------- S&P 1500 Telecommunications Services Index 18.95% 31.51% -14.35% -1.20% - ----------------------------------------------------------------------------------------- S&P 1500 Utilities Index 13.54% 36.60% 2.74% 5.08% - ----------------------------------------------------------------------------------------- S&P 1500 Index 14.75% 36.92% 0.09% 5.43% - -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON S&P 1500 TELECOMMUNICATION & TELECOMMUNICATIONS S&P 1500 UTILITIES UTILITIES FUND SERVICES INDEX INDEX S&P 1500 INDEX ------------------- ------------------ ------------------ -------------- 7/9/97 10000 10000 10000 10000 3/31/98 13800 14982 12775 12321 3/31/99 15112 20000 12192 14207 3/31/00 15960 22888 13585 16994 3/31/01 15995 14014 18172 13550 3/31/02 15322 10537 14813 13837 3/31/03 11625 7010 10216 10425 3/31/04 17290 9219 13956 14275
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. 47 Schedule of Investments (unaudited) ICON TELECOMMUNICATION & UTILITIES FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- COMMON STOCKS 99.5% ENERGY 2.1% OIL & GAS EXPLORATION & PRODUCTION 2.1% 51,400 Southwestern Energy Company(a) $ 1,239,768 - --------------------------------------------------- TOTAL ENERGY 1,239,768 INDUSTRIALS 7.9% BUILDING PRODUCTS 1.9% 11,700 Simpson Manufacturing Co., Inc. 572,715 14,400 York International Corporation 566,064 - --------------------------------------------------- 1,138,779 CONSTRUCTION & ENGINEERING 6.0% 37,500 Granite Construction Incorporated 891,375 14,700 Jacobs Engineering Group Inc.(a) 655,620 79,200 The Shaw Group Inc.(a) 858,528 40,400 URS Corporation(a) 1,162,712 - --------------------------------------------------- 3,568,235 - --------------------------------------------------- TOTAL INDUSTRIALS 4,707,014 INFORMATION TECHNOLOGY 5.6% COMMUNICATIONS EQUIPMENT 4.0% 106,400 Cable Design Technologies Corporation(a) 1,008,672 20,000 NICE Systems Ltd.(a) -- ADR 475,600 50,000 SpectraLink Corporation 851,500 - --------------------------------------------------- 2,335,772 DATA PROCESSING & OUTSOURCED SERVICES 1.6% 50,300 Intrado Inc.(a) 973,305 - --------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 3,309,077 TELECOMMUNICATION & UTILITIES 83.9% ALTERNATIVE CARRIERS 1.4% 92,000 PTEK Holdings, Inc.(a) 845,480 ELECTRIC UTILITIES 19.1% 84,800 Alliant Energy Corporation 2,209,888 94,700 Cleco Corporation 1,802,141 65,000 DPL Inc. 1,218,750 88,400 Duquesne Light Holdings Inc. 1,723,800 10,400 FPL Group, Inc. 695,240 12,500 Huaneng Power International, Inc. -- ADR 979,000 60,600 IDACORP, Inc 1,811,940 23,100 Pinnacle West Capital Corporation 908,985 - --------------------------------------------------- 11,349,744 GAS UTILITIES 4.4% 25,200 Kinder Morgan, Inc. 1,588,104 31,000 Sempra Energy 985,800 - --------------------------------------------------- 2,573,904 INTEGRATED TELECOMMUNICATION SERVICES 12.4% 36,600 China Telecom Corporation Limited -- ADR 1,269,654 53,600 Golden Telecom, Inc. 1,824,008 130,000 Philippine Long Distance Telephone Company(a) -- ADR 2,223,000
- ---------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE 59,500 Sprint Corporation $ 1,096,585 27,600 Telefonos de Mexico SA de CV -- ADR 963,516 - --------------------------------------------------- 7,376,763 MULTI-UTILITIES & UNREGULATED POWER 8.6% 38,200 Constellation Energy Group, Inc. 1,526,090 82,600 Duke Energy Corporation 1,866,760 22,800 Public Service Enterprise Group Incorporated 1,071,144 87,000 Sierra Pacific Resources(a) 643,800 - --------------------------------------------------- 5,107,794 WIRELESS TELECOMMUNICATION SERVICES 38.0% 82,000 America Movil S.A. de C.V. -- ADR 3,169,300 18,500 AO VimpelCom(a) -- ADR 1,923,815 152,700 China Unicom Limited -- ADR 1,375,827 23,000 Mobile Telesystems -- ADR 3,024,500 63,000 Nextel Communications, Inc.(a) 1,557,990 42,000 NII Holdings Inc.(a) 1,471,260 115,500 Partner Communications Company Ltd.(a) -- ADR 918,225 102,800 STET Hellas Telecommunications S.A. -- ADR 2,097,120 67,500 Tele Nordeste Celular Participacoes S.A. -- ADR 1,831,275 34,900 Telemig Celular Participacoes S.A. -- ADR 1,364,590 76,500 Turkcell Iletisim Hizmetleri A.S.(a) -- ADR 2,734,875 26,800 United States Cellular Corporation(a) 1,035,820 - --------------------------------------------------- 22,504,597 - --------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 49,758,282 - --------------------------------------------------- TOTAL COMMON STOCKS (COST $46,453,592) 59,014,141 SHORT-TERM INVESTMENT 0.0% VARIABLE RATE DEMAND NOTE 0.0% $ 3,301 American Family Demand Note, 0.6908%# $ 3,301 - --------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $3,301) 3,301 - --------------------------------------------------- TOTAL INVESTMENTS 99.5% (COST $46,456,893) 59,017,442 - --------------------------------------------------- OTHER ASSETS LESS LIABILITIES 0.5% 282,319 - --------------------------------------------------- NET ASSETS 100.0% $59,299,761 - ---------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign security 48 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 -0.03% for the six-month period ended March 31, 2004, trailing its unmanaged benchmark, the Merrill Lynch 1-Year Treasury Bill Index, which returned 0.70%. Total returns for other periods as of March 31, 2004 are listed on the following page. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? The Federal Reserve Board kept the overnight lending rate unchanged during the period, maintaining the target rate at a 45-year low of 1.00%. Meanwhile, the short end of the yield curve remained relatively flat, with the yield on the 3-Month U.S. Treasury Bill increasing from 0.922% at the beginning of the period to 0.944% at period-end, while the 6-month U.S. Treasury Bill yield moved lower, starting at 1.033% and ending at 0.985%. All told, this proved to be an unfavorable environment for cash equivalents as Fed monetary policy focused on sustaining economic growth in an attempt to stimulate investment. Despite market concerns surrounding the pace of job creation, incremental improvements in employment rolls, payroll growth and productivity gains were realized throughout the period, leading to a shift in Federal Reserve rhetoric. Although election-year policy shifts are generally rare, particularly in light of tame inflation readings, many observers believed that the Fed was laying the groundwork for raising short-term rates, possibly as early as this summer. HOW WAS THE FUND MANAGED AND HOW DID THAT AFFECT PERFORMANCE? Late in the period, as existing holdings matured and were subsequently liquidated, the Fund actively pursued bank certificates of deposit in hopes of enhancing yield. Purchases were laddered in varying maturities in order to minimize interest rate risk, thereby maintaining flexibility in the event yields rose. All current CD positions were held at the $100,000 level or below, well within FDIC insurance coverage guidelines. Even with this new strategy, the Fund's operating expenses had an increasingly pronounced effect on overall returns with short-term yields already at near-historical lows. WHAT IS THE INVESTMENT OUTLOOK FOR THE SHORT-TERM FIXED INCOME MARKET? Many analysts expect short-term rates to rise as the economic recovery proves sustainable and investors continue to seek higher rates of return from the stock market. However, given the current low-inflation environment, we believe it is unlikely that any increase would be overly dramatic. Therefore, we will continue our policy of investing in high-quality short-term securities that offer a prudent combination of income potential and interest rate sensitivity. 49 Management Overview (continued) ICON SHORT-TERM FIXED INCOME FUND - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 2/7/97 - ------------------------------------------------------------------------------------------ ICON Short-Term Fixed Income Fund -0.03% -0.17% 2.06% 3.01% - ------------------------------------------------------------------------------------------ Merrill Lynch 1-Year U.S. Treasury Bill Index 0.70% 1.46% 4.28% 4.70% - ------------------------------------------------------------------------------------------
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 certain Fund expenses; without these waivers, returns would have been lower. The waiver provisions may be terminated in the future. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON SHORT-TERM FIXED INCOME MERRILL LYNCH 1-YEAR U.S. TREASURY FUND BILL INDEX ---------------------------- ---------------------------------- 2/7/97 10000 10000 3/31/97 10018 10043 3/31/98 10582 10673 3/31/99 11168 11256 3/31/00 11562 11741 3/31/01 12131 12641 3/31/02 12187 13211 3/31/03 12384 13683 3/31/04 12363 13883
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 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. 50 Schedule of Investments (unaudited) ICON SHORT-TERM FIXED INCOME FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- SHORT-TERM INVESTMENTS 9.6% CERTIFICATES OF DEPOSIT 9.6% $ 99,000 American Bank Bozeman, 1.15%, 9-20-04 $ 98,793 99,000 Beal Bank SSB, 1.05%, 6-23-04 98,876 99,000 FirstBank Puerto Rico, 1.05%, 7-6-04 98,861 99,000 New York Community Bank, 1.10%, 7-26-04 98,847 99,000 Wilmington Savings Bank, 1.05%, 7-7-04 99,000 - --------------------------------------------------- TOTAL CERTIFICATES OF DEPOSIT 494,377 - --------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS 494,377 - --------------------------------------------------- U.S. GOVERNMENT AGENCIES 76.5% $3,937,000 Federal Home Loan Bank Discount Note, 0.7100%, 4-1-04 3,937,000 - --------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 3,937,000 U.S. GOVERNMENT OBLIGATIONS 19.6% 1,000,000 U.S. Treasury Note, 2.000%, 8-31-05 1,009,922 - --------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS 1,009,922 - --------------------------------------------------- TOTAL INVESTMENTS 105.7% (AMORTIZED COST $5,436,016) 5,441,299 - --------------------------------------------------- LIABILITIES LESS OTHER ASSETS (5.7%) (295,577) - --------------------------------------------------- NET ASSETS 100.0% $5,145,722 - ---------------------------------------------------
The accompanying notes are an integral part of the financial statements. Dates shown on securities are the due dates of the obligation. 51 Statements of Assets and Liabilities (unaudited)
------------------ -------------- -------------- MARCH 31, 2004 ICON ICON ICON CONSUMER ENERGY FINANCIAL DISCRETIONARY FUND FUND FUND ------------------ -------------- -------------- ASSETS Investments, at cost $155,400,748 $ 92,956,272 $151,789,077 ------------------ -------------- -------------- Investments, at value 198,060,652 120,189,136 181,720,325 Cash - 1,440 - Receivables: Fund shares sold 567,889 1,231,119 637,320 Investments sold 2,831,805 - - Advisor - - - Interest 114 809 88 Dividends 177,799 114,861 127,537 Other assets 7,482 4,062 8,761 ------------------ -------------- -------------- Total Assets 201,645,741 121,541,427 182,494,031 ------------------ -------------- -------------- LIABILITIES Payables: Due to custodian bank - - 670,000 Fund shares redeemed 102,903 68,315 230,699 Investments bought 5,124,247 4,833,353 - Advisory fees 163,140 91,884 135,893 Fund accounting, custodial and transfer agent fees 50,960 27,619 42,763 Administration fees 8,157 4,594 6,795 Distributions due to shareholders - - - Accrued expenses 54,500 34,816 43,954 ------------------ -------------- -------------- Total Liabilities 5,503,907 5,060,581 1,130,104 ------------------ -------------- -------------- NET ASSETS $196,141,834 $116,480,846 $181,363,927 ================== ============== ============== Shares outstanding (unlimited shares authorized, no par value) 14,165,978 6,403,635 13,577,120 Net asset value (offering price and redemption price per share) $ 13.85 $ 18.19 $ 13.36
The accompanying notes are an integral part of the financial statements. 52
-------------- -------------- --------------- ------------ -------------- ------------------- ---------------- ICON ICON ICON ICON LEISURE ICON ICON ICON HEALTHCARE INDUSTRIALS INFORMATION AND CONSUMER MATERIALS TELECOMMUNICATION & SHORT-TERM FIXED FUND FUND TECHNOLOGY FUND STAPLES FUND FUND UTILITIES FUND INCOME FUND -------------- -------------- --------------- ------------ -------------- ------------------- ---------------- $214,614,723 $136,021,438 $288,265,067 $89,995,984 $45,584,258 $46,456,893 $5,436,016 -------------- -------------- --------------- ------------ -------------- ------------------- ---------------- 260,061,103 168,943,255 322,908,507 111,170,939 56,426,574 59,017,442 5,441,299 - 2,100 - - 3,585 - - 1,107,379 535,932 2,371,329 339,945 325,682 275,594 27,587 - - 11,110,216 6,089,242 - 642,102 - - - - - - - 5,215 1,208 764 13 240 142 274 1,826 62,318 137,819 44,278 93,675 54,289 46,666 - 7,265 4,337 12,169 5,069 3,008 2,825 527 -------------- -------------- --------------- ------------ -------------- ------------------- ---------------- 261,239,273 169,624,207 336,446,512 117,699,110 56,813,280 59,984,903 5,476,454 -------------- -------------- --------------- ------------ -------------- ------------------- ---------------- - - 1,422,000 - - 172,000 348 215,419 82,948 734,304 79,141 50,807 13,475 114,538 9,076,996 - 11,666,016 8,263,067 - 406,585 198,000 212,125 156,131 267,634 90,396 46,129 49,351 2,974 65,818 48,758 85,336 28,135 14,492 15,314 1,386 10,606 7,807 14,565 4,520 2,306 2,468 229 - - - - - - 957 61,798 49,960 83,064 35,183 25,889 25,949 12,300 -------------- -------------- --------------- ------------ -------------- ------------------- ---------------- 9,642,762 345,604 14,272,919 8,500,442 139,623 685,142 330,732 -------------- -------------- --------------- ------------ -------------- ------------------- ---------------- $251,596,511 $169,278,603 $322,173,593 $109,198,668 $56,673,657 $59,299,761 $5,145,722 ============== ============== =============== ============ ============== =================== ================ 17,847,314 16,663,442 36,493,966 7,365,808 7,056,672 8,768,960 566,831 $ 14.10 $ 10.16 $ 8.83 $ 14.83 $ 8.03 $ 6.76 $ 9.08
53 Statements of Operations (unaudited)
------------------ -------------- -------------- FOR THE SIX MONTHS ENDED MARCH 31, 2004 ICON ICON ICON CONSUMER ENERGY FINANCIAL DISCRETIONARY FUND FUND FUND ------------------ -------------- -------------- INVESTMENT INCOME Interest $ 6,020 $ 27,459 $ 7,400 Dividends 748,867 447,902 1,219,380 Foreign taxes withheld - (29,070) - ------------------ -------------- -------------- Total Investment Income 754,887 446,291 1,226,780 ------------------ -------------- -------------- EXPENSES Advisory fees 902,645 400,845 724,870 Fund accounting, custodial and transfer agent fees 135,049 62,198 107,552 Administration fees 44,712 19,858 35,808 Audit fees 11,423 5,058 9,149 Registration fees 24,692 19,103 19,205 Legal fees 2,806 1,039 2,379 Insurance expense 4,014 1,874 4,540 Trustee fees and expenses 7,818 3,208 6,867 Shareholder reports 17,662 8,356 14,624 Interest expense 2,938 - 17,286 Other expenses 19,236 20,464 23,013 ------------------ -------------- -------------- Total expenses before Adviser reimbursement 1,172,995 542,003 965,293 Expense reimbursement by Adviser - - - ------------------ -------------- -------------- Total Expenses 1,172,995 542,003 965,293 ------------------ -------------- -------------- NET INVESTMENT INCOME (LOSS) (418,108) (95,712) 261,487 ------------------ -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from investment transactions 12,707,286 1,840,897 15,771,518 Change in unrealized net appreciation/(depreciation): on securities 14,457,402 18,851,371 15,560,534 ------------------ -------------- -------------- Net realized and unrealized gain/(loss) on investments 27,164,688 20,692,268 31,332,052 ------------------ -------------- -------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $26,746,580 $20,596,556 $31,593,539 ================== ============== ==============
The accompanying notes are an integral part of the financial statements. 54
-------------- -------------- --------------- ------------ -------------- ----------------- ---------------- ICON ICON ICON ICON LEISURE ICON ICON ICON HEALTHCARE INDUSTRIALS INFORMATION AND CONSUMER MATERIALS TELECOMMUNICATION SHORT-TERM FIXED FUND FUND TECHNOLOGY FUND STAPLES FUND FUND & UTILITIES FUND INCOME FUND -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- $ 33,797 $ 22,746 $ 7,638 $ 3,784 $ 4,052 $ 1,910 $ 43,926 307,387 712,452 703,471 538,459 280,729 426,321 - (1,706) (3,672) - (17) (4,504) 48 - -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- 339,478 731,526 711,109 542,226 280,277 428,279 43,926 -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- 1,040,006 888,052 1,637,824 482,345 228,345 256,471 13,848 157,654 132,291 237,941 72,030 35,259 38,317 3,236 51,615 44,039 82,218 23,898 11,319 12,703 1,056 13,157 11,256 20,741 6,103 2,888 3,245 270 25,299 23,419 32,913 17,170 14,007 16,897 8,640 2,771 2,578 5,426 1,474 604 754 62 3,641 2,390 6,864 2,610 1,592 1,205 286 8,121 7,182 15,100 4,232 1,788 2,206 248 19,848 16,634 31,261 9,837 4,775 5,667 490 - - 15,500 2,429 5,203 368 - 23,088 10,810 2,761 14,791 10,635 12,317 8,193 -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- 1,345,200 1,138,651 2,088,549 636,919 316,415 350,150 36,329 - - - - - - (13,630) -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- 1,345,200 1,138,651 2,088,549 636,919 316,415 350,150 22,699 -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- (1,005,722) (407,125) (1,377,440) (94,693) (36,138) 78,129 21,227 -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- 5,861,834 3,543,457 49,285,173 6,791,225 1,179,344 2,567,494 - 19,213,193 17,472,962 (26,657,046) 9,718,069 8,807,441 6,534,550 (20,251) -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- 25,075,027 21,016,419 22,628,127 16,509,294 9,986,785 9,102,044 (20,251) -------------- -------------- --------------- ------------ -------------- ----------------- ---------------- $24,069,305 $20,609,294 $ 21,250,687 $16,414,601 $9,950,647 $9,180,173 $ 976 ============== ============== =============== ============ ============== ================= ================
55 Statements of Changes in Net Assets
------------------------------- ------------------------------- ICON CONSUMER ICON DISCRETIONARY FUND ENERGY FUND ------------------------------- ------------------------------- Six Months Six Months Ended Ended March 31, Year Ended March 31, Year Ended 2004 September 30, 2004 September 30, (unaudited) 2003 (unaudited) 2003 ------------ ------------- ------------ ------------- OPERATIONS Net investment income/(loss) $ (418,108) $ (934,138) $ (95,712) $ (219,166) Net realized gain/(loss) from investment transactions 12,707,286 (3,833,114) 1,840,897 (5,971,578) Net realized gain/(loss) from foreign currency translations - - - - Change in unrealized appreciation/(depreciation) on securities and foreign currency translations 14,457,402 24,416,611 18,851,371 15,279,562 ------------ ------------- ------------ ------------- Net increase/(decrease) in net assets resulting from operations 26,746,580 19,649,359 20,596,556 9,088,818 ------------ ------------- ------------ ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - - - Net realized gains - - - - ------------ ------------- ------------ ------------- Net decrease from dividends and distributions - - - - ------------ ------------- ------------ ------------- FUND SHARE TRANSACTIONS Shares sold 37,324,181 74,163,195 60,903,552 43,780,341 Reinvested dividends and distributions - - - - Shares repurchased (17,993,650) (65,388,174) (20,648,293) (101,459,945) ------------ ------------- ------------ ------------- Net increase/(decrease) from fund share transactions 19,330,531 8,775,021 40,255,259 (57,679,604) ------------ ------------- ------------ ------------- Total net increase/(decrease) in net assets 46,077,111 28,424,380 60,851,815 (48,590,786) NET ASSETS Beginning of period 150,064,723 121,640,343 55,629,031 104,219,817 ------------ ------------- ------------ ------------- End of period $196,141,834 $150,064,723 $116,480,846 $ 55,629,031 ------------ ------------- ------------ ------------- NET ASSETS CONSIST OF Paid-in capital $165,275,706 $145,945,175 $101,527,758 $ 61,272,499 Accumulated undistributed net investment income/(loss) (418,108) - (95,712) - Accumulated undistributed net realized gain/(loss) from investments (11,375,668) (24,082,954) (12,184,064) (14,024,961) Unrealized appreciation/(depreciation) on securities 42,659,904 28,202,502 27,232,864 8,381,493 ------------ ------------- ------------ ------------- Net Assets $196,141,834 $150,064,723 $116,480,846 $ 55,629,031 ============ ============= ============ ============= TRANSACTIONS IN FUND SHARES Shares sold 2,778,225 7,144,559 3,584,554 3,435,224 Reinvested dividends and distributions - - - - Shares repurchased (1,341,053) (6,440,247) (1,241,749) (8,177,227) ------------ ------------- ------------ ------------- Net increase/(decrease) 1,437,172 704,312 2,342,805 (4,742,003) Shares outstanding beginning of period 12,728,806 12,024,494 4,060,830 8,802,833 ------------ ------------- ------------ ------------- Shares outstanding end of period 14,165,978 12,728,806 6,403,635 4,060,830 ============ ============= ============ ============= PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $114,913,986 $215,314,229 $ 45,950,710 $ 30,459,479 Proceeds from sales of securities 92,193,978 209,236,884 4,906,557 93,961,245
The accompanying notes are an integral part of the financial statements. 56
---------------------------- ---------------------------- ---------------------------- ICON ICON ICON FINANCIAL FUND HEALTHCARE FUND INDUSTRIALS FUND ---------------------------- ---------------------------- ---------------------------- Six Months Six Months Six Months Ended Ended Ended March 31, Year Ended March 31, Year Ended March 31, Year Ended 2004 September 30, 2004 September 30, 2004 September 30, (unaudited) 2003 (unaudited) 2003 (unaudited) 2003 ------------ ------------- ------------ ------------- ------------ ------------- $ 261,487 $ 702,971 $ (1,005,722) $ (1,014,408) $ (407,125) $ (450,789) 15,771,518 557,118 5,861,834 (6,819,268) 3,543,457 (6,100,761) - - - - - - 15,560,534 26,857,798 19,213,193 24,785,530 17,472,962 15,072,214 ------------ ------------- ------------ ------------- ------------ ------------- 31,593,539 28,117,887 24,069,305 16,951,854 20,609,294 8,520,664 ------------ ------------- ------------ ------------- ------------ ------------- (576,093) (399,824) - - - - - - - - - - ------------ ------------- ------------ ------------- ------------ ------------- (576,093) (399,824) - - - - ------------ ------------- ------------ ------------- ------------ ------------- 72,343,585 76,466,734 114,360,121 116,684,705 66,609,068 90,962,271 570,282 392,348 - - - - (61,828,510) (75,431,900) (28,091,806) (85,408,913) (50,494,072) (30,848,064) ------------ ------------- ------------ ------------- ------------ ------------- 11,085,357 1,427,182 86,268,315 31,275,792 16,114,996 60,114,207 ------------ ------------- ------------ ------------- ------------ ------------- 42,102,803 29,145,245 110,337,620 48,227,646 36,724,290 68,634,871 139,261,124 110,115,879 141,258,891 93,031,245 132,554,313 63,919,442 ------------ ------------- ------------ ------------- ------------ ------------- $181,363,927 $139,261,124 $251,596,511 $141,258,891 $169,278,603 $132,554,313 ------------ ------------- ------------ ------------- ------------ ------------- $141,080,005 $129,994,648 $211,179,650 $124,911,335 $163,215,300 $147,100,304 (24,132) 290,474 (1,005,722) - (407,125) - 10,376,806 (5,394,712) (4,023,797) (9,885,631) (26,451,389) (29,994,846) 29,931,248 14,370,714 45,446,380 26,233,187 32,921,817 15,448,855 ------------ ------------- ------------ ------------- ------------ ------------- $181,363,927 $139,261,124 $251,596,511 $141,258,891 $169,278,603 $132,554,313 ============ ============= ============ ============= ============ ============= 5,620,700 8,155,031 8,384,434 10,595,794 6,767,924 10,993,513 47,802 42,462 - - - - (5,012,255) (7,737,576) (2,041,969) (8,078,236) (5,171,305) (3,954,112) ------------ ------------- ------------ ------------- ------------ ------------- 656,247 459,917 6,342,465 2,517,558 1,596,619 7,039,401 12,920,873 12,460,956 11,504,849 8,987,291 15,066,823 8,027,422 ------------ ------------- ------------ ------------- ------------ ------------- 13,577,120 12,920,873 17,847,314 11,504,849 16,663,442 15,066,823 ============ ============= ============ ============= ============ ============= $115,042,476 $188,775,243 $130,626,851 $126,928,736 $ 70,880,813 $119,495,145 103,287,361 184,312,033 45,814,020 99,893,688 51,665,634 64,553,264
57 Statements of Changes in Net Assets (continued)
------------------------------- ------------------------------- ICON INFORMATION ICON LEISURE AND TECHNOLOGY FUND CONSUMER STAPLES FUND ------------------------------- ------------------------------- Six Months Six Months Ended Ended March 31, Year Ended March 31, Year Ended 2004 September 30, 2004 September 30, (unaudited) 2003 (unaudited) 2003 ------------ ------------- ------------ ------------- OPERATIONS Net investment income/(loss) $ (1,377,440) $ (2,215,300) $ (94,693) $ (412,917) Net realized gain/(loss) from investment transactions 49,285,173 3,753,887 6,791,225 (1,107,203) Net realized gain/(loss) from foreign currency translations - - - - Change in unrealized appreciation/(depreciation) on securities and foreign currency translations (26,657,046) 69,595,068 9,718,069 9,588,234 ------------ ------------- ------------ ------------- Net increase/(decrease) in net assets resulting from operations 21,250,687 71,133,655 16,414,601 8,068,114 ------------ ------------- ------------ ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - - - Net realized gains - - - - ------------ ------------- ------------ ------------- Net decrease from dividends and distribution - - - - ------------ ------------- ------------ ------------- FUND SHARE TRANSACTIONS Shares sold 91,985,569 267,777,926 21,460,972 39,239,478 Reinvested dividends and distributions - - - - Shares repurchased (99,035,153) (106,562,014) (11,024,218) (53,301,166) ------------ ------------- ------------ ------------- Net increase/(decrease) from fund share transactions (7,049,584) 161,215,912 10,436,754 (14,061,688) ------------ ------------- ------------ ------------- Total net increase/(decrease) in net assets 14,201,103 232,349,567 26,851,355 (5,993,574) NET ASSETS Beginning of period 307,972,490 75,622,923 82,347,313 88,340,887 ------------ ------------- ------------ ------------- End of period $322,173,593 $ 307,972,490 $109,198,668 $ 82,347,313 ------------ ------------- ------------ ------------- NET ASSETS CONSIST OF Paid-in capital $335,070,478 $ 342,120,062 $ 82,801,094 $ 72,364,340 Accumulated undistributed net investment income/(loss) (1,377,440) - (94,693) - Accumulated undistributed net realized gain/(loss) from investments (46,162,885) (95,448,058) 5,317,312 (1,473,913) Unrealized appreciation/(depreciation) on securities 34,643,440 61,300,486 21,174,955 11,456,886 ------------ ------------- ------------ ------------- Net Assets $322,173,593 $ 307,972,490 $109,198,668 $ 82,347,313 ============ ============= ============ ============= TRANSACTIONS IN FUND SHARES Shares sold 10,290,442 39,746,545 1,524,493 3,467,652 Reinvested dividends and distributions - - - - Shares repurchased (11,035,312) (15,146,622) (791,202) (4,724,938) ------------ ------------- ------------ ------------- Net increase/(decrease) (744,870) 24,599,923 733,291 (1,257,286) Shares outstanding beginning of period 37,238,836 12,638,913 6,632,517 7,889,803 ------------ ------------- ------------ ------------- Shares outstanding end of period 36,493,966 37,238,836 7,365,808 6,632,517 ============ ============= ============ ============= PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $345,888,366 $ 453,451,611 $ 67,604,745 $112,992,030 Proceeds from sales of securities 354,097,567 293,739,149 57,742,028 125,691,402 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. 58
---------------------------- --------------------------- --------------------------- ICON ICON TELECOMMUNICATION & ICON SHORT-TERM MATERIALS FUND UTILITIES FUND FIXED INCOME FUND ---------------------------- --------------------------- --------------------------- Six Months Six Months Six Months Ended Ended Ended March 31, Year Ended March 31, Year Ended March 31, Year Ended 2004 September 30, 2004 September 30, 2004 September 30, (unaudited) 2003 (unaudited) 2003 (unaudited) 2003 ------------ ------------- ----------- ------------- ----------- ------------- $ (36,138) $ 236,659 $ 78,129 $ 1,088,542 $ 21,227 $ 19,354 1,179,344 (3,456,930) 2,567,494 (2,316,365) - - - - - - - - 8,807,441 5,930,581 6,534,550 9,090,560 (20,251) (23,336) ------------ ------------- ----------- ------------- ----------- ------------- 9,950,647 2,710,310 9,180,173 7,862,737 976 (3,982) ------------ ------------- ----------- ------------- ----------- ------------- (198,911) (93,225) (559,797) (888,104) (21,227) (20,760) - - - - - - ------------ ------------- ----------- ------------- ----------- ------------- (198,911) (93,225) (559,797) (888,104) (21,227) (20,760) ------------ ------------- ----------- ------------- ----------- ------------- 28,063,439 14,151,946 15,117,340 28,972,038 4,578,339 23,499,482 198,136 92,665 557,773 886,340 20,653 20,010 (11,715,905) (45,505,812) (7,504,922) (60,690,304) (5,599,024) (24,993,710) ------------ ------------- ----------- ------------- ----------- ------------- 16,545,670 (31,261,201) 8,170,191 (30,831,926) (1,000,032) (1,474,218) ------------ ------------- ----------- ------------- ----------- ------------- 26,297,406 (28,644,116) 16,790,567 (23,857,293) (1,020,283) (1,498,960) 30,376,251 59,020,367 42,509,194 66,366,487 6,166,005 7,664,965 ------------ ------------- ----------- ------------- ----------- ------------- $ 56,673,657 $ 30,376,251 $59,299,761 $ 42,509,194 $ 5,145,722 $ 6,166,005 ------------ ------------- ----------- ------------- ----------- ------------- $ 65,826,234 $ 49,280,564 $52,832,065 $ 44,661,874 $ 5,144,376 $ 6,144,408 (57,028) 178,021 78,134 559,802 (117) (117) (19,937,865) (21,117,209) (6,170,987) (8,738,481) (3,820) (3,820) 10,842,316 2,034,875 12,560,549 6,025,999 5,283 25,534 ------------ ------------- ----------- ------------- ----------- ------------- $ 56,673,657 $ 30,376,251 $59,299,761 $ 42,509,194 $ 5,145,722 $ 6,166,005 ============ ============= =========== ============= =========== ============= 3,671,703 2,446,314 2,411,724 5,787,036 503,966 2,570,121 26,174 15,406 94,538 174,133 2,269 2,181 (1,536,700) (7,953,735) (1,213,750) (12,373,258) (614,999) (2,733,550) ------------ ------------- ----------- ------------- ----------- ------------- 2,161,177 (5,492,015) 1,292,512 (6,412,089) (108,764) (161,248) 4,895,495 10,387,510 7,476,448 13,888,537 675,595 836,843 ------------ ------------- ----------- ------------- ----------- ------------- 7,056,672 4,895,495 8,768,960 7,476,448 566,831 675,595 ============ ============= =========== ============= =========== ============= $ 43,236,665 $ 52,868,818 $31,045,022 $ 83,676,470 $ - $ - 27,083,366 80,253,664 23,394,101 114,328,699 - - - - - - - 1,005,625 - - - - - -
59 Financial Highlights
---------------------------------------------------------------------------- ICON CONSUMER DISCRETIONARY FUND ---------------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period $ 11.79 $ 10.12 $ 8.96 $ 9.23 $ 9.67 $ 7.87 ----------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.03) (0.08) (0.06) (0.01) (0.02) - Net realized and unrealized gains/(losses) on investments 2.09 1.75 1.22 (0.26) (0.42) 2.04 ----------- --------- --------- --------- --------- --------- Total from investment operations 2.06 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 $ 13.85 $ 11.79 $ 10.12 $ 8.96 $ 9.23 $ 9.67 =========== ========= ========= ========= ========= ========= Total return 17.47% 16.50% 12.95% (2.93)% (4.55)% 25.78% Net assets, end of period (in thousands) $196,142 $150,065 $121,640 $107,075 $40,894 $54,351 Average net assets for the period (in thousands) 180,036 118,834 184,174 78,281 46,246 58,294 Ratio of expenses to average net assets* 1.30% 1.40% 1.29% 1.37% 1.35% 1.35% Ratio of net investment income/(loss) to average net assets* (0.46)% (0.79)% (0.49)% (0.10)% (0.27)% (0.46)% Portfolio turnover rate 51.58% 174.51% 128.06% 88.20% 88.44% 27.83%
(x) Calculated using the average share method * Annualized for periods less than one year The accompanying notes are an integral part of the financial statements. 60
----------------------------------------------------------------------- ICON ENERGY FUND ----------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- $ 13.70 $ 11.84 $ 11.29 $ 13.19 $ 7.98 $ 6.35 ----------- --------- --------- --------- --------- --------- (0.02) (0.04) (0.08) 0.07 0.04 0.01 4.51 1.90 0.65 (0.76) 5.17 1.69 ----------- --------- --------- --------- --------- --------- 4.49 1.86 0.57 (0.69) 5.21 1.70 ----------- --------- --------- --------- --------- --------- - - (0.02) (0.09) - (0.07) - - - (1.12) - - ----------- --------- --------- --------- --------- --------- - - (0.02) (1.21) - (0.07) ----------- --------- --------- --------- --------- --------- $ 18.19 $ 13.70 $ 11.84 $ 11.29 $ 13.19 $ 7.98 =========== ========= ========= ========= ========= ========= 32.77% 15.71% 5.03% (6.53)% 65.29% 27.28% $116,481 $55,629 $104,220 $36,945 $44,294 $19,230 79,936 74,883 71,434 49,195 29,564 13,801 1.35% 1.40% 1.35% 1.39% 1.36% 1.45% (0.24)% (0.29)% (0.61)% 0.54% 0.43% (0.26)% 6.61% 42.53% 26.30% 134.77% 123.70% 34.41%
61 Financial Highlights
------------------------------------------------------------------------------- ICON FINANCIAL FUND ------------------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period $ 10.78 $ 8.84 $ 12.04 $ 12.26 $ 8.99 $ 9.37 ----------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.02 0.05 (0.01) 0.06 0.11 0.02 Net realized and unrealized gains/(losses) on investments 2.62 1.92 (1.08) 1.13 3.28 1.05 ----------- --------- --------- --------- --------- --------- Total from investment operations 2.64 1.97 (1.09) 1.19 3.39 1.07 ----------- --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.06) (0.03) - (1.41) (0.12) (0.06) Distributions from net realized gains - - (2.11) - - (1.39) ----------- --------- --------- --------- --------- --------- Total distributions (0.06) (0.03) (2.11) (1.41) (0.12) (1.45) ----------- --------- --------- --------- --------- --------- Net asset value, end of period $ 13.36 $ 10.78 $ 8.84 $ 12.04 $ 12.26 $ 8.99 =========== ========= ========= ========= ========= ========= Total return 24.53% 22.35% (11.88)% 9.57% 38.14% 10.05% Net assets, end of period (in thousands) $181,364 $139,261 $110,116 $54,318 $100,404 $ 5,483 Average net assets for the period (in thousands) 144,578 131,042 60,904 59,425 43,690 10,415 Ratio of expenses to average net assets* 1.33% 1.34% 1.36% 1.41% 1.33% 1.58% Ratio of net investment income/(loss) to average net assets* 0.36% 0.54% (0.06)% 0.51% 1.14% 0.09% Portfolio turnover rate 69.60% 142.77% 69.58% 174.41% 28.99% 53.29%
(x) Calculated using the average share method * Annualized for periods less than one year The accompanying notes are an integral part of the financial statements. 62
----------------------------------------------------------------------- ICON HEALTHCARE FUND ----------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- $ 12.28 $ 10.35 $ 11.57 $ 11.93 $ 7.98 $ 11.39 ----------- --------- --------- --------- --------- --------- (0.07) (0.09) (0.12) (0.10) (0.08) - 1.89 2.02 (0.49) 0.51 4.34 (0.25) ----------- --------- --------- --------- --------- --------- 1.82 1.93 (0.61) 0.41 4.26 (0.25) ----------- --------- --------- --------- --------- --------- - - - - - - - - (0.56) (0.77) (0.31) (3.16) ----------- --------- --------- --------- --------- --------- - - (0.61) (0.77) (0.31) (3.16) ----------- --------- --------- --------- --------- --------- $ 14.10 $ 12.28 $ 10.35 $ 11.57 $ 11.93 $ 7.98 =========== ========= ========= ========= ========= ========= 14.82% 18.65% (5.63)% 3.39% 55.35% (5.34)% $251,597 $141,259 $93,031 $33,646 $49,066 $24,550 207,433 120,068 44,042 35,981 38,688 29,272 1.29% 1.34% 1.39% 1.45% 1.38% 1.40% (0.97)% (0.84)% (1.05)% (0.98)% (0.74)% (0.83)% 23.08% 85.52% 104.90% 145.08% 115.05% 85.99%
63 Financial Highlights
---------------------------------------------------------------------------- ICON INDUSTRIALS FUND ---------------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period $ 8.80 $ 7.96 $ 8.55 $ 9.07 $ 10.31 $ 9.45 ----------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.02) (0.05) (0.02) (0.02) 0.03 0.01 Net realized and unrealized gains/(losses) on investments 1.38 0.89 (0.57) (0.48) (0.47) 1.63 ----------- --------- --------- --------- --------- --------- Total from investment operations 1.36 0.84 (0.59) (0.50) (0.44) 1.64 ----------- --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - (0.02) - (0.02) Distributions from net realized gains - - - - (0.80) (0.76) ----------- --------- --------- --------- --------- --------- Total distributions - - - (0.02) (0.80) (0.78) ----------- --------- --------- --------- --------- --------- Net asset value, end of period $ 10.16 $ 8.80 $ 7.96 $ 8.55 $ 9.07 $ 10.31 =========== ========= ========= ========= ========= ========= Total return 15.45% 10.55% (6.90)% (5.55)% (4.32)% 16.89% Net assets, end of period (in thousands) $169,279 $132,554 $ 63,919 $76,325 $22,068 $21,004 Average net assets for the period (in thousands) 177,125 70,382 107,335 55,928 21,220 24,387 Ratio of expenses to average net assets* 1.28% 1.43% 1.30% 1.38% 1.38% 1.41% Ratio of net investment income/(loss) to average net assets* (0.46)% (0.64)% (0.24)% (0.16)% 0.34% 0.10% Portfolio turnover rate 31.00% 90.49% 99.22% 72.65% 72.90% 47.97%
(x) Calculated using the average share method * Annualized for periods less than one year The accompanying notes are an integral part of the financial statements. 64
----------------------------------------------------------------------- ICON INFORMATION TECHNOLOGY FUND ----------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- $ 8.27 $ 5.98 $ 7.80 $ 22.13 $ 19.00 $ 9.20 ----------- --------- --------- --------- --------- --------- (0.04) (0.08) (0.10) (0.10) (0.05) - 0.60 2.37 (1.72) (4.03) 9.62 10.58 ----------- --------- --------- --------- --------- --------- 0.56 2.29 (1.82) (4.13) 9.57 10.58 ----------- --------- --------- --------- --------- --------- - - - - - - - - - (10.20) (6.44) (0.78) ----------- --------- --------- --------- --------- --------- - - - (10.20) (6.44) (0.78) ----------- --------- --------- --------- --------- --------- $ 8.83 $ 8.27 $ 5.98 $ 7.80 $ 22.13 $ 19.00 =========== ========= ========= ========= ========= ========= 6.77% 38.29% (23.33)% (32.90)% 59.24% 119.53% $322,174 $307,972 $ 75,623 $118,851 $46,689 $55,126 326,670 190,287 189,972 99,875 56,279 66,977 1.28% 1.35% 1.31% 1.37% 1.35% 1.37% (0.84)% (1.16)% (1.09)% (0.90)% (0.23)% (1.06)% 105.52% 155.39% 190.09% 70.32% 137.69% 31.75%
65 Financial Highlights
---------------------------------------------------------------------------- ICON LEISURE AND CONSUMER STAPLES FUND ---------------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period $ 12.42 $ 11.20 $ 9.42 $ 9.24 $ 12.05 $ 11.79 ----------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.01) (0.06) (0.07) (0.05) 0.01 0.10 Net realized and unrealized gains/(losses) on investments 2.42 1.28 1.85 0.26 0.25 1.61 ----------- --------- --------- --------- --------- --------- Total from investment operations 2.41 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 $ 14.83 $ 12.42 $ 11.20 $ 9.42 $ 9.24 $ 12.05 =========== ========= ========= ========= ========= ========= Total return 19.40% 10.89% 18.90% 2.26% 5.27% 14.76% Net assets, end of period (in thousands) $109,199 $82,347 $88,341 $41,162 $ 7,765 $31,559 Average net assets for the period (in thousands) 96,205 80,928 86,202 41,086 18,029 40,054 Ratio of expenses to average net assets* 1.32% 1.38% 1.34% 1.40% 1.51% 1.38% Ratio of net investment income/(loss) to average net assets* (0.20)% (0.51)% (0.55)% (0.50)% 0.13% (0.12)% Portfolio turnover rate 60.41% 139.54% 90.43% 148.23% 24.50% 49.22%
(x) Calculated using the average share method * Annualized for periods less than one year The accompanying notes are an integral part of the financial statements. 66
----------------------------------------------------------------------- ICON MATERIALS FUND ----------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- $ 6.20 $ 5.68 $ 5.70 $ 6.49 $ 7.31 $ 6.58 ----------- --------- --------- --------- --------- --------- (0.01) 0.03 0.02 0.02 0.03 0.02 1.87 0.50 (0.01) (0.74) (0.85) 0.74 ----------- --------- --------- --------- --------- --------- 1.86 0.53 0.01 (0.72) (0.82) 0.76 ----------- --------- --------- --------- --------- --------- (0.03) (0.01) (0.03) (0.07) - (0.03) - - - - - - ----------- --------- --------- --------- --------- --------- (0.03) (0.01) (0.03) (0.07) - (0.03) ----------- --------- --------- --------- --------- --------- $ 8.03 $ 6.20 $ 5.68 $ 5.70 $ 6.49 $ 7.31 =========== ========= ========= ========= ========= ========= 30.09% 9.36% 0.06% (11.07)% (11.22)% 11.65% $56,674 $30,376 $59,020 $29,200 $18,162 $26,373 45,544 40,156 45,917 24,544 23,620 17,145 1.39% 1.47% 1.36% 1.47% 1.41% 1.45% (0.16)% 0.59% 0.23% 0.40% 0.42% 0.16% 60.58% 130.01% 74.55% 91.28% 91.76% 118.29%
67 Financial Highlights
---------------------------------------------------------------------------- ICON TELECOMMUNICATION & UTILITIES FUND ---------------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period $ 5.69 $ 4.78 $ 6.19 $ 8.13 $10.04 $14.17 ----------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.01 0.10 0.10 0.09 0.20 0.83 Net realized and unrealized gains/(losses) on investments 1.13 0.87 (1.45) (1.52) 0.99 1.18 ----------- --------- --------- --------- --------- --------- Total from investment operations 1.14 0.97 (1.35) (1.43) 1.19 2.01 ----------- --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.07) (0.06) (0.06) (0.11) (0.16) (1.02) Distributions from net realized gains - - - (0.40) (2.94) (5.12) ----------- --------- --------- --------- --------- --------- Total distributions (0.07) (0.06) (0.06) (0.51) (3.10) (6.14) ----------- --------- --------- --------- --------- --------- Net asset value, end of period $ 6.76 $ 5.69 $ 4.78 $ 6.19 $ 8.13 $10.04 =========== ========= ========= ========= ========= ========= Total return 20.24% 20.36% (22.05)% (18.74)% 14.99% 15.25% Net assets, end of period (in thousands) $59,300 $42,509 $66,366 $16,537 $8,619 $7,129 Average net assets for the period (in thousands) 51,154 53,219 20,196 13,554 7,231 9,825 Ratio of expenses to average net assets* 1.37% 1.41% 1.50% 1.54% 1.53% 1.59% Ratio of net investment income/(loss) to average net assets* 0.30% 2.05% 1.78% 1.22% 2.43% 1.84% Portfolio turnover rate 46.13% 158.24% 137.81% 46.10% 41.86% 18.85%
(x) Calculated using the average share method * Annualized for periods less than one year ++ 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 1.70% for the six months ended March 31, 2004, 1.43% in 2003 and 1.41% in 2002 the ratio of net investment income to average net assets would have been 0.36% for the six months ended March 31, 2004, 0.26% in 2003 and 0.58% in 2002. (See note 4) The accompanying notes are an integral part of the financial statements. 68
----------------------------------------------------------------------- ICON SHORT-TERM FIXED INCOME FUND ----------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- $ 9.13 $ 9.16 $ 9.14 $ 9.14 $ 9.15 $ 9.79 ----------- --------- --------- --------- --------- --------- 0.05 0.02 0.05 0.26 0.39 0.43 (0.05) (0.02) (0.00) 0.02 0.02 (0.12) ----------- --------- --------- --------- --------- --------- - - 0.05 0.28 0.41 0.31 ----------- --------- --------- --------- --------- --------- (0.05) (0.03) (0.03) (0.28) (0.39) (0.65) - - - - (0.03) (0.30) ----------- --------- --------- --------- --------- --------- (0.05) (0.03) (0.03) (0.28) (0.42) (0.95) ----------- --------- --------- --------- --------- --------- $ 9.08 $ 9.13 $ 9.16 $ 9.14 $ 9.14 $ 9.15 =========== ========= ========= ========= ========= ========= (0.03)% (0.02)% 0.96% 3.15% 4.45% 3.54% $5,146 $6,166 $7,665 $20,338 $5,386 $5,111 4,250 7,255 7,643 6,276 5,367 4,658 1.07%+ 1.42%+ 1.35%+ 1.52% 1.52% 1.06%++ 1.00%+ 0.27%+ 0.52%+ 2.85% 4.16% 4.42%++ 0.00% 0.00% 0.00% 0.00% 53.26% 53.22%
69 Notes to Financial Statements MARCH 31, 2004 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Consumer Discretionary Fund ("Consumer Discretionary Fund"), ICON Energy Fund ("Energy Fund"), ICON Financial Fund ("Financial Fund"), ICON Healthcare Fund ("Healthcare Fund"), ICON Industrials Fund ("Industrials Fund"), ICON Information Technology Fund ("Information Technology Fund"), ICON Leisure and Consumer Staples Fund ("Leisure and Consumer Staples Fund"), ICON Materials Fund ("Materials Fund"), ICON Telecommunication & Utilities Fund ("Telecomm & Utilities Fund"), (collectively, the "Sector 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 registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment management company. There are eight other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. The Sector 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 Sector 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. There is no assurance that the investment process will consistently lead to successful results. An investment in a non-diversified sector fund may involve greater risk and volatility than a diversified fund. Investments in foreign securities 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. 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 "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by a Fund at the NASDAQ Official Closing Price provided by NASDAQ each business day. The Funds use pricing services to determine the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board of Trustees ("Board") or pursuant to procedures approved by the Board. Any foreign investments in the Funds traded in countries outside of the Western Hemisphere are fair valued daily based on procedures established by the Funds' Board to avoid stale prices and to take into account, among other things, any significant events occurring after the close of a foreign market in those regions. The valuation assigned to fair- valued securities for purposes of calculating a Fund's NAV may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. 70 A security listed or traded primarily on a securities exchange or in the over-the-counter market is generally valued at its last sale price on the exchange or market where it is principally traded, except that securities primarily traded on NASDAQ are normally valued at the NASDAQ Official Closing Price. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the sum of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than sixty days are valued in accordance with the evaluated bid price supplied by the pricing service. Short-term securities with remaining maturities of sixty days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. London closing 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. No repurchase agreements were purchased or sold by the Funds during the semiannual period ended March 31, 2004. 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 Sector 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. 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. 71 Notes to Financial Statements (continued) 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. 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. Expenses. Expenses which cannot be directly attributed to a specific fund in the Trust are apportioned between all funds based upon relative net assets. 72 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Investment Advisory Fees. ICON Advisers, Inc. ("ICON") (formerly Meridian Investment Management Corporation) serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 1.00% of the Sector Funds' average daily net assets and 0.65% of the Short-Term Fixed Income Fund's average daily net assets. For the period December 1, 2003 through September 30, 2005, ICON has contractually agreed to limit its investment advisory fee and/or reimburse the operating expenses of the Short-Term Fixed Income Fund (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that the Funds' operating expenses do not exceed 0.75%. To the extent ICON reimburses or absorbs fees and expenses, it may seek payment of such amounts for up to three years after the expenses were reimbursed or absorbed. The Short-Term Fixed Income 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 six-month period ended March 31, 2004, ICON reimbursed/absorbed $13,630 on shares of the Short-Term Fixed Income Fund. These expenses are subject to recovery by ICON based on a rolling three-year period. 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 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 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. 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. Administrative Services. The Trust has entered into an administrative services agreement with ICON. This agreement provides for an annual fee of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. Related Parties. Certain officers and directors of ICON 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. 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. 73 Notes to Financial Statements (continued)
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 (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
The difference between book and tax net appreciation and depreciation of investments is wash sale loss deferrals and corporate actions. The Financial Fund and the Materials Fund had significant wash sale deferrals of $2,186,843 and $321,830, respectively. The aggregate composition by Fund of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2003 is as follows:
UNREALIZED UNREALIZED NET APPRECIATION FEDERAL TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ICON Consumer Discretionary Fund $155,400,748 $45,550,943 $ (2,891,039) $42,659,904 ICON Energy Fund 92,956,272 27,976,437 (743,573) 27,232,864 ICON Financial Fund 151,789,077 30,632,347 (701,099) 29,931,248 ICON Healthcare Fund 214,614,723 49,286,295 (3,839,915) 45,446,380 ICON Industrials Fund 136,021,438 35,537,479 (2,615,662) 32,921,817 ICON Information Technology Fund 288,265,067 45,425,871 (10,782,431) 34,643,440 ICON Leisure and Consumer Staples Fund 89,995,984 22,782,049 (1,607,094) 21,174,955 ICON Materials Fund 45,584,258 11,787,283 (944,967) 10,842,316 ICON Telecommunication & Utilities Fund 46,456,893 13,611,170 (1,050,621) 12,560,549 ICON Short-Term Fixed Income Fund 5,436,016 5,907 (624) 5,283
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. 74 [ICON FUNDS LOGO] FOR MORE INFORMATION ABOUT THE ICON FUNDS, CONTACT US: By Telephone 1-800-764-0442 By Mail ICON Funds P.O. Box 701 Milwaukee, WI 53201-0701 In Person ICON Funds 5299 DTC Boulevard, 12th Floor Greenwood Village, CO 80111 By E-Mail info@iconadvisers.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. Consider the investment objectives, risks, charges, expenses and share classes of each ICON Fund carefully before investing. The prospectus contains this and other information about the Funds and is available by visiting www.iconfunds.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor I-132-SEC ICSECSEMI - -------------------------------------------------------------------------------- March 31, 2004 Investment Update ICON FOREIGN FUNDS Semiannual Report [ICON FUNDS LOGO] Table of Contents
ABOUT THIS REPORT ............................................2 MESSAGE FROM ICON FUNDS ............................................4 MANAGEMENT OVERVIEWS AND SCHEDULES OF INVESTMENTS ............................................6 ICON Asia-Pacific Region Fund ............................................6 ICON Europe Fund ...........................................12 ICON International Equity Fund ...........................................18 FINANCIAL STATEMENTS ...........................................25 FINANCIAL HIGHLIGHTS ...........................................30 NOTES TO FINANCIAL STATEMENTS ...........................................33
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. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconfunds.com for performance results current to the most recent month-end. - -------------------------------------------------------------------------------- PORTFOLIO DATA - -------------------------------------------------------------------------------- Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's percentage holdings as of March 31, 2004 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology does not consider company-specific factors beyond financial data, 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. There is no assurance that the investment process will consistently lead to successful results. Investments in foreign securities may entail unique risks, including political, market and currency risks. An investment in a region fund may involve greater risk and volatility than a diversified fund. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. 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 an index. - - The unmanaged Morgan Stanley Capital International (MSCI) Europe 15 Index comprises approximately 600 stocks traded in developed markets from 15 European countries. The capitalization-weighted index attempts to capture at least 60% of investable capitalization in those markets subject to constraints governed by industry representation, maximum liquidity, maximum float, and minimum cross-ownership. - - The unmanaged MSCI All Country Pacific Free Index comprises stocks traded in the developed and emerging markets of the Pacific Basin (Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand). The capitalization-weighted index attempts to capture at least 60% of investable capitalization in those markets subject to constraints governed by industry representation, maximum liquidity, maximum float, and minimum cross-ownership. - - The MSCI All Country World Index Free ex-United States (ACWI Free ex-U.S.) is a leading unmanaged benchmark of international stock performance. The capitalization-weighted index is representative of the performance of securities of companies located in developed and emerging markets outside of the United States. - - The unmanaged Bloomberg European 500 Index measures the weighted average performance in U.S. dollars of the 500 most highly capitalized European companies. Index returns and statistical data included in this report are provided by Bloomberg and FactSet. 3 Message from ICON Funds - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: [PHOTO] - -------------------------------------------------------------------------------- Last November, I found myself in a somewhat heated TV debate in which I contended that the then eight-month rally in stock prices still had further upside. In taking this decidedly bullish stance, I based my position on the fact that the stocks in the ICON domestic database were priced on average about 15% below our estimate of fair value, and that we expected them to continue in their upward march. Meanwhile my opponent, a respected money manager, voiced a more pessimistic outlook. Armed with a host of fear-based objections, including overheated price/earnings ratios, rising interest rates and sluggish job growth, his intuitive arguments supporting a precipitous decline undoubtedly proved convincing to many investors. Except that he was wrong. THE PRODUCT OF FAULTY REASONING Through mid-March 2004, stocks did in fact continue their move toward fair value, despite these and other concerns. Although Wall Street has been known to climb a wall of worry, the skepticism and doubt expressed by some investors during the advance was likely the product of faulty reasoning. Let's explore some common investor misperceptions: - - STOCKS ARE OVERPRICED BASED ON P/E. Price/earnings ratio is a simplistic measure that fails to consider the impact of interest rates, a key component in calculating the present value of any asset. Value, of course, is not stagnant and can increase or decrease depending on the current interest rate environment. In the current low interest rate setting, we believe it makes sense that stock prices would be higher relative to earnings. Our valuation model considers earnings estimates, but expands beyond this one-dimensional statistic. - - INTEREST RATES WILL HAVE TO RISE. There appears to be a consensus among market observers that short-term interest rates will move higher as the economic recovery gains traction, pressuring earnings and consequently stock prices. The fact is short-term rates play a limited role in our system, which emphasizes the AAA long-term bond yield in its assessment of valuation. With long-term rates experiencing a 20-year secular decline, we find it counterproductive to predict the impact of an increase. That being said, we do not currently see any force capable of reversing this downward trend. - - SLOWER U.S. CONSUMER SPENDING WILL HURT THE GLOBAL ECONOMY. Consumer spending in the U.S. continues to accelerate and is the primary driver of sustainable economic growth. However, recent developments suggest there's more to the global economy than just the U.S. consumer. Japan appears to be in the midst of an internal recovery, while China's expansion remains robust. Europe is holding steady despite headwinds created by currency gains as structural reforms begin to stimulate improvements. FAVORING CYCLICAL INDUSTRIES Naturally, as evidenced by the market dip in mid-March 2004, it is quite normal for news events to distract investors and interrupt the path back toward fair value. Nevertheless, we remain bullish and believe stock prices are positioned to resume their value-driven advance. Our valuation model suggests that stocks continue to be priced at discounts relative to intrinsic value, and that market action late in the period was merely a temporary setback. [SIDENOTE] Intuitive arguments supporting a decline undoubtedly proved convincing. Except that they were wrong. [SIDENOTE] We remain bullish and believe stock prices are positioned to resume their value-driven advance. 4 This interruption, however, was not without its impact. Since late January 2004, market leadership has lacked a common theme, as top-performing cyclical and economically sensitive sectors such as technology, consumer discretionary, industrials, and materials turned increasingly volatile. At the same time, defensive groups such as healthcare, utilities and consumer staples demonstrated strength amid market pullbacks. We don't expect an economic boom; we think the economic environment is healthy. Nor do we believe the market needs a big news event to be propelled forward. Despite these seemingly short-lived theme reversals, we think it best to continue favoring underpriced cyclical industries, and ride through the occasional turbulence. A HIGH DEGREE OF GLOBAL CORRELATION Overseas markets were highly correlated during the period with sector and industry moves mirroring those that demonstrated cyclical leadership within the United States. However, having begun the period trading at relatively deeper discounts to U.S. stocks, foreign issues on the whole outperformed the broader domestic markets. Bolstered by a higher concentration of leading global industries in Asia-Pacific markets and currency gains versus the U.S. dollar in European markets, foreign markets closed a considerably wider valuation gap. As international markets have matured and technology has advanced, we have become more cognizant of industry and sector themes that cut across country borders. To that end, we modified the investment strategy of our foreign funds to allow for rotation among these leading sectors and industries, replacing their prior focus, which emphasized country rotation. In doing so, we can implement our valuation methodology on a broader scale. A NEW NAME Effective January 2004, Meridian Investment Management Corporation, adviser to the ICON Funds, changed its name to ICON Advisers, Inc. More than just a name change, we believe it represents an opportunity for our advisory firm to introduce our story to a wider audience. The name involves many strategic marketing and communications initiatives, including a new website for shareholders like you and financial advisers, which we plan to launch this summer. In closing, we once again experienced a market that defies conventional wisdom. ICON thanks you for the opportunity to help guide you through it. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and Chief Investment Officer of the Adviser [SIDENOTE] Despite short-lived theme reversals and temporary setbacks, our valuation model suggests stocks are still priced below intrinsic value. 5 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 18.56% for the fiscal half-year ended March 31, 2004, falling short of its benchmark, the MSCI All Country Pacific Index, which returned 24.23% over the same period. Total returns for other periods as of March 31, 2004 are listed on page 9. Although Asian markets reflected the same cyclically driven advance that bolstered U.S. stocks during the period, the Fund's relative performance suffered due to disparities in sector and industry allocation versus the benchmark. However, with Asian shares trading at deeper relative discounts, in part because of exceedingly low interest rates throughout the region, they closed a much wider valuation gap and outperformed the broad U.S. market by a considerable margin. The Fund is managed using an all-cap strategy, meaning we invest in Asia-Pacific securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. The Fund's growth orientation during the period, as measured on a price-to-earnings (P/E) basis, hindered performance. For the record, the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? While our system continued to support the recovery-based theme and its early-period gains, geopolitical tensions and world unrest exacerbated a latter-period correction in which cyclical industries surrendered leadership to more defensive groups. Having viewed these sporadic reversals as temporary, the Fund capitalized on opportunities to purchase underpriced cyclical industries on the belief that they would retain leadership given sustainable improvements in global economic conditions. Asia, more so than other regions, demonstrated robust improvements, as Japan showed clear signs of internal recovery, having made significant headway in attempts to restore its debt-burdened banking system. South Korea emerged from a brief recession, as strong exports and stabilizing credit fundamentals allowed it to weather a series of domestic and external shocks. Asia's real strength, however, continued to be exemplified by torrid growth in China, which, despite fears of overheating, rapidly established the country as an economic powerhouse. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? An underweight position in the Financials sector, specifically within diversified banks, worked against relative Fund performance during the period. On a company-specific level, lack of exposure to banking giants Mitsubishi Financial Group and Mizuho Financial Group, neither of which displayed the value characteristics we seek, proved detrimental as those stocks rebounded strongly on the improving health of Japan's banking system. Meanwhile, overweight exposure to the Industrials and Materials sectors contributed positively, largely on the rapid pace of infrastructure growth in China. [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 100.0% Top 10 Equity Holdings 28.2% Number of Stocks 61 Cash Equivalents 0.2% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Jiangxi Copper Company Ltd. 3.7% Sumitomo Metal Mining Co., Ltd. 3.2% Kawasaki Kisen Kaisha, Ltd. 2.9% Zhejiang Expressway Co., Ltd. 2.9% Denway Motors Limited 2.7% Hopewell Holdings Limited 2.7% Fuji Soft ABC Incorporated 2.6% Nippon Light Metal Company, Ltd. 2.6% Sumitomo Heavy Industries, Ltd. 2.5% China Merchants Holdings International Company Limited 2.4% Percentages are based upon net assets. 6 Among the Fund's measurable individual contributors, copper producer Jiangxi Copper Co. benefited from China's hearty appetite for commodities, even as the company continued to trade below our fair value estimates. Denway Motors Ltd. also advanced on the significant consumer demand and rising car sales in Hong Kong. Fund returns were hampered by positions in Olympus Corp., which exhibited deteriorating relative strength and was sold when the Fund's Healthcare position was trimmed. Alps Electric Co., Ltd. also suffered from weakening relative strength and was sold when we pared the Fund's weighting in the Technology sector. The proceeds from these liquidations were reallocated to Industrials and Materials positions, which showed more value. WHAT IS THE INVESTMENT OUTLOOK FOR THE ASIA-PACIFIC REGION? Looking ahead, we continue to see increased global correlation among industry themes, and will remain focused on seeking out market leadership within the Asia-Pacific Region regardless of country origin or benchmark allocations. Valuation and relative strength have combined to create compelling buying opportunities in the Financials sector, particularly within diversified banks and real estate investment trusts. Although we see ongoing leadership in the heavily weighted Industrials and Materials sectors, we are less optimistic about the Technology sector. In light of this, we continue to look for industries in the region that are exhibiting relative strength and trading below our estimates of fair value. 7 Management Overview (continued) ICON ASIA-PACIFIC REGION FUND - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Our valuation methods led us to overweight small- and mid-capitalization companies in the region, which produced mixed results. - - Among the Fund's strongest-performing holdings during the period were Jiangxi Copper Co. Corp. and Denway Motors Ltd. - - Our methodology led us to hold a significant position in the Industrials and Materials sectors, and the Fund's holdings in these sectors performed strongly relative to the Index. - - An underweight position in Japan, which comprises a large part of the Index, hampered performance. - - On an industry level, strong stock selection in automobile manufacturers boosted Fund performance. - -------------------------------------------------------------------------------- COUNTRY ALLOCATION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Japan 36.6% Hong Kong 34.0% Malaysia 8.9% South Korea 8.3% Australia 7.6% Singapore 4.6%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- SECTOR COMPOSITION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Industrials 28.9% Materials 23.3% Financial 15.1% Information Technology 11.8% Consumer Discretionary 10.3% Leisure and Consumer Staples 5.0% Telecommunication & Utilities 3.5% Energy 1.5% Health Care 0.6%
Percentages are based upon net assets. 8 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 2/25/97 - ------------------------------------------------------------------------------------------ ICON Asia-Pacific Region Fund 18.56% 56.30% 1.13% -1.37% - ------------------------------------------------------------------------------------------ MSCI All Country Pacific Index 24.23% 67.67% 3.07% 0.03% - ------------------------------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON ASIA-PACIFIC REGION FUND MSCI ALL COUNTRY PACIFIC INDEX ----------------------------- ------------------------------ 2/25/97 10000 10000 3/31/97 9550 9496 3/31/98 8310 7839 3/31/99 8570 8616 3/31/00 11620 12234 3/31/01 9010 8111 3/31/02 6624 7264 3/31/03 5801 5976 3/31/04 9067 10020
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. 9 Schedule of Investments (unaudited) ICON ASIA-PACIFIC REGION FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------- COMMON STOCKS (FOREIGN) 100.0% CONSUMER DISCRETIONARY 10.3% AUTOMOBILE MANUFACTURERS 4.5% 386,000 Denway Motors Limited (HK) $ 445,285 1,800 Honda Motor Co., LTD. (JP) 83,088 5,400 Toyota Motor Corporation (JP) 200,901 - -------------------------------------------------- 729,274 CONSUMER ELECTRONICS 1.5% 13,700 Sharp Corporation (JP) 245,194 FOOTWEAR 1.3% 77,000 Yue Yuen Industrial (Holdings) Limited (HK) 211,437 HOUSEHOLD APPLIANCES 3.0% 241,000 Guangdong Kelon Electrical Holdings Company Limited (HK)(a) 125,278 110,000 Techtronic Industries Company Limited (HK) 357,985 - -------------------------------------------------- 483,263 - -------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 1,669,168 ENERGY 1.5% INTEGRATED OIL & GAS 1.5% 56,000 Origin Energy Limited (AU) 235,552 - -------------------------------------------------- TOTAL ENERGY 235,552 FINANCIAL 15.1% DIVERSIFIED BANKS 9.6% 6,500 Commonwealth Bank of Australia (AU) 165,779 6,000 Kookmin Bank (KR)(a) 243,929 8,700 National Australia Bank Limited (AU) 206,249 13,500 Shinhan Financial Group Co., Ltd. (KR) 249,091 25 Sumitomo Mitsui Financial Group, Inc. (JP) 185,938 25 UFJ Holdings, Inc. (JP) 159,680 24,679 United Overseas Bank Limited (SG) 197,076 12,000 Westpac Banking Corporation (AU) 160,943 - -------------------------------------------------- 1,568,685 MULTI-SECTOR HOLDINGS 1.5% 213,700 Swire Pacific Limited (HK) 243,754 REAL ESTATE MANAGEMENT & DEVELOPMENT 4.0% 360,000 Sino Land Company Limited (HK) 225,482 21,000 Sumitomo Realty & Development Co., Ltd. (JP) 274,098 16,000 Sun Hung Kai Properties Limited (HK) 146,669 - -------------------------------------------------- 646,249 - -------------------------------------------------- TOTAL FINANCIAL 2,458,688
- --------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE HEALTH CARE 0.6% PHARMACEUTICALS 0.6% 295,000 China Pharmaceutical Group Limited (HK) $ 96,765 - -------------------------------------------------- TOTAL HEALTH CARE 96,765 INDUSTRIALS 28.9% AIRLINES 2.1% 168,800 Cathay Pacific Airways Limited (HK) 345,442 CONSTRUCTION & ENGINEERING 1.9% 634,000 Sunway Holdings Incorporated Berhad (MY)(a) 314,127 CONSTRUCTION & FARM MACHINERY 2.2% 56,000 KOMATSU LTD. (JP) 355,661 HIGHWAYS & RAILTRACKS 7.9% 225,000 Hopewell Holdings Limited (HK) 442,031 646,000 Jiangsu Expressway Company Ltd. (HK) 378,452 636,000 Zhejiang Expressway Co., Ltd. (HK) 469,512 - -------------------------------------------------- 1,289,995 INDUSTRIAL CONGLOMERATES 5.4% 282,000 China Merchants Holdings International Company Limited (HK) 396,337 51,000 Citic Pacific Limited (HK) 144,186 37,000 Keppel Corporation Limited (SG) 161,297 77,000 Shanghai Industrial Holdings Limited (HK) 171,919 - -------------------------------------------------- 873,739 INDUSTRIAL MACHINERY 2.5% 140,000 SUMITOMO HEAVY INDUSTRIES, LTD. (JP)(a) 399,573 MARINE 5.8% 462,000 China Shipping Development Company Limited (HK) 316,679 22,000 Hyundai Merchant Marine Co., Ltd. (KR)(a) 151,514 92,000 Kawasaki Kisen Kaisha, Ltd. (JP) 477,386 - -------------------------------------------------- 945,579 TRUCKING 1.1% 18,000 Seino Transportation Co., Ltd. (JP) 184,621 - -------------------------------------------------- TOTAL INDUSTRIALS 4,708,737 INFORMATION TECHNOLOGY 11.8% ELECTRONIC EQUIPMENT MANUFACTURERS 4.0% 3,400 Hoya Corporation (JP) 332,214 3,000 Nidec Corporation (JP) 312,814 - -------------------------------------------------- 645,028
10 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - -------------------------------------------------- ELECTRONIC MANUFACTURING SERVICES 1.6% 22,200 Venture Corporation Limited (SG) $ 256,087 IT CONSULTING & OTHER SERVICES 1.8% 6,500 TIS Inc. (JP) 296,122 SEMICONDUCTOR EQUIPMENT 1.8% 3,600 Advantest Corporation (JP) 294,649 SYSTEMS SOFTWARE 2.6% 10,000 Fuji Soft ABC Incorporated (JP) 428,761 - -------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 1,920,647 LEISURE AND CONSUMER STAPLES 5.0% AGRICULTURAL PRODUCTS 1.4% 110,000 PPB Group Berhad (MY) 225,790 BREWERS 0.7% 13,335 Fraser & Neave Limited (SG) 116,147 HOTELS, RESORTS & CRUISE LINES 1.5% 364,000 The Hongkong and Shanghai Hotels, Limited (HK) 245,410 TOBACCO 1.4% 10,000 KT&G Corporation (KR) 229,950 - -------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 817,297 MATERIALS 23.3% ALUMINUM 3.5% 38,000 Alumina Limited (AU) 155,686 153,000 Nippon Light Metal Company, Ltd. (JP) 417,667 - -------------------------------------------------- 573,353 BUILDING PRODUCTS 1.9% 232,000 Hume Industries (Malaysia) Berhad (MY) 304,179 COMMODITY CHEMICALS 1.1% 38,000 Toray Industries, Inc. (JP) 176,422 DIVERSIFIED CHEMICALS 1.9% 29,000 Orica Limited (AU) 317,121 DIVERSIFIED METALS & MINING 7.0% 1,118,000 Jiangxi Copper Company Ltd. (HK) 606,275 10,000 Korea Zinc Co., Ltd. (KR) 199,888 46,000 Sumitomo Metal Mining Co., Ltd. (JP) 333,223 - -------------------------------------------------- 1,139,386 STEEL 7.9% 265,000 Malayawata Steel Berhad (MY) 193,868 120,000 Nippon Steel Corporation (JP) 280,640 2,000 POSCO (KR) 282,963 393,000 Sumitomo Metal Industries, Ltd. (JP) 525,982 - -------------------------------------------------- 1,283,453 - -------------------------------------------------- TOTAL MATERIALS 3,793,914
- --------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE TELECOMMUNICATION & UTILITIES 3.5% INTEGRATED TELECOMMUNICATIONS SERVICES 0.9% 55,000 Telekom Malaysia Berhad (MY) $ 149,217 WIRELESS TELECOMMUNICATIONS SERVICES 2.6% 190,000 China Unicom Limited (HK) 170,419 105,000 Maxis Communications Berhad (MY) 254,211 - -------------------------------------------------- 424,630 - -------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 573,847 - -------------------------------------------------- TOTAL COMMON STOCKS (FOREIGN) (COST $13,273,231) 16,274,615 SHORT-TERM INVESTMENT 0.2% $ 35,080 J.P. Morgan Chase Interest Bearing Demand Deposit Account 35,080 - -------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $35,080) 35,080 - -------------------------------------------------- TOTAL INVESTMENTS 100.2% (COST $13,308,311) 16,309,695 - -------------------------------------------------- LIABILITIES LESS OTHER ASSETS (0.2%) (26,511) - -------------------------------------------------- NET ASSETS 100.0% $16,283,184 - --------------------------------------------------
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 KR South Korea HK Hong Kong MY Malaysia JP Japan SG Singapore
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ADR -- American Depository Receipt 11 Management Overview ICON EUROPE FUND A discussion with Robert Straus, CMT, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Europe Fund appreciated 20.73% for the six-month period ended March 31, 2004, outpacing the 15.08% return for its broader benchmark, the Bloomberg European 500 Index but trailing the MSCI Europe 15 Index, which returned 21.51%. Total returns for other periods as of March 31, 2004 are listed on page 15. A cyclically driven bull market worked to the Fund's benefit during the period, as European markets mirrored the broad advance toward fair value that has bolstered U.S. stocks for more than a year. However, because European issues were trading largely at deeper relative discounts to their domestic counterparts, they closed a significantly wider valuation gap, thereby outperforming the broad U.S. market by a considerable margin. The Fund is managed using an all-cap strategy, meaning we invest in European securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. In this somewhat cyclical, somewhat defensive environment, the Fund's balanced stance between growth/value mirrored the broader market, as measured on a price-to-earnings (P/E) basis. For the record, the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Geopolitical tensions and world unrest continued to influence investor sentiment, yet offered the Fund compelling opportunities to purchase underpriced industries that were demonstrating market leadership. While our system continued to suggest that a cyclical, recovery-based theme remained in place, the period was underscored by sporadic strength in defensive industries. Based on our valuation and relative strength readings, we viewed these reversals as short-lived, and believe economically sensitive industries can retain leadership in light of projected improvements. During the period, however, Europe remained entrenched in a low-growth scenario while facing stiff headwinds from an appreciating euro. Germany, Europe's largest economy, was particularly hard hit as business confidence came under increasing pressure and unemployment languished at historically high levels. Nevertheless, structural reforms seem to be taking hold, as evidenced by recent economic progress, and should ultimately prove advantageous for the region. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? Perhaps the most significant change in the Fund's composition during the period was its transformation on January 29, 2004, from the ICON South Europe Region Fund to the ICON Europe Fund. Given this expanded mandate, allowing us to invest in equity securities anywhere in Europe, the Fund is now guided by our time-tested strategy of industry and sector rotation. With investment themes more closely correlated across national borders, recent studies convinced us to adopt this strategy and replace the Fund's prior focus, which emphasized country rotation. [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 94.8% Top 10 Equity Holdings 27.2% Number of Stocks 56 Cash Equivalents 13.1% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Camaieu 3.3% Trigano 2.9% Arcelor 2.8% Buzzi Unicem S.p.A. 2.8% Ascom Holding AG 2.7% PubliGroupe S.A. 2.7% Grupo Empresarial Ence, S.A. 2.6% Georg Fischer AG 2.5% Vivendi Universal SA 2.5% SEB SA 2.4% Percentages are based upon net assets. 12 Dominant themes that played out in Europe during the period included wireless telecommunication services, as rising global demand re-energized this previously out-of-favor industry. Guided by our valuation discipline, the Fund overweighted the Materials sector, which also performed strongly, with notable contributions from steel and construction materials. Both industries benefited from increasing worldwide consumption, driven in large part by infrastructure development in Mainland China. In contrast, specialty stores proved detrimental and was eliminated on valuation concerns, while food retail detracted due to its defensive nature. The Fund logged measurable individual performance contributions from Swiss telecommunication services firm Ascom Holding AG, which benefited from strong operating results, including improved order intake and lower net losses. Also based in Switzerland, fashion retailer Charles Voegele Holding AG realized higher operating earnings on better sales performance and efficient inventory reduction. The Fund also profited from direct exposure to gains in the euro, the common currency of the European Monetary Union, which helped boost returns in the underlying equities. In contrast, Fund performance was hampered by its stake in Marionnaud Parfumeries SA, Europe's largest perfume retailer, which fell as rising costs proved a drag on profits. Deteriorating relative strength led us to sell the company. Portuguese food distributor Jeronimo Martins SGPS SA faced a difficult operating environment, including temporary store closures and increased competition. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE EUROPEAN MARKET? Our system continues to indicate increased global correlation among industry themes, and we will remain focused on seeking out market leadership within the Europe Region regardless of country origin or benchmark allocations. One of the clear examples we're currently seeing is in the wireless telecommunication services industry, where valuation and relative strength have combined to create compelling buying opportunities. We continue to be guided by our methodology to identify leading industries. 13 Management Overview (continued) ICON EUROPE FUND - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Our valuation methods led us to overweight small- and mid-capitalization European companies, which added to relative performance. - - Among the Fund's strongest-performing holdings during the period were Ascom Holding AG and Charles Voegele Holding AG, both based in Switzerland. - - Our methodology led us to hold a significant position in the Consumer Discretionary and Materials sectors, and the Fund's holdings in these sectors performed strongly relative to Index. - - Although they contributed positively, stockpicks in the Energy and Financial sectors caused a slight drag on relative performance. - - Our stockpicking in the apparel retail industry, a slightly overweight position, added to returns. - -------------------------------------------------------------------------------- TOP 10 COUNTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- France 24.6% Switzerland 22.8% Italy 9.0% Germany 8.3% Austria 5.6% Belgium 4.5% Spain 4.5% Luxembourg 2.8% Norway 2.6% Poland 1.8%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- SECTOR COMPOSITION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Industrials 17.0% Consumer Discretionary 15.8% Materials 12.1% Leisure and Consumer Staples 12.0% Telecommunication and Utilities 11.7% Financial 10.5% Information Technology 9.3% Energy 3.3% Health Care 3.1%
Percentages are based upon net assets. 14 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS SINCE ENDED ONE FIVE INCEPTION 3/31/04* YEAR YEARS 2/20/97 - ------------------------------------------------------------------------------------------ ICON Europe Fund 20.73% 64.32% 2.11% 6.66% - ------------------------------------------------------------------------------------------ MSCI Europe 15 Index 21.51% 54.61% 0.15% 6.38% - ------------------------------------------------------------------------------------------ Bloomberg European 500 Index 15.08% 37.68% -1.35% 5.64% - ------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Fund's name and investment strategy changed effective January 29, 2004. The Fund's past performance would have been different if the current strategy had been in effect. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
BLOOMBERG EUROPEAN 500 ICON EUROPE FUND MSCI EUROPE 15 INDEX INDEX ---------------- -------------------- ---------------------- 2/20/97 10000 10000 10000 3/31/97 9800 10308 10154 3/31/98 15106 14684 15466 3/31/99 14247 15401 15808 3/31/00 13849 18298 21916 3/31/01 12654 14181 17706 3/31/02 11979 13479 17566 3/31/03 9623 10038 10728 3/31/04 15813 15519 14770
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 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 (unaudited) ICON EUROPE FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- COMMON STOCKS (FOREIGN) 94.8% CONSUMER DISCRETIONARY 15.8% ADVERTISING 2.7% 621 PubliGroupe S.A. (SZ)(a) $ 202,441 APPAREL RETAIL 5.3% 2,570 Camaieu (FR) 248,398 2,282 Charles Voegele Holding AG (SZ)(a) 152,857 - --------------------------------------------------- 401,255 AUTO PARTS & EQUIPMENT 0.9% 10,500 Brembo S.p.A. (IT) 73,166 AUTOMOBILE MANUFACTURERS 1.4% 2,500 DaimlerChrysler AG (GR) 104,409 DEPARTMENT STORES 2.1% 1,490 Pinault-Printemps-Redoute SA (FR) 156,012 HOUSEHOLD APPLIANCES 2.4% 1,430 SEB SA (FR) 183,289 TIRES & RUBBER 1.0% 2,000 Continental AG (GR) 79,044 - --------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 1,199,616 ENERGY 3.3% INTERGRATED OIL & GAS 0.7% 295 OMV AG (AT) 55,866 OIL & GAS DRILLING 1.6% 13,200 Smedvig ASA (NW) 122,159 OIL & GAS EXPLORATION & PRODUCTION 1.0% 1,150 Norsk Hydro ASA (NW) 72,506 - --------------------------------------------------- TOTAL ENERGY 250,531 FINANCIAL 10.5% DIVERSIFIED BANKS 5.7% 44,290 Banca Intesa S.p.A. (IT) 146,734 11,339 SanPaolo IMI S.p.A. (IT) 129,309 1,820 Societe Generale (FR) 155,720 - --------------------------------------------------- 431,763 DIVERSIFIED CAPITAL MARKETS 3.8% 4,170 Credit Suisse Group (SZ) 145,079 1,904 UBS AG (SZ) 141,764 - --------------------------------------------------- 286,843 MULTI-LINE INSURANCE 1.0% 715 Allianz AG (GR) 78,254 - --------------------------------------------------- TOTAL FINANCIAL 796,860 HEALTH CARE 3.1% PHARMACEUTICALS 3.1% 1,157 Roche Holding AG (SZ) 113,099 3,155 UCB SA (BE) 121,239 - --------------------------------------------------- 234,338 - --------------------------------------------------- TOTAL HEALTH CARE 234,338
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE INDUSTRIALS 17.0% BUILDING PRODUCTS 3.0% 2,780 Compagnie de Saint-Gobain (FR) $ 140,642 2,700 Wienerberger AG (AT) 89,608 - --------------------------------------------------- 230,250 CONSTRUCTION & ENGINEERING 3.0% 4,000 Fomento de Construcciones y Contratas S.A. (SP) 145,443 3,000 Hochtief AG (GR) 84,573 - --------------------------------------------------- 230,016 DIVERSIFIED CHEMICALS 0.7% 1,975 Bayer AG (GR) 48,315 ELECTRICAL COMPONENTS & EQUIPMENT 0.7% 1,000 Bekaert NV (BE) 55,212 ENVIRONMENTAL SERVICES 1.5% 4,530 BWT AG (AT) 111,048 INDUSTRIAL MACHINERY 5.5% 850 Georg Fischer AG (SZ)(a) 191,777 435 Schindler Holding AG (SZ) 138,468 355 Sulzer AG (SZ) 88,401 - --------------------------------------------------- 418,646 PAPER PRODUCTS 2.6% 7,200 Grupo Empresarial Ence, S.A. (SP) 197,312 - --------------------------------------------------- TOTAL INDUSTRIALS 1,290,799 INFORMATION TECHNOLOGY 9.3% COMMUNICATIONS EQUIPMENT 2.7% 21,238 Ascom Holding AG (SZ)(a) 208,717 ELECTRONIC EQUIPMENT MANUFACTURERS 2.7% 1,105 Barco NV (BE) 92,081 4,950 Epcos AG (GR)(a) 111,927 - --------------------------------------------------- 204,008 SEMICONDUCTOR EQUIPMENT 2.2% 1,270 Unaxis Holding AG (SZ) 169,892 SYSTEM SOFTWARES 1.7% 5,005 UBI Soft Entertainment SA (FR)(a) 126,252 - --------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 708,869 LEISURE AND CONSUMER STAPLES 12.0% BROADCASTING & CABLE TV 2.5% 10,847 Mediaset S.p.A. (IT) 120,238 3,455 ProSiebenSat.1 Media AG Preferred Stock (GR) 67,940 - --------------------------------------------------- 188,178 FOOD RETAIL 1.8% 12,715 Jeronimo Martins, SGPS, S.A. (PL)(a) 138,858 HOTELS, RESORTS & CRUISE LINES 2.3% 490 Kuoni Reisen Holding AG (SZ) 178,889
16 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- LEISURE PRODUCTS 2.9% 4,220 Trigano (FR) $ 218,428 MOVIES & ENTERTAINMENT 2.5% 7,097 Vivendi Universal SA (FR)(a) 188,569 - --------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 912,922 MATERIALS 12.1% CONSTRUCTION MATERIALS 7.7% 18,220 Buzzi Unicem S.p.A. (IT) 212,865 285 Imerys SA (FR) 67,954 1,640 Lafarge SA (FR) 132,925 7,895 RHI AG (AT)(a) 171,179 - --------------------------------------------------- 584,923 FERTILIZERS & AGRICULTURAL CHEMICALS 0.9% 4,880 Kemira Oyj (FI) 65,064 STEEL 3.5% 11,900 Arcelor (LX) 216,093 2,920 ThyssenKrupp AG (GR) 54,402 - --------------------------------------------------- 270,495 - --------------------------------------------------- TOTAL MATERIALS 920,482 TELECOMMUNICATIONS & UTILITIES 11.7% COMMUNICATIONS EQUIPMENT 2.0% 1,320 Sagem SA (FR) 146,946 INTEGRATED TELECOMMUNICATIONS SERVICES 2.3% 15,500 Portugal Telecom, SGPS, S.A. (PL) 173,485 WIRELESS TELECOMMUNICATION SERVICES 7.4% 785 AO VimpelCom -- ADR(a) 81,632 2,995 Bouygues SA (FR) 103,211 695 Mobile Telesystems -- ADR 91,393 1,135 Mobistar SA (BE)(a) 74,482 5,700 STET Hellas Telecommunications S.A. -- ADR 116,280 2,710 Turkcell Iletisim Hizmetleri A.S. -- ADR(a) 96,883 - --------------------------------------------------- 563,881 - --------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 884,312 - --------------------------------------------------- TOTAL COMMON STOCKS (FOREIGN) (COST $5,656,123) 7,198,729
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENT 13.1% $990,507 J.P. Morgan Chase Interest Bearing Demand Deposit Account $ 990,507 - --------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $990,507) 990,507 - --------------------------------------------------- TOTAL INVESTMENTS 107.9% (COST $6,646,630) 8,189,236 - --------------------------------------------------- LIABILITIES LESS OTHER ASSETS (7.9%) (597,929) - --------------------------------------------------- NET ASSETS 100.0% $7,591,307 - ---------------------------------------------------
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 IT Italy BE Belgium LX Luxembourg FI Finland NW Norway FR France PL Portugal GR Germany SP Spain SZ Switzerland
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ADR -- American Depository Receipt 17 Management Overview ICON INTERNATIONAL EQUITY FUND A discussion with the Portfolio Management Team HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON International Equity Fund, Class Z advanced 29.30% for the six-month period ended March 31, 2004, outpacing its benchmark, the MSCI All Country World Index ex-U.S., which returned 22.77%. The Fund's I shares returned -1.37% since their recent February 6, 2004 inception compared to a 1.81% return for the benchmark, while its Class C shares returned -4.43% since their February 19, 2004 inception compared to a -1.15% return for the benchmark over the same period. Total returns for other periods as of March 31, 2004 are listed on page 21. The increased interdependency of global economies worked to the Fund's benefit during the period, as international markets mirrored the far-reaching move toward fair value that has bolstered U.S. stocks for more than a year. However, because international issues were largely trading at a deeper discount relative to their domestic counterparts, they closed a considerably wider valuation gap, thereby outperforming the broad U.S. market by a substantial margin. The Fund is managed using an all-cap strategy, meaning we invest in international securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Even though our approach views investment style as irrelevant, the Fund benefited due to its growth bias during the reporting period, as measured on a traditional price-to-earnings (P/E) basis. For the record, the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Favorable value-to-price ratios and investor overreactions to geopolitical tensions and world unrest afforded the Fund numerous opportunities to capitalize on underpriced industries that were demonstrating leadership relative to the broader foreign market. While our system continued to detect a cyclical theme leaning toward a recovering global economy, the period was marked by nascent strength among defensive industries. We judged these reversals to be temporary and believe economically sensitive industries can again assume leadership as the recovery gains traction. Europe remained entrenched in a low-growth environment while facing stiff headwinds from the appreciating euro. Nevertheless, structural reforms seem to be taking hold, which could ultimately prove advantageous for the region. Japan, on the other hand, showed clear signs of internal recovery, having made considerable headway in restoring its debt-burdened banking system. Asia's strength, however, continued to be driven by robust growth in China, which is rapidly establishing itself as an economic powerhouse. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? Perhaps the most significant change to the Fund during the period was its transition on January 29, 2004, from the ICON North Europe Region Fund to the diversified ICON International Equity Fund. In light of this expanded mandate, which permits us to invest in equity securities anywhere in the world excluding [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 95.8% Top 10 Equity Holdings 18.1% Number of Stocks 86 Cash Equivalents 9.1% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) TUI AG 2.1% Deutsche Bank AG 2.1% Companhia Siderurgica Nacional S.A. 1.9% ITV plc 1.8% Metro AG 1.7% Alcan Inc. 1.7% Nokia Oyj 1.7% QIAGEN N.V. 1.7% Hilton Group plc 1.7% Georg Fischer AG 1.7% Percentages are based upon net assets. 18 the United States, the Fund is now guided by our time-tested strategy of industry and sector rotation. With investment themes increasingly cutting across country borders, correlation studies convinced us to adopt this strategy and replace the Fund's prior focus, which emphasized country rotation. Against this backdrop, much of the Fund's subsequent restructuring centered on sector allocation rather than country weightings. For example, despite being a leading net and relative contributor to returns, the Fund's overweight position in Information Technology was significantly reduced during the reporting period, as valuation concerns pressured the semiconductor equipment and semiconductors industries. In contrast, sector exposure to relative detractor Materials was enhanced to almost an equal weight, as steel industry fundamentals registered vastly improving relative strength. Holdings in the Energy sector also detracted relative to the benchmark, while Leisure and Consumer Staples contributed due to outperformance in the broadcasting & cable television industry. Among the Fund's leading individual contributors to performance, semiconductor equipment company ASML Holding NV of the Netherlands advanced on industry-leading market share gains in its core photolithography business. U.K. TV broadcaster Carlton Communications also climbed on anticipated cost synergies from its approved merger with rival firm Granada Plc, but the stock became overvalued during the period and we sold it. An improved current-year outlook bolstered British microchip designer ARM Holdings Plc., and German electronic component supplier Epcos AG posted a four-fold rise in operating profits. In contrast, Fund returns were hampered by poor performance from Irish discount airline Ryanair Holdings Plc., which tumbled when the company announced its first-ever profit warning. Its free-fall led us to sell the company. Canadian WestJet Airlines Ltd. also declined as government repeal of a planned corporate tax cut forced the Canadian carrier to miss earnings expectations. Analyst downgrades pressured the aluminum industry hurting leading producer Alcan Inc., while steelmaker Dofasco, Inc. of Canada fell as rising energy costs offset record shipments. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE INTERNATIONAL MARKET? Although defensive names rebounded during the cyclical pullback of early 2004, we believe this to be a temporary theme reversal. On the basis of valuation and relative strength, we anticipate that economically sensitive sectors will regain their status as market leaders, particularly as the recovery proves sustainable. Given the increased correlation of industries on a global scale, we will continue to seek out market leadership regardless of country origin. One of the clear examples we're currently seeing is in the wireless telecommunication services industry, where valuation and relative strength have combined to create compelling buying opportunities in countries as varied as Russia, Turkey and China. We continue to seek leading industries, regardless of location, in order to capitalize on projected robust moves toward fair value. 19 Management Overview (continued) ICON INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - On January 29, 2004, the Fund changed from the region-specific ICON North Europe Region Fund to the diversified ICON International Equity Fund, and its investment strategy now allows investments in equity securities anywhere in the world excluding the United States. - - Valuation led us to overweight small- and mid-capitalization foreign companies, which aided relative performance. - - All sectors owned in the Fund had positive performance during the period. - - Among the Fund's strongest-performing holdings during the period were ASML Holding N.V. of the Netherlands and Carlton Communications from the United Kingdom. - - Our methodology led us to hold a significant position in the Information Technology sector, and the Fund's holdings in this sector contributed to returns. - - Our stockpicking in the broadcasting & TV industry added to returns. - -------------------------------------------------------------------------------- TOP 10 COUNTRIES March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Germany 19.1% Japan 13.8% United Kingdom 7.6% Canada 7.3% Hong Kong 5.8% Sweden 4.8% Netherlands 4.4% Austria 4.3% Finland 4.1% Mexico 3.2%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- SECTOR COMPOSITION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Industrials 19.8% Financial 16.7% Materials 14.7% Consumer Discretionary 12.6% Information Technology 10.0% Leisure and Consumer Staples 8.3% Telecommunication & Utilities 7.7% Energy 4.3% Health Care 1.7%
Percentages are based upon net assets. 20 - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS INCEPTION ENDED ONE FIVE SINCE DATE 3/31/04* YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON International Equity Fund-Class Z 2/18/97 29.30% 87.81% 5.28% 6.59% - ------------------------------------------------------------------------------------------ MSCI ACWI ex-U.S. 22.77% 59.91% 2.03% 4.08% - ------------------------------------------------------------------------------------------ ICON International Equity Fund-Class I 2/6/04 N/A N/A N/A -1.37% - ------------------------------------------------------------------------------------------ MSCI ACWI ex-U.S. N/A N/A N/A 1.81% - ------------------------------------------------------------------------------------------ ICON International Equity Fund-Class C 2/19/04 N/A N/A N/A -4.43% - ------------------------------------------------------------------------------------------ MSCI ACWI ex-U.S. N/A N/A N/A -1.15% - ------------------------------------------------------------------------------------------
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 Fund's name and investment strategy changed effective January 29, 2004. The Fund's past performance would have been different if the current strategy had been in effect. Performance shown is for the Fund's Class Z shares, which are available only to grandfathered and institutional investors. Performance for the Fund's other classes will vary due to differences in charges and expenses. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON INTERNATIONAL EQUITY FUND- CLASS Z MSCI ACWI EX-U.S. ------------------------------- ----------------- 2/18/97 10000 10000 3/31/97 10230 10028 3/31/98 12900 11659 3/31/99 12171 12019 3/31/00 15585 15490 3/31/01 12239 11337 3/31/02 11146 10680 3/31/03 8354 8312 3/31/04 15744 13291
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. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends, capital gain distributions and tax return of capital but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 21 Schedule of Investments (unaudited) ICON INTERNATIONAL EQUITY FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- COMMON STOCKS (FOREIGN) 95.8% CONSUMER DISCRETIONARY 12.6% APPAREL ACCESSORIES & LUXURY GOODS 1.0% 5,576 Hugo Boss AG (GR) $ 123,342 AUTOMOBILE MANUFACTURERS 2.2% 3,665 DaimlerChrysler AG (GR) 153,064 3,000 Toyota Motor Corporation (JP) 111,611 - --------------------------------------------------- 264,675 CONSUMER ELECTRONICS 0.7% 2,868 Koninklijke (Royal) Philips Electronics N.V. (NE) 83,068 FOOTWEAR 1.7% 900 Puma AG Rudolf Dassler Sport (GR) 198,244 HOME IMPROVEMENT RETAIL 0.8% 4,500 RONA inc. (CN)(a) 100,118 HOMEBUILDING 0.7% 2,100 Daito Trust Construction Co., Ltd. (JP) 82,170 HOUSEHOLD APPLIANCES 1.1% 10,000 Makita Corporation (JP) 128,548 HOUSEWARES & SPECIALTIES 0.7% 18,000 Noritake Co., Limited (JP) 83,030 SPECIALTY STORES 1.5% 6,247 Douglas Holding AG (GR) 180,169 COMPUTER & ELECTRONIC -- RETAIL 0.8% 13,400 Elektra Comercial S.A. de C.V. (MX)(a) 88,654 TIRES & RUBBER 1.4% 4,306 Continental AG (GR) 170,181 - --------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 1,502,199 ENERGY 4.3% INTEGRATED OIL & GAS 0.8% 526 OMV AG (AT) 99,612 OIL & GAS DRILLING 0.8% 10,085 Smedvig ASA (NW) 93,331 OIL & GAS EQUIPMENT & SERVICES 2.7% 8,700 Enerflex Systems Ltd. (CN) 158,477 42,300 Peak Energy Services Ltd. (CN)(a) 158,675 - --------------------------------------------------- 317,152 - --------------------------------------------------- TOTAL ENERGY 510,095 FINANCIAL 16.7% CONSUMER FINANCE 3.4% 1,000 Acom Co., Ltd. (JP) 73,209 3,800 Credit Saison Co., Ltd. (JP) 114,264 1,000 ORIX Corporation (JP) 110,905 7,600 Provident Financial plc (UK) 102,271 - --------------------------------------------------- 400,649
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE DIVERSIFIED BANKS 3.0% 12,293 Barclays PLC (UK) $ 108,362 4,585 Danske Bank A/S (DE) 103,847 2,465 KBC Bankverzekeringsholding (BE) 144,392 - --------------------------------------------------- 356,601 DIVERSIFIED CAPITAL MARKETS 2.1% 2,968 Deutsche Bank AG (GR) 248,000 LIFE & HEALTH INSURANCE 2.7% 71,980 Legal & General Group plc (UK) 125,236 47,767 Skandia Forsakrings AB (SW) 189,405 - --------------------------------------------------- 314,641 PROPERTY & CASUALTY INSURANCE 0.9% 10,000 Mitsui Sumitomo Insurance Company, Limited (JP) 106,703 REAL ESTATE MANAGEMENT & DEVELOPMENT 2.5% 460,000 China Overseas Land & Investment Limited (HK) 104,075 55,000 Hysan Development Company Limited (HK) 95,519 160,000 Sino Land Company Limited (HK) 100,214 - --------------------------------------------------- 299,808 REGIONAL BANKS 1.3% 12,000 The 77 Bank, Ltd. (JP) 75,106 14,000 The Bank of Yokohama, Ltd. (JP) 82,420 - --------------------------------------------------- 157,526 SPECIALIZED FINANCE 0.8% 7,169 OMHEX AB (SW)(a) 100,578 - --------------------------------------------------- TOTAL FINANCIAL 1,984,506 HEALTH CARE 1.7% BIOTECHNOLOGY 1.7% 15,417 QIAGEN N.V. (GR)(a) 202,331 - --------------------------------------------------- TOTAL HEALTH CARE 202,331 INDUSTRIALS 19.8% AEROSPACE & DEFENSE 1.1% 4,000 Empresa Brasileira de Aeronautica S.A. (Embraer) -- ADR 128,400 AIRLINES 3.3% 8,500 Austrian Airlines/ Osterreichische Luftverkehrs AG (AT)(a) 126,183 10,942 Deutsche Lufthansa AG (GR) 179,334 4,600 WestJet Airlines Ltd. (CN)(a) 91,877 - --------------------------------------------------- 397,394
22 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- BUILDING PRODUCTS 2.3% 2,900 Compagnie de Saint-Gobain (FR) $ 146,713 4,150 Uponor Oyj (FI) 124,846 - --------------------------------------------------- 271,559 CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS 2.2% 40,900 Global Railway Industries Ltd. (CN)(a) 133,818 3,907 Volvo AB (SW) 128,846 - --------------------------------------------------- 262,664 INDUSTRIAL CONGLOMERATES 1.0% 30,000 Alfa, S.A. (MX)(a) 113,850 INDUSTRIAL MACHINERY 2.8% 880 Georg Fischer AG (SZ)(a) 198,545 9,000 Komori Corporation (JP) 140,505 - --------------------------------------------------- 339,050 MARINE 2.2% 172,000 China Shipping Development Company Limited (HK) 117,898 27,000 Kawasaki Kisen Kaisha, Ltd. (JP) 140,102 - --------------------------------------------------- 258,000 HIGHWAYS & RAILTRACKS 1.2% 190,000 Zhejiang Expressway Co., Ltd. (HK) 140,263 TRADING COMPANIES & DISTRIBUTORS 1.4% 9,000 Mitsui & Co., Ltd. (JP) 81,060 9,000 Sumitomo Corporation (JP) 81,099 - --------------------------------------------------- 162,159 TRUCKING 2.3% 2,900 DSV, De Sammensluttede Vognmaend af 13-7-1976 A/S (DE) 123,828 15,000 Seino Transportation Co., Ltd. (JP) 153,851 - --------------------------------------------------- 277,679 - --------------------------------------------------- TOTAL INDUSTRIALS 2,351,018 INFORMATION TECHNOLOGY 10.0% COMMUNICATIONS EQUIPMENT & SERVICES 3.8% 9,600 China Unicom Limited -- ADR 86,496 73,414 Nera ASA (NW)(a) 160,356 10,070 Nokia Oyj (FI) 205,096 - --------------------------------------------------- 451,948 ELECTRONIC EQUIPMENT MANUFACTURERS 0.9% 4,650 Epcos AG (GR)(a) 105,144
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE IT CONSULTING & OTHER SERVICES 2.6% 5,259 TietoEnator Oyj (FI) $ 159,812 59,285 WM-data AB (SW)(a) 149,529 - --------------------------------------------------- 309,341 OFFICE ELECTRONICS 1.2% 8,468 Oce N.V. (NE) 143,948 SEMICONDUCTOR EQUIPMENT 1.5% 9,578 ASML Holding N.V. (NE)(a) 175,371 - --------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 1,185,752 LEISURE AND CONSUMER STAPLES 8.3% BROADCASTING & CABLE TV 1.9% 85,117 ITV plc (UK)(a) 208,446 10,915 ITV plc -- Convertible Shares (UK)(a) 15,015 - --------------------------------------------------- 223,461 CASINOS & GAMING 1.7% 48,048 Hilton Group plc (UK) 200,834 HOTELS, RESORTS & CRUISE LINES 2.1% 11,124 TUI AG (GR) 254,405 HYPERMARKETS & SUPER CENTERS 1.8% 4,828 Metro AG (GR) 207,156 PUBLISHING 0.8% 5,140 Schibsted ASA (NW) 93,742 - --------------------------------------------------- TOTAL LEISURE AND CONSUMER STAPLES 979,598 MATERIALS 14.7% ALUMINUM 1.7% 4,600 Alcan Inc. 206,034 CONSTRUCTION MATERIALS 2.3% 4,600 Cemex S.A. de C.V. -- ADR 137,172 6,400 RHI AG (AT)(a) 138,764 - --------------------------------------------------- 275,936 DIVERSIFIED CHEMICALS 1.0% 3,355 Akzo Nobel N.V. (NE) 124,121 DIVERSIFIED METALS & MINING 1.1% 243,000 Jiangxi Copper Company Ltd. (HK) 131,775 FOREST PRODUCTS 0.8% 8,000 Nexfor Inc. (CN) 88,933 INDUSTRIAL GASES 1.1% 2,391 Linde AG (GR) 126,999
23 Schedule of Investments (continued) (unaudited) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - --------------------------------------------------- METAL & GLASS CONTAINERS 1.3% 4,000 Toyo Seikan Kaisha, Ltd. (JP) $ 79,733 63,000 Vitro, S.A. de C.V. (MX) 78,510 - --------------------------------------------------- 158,243 STEEL 5.4% 1,790 Boehler-Uddeholm AG (AT) 145,694 3,300 Companhia Siderurgica Nacional S.A. -- ADR 225,060 5,148 Dofasco Inc. (CN) 133,180 10,197 Hylsamex, S.A. de C.V. (MX)(a) 10,425 6,500 ThyssenKrupp AG (GR) 121,101 - --------------------------------------------------- 635,460 - --------------------------------------------------- TOTAL MATERIALS 1,747,501 TELECOMMUNICATION & UTILITIES 7.7% INTEGRATED TELECOMMUNICATION SERVICES 1.3% 4,199 TDC A/S (DE) 153,551 WATER UTILITIES 1.2% 14,061 AWG plc (UK) 142,195 WIRELESS TELECOMMUNICATIONS SERVICES 5.2% 48,220 America Movil S.A. de C.V. (MX) 93,159 1,900 AO VimpelCom(a) -- ADR 197,581 7,400 STET Hellas Telecommunications S.A. -- ADR 150,960 5,100 Turkcell Iletisim Hizmetleri A.S.(a) -- ADR 182,325 - --------------------------------------------------- 624,025 - --------------------------------------------------- TOTAL TELECOMMUNICATION & UTILITIES 919,771 - --------------------------------------------------- TOTAL COMMON STOCKS (COST $9,136,101) 11,382,771
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SHARES OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENTS 9.1% FOREIGN CURRENCY CONTRACTS 0.0% $ 31 British Pounds $ 57 - --------------------------------------------------- TOTAL FOREIGN CURRENCY CONTRACTS 57 INTEREST BEARING DEMAND DEPOSIT 9.1% 1,083,016 J.P. Morgan Chase Interest Bearing Demand Deposit Account 1,083,016 - --------------------------------------------------- TOTAL INTEREST BEARING DEMAND DEPOSIT 1,083,016 - --------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $1,083,060) 1,083,073 - --------------------------------------------------- TOTAL INVESTMENTS 104.9% (COST $10,219,161) 12,465,844 - --------------------------------------------------- LIABILITIES LESS OTHER ASSETS (4.9%) (583,881) - --------------------------------------------------- NET ASSETS 100.0% $11,881,963 - ---------------------------------------------------
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 JP Japan BE Belgium MX Mexico CN Canada NE Netherlands DE Denmark NW Norway FI Finland SW Sweden FR France SZ Switzerland GR Germany UK United Kingdom HK Hong Kong
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ADR -- American Depositary Receipt 24 Statements of Assets and Liabilities (unaudited)
-------------- -------------- -------------- MARCH 31, 2004 ICON ICON ICON ASIA-PACIFIC EUROPE INTERNATIONAL REGION FUND FUND EQUITY FUND ------------ -------------- -------------- ASSETS Investments, at cost $13,308,311 $6,646,630 $10,219,161 -------------- -------------- -------------- Investments, at value 16,309,695 8,189,236 12,465,844 Cash 18,845 35,308 - Receivables: Fund shares sold 57,127 20,072 87,700 Investments sold - - 302,322 Interest 37 34 50 Dividends 37,942 12,131 47,012 Other assets 460 421 568 -------------- -------------- -------------- Total Assets 16,424,106 8,257,202 12,903,496 -------------- -------------- -------------- LIABILITIES Payables: Due to custodian bank - - 192,272 Fund shares redeemed 98,186 - - Investments bought - 641,592 790,676 Advisory fees 13,456 5,881 9,561 Accrued distribution fees - - 166 Fund accounting, custodial and transfer agent fees 8,696 4,092 6,878 Administration fees 673 294 478 Accrued expenses 19,911 14,036 21,502 -------------- -------------- -------------- Total Liabilities 140,922 665,895 1,021,533 -------------- -------------- -------------- NET ASSETS -- ALL SHARE CLASSES $16,283,184 $7,591,307 $11,881,963 -------------- -------------- -------------- NET ASSETS -- CLASS I $ - $ - $ 1,234,056 -------------- -------------- -------------- NET ASSETS -- CLASS C $ - $ - $ 134,599 -------------- -------------- -------------- NET ASSETS -- CLASS Z $ - $ - $10,513,308 ============== ============== ============== Shares outstanding (unlimited shares authorized, no par value) Class I 1,807,377 638,924 114,202 Class C - - 12,469 Class Z - - 972,764 Net asset value (offering price and redemption price per share) Class I $ 9.01 $ 11.88 $ 10.81 Class C - - $ 10.79 Class Z - - $ 10.81
The accompanying notes are an integral part of the financial statements. 25 Statements of Operations (unaudited)
-------------- -------------- -------------- FOR THE SIX MONTHS ENDED MARCH 31, 2004 ICON ICON ICON ASIA-PACIFIC EUROPE INTERNATIONAL REGION FUND FUND EQUITY FUND ------------ -------------- -------------- INVESTMENT INCOME Interest $ 39 $ 125 $ 394 Dividends 114,163 16,994 86,048 Foreign taxes withheld (11,920) (3,024) (10,763) -------------- -------------- -------------- Total Investment Income 102,282 14,095 75,679 -------------- -------------- -------------- EXPENSES Advisory fees 72,731 33,393 52,442 Distribution fees: Class I - - 103 Class C - - 88 Fund accounting, custodial and transfer agent fees 32,488 16,886 22,635 Administration fees 3,600 1,824 2,429 Audit fees 918 424 664 Registration fees 8,626 8,621 9,416 Legal fees 212 154 120 Insurance expense 254 224 240 Trustee fees and expenses 487 412 467 Shareholder reports 1,396 689 1,052 Interest expense 11 18 - Other expenses 15,448 12,899 14,374 -------------- -------------- -------------- Total Expenses 136,171 75,544 104,030 -------------- -------------- -------------- NET INVESTMENT (LOSS) (33,889) (61,449) (28,351) -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain from investment transactions 438,815 1,059,056 3,224,538 Net realized gain/(loss) from foreign currency translations (156) 72 417 Change in unrealized net appreciation/(depreciation): on securities 1,428,070 485,977 (504,423) on other assets and liabilities denominated in foreign currency 570 (183) 642 -------------- -------------- -------------- Net realized and unrealized gain on investments 1,867,299 1,544,922 2,721,174 -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $1,833,410 $1,483,473 $2,692,823 ============== ============== ==============
The accompanying notes are an integral part of the financial statements. 26 Statements of Changes in Net Assets (unaudited)
ICON ASIA-PACIFIC REGION FUND ------------------------------------------- Six months ended March 31, 2004 Year ended (unaudited) September 30, 2003 ---------------- ------------------ OPERATIONS Net investment income/(loss) $ (33,889) $ 45,529 Net realized gain from investment transactions 438,815 745,694 Net realized (loss) from foreign currency translations (156) (1,457) Change in unrealized appreciation on securities and foreign currency translations 1,428,640 868,520 ---------------- ------------------ Net increase in net assets resulting from operations 1,833,410 1,658,286 ---------------- ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (39,164) - Net realized gains - - ---------------- ------------------ Net decrease from dividends and distributions (39,164) - ---------------- ------------------ FUND SHARE TRANSACTIONS Shares sold 13,850,495 6,269,616 Reinvested dividends and distributions 39,063 - Shares repurchased (5,484,830) (8,770,250) ---------------- ------------------ Net increase/(decrease) from fund share transactions 8,404,728 (2,500,634) ---------------- ------------------ Total net increase/(decrease) in net assets 10,198,974 (842,348) NET ASSETS Beginning of period 6,084,210 6,926,558 ---------------- ------------------ End of period $16,283,184 $ 6,084,210 ---------------- ------------------ NET ASSETS CONSIST OF Paid-in capital $22,803,029 $14,398,301 Accumulated undistributed net investment income/(loss) (33,890) 39,163 Accumulated undistributed net realized (loss) from investments (8,768,662) (9,207,477) Accumulated net realized (loss) from foreign currency translations (719,191) (719,035) Unrealized appreciation/(depreciation): on securities 3,001,384 1,573,314 on other assets and liabilities denominated in foreign currency 514 (56) ---------------- ------------------ NET ASSETS $16,283,184 $ 6,084,210 ================ ================== TRANSACTIONS IN FUND SHARES Shares sold 1,649,995 879,754 Reinvested dividends and distributions 4,835 - Shares repurchased (645,384) (1,302,144) ---------------- ------------------ Net increase/(decrease) 1,009,446 (422,390) Shares outstanding beginning of period 797,931 1,220,321 ---------------- ------------------ Shares outstanding end of period 1,807,377 797,931 ================ ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $13,575,890 $ 5,375,821 Proceeds from sales of securities 5,258,853 7,711,768
The accompanying notes are an integral part of the financial statements. 27 Statements of Changes in Net Assets (continued) (unaudited)
ICON EUROPE FUND ------------------------------------------- Six months ended March 31, 2004 Year ended (unaudited) September 30, 2003 ---------------- ------------------ OPERATIONS Net investment income/(loss) $ (61,449) $ (19,824) Net realized gain from investment transactions 1,059,056 558,317 Net realized gain from foreign currency translations 72 691 Change in unrealized appreciation on securities and foreign currency translations 485,794 1,568,069 ---------------- ------------------ Net increase in net assets resulting from operations 1,483,473 2,107,253 ---------------- ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - ---------------- ------------------ Net decrease from dividends and distributions - - ---------------- ------------------ FUND SHARE TRANSACTIONS Shares sold 3,720,070 21,160,657 Reinvested dividends and distributions - - Shares repurchased (6,874,685) (18,624,601) ---------------- ------------------ Net increase/(decrease) from fund share transactions (3,154,615) 2,536,056 ---------------- ------------------ Total net increase/(decrease) in net assets (1,671,142) 4,643,309 NET ASSETS Beginning of period 9,262,449 4,619,140 ---------------- ------------------ End of period $ 7,591,307 $ 9,262,449 ---------------- ------------------ NET ASSETS CONSIST OF Paid-in capital $ 7,127,866 $10,282,481 Accumulated undistributed net investment income/(loss) (61,449) - Accumulated undistributed net realized (loss) from investments (663,426) (1,722,482) Accumulated net realized (loss) from foreign currency translations (354,341) (354,413) Unrealized appreciation: on securities 1,542,606 1,056,629 on other assets and liabilities denominated in foreign currency 51 234 ---------------- ------------------ NET ASSETS $ 7,591,307 $ 9,262,449 ================ ================== TRANSACTIONS IN FUND SHARES Shares sold 336,843 2,507,561 Reinvested dividends and distributions - - Shares repurchased (639,072) (2,190,470) ---------------- ------------------ Net increase/(decrease) (302,229) 317,091 Shares outstanding beginning of period 941,153 624,062 ---------------- ------------------ Shares outstanding end of period 638,924 941,153 ================ ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ 3,735,632 $ 8,271,751 Proceeds from sales of securities 6,784,080 6,013,474
The accompanying notes are an integral part of the financial statements. 28
ICON INTERNATIONAL EQUITY FUND ------------------------------------------- Six months ended March 31, 2004 Year ended (unaudited) September 30, 2003 ---------------- ------------------ OPERATIONS Net investment income/(loss) $ (28,351) $ 75,481 Net realized gain from investment transactions 3,224,538 120,749 Net realized gain from foreign currency translations 417 3,777 Change in unrealized appreciation/(depreciation) on securities and foreign currency translations (503,781) 2,997,553 ---------------- ------------------ Net increase in net assets resulting from operations 2,692,823 3,197,560 ---------------- ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class I - - Class C - - Class Z (57,934) (84,595) Net realized gains Class I - - Class C - - Class Z - - ---------------- ------------------ Net decrease from dividends and distributions (57,934) (84,595) ---------------- ------------------ FUND SHARE TRANSACTIONS Shares sold Class I 1,217,107 - Class C 137,165 - Class Z 2,826,658 10,203,582 Reinvested dividends and distributions Class I - - Class C - - Class Z 57,395 84,466 Shares repurchased Class I (3,400) - Class C - - Class Z (5,575,350) (11,035,500) ---------------- ------------------ Net (decrease) from fund share transactions (1,340,425) (747,452) ---------------- ------------------ Total net increase in net assets 1,294,464 2,365,513 NET ASSETS Beginning of period 10,587,499 8,221,986 ---------------- ------------------ End of period $11,881,963 $10,587,499 ---------------- ------------------ NET ASSETS CONSIST OF Paid-in capital $ 8,929,140 $10,269,565 Accumulated undistributed net investment income/(loss) (86,285) - Accumulated undistributed net realized gain/(loss) from investments 1,465,192 (1,759,346) Accumulated net realized (loss) from foreign currency translations (674,146) (674,563) Unrealized appreciation: on securities 2,246,670 2,751,093 on other assets and liabilities denominated in foreign currency 1,392 750 ---------------- ------------------ NET ASSETS $11,881,963 $10,587,499 ================ ================== TRANSACTIONS IN FUND SHARES Shares sold Class I 114,519 - Class C 12,469 - Class Z 275,634 1,344,165 Reinvested dividends and distributions Class I - - Class C - - Class Z 5,845 13,781 Shares repurchased Class I (317) - Class C - - Class Z (568,069) (1,478,885) ---------------- ------------------ Net (decrease) (159,919) (120,939) Shares outstanding beginning of period 1,259,354 1,380,293 ---------------- ------------------ Shares outstanding end of period 1,099,435 1,259,354 ================ ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ 6,906,260 $ 8,232,853 Proceeds from sales of securities 8,752,592 8,866,056
The accompanying notes are an integral part of the financial statements. 29 Financial Highlights
---------------------------------------------------------------------------- ICON ASIA-PACIFIC REGION FUND ---------------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period $ 7.62 $ 5.68 $ 6.81 $ 10.25 $ 10.87 $ 6.09 ----------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.02) 0.04 (0.19) 0.07 0.03 (0.01) Net realized and unrealized gains/(losses) on investments 1.43 1.90 (0.91) (3.51) (0.65) 4.79 ----------- --------- --------- --------- --------- --------- Total from investment operations 1.41 1.94 (1.10) (3.44) (0.62) 4.78 ----------- --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.02) - - - - - Distributions from net realized gains - - - - - - Return of capital - - (0.03) - - - ----------- --------- --------- --------- --------- --------- Total distributions (0.02) - (0.03) - - - ----------- --------- --------- --------- --------- --------- Net asset value, end of period $ 9.01 $ 7.62 $ 5.68 $ 6.81 $ 10.25 $ 10.87 =========== ========= ========= ========= ========= ========= Total return 18.56% 34.15% (16.29)% (33.56)% (5.70)% 78.49% Net assets, end of period (in thousands) $16,283 $6,084 $ 6,927 $19,684 $25,710 $33,564 Average net assets for the period (in thousands) 14,506 6,683 12,142 18,749 32,629 29,191 Ratio of expenses to average net assets* 1.87% 1.98% 1.66% 1.70% 1.53% 1.59% Ratio of net investment income/(loss) to average net assets* (0.47)% 0.68% (0.23)% 0.75% 0.24% (0.57)% Portfolio turnover rate 37.58% 81.44% 14.43% 55.58% 101.88% 62.82%
(x) Calculated using the average share method * Annualized for periods less than one year The accompanying notes are an integral part of the financial statements. 30
---------------------------------------------------------------------------- ICON EUROPE FUND ---------------------------------------------------------------------------- Six Months Ended March 31, 2004 Year Ended September 30, (unaudited) 2003 2002 2001 2000 1999 ----------- --------- --------- --------- --------- --------- Net asset value, beginning of period $ 9.84 $ 7.40 $ 8.13 $10.14 $10.12 $11.87 ----------- --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.10) (0.02) (0.04) 0.05 0.02 0.02 Net realized and unrealized gains/(losses) on investments 2.14 2.46 (0.67) (2.06) - 1.06 ----------- --------- --------- --------- --------- --------- Total from investment operations 2.04 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 $11.88 $ 9.84 $ 7.40 $ 8.13 $10.14 $10.12 =========== ========= ========= ========= ========= ========= Total return 20.73% 32.97% (8.76)% (19.82)% 0.20% 6.41% Net assets, end of period (in thousands) $7,591 $ 9,262 $4,619 $7,397 $6,560 $5,298 Average net assets for the period (in thousands) 6,660 6,774 5,706 7,935 7,109 8,107 Ratio of expenses to average net assets* 2.26% 1.87% 2.14% 1.96% 1.80% 1.81% Ratio of net investment income/(loss) to average net assets* (1.84)% (0.29)% (0.42)% 0.55% 0.18% (0.53)% Portfolio turnover rate 57.64% 101.37% 12.26% 84.49% 62.17% 70.65%
(x) Calculated using the average share method * Annualized for periods less than one year The accompanying notes are an integral part of the financial statements. 31 Financial Highlights (continued)
--------------------------------------------------- ICON INTERNATIONAL EQUITY FUND --------------------------------------------------- Class I Class C Class Z For the period For the period Six Months February 6, 2004 February 19, 2004 Ended (inception) to (inception) to March 31, March 31, 2004 March 31, 2004 2004 (unaudited) (unaudited) (unaudited) ----------------- ----------------- ----------- Net asset value, beginning of period $10.96 $11.29 $ 8.41 ----------------- ----------------- ----------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.04) (0.08) (0.08) Net realized and unrealized gains/(losses) on investments (0.11) (0.42) 2.54 ----------------- ----------------- ----------- Total from investment operations (0.15) (0.50) 2.46 ----------------- ----------------- ----------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - (0.06) Distributions from net realized gains - - - Return of Capital - - - ----------------- ----------------- ----------- Total distributions - - (0.06) ----------------- ----------------- ----------- Net asset value, end of period $10.81 $10.79 $ 10.81 ================= ================= =========== Total return (1.37)%(b) (4.43)%(b) 29.30% Net assets, end of period (in thousands) $1,234 $ 135 $10,513 Average net assets for the period (in thousands) 82 18 10,358 Ratio of expenses to average net assets* 2.23% 2.98% 1.98% Ratio of net investment income/(loss) to average net assets* (0.79)% (1.54)% (0.54)% Portfolio turnover rate 68.37%(a) 68.37%(a) 68.37%(a) --------------------------------------------------------- ICON INTERNATIONAL EQUITY FUND --------------------------------------------------------- Class Z Year Ended September 30, 2003 2002 2001 2000 1999 --------- --------- --------- --------- --------- Net asset value, beginning of period $ 5.96 $ 7.24 $ 11.79 $ 11.74 $ 11.63 --------- --------- --------- --------- --------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.06 0.04 0.09 0.04 (0.05) Net realized and unrealized gains/(losses) on investments 2.45 (1.25) (3.31) 1.21 1.51 --------- --------- --------- --------- --------- Total from investment operations 2.51 (1.21) (3.22) 1.25 1.46 --------- --------- --------- --------- --------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - (0.04) - - (0.17) Distributions from net realized gains (0.06) - (1.33) (1.20) (1.18) Return of Capital - (0.03) - - - --------- --------- --------- --------- --------- Total distributions (0.06) (0.07) (1.33) (1.20) (1.35) --------- --------- --------- --------- --------- Net asset value, end of period $ 8.41 $ 5.96 $ 7.24 $ 11.79 $ 11.74 ========= ========= ========= ========= ========= Total return 42.60% (16.94)% (30.29)% 10.43% 12.78% Net assets, end of period (in thousands) $10,587 $ 8,222 $14,196 $33,315 $23,971 Average net assets for the period (in thousands) 8,571 13,347 18,204 29,412 30,993 Ratio of expenses to average net assets* 2.00% 1.72% 1.65% 1.52% 1.59% Ratio of net investment income/(loss) to average net assets* 0.88% 0.48% 0.97% 0.30% 0.25% Portfolio turnover rate 98.91% 91.99% 41.67% 34.24% 50.36%
(x) Calculated using the average share method * Annualized for periods less than one year (a)Portfolio turnover is calculated at the Fund level and therefore represents the six months ended March 31, 2004. (b)The total return calculation is for the period indicated. The accompanying notes are an integral part of the financial statements. 32 Notes to Financial Statements MARCH 31, 2004 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Asia-Pacific Region Fund ("Asia-Pacific Region Fund"), ICON Europe Fund ("Europe Fund") and ICON International Equity Fund ("International Equity Fund") are series funds (individually a "Fund" and collectively, the "Funds"). The Funds are part of the ICON Funds (the "Trust"), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end investment management company. The International Equity Fund offers three classes of shares. There are fifteen other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. Each Fund is authorized to issue an unlimited number of no par shares. The Funds primarily invest in foreign securities; the Asia-Pacific Region Fund and Europe Fund primarily invest in companies whose principal business activities fall within specific regions. The investment objective of each Fund is long-term capital appreciation. The Funds may have elements of risk, including the risk of loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. 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. 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 "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that (a) securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by a Fund at the NASDAQ Official Closing Price provided by NASDAQ each business day; and (b) any foreign investments in the Funds traded in countries outside of the Western Hemisphere are fair valued daily based on procedures established by the Funds' Board of Trustees ("Board") to avoid stale prices and to take into account, among other things, any significant events occurring after the close of a foreign market in those regions. The Funds use pricing services to determine the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board or pursuant to procedures approved by the Board. The valuation assigned to fair-valued securities for purposes of calculating a Fund's NAV may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. 33 Notes to Financial Statements (continued) Foreign securities traded in countries outside of the Western Hemisphere are fair valued daily. Other securities listed or traded primarily on a securities exchange or in the over-the-counter market are generally valued at the last sale price on the exchange or market where the security is principally traded, except that securities primarily traded on NASDAQ are normally valued at the NASDAQ Official Closing Price. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the sum of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than sixty days are valued in accordance with the evaluated bid price supplied by the pricing service. Short-term securities with remaining maturities of sixty days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. London closing 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. No repurchase agreements were purchased or sold by the Funds during the semiannual period ended March 31, 2004. Foreign Currency Translation. The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange daily. Income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held 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. Forward Foreign Currency Contracts. The Funds may enter into short-term forward foreign currency contracts in connection with planned purchases or sales of securities as a hedge against fluctuations in foreign exchange rates pending the settlement of transactions in foreign securities. A forward foreign currency contract is an agreement between contracting parties to exchange an amount of currency at some future time with an agreed upon rate. Thesecontracts 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. 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. 34 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. Dividends received by shareholders of the Funds which are derived from foreign source income and foreign taxes paid by the Funds are to be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Funds. Dividends paid by the Funds from net investment income and distributions of net realized short-term gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Dividends and distributions to shareholders are recorded by the Funds on the ex-dividend/distribution date. The Funds distribute net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. 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. Expenses. Expenses which cannot be directly attributed to a specific fund in the Trust are apportioned between all funds based upon relative net assets. Each class of the International Equity Fund bears expenses incurred on its behalf, and, in addition, each class bears a portion of general expenses, based upon relative net assets of each class. 35 Notes to Financial Statements (continued) 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Investment Advisory Fees. ICON Advisers, Inc. ("ICON") (formerly Meridian Investment Management Corporation) serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 1.00% of each Fund's average daily net assets. Transfer Agent, Custody and Accounting Fees. U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provides transfer agent services and fund accounting for the Funds. For these services, the Trust pays a fee for transfer agent services at an annual rate of 0.055% on the Trust's first $500 million of daily average net assets, 0.05% on the next $1 billion of average daily net assets, and 0.04% on the balance of average daily net assets in excess of $1.5 billion. 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. 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. U.S. Bancorp has entered into an agreement with JP Morgan Chase Co. ("Chase") on behalf of the Funds to provide international custodial services. The 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 ICON. This agreement provides for an annual fee of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. Distribution Fees. The International Equity Fund has adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") under which the Funds are authorized to compensate the Funds' distributor, ICON Distributors, Inc. ("IDI") (formerly Meridian Clearing Corp.) (an affiliate of the adviser) for the sale and distribution of shares. For the six months ended March 31, 2004 the total amounts paid or payable to IDI pursuant to the 12b-1 Plan were $88 on Class C shares and $103 on Class I shares. Related Parties. Certain officers and directors of ICON 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. 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 Asia-Pacific Region Fund............................... $(9,769,168) $0 ICON Europe Fund............................................ (2,076,909) 0 ICON International Equity Fund.............................. (2,433,905) 0
36 The aggregate composition by Fund of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of March 31, 2004 are as follows:
FEDERAL UNREALIZED UNREALIZED NET APPRECIATION TAX COST APPRECIATION DEPRECIATION (DEPRECIATION) ICON Asia-Pacific Region Fund............. $13,308,311 $3,189,065 $(187,681) $3,001,384 ICON Europe Fund.......................... 6,646,630 1,674,712 (132,106) 1,542,606 ICON International Equity Fund............ 10,219,161 2,430,284 (183,614) 2,246,670
37 THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK THIS PAGE INTENTIONALLY LEFT BLANK ICON FUNDS LOGO For more information about the ICON Funds, contact us: By Telephone 1-800-764-0442 By Mail ICON Funds P.O. Box 701 Milwaukee, WI 53201-0701 In Person ICON Funds 5299 DTC Boulevard, 12th Floor Greenwood Village, CO 80111 By E-Mail info@iconadvisers.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. Consider the investment objectives, risks, charges, and share classes of each ICON Fund carefully before investing. The prospectus contains this and other information about the Funds and is available by visiting www.iconfunds.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor I-131-FOR ICFORSEMI - -------------------------------------------------------------------------------- [ICON FUNDS LOGO] SUPPLEMENT DATED AUGUST 5, 2004 TO ICON U.S. DIVERSIFIED FUNDS SEMIANNUAL REPORT DATED MARCH 31, 2004 The ICON Funds Semiannual Report related to the ICON U.S. Diversified Funds (ICON Bond Fund, ICON Core Equity Fund, ICON Covered Call Fund, ICON Equity Income Fund, and ICON Long/Short Fund) ("Report") is hereby amended as follows: The chart on page 14 of the Report titled "Average Annual Total Return as of March 31, 2004" is amended by replacing the information for ICON Core Equity - -Fund Class C with the following:
- ------------------- ----------------- ----------------- ----------------- --------- ----------------- Inception Date Six Months One year Five Since Ended Years Inception 3/31/04* - ------------------- ----------------- ----------------- ----------------- --------- ----------------- ICON Core Equity 11/28/00 13.88% 48.21% N/A 5.44% Fund - Class C - ------------------- ----------------- ----------------- ----------------- --------- ----------------- *Not annualized.
The chart on page 14 of the Report titled "Value of a $10,000 Investment through March 31, 2004" is hereby amended by replacing the starting date of the chart with the date 10/12/00. The Financial Highlights on page 51 of the Report related to the ICON Core Equity Fund - Class C is amended by replacing the last column on the page with the following: 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 (6.03)% (b) Net assets, end of period (in thousands) $6,324 Average net assets for the period $2,920 (in thousands) 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 (a) Portfolio turnover is calculated at the Fund level and therefore represents the period October 12, 2000 (Fund inception) to September 30, 2001. (b) The total return calculation is for the period indicated. x Calculated using the average share method March 31, 2004 Investment Update ICON DIVERSIFIED FUNDS Semiannual Report [ICON FUNDS LOGO] Table of Contents
ABOUT THIS REPORT ......................................2 MESSAGE FROM ICON FUNDS ......................................4 MANAGEMENT OVERVIEWS AND SCHEDULES OF INVESTMENTS ......................................6 ICON Bond Fund ......................................6 ICON Core Equity Fund .....................................12 ICON Covered Call Fund .....................................18 ICON Equity Income Fund .....................................27 ICON Long/Short Fund .....................................35 FINANCIAL STATEMENTS .....................................42 FINANCIAL HIGHLIGHTS .....................................48 NOTES TO FINANCIAL STATEMENTS .....................................55
About This Report - -------------------------------------------------------------------------------- HISTORICAL RETURNS - -------------------------------------------------------------------------------- All total returns mentioned in this report account for the change in a Fund's per-share price, the reinvestment of any dividends and capital gain distributions, and adjustments for financial statement purposes. If your account is set up to receive Fund distributions in cash rather than reinvest them, your actual return may differ from these figures. The Funds' performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconfunds.com for performance results current to the most recent month-end. - -------------------------------------------------------------------------------- PORTFOLIO DATA - -------------------------------------------------------------------------------- Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's percentage holdings as of March 31, 2004 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology does not consider company-specific factors beyond financial data, 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. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. 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 Long/Short 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. High-yield bonds involve a greater risk of default and price volatility than U.S. Government and other higher-quality bonds. High-yield/high-risk bonds can experience sudden and sharp price swings which may affect net asset value. 2 - -------------------------------------------------------------------------------- COMPARATIVE INDEX - -------------------------------------------------------------------------------- The comparative indexes discussed in this report are meant to provide a basis for judging the Funds' performance against a specific securities index. Each index shown accounts for both change in security price and reinvestment of dividends and distributions, but does not reflect the costs of managing a mutual fund. The Funds' portfolios may significantly differ in holdings and composition from the index. Individuals cannot invest directly in an index. - - The unmanaged Standard & Poor's 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. - - The Lehman Brothers (LB) U.S. Universal Index represents the union of the U.S. Aggregate Index, the U.S. High-Yield Corporate Index, the 144A Index, the Eurodollar Index, the Emerging Markets Index, the non-ERISA portion of the Commercial Mortgage-Backed Securities (CMBS) Index and the CMBS High-Yield Index. All securities in this market-value weighted index have at least one year remaining to maturity and meet certain minimum issue size criteria. Index returns and statistical data included in this report are provided by Bloomberg, FactSet, and Lehman Brothers. 3 Message from ICON Funds - -------------------------------------------------------------------------------- DEAR SHAREHOLDER: [PHOTO] - -------------------------------------------------------------------------------- Last November, I found myself in a somewhat heated TV debate in which I contended that the then eight-month rally in stock prices still had further upside. In taking this decidedly bullish stance, I based my position on the fact that the stocks in the ICON domestic database were priced on average about 15% below our estimate of fair value, and that we expected them to continue in their upward march. Meanwhile my opponent, a respected money manager, voiced a more pessimistic outlook. Armed with a host of fear-based objections, including overheated price/earnings ratios, rising interest rates and sluggish job growth, his intuitive arguments supporting a precipitous decline undoubtedly proved convincing to many investors. Except that he was wrong. THE PRODUCT OF FAULTY REASONING Through mid-March 2004, stocks did in fact continue their move toward fair value, despite these and other concerns. Although Wall Street has been known to climb a wall of worry, the skepticism and doubt expressed by some investors during the advance was likely the product of faulty reasoning. Let's explore some common investor misperceptions: - - STOCKS ARE OVERPRICED BASED ON P/E. Price/earnings ratio is a simplistic measure that fails to consider the impact of interest rates, a key component in calculating the present value of any asset. Value, of course, is not stagnant and can increase or decrease depending on the current interest rate environment. In the current low interest rate setting, we believe it makes sense that stock prices would be higher relative to earnings. Our valuation model considers earnings estimates, but expands beyond this one-dimensional statistic. - - INTEREST RATES WILL HAVE TO RISE. There appears to be a consensus among market observers that short-term interest rates will move higher as the economic recovery gains traction, pressuring earnings and consequently stock prices. The fact is short-term rates play a limited role in our system, which emphasizes the AAA long-term bond yield in its assessment of valuation. With long-term rates experiencing a 20-year secular decline, we find it counterproductive to predict the impact of an increase. That being said, we do not currently see any force capable of reversing this downward trend. - - SLUGGISH JOB GROWTH WILL SLOW CONSUMER SPENDING. While unemployment is near its historical average, investors have sold stocks on the belief that disappointing job growth will slow consumer spending. Having examined various measures of consumer spending going back to the 1960s, I have found no evidence of a direct link between employment and spending. Interestingly enough, the data would seem to suggest that spending has triggered employment, not the other way around. FAVORING CYCLICAL INDUSTRIES Naturally, as evidenced by the market dip in mid-March 2004, it is quite normal for news events to distract investors and interrupt the path back toward fair value. Nevertheless, we remain bullish and believe stock prices are positioned to resume their value-driven advance. Our valuation model suggests that stocks continue to be priced at discounts relative to intrinsic value, and that market action late in the period was merely a temporary setback. [SIDENOTE] Intuitive arguments supporting a decline undoubtedly proved convincing. Except that they were wrong. [SIDENOTE] We remain bullish and believe stock prices are positioned to resume their value-driven advance. 4 This interruption, however, was not without its impact. Since late January 2004, market leadership has lacked a common theme, as top-performing cyclical and economically sensitive sectors such as technology, consumer discretionary, industrials, and materials turned increasingly volatile. At the same time, defensive groups such as healthcare, utilities and consumer staples demonstrated strength amid market pullbacks. We don't expect an economic boom; we think the economic environment is healthy. Nor do we believe the market needs a big news event to be propelled forward. Despite these seemingly short-lived theme reversals, we think it best to continue favoring underpriced cyclical industries and ride through the occasional turbulence. A HEALTHY SKEPTICISM Our valuation readings continued to support the powerful 20-year trend toward lower interest rates. With yields moving in a sideways trading range, we tilted our fixed-income holdings toward the longer end of the maturity spectrum, where value was more prevalent relative to premium priced shorter-dated issues. The consensus view that rates would trend higher promoted a healthy skepticism on our part, which was rewarded when yields in fact moved lower. We currently view interest rates at near equilibrium, with little pressure to move considerably higher or lower. Assuming as we do that these factors remain in place, we will continue to emphasize higher-yielding corporate bonds over more richly valued government securities. A NEW NAME Effective January 2004, Meridian Investment Management Corporation, adviser to the ICON Funds, changed its name to ICON Advisers, Inc. More than just a name change, we believe it represents an opportunity for our advisory firm to introduce our story to a wider audience. The name involves many strategic marketing and communications initiatives, including a new website for shareholders like you and financial advisers, which we plan to launch this summer. In closing, we once again experienced a market that defies conventional wisdom. ICON thanks you for the opportunity to help guide you through it. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and Chief Investment Officer of the Adviser [SIDENOTE] Despite short-lived theme reversals and temporary setbacks, our valuation model suggests stocks are still priced below intrinsic value. 5 Management Overview ICON BOND FUND A discussion with Derek Rollingson, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? For the six-month period ended March 31, 2004, the ICON Bond Fund, Class I appreciated 5.56%, while its Class C shares appreciated 5.15%. These gains outpaced the Fund's benchmark, the Lehman Brothers U.S. Universal Index, which returned 3.45% over the same period. Total returns for other periods as of March 31, 2004 are listed on the next page. Limited interest-rate fluctuations and tighter yield spreads worked to the Fund's advantage during the period. With minor signs of flattening at the short and long ends of the yield curve, yields moved within a trading range, countering the prevailing opinion that rates would have to move appreciably above historical norms. In light of this, the Fund tilted its holdings toward longer maturities, which, according to our readings, demonstrated better value than premium-priced shorter-dated issues. These moves were rewarded when longer rates in fact trended lower. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Despite concerns surrounding the pace of job creation, incremental improvements in employment rolls, payroll growth and productivity gains were realized throughout the period, leading to a shift in Federal Reserve rhetoric. Although policymakers left the overnight lending rate unchanged, maintaining the target rate at a 45-year low of 1.00%, many observers believed that the Fed was laying the groundwork for raising short-term rates, possibly as early as its June meeting. Given the current low inflation environment, it was presumed that an increase in short-term rates would be measured. Meanwhile, longer rates, which often move independently of short rates, remained well within levels established by their 20-year secular decline. Against this backdrop, longer-dated investment-grade and higher-yielding corporate bonds were better positioned to retain their value, even as the benchmark 10-year U.S. Treasury yield periodically moved higher. HOW WAS THE FUND MANAGED AND HOW DID THAT AFFECT PERFORMANCE? The Fund navigated the period by going further out on the maturity spectrum while taking steps to improve credit quality based on valuation. As directed by our bond model, underpriced issues with maturities of greater than 10 years were increased from 24.98% of invested assets at the start of the fiscal year to 29.78% at period-end. In doing so, weighted average duration and maturity both increased as higher-duration bonds demonstrated better value-to-price and relative strength characteristics relative to the broader bond market. At the same time, with corporate issues outperforming during the period, U.S. Government and Agency bonds were increased from 19.9% to 24.8% of net assets as the risk premium for corporates diminished considerably. While more heavily weighted investment-grade and high-yield corporate debt positions bolstered Fund performance, spreads tightened to extreme levels amid heightened geopolitical fears and rate-hike concerns, leaving little room for further contraction among these sectors. WHAT IS THE INVESTMENT OUTLOOK FOR THE BOND MARKET? We will continue to rely on valuation-focused fundamentals in seeking out suitable bond investments rather than partake in the counterproductive exercise of forecasting interest rate movements. However, given the 20-year downward trend in longer-term rates, we anticipate yields will simply revert to historical norms that existed prior to the inflationary spiral of the late 1970s and early 1980s. With yields now trading in a sideways range of between 4% and 5%, we currently see no reason why rates must rise appreciably beyond these levels. [SIDENOTE] PORTFOLIO COMPOSITION March 31, 2004 (unaudited) Corporate Bonds: 64.7% Investment Grade 42.4% High Yield 22.3% Convertible Bonds 0.9% U.S. Government 10.0% U.S. Agency 14.8% Equities 1.0% Cash Equivalents 6.1% Percentages are based upon net assets. [SIDENOTE] PORTFOLIO HIGHLIGHTS March 31, 2004 (unaudited) Number of Bonds 80 Number of Equities 1 Weighted average maturity 11.5 years Weighted average duration 6.8 years 30-Day Current Yield (after expense limitation) 3.69% 30-Day Current Yield (before expense limitation) 3.39% Yield will fluctuate. 6 - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - The Fund was rewarded by its tilt toward longer maturities, which demonstrated better value than premium-priced shorter-dated issues. - - Underpriced issues with maturities of greater than 10 years were increased as higher-duration bonds demonstrated better value-to-price and relative strength characteristics relative to the broader bond market. - - Investment-grade and high-yield corporate debt positions bolstered Fund performance as they remained undervalued. - -------------------------------------------------------------------------------- TOP 10 BOND HOLDINGS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- U.S. Treasury, 5.000%, 2-15-11 2.4% DaimlerChrysler N.A. Holdings, 6.500%, 11-15-13 2.3% Xerox Corp. Senior Notes, 7.625%, 6-15-13 2.1% Federal National Mortgage Association (FNMA) Notes, 5.250%, 8-01-12 2.1% Tennessee Valley Authority, 5.625%, 1-18-11 1.9% Federal National Mortgage Association (FNMA) Notes, 7.125%, 1-15-30 1.9% Owens-Illinois Inc. Senior Notes, 8.100%, 5-15-07 1.8% Tennessee Valley Authority Notes, 6.875%, 12-15-43 1.8% Computer Associates International Inc. Senior Notes, 6.375%, 4-15-05 1.8% U.S. Treasury, 7.500%, 11-15-16 1.7%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS INCEPTION ENDED ONE FIVE SINCE DATE 3/31/04* YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Bond Fund-Class I 10/1/02 5.56% 11.48% N/A 9.29% - ------------------------------------------------------------------------------------------ Lehman Brothers U.S. Universal Index 3.45% 6.73% 7.11% - ------------------------------------------------------------------------------------------ ICON Bond Fund-Class C 10/21/02 5.15% 10.82% N/A 10.61% - ------------------------------------------------------------------------------------------ Lehman Brothers U.S. Universal Index 3.45% 6.73% 8.66% - ------------------------------------------------------------------------------------------
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 waive certain Fund expenses; without these waivers, returns would have been lower. The waiver provisions may be terminated in the future. * Not annualized. 7 Management Overview (continued) ICON BOND FUND - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
LEHMAN BROTHERS U.S. UNIVERSAL ICON BOND FUND-CLASS I INDEX ---------------------- ------------------------------ 10/01/02 10000 10000 12/31/02 10053 10199 3/31/03 10245 10383 6/30/03 10853 10703 9/30/03 10819 10712 12/31/03 11069 10793 3/31/04 11421 11082
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. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 8 Schedule of Investments (unaudited) ICON BOND FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- BONDS 90.4% CORPORATE BONDS 64.7% $ 450,000 Allied Waste North America Inc. Guaranteed, 10.000%, 8-1-09 $ 482,625 316,000 Altria Group, Inc., 7.000%, 11-4-13 348,245 700,000 AMR Corporation Debentures, 9.000%, 8-1-12 596,750 372,000 AT&T Corporation Notes, 7.750%, 3-1-07 418,656 450,000 AT&T Wireless Services Inc. Senior Notes, 8.750%, 3-1-31 583,651 500,000 Boeing Co. Debentures, 8.750%, 8-15-21 664,640 350,000 Capital One Financial Corp. Senior Notes, 6.875%, 2-1-06 378,108 391,000 Cendant Corp. Senior Notes, 7.375%, 1-15-13 458,716 450,000 Cincinnati Financial Corp. Debentures, 6.900%, 5-15-28 516,940 525,000 CITGroup Inc. Senior Notes, 7.750%, 4-2-12 634,103 400,000 Comcast Corp. Notes, 8.875%, 5-1-17 522,497 500,000 Comcast Corp. Notes, 6.200%, 11-15-08 553,392 800,000 Computer Associates International Inc. Senior Notes, 6.375%, 4-15-05 830,000 300,000 Cox Communications Inc. Notes, 7.750%, 11-1-10 357,966 500,000 Credit Suisse FB USA Inc. Notes, 5.500%, 8-15-13 531,687 500,000 CSC Holdings Inc. Senior Notes, 7.250%, 7-15-08 527,500 1,000,000 Daimlerchrysler N.A. Holdings, 6.500%, 11-15-13 1,081,555 260,000 FairFax Financial Holdings Notes, 7.375%, 3-15-06(f) 274,300 6,000 First American Corp. Debentures, 7.550%, 4-1-28 6,697 783,000 Ford Motor Company Notes, 7.450%, 7-16-31 781,961 350,000 Ford Motor Credit Co. Notes, 7.375%, 10-28-09 384,175 185,000 GTE North Inc. Debentures, 6.940%, 4-15-28 200,837
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PRINCIPAL AMOUNT MARKET VALUE $ 350,000 The Gap Inc. Notes, 6.900%, 9-15-07 $ 388,500 300,000 The Gap Inc. Notes, 8.800%, 12-15-08 372,000 410,000 General Electric Capital Corp. Notes, 6.750%, 3-15-32 473,618 354,000 General Electric Capital Corp. Notes, 7.375%, 1-19-10 424,526 600,000 General Motors Acceptance Co. Notes, 6.125%, 8-28-07 646,630 537,000 General Motors Acceptance Co. Notes, 7.200%, 1-15-11 588,517 240,000 Georgia-Pacific Corp. Notes, 8.875%, 5-15-31 268,800 350,000 Georgia-Pacific Corp. Debentures, 7.375%, 12-1-25 346,500 300,000 Goldman Sachs Group Inc. Notes, 6.600%, 1-15-12 343,818 600,000 Halliburton Company Notes, 6.000%, 8-1-06 643,634 680,000 Hertz Corp. Senior Notes, 7.625%, 6-1-12 748,527 300,000 Hilton Hotels Corp. Senior Notes, 7.500%, 12-15-17 335,250 500,000 Household Finance Corp. Senior Unsubordinated, 5.875%, 2-1-09 554,103 400,000 JC Penney Co. Inc. Debentures, 7.950%, 4-1-17 473,000 450,000 John Hancock Notes, 7.375%, 2-15-24 531,295 455,000 J.P. Morgan Chase & Co. Subordinated Notes, 6.750%, 8-15-08 519,120 500,000 Liberty Media Corp. Debentures, 8.250%, 2-1-30 615,530 250,000 Marsh Supermarket Inc. Guaranteed, 8.875%, 8/1/07 250,625 500,000 Mediacom Broadband LLC Guaranteed, 11.000%, 7-15-13 535,000 500,000 Morgan Stanley Notes, 7.250%, 4-1-32 603,742 500,000 Motorola Inc. Debentures, 6.500%, 11-15-28 507,543 440,000 News America Holdings Inc. Debentures, 7.750%, 2-1-24 520,632
9 Schedule of Investments (continued) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- $ 300,000 News America Holdings Guaranteed, 8.150%, 10-17-36 $ 378,371 575,000 Nextel Communications Inc. Senior Notes, 9.375%, 11-15-09 625,313 829,000 Owens-Illinois Inc. Senior Notes, 8.100%, 5-15-07 845,580 345,000 Pep Boys Manny Moe & Jack Notes, 7.000%, 6-1-05 357,075 300,000 Phillips Petroleum Notes, 8.750%, 5-25-10 381,545 600,000 PSEG Power LLC Guaranteed, 6.950%, 6-1-12 691,016 350,000 Royal Caribbean Cruises Ltd. Senior Notes, 6.750%, 3-15-08(f) 374,500 382,000 SBC Communications Inc. Notes, 6.250%, 3-15-11 427,784 160,000 SEMCO Energy Senior Notes, 8.000%, 6-30-16 167,600 300,000 Starwood Hotels & Resorts Worldwide Inc. Guaranteed, 7.875%, 5-1-12 339,000 515,000 Tesoro Petroleum Corp. Guaranteed, 9.000%, 7-1-08 537,531 399,000 Time Warner Inc. Debentures, 7.570%, 2-1-24 459,481 350,000 Toys R Us Inc. Notes, 7.625%, 8-1-11 365,750 250,000 Tyco International Ltd. Guaranteed, 6.125%, 11-1-08(f) 271,989 560,000 Verizon New Jersey Inc. Debentures, 5.875%, 1-17-12 610,469 300,000 Wisconsin Power & Light Co. Notes, 7.000%, 6-15-07 337,780 900,000 Xerox Corp. Senior Notes, 7.625%, 6-15-13 958,500 - ------------------------------------------------- TOTAL CORPORATE BONDS 29,955,195 CONVERTIBLE BONDS 0.9% 400,000 Providian Financial Corp., 3.250%, 8-15-05 393,000 - ------------------------------------------------- TOTAL CONVERTIBLE BONDS 393,000
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PRINCIPAL AMOUNT MARKET VALUE U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS 24.8% $ 200,000 Federal Farm Credit Bank Notes, 5.900%, 7-21-08 $ 224,361 255,000 Federal Farm Credit Bank Notes, 5.900%, 8-4-08 286,111 210,000 Federal Home Loan Bank (FHLB), 5.945%, 7-28-08 236,534 450,000 Federal Home Loan Bank (FHLB), 5.875%, 2-15-11 505,173 588,000 Federal Home Loan Mortgage Corporation (FHLMC) Notes, 5.125%, 7-15-12 633,286 600,000 Federal Home Loan Mortgage Corporation (FHLMC) Notes, 6.250%, 7-15-32 683,965 700,000 Federal National Mortgage Association (FNMA) Notes, 7.125%, 1-15-30 879,569 550,000 Federal National Mortgage Association (FNMA) Notes, 7.250%, 5-15-30 701,634 900,000 Federal National Mortgage Association (FNMA) Notes, 5.250%, 8-01-12 955,589 300,000 Private Export Funding Guaranteed, 6.490%, 7-15-07 337,862 800,000 Tennessee Valley Authority, 5.625%, 1-18-11 892,590 800,000 Tennessee Valley Authority Notes, 6.875%, 12-15-43 836,586 669,000 U.S. Treasury, 4.875%, 2-15-12 730,282 1,000,000 U.S. Treasury, 5.000%, 2-15-11 1,103,906 500,000 U.S. Treasury, 5.750%, 8-15-10 574,062 559,000 U.S. Treasury, 6.625%, 5-15-07 636,059 600,000 U.S. Treasury, 7.500%, 11-15-16 791,015 321,000 U.S. Treasury, 8.750%, 5-15-17 465,513 - ------------------------------------------------- TOTAL U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS 11,474,097 - ------------------------------------------------- TOTAL BONDS (COST $39,354,897) 41,822,292
10 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES MARKET VALUE - ------------------------------------------------- COMMON STOCKS 1.0% FINANCIAL 1.0% REAL ESTATE INVESTMENT TRUSTS 7,200 Novastar Financial, Inc. $ 474,840 - ------------------------------------------------- TOTAL FINANCIAL 474,840 - ------------------------------------------------- TOTAL COMMON STOCKS (COST $178,262) 474,840 CONTRACTS (100 SHARES PER CONTRACT) - ------------------------------------------------- CALL OPTIONS PURCHASED 0.1% 400 Xerox Corporation Expiration January 2006, Exercise Price $20.00 50,000 - ------------------------------------------------- TOTAL CALL OPTIONS PURCHASED (COST $46,012) 50,000 PRINCIPAL AMOUNT - ------------------------------------------------- SHORT-TERM INVESTMENTS 6.1% U.S. GOVERNMENT AGENCIES 3.0% $1,416,000 Federal Home Loan Bank (FHLB) Discount Note, 0.7500%, 4-1-04 1,416,000 - ------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES 1,416,000
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PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- VARIABLE RATE DEMAND NOTE 3.1% $1,425,389 American Family Demand Note, 0.7008%# $ 1,425,389 - ------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 1,425,389 - ------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $2,841,389) 2,841,389 - ------------------------------------------------- TOTAL INVESTMENTS 97.6% (COST $42,420,560) 45,188,521 - ------------------------------------------------- OTHER ASSETS LESS LIABILITIES 2.4% 1,096,370 - ------------------------------------------------- NET ASSETS 100.0% $46,284,891 - -------------------------------------------------
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 March 31, 2004. f Foreign security Dates shown on securities are the due dates of the obligations. 11 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 14.30% for the six-month period ended March 31, 2004, while its Class C shares appreciated 13.88%. In comparison, the Fund's benchmark, the S&P 1500 Index, returned 14.75% over the same period. Total returns for other periods as of March 31, 2004 are listed on page 14. Despite capturing solid gains for the period, the Fund came under pressure amid valuation-related profit-taking in the Technology sector during the fourth quarter of 2003, followed by a two-month cyclical pullback in early 2004 that saw renewed strength among more defensive issues. Given the Fund's economically sensitive orientation, these short-term theme reversals worked against performance as they bolstered areas in which the Fund was underexposed. Although our overall valuation and relative strength readings continued to support a recovery-based theme, the resulting tug of war limited the Fund's advance. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Having entered the period revealing a modest growth bias, as measured on a price-to-earnings (P/E) basis, the Fund suffered when shares considered more richly valued encountered severe resistance. Although our valuation readings would most likely classify many of these shares as underpriced, our subsequent shift to a value bias failed to offset earlier damage. It should be noted that the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We believe this to be more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Stocks moved higher during the period even as market psychology turned increasingly negative. Amid steady improvements in economic and company fundamentals, investors were seemingly distracted by unwarranted concerns such as overheated valuations, rising interest rates, lackluster job growth, and sluggish consumer spending. While impatient sellers overreacted to these and other misperceptions, most industries remained underpriced based on our estimate of fair value. Further exacerbating investor uncertainty was fears surrounding heightened terrorist activities and world unrest. Although economically sensitive sectors bore the brunt of event-driven sell-offs, these disruptions proved temporary as the broader market rebounded late in the period. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A cyclical orientation as well as our exposure or lack thereof to several key sectors and industries worked against the Fund during the period. On the sector level, the Fund was hindered relative to the benchmark by the Information Technology and Energy sectors. Within the Information Technology area, underweight positions in the computer hardware and communications equipment industries had a negative impact on the Fund. A limited weighting in the Energy [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 99.5% Top 10 Equity Holdings 17.5% Number of Stocks 89 Cash Equivalents 0.5% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Labor Ready, Inc. 2.0% AO VimpelCom 1.9% PacifiCare Health Systems, Inc. 1.8% The Manitowoc Company, Inc. 1.8% URS Corporation 1.8% Apollo Group, Inc. 1.8% Granite Construction Incorporated 1.7% STET Hellas Telecommunications S.A. 1.6% America Movil S.A. de C.V. 1.6% Cognizant Technology Solutions Corp. 1.5% Percentages are based upon net assets. 12 sector hurt performance as rising energy prices during the period bolstered the group. Meanwhile, stock selection in leisure products and industrial machinery proved detrimental, as did an overweighting in airlines. In contrast, sectors contributing positive performance included Materials, Consumer Discretionary and Telecommunications & Utilities. Within Materials, steel demonstrated strength on rising global demand, while Telecommunications leader wireless services benefited from capacity enhancements. Other industries making notable contributions were managed health care, and employment services. Measurable individual contributors included the U.S.-traded American Depositary Receipts ("ADRs") of wireless services provider AO VimpelCom, which capitalized on its leadership position in tapping the rapidly growing Russian cell phone market. Managed health care provider PacifiCare Health Systems, Inc. also advanced, having reported strong enrollment trends. Auto finance company AmeriCredit Corp. posted better-than-expected earnings due to credit quality improvements. Favorable prospects for federal markets boosted engineering services provider URS Corp., while automotive OEM gains drove growth for audio system supplier Harman International Industries, Inc. In contrast, among the Fund's poorest-performing stocks were messaging services provider j2 Global Communications, Inc., which fell on unexpectedly weak performance in several of its markets. Elsewhere, discount carrier JetBlue Airways Corp. faced stiff headwinds from higher fuel costs and intense pricing competition. Specialty toolmaker SPX Corp. retreated as analysts downgraded the stock on earnings quality concerns. Educational toymaker LeapFrog Enterprises Inc. and collectibles marketer Action Performance Companies, Inc. also declined amid forecasting missteps and slowing revenues. These companies were all sold as their relative strength weakened. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? Going forward, we anticipate continued strength as the cyclical theme benefits from sustainable economic expansion. With stocks continuing to trade below our estimate of intrinsic value, we believe the potential for further upside still exists. This combination of cyclical underpriced industries and an expanding domestic economy provides the Fund with both the opportunity and the catalyst to capture fair value moves within the broader market. While interruptions certainly pose a near-term threat, our overall outlook remains positive. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Relative performance was hampered by holdings in the Information Technology Sector and by minimal exposure to the Energy sector. - - Several stocks within the Internet software & services industry caused a negative impact to returns. - - Positive performance was contributed by the Consumer Discretionary and Telecommunications & Utilities sectors, as well as Materials, which was driven by the steel industry. - - The wireless services, managed health care, and employment services industries all aided performance. - - Stocks that contributed significantly to performance included AO VimpelCom, PacifiCare Health Systems, Inc., and AmeriCredit Corp., while j2 Global Communications, Inc., JetBlue Airways Corp. and SPX Corp. were among the Fund's poorest individual performers. 13 Management Overview (continued) ICON CORE EQUITY FUND - -------------------------------------------------------------------------------- SECTOR COMPOSITION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Consumer Discretionary 19.9% Industrials 17.4% Information Technology 15.8% Financial 11.8% Materials 10.8% Healthcare 9.2% Leisure & Consumer Staples 6.9% Telecommunications & Utilities 4.7% Energy 3.0%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS INCEPTION ENDED ONE FIVE SINCE DATE 3/31/04* YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Core Equity Fund-Class I 10/12/00 14.30% 49.18% N/A 7.86% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% -1.96% - ------------------------------------------------------------------------------------------ ICON Core Equity Fund-Class C 11/27/00 13.88% 48.21% N/A 7.35% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% -2.41% - ------------------------------------------------------------------------------------------
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. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON CORE EQUITY FUND-CLASS I S&P 1500 INDEX ----------------------------- -------------- 10/12/02 10000 10000 3/31/01 10810 8861 3/31/02 13234 9049 3/31/03 8713 6818 3/31/04 12998 9336
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 10/12/00 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 14 Schedule of Investments (unaudited) ICON CORE EQUITY FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- COMMON STOCKS 99.5% CONSUMER DISCRETIONARY 19.9% APPAREL RETAIL 1.2% 23,100 Chico's FAS, Inc.(a) $ 1,071,840 AUTOMOBILE MANUFACTURERS 3.4% 78,900 Ford Motor Company 1,070,673 16,000 General Motors Corporation 753,600 39,000 Winnebago Industries, Inc. 1,215,630 - ------------------------------------------------- 3,039,903 AUTOMOBILE PARTS & EQUIPMENT 4.0% 88,400 Aftermarket Technology Corp.(a) 1,298,596 15,100 BorgWarner, Inc. 1,280,933 17,400 Lear Corporation 1,078,104 - ------------------------------------------------- 3,657,633 HOUSEHOLD APPLIANCES 1.2% 36,400 Helen of Troy Limited(a)(f) 1,128,764 DEPARTMENT STORES 1.0% 17,000 Federated Department Stores, Inc. 918,850 FOOD DISTRIBUTORS 1.1% 40,400 Nash Finch Company 956,672 HOME FURNISHINGS 1.0% 28,600 Furniture Brands International, Inc. 920,920 HOMEBUILDING 1.0% 20,600 Hovnanian Enterprises, Inc.(a) 888,890 INTERNET RETAIL 0.8% 74,400 1-800-FLOWERS.COM, Inc.(a) 712,008 RESTAURANTS 1.1% 31,200 Ruby Tuesday, Inc. 1,003,080 SPECIALTY STORES 4.1% 23,400 Michaels Stores, Inc. 1,137,708 22,400 The Sports Authority, Inc.(a) 897,792 28,900 United Auto Group, Inc. 790,704 14,700 Zale Corporation(a) 904,785 - ------------------------------------------------- 3,730,989 - ------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 18,029,549 ENERGY 3.0% OIL & GAS EXPLORATION & PRODUCTION 1.0% 30,600 Ultra Petroleum Corp.(a)(f) 918,306
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE OIL & GAS REFINING, MARKETING & TRANSPORTATION 2.0% 18,500 Ashland Inc. $ 860,065 13,300 Teekay Shipping Corporation(f) 916,370 - ------------------------------------------------- 1,776,435 - ------------------------------------------------- TOTAL ENERGY 2,694,741 FINANCIAL 11.8% ASSET MANAGEMENT & CUSTODY BANKS 1.0% 28,000 The Bank of New York Company, Inc. 882,000 CONSUMER FINANCE 5.9% 59,500 AmeriCredit Corp.(a) 1,013,285 15,900 Capital One Financial Corporation 1,199,337 44,700 CompuCredit Corporation(a) 944,958 35,200 First Cash Financial Services, Inc.(a) 1,183,776 74,000 Providian Financial Corporation(a) 969,400 - ------------------------------------------------- 5,310,756 INSURANCE BROKERS 1.0% 24,200 Hilb, Rogal and Hamilton Company 922,020 MULTI-LINE INSURANCE 2.2% 30,300 American Financial Group, Inc. 903,849 18,900 Loews Corporation 1,116,234 - ------------------------------------------------- 2,020,083 PROPERTY & CASUALTY INSURANCE 1.1% 15,800 MBIA Inc. 990,660 THRIFTS & MORTGAGE FINANCE 0.6% 15,600 The PMI Group, Inc. 582,816 - ------------------------------------------------- TOTAL FINANCIAL 10,708,335 HEALTHCARE 9.2% HEALTH CARE DISTRIBUTORS 1.0% 20,500 Omnicare, Inc. 908,765 HEALTH CARE EQUIPMENT 1.5% 14,200 ResMed Inc.(a) 641,698 12,400 Respironics(a) 669,848 - ------------------------------------------------- 1,311,546 HEALTH CARE FACILITIES 1.0% 58,900 Province Healthcare Company(a) 936,510 HEALTH CARE SERVICES 1.0% 20,300 Renal Care Group, Inc.(a) 928,928
15 Schedule of Investments (continued) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- MANAGED HEALTH CARE 4.7% 7,400 Aetna Inc. $ 663,928 7,300 Anthem, Inc.(a) 661,672 30,450 Coventry Health Care, Inc.(a) 1,288,949 42,400 PacifiCare Health Systems, Inc.(a) 1,676,920 - ------------------------------------------------- 4,291,469 - ------------------------------------------------- TOTAL HEALTHCARE 8,377,218 INDUSTRIALS 17.4% AEROSPACE AND DEFENSE 1.0% 15,400 L-3 Communications Holdings, Inc. 915,992 BUILDING PRODUCTS 3.9% 32,500 Lennox International Inc. 602,875 20,800 Masco Corporation 633,152 39,900 Universal Forest Products, Inc. 1,231,314 27,200 York International Corporation 1,069,232 - ------------------------------------------------- 3,536,573 COMMERCIAL PRINTING 0.7% 20,100 John H. Harland Company 625,512 CONSTRUCTION & ENGINEERING 3.5% 63,200 Granite Construction Incorporated 1,502,264 56,900 URS Corporation(a) 1,637,582 - ------------------------------------------------- 3,139,846 DIVERSIFIED COMMERCIAL SERVICES 3.3% 15,900 Apollo Group, Inc.(a) 1,369,149 18,300 University of Phoenix Online(a) 1,592,466 - ------------------------------------------------- 2,961,615 EMPLOYMENT SERVICES 3.2% 38,900 Gevity HR, Inc. 1,135,880 131,500 Labor Ready, Inc.(a) 1,777,880 - ------------------------------------------------- 2,913,760 INDUSTRIAL MACHINERY 1.8% 56,500 The Manitowoc Company, Inc. 1,671,270 - ------------------------------------------------- TOTAL INDUSTRIALS 15,764,568 INFORMATION TECHNOLOGY 15.8% APPLICATION SOFTWARE 0.8% 35,200 Magma Design Automation, Inc.(a) 736,032 COMMUNICATIONS EQUIPMENT 0.9% 83,200 Cable Design Technologies Corporation(a) 788,736 ELECTRONIC EQUIPMENT MANUFACTURERS 0.5% 42,800 Fargo Electronics(a) 483,640
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE INTERNET SOFTWARE & SERVICES 1.9% 32,700 Digital Insight Corporation(a) $ 677,544 36,000 Websense, Inc.(a) 1,065,960 - ------------------------------------------------- 1,743,504 IT CONSULTING & OTHER SERVICES 3.1% 30,700 Cognizant Technology Solutions Corporation(a) 1,389,175 31,800 ManTech International Corporation(a) 651,582 52,200 Unisys Corporation(a) 745,416 - ------------------------------------------------- 2,786,173 SEMICONDUCTORS 2.0% 39,000 OmniVision Technologies, Inc.(a) 1,065,090 14,500 Silicon Laboratories Inc.(a) 766,760 - ------------------------------------------------- 1,831,850 TECHNICAL DISTRIBUTORS 1.3% 35,400 Global Imaging Systems, Inc.(a) 1,175,988 TECHNOLOGY DISTRIBUTORS 2.7% 43,600 Arrow Electronics, Inc.(a) 1,110,056 33,800 Tech Data Corporation(a) 1,383,772 - ------------------------------------------------- 2,493,828 WIRELESS TELECOMMUNICATION SERVICES 2.6% 72,700 STET Hellas Telecommunications S.A. -- ADR 1,483,080 21,900 Telemig Celular Participacoes S.A. -- ADR 856,290 - ------------------------------------------------- 2,339,370 - ------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 14,379,121 LEISURE & CONSUMER STAPLES 6.9% CASINOS & GAMING 0.9% 15,500 Harrah's Entertainment, Inc. 850,795 HOTELS, RESORTS & CRUISE LINES 2.4% 72,100 Prime Hospitality Corp.(a) 820,498 30,200 Royal Caribbean Cruises Ltd.(f) 1,331,820 - ------------------------------------------------- 2,152,318 MOVIES & ENTERTAINMENT 1.0% 36,400 The Walt Disney Company 909,636 RESTAURANTS 1.0% 24,900 CEC Entertainment Inc.(a) 864,030 TOBACCO 1.6% 10,900 Altria Group, Inc. 593,505 14,200 R.J. Reynolds Tobacco Holdings, Inc. 859,100 - ------------------------------------------------- 1,452,605 - ------------------------------------------------- TOTAL LEISURE & CONSUMER STAPLES 6,229,384
16 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- MATERIALS 10.8% ALUMINUM 0.9% 19,200 Alcan Inc.(f) $ 859,968 COMMODITY CHEMICALS 2.0% 38,400 Headwaters Incorporated(a) 983,808 54,200 Millennium Chemicals Inc.(a) 809,748 - ------------------------------------------------- 1,793,556 CONSTRUCTION MATERIALS 1.1% 28,400 Texas Industries, Inc. 1,026,660 DIVERSIFIED CHEMICALS 1.4% 29,100 FMC Corporation(a) 1,246,062 FERTILIZER & AGRICULTURAL CHEMICALS 0.8% 52,100 Agrium Inc.(f) 765,870 SPECIALTY CHEMICALS 1.1% 32,400 OM Group, Inc.(a) 984,960 STEEL 3.5% 37,100 Carpenter Technology Corporation 1,219,848 38,100 Steel Dynamics, Inc.(a) 944,118 52,800 Steel Technologies Inc. 1,020,096 - ------------------------------------------------- 3,184,062 - ------------------------------------------------- TOTAL MATERIALS 9,861,138 TELECOMMUNICATIONS & UTILITIES 4.7% WIRELESS TELECOMMUNICATION SERVICES 4.7% 37,400 America Movil S.A. de C.V. -- ADR 1,445,510 16,200 AO VimpelCom(a) -- ADR 1,684,638 45,200 Nextel Communications, Inc.(a) 1,117,796 - ------------------------------------------------- 4,247,944 - ------------------------------------------------- TOTAL TELECOMMUNICATIONS & UTILITIES 4,247,944 - ------------------------------------------------- TOTAL COMMON STOCKS (COST $74,676,424) 90,291,998
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENT 0.5% $427,879 American Family Demand Note, 0.6908%# $ 427,879 - ------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $427,879) 427,879 - ------------------------------------------------- TOTAL INVESTMENTS 100.0% (COST $75,104,303) 90,719,877 - ------------------------------------------------- OTHER ASSETS IN EXCESS OF LIABILITIES 0.0%* 15,406 - ------------------------------------------------- NET ASSETS 100.0% $90,735,283 - -------------------------------------------------
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 March 31, 2004. f Foreign security ADR -- American Depositary Receipt * Less than 0.1% 17 Management Overview ICON COVERED CALL FUND A discussion with Robert Straus, CMT, Portfolio Manager HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Covered Call Fund, Class I rose 11.28% for the six-month period ended March 31, 2004, while its Class C shares appreciated 10.78%. In comparison, the Fund's benchmark, the S&P 1500 Index, returned 14.75% over the same period. Total returns for other periods as of March 31, 2004 are listed on page 20. The Fund's six-month underperformance is attributed to a number of reasons. Given the Fund's economically sensitive orientation, it was vulnerable to valuation-related profit taking in the Information Technology sector during the fourth quarter of 2003, as well a broader, two-month cyclical downdraft in early 2004. The Fund's covered call strategy also detracted, as robust equity gains during the period sent stock prices past their strike price, thereby limiting upside potential. Furthermore, lower implied volatility, as measured by the Chicago Board Options Exchange OEX Volatility Index, diminished the Fund's income stream, as options commanded lower premiums. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Having entered the period revealing a sizable growth bias, as measured on a price-to-earnings (P/E) basis, the Fund suffered when stocks considered more richly valued encountered severe resistance. Although our valuation readings would most likely classify many of these shares as underpriced, a subsequent shift favoring value failed to offset earlier damage. The Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We believe this to be more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Although our overall readings continued to support a recovery-based theme, fear was still pervasive and weighed heavily on the equity markets. Overheated valuations, rising interest rates and stagnant job creation were just some of the concerns that triggered a cyclical correction, even as economic fundamentals and corporate earnings recorded steady improvements. Amid several short-lived theme reversals, defensive issues strengthened despite a trend toward sustainable GDP growth. Further exacerbating investor uncertainties were fears surrounding heightened terrorist activities and world unrest. Although economically sensitive sectors bore the brunt of event-driven sell-offs, these disruptions proved temporary as the broader market rebounded late in the period. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? While the Fund's flexibility had previously worked in our favor, such was not the case during this past reporting period. Limited exposure to the Energy sector hurt performance as rising energy prices bolstered that sector. Meanwhile, overexposure to Internet software & services and apparel retail also proved detrimental and was trimmed on declining relative strength. [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 102.0% Bonds 1.2% Top 10 Equity Holdings 16.2% Number of Stocks 92 Number of Calls Outstanding 80 Cash Equivalents 0.3% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) Helen of Troy Limited 1.9% Headwaters Incorporated 1.9% Alcoa Inc. 1.7% Capital One Financial Corporation 1.6% BorgWarner, Inc. 1.6% Quicksilver, Inc. 1.5% Ultra Petroleum Corp. 1.5% Hilb, Rogal and Hamilton Company 1.5% Sonic Corp. 1.5% Oshkosh Truck Corporation 1.5% Percentages are based upon net assets. 18 In contrast, contributing sectors included Materials, Consumer Discretionary and Financials. Within Materials, a newly initiated position in steel demonstrated strength on rising global demand, while specialty stores continued to lead the Consumer group, but was trimmed on valuation concerns. Semiconductors, as well, continued an earlier run but were later pared back, having weakened considerably. Other industries making notable contributions were overweight positions in consumer finance, wireless telecommunication services and technology distributors. Stocks that contributed measurable Fund performance included Ultra Petroleum Corp., which soared when analysts upgraded this emerging exploration and production company. Leading Russian wireless operator Mobile TeleSystems also advanced as revenue growth outpaced rising expenses needed to expand its geographic footprint. Elsewhere, pawnshop operator First Cash Financial Services Inc. capitalized on its retail business model to boost earnings, while aluminum giant Alcoa Inc. reported continued leverage to higher volume and pricing increases. Finally, earnings surprises raised Oshkosh Truck Corp., which reported better-than-expected sales in its defense unit. Among the Fund's laggards, messaging services provider j2 Global Communications, Inc. fell on unexpectedly weak performance in several of its key markets. Meanwhile, women's apparel retailer Christopher & Banks Corp. posted lower same-store sales, citing a challenging operating environment. Technology services consultant ManTech International Corp. also dropped when the company lowered full-year profit projections. Additionally, Internet access provider United Online Inc. retreated amid severe pricing pressures, while specialty toolmaker SPX Corp. pulled back as analysts downgraded the stock on earnings quality concerns. These poor performers were sold from the Fund as their relative strength deteriorated. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? Going forward, we continue to see attractive value in the marketplace and believe current conditions suggest that a cyclical theme remains in place. With respect to contracting option premiums, we have gradually let calls expire on selected stocks in order to enhance upside potential. At the same time, we are writing calls closer to expiration in order to take advantage of an accelerating rate of decay and to minimize the risk of locking in low premiums for longer time periods. Lastly, we continue to write out-of-the-money calls to capture as much upside potential as possible without completely sacrificing premium income. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Equity gains sent stocks past the written call strike prices and limited the Fund's upside potential. - - The Fund suffered from an underweight position in the Energy sector. - - Positive performance was contributed by Consumer Discretionary, Financials and Materials. - - Individual stocks such as Ultra Petroleum Corp., Mobile TeleSystems, and First Cash Financial Services Inc. added significantly to returns. - - The Fund suffered from positions in j2 Global Communications, Inc., Christopher & Banks Corp., and ManTech International Corp., all which were sold from the Fund during the period. The Chicago Board Options Exchange OEX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide range of strikes. 19 Management Overview (continued) ICON COVERED CALL FUND - -------------------------------------------------------------------------------- SECTOR COMPOSITION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Consumer Discretionary 19.1% Materials 16.4% Industrials 15.7% Information Technology 14.6% Financial 13.0% Health Care 8.3% Telecommunications & Utilities 6.8% Leisure & Consumer Staples 5.4% Energy 2.7%
Percentages are based upon net assets - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS INCEPTION ENDED ONE FIVE SINCE DATE 3/31/04* YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Covered Call Fund-Class I 10/1/02 11.28% 37.31% N/A 24.02% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 27.06% - ------------------------------------------------------------------------------------------ ICON Covered Call Fund-Class C 11/21/02 10.78% 36.21% N/A 19.25% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 20.00% - ------------------------------------------------------------------------------------------
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 waive certain Fund expenses; without these waivers, returns would have been lower. The waiver provisions may be terminated in the future. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON COVERED CALL FUND-CLASS I S&P 1500 INDEX ------------------------------ -------------- 10/01/02 10000 10000 12/31/02 10490 10811 3/31/03 10050 10450 6/30/03 11770 12093 9/30/03 12400 12469 12/31/03 13541 14009 3/31/04 13799 14308
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. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 20 Schedule of Investments (unaudited) ICON COVERED CALL FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- COMMON STOCKS 102.0% CONSUMER DISCRETIONARY 19.1% APPAREL ACCESSORIES & LUXURY GOODS 2.6% 9,000 Kenneth Cole Productions, Inc.(c) $ 306,900 20,000 Quiksilver, Inc.(a)(c) 437,000 - ------------------------------------------------- 743,900 APPAREL RETAIL 0.7% 7,700 Pacific Sunwear of California, Inc.(a) 188,958 AUTO PARTS & EQUIPMENT 2.8% 5,200 BorgWarner, Inc.(c) 441,116 5,500 Lear Corporation(c) 340,780 - ------------------------------------------------- 781,896 AUTOMOBILE MANUFACTURERS 3.5% 7,500 General Motors Corporation(c) 353,250 12,800 Thor Industries, Inc.(c) 343,808 9,000 Winnebago Industries, Inc.(c) 280,530 - ------------------------------------------------- 977,588 COMPUTER & ELECTRONICS RETAIL 0.7% 3,800 Best Buy Co., Inc.(c) 196,536 DEPARTMENT STORES 1.1% 6,000 Federated Department Stores, Inc.(c) 324,300 GENERAL MERCHANDISE STORES 0.6% 7,400 Fred's, Inc.(c) 179,598 HOMEBUILDING 0.9% 6,000 Hovnanian Enterprises, Inc.(a)(c) 258,900 HOUSEHOLD APPLIANCES 1.9% 17,500 Helen of Troy Limited(a)f(c) 542,675 INTERNET RETAIL 0.7% 21,500 1-800-FLOWERS.COM, Inc.(a)(c) 205,755 SPECIALTY STORES 3.6% 8,500 The Sports Authority, Inc.(a)(c) 340,680 11,000 West Marine, Inc.(a)(c) 350,350 5,400 Zale Corporation(a)(c) 332,370 - ------------------------------------------------- 1,023,400 - ------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 5,423,506 ENERGY 2.7% OIL & GAS EXPLORATION & PRODUCTION 1.5% 14,000 Ultra Petroleum Corp.(a)f(c) 420,140
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE OIL & GAS REFINING & MARKETING & TRANSPORTATION 1.2% 7,500 Ashland Inc. $ 348,675 - ------------------------------------------------- TOTAL ENERGY 768,815 FINANCIAL 13.0% CONSUMER FINANCE 4.9% 19,000 AmeriCredit Corp.(a)(c) 323,570 6,000 Capital One Financial Corporation(c) 452,580 12,500 CompuCredit Corporation(a)(c) 264,250 10,000 First Cash Financial Services, Inc.(a) 336,300 - ------------------------------------------------- 1,376,700 INSURANCE BROKERS 1.5% 11,000 Hilb, Rogal and Hamilton Company(c) 419,100 MULTI-LINE INSURANCE 2.2% 9,500 American Financial Group, Inc. 283,385 5,700 Loews Corporation(c) 336,642 - ------------------------------------------------- 620,027 REGIONAL BANKS 1.2% 6,000 East West Bancorp, Inc.(c) 336,000 THRIFTS & MORTGAGE FINANCE 3.2% 9,000 IndyMac Bancorp, Inc.(c) 326,610 7,000 New Century Financial Corporation(c) 339,920 7,338 New York Community Bancorp, Inc.(c) 251,547 - ------------------------------------------------- 918,077 - ------------------------------------------------- TOTAL FINANCIAL 3,669,904 HEALTH CARE 8.3% HEALTH CARE DISTRIBUTORS 2.3% 7,600 Omnicare, Inc.(c) 336,908 14,000 Priority Healthcare Corporation(a)(c) 298,060 - ------------------------------------------------- 634,968 HEALTH CARE FACILITIES 2.9% 13,500 AmSurg Corp.(a)(c) 306,585 17,000 Province Healthcare Company(a)(c) 270,300 15,000 Select Medical Corporation(c) 250,500 - ------------------------------------------------- 827,385 HEALTH CARE SERVICES 1.9% 7,000 DaVita, Inc.(a)(c) 334,250 4,500 Renal Care Group, Inc.(a) 205,920 - ------------------------------------------------- 540,170
21 Schedule of Investments (continued) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- MANAGED HEALTH CARE 1.2% 8,250 Coventry Health Care, Inc.(a)(c) $ 349,222 - ------------------------------------------------- TOTAL HEALTH CARE 2,351,745 INDUSTRIALS 15.7% AEROSPACE & DEFENSE 1.8% 11,000 EDO Corporation(c) 264,880 9,000 Goodrich Corporation(c) 252,630 - ------------------------------------------------- 517,510 BUILDING PRODUCTS 3.4% 6,500 Simpson Manufacturing Co., Inc. 318,175 8,000 Universal Forest Products, Inc. 246,880 10,000 York International Corporation(c) 393,100 - ------------------------------------------------- 958,155 CONSTRUCTION & ENGINEERING 4.4% 16,300 Granite Construction Incorporated(c) 387,451 6,800 Jacobs Engineering Group Inc.(a)(c) 303,280 15,000 The Shaw Group Inc.(a)(c) 162,600 13,000 URS Corporation(a) 374,140 - ------------------------------------------------- 1,227,471 CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS 1.5% 7,500 Oshkosh Truck Corporation(c) 417,750 DIVERSIFIED COMMERCIAL SERVICES 1.9% 10,000 NCO Group, Inc.(a)(c) 233,700 3,500 University of Phoenix Online(a)(c) 304,570 - ------------------------------------------------- 538,270 EMPLOYMENT SERVICES 1.9% 8,400 Gevity HR, Inc. 245,280 22,500 Labor Ready, Inc.(a)(c) 304,200 - ------------------------------------------------- 549,480 INDUSTRIAL MACHINERY 0.8% 3,500 Ingersoll-Rand Company(f(c) 236,775 - ------------------------------------------------- TOTAL INDUSTRIALS 4,445,411 INFORMATION TECHNOLOGY 14.6% APPLICATION SOFTWARE 1.4% 5,400 Kronos Incorporated(a)(c) 175,662 11,000 Magma Design Automation, Inc.(a)(c) 230,010 - ------------------------------------------------- 405,672
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE COMMUNICATIONS EQUIPMENT 1.8% 27,000 Cable Design Technologies Corporation(a)(c) $ 255,960 15,000 SpectraLink Corporation(c) 255,450 - ------------------------------------------------- 511,410 COMPUTER STORAGE & PERIPHERALS 0.7% 6,600 SanDisk Corporation(a)(c) 187,242 ELECTRONIC EQUIPMENT MANUFACTURERS 1.1% 16,500 Technitrol, Inc.(a)(c) 310,200 HOME ENTERTAINMENT SOFTWARE 2.8% 25,500 Activision, Inc.(a)(c) 403,410 10,700 Take-Two Interactive Software, Inc.(a)(c) 393,546 - ------------------------------------------------- 796,956 INTERNET SOFTWARE & SERVICES 0.9% 12,000 Digital Insight Corporation(a)(c) 248,640 IT CONSULTING & OTHER SERVICES 1.4% 9,000 Cognizant Technology Solutions Corporation(a)(c) 407,250 SEMICONDUCTORS 0.7% 7,100 OmniVision Technologies, Inc.(a)(c) 193,901 TECHNOLOGY DISTRIBUTORS 3.8% 16,000 Avnet, Inc.(a)(c) 391,840 11,000 Global Imaging Systems, Inc.(a) 365,420 17,000 Ingram Micro Inc.(a)(c) 307,700 - ------------------------------------------------- 1,064,960 - ------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 4,126,231 LEISURE & CONSUMER STAPLES 5.4% LEISURE PRODUCTS 1.0% 7,500 SCP Pool Corporation(a)(c) 279,450 MOVIES & ENTERTAINMENT 0.8% 10,000 4Kids Entertainment, Inc.(a)(c) 223,700 RESTAURANTS 2.5% 9,500 Ruby Tuesday, Inc.(c) 305,425 12,200 Sonic Corp.(a)(c) 418,216 - ------------------------------------------------- 723,641 TOBACCO 1.1% 5,000 R.J. Reynolds Tobacco Holdings, Inc.(c) 302,500 - ------------------------------------------------- TOTAL LEISURE & CONSUMER STAPLES 1,529,291
22 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- MATERIALS 16.4% FERTILIZERS & AGRICULTURAL CHEMICALS 1.3% 10,300 Monsanto Company(c) $ 377,701 ALUMINUM 2.7% 6,000 Alcan Inc.(f(c) 268,740 14,100 Alcoa Inc.(c) 489,129 - ------------------------------------------------- 757,869 COMMODITY CHEMICALS 3.7% 9,700 Georgia Gulf Corporation 292,455 21,000 Headwaters Incorporated(a)(c) 538,020 15,500 Lyondell Chemical Company(c) 230,020 - ------------------------------------------------- 1,060,495 DIVERSIFIED CHEMICALS 1.4% 9,000 FMC Corporation(a)(c) 385,380 FERTILIZERS & AGRICULTURAL CHEMICALS 1.5% 6,500 The Scotts Company(a)(c) 416,975 METAL & GLASS CONTAINERS 1.0% 21,000 Owens-Illinois, Inc.(a)(c) 301,430 SPECIALTY CHEMICALS 1.7% 12,000 A. Schulman, Inc. 235,800 8,500 Albemarle Corporation(c) 246,500 - ------------------------------------------------- 482,300 STEEL 3.1% 5,200 Quanex Corporation 220,948 13,000 Steel Dynamics, Inc.(a)(c) 337,008 16,600 Steel Technologies Inc. 320,712 - ------------------------------------------------- 878,668 - ------------------------------------------------- TOTAL MATERIALS 4,660,818 TELECOMMUNICATIONS & UTILITIES 6.8% WIRELESS TELECOMMUNICATION SERVICES 6.8% 10,000 America Movil S.A. de C.V. -- ADR(c) 386,500 31,000 China Unicom Limited -- ADR(c) 283,815 3,000 Mobile Telesystems -- ADR(c) 394,500 10,900 Nextel Communications, Inc.(a)(c) 269,557 15,900 STET Hellas Telecommunications S.A. -- ADR 324,360 6,800 Telemig Celular Participacoes S.A. -- ADR 265,880 - ------------------------------------------------- 1,924,612 - ------------------------------------------------- TOTAL TELECOMMUNICATIONS & UTILITIES 1,924,612 - ------------------------------------------------- TOTAL COMMON STOCKS (COST $25,324,504) 28,900,333
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE CALL OPTION PURCHASED (100 SHARES PER CONTRACT)* Ford Motor Company 173 Expiration January 2006, Exercise Price $20.00 $ 9,948 - ------------------------------------------------- TOTAL CALL OPTION PURCHASED (COST $9,256) 9,948 CORPORATE BONDS 1.2% $323,000 Ford Motor Credit Co. 7.000%, 10-1-13 340,850 - ------------------------------------------------- TOTAL BOND (COST $345,195) 340,850 SHORT-TERM INVESTMENT 0.3% $ 73,617 American Family Demand Note, 0.6908%# 73,617 - ------------------------------------------------- TOTAL SHORT-TERM INVESTMENT (COST $73,617) 73,617 - ------------------------------------------------- TOTAL INVESTMENTS 103.5% (COST $25,752,572) 29,324,748 - ------------------------------------------------- LIABILITIES LESS OTHER ASSETS (3.5%) (994,623) - ------------------------------------------------- NET ASSETS 100.0% $28,330,125 - -------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign (c) Collateral for call option * Less than 0.1% Dates shown on securities are due dates of the obligations. 23 Schedule of Investments (unaudited) ICON COVERED CALL FUND - -------------------------------------------------------------------------------- SCHEDULE OF WRITTEN OPTIONS March 31, 2004 - --------------------------------------------------------------------------------
CONTRACTS UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE (100 SHARES PER CONTRACT) MARKET VALUE - ----------------------------------------------------------------------------------------------- CALL OPTIONS 1-800-FLOWERS.COM, Inc. Expiration April 2004, Exercise Price $10.00 215 $ 4,837 4Kids Entertainment, Inc. Expiration May 2004, Exercise Price $25.00 100 7,000 Activision, Inc. Expiration April 2004, Exercise Price $15.00 255 26,137 Albemarle Corporation Expiration June 2004, Exercise Price $35.00 85 1,063 Alcan Inc. Expiration May 2004, Exercise Price $50.00 60 2,550 Alcoa Inc. Expiration April 2004, Exercise Price $35.00 141 10,927 America Movil S.A. de C.V. Expiration May 2004, Exercise Price $40.00 100 10,000 AmeriCredit Corp. Expiration May 2004, Exercise Price $20.00 190 8,550 AmSurg Corp. Expiration May 2004, Exercise Price $23.375 135 11,813 Avnet, Inc. Expiration April 2004, Exercise Price $25.00 160 8,800 Best Buy Co., Inc. Expiration April 2004, Exercise Price $55.00 38 722 BorgWarner, Inc. Expiration April 2004, Exercise Price $85.00 35 6,037 BorgWarner, Inc. Expiration April 2004, Exercise Price $100.00 17 213 Cable Design Technologies Corporation Expiration April 2004, Exercise Price $10.00 270 6,075 Capital One Financial Corporation Expiration May 2004, Exercise Price $80.00 60 12,450 China Unicom Limited Expiration April 2004, Exercise Price $12.50 315 788 Cognizant Technology Solutions Corporation Expiration April 2004, Exercise Price $55.00 90 450 CompuCredit Corporation Expiration April 2004, Exercise Price $22.50 125 4,687 Coventry Health Care, Inc. Expiration May 2004, Exercise Price $45.00 82 10,455 DaVita, Inc. Expiration April 2004, Exercise Price $40.00 70 54,250 Digital Insight Corporation Expiration May 2004, Exercise Price $25.00 120 3,300 East West Bancorp, Inc. Expiration April 2004, Exercise Price $55.00 60 9,150 EDO Corporation Expiration April 2004, Exercise Price $30.00 110 2,750 Federated Department Stores, Inc. Expiration May 2004, Exercise Price $55.00 60 11,250 FMC Corporation Expiration April 2004, Exercise Price $35.00 90 70,650 Fred's, Inc. Expiration April 2004, Exercise Price $25.00 74 3,330 General Motors Corporation Expiration May 2004, Exercise Price $50.00 75 4,687
24 - -------------------------------------------------------------------------------- SCHEDULE OF WRITTEN OPTIONS March 31, 2004 - --------------------------------------------------------------------------------
CONTRACTS UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE (100 SHARES PER CONTRACT) MARKET VALUE - ----------------------------------------------------------------------------------------------- Goodrich Corporation Expiration May 2004, Exercise Price $35.00 90 900 Granite Construction Incorporated Expiration June 2004, Exercise Price $25.00 90 6,525 Headwaters Incorporated Expiration May 2004, Exercise Price $22.50 210 75,600 Helen of Troy Limited Expiration May 2004, Exercise Price $30.00 88 20,240 Helen of Troy Limited Expiration May 2004, Exercise Price $35.00 87 5,438 Hilb, Rogal and Hamilton Company Expiration May 2004, Exercise Price $40.00 110 6,325 Hovnanian Enterprises, Inc. Expiration April 2004, Exercise Price $42.50 60 10,350 IndyMac Bancorp, Inc. Expiration April 2004, Exercise Price $35.00 90 15,750 Ingersoll-Rand Company Expiration May 2004, Exercise Price $70.00 35 5,512 Ingram Micro Inc. Expiration April 2004, Exercise Price $17.50 170 14,025 Jacobs Engineering Group Inc. Expiration April 2004, Exercise Price $50.00 43 538 Kenneth Cole Productions, Inc. Expiration April 2004, Exercise Price $35.00 90 6,525 Kronos Incorporated Expiration April 2004, Exercise Price $35.00 54 1,755 Labor Ready, Inc. Expiration May 2004, Exercise Price $12.50 225 32,062 Lear Corporation Expiration May 2004, Exercise Price $65.00 55 5,913 Loews Corporation Expiration May 2004, Exercise Price $65.00 57 1,425 Lyondell Chemical Company Expiration May 2004, Exercise Price $17.50 155 1,163 Magma Design Automation, Inc. Expiration April 2004, Exercise Price $25.00 110 1,375 Mobile Telesystems Expiration May 2004, Exercise Price $125.00 30 33,600 Monsanto Company Expiration April 2004, Exercise Price $30.00 100 66,500 NCO Group, Inc. Expiration May 2004, Exercise Price $25.00 100 7,000 New Century Financial Corporation Expiration May 2004, Exercise Price $60.00 70 2,100 New York Community Bancorp, Inc. Expiration April 2004, Exercise Price $30.00 73 31,820 Nextel Communications, Inc. Expiration May 2004, Exercise Price $30.00 109 1,907 Omnicare, Inc. Expiration May 2004, Exercise Price $47.50 76 5,510 OmniVision Technologies, Inc. Expiration April 2004, Exercise Price $30.00 71 4,083 Oshkosh Truck Corporation Expiration April 2004, Exercise Price $50.00 75 44,625
25 Schedule of Investments (continued) (unaudited) - -------------------------------------------------------------------------------- SCHEDULE OF WRITTEN OPTIONS March 31, 2004 - --------------------------------------------------------------------------------
CONTRACTS UNDERLYING SECURITY/ EXPIRATION DATE/ EXERCISE PRICE (100 SHARES PER CONTRACT) MARKET VALUE - ----------------------------------------------------------------------------------------------- Owens-Illinois, Inc. Expiration May 2004, Exercise Price $15.00 215 10,213 Priority Healthcare Corporation Expiration April 2004, Exercise Price $25.00 140 1,400 Province Healthcare Company Expiration May 2004, Exercise Price $17.50 170 6,375 Quiksilver, Inc. Expiration May 2004, Exercise Price $22.50 200 17,500 R.J. Reynolds Tobacco Holdings, Inc. Expiration April 2004, Exercise Price $70.00 50 375 Ruby Tuesday, Inc. Expiration May 2004, Exercise Price $30.00 30 7,950 Ruby Tuesday, Inc. Expiration May 2004, Exercise Price $35.00 65 2,275 SanDisk Corporation Expiration April 2004, Exercise Price $32.50 66 1,815 The Scotts Company Expiration June 2004, Exercise Price $65.00 65 12,675 SCP Pool Corporation Expiration April 2004, Exercise Price $40.00 75 750 Select Medical Corporation Expiration April 2004, Exercise Price $20.00 150 750 The Shaw Group Inc. Expiration April 2004, Exercise Price $15.00 150 1,125 Sonic Corp. Expiration April 2004, Exercise Price $35.00 50 2,250 Sonic Corp. Expiration June 2004, Exercise Price $40.00 72 1,980 SpectraLink Corporation Expiration May 2004, Exercise Price $20.00 150 9,375 The Sports Authority, Inc. Expiration April 2004, Exercise Price $45.00 85 1,062 Steel Dynamics, Inc. Expiration April 2004, Exercise Price $25.00 136 8,160 Take-Two Interactive Software, Inc. Expiration April 2004, Exercise Price $37.50 107 9,095 Technitrol, Inc. Expiration April 2004, Exercise Price $25.00 165 2,063 Thor Industries, Inc. Expiration May 2004, Exercise Price $30.00 128 9,280 Ultra Petroleum Corp. Expiration May 2004, Exercise Price $35.00 140 7,000 University of Phoenix Online Expiration May 2004, Exercise Price $90.00 35 10,500 West Marine, Inc. Expiration April 2004, Exercise Price $30.00 110 24,200 Winnebago Industries, Inc. Expiration April 2004, Exercise Price $37.50 90 225 York International Corporation Expiration May 2004, Exercise Price $45.00 100 1,250 Zale Corporation Expiration May 2004, Exercise Price $60.00 54 17,280 - ----------------------------------------------------------------------------------------------- TOTAL OPTIONS WRITTEN (PREMIUMS RECEIVED $468,687) 8,453 $868,410
26 Management Overview ICON EQUITY INCOME FUND A discussion with the Portfolio Management Team HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? The ICON Equity Income Fund, Class I advanced 19.69% for the six-month period ended March 31, 2004. At the same time, its Class C shares appreciated 19.12%, both of which outperformed the 14.75% return for the Fund's benchmark, the S&P 1500 Index. Total returns for other periods as of March 31, 2004 are listed on page 29. In light of volatile equity markets and declining value-to-price ratios during the period, the Fund took a more conservative stance, reducing its pure equity exposure while increasing its weighting in income-producing investments such as preferred stocks and convertible bonds. By doing so, the Fund lowered its risk profile yet maintained equity-like exposure to the residual intrinsic value we continue to detect. However, in increasing its weighting in convertible bonds, the Fund sidestepped supply issues associated with that marketplace by creating a blended security, combining a company's corporate bond with a call option on its stock. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Other performance considerations during the period included the Fund's value bias, as measured on a price-to-earnings (P/E) basis. Although our valuation readings classified much of the Fund's holdings as underpriced, returns may have benefited when stocks generally considered more growth-oriented encountered severe resistance amid valuation-related profit taking during the fourth quarter of 2003 and a two-month cyclical correction in early 2004. The Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We believe this to be more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Despite their seemingly robust gains, stocks came under pressure during the period as geopolitical tensions reignited in the wake of the overseas terrorist events. Although economic fundamentals demonstrated incremental improvements, conflicting data exacerbated market uncertainty as investors grappled with misplaced concerns surrounding lackluster job growth, weaker consumer spending and higher interest rates. Short-term interest rates remained at 45-year lows and given the current low-inflation environment, it seems likely that any increase would be gradual. Furthermore, with longer rates experiencing a 20-year secular decline, we anticipate that yields will merely revert to historical norms, ranging between 4.0% and 5.0%. That being said, we currently see no reason for interest rates to rise appreciably above these levels. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? Positive contributions from all sectors with notable outperformance among overweights in Industrials and Consumer Discretionary worked [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) EQUITIES 82.7% COMMON STOCKS 72.2% PREFERRED STOCKS 4.5% CONVERTIBLE PREFERRED STOCKS 6.0% TOP 10 EQUITY HOLDINGS 16.2% NUMBER OF STOCKS 121 OPTIONS PURCHASED CALL OPTIONS 0.2% NUMBER OF CONTRACTS 4 BONDS & CASH EQUIVALENTS 18.3% CONVERTIBLE CORPORATE BONDS 10.0% CORPORATE BONDS 4.0% CASH EQUIVALENTS 4.3% NUMBER OF BONDS 18 Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS March 31, 2004 (unaudited) NOVASTAR FINANCIAL, INC. 2.0% KIMBERLY-CLARK CORPORATION 1.8% KNIGHTSBRIDGE TANKERS LTD. 1.7% SMITH & NEPHEW PLC 1.7% STEEL TECHNOLOGIES INC. 1.6% GEVITY HR, INC. 1.5% METHANEX CORPORATION 1.5% FERRO CORPORATION 1.5% TIDEWATER INC. 1.5% MAYTAG, CORP. 1.4% Percentages are based upon net assets. 27 Management Overview (continued) ICON EQUITY INCOME FUND to the Fund's advantage during the period. Selected overweight industries also made significant contributions, including real estate investment trusts, oil & gas refining & marketing and employment services. Sectors detracting on a relative basis centered on the underweight Information Technology, Health Care and Energy groups. Underweight industries such as communications equipment, semiconductors, soft drinks, and regional banks proved also detrimental while an overweighting in commodity chemicals held back performance. Measurable company contributors included subprime mortgage lender NovaStar Financial Inc., which reported strong earnings-per-share gains in addition to announcing a 2-for-1 stock split. Employment services firm Gevity HR, Inc. also advanced, having implemented organizational changes that boosted client growth. Meanwhile, wholesale food distributor Nash Finch Co. resumed its turnaround after posting higher profits on revenue gains and cost-cutting measures. Drugmaker Valeant Pharmaceuticals International also rebounded, having benefited from lower quarterly losses and positive clinical data for its new Hepatitis C treatment, while Big Three automaker Ford Motor Company gained on optimism generated by the reviving economy. In contrast, shares of SpectraLink plummeted after the maker of wireless communications equipment reported missing Wall Street revenue estimates. Leading polyester fiber producer Wellman Inc. also declined after warning of wider-than-expected losses due to rising raw material costs. Likewise, offshore fleet operator Tidewater Inc. encountered guidance concerns when the company's earnings forecast fell below consensus estimates on weaker utilization trends. Elsewhere, semiconductor equipment supplier Cabot Microelectronics Corp. and integrated database resource FactSet Research Systems Inc. both retreated amid widespread profit taking in the Information Technology sector. However, these stocks did not meet the Fund's sell discipline and we continued to hold them period-end. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC MARKET? Assuming long-term interest rates trade at or near historical norms, we do not expect fixed-income markets to be adversely affected. At the same time, we continue to see modest upside in the equity markets based on our overall estimate of fair value. Although relative strength readings continue to support a cyclical theme tied to the economic recovery, we believe a conservative approach still makes sense. That being said, while our outlook is positive, we are mindful of the fact that the road to fair value is never a straight line. - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - Positive contributions from all sectors, particularly Industrials and Consumer Discretionary, aided Fund returns during the period. - - Selected industries also made significant contributions, including real estate investment trusts, oil & gas refining & marketing and employment services. - - Poorer-performing sectors included Information Technology, Health Care and Energy. - - Specific companies contributing positively to returns included NovaStar Financial Inc., Gevity HR, Inc., and Nash Finch Co., while SpectraLink, Wellman Inc., and Tidewater Inc. were poor performers. 28 - -------------------------------------------------------------------------------- SECTOR COMPOSITION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Financial 14.5% Materials 12.1% Industrials 11.1% Leisure & Consumer Staples 9.4% Consumer Discretionary 6.7% Information Technology 6.0% Telecommunications & Utilities 5.4% Energy 4.0% Healthcare 3.0%
Percentages are based upon common stock positions and net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS INCEPTION ENDED ONE FIVE SINCE DATE 3/31/04* YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Equity Income Fund-Class I 10/1/02 19.69% 48.05% N/A 30.78% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 27.06% - ------------------------------------------------------------------------------------------ ICON Equity Income Fund-Class C 11/8/02 19.12% 46.85% N/A 26.65% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 20.56% - ------------------------------------------------------------------------------------------
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 waive certain Fund expenses; without these waivers, returns would have been lower. The waiver provisions may be terminated in the future. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON EQUITY INCOME FUND-CLASS I S&P 1500 INDEX ------------------------------- -------------- 10/01/02 10000 10000 12/31/02 10819 10811 3/31/03 10091 10450 6/30/03 12073 12093 9/30/03 12482 12469 12/31/03 14475 14009 3/31/04 14940 14308
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. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 29 Schedule of Investments (unaudited) ICON EQUITY INCOME FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- COMMON STOCKS 72.2% CONSUMER DISCRETIONARY 6.7% ADVERTISING 0.4% 29,000 The Interpublic Group of Companies, Inc.(a) $ 446,020 APPAREL ACCESSORIES & LUXURY GOODS 0.5% 7,900 Kellwood Company 310,075 5,600 V. F. Corporation 261,520 - ------------------------------------------------- 571,595 APPAREL RETAIL 0.8% 15,900 The Cato Corporation 319,272 26,500 Limited Brands 530,000 - ------------------------------------------------- 849,272 AUTOMOBILE MANUFACTURERS 1.3% 28,300 General Motors Corporation 1,332,930 DEPARTMENT STORES 0.4% 10,500 Sears, Roebuck and Co. 451,080 DISTRIBUTORS 0.1% 4,800 Genuine Parts Company 157,056 FOOTWEAR 0.3% 7,000 Brown Shoe Company, Inc. 255,010 HOUSEHOLD APPLIANCES 2.2% 48,000 Maytag Corporation 1,515,360 10,800 Snap-on Incorporated 349,272 6,700 Whirlpool Corporation 461,429 - ------------------------------------------------- 2,326,061 TIRES & RUBBER 0.7% 7,100 Bandag, Incorporated 353,367 18,700 Cooper Tire & Rubber Company(f) 376,805 - ------------------------------------------------- 730,172 - ------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 7,119,196 ENERGY 4.0% INTEGRATED OIL & GAS 0.3% 5,300 ConocoPhillips 369,993 OIL & GAS EQUIPMENT & SERVICES 1.5% 56,000 Tidewater Inc. 1,575,280 OIL & GAS REFINING & MARKETING & TRANSPORTATION 2.2% 10,600 Ashland Inc. 492,794 87,500 Knightsbridge Tankers Ltd.(f) 1,861,125 - ------------------------------------------------- 2,353,919 - ------------------------------------------------- TOTAL ENERGY 4,299,192
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE FINANCIAL 14.5% ASSET MANAGEMENT & CUSTODY BANKS 0.4% 12,600 The Bank of New York Company, Inc. $ 396,900 DIVERSIFIED BANKS 1.8% 7,100 Bank of America Corporation 574,958 29,800 FleetBoston Financial Corporation 1,338,020 - ------------------------------------------------- 1,912,978 DIVERSIFIED CAPITAL MARKETS 1.0% 24,500 J.P. Morgan Chase & Co. 1,027,775 INSURANCE BROKERS 2.1% 42,500 Aon Corporation 1,186,175 32,000 Arthur J. Gallagher & Co. 1,042,240 - ------------------------------------------------- 2,228,415 INVESTMENT BANKING & BROKERAGE 0.5% 10,400 Morgan Stanley 595,920 LIFE & HEALTH INSURANCE 0.5% 12,000 Lincoln National Corporation 567,840 MULTI-LINE INSURANCE 2.5% 48,300 American Financial Group, Inc. 1,440,789 21,000 Loews Corporation 1,240,260 - ------------------------------------------------- 2,681,049 OTHER DIVERSIFIED FINANCIAL SERVICES 1.0% 11,500 Citigroup Inc. 594,550 20,900 ING Groep N.V. -- ADR 460,845 - ------------------------------------------------- 1,055,395 PROPERTY & CASUALTY INSURANCE 0.3% 15,450 Old Republic International Corporation 379,452 REAL ESTATE INVESTMENT TRUSTS 2.4% 13,200 General Growth Properties, Inc. 463,980 31,600 Novastar Financial, Inc. 2,084,020 - ------------------------------------------------- 2,548,000 THRIFTS & MORTGAGE FINANCE 2.0% 10,900 Countrywide Financial Corporation 1,045,310 31,700 New York Community Bancorp, Inc. 1,086,676 - ------------------------------------------------- 2,131,986 - ------------------------------------------------- TOTAL FINANCIAL 15,525,710
30 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- HEALTHCARE 3.0% HEALTH CARE DISTRIBUTORS 0.5% 20,500 Owens & Minor, Inc. $ 518,650 HEALTH CARE FACILITIES 0.6% 17,400 Manor Care, Inc. 614,046 HEALTH CARE SUPPLIES 1.7% 36,000 Smith & Nephew plc -- ADR 1,819,440 PHARMACEUTICALS 0.2% 11,200 Bristol-Myers Squibb Company 271,376 - ------------------------------------------------- TOTAL HEALTHCARE 3,223,512 INDUSTRIALS 11.1% AEROSPACE & DEFENSE 0.6% 24,200 Goodrich Corporation 679,294 AIR FREIGHT & LOGISTICS 0.5% 13,700 Ryder System, Inc. 530,601 BUILDING PRODUCTS 1.1% 19,400 Masco Corporation 590,536 16,000 York International Corporation 628,960 - ------------------------------------------------- 1,219,496 COMMERCIAL PRINTING 1.1% 38,000 R.R. Donnelley & Sons Company 1,149,500 CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS 0.9% 7,300 Caterpillar Inc. 577,211 20,400 Federal Signal Corporation 404,940 - ------------------------------------------------- 982,151 DIVERSIFIED COMMERCIAL SERVICES 0.3% 8,700 Deluxe Corporation 348,870 ELECTRICAL COMPONENTS & EQUIPMENT 1.5% 8,300 Cooper Industries, Ltd. 474,594 7,000 Emerson Electric Co. 419,440 8,700 Hubbell Incorporated 349,131 7,900 Roper Industries, Inc. 381,175 - ------------------------------------------------- 1,624,340 EMPLOYMENT SERVICES 1.6% 57,000 Gevity HR, Inc. 1,664,400 INDUSTRIAL CONGLOMERATES 1.1% 33,000 ALLETE, Inc. 1,157,970
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE INDUSTRIAL MACHINERY 1.6% 8,400 Briggs & Stratton Corporation $ 566,748 11,100 Harsco Corporation 505,050 40,700 Stewart & Stevenson Services, Inc. 595,034 - ------------------------------------------------- 1,666,832 MARINE 0.4% 14,000 Alexander & Baldwin, Inc. 463,120 TRADING COMPANIES & DISTRIBUTORS 0.4% 16,800 Applied Industrial Technologies, Inc. 381,696 - ------------------------------------------------- TOTAL INDUSTRIALS 11,868,270 INFORMATION TECHNOLOGY 6.0% APPLICATION SOFTWARE 1.0% 11,300 FactSet Research Systems Inc. 480,928 27,100 Jack Henry & Associates, Inc. 521,946 - ------------------------------------------------- 1,002,874 COMMUNICATIONS EQUIPMENT 1.0% 64,000 SpectraLink Corporation 1,089,920 COMPUTER HARDWARE 0.6% 27,900 Hewlett-Packard Company 637,236 DATA PROCESSING & OUTSOURCED SERVICES 1.1% 26,400 Electronic Data Systems Corporation 510,840 19,300 StarTek, Inc. 701,362 - ------------------------------------------------- 1,212,202 ELECTRONIC EQUIPMENT MANUFACTURERS 0.8% 41,900 PerkinElmer, Inc. 866,911 SEMICONDUCTOR EQUIPMENT 0.2% 5,000 Cabot Microelectronics Corporation(a) 211,200 SEMICONDUCTORS 0.5% 19,700 Intel Corporation 535,840 TECHNOLOGY DISTRIBUTORS 0.8% 17,000 Agilysys, Inc. 826,625 - ------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 6,382,808 LEISURE & CONSUMER STAPLES 9.4% CASINOS & GAMING 0.6% 10,900 Mandalay Resort Group 624,134 FOOD DISTRIBUTORS 1.2% 55,200 Nash Finch Company 1,307,136
31 Schedule of Investments (continued) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- FOOD RETAIL 2.7% 66,000 Albertson's, Inc. $ 1,461,900 47,100 SUPERVALU INC. 1,438,434 - ------------------------------------------------- 2,900,334 HOUSEHOLD PRODUCTS 1.8% 30,000 Kimberly-Clark Corporation 1,893,000 LEISURE PRODUCTS 0.6% 33,700 Callaway Golf Company 639,626 PACKAGED FOODS & MEATS 0.8% 54,300 Lance, Inc. 889,977 PUBLISHING 0.4% 9,500 Dow Jones & Company, Inc. 455,145 TOBACCO 1.3% 21,800 R.J. Reynolds Tobacco Holdings, Inc. 1,318,900 - ------------------------------------------------- TOTAL LEISURE & CONSUMER STAPLES 10,028,252 MATERIALS 12.1% ALUMINUM 0.4% 11,500 Alcoa Inc. 398,935 COMMODITY CHEMICALS 3.9% 96,700 Lyondell Chemical Company 1,435,028 147,100 Methanex Corporation(f) 1,647,520 130,000 Wellman, Inc. 1,085,500 - ------------------------------------------------- 4,168,048 CONSTRUCTION MATERIALS 1.3% 46,000 Cemex S.A. de C.V. -- ADR 1,371,720 FERTILIZERS & AGRICULTURAL CHEMICALS 0.3% 10,200 Monsanto Company 374,034 PAPER PRODUCTS 1.3% 19,200 Aracruz Celulose S.A. -- ADR 734,400 19,700 Georgia-Pacific Corp. 663,693 - ------------------------------------------------- 1,398,093 SPECIALTY CHEMICALS 3.3% 95,000 Crompton Corporation 606,100 61,000 Ferro Corporation 1,595,150 79,600 RPM International, Inc. 1,316,584 - ------------------------------------------------- 3,517,834
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE STEEL 1.6% 87,600 Steel Technologies Inc. $ 1,692,432 - ------------------------------------------------- TOTAL MATERIALS 12,921,096 TELECOMMUNICATIONS & UTILITIES 5.4% ELECTRIC UTILITIES 2.0% 31,600 Alliant Energy Corporation 823,496 51,500 Duquesne Light Holdings Inc. 1,004,250 9,100 IDACORP, Inc. 272,090 - ------------------------------------------------- 2,099,836 GAS UTILITIES 0.4% 6,900 Atmos Energy Corporation 176,433 5,700 Peoples Energy Corporation 254,505 - ------------------------------------------------- 430,938 INTEGRATED TELECOMMUNICATION SERVICES 1.5% 8,500 ALLTEL Corporation 431,120 6,300 SBC Communications Inc. 154,602 16,600 Sprint Corporation 305,938 71,800 Sprint Corporation -- Units 744,566 - ------------------------------------------------- 1,636,226 MULTI-UTILITIES & UNREGULATED POWER 1.5% 10,300 Energy East Corporation 261,208 34,000 Telemig Celular Participacoes S.A. -- ADR 1,329,400 - ------------------------------------------------- 1,590,608 - ------------------------------------------------- TOTAL TELECOMMUNICATIONS & 5,757,608 UTILITIES - ------------------------------------------------- TOTAL COMMON STOCKS (COST $66,692,464) 77,125,644
32 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- PREFERRED STOCKS 4.5% 18,200 Aetna Inc., 8.500%, 8-31-41 $ 505,596 12,200 Ambac Financial Group, Inc., 7.000%, 10-17-51 330,620 6,600 Bank One Capital Corporation, 8.000%, 1-30-31 182,160 27,000 Ford Motor Credit Company, 7.600%, 3-01-32 722,250 26,000 General Motors Acceptance Corporation, 7.350%, 8-8-32 691,080 15,000 Maytag Corporation, 7.875%, 8-1-31 409,500 16,000 MBNA Corporation, 7.500%, Series A 424,000 38,000 The Walt Disney Company, 7.000%, 11-1-31 1,024,100 18,100 Xerox Capital LLC, 6.540%, 2-28-06, Series A(f) 557,633 - ------------------------------------------------- TOTAL PREFERRED STOCKS (COST $4,807,239) 4,846,939
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE CONVERTIBLE PREFERRED STOCKS 6.0% 16,200 Ameren Corporation, 9.750%, 5-15-05 $ 452,790 16,300 CenturyTel, Inc., 6.875%, 5-15-05 390,874 4,200 Chesapeake Energy Corporation, 6.750%, 12-31-49 371,700 39,000 Constellation Brands, Inc., 5.750%, 9-1-06 1,189,500 5,700 Emmis Communications Corporation, 6.250%, 12-31-49, Series A 278,160 4,300 KeySpan Corporation, 8.750%, 5-16-05 230,050 4,000 Northrop Grumman Corporation, 7.000%, 4-4-21 506,000 9,000 Omnicare, Inc., 4.000%, 6-15-33 589,500 8,600 Philippine Long Distance Telephone Company, 3.500%, 12-31-49, Series III -- ADR 395,600 10,500 Sempra Energy, 8.500%, 5-17-05 306,600 14,400 TXU Corp., 8.750%, 11-16-05, Series C 529,200 23,200 Toy "R" Us, Inc., 6.250%, 8-16-05 1,110,816 - ------------------------------------------------- TOTAL CONVERTIBLE PREFERRED STOCKS (COST $5,882,095) 6,350,790 CALL OPTIONS PURCHASED (100 SHARES PER CONTRACT) 0.2% 400 Ford Motor Company Expiration January 2006, Exercise Price $20.00 23,000 75 McDonald's Corp. Expiration September 2004, Exercise Price $30.00 10,125 200 Royal Caribbean Cruises Ltd. Expiration September 2004, Exercise Price $50.00 43,000 1,100 XEROX Corporation Expiration January 2006, Exercise Price $20.00 151,250 - ------------------------------------------------- TOTAL CALL OPTIONS PURCHASED (COST $180,032) 227,375
33 Schedule of Investments (continued) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- CONVERTIBLE CORPORATE BONDS 10.0% $ 177,000 Adaptec, Inc., 3.000%, 3-5-07 $ 177,221 100,000 Amerisource Health Corporation, 5.000%, 12-1-07 114,875 158,000 The BISYS Group, Inc., 4.000%, 3-15-06 158,790 790,000 China Mobile Limited, 2.250%, 10-31-05(f) 792,963 1,600,000 DaimlerChrysler AG, 6.500%, 11-15-13 1,730,488 110,000 Eastman Kodak Company, 3.375%, 10-15-33 127,187 1,288,000 Household Finance Corporation, 4.750%, 7-15-13 1,296,412 600,000 International Rectifier Corporation, 4.250%, 7-15-07 603,750 1,500,000 King Pharmaceuticals, Inc., 2.750%, 11-21-06 1,447,500 135,000 Mediacom Communications Corporation, 5.250%, 7-1-06 131,287 1,230,000 Providian Financial Corporation, 3.250%, 8-15-05 1,208,475 136,000 Tower Automotive, Inc., 5.000%, 8-1-04 130,560 1,270,000 The Walt Disney Company, 2.125%, 4-15-23 1,403,350 1,000,000 UTStarcom, Inc., 0.875%, 3-1-08 1,403,750 - ------------------------------------------------- TOTAL CONVERTIBLE CORPORATE BONDS (COST $10,865,827) 10,726,608 CORPORATE BONDS 4.0% 750,000 Ford Motor Credit Co., 7.000%, 10-1-13 791,447 225,000 McDonald's Corp., 5.000%, 9-30-16 223,509 1,000,000 Royal Caribbean Cruises, 7.250%, 3-15-18(f) 1,045,000 2,100,000 Xerox Corporation, 7.625%, 6-15-13(a) 2,236,500 - ------------------------------------------------- TOTAL CORPORATE BOND (COST $4,377,178) 4,296,456
- -------------------------------------------------
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE SHORT-TERM INVESTMENTS 4.3% U.S. GOVERNMENT OBLIGATIONS 3.0% 3,153,000 FHLB Discount Note, 1.000%, 4-01-04 $ 3,153,000 - ------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS 3,153,000 VARIABLE RATE DEMAND NOTE 1.3% 1,379,833 American Family Demand Note, 0.6908%# 1,379,833 - ------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE 1,379,833 - ------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $4,532,833) 4,532,833 - ------------------------------------------------- TOTAL INVESTMENTS 101.2% (COST $97,337,668) 108,106,645 - ------------------------------------------------- LIABILITIES LESS OTHER (1,296,126) ASSETS (1.2%) - ------------------------------------------------- NET ASSETS 100.0% $106,810,519 - -------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign Dates shown on securities are due dates of the obligations. 34 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 advanced 20.21% for the six-month period ended March 31, 2004, while its Class C shares appreciated 19.84%. Both returns outpaced the Fund's benchmark, the S&P 1500 Index, which returned 14.75% over the same period. Total returns for other periods as of March 31, 2004 are listed on page 38. The Fund's performance advantage during the period can be attributed to holding concentrated long positions in leading industries favored by our valuation methodology. Furthermore, as certain overpriced industries within the Information Technology sector began to decline in relative strength, the Fund initiated short positions within the technology area that ultimately contributed to performance. The Fund is managed using an all-cap strategy, meaning we invest in securities we believe are undervalued, regardless of their location on the traditional style grid. Our investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership regardless of where it emerges. Other performance considerations during the period included the Fund's growth bias, as measured on a price-to-earnings (P/E) basis. Although our valuation readings classified many of its holdings as underpriced, the Fund may have suffered when stocks considered more richly valued based on P/E encountered severe resistance on two separate occasions. These occurrences include valuation-related profit taking in the Technology sector during the fourth quarter of 2003 and a two-month cyclical correction in early 2004 that lifted more defensive issues. Note that the Fund does not utilize P/E ratio as a valuation measure, regarding it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We believe this to be more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE PAST SIX MONTHS? Seemingly negative market trends prevailed despite the fact that stocks turned in a strong showing during the period. Although economic fundamentals and corporate earnings both made considerable headway, investors instead focused on interest rate fears, job growth concerns and consumer spending worries. Our system saw things differently, as valuations and relative strength readings continued to support an upward move, particularly as the recovery gained traction. While stock prices remained underpriced based on our estimate of fair value, event-driven sell-offs weighed heavily on the market. Adding to the uncertainty was the underpinning of terrorism, which heightened following terrorist bombings and lingering hostilities in the Middle East. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? The Fund's industry focus worked to its benefit during the period, as benchmark-beating returns were generated from overweight positions in steel, wireless telecommunication services, specialty stores, consumer finance, and employment services. Among top-performing sectors, the Fund was increasingly tilted toward Materials as steel strengthened on rising global demand, while Telecommunications leader wireless services benefited from capacity [SIDENOTE] PORTFOLIO PROFILE March 31, 2004 (unaudited) Equities 89.7% Top 10 Equity Holdings 17.9% Number of Stocks 71 Cash Equivalents 11.3% Percentages are based upon net assets. [SIDENOTE] TOP 10 EQUITY HOLDINGS (LONG POSITIONS) March 31, 2004 (unaudited) First Cash Financial Services, Inc. 2.1% Activision, Inc. 2.0% Turkcell Iletisim Hizmetleri A.S. 1.8% Steel Technologies Inc. 1.8% Mobile Telesystems 1.8% Steel Dynamics, Inc. 1.8% Capital One Financial Corporation 1.7% IMC Global Inc. 1.7% STET Hellas Telecommunications S.A. 1.6% AO VimpelCom 1.6% Percentages are based upon net assets. 35 Management Overview (continued) ICON LONG/SHORT FUND enhancements. However, Consumer Discretionary was steadily reduced as apparel retail and auto parts & equipment came under pressure. Conversely, an overweight position in Internet software & services proved detrimental and was subsequently removed, while underexposure to communications equipment also had a negative effect. Other detractors included limited exposure to the Energy sector and pharmaceuticals, and an overweight position in airlines, which was ultimately liquidated. In accordance with the Fund's shorting discipline, which focuses on industries that our system indicates are both overpriced and declining in relative strength, the Fund's short weighting grew from 0.1% at the beginning of the period to 21.9% of net assets at period-end. Short positions were initiated during the fourth quarter of 2003 in semiconductor equipment, followed by semiconductors and systems software in early 2004. While these positions contributed to performance as the Information Technology sector declined on valuation concerns, a short position in gold detracted from performance. 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. Among the Fund's leading individual stock contributors, pawnshop operator First Cash Financial Services Inc. capitalized on its retail-oriented business model and strength in payday lending to boost earnings. Mid-market auto finance company AmeriCredit Corp. also advanced, having posted better-than-expected earnings due to credit quality improvements. Entertainment software provider Activision Inc. continued to report impressive quarterly results as well, citing strong sales in its core titles. Meanwhile, Allegheny Technologies Inc. rallied after announcing double-digit price increases for its specialty steel and titanium alloy products, whereas employment services firm Gevity HR, Inc. reported organizational changes that boosted client growth. Other specific companies hampered returns. Messaging services provider j2 Global Communications, Inc. fell on unexpectedly weak performance in several of its key markets. NASCAR marketer Action Performance Companies, Inc. also declined amid slowing revenues in its die-cast collectibles. Elsewhere, discount carrier JetBlue Airways Corp. faced stiff headwinds from higher fuel costs and intense pricing competition. Also retreating was structural component manufacturer Tower Automotive, Inc., which declined on losses related to a joint venture, and respiratory therapy supplier Lincare Holdings Inc., as expectations of lower Medicare reimbursement rates pressured the stock. This group of weak performers was sold during the period as their relative strength dropped. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC MARKET? On the basis of valuation and relative strength, we anticipate continued upside for industries such as consumer finance, wireless telecommunication services and industrial machinery. At the same time, we remain committed to managing our short positions independent of our longer-term holdings, looking for suitable concentration opportunities among overpriced, weakening industries poised for pullback. As today's favored industries resume their projected march toward fair value, these opportunities should become more plentiful. 36 - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- - - The Fund's short weighting grew to 21.9% of net assets at period-end, with positions in semiconductor equipment, followed by semiconductors and systems software. These positions contributed to performance, but a short position in gold detracted from performance. - - Positions in the Materials, Financials, and Telecommunications sectors aided returns. - - On an industry level, steel, wireless telecommunication services, specialty stores, consumer finance, and employment services were among the Fund's best performers. - - Conversely, an overweight position in Internet software & services proved detrimental, while a lack of exposure to the Energy sector and pharmaceuticals and an overweight position in airlines hampered performance. - - First Cash Financial Services Inc., AmeriCredit Corp., and Activision Inc. made significant contributions to performance, but returns suffered from the Fund's holdings in j2 Global Communications, Inc., Action Performance Companies, Inc., and JetBlue Airways Corp. 37 Management Overview (continued) ICON LONG/SHORT FUND - -------------------------------------------------------------------------------- SECTOR COMPOSITION March 31, 2004 (unaudited) - -------------------------------------------------------------------------------- Materials 14.6% Financial 13.7% Industrials 12.0% Telecommunications & Utilities 11.8% Health Care 10.0% Information Technology 9.3% Leisure & Consumer Staples 9.1% Consumer Discretionary 5.6% Energy 3.6%
Percentages are based upon net assets. - -------------------------------------------------------------------------------- AVERAGE ANNUAL TOTAL RETURN as of March 31, 2004 (unaudited) - --------------------------------------------------------------------------------
SIX MONTHS INCEPTION ENDED ONE FIVE SINCE DATE 3/31/04* YEAR YEARS INCEPTION - ------------------------------------------------------------------------------------------ ICON Long/Short Fund-Class I 10/1/02 20.21% 62.44% N/A 27.75% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 27.06% - ------------------------------------------------------------------------------------------ ICON Long/Short Fund-Class C 10/17/02 19.84% 61.23% N/A 22.73% - ------------------------------------------------------------------------------------------ S&P 1500 Index 14.75% 36.92% 23.84% - ------------------------------------------------------------------------------------------
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 waive certain Fund expenses; without these waivers, returns would have been lower. The waiver provisions may be terminated in the future. * Not annualized. - -------------------------------------------------------------------------------- VALUE OF A $10,000 INVESTMENT through March 31, 2004 - -------------------------------------------------------------------------------- [LINE GRAPH]
ICON LONG/SHORT FUND-CLASS I S&P 1500 INDEX ---------------------------- -------------- 10/01/02 10000 10000 12/31/02 9760 10811 3/31/03 8880 10450 6/30/03 11040 12093 9/30/03 12000 12469 12/31/03 13453 14009 3/31/04 14425 14308
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. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 38 Schedule of Investments (unaudited) ICON LONG/SHORT FUND - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- COMMON STOCKS 89.7% CONSUMER DISCRETIONARY 5.6% AUTO PARTS & EQUIPMENT 2.1% 1,600 BorgWarner, Inc. $ 135,728 2,200 Lear Corporation 136,312 - ------------------------------------------------- 272,040 INTERNET RETAIL 1.2% 2,200 eBay Inc.(a) 152,526 SPECIALTY STORES 2.3% 3,300 Barnes & Noble, Inc.(a) 107,580 4,500 The Sports Authority, Inc.(a) 180,360 - ------------------------------------------------- 287,940 - ------------------------------------------------- TOTAL CONSUMER DISCRETIONARY 712,506 ENERGY 3.6% OIL & GAS EXPLORATION & PRODUCTION 1.2% 5,100 Ultra Petroleum Corp.(a)f) 153,051 OIL & GAS REFINING, MARKETING & TRANSPORTATION 2.4% 3,100 Ashland Inc. 144,119 2,200 Teekay Shipping Corporation(f) 151,580 - ------------------------------------------------- 295,699 - ------------------------------------------------- TOTAL ENERGY 448,750 FINANCIAL 13.7% CONSUMER FINANCE 7.7% 10,500 AmeriCredit Corp.(a) 178,815 2,800 Capital One Financial Corporation 211,204 7,800 First Cash Financial Services, Inc.(a) 262,314 5,600 MBNA Corporation 154,728 12,700 Providian Financial Corporation(a) 166,370 - ------------------------------------------------- 973,431 INSURANCE BROKERS 2.4% 5,400 Aon Corporation 150,714 4,000 Hilb, Rogal and Hamilton Company 152,400 - ------------------------------------------------- 303,114 MULTI-LINE INSURANCE 2.6% 4,600 HCC Insurance Holdings, Inc. 148,718 3,000 Loews Corporation 177,180 - ------------------------------------------------- 325,898 THRIFTS & MORTGAGE FINANCE 1.0% 3,733 New York Community Bancorp, Inc. 127,967 - ------------------------------------------------- TOTAL FINANCIAL 1,730,410
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE HEALTH CARE 10.0% HEALTH CARE DISTRIBUTORS 1.4% 4,000 Omnicare, Inc. $ 177,320 HEALTH CARE FACILITIES 3.9% 4,000 LifePoint Hospitals, Inc.(a) 129,360 11,700 Province Healthcare Company(a) 186,030 5,500 United Surgical Partners International, Inc.(a) 186,670 - ------------------------------------------------- 502,060 HEALTH CARE SERVICES 2.1% 5,300 Dendrite International, Inc.(a) 84,800 3,900 Renal Care Group, Inc.(a) 178,464 - ------------------------------------------------- 263,264 MANAGED HEALTH CARE 2.6% 3,600 Coventry Health Care, Inc.(a) 152,388 4,400 PacifiCare Health Systems, Inc.(a) 174,020 - ------------------------------------------------- 326,408 - ------------------------------------------------- TOTAL HEALTH CARE 1,269,052 INDUSTRIALS 12.0% BUILDING PRODUCTS 3.1% 7,300 Griffon Corporation(a) 157,680 3,700 Universal Forest Products, Inc. 114,182 3,100 York International Corporation 121,861 - ------------------------------------------------- 393,723 CONSTRUCTION & ENGINEERING 2.8% 6,600 Granite Construction Incorporated 156,882 6,800 URS Corporation(a) 195,704 - ------------------------------------------------- 352,586 DIVERSIFIED COMMERCIAL SERVICES 1.5% 2,200 University of Phoenix Online(a) 191,444 EMPLOYMENT SERVICES 3.6% 6,500 Gevity HR, Inc. 189,800 10,200 Labor Ready, Inc.(a) 137,904 13,100 Spherion Corporation(a) 134,013 - ------------------------------------------------- 461,717 INDUSTRIAL MACHINERY 1.0% 4,200 The Manitowoc Company, Inc. 124,236 - ------------------------------------------------- TOTAL INDUSTRIALS 1,523,706
39 Schedule of Investments (continued) - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- INFORMATION TECHNOLOGY 9.3% HOME ENTERTAINMENT SOFTWARE 4.5% 15,900 Activision, Inc.(a) $ 251,538 22,000 Midway Games Inc.(a) 160,160 7,800 THQ Inc.(a) 157,794 - ------------------------------------------------- 569,492 IT CONSULTING & OTHER SERVICES 1.0% 11,700 MPS Group, Inc.(a) 130,104 TECHNOLOGY DISTRIBUTORS 3.8% 12,300 Agilysys, Inc. 146,370 5,700 Global Imaging Systems, Inc.(a) 189,354 11,700 GTSI Corp.(a) 141,816 - ------------------------------------------------- 477,540 - ------------------------------------------------- TOTAL INFORMATION TECHNOLOGY 1,177,136 LEISURE & CONSUMER STAPLES 9.1% FOOD DISTRIBUTORS 1.7% 5,300 Nash Finch Company 125,504 19,300 Spartan Stores, Inc.(a) 86,850 - ------------------------------------------------- 212,354 FOOD RETAIL 1.1% 4,400 SUPERVALU INC. 134,376 MOVIES & ENTERTAINMENT 1.1% 5,500 The Walt Disney Company 137,445 RESTAURANTS 1.7% 3,300 CEC Entertainment Inc.(a) 114,510 5,300 The Steak n Shake Company(a) 102,025 - ------------------------------------------------- 216,535 TOBACCO 3.5% 2,700 Altria Group, Inc. 147,015 2,500 R.J. Reynolds Tobacco Holdings, Inc. 151,250 3,000 Universal Corporation 152,460 - ------------------------------------------------- 450,725 - ------------------------------------------------- TOTAL LEISURE & CONSUMER STAPLES 1,151,435 MATERIALS 14.6% ALUMINUM 2.9% 4,000 Alcan Inc.(f) 179,160 5,600 Alcoa Inc. 194,264 - ------------------------------------------------- 373,424 COMMODITY CHEMICALS 2.2% 6,500 Headwaters Incorporated(a) 166,530 7,500 Lyondell Chemical Company 111,300 - ------------------------------------------------- 277,830
- -------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE DIVERSIFIED CHEMICALS 2.1% 2,800 Eastman Chemical Company $ 119,504 3,400 FMC Corporation(a) 145,588 - ------------------------------------------------- 265,092 FERTILIZERS & AGRICULTURAL CHEMICALS 3.8% 14,600 IMC Global Inc.(a) 208,780 2,500 Monsanto Company 91,675 2,800 The Scotts Company(a) 179,620 - ------------------------------------------------- 480,075 STEEL 3.6% 9,000 Steel Dynamics, Inc.(a) 223,020 12,000 Steel Technologies Inc. 231,840 - ------------------------------------------------- 454,860 - ------------------------------------------------- TOTAL MATERIALS 1,851,281 TELECOMMUNICATIONS & UTILITIES 11.8% ALTERNATIVE CARRIERS 1.0% 12,500 PTEK Holdings, Inc.(a) 114,875 WIRELESS TELECOMMUNICATION SERVICES 10.8% 5,100 America Movil S.A. de C.V. -- ADR 197,115 1,900 AO VimpelCom(a) -- ADR 197,581 1,700 Mobile Telesystems -- ADR 223,550 22,500 Partner Communications Company Ltd.(a) -- ADR 178,875 9,800 STET Hellas Telecommunications S.A. -- ADR 199,920 3,700 Telemig Celular Participacoes S.A. -- ADR 144,670 6,500 Turkcell Iletisim Hizmetleri A.S.(a)-- ADR 232,375 - ------------------------------------------------- 1,374,086 - ------------------------------------------------- TOTAL TELECOMMUNICATIONS & UTILITIES 1,488,961 - ------------------------------------------------- TOTAL COMMON STOCKS (COST $9,249,434) 11,353,237 SHORT-TERM INVESTMENTS 11.3% US GOVERNMENT OBLIGATIONS 11.3% $1,434,000 FHLB Discount Note, 0.750%, 4-1-04(b) 1,434,000 - ------------------------------------------------- TOTAL U.S. GOVERNMENT OBLIGATIONS (COST $1,434,000) 1,434,000
40 - -------------------------------------------------------------------------------- SCHEDULE OF INVESTMENTS March 31, 2004 - --------------------------------------------------------------------------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE - ------------------------------------------------- VARIABLE RATE DEMAND NOTE 0.0%* 3,008 American Family Demand Note, 0.6908%# $ 3,008 - ------------------------------------------------- TOTAL VARIABLE RATE DEMAND NOTE (COST $3,008) 3,008 - ------------------------------------------------- TOTAL SHORT-TERM INVESTMENTS (COST $1,437,008) 1,437,008 - ------------------------------------------------- TOTAL INVESTMENTS 101.0% (COST $10,686,442) 12,790,245 - ------------------------------------------------- LIABILITIES LESS OTHER ASSETS (1.0%) (150,107) - ------------------------------------------------- NET ASSETS 100.0% $12,640,138 - -------------------------------------------------
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 March 31, 2004. ADR -- American Depositary Receipt f Foreign * Less than 0.1% Dates shown on securities are due dates of the obligations. - -------------------------------------------------------------------------------- SCHEDULE OF SHORT SECURITIES March 31, 2004 - --------------------------------------------------------------------------------
SHORT SECURITIES SHARES MARKET VALUE - ------------------------------------------------------------------------------------------------ Ascential Software Corporation(a) 9,800 $ 214,816 ATMI, Inc.(a) 7,600 200,032 Cohu, Inc. 10,900 203,285 Glamis Gold Ltd.(a)f) 10,500 189,105 Integrated Device Technology, Inc.(a) 9,000 135,000 Lam Research Corporation(a) 7,900 199,159 LSI Logic Corporation(a) 10,500 98,070 Micrel, Incorporated(a) 9,700 129,495 Novellus Systems, Inc.(a) 6,200 197,098 Photronics, Inc.(a) 9,800 173,852 Placer Dome Inc.(f) 10,000 179,700 Skyworks Solutions, Inc.(a) 11,000 128,260 TALX Corporation 10,300 226,085 Ultratech, Inc.(a) 8,100 188,811 VERITAS Software Corporation(a) 6,400 172,224 Zygo Corporation(a) 9,000 140,670 - ------------------------------------------------------------------------------------------------ TOTAL SHORT SECURITIES (PROCEEDS OF $2,906,841) 146,700 $2,775,662
(a) Non-income producing security f Foreign The accompanying notes are an integral part of the financial statements. 41 Statements of Assets and Liabilities (unaudited)
-------------- -------------- -------------- -------------- -------------- MARCH 31, 2004 ICON ICON ICON ICON ICON BOND CORE EQUITY COVERED CALL EQUITY INCOME LONG/SHORT FUND FUND FUND FUND FUND -------------- -------------- -------------- -------------- -------------- ASSETS Investments, at cost $42,420,560 $75,104,303 $25,752,572 $ 97,337,668 $10,686,442 ----------- ----------- ----------- ------------ ----------- Investments, at value 45,188,521 90,719,877 29,324,748 108,106,645 12,790,245 Cash 13 951 - 7,502 - Receivables: Fund shares sold 402,957 226,620 152,808 761,584 124,566 Investments sold 264,000 - 350,145 - - Interest 705,461 183 12,022 187,368 12 Dividends - 39,755 14,867 104,269 6,147 Deposits for short sales - - - - 2,885,171 Expense reimbursements by Adviser 11,554 - 16,901 1,989 9,743 Other assets 2,307 4,165 879 1,557 419 ----------- ----------- ----------- ------------ ----------- Total Assets 46,574,813 90,991,551 29,872,370 109,170,914 15,816,303 ----------- ----------- ----------- ------------ ----------- LIABILITIES Options written, at value (premiums received of $0, $0, $468,687, $0 and $0, respectively) - - 868,410 - - Common stocks sold short, at value (proceeds of $0, $0, $0, $0 and $2,906,841, respectively) - - - - 2,775,662 Payables: Due to custodian bank - - - - 348,542 Investments bought - - 581,394 1,861,149 Fund shares redeemed 13,838 98,261 8,301 11,423 - Dividends payable - - - - Advisory fees 22,924 56,258 17,259 65,484 9,018 Accrued distribution fees 9,707 47,384 6,159 21,707 3,264 Fund accounting, custodial and transfer agent fees 13,881 17,595 9,446 18,817 9,776 Administration fees 1,910 3,751 1,151 4,366 530 Distributions due to shareholders 175,378 - - 309,323 - Accrued expenses 52,284 33,019 50,125 68,126 29,373 ----------- ----------- ----------- ------------ ----------- Total Liabilities 289,922 256,268 1,542,245 2,360,395 3,176,165 ----------- ----------- ----------- ------------ ----------- NET ASSETS -- ALL SHARE CLASSES $46,284,891 $90,735,283 $28,330,125 $106,810,519 $12,640,138 =========== =========== =========== ============ =========== NET ASSETS -- CLASS I $45,830,073 $44,026,800 $27,441,192 $105,662,721 $11,494,107 =========== =========== =========== ============ =========== NET ASSETS -- CLASS C $ 454,818 $46,708,483 $ 888,933 $ 1,147,798 $ 1,146,031 =========== =========== =========== ============ =========== Shares outstanding (unlimited shares authorized, no par value) Class I 4,264,266 3,463,773 2,057,209 7,283,971 806,561 Class C 42,326 3,770,871 67,393 79,389 81,246 Net asset value (offering price and redemption price per share) Class I $ 10.75 $ 12.71 $ 13.34 $ 14.51 $ 14.25 Class C $ 10.75 $ 12.39 $ 13.19 $ 14.46 $ 14.11
The accompanying notes are an integral part of the financial statements. 42 Statements of Operations (unaudited)
-------------- -------------- -------------- -------------- -------------- FOR THE SIX MONTHS ENDED MARCH 31, 2004 ICON ICON ICON ICON ICON BOND CORE EQUITY COVERED CALL EQUITY INCOME LONG/SHORT FUND FUND FUND FUND FUND -------------- -------------- -------------- -------------- -------------- INVESTMENT INCOME Interest $1,171,157 $ 6,150 $ 1,568 $ 68,067 $ 3,423 Dividends (net of foreign tax of $0, $1,928, $406, $4,674, and $194, respectively) 35,000 256,981 99,161 1,074,746 37,592 -------------- -------------- -------------- -------------- -------------- Total Investment Income 1,206,157 263,131 100,729 1,142,813 41,015 -------------- -------------- -------------- -------------- -------------- EXPENSES Advisory fees 125,375 317,164 96,068 257,178 48,821 Distribution fees: Class I 51,870 53,098 31,413 84,660 13,434 Class C 1,255 210,496 2,440 4,264 3,700 Fund accounting, custodial and transfer agent fees 35,291 45,844 30,277 42,563 25,483 Administration fees 10,719 20,943 6,343 17,032 2,846 Audit fees 11,093 5,941 6,869 18,336 3,081 Registration fees 15,176 14,128 14,352 15,504 13,697 Legal fees 876 1,771 399 808 183 Insurance expense 1,650 2,664 502 889 237 Trustee fees and expenses 1,925 3,739 1,109 2,580 507 Shareholder reports 12,613 11,704 8,203 15,984 3,835 Excise tax - - - 18,436 - Other expenses 18,244 26,418 26,555 18,036 13,474 -------------- -------------- -------------- -------------- -------------- Total expenses before expense (reimbursement)/recoupment 286,087 713,910 224,530 496,270 129,298 Expense (reimbursement)/recoupment by Adviser (13,556) - (36,969) 3,886 (37,497) -------------- -------------- -------------- -------------- -------------- Net Expenses 272,531 713,910 187,561 500,156 91,801 -------------- -------------- -------------- -------------- -------------- NET INVESTMENT INCOME (LOSS) 933,626 (450,779) (86,832) 642,657 (50,786) -------------- -------------- -------------- -------------- -------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investment transactions 436,387 5,339,460 2,093,937 2,097,625 1,363,420 Written options - - (90,216) - - -------------- -------------- -------------- -------------- -------------- Total net realized gain 436,387 5,339,460 2,003,721 2,097,625 1,363,420 -------------- -------------- -------------- -------------- -------------- Change in net unrealized appreciation/(depreciation) on securities, written options and securities sold short 899,529 5,633,383 574,681 6,846,624 687,867 -------------- -------------- -------------- -------------- -------------- Net realized and unrealized gain on investments 1,335,916 10,972,843 2,578,402 8,944,249 2,051,287 -------------- -------------- -------------- -------------- -------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,269,542 $10,522,064 $2,491,570 $9,586,906 $2,000,501 ============== ============== ============== ============== ==============
The accompanying notes are an integral part of the financial statements. 43 Statements of Changes in Net Assets
--------------------------------------- --------------------------------------- ICON ICON BOND FUND CORE EQUITY FUND --------------------------------------- --------------------------------------- For the Six For the Year For the Six Months Ended October 1, 2002* Months Ended March 31, 2004 (Inception) to March 31, 2004 Year Ended (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 ----------------- ------------------- ----------------- ------------------- OPERATIONS Net investment income/(loss) $ 933,626 $ 1,401,247 $ (450,779) $ (467,910) Net realized gain/(loss) from investment transactions, written options and securities sold short 436,387 (294,006) 5,339,460 (3,558,157) Change in unrealized appreciation/(depreciation) on securities, written options and securities sold short 899,529 1,868,432 5,633,383 13,315,101 ----------------- ------------------- ----------------- ------------------- Net increase in net assets resulting from operations 2,269,542 2,975,673 10,522,064 9,289,034 ----------------- ------------------- ----------------- ------------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (928,305) (1,394,730) - - Net realized gains - - - - ----------------- ------------------- ----------------- ------------------- Net decrease from dividends and distributions (928,305) (1,394,730) - - ----------------- ------------------- ----------------- ------------------- FUND SHARE TRANSACTIONS Shares sold Class I 13,493,754 56,519,622 8,469,796 15,777,863 Class C 235,144 372,769 9,130,439 17,459,010 Reinvested dividends and distributions Class I 922,482 1,384,911 - - Class C 5,547 7,462 - - Shares repurchased Class I (9,254,343) (20,136,882) (7,487,354) (25,007,736) Class C (56,911) (130,844) (2,930,642) (14,463,137) ----------------- ------------------- ----------------- ------------------- Net increase/(decrease) from fund share transactions 5,345,673 38,017,038 7,182,239 (6,234,000) ----------------- ------------------- ----------------- ------------------- Total net increase in net assets 6,686,910 39,597,981 17,704,303 3,055,034 NET ASSETS Beginning of period 39,597,981 - 73,030,980 69,975,946 ----------------- ------------------- ----------------- ------------------- End of period $46,284,891 $ 39,597,981 $90,735,283 $ 73,030,980 ================= =================== ================= ===================
The accompanying notes are an integral part of the financial statements. 44
---------------------------------------- ---------------------------------------- ---------------------------------------- ICON ICON ICON COVERED CALL FUND EQUITY INCOME FUND LONG/SHORT FUND ---------------------------------------- ---------------------------------------- ---------------------------------------- For the Six For the Year For the Six For the Year For the Six For the year Months Ended October 1, 2002* Months Ended October 1, 2002* Months Ended October 1, 2002* March 31, 2004 (Inception) to March 31, 2004 (Inception) to March 31, 2004 (Inception) to (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- $ (86,832) $ (93,978) $ 642,657 $ 555,722 $ (50,786) $ (48,508) 2,003,721 513,942 2,097,625 491,012 1,363,420 (172,889) 574,681 2,597,772 6,846,624 3,922,353 687,867 1,547,115 ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- 2,491,570 3,017,736 9,586,906 4,969,087 2,000,501 1,325,718 ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- - - (637,901) (555,767) - - (825,299) - - - (130,149) - ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- (825,299) - (637,901) (555,767) (130,149) ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- 9,930,704 21,535,397 61,818,673 44,637,115 5,112,786 10,958,821 786,004 177,231 584,328 637,549 810,501 436,593 802,497 - 607,158 528,515 121,354 - 10,975 - 5,788 4,458 7,238 - (5,917,321) (3,564,680) (8,064,295) (7,026,892) (5,238,334) (2,533,670) (77,952) (36,737) (145,695) (138,508) (38,416) (192,805) ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- 5,534,907 18,111,211 54,805,957 38,642,237 775,129 8,668,939 ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- 7,201,178 21,128,947 63,754,962 43,055,557 2,645,481 9,994,657 21,128,947 - 43,055,557 - 9,994,657 - ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- $28,330,125 $21,128,947 $106,810,519 $43,055,557 $12,640,138 $ 9,994,657 ================= =================== ================= =================== ================= ===================
45 Statements of Changes in Net Assets (continued)
--------------------------------------- --------------------------------------- ICON ICON BOND FUND CORE EQUITY FUND --------------------------------------- --------------------------------------- For the Six For the Year For the Six Months Ended October 1, 2002* Months Ended March 31, 2004 (Inception) to March 31, 2004 Year Ended (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 ----------------- ------------------- ----------------- ------------------- NET ASSETS CONSIST OF Paid-in capital $43,362,711 $38,017,038 $83,789,397 $ 76,607,158 Accumulated undistributed net investment income/(loss) 17,361 12,040 (450,779) - Accumulated undistributed net realized gain/(loss) from investments 136,858 (299,529) (8,218,909) (13,558,369) Unrealized appreciation/(depreciation) on securities, written options and securities sold short 2,767,961 1,868,432 15,615,574 9,982,191 ----------------- ------------------- ----------------- ------------------- NET ASSETS $46,284,891 $39,597,981 $90,735,283 $ 73,030,980 ================= =================== ================= =================== TRANSACTIONS IN FUND SHARES Shares sold Class I 1,276,949 5,630,081 690,395 1,599,134 Class C 22,361 36,999 758,779 1,836,853 Reinvested dividends and distributions Class I 87,284 135,559 - - Class C 530 726 - - Shares repurchased Class I (877,799) (1,987,808) (606,770) (2,665,419) Class C (5,479) (12,811) (244,067) (1,544,876) ----------------- ------------------- ----------------- ------------------- Net increase/(decrease) 503,846 3,802,746 598,337 (774,308) ----------------- ------------------- ----------------- ------------------- Shares outstanding beginning of period 3,802,746 - 6,636,307 7,410,615 ----------------- ------------------- ----------------- ------------------- Shares outstanding end of period 4,306,592 3,802,746 7,234,644 6,636,307 ================= =================== ================= =================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities and written options) Purchase of securities (including short sale transactions) $ 4,551,878 $32,843,432 $60,894,262 $121,427,409 Proceeds from sales of securities (including short sale transactions) 2,360,465 4,586,062 53,622,419 129,023,828 Purchases of long-term U.S. government securities 3,518,440 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. The offering of Class C shares commenced on October 21, 2002, November 21, 2002, November 8, 2002 and October 17, 2002, respectively. The accompanying notes are an integral part of the financial statements. 46
---------------------------------------- ---------------------------------------- ---------------------------------------- ICON ICON ICON COVERED CALL FUND EQUITY INCOME FUND LONG/SHORT FUND ---------------------------------------- ---------------------------------------- ---------------------------------------- For the Six For the Year For the Six For the Year For the Six For the Year Months Ended October 1, 2002* Months Ended October 1, 2002* Months Ended October 1, 2002* March 31, 2004 (Inception) to March 31, 2004 (Inception) to March 31, 2004 (Inception) to (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- $23,646,118 $18,111,211 $ 93,448,194 $38,642,237 $ 9,395,560 $ 8,620,431 (86,832) - 19,361 14,605 (50,786) - 1,598,386 419,964 2,573,987 476,362 1,060,382 (172,889) 3,172,453 2,597,772 10,768,977 3,922,353 2,234,982 1,547,115 ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- $28,330,125 $21,128,947 $106,810,519 $43,055,557 $12,640,138 $ 9,994,657 ================= =================== ================= =================== ================= =================== 748,249 2,020,657 4,343,888 4,069,794 374,789 1,055,319 60,530 15,317 42,143 60,013 61,094 42,776 63,040 - 41,981 47,549 9,511 - 882 - 410 405 574 - (446,296) (328,441) (576,293) (642,948) (388,054) (245,004) (6,033) (3,303) (10,765) (12,817) (2,966) (20,232) ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- 420,372 1,704,230 3,841,364 3,521,996 54,948 832,859 ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- 1,704,230 - 3,521,996 - 832,859 - ----------------- ------------------- ----------------- ------------------- ----------------- ------------------- 2,124,602 1,704,230 7,363,360 3,521,996 887,807 832,859 ================= =================== ================= =================== ================= =================== $29,300,213 $45,565,265 $ 61,492,231 $47,049,615 $ 9,737,662 $19,387,249 24,665,397 28,417,692 9,374,135 9,058,288 9,561,643 11,575,765 - - - - - - - - - - - -
47 Financial Highlights
-------------------------------------------------------------------------------------- ICON BOND FUND -------------------------------------------------------------------------------------- Class I Class C For the Six For the Year For the Six For the Period Months Ended October 1, 2002 Months Ended October 21, 2002 March 31, 2004 (Inception) to March 31, 2004 (Inception) to (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 ----------------- -------------------- ----------------- -------------------- Net asset value, beginning of period $ 10.41 $ 10.00 $10.42 $ 9.79 ----------------- -------------------- ----------------- -------------------- INCOME FROM INVESTMENT OPERATIONS Net investment income(x) 0.24 0.42 .21 0.37 Net realized and unrealized gains on investments 0.33 0.38 .32 0.60 ----------------- -------------------- ----------------- -------------------- Total from investment operations 0.57 0.80 .53 0.97 ----------------- -------------------- ----------------- -------------------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.23) (0.39) (0.20) (0.34) Distributions from net realized gains 0.00 0.00 0.00 0.00 ----------------- -------------------- ----------------- -------------------- Total distributions (0.23) (0.39) (0.20) (0.34) ----------------- -------------------- ----------------- -------------------- Net asset value, end of period $ 10.75 $ 10.41 $10.75 $10.42 ================= ==================== ================= ==================== Total return 5.56% 8.19% 5.15% 9.98%(b) Net assets, end of period (in thousands) $45,830 $39,338 $ 454 $ 260 Average net assets for the period (in thousands) $41,385 $33,787 $ 298 $ 199 Ratio of expenses to average net assets* Before expense waiver 1.34% 1.45% 5.20% 2.05% After expense waiver 1.30% 1.30% 1.90% 1.90% Ratio of net investment income to average net assets* Before expense waiver 4.43% 4.01% 0.58% 3.48% After expense waiver 4.47% 4.16% 3.87% 3.63% Portfolio turnover rate 6.13% 41.65%(a) 6.13% 41.65%(a)
* Annualized for periods less than a year (a) Portfolio turnover is calculated at the Fund level and therefore represents the period 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 48 THIS PAGE INTENTIONALLY LEFT BLANK 49 Financial Highlights (continued)
-------------------------------------------------------------------------------------- ICON CORE EQUITY FUND -------------------------------------------------------------------------------------- Class I For the Six For the Year For the Period Months Ended For the Year Ended October 12, 2000 March 31, 2004 Ended September 30, (Inception) to (Unaudited) September 30, 2003 2002 September 30, 2001 ----------------- -------------------- ----------------- -------------------- Net asset value, beginning of period $ 11.12 $ 9.50 $ 10.04 $ 10.00 ----------------- -------------------- ----------------- -------------------- INCOME FROM INVESTMENT OPERATIONS Net investment loss(x) (0.04) (0.04) (0.07) (0.05) Net realized and unrealized gains/(losses) on investments 1.63 1.66 (0.20) 0.09 ----------------- -------------------- ----------------- -------------------- Total from investment operations 1.59 1.62 (0.27) 0.04 ----------------- -------------------- ----------------- -------------------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 0.00 0.00 Distributions from net realized gains 0.00 0.00 (0.27) 0.00 ----------------- -------------------- ----------------- -------------------- Total distributions 0.00 0.00 (0.27) 0.00 ----------------- -------------------- ----------------- -------------------- Net asset value, end of period $ 12.71 $ 11.12 $ 9.50 $ 10.04 ================= ==================== ================= ==================== Total return 14.30% 17.05% (3.23)% 0.40%(b) Net assets, end of period (in thousands) $44,027 $37,603 $42,232 $23,261 Average net assets for the period (in thousands) $42,365 $34,007 $37,577 $23,802 Ratio of expenses to average net assets 1.31%* 1.39% 1.36% 1.60%* Ratio of net investment loss to average net assets (0.69)%* (0.37)% (0.58)% (0.36)%* Portfolio turnover rate 64.33% 188.07% 107.82% 124.61%(a)
* Annualized for periods less than a year (a) Portfolio turnover is calculated at the Fund level and therefore represents the period October 12, 2000 (Fund inception) to September 30, 2003. (b) The total return calculation is for the period indicated. (x) Calculated using the average share method 50
-------------------------------------------------------------------------------------- ICON CORE EQUITY FUND -------------------------------------------------------------------------------------- Class C For the Six For the Year For the Period Months Ended For the Year Ended November 28, 2000 March 31, 2004 Ended September 30, (Inception) to (Unaudited) September 30, 2003 2002 September 30, 2001 ----------------- -------------------- ----------------- -------------------- $ 10.88 $ 9.36 $ 9.98 $ 10.62 ----------------- -------------------- ----------------- -------------------- (0.08) (0.11) (0.15) (0.10) 1.59 1.63 (0.20) (0.54) ----------------- -------------------- ----------------- -------------------- 1.51 1.52 (0.35) (0.64) ----------------- -------------------- ----------------- -------------------- 0.00 0.00 0.00 0.00 0.00 0.00 (0.27) 0.00 ----------------- -------------------- ----------------- -------------------- 0.00 0.00 (0.27) 0.00 ----------------- -------------------- ----------------- -------------------- $ 12.39 $ 10.88 $ 9.36 $ 9.98 ================= ==================== ================= ==================== 13.88% 16.24% (4.07)% (0.20)%(b) $46,708 $35,428 $27,744 $ 6,324 $41,987 $30,459 $19,849 $ 2,920 2.07%* 2.14% 2.11% 2.23%* (1.44)%* (1.12)% (1.33)% (1.24)%* 64.33% 188.07% 107.82% 124.61%(a)
51 Financial Highlights (continued)
--------------------------------------------------------------------------------- ICON COVERED CALL FUND --------------------------------------------------------------------------------- Class I Class C For the Six For the Year For the Six For the Period Months Ended October 1, 2002 Months Ended October 1, 2002 March 31, 2004 (Inception) to March 31, 2004 (Inception) to (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 ----------------- ------------------- ----------------- ------------------- Net asset value, beginning of period $ 12.40 $ 10.00 $12.32 $10.75 ----------------- ------------------- ----------------- ------------------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.04) (0.07) (0.09) (0.17) Net realized and unrealized gains on investments 1.42 2.47 1.40 1.74 ----------------- ------------------- ----------------- ------------------- Total from investment operations 1.38 2.40 1.31 1.57 ----------------- ------------------- ----------------- ------------------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 0.00 0.00 Distributions from net realized gains (0.44) 0.00 (0.44) 0.00 ----------------- ------------------- ----------------- ------------------- Total distributions (0.44) 0.00 (0.44) 0.00 ----------------- ------------------- ----------------- ------------------- Net asset value, end of period $ 13.34 $ 12.40 $13.19 $12.32 ================= =================== ================= =================== Total return 11.28% 24.00% 10.78% 14.60%(b) Net assets, end of period (in thousands) $27,441 $20,981 $ 889 $ 148 Average net assets for the period (in thousands) $25,063 $14,544 $ 499 $ 50 Ratio of expenses to average net assets* Before expense waiver 1.70% 2.07% 4.41% 2.83% After expense waiver 1.45% 1.45% 2.20% 2.20% Ratio of net investment income/(loss) to average net assets* Before expense waiver (0.99)% (1.27)% (3.70)% (2.13)% After expense waiver (0.74)% (0.65)% (1.49)% (1.50)% Portfolio turnover rate 93.88%(a) 184.24%(a) 93.88%(a) 184.24%(a)
* Annualized for periods less than a year (a) Portfolio turnover is calculated at the Fund level and therefore represents the period 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 The accompanying notes are an integral part of the financial statements. 52
--------------------------------------------------------------------------------- ICON EQUITY INCOME FUND --------------------------------------------------------------------------------- Class I Class C For the Six For the Year For the Six For the Year Months Ended October 1, 2002 Months Ended November 8, 2002 March 31, 2004 (Inception) to March 31, 2004 (Inception) to (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 ----------------- ------------------- ----------------- ------------------- Net asset value, beginning of period $ 12.22 $ 10.00 $12.21 $10.63 ----------------- ------------------- ----------------- ------------------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.13 0.25 0.08 0.16 Net realized and unrealized gains on investments 2.29 2.20 2.25 1.59 ----------------- ------------------- ----------------- ------------------- Total from investment operations 2.42 2.45 2.33 1.75 ----------------- ------------------- ----------------- ------------------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.13) (0.23) (0.08) (0.17) Distributions from net realized gains 0.00 0.00 0.00 0.00 ----------------- ------------------- ----------------- ------------------- Total distributions (0.13) (0.23) (0.08) (0.17) ----------------- ------------------- ----------------- ------------------- Net asset value, end of period $ 14.51 $ 12.22 $14.46 $12.21 ================= =================== ================= =================== Total return 19.69% 24.72% 19.12% 16.63%(b) Net assets, end of period (in thousands) $105,663 $42,474 $1,148 $ 581 Average net assets for the period (in thousands) $ 67,543 $25,288 $ 858 $ 348 Ratio of expenses to average net assets* Before expense recoupment/waiver 1.44% 1.72% 2.17% 2.48% After expense recoupment/waiver 1.45% 1.45% 2.20% 2.20% Ratio of net investment income/(loss) to average net assets* Before expense recoupment/waiver 1.89% 1.93% 1.16% 1.10% After expense recoupment/waiver 1.88% 2.20% 1.13% 1.38% Portfolio turnover rate 14.36% 35.17%(a) 14.36% 35.17%(a)
* Annualized for periods less than a year (a) Portfolio turnover is calculated at the Fund level and therefore represents the period 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 The accompanying notes are an integral part of the financial statements. 53 Financial Highlights
------------------------------------------------------------------------------ ICON LONG/SHORT FUND ------------------------------------------------------------------------------ Class I Class C For the Six For the Year For the Six For the Period Months Ended October 1, 2002 Months Ended October 17, 2002 March 31, 2004 (Inception) to March 31, 2004 (Inception) to (Unaudited) September 30, 2003 (Unaudited) September 30, 2003 -------------- ------------------- -------------- ------------------- Net asset value, beginning of period $ 12.00 $10.00 $11.92 $10.61 -------------- ------------------- -------------- ------------------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.06) (0.07) (0.11) (0.15) Net realized and unrealized gains on investments 2.47 2.07 2.46 1.46 -------------- ------------------- -------------- ------------------- Total from investment operations 2.41 2.00 2.35 1.31 -------------- ------------------- -------------- ------------------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 0.00 0.00 Distributions from net realized gains (0.16) 0.00 (0.16) 0.00 -------------- ------------------- -------------- ------------------- Total distributions (0.16) 0.00 (0.16) 0.00 -------------- ------------------- -------------- ------------------- Net asset value, end of period $ 14.25 $12.00 $14.11 $11.92 ============== =================== ============== =================== Total return 20.21% 20.00% 19.84% 12.35%(b) Net assets, end of period (in thousands) $11,494 $9,726 $1,146 $ 269 Average net assets for the period (in thousands) $10,718 $6,997 $ 745 $ 186 Ratio of expenses to average net assets* Before expense waiver 2.12% 3.09% 4.11% 3.84% After expense waiver 1.55% 1.55% 2.30% 2.30% Ratio of net investment income/(loss) to average net assets* Before expense waiver (1.41)% (2.20)% (3.40)% (2.99)% After expense waiver (0.84)% (0.66)% (1.99)% (1.45)% Portfolio turnover rate 84.66% 162.25%(a) 84.66% 162.25%(a)
* Annualized for periods less than a year (a) Portfolio turnover is calculated at the Fund level and therefore represents the period 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 54 Notes to Financial Statements MARCH 31, 2004 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Bond Fund ("Bond Fund"), ICON Core Equity Fund ("Core Equity Fund") ICON Covered Call Fund ("Covered Call Fund"), ICON Equity Income Fund ("Equity Income Fund"), and ICON Long/Short Fund ("Long/Short Fund") are series funds (individually a "Fund" and collectively, the "Funds"). The Funds are part of the ICON Funds (the "Trust"), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end investment management company. The ICON Core Equity Fund commenced operations on October 12, 2000; the other Funds commenced operations on October 1, 2002. Each Fund offers three classes of shares; there were no Class Z shareholders in the Funds as of March 31, 2004. There are currently 13 other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. Each Fund is authorized to issue an unlimited number of no par shares. The investment objective of the Bond Fund is maximum total return. The investment objective of the Core Equity Fund is long-term capital appreciation with a secondary objective of capital preservation. The investment objective of the Covered Call Fund is modest capital appreciation and to maximize realized gains from writing covered call options. The investment objective of the Equity Income Fund is modest capital appreciation and income. The investment objective of the Long/Short Fund is capital appreciation. The Funds may have elements of risk, including the risk of loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Additionally, the Bond Fund may invest in medium- and lower-quality debt securities. These high-yield bonds involve 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. The Covered Call Fund invests in call options; call options involve certain risks and are not suitable for all investors. The Long/Short Fund invests short in securities; there are risks associated with selling short, including the risk that the Long/Short Fund may have to cover its short position at a higher price than the short sale, resulting in a loss. 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. 55 Notes to Financial Statements (continued) Investment Valuation. The Funds' securities and other assets are valued as of the close of regular trading on the New York Stock Exchange (the "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by a Fund at the NASDAQ Official Closing Price provided by NASDAQ each business day. The Funds use pricing services to determine the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board of Trustees ("Board") or pursuant to procedures approved by the Board. Any foreign investments in the Funds traded in countries outside of the Western Hemisphere are fair valued daily based on procedures established by the Funds' Board to avoid stale prices and to take into account, among other things, any significant events occurring after the close of a foreign market in those regions. The valuation assigned to fair- valued securities for purposes of calculating a Fund's NAV may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. A security listed or traded primarily on a securities exchange or in the over-the-counter market is generally valued at its last sale price on the exchange or market where it is principally traded, except that securities primarily traded on NASDAQ are normally valued at the NASDAQ Official Closing Price. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes obtained from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the sum of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than sixty days are valued in accordance with the evaluated bid price supplied by the pricing service. Short-term securities with remaining maturities of sixty days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. London closing 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 purchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. No repurchase agreements were purchased or sold by the Funds during the semiannual period ended March 31, 2004. Options Transactions. Each Fund may write (sell) 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. 56 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 Bond Fund distributes net investment income, if any, to shareholders monthly. 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. 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. 57 Notes to Financial Statements (continued) 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES Investment Advisory Fees. ICON Advisers, Inc. ("ICON") (formerly Meridian Investment Management Corporation) serves as investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 0.60% of average daily nets assets of the Bond Fund, 0.75% of average daily net assets of the Core Equity, Covered Call and Equity Income Funds, and 0.85% of average daily net assets of the Long/ Short Fund. For the period ended September 30, 2004, ICON has contractually agreed to limit its investment advisory fee and/or reimburse certain of the Funds' operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that the Funds' operating expenses do not exceed 1.90% for Class C and 1.30% for Class I shares of the Bond Fund, 2.20% for Class C and 1.45% for Class I shares of the Covered Call and Equity Income Funds, and 2.30% for Class C and 1.55% for Class I shares of the Long/Short Fund. To the extent ICON reimburses or absorbs fees and expenses, it may seek payment of such amounts for up to three years after the expenses were reimbursed or absorbed. A Fund will make no such payment, however, if the total Fund operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed. For the six-month period ended March 31, 2004, ICON reimbursed/absorbed $4,927 on Class C and $8,629 on Class I shares of the Bond Fund; $5,666 on Class C and $31,303 on Class I shares of the Covered Call Fund; $4,551 on Class C and $26,873 (prior to reimbursement by ICON for excise tax) on Class I shares of the Equity Income Fund; and $6,834 on Class C and $30,663 on Class I shares of the Long/Short Fund, respectively. These expenses are subject to recovery by ICON based on a rolling three-year period. During the period, ICON paid an excise tax liability for the Equity Income Fund in the amount of $18,436. 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 $37,500 on the Core Equity Fund; $48,750 on the Bond Fund, Covered Call Fund, and Long/Short Fund; and $41,250 on the Equity Income 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 ICON. This agreement provides for an annual fee of 0.05% on the Trust's first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. 58 Distribution Fees. The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") under which the Funds are authorized to compensate the Funds' distributor, ICON Distributors, Inc. ("IDI") (formerly Meridian Clearing Corp.) (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, Bond Fund Class C shareholders pay an annual 12b-1 and service fee of 0.85% of average daily net assets and Class I shareholders pay an annual 12b-1 fee of 0.25% of average daily net assets. The shareholders of the other Funds pay an annual 12b-1 and service fee of 1.00% of average daily net assets for Class C shares and an annual 12b-1 and service fee of 0.25% of average daily net assets for Class I shares. For the six-months ended March 31, 2004 the total amounts paid or payable to IDI pursuant to the 12b-1 Plan were $1,255 on Class C shares and $51,870 on Class I shares of the Bond Fund, $210,496 on Class C shares and $53,098 on Class I shares of the Core Equity Fund, $2,440 on Class C shares and $31,413 on Class I shares of the Covered Call Fund, $4,264 on Class C shares and $84,660 on Class I shares of the Equity Income Fund, and $3,700 on Class C shares and $13,434 on Class I shares of the Long/Short Fund. Related parties. Certain officers and directors of ICON and IDI are also officers and trustees of the Trust; however, such officers and trustees receive no compensation from the Trust. 3. OPTIONS CONTRACTS WRITTEN The number of option contracts written and the premiums received by the ICON Covered Call Fund during the six-month period ended March 31, 2004, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED Options outstanding, beginning of period............... 3,334 $ 241,662 Options written during period............... 25,152 1,862,467 Options expired during period............... (593) (71,714) Options closed during period............... (5,238) (1,242,589) Options exercised during period........ (14,240) (321,139) ------- ----------- Options outstanding, end of period........ 8,415 $ 468,687 ======= ===========
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 for the six-month period ended March 31, 2004 are as follows:
ICON ICON ICON ICON ICON BOND CORE EQUITY COVERED CALL EQUITY INCOME LONG/SHORT FUND FUND FUND FUND FUND Federal Tax Cost........ $42,420,560 $75,104,303 $25,752,572 $97,337,668 $10,686,442 Unrealized Appreciation.......... $ 2,865,048 $16,692,543 $ 4,335,451 $13,088,778 $ 2,460,783 Unrealized Depreciation.......... $ (97,087) $(1,076,969) $(1,162,998) $(2,319,801) $ (225,801) Net Appreciation........ $ 2,767,961 $15,615,574 $ 3,172,453 $10,768,977 $ 2,234,982
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. 59 Notes to Financial Statements (continued) In 2003, the portfolios 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 Bond Fund....... $ (716) $ (296,502) ICON Core Equity Fund............... (11,898,396) (1,659,973) ICON Covered Call Fund............... -- -- ICON Equity Income Fund............... -- -- ICON Long Short Fund............... (445) (172,444)
60 THIS PAGE INTENTIONALLY LEFT BLANK [ICON FUNDS LOGO] For more information about the ICON Funds, contact us: By Telephone 1-800-764-0442 By Mail ICON Funds P.O. Box 701 Milwaukee, WI 53201-0701 In Person ICON Funds 5299 DTC Boulevard, 12th Floor Greenwood Village, CO 80111 By E-Mail info@iconadvisers.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. Consider the investment objectives, risks, charges, expenses, and share classes of each ICON Fund carefully before investing. The prospectus contains this and other information about the Funds and is available by visiting www.iconfunds.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor I-130-D1V ICDIVSEMI - -------------------------------------------------------------------------------- Item 2. Code of Ethics. Not applicable to semiannual reports. Item 3. Audit Committee Financial Expert. Not applicable to semiannual reports. Item 4. Principal Accountant Fees and Services. Not applicable to semiannual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Not applicable - schedule is included as part of the report to shareholders filed under Item 1. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders. Not applicable. Item 10. 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 11. Exhibits. (a)(1) Previously filed on December 1, 2003. (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. (a)(3) Not applicable. (b) A certifications 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. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ICON Funds By: /s/ Craig T. Callahan -------------------------------------------- Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) Date: August 5, 2004 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: August 5, 2004 By: /s/ Erik L. Jonson -------------------------------------------- Erik L. Jonson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: August 5, 2004 EX-99.CERT 2 exh99cert.txt CERTIFICATIONS - CALLAHAN/JONSON EXHIBIT 99.CERT. I, Craig T. Callahan, certify that: 1. I have reviewed this report on Form N-CSRS/A 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) and internal controls over financial reporting (as defined in Rule 30a-3(a) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this 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: August 5, 2004 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-CSRS/A 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) and internal controls over financial reporting (as defined in Rule 30a-3(a) 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) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) 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 (d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this 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: August 5, 2004 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 3 exh99906cert.txt CERTIFICATIONS - CALLAHAN/JONSON EXHIBIT 99.906CERT Certification Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the attached Report on Form N-CSRS/A of ICON Funds (the "Trust") for the period ended March 31, 2004 (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 as applicable; 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: August 5, 2004 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. -----END PRIVACY-ENHANCED MESSAGE-----