N-CSR 1 formncsr.txt FORM N-CSR - SEPTEMBER 30, 2004 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number: 811-07883 ICON FUNDS (Exact name of registrant as specified in charter) 5299 DTC Blvd., Suite 1200 Greenwood Village, CO 80111 (Address of principal executive offices) Andra C. Ozols 5299 DTC Blvd., Suite 1200 Greenwood Village, CO 80111 (Name and Address of Agent for Service) Registrant's telephone number, including area code: 303-790-1600 Date of fiscal year end: 09/30 Date of reporting period: 09/30/2004 Item 1 - Reports to Stockholders > 2004 Annual Report Investment Update ICON U.S. DIVERSIFIED FUNDS ICON BOND FUND ICON CORE EQUITY FUND ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND [ICON FUNDS LOGO] Table of Contents ABOUT THIS REPORT (UNAUDITED) 2 MESSAGE FROM ICON FUNDS (UNAUDITED) 4 MANAGEMENT OVERVIEWS (UNAUDITED) AND SCHEDULES OF INVESTMENTS ICON Bond Fund 7 ICON Core Equity Fund 18 ICON Covered Call Fund 29 ICON Equity Income Fund 48 ICON Long/Short Fund 62 FINANCIAL STATEMENTS 75 FINANCIAL HIGHLIGHTS 82 NOTES TO FINANCIAL STATEMENTS 92 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 102 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 103 OTHER INFORMATION (UNAUDITED) 106
[RECYCLE LOGO] About This Report HISTORICAL RETURNS All total returns mentioned in this report account for the change in a Fund's per-share price, 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.iconadvisers.com for performance results current to the most recent month-end. PORTFOLIO DATA This report reflects ICON's views, opinions, and portfolio holdings as of September 30, 2004, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's percentage holdings as of September 30, 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, those factors 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. The Fund's loss on a short sale is potentially unlimited as a loss occurs when the value of a security sold short increases. Call options involve certain risks, such as limited gains and lack of liquidity of 2 About This Report the underlying securities, and are not suitable for all investors. Investments in foreign securities may entail unique risks, including political, market, and currency risks. Investing in fixed income securities such as bonds involves interest rate risk. When interest rates rise, the value of fixed income securities generally decreases. The Bond Fund may invest up to 25% of its assets in high-yield bonds that are below investment grade. High-yield bonds involve a greater risk of default and price volatility than U.S. Government and other higher-quality bonds. COMPARATIVE INDEXES The comparative indexes discussed in this report are meant to provide a basis for judging the Funds' performance against a specific securities index. Each index shown accounts for both change in security price and reinvestment of dividends and distributions, but does not reflect the costs of managing a mutual fund. The Funds' portfolios may significantly differ in holdings and composition from the index. Individuals cannot invest directly in an index. - The unmanaged Standard & Poor's 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. About This Report 3 Dear ICON Shareholder: -------------------------------------------------------------------------------- While the themeless market has not necessarily made for a negative environment, it has made for a difficult one. -------------------------------------------------------------------------------- ICON's disciplined investment methodology focuses on the identification of changing industry themes that our system indicates are favorably positioned to outperform the broader market. During the early months of the Funds' fiscal year, economically sensitive sectors drove nearly all of the 14.58% annual gain in the benchmark S&P 1500 Index. Later in the fiscal year, despite a number of peaks and valleys, the market has traded in a sideways manner, offering few signs of a clear direction. Within this trading range, economically sensitive sectors such as Materials, Consumer Discretionary, Information Technology, and Industrials have led during market advances, yet in complete and extreme theme reversals, they suffered the most amid subsequent pullbacks, as defensive-oriented sectors such as Healthcare, Utilities and Consumer Staples demonstrated passing strength. With such notable exceptions as the steel and oil & gas refining, marketing & transportation industries, the behavior of the market over the past 12 months has been themeless. EXTRANEOUS EVENTS HAVE DISTRACTED INVESTORS While the themeless market has not necessarily made for a negative environment, it has made for a difficult one. Considering the backdrop of mostly favorable underlying fundamentals, from inflation to interest rates to corporate earnings, the pause has proven increasingly frustrating for a number of investors, pushing many to the sidelines. Although we view this lull as an interruption to the rally that was underway last year, it appears to us that investors have become distracted by extraneous events, such as rising oil prices, higher interest rates, terrorism, and the presidential election. Despite our longstanding belief that stock prices are driven by fundamentals and value, it is not unusual for these and other distractions to create a temporary disconnect for investors. We would never presume to cast doubt on any investor for experiencing these concerns. On an emotional level, they are very real and fueled on a daily basis by the media. However, due to their unpredictability, these fears play no role in ICON's valuation system. Moreover, we currently see little or no evidence to support the overstated influence they are currently exerting. FAVORABLE UNDERLYING FUNDAMENTALS Starting with the overall economy, scores of investors seem to view the current setting of moderate economic growth as inadequate, desiring a return to the higher growth, yet unsustainable environment of the late 1990s. Nevertheless, the Federal Reserve continues to pursue this rational scenario, balancing sustainable moderate growth with low inflation. Even though these efforts have been largely successful, there continues to be considerable reluctance on the 4 Message from ICON Funds We continue to monitor industry leadership rather than engage in the futile exercise of timing market bottoms. [CRAIG T. CALLAHAN PHOTO] Craig T. Callahan Chairman and Chief Investment Officer part of many investors to embrace these new, and we believe more favorable, conditions. With respect to rising oil prices, we have detected an unusually strong negative correlation this year relative to stock prices, meaning that when the price of oil has increased, stocks, as measured by the S&P 500 Index, have declined. While this makes intuitive sense, historically we have found just the opposite: a fairly low if not slightly positive correlation between oil prices and stock prices. Whereas this recent negative correlation has been extreme, we expect it will be brief. At the same time, higher oil prices did not lead to higher inflation, as many had anticipated. One need only look at the Consumer Price Index, which experienced moves of -0.1% in July and +0.1% in August. Long-term interest rates, as measured by the 10-year Treasury Note yield, also declined during the summer months, puzzling skeptics who expected that rates would trend higher. However, as fixed-income investors extended maturities in conjunction with the Federal Reserve's short-term rate hikes, longer-term yields fell amid signals that the tightening would keep inflation in check. As for the presidential election, that's a guessing game we routinely avoid, as it is inconsistent with our valuation-driven system. New legislation typically encounters many levels of compromise, and it would be years before its impact on corporate earnings could be determined. Pharmaceutical stocks, for example, have been cited as an area that could face legislative and regulatory hurdles based on election results. However, we believe those companies' prospects are more dependent on the aging population and the demand for new treatments than they are on election outcomes. POSITIONED TO PARTICIPATE Guided by the ICON system, we base our sector rotations not on external events but on valuation and relative strength. As a result of these readings, we more heavily weighted the Materials and Industrials sectors during the period, and late in the period, increased the Funds' exposure to Information Technology. With stock prices in the sector generally declining and corporate earnings on the rise, our value/price ratios are once again attractive. It now 5 Message from ICON Funds appears to us that this leadership trend could continue and we believe we are positioned to participate should a sustainable rally emerge. The same holds true for our bond holdings, where between June and August we gradually tilted the Bond Fund's exposure toward longer-term government and agency securities. In light of widespread expectations that interest rates would rise, we sense that the subsequent rally caught most investors by surprise. Even after this recent rally, longer-term bonds remained priced below our estimate of intrinsic value, suggesting the potential for further upside. RALLIES SELDOM OFFER INVITATIONS At the end of the period, our analysis indicated that the U.S. domestic market was undervalued by approximately 22%. For that reason, we are riding through this period with the expectation that after the breakout from the current scenario, stocks will resume their path toward fair value. Last year reminded us that rallies seldom offer invitations, and often materialize without a significant triggering event. Still, we continue to monitor industry leadership and theme identification closely, rather than engage in the futile exercise of attempting to time market bottoms. In closing, I wish to again thank you for the opportunity to help guide you through these challenging markets. For ongoing market updates, as well as up- to-date Fund, performance, and account information, we invite you to visit our new website at www.iconadvisers.com. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and Chief Investment Officer of the Adviser The unmanaged Standard & Poor's 500 Index is a market value-weighted index of large-cap common stocks considered representative of the broad market. The Consumer Price Index is the primary indicator of U.S. inflation and is used to make cost-of-living adjustments to billions of dollars in benefit payments. 6 Message from ICON Funds Management Overview ICON Bond Fund -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION September 30, 2004 Corporate Bonds 47.6% Investment Grade 37.4% High Yield 10.2% Convertible Bonds 0.6% U.S. Governments 29.2% U.S. Agencies 15.5% Equities 0.0% Short-Term Investments 3.9% Percentages are based upon net assets. PORTFOLIO HIGHLIGHTS September 30, 2004 Number of Bonds 85 Number of Equities 0 Weighted average maturity 11.87 years Weighted average duration 7.44 years 30-Day SEC Yield (after expense limitation) - Class I 3.19% 30-Day SEC Yield (before expense limitation) - Class I 3.25% Yield is for the Fund's Class I shares. Yield for the Fund's other share classes will vary due to differences in charges and expenses. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Bond Fund, Class I appreciated 5.41% for the fiscal year ended September 30, 2004, while its Class C shares appreciated 4.83%. This compares to a 4.41% return for the Fund's benchmark, the Lehman Brothers U.S. Universal Index. The Fund's Class Z shares returned 4.33% since their May 6, 2004 inception compared to a 4.28% return for the benchmark over the same period. Total returns for longer periods appear on page 11. Despite widespread expectations that bond yields would trend higher in anticipation of and in conjunction with monetary tightening by the Federal Reserve, the long end of Treasury curve remained virtually unchanged during the period. Given rate pressures in premium-priced shorter-dated issues, the Fund's value-driven tilt toward longer maturities -- initially in higher-yielding corporate bonds, then in government and agency securities later in the period -- worked in its favor. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Rising oil prices, geopolitical tensions, and election-year rhetoric triggered a climate of fear and uncertainty during the period, even as underlying economic fundamentals remained perceptibly positive. This near utopia of moderate real GDP, nominal inflation and declining unemployment, coupled with three late-period hikes in the federal funds rate, convinced many investors that long yields would have to move appreciably higher than their recent historical lows. However, extraneous events raised doubts about the sustainability of the yearlong economic recovery, resulting in a moderate flattening of the yield curve. Although the benchmark 10-Year Treasury Note yield peaked in mid-June, rates then proceeded to trend markedly lower before settling into a narrow trading range. With rates well within levels established by their 20-year secular decline, bond prices rallied as investors extended maturities on hopes that the Fed's actions would keep forward inflation in check. Q. HOW WAS THE FUND MANAGED AND HOW DID THAT AFFECT PERFORMANCE? A. In light of prevailing conditions, the Fund acted on valuation readings favoring longer-duration bonds, increasing its weighted average duration from 6.07 years at the beginning of the period to 7.44 years at period-end. While heavily weighted high-yield corporate debt positions bolstered Fund performance during the fiscal half-year, spreads tightened to extreme levels amid heightened anxiety, leaving little room for further contraction within this sector. Management Overview 7 Management Overview (continued) ICON Bond Fund As such, weakening valuation and relative strength metrics in the months leading up to a late-period rally prompted us reduce the Fund's weighting in high-yield corporate bonds by more than half. At the same time, we steadily tilted Fund exposure toward longer-term government and agency securities, from 20% of net assets at the fiscal half-year to 43% at period-end, as the risk premium for corporates diminished considerably. Accordingly, long-term government bonds proved to be the largest overall contributor to Fund performance during the fiscal year, while analyst downgrades pressured the bonds of supermarket operator Winn-Dixie Stores Inc., and mortgage guarantor Federal National Mortgage Association (FNMA) Notes, both of which were subsequently sold. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE BOND MARKET? A. Based on rigorous analysis of valuation and relative strength, our system continues to favor longer-duration bonds. With economic growth seemingly in line with sustainable Federal Reserve targets, we see no reason why rates must rise appreciably above current range-bound levels. However, given the 20-year secular decline in yields, the exercise of forecasting interest rate movements is at best counterproductive. Instead, we continue to rely on valuation-focused fundamentals in seeking out suitable opportunities for investment. 8 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2004 - The Fund was rewarded by its tilt toward longer maturity bonds, which demonstrated better value than premium-priced shorter-dated issues. - High-yield corporate debt bolstered Fund performance early in the period but was significantly reduced when tighter spreads left little room for further contraction. - Our methodology led us to steadily increase exposure to government and agency issues, ultimately the largest contributors to Fund performance during the period. Management Overview 9 Management Overview (continued) ICON Bond Fund TOP 10 BOND HOLDINGS September 30, 2004 U.S. Treasury, 7.500%, 11-15-24 3.2% Federal Home Loan Bank (FHLB), 5.375%, 8-15-18 3.2% U.S. Treasury, 7.500%, 11-15-16 3.1% U.S. Treasury, 6.875%, 8-15-25 3.0% U.S. Treasury, 8.750%, 5-15-17 2.9% U.S. Treasury, 3.875%, 2-15-13 2.8% U.S. Treasury, 5.000%, 2-15-11 2.6% U.S. Treasury, 4.875%, 2-15-12 2.6% U.S. Treasury, 5.250%, 2-15-29 2.5% U.S. Treasury, 5.250%, 11-15-28 2.5%
Percentages are based upon net assets. 10 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Bond Fund-Class I 10/1/02 5.41% N/A 6.80% ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 4.41% 5.77% ------------------------------------------------------------------------------------------- ICON Bond Fund-Class C 10/21/02 4.83% N/A 7.60% ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 4.41% 6.98% ------------------------------------------------------------------------------------------- ICON Bond Fund-Class Z 5/6/04 N/A N/A 4.33%* ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 4.28%* -------------------------------------------------------------------------------------------
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 limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [BAR CHART] 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. Management Overview 11 Management Overview (continued) ICON Bond Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Bond Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first set of lines in the table below provide information about actual account values and actual expenses, (with actual net expenses being limited to 1.90%, 1.30% and 1.05% based on a contractual commitment). The Example below includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses, or dividends on short positions taken by the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second set of lines in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. 12 Management Overview
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04** --------------------------------------------------------------------------------------------- CLASS C --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 996.10 $9.48 --------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,015.50 $9.57 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS I --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 998.60 $6.50 --------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1.018.50 $6.56 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS Z --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,043.30 $3.57 --------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,016.50 $3.52 (5% return before expenses) ---------------------------------------------------------------------------------------------
* Class Z shares commenced operations May 6, 2004. ** Expenses are equal to the Fund's six-month expense ratios after limitation, if any, of 1.90% (Class C), 1.30% (Class I) and 0.87% (Class Z), annualized, multiplied by the average account value over the period, multiplied by 183/366, 183/366 and 147/366 respectively to reflect the one-half year period or date of inception. Management Overview 13 Schedule of Investments ICON Bond Fund September 30, 2004
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- BONDS 93.5% CORPORATE BONDS 47.6% AAA RATING 1.2% 354,000 General Electric Capital Corp. Notes, 7.375%, 1-19-10 $ 407,958 300,000 Private Export Funding Guaranteed, 6.490%, 7-15-07 324,931 ------------ 732,889 AA3 RATING 3.1% 500,000 Bell Atlantic Pennsylvania Debentures, 6.000%, 12-1-28 490,518 300,000 Goldman Sachs Group Inc. Notes, 6.600%, 1-15-12 335,030 500,000 Merrill Lynch & Co. Notes, 5.300%, 9-30-15 508,328 560,000 Verizon New Jersey Inc. Debentures, 5.875%, 1-17-12 595,916 ------------ 1,929,792 A3 RATING 6.8% 500,000 Boeing Co. Debentures, 8.750%, 8-15-21 663,768 1,000,000 DaimlerChrysler N.A. Holdings Guaranteed, 6.500%, 11-15-13 1,085,010 450,000 Dow Chemical Debentures, 7.375%, 11-1-29 522,533 350,000 Ford Motor Credit Co. Notes, 7.375%, 10-28-09 383,367 185,000 Verizon Communications Debentures, 6.940%, 4-15-28 199,159 250,000 McDonnell Douglas Corp. Debentures, 9.750%, 4-1-12 330,030
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 500,000 Phillips Petroleum Notes, 8.750%, 5-25-10 $ 615,215 400,000 PNC Funding Corp. Guaranteed, 5.250%, 11-15-15 406,036 ------------ 4,205,118 A2 RATING 8.1% 750,000 BB&T Corporation Subordinated Notes, 4.750%, 10-1-12 752,430 736,000 Becton Dickinson Notes, 4.550%, 4-15-13 729,835 450,000 Cincinnati Financial Corp. Debentures, 6.900%, 5-15-28 505,983 525,000 CITGroup Inc. Senior Notes, 7.750%, 4-2-12 621,314 550,000 Coca-Cola Enterprises Debentures, 8.500%, 2-1-12 689,351 600,000 General Motors Acceptance Corp. Notes, 6.125%, 8-28-07 632,134 450,000 John Hancock Notes, 7.375%, 2-15-24 522,462 500,000 Wisconsin Power & Light Co. Notes, 7.000%, 6-15-07 543,261 ------------ 4,996,770 A1 RATING 2.7% 670,000 Household Finance Corp. Senior Unsubordinated, 5.875%, 2-1-09 722,245 455,000 J.P. Morgan Chase & Co. Subordinated Notes, 6.750%, 8-15-08 504,056 382,000 SBC Communications Inc. Notes, 6.250%, 3-15-11 419,048 ------------ 1,645,349
14 Schedule of Investments
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- BAA3 RATING 6.2% 500,000 Comcast Cable Communications Notes, 6.200%, 11-15-08 $ 540,310 400,000 Comcast Cable Communications Notes, 8.875%, 5-1-17 510,812 500,000 Farmers Exchange Capital Notes, 7.200%, 7-15-48, (Acquired 4-27- 04; Cost $497,500)* 505,997 300,000 Hilton Hotels Corp. Senior Notes, 7.500%, 12-15-17 343,500 500,000 Motorola Inc. Debentures, 6.500%, 11-15-28 519,175 440,000 News America Holdings Debentures, 7.750%, 2-1-24 513,763 300,000 News America Holdings Guaranteed, 8.150%, 10-17-36 373,059 500,000 Tyco International Group SA Guaranteed, 6.125%, 11-1-08(f) 542,282 ------------ 3,848,898 BAA2 RATING 4.6% 316,000 Altria Group, Inc. Notes, 7.000%, 11-4-13 329,703 400,000 Phillip Morris Inc. Notes, 7.650%, 7-1-08 435,116 350,000 Capital One Financial Corp. Senior Notes, 6.875%, 2-1-06 368,012 300,000 Cox Communications Inc. Notes, 7.750%, 11-1-10 334,338 6,000 First American Corp. Debentures, 7.550%, 4-1-28 6,607
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 600,000 Halliburton Company Notes, 6.000%, 8-1-06 $ 626,723 680,000 Hertz Corp. Senior Notes, 7.625%, 6-1-12 746,488 ------------ 2,846,987 BAA1 RATING 4.7% 391,000 Cendant Corp. Senior Notes, 7.375%, 1-15-13 452,415 783,000 Ford Motor Company Notes, 7.450%, 7-16-31 767,755 537,000 General Motors Notes, 7.200%, 1-15-11 568,719 600,000 PSEG Power LLC Guaranteed, 6.950%, 6-1-12 672,033 399,000 Time Warner Company Inc. Debentures, 7.570%, 2-1-24 450,725 ------------ 2,911,647 BA3 RATING 3.1% 194,000 FairFax Financial Holdings Notes, 7.375%, 4-26-12(f) 175,570 350,000 Georgia-Pacific Corp. Debentures, 7.375%, 12-1-25 372,750 240,000 Georgia-Pacific Corp. Notes, 8.875%, 5-15-31 291,000 575,000 Nextel Communications Inc. Senior Notes, 9.375%, 11-15-09 608,781 426,000 Qwest Corporation Notes, 6.125%, 11-15-05 435,053 ------------ 1,883,154 BA2 RATING 2.2% 350,000 Royal Caribbean Cruises Ltd. Senior Notes, 6.750%, 3-15-08(f) 372,313 900,000 Xerox Corporation Senior Notes, 7.625%, 6-15-13 972,000 ------------ 1,344,313
Schedule of Investments 15 Schedule of Investments (continued) ICON Bond Fund September 30, 2004
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- B3 RATING 1.4% 352,000 Allied Waste North America Inc. Guaranteed, 10.000%, 8-1-09 $ 370,480 500,000 Marsh Supermarket Inc. Guaranteed, 8.875%, 8-1-07 505,000 ------------ 875,480 B2 RATING 1.3% 500,000 Bally Total Fitness Holdings Senior Notes, 10.500%, 7-15-11 475,000 345,000 Pep Boys Manny Moe & Jack Notes, 7.000%, 6-1-05 350,175 ------------ 825,175 B1 RATING 0.8% 500,000 CSC Holdings Inc. Senior Notes, 7.250%, 7-15-08 520,000 CAA1 RATING 1.4% 829,000 Owens-Illinois Inc. Senior Notes, 8.100%, 5-15-07 870,450 ------------ TOTAL CORPORATE BONDS 29,436,022 CERTIFICATES OF DEPOSIT 0.6% 98,000 Amcore Bank, 1.500%, 2-14-05 97,755 98,000 Catawaba Valley, 1.500%, 2-14-05 97,755 99,000 Independent Bankers Bank Deposit Notes, 1.300%, 11-15-04 98,917 99,000 Westernbank Puerto Rico Deposit Notes, 1.300%, 11-12-04 98,924 ------------ TOTAL CERTIFICATES OF DEPOSIT 393,351 ------------ CONVERTIBLE BONDS 0.6% B2 RATING 0.6% 400,000 Providian Financial Corp., 3.250%, 8-15-05 394,000 ------------ TOTAL CONVERTIBLE BONDS 394,000
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS 44.7% AAA RATING 43.2% 200,000 Federal Farm Credit Bank Notes, 5.900%, 7-21-08 $ 217,162 255,000 Federal Farm Credit Bank Notes, 5.900%, 8-4-08 276,968 210,000 Federal Home Loan Bank (FHLB), 5.945%, 7-28-08 228,869 450,000 Federal Home Loan Bank (FHLB), 5.875%, 2-15-11 491,332 1,000,000 Federal Home Loan Bank (FHLB), 4.500%, 9-16-13 998,862 1,850,000 Federal Home Loan Bank (FHLB), 5.375%, 8-15-18 1,966,883 900,000 Federal Home Loan Mortgage Corporation (FHLMC) Notes, 5.125%, 7-15-12 945,352 1,250,000 Federal National Mortgage Association (FNMA) Notes, 6.250%, 5-15-29 1,395,510 1,000,000 Federal National Mortgage Association (FNMA) Notes, 7.125%, 1-15-30 1,231,975 800,000 Tennessee Valley Authority, 5.625%, 1-18-11 867,410 1,000,000 U.S. Treasury, 3.875%, 5-15-09 1,024,297 1,250,000 U.S. Treasury, 5.750%, 8-15-10 1,393,506 1,500,000 U.S. Treasury, 5.000%, 2-15-11 1,612,675 1,500,000 U.S. Treasury, 4.875%, 2-15-12 1,598,554 1,750,000 U.S. Treasury, 3.875%, 2-15-13 1,739,062 1,500,000 U.S. Treasury, 7.500%, 11-15-16 1,927,675 1,250,000 U.S. Treasury, 8.750%, 5-15-17 1,763,622
16 Schedule of Investments
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 1,500,000 U.S. Treasury, 7.500%, 11-15-24 $ 2,000,917 1,500,000 U.S. Treasury, 6.875%, 8-15-25 1,883,028 1,500,000 U.S. Treasury, 5.250%, 11-15-28 1,560,117 1,500,000 U.S. Treasury, 5.250%, 2-15-29 1,561,582 ------------ 26,685,358 AA2 RATING 1.5% 900,000 Federal National Mortgage Association (FNMA) Subordinated Notes, 5.250%, 8-01-12 935,333 ------------ TOTAL U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS 27,620,691 ------------ TOTAL BONDS (COST $56,105,740) 57,844,064 CONTRACTS (100 SHARES PER CONTRACT) --------------------------------------------- CALL OPTIONS PURCHASED 0.0% 400 Xerox Corporation Expiration January 2006, Exercise Price $20.00 16,000 ------------ TOTAL CALL OPTIONS PURCHASED (COST $46,012) 16,000 PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- SHORT-TERM INVESTMENTS 3.9% U.S. GOVERNMENT AGENCIES 3.5% $2,154,000 Federal Home Loan Bank (FHLB) Discount Note, 1.369%, 10-1-04 2,154,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 2,154,000 VARIABLE RATE DEMAND NOTE 0.4% 275,097 American Family Demand Note, 1.453%# 275,097 ------------ TOTAL VARIABLE RATE DEMAND NOTE 275,097 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $2,429,097) 2,429,097 ------------ TOTAL INVESTMENTS 97.4% (COST $58,580,849) 60,289,161 ------------ OTHER ASSETS LESS LIABILITIES 2.6% 1,584,082 ------------ NET ASSETS 100.0% $ 61,873,243 ============
The accompanying notes are an integral part of the financial statements. # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. f Foreign security * Security was acquired pursuant to Rule 144A of the Securities Act of 1933 and may be deemed to be restricted for resale. Dates shown on securities are the due dates of the obligations. Schedule of Investments 17 Management Overview ICON Core Equity Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 99.3% Top 10 Equity Holdings 16.3% Number of Stocks 92 Short-Term Investments 1.5% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 The Manitowoc Company, Inc. 2.0% CIGNA Corporation 1.8% Yellow Roadway Corporation 1.7% Arkansas Best Corporation 1.6% Coventry Health Care, Inc. 1.6% Quicksilver, Inc. 1.6% Cognizant Technology Solutions Corporation 1.5% Best Buy Co., Inc. 1.5% Ultra Petroleum Corp. 1.5% Labor Ready, Inc. 1.5% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Core Equity Fund, Class I gained 14.93% for the fiscal year ended September 30, 2004, while its Class C shares appreciated 14.06%. This compares to a 14.58% return for the Fund's benchmark, the S&P 1500 Index. The Fund's Class Z shares returned 5.97% since their May 6, 2004 inception compared to a 1.02% return for the benchmark over the same period. Total returns for other periods as of September 30, 2004 are listed on page 22. Despite these gains, the Fund weathered extreme volatility during the period, dominated by sharp and sudden theme reversals. Having maintained a tilt toward economically sensitive sectors during the period, the Fund outperformed the market during cyclical upturns, but lagged when dramatic pullbacks favored more defensive-oriented sectors. Although our valuation and relative strength metrics continued to support a recovery-driven theme, the lack of consistent cyclical leadership detracted from overall performance. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. While the ICON system does not consider investment style, the Fund maintained a neutral bias during the period as measured on a traditional price-to-earnings (P/E) basis. Based on S&P/Barra data, value stocks outperformed their growth counterparts during the period, suggesting that portfolio composition worked against Fund performance. Our research suggests otherwise, indicating that industry and sector weightings derived from intrinsic valuation analysis proved more relevant than traditional valuation measures. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. A "Jekyll & Hyde" market dominated the investment environment during the period, as rising oil prices, military activity, terrorist threats, economic sustainability, and election-year uncertainty all weighed heavily on investor sentiment. Following a strong cyclical rally in the fourth quarter of 2003, stocks recoiled as calendar year 2004 unfolded, then reversed course and 18 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager peaked in early March. However, as investor concerns intensified, these swings grew more pronounced. Upturns were typically led by economically sensitive sectors, while downturns saw renewed strength among more defensive issues. In all, three sizable upswings were countered by three slightly sharper downturns, resulting in a volatile and slightly negative trading range. Although prevailing economic conditions showed incremental improvements during the first three quarters of 2004, each rally was extinguished amid a climate of fear and uncertainty. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Overweight positions in the Materials and Consumer Discretionary sectors contributed significantly to Fund performance during the fiscal year. Major industry contributors included steel and consumer finance, both of which maintained strong value-to-price and relative strength readings throughout the period. Steel prices skyrocketed on rising global demand, while the low interest rate environment benefited interest-rate sensitive groups such as consumer finance. In contrast, the Information Technology sector was the largest overall detractor, although its negative impact was modest in absolute terms. Nevertheless, the volatile nature of the sector made it particularly vulnerable to severe downturns. Meanwhile, the Fund's Energy holdings contributed positively to absolute performance yet resulted in an opportunity cost due to limited exposure in this fully valued sector. Other industries diminishing performance included leisure products, health care distributors, apparel retail, and airlines. Measurable individual stock contributors included leading middle-market auto finance company AmeriCredit Corp., whose recent record of better- than-expected quarterly results boosted the stock. Specialty steelmaker Carpenter Technology Corp. also advanced, buoyed by rising steel prices and strong global demand. Elsewhere, IT services provider Cognizant Technology Solutions Corp. benefited from adding 40 new strategic clients in a three-month period. Among the Fund's laggards, discount carrier JetBlue Airways Corp. struggled amid competitive pressures and higher fuel costs, which offset revenue growth, and was removed from the Fund. Meanwhile, drug distributor Cardinal Health Inc. retreated on regulatory probes into its accounting practices and was subsequently sold. Messaging services provider j2 Global Communications, Inc. also pulled back when its earnings guidance fell short of consensus expectations, but it did not reach our sell criteria during the period. Management Overview 19 Management Overview (continued) ICON Core Equity Fund Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? A. A late-period cyclical rally revealed broad participation as investors once again turned their attention to the sound economic underpinnings that seemingly prevail. With stocks currently trading at a 22% discount to our estimate of intrinsic worth, clear value exists in the marketplace. Assuming a dissipation of investor concerns, we contend that this rally is sustainable. PERFORMANCE HIGHLIGHTS September 30, 2004 - Having maintained a tilt toward economically sensitive sectors, the lack of consistent cyclical leadership limited overall Fund performance. - Positive performance was driven by overweight positions in the Materials and Consumer Discretionary sectors, as well as contributions from the steel and consumer finance industries. - Relative performance was hampered by holdings in the Information Technology sector and by limited exposure to the Energy sector. - Stocks that contributed significantly to performance included AmeriCredit Corp., Carpenter Technology Corp. and Cognizant Technology Solutions Corp. - Among the Fund's poorest individual performers were JetBlue Airways Corp., Cardinal Health Inc. and j2 Global Communications, Inc. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. 20 Management Overview TOP SECTORS September 30, 2004 Industrials 20.2% Financial 15.5% Materials 14.3% Consumer Discretionary 12.4% Information Technology 11.2% Healthcare 9.7% Leisure & Consumer Staples 7.9% Telecommunications & Utilities 4.5% Energy 3.6%
Percentages are based upon net assets. Management Overview 21 Management Overview (continued) ICON Core Equity Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Core Equity Fund-Class I 10/12/00 14.93% N/A 6.98% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -1.76% ------------------------------------------------------------------------------------------- ICON Core Equity Fund-Class C 11/28/00 14.06% N/A 4.76% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -2.14% ------------------------------------------------------------------------------------------- ICON Core Equity Fund-Class Z 5/6/04 N/A N/A 5.97%* ------------------------------------------------------------------------------------------- S&P 1500 Index 1.02%* -------------------------------------------------------------------------------------------
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 Since Inception performance results for Class C shares include returns for certain time periods that were restated as of June 8, 2004. Class Z shares are available only to institutional investors. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [BAR CHART] 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. 22 Management Overview FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Core Equity Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first set of lines in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses, and interest expense or dividends on short positions taken by the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second set of lines in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. Management Overview 23 Management Overview (continued) ICON Core Equity Fund
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04** ---------------------------------------------------------------------------------------------- CLASS C ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,001.60 $10.51 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,014.50 $10.58 (5% return before expenses) ---------------------------------------------------------------------------------------------- CLASS I ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,005.50 $ 6.77 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.25 $ 6.81 (5% return before expenses) ---------------------------------------------------------------------------------------------- CLASS Z ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,059.70 $ 4.67 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,015.54 $ 4.57 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Class Z shares commenced operations May 6, 2004. ** Expenses are equal to the Fund's six-month expense ratios of 2.10% (Class C), 1.35% (Class I), and 1.13% (Class Z), annualized, multiplied by the average account value over the period, multiplied by 183/366, 183/366 and 147/366 respectively to reflect the one-half year period or date of inception. 24 Management Overview 22 Schedule of Investments ICON Core Equity Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 99.3% UNITED STATES OF AMERICA 95.1% CONSUMER DISCRETIONARY 12.4% APPAREL ACCESSORIES & LUXURY GOODS 2.7% 31,800 Polo Ralph Lauren Corporation $ 1,156,566 62,800 Quiksilver, Inc.(a) 1,596,376 ------------ 2,752,942 AUTOMOBILE MANUFACTURERS 0.8% 22,200 Winnebago Industries, Inc. 769,008 COMPUTER & ELECTRONICS RETAIL 1.5% 27,700 Best Buy Co., Inc. 1,502,448 CONSUMER ELECTRONICS 1.1% 9,800 Harman International Industries 1,055,950 HOME IMPROVEMENT RETAIL 1.2% 31,700 The Home Depot, Inc. 1,242,640 HOUSEWARES & SPECIALTIES 0.8% 27,400 Blyth, Inc. 846,660 MOTORCYCLE MANUFACTURERS 1.1% 19,000 Harley-Davidson, Inc. 1,129,360 SPECIALTY STORES 2.1% 23,400 Michaels Stores, Inc. 1,385,514 25,800 Zale Corporation(a) 724,980 ------------ 2,110,494 TIRES & RUBBER 1.1% 53,000 Cooper Tire & Rubber Company 1,069,010 ------------ TOTAL CONSUMER DISCRETIONARY 12,478,512 ENERGY 2.5% OIL & GAS REFINING, MARKETING & TRANSPORTATION 1.0% 18,500 Ashland Inc. 1,037,480 OIL & GAS EXPLORATION & PRODUCTION 1.5% 30,600 Ultra Petroleum Corp.(a) 1,500,930 ------------ TOTAL ENERGY 2,538,410
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- FINANCIAL 15.5% ASSET MANAGEMENT & CUSTODY BANKS 3.1% 23,100 American Capital Strategies, Ltd. $ 723,954 28,000 The Bank of New York Company, Inc. 816,760 19,000 Investors Financial Services Corp. 857,470 21,400 SEI Investments Company 720,752 ------------ 3,118,936 CONSUMER FINANCE 3.1% 36,500 AmeriCredit Corp.(a) 762,120 15,900 Capital One Financial Corporation 1,175,010 74,000 Providian Financial Corporation(a) 1,149,960 ------------ 3,087,090 INSURANCE BROKERS 1.8% 32,500 Aon Corporation 934,050 24,200 Hilb Rogal and Hobbs Company 876,524 ------------ 1,810,574 INVESTMENT BANKING & BROKERAGE 1.2% 12,200 The Bear Stearns Companies Inc. 1,173,274 LIFE & HEALTH INSURANCE 2.2% 23,600 AmerUS Group Co. 967,600 36,900 UICI 1,208,106 ------------ 2,175,706 MULTI-LINE INSURANCE 0.9% 30,300 American Financial Group, Inc. 905,667 OTHER DIVERSIFIED FINANCIAL SERVICES 0.7% 19,300 JPMorgan Chase & Co. 766,789 PROPERTY & CASUALTY INSURANCE 0.9% 24,100 Selective Insurance Group, Inc. 896,520
Schedule of Investments 25 Schedule of Investments (continued) ICON Core Equity Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- REGIONAL BANKS 0.9% 23,200 BB&T Corporation $ 920,808 THRIFTS & MORTGAGE FINANCE 0.7% 15,600 The PMI Group, Inc. 633,048 ------------ TOTAL FINANCIAL 15,488,412 HEALTHCARE 9.7% HEALTH CARE EQUIPMENT 2.1% 21,700 ResMed Inc.(a) 1,033,137 20,400 Respironics, Inc.(a) 1,090,176 ------------ 2,123,313 HEALTH CARE SERVICES 1.0% 30,450 Renal Care Group, Inc.(a) 981,403 HEALTH CARE SUPPLIES 1.3% 19,800 The Cooper Companies, Inc. 1,357,290 MANAGED HEALTH CARE 5.3% 7,400 Aetna Inc. 739,482 13,200 Anthem, Inc.(a) 1,151,700 25,500 CIGNA Corporation 1,775,565 30,450 Coventry Health Care, Inc.(a) 1,625,117 ------------ 5,291,864 ------------ TOTAL HEALTHCARE 9,753,870 INDUSTRIALS 20.2% AEROSPACE & DEFENSE 4.5% 20,500 Curtiss-Wright Corporation 1,173,215 15,400 L-3 Communications Holdings, Inc. 1,031,800 20,800 Lockheed Martin Corporation 1,160,224 21,200 Northrop Grumman Corporation 1,130,596 ------------ 4,495,835 BUILDING PRODUCTS 1.7% 24,800 Griffon Corporation(a) 523,280 35,100 Masco Corporation 1,212,003 ------------ 1,735,283 COMMERCIAL PRINTING 0.6% 20,100 John H. Harland Company 630,135
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- EMPLOYMENT SERVICES 1.5% 105,900 Labor Ready, Inc.(a) $ 1,484,718 INDUSTRIAL MACHINERY 4.5% 51,400 Flowserve Corporation(a) 1,242,852 56,500 The Manitowoc Company, Inc. 2,003,490 16,300 Reliance Steel & Aluminum Co. 647,110 23,100 Watts Water Technologies, Inc. 620,235 ------------ 4,513,687 RAILROADS 2.7% 34,700 Burlington Northern Santa Fe Corporation 1,329,357 47,000 Norfolk Southern Corporation 1,397,780 ------------ 2,727,137 TRUCKING 4.7% 44,400 Arkansas Best Corporation 1,625,928 62,250 Knight Transportation, Inc.(a) 1,333,395 36,700 Yellow Roadway Corporation(a) 1,720,863 ------------ 4,680,186 ------------ TOTAL INDUSTRIALS 20,266,981 INFORMATION TECHNOLOGY 11.2% COMMUNICATIONS EQUIPMENT 1.3% 48,900 Comtech Telecommunications Corp.(a) 1,325,190 COMPUTER STORAGE & PERIPHERALS 1.0% 51,600 Synaptics Incorporated(a) 1,040,256 DATA PROCESSING & OUTSOURCED SERVICES 1.4% 30,700 Computer Sciences Corporation(a) 1,445,970 ELECTRONIC EQUIPMENT MANUFACTURERS 1.0% 20,500 Mettler-Toledo International Inc.(a) 968,010
26 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- INTERNET SOFTWARE & SERVICES 1.6% 17,800 Digital River, Inc.(a) $ 530,084 32,900 j2 Global Communications, Inc.(a) 1,039,311 ------------ 1,569,395 IT CONSULTING & OTHER SERVICES 1.5% 49,700 Cognizant Technology Solutions Corporation(a) 1,516,347 SEMICONDUCTORS 1.1% 34,600 Cree, Inc.(a) 1,056,338 TECHNOLOGY DISTRIBUTORS 2.3% 33,800 Tech Data Corporation(a) 1,302,990 61,700 Ingram Micro Inc.(a) 993,370 ------------ 2,296,360 ------------ TOTAL INFORMATION TECHNOLOGY 11,217,866 LEISURE & CONSUMER STAPLES 7.9% FOOD DISTRIBUTORS 1.2% 40,400 Nash Finch Company 1,270,580 FOOD RETAIL 0.9% 36,600 Albertson's, Inc. 875,838 HOTELS, RESORTS & CRUISE LINES 1.0% 22,000 Royal Caribbean Cruises Ltd. 959,200 MOVIES & ENTERTAINMENT 0.8% 36,400 The Walt Disney Company(a) 820,820 PACKAGED FOODS & MEATS 0.7% 20,500 Ralcorp Holdings, Inc.(a) 740,050 RESTAURANTS 1.8% 24,900 CEC Entertainment, Inc.(a) 915,075 31,200 Ruby Tuesday, Inc. 869,544 ------------ 1,784,619 TOBACCO 1.5% 10,900 Altria Group, Inc. 512,736 14,200 Reynolds American, Inc. 966,168 ------------ 1,478,904 ------------ TOTAL LEISURE & CONSUMER STAPLES 7,930,011
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- MATERIALS 13.6% COMMODITY CHEMICALS 2.3% 38,400 Headwaters Incorporated(a) $ 1,185,024 54,200 Millennium Chemicals Inc.(a) 1,149,582 ------------ 2,334,606 CONSTRUCTION MATERIALS 1.5% 28,400 Texas Industries, Inc. 1,460,896 DIVERSIFIED CHEMICALS 2.1% 14,900 Eastman Chemical Company 708,495 29,100 FMC Corporation(a) 1,413,387 ------------ 2,121,882 FERTILIZERS & AGRICULTURAL CHEMICALS 1.2% 70,400 The Mosaic Co.(a) 1,224,256 METAL & GLASS CONTAINERS 1.8% 70,180 Myers Industries, Inc. 768,471 63,600 Owens-Illinois, Inc.(a) 1,017,600 ------------ 1,786,071 SPECIALTY CHEMICALS 1.2% 32,400 OM Group, Inc.(a) 1,184,544 STEEL 3.5% 21,800 Carpenter Technology Corporation 1,040,732 38,100 Steel Dynamics, Inc. 1,471,422 39,900 Steel Technologies Inc. 1,022,118 ------------ 3,534,272 ------------ TOTAL MATERIALS 13,646,527 TELECOMMUNICATIONS & UTILITIES 2.1% MULTI-UTILITIES & UNREGULATED POWER 1.0% 27,700 Sempra Energy 1,002,463 WIRELESS TELECOMMUNICATION SERVICES 1.1% 45,200 Nextel Communications, Inc.(a) 1,077,568 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 2,080,031 ------------ TOTAL UNITED STATES OF AMERICA 95,400,620
Schedule of Investments 27 Schedule of Investments (continued) ICON Core Equity Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- AMERICAN DEPOSITARY RECEIPTS 3.1% MEXICO 2.1% MATERIALS 0.7% CONSTRUCTION MATERIALS 0.7% 24,330 Cemex S.A. de C.V. $ 684,646 ------------ TOTAL MATERIALS 684,646 WIRELESS TELECOMMUNICATION SERVICES 1.47% 37,400 America Movil S.A. de C.V. 1,459,722 ------------ TOTAL MEXICO 2,144,368 RUSSIA 1.4% TELECOMMUNICATIONS & UTILITIES 1.0% 9,100 AO VimpelCom(a) 990,080 ------------ 990,080 ------------ TOTAL RUSSIA 990,080 ------------ TOTAL AMERICAN DEPOSITARY RECEIPTS 3,134,448 BAHAMAS 1.1% ENERGY 1.1% OIL & GAS REFINING, MARKETING & TRANSPORTATION 1.1% 26,600 Teekay Shipping Corporation 1,146,194 ------------ TOTAL ENERGY 1,146,194 ------------ TOTAL BAHAMAS 1,146,194 ------------ TOTAL COMMON STOCKS (COST $83,093,099) 99,681,262
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- SHORT-TERM INVESTMENT 1.5% U.S. GOVERNMENT OBLIGATIONS 1.4% $1,458,000 FHLB Discount Note, 1.369%, 10-01-04 $ 1,458,000 ------------ TOTAL U.S. GOVERNMENT OBLIGATIONS 1,458,000 VARIABLE RATE DEMAND NOTE 0.1% 47,104 American Family Demand Note, 1.453%# 47,104 ------------ TOTAL VARIABLE RATE DEMAND NOTE 47,104 ------------ TOTAL SHORT-TERM INVESTMENT (COST $1,505,104) 1,505,104 ------------ TOTAL INVESTMENTS 100.8% (COST $84,598,203) 101,186,366 ------------ LIABILITIES LESS OTHER ASSETS (0.8%) (776,556) ------------ NET ASSETS 100.0% $100,409,810 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. 28 Schedule of Investments Management Overview ICON Covered Call Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 102.1% Top 10 Equity Holdings 17.1% Number of Stocks 102 Number of Written Option Contracts 165 Short-Term Investments 0.4% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Yellow Roadway Corporation 2.7% Steel Dynamics, Inc. 2.0% Owens-Illinois, Inc. 1.7% Knight Transportation, Inc. 1.6% Headwaters Incorporated 1.6% CIGNA Corporation 1.6% The Home Depot, Inc. 1.5% Burlington Northern Santa Fe Corporation 1.5% Ultra Petroleum Corp. 1.5% UICI 1.4% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Covered Call Fund, Class I rose 10.53% for the fiscal year ended September 30, 2004, while its Class C shares appreciated 9.69%. This compares to a 14.58% return for the Fund's benchmark, the S&P 1500 Index. The Fund's Class Z shares returned 3.34% since their May 6, 2004 inception compared to a 1.02% return for the benchmark over the same period. Total returns for other periods as of September 30, 2004 are listed on page 33. Although the Fund produced a positive return, sharp theme reversals and an absence of consistent sector leadership worked against the Fund's cyclical tilt, resulting in relative underperformance for the fiscal-year period. Also detracting from returns was the Fund's call writing strategy, which limited upside potential in a rising market. Implied volatility (as measured by the CBOE Market Volatility Index), is the primary driver behind option premiums increasing or decreasing. When implied volatility fell during the period, it tempered the Fund's downside protection, as option premiums dropped to five-year lows. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Although ICON's system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. This is corroborated by independent data, which details the outperformance of S&P/Barra Value Indexes over their S&P/Barra Growth counterparts for the one-year period ended September 30, 2004. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. The market took on a "Jekyll & Hyde" quality during the period, as an extended first-half rally dissipated amid extreme fear and uncertainty. Within this volatile trading range, rising oil prices, geopolitical tensions, economic setbacks, and election-year rhetoric all weighed heavily on investor sentiment. However, as these concerns intensified, the swings grew more pronounced, quickly extinguishing any move toward a sustained cyclical rally. Management Overview 29 Management Overview (continued) ICON Covered Call Fund Nevertheless, upturns were typically led by economically sensitive sectors, while downturns saw renewed strength among more defensive issues. In all, a slight negative bias held back second-half returns, even as our valuation and relative strength analysis continued to support a recovery-driven theme against a backdrop of favorable underlying fundamentals. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. As implied volatility and call option premiums steadily declined during the year, many option writers gravitated toward longer-dated calls, which locked in historically low premiums for extended periods. Instead, we wrote shorter- dated options that decay more rapidly prior to expiration, while waiting for premiums to regress upward toward normally higher levels. With option premiums at historical lows, this tactic served to hamper Fund performance. With respect to sectors and industries, our valuation-related underweighting in the Energy sector resulted in an opportunity cost, as the Fund surrendered a sizable portion of that group's robust gains relative to the benchmark. At the industry level, apparel retail, health care distributors, Internet software & services, and real estate investment trusts detracted from Fund performance, and were subsequently trimmed on declining relative strength. In contrast, leading contributors included overweight positions in the cyclically oriented Materials, Industrials and Consumer Discretionary sectors. The semiconductors industry was a noteworthy performer, although later pared on weakness, while apparel & accessories, construction & farm machinery, diversified chemicals, homebuilding, aluminum, and employment services also made measurable contributions. Among the Fund's primary individual detractors, drug distributor Cardinal Health Inc. saw its accounting practices come under regulatory scrutiny and was subsequently sold. Mortgage finance group New Century Financial Corp. also retreated as uncertainty surrounding its conversion into a real estate investment trust pressured the stock. Elsewhere, specialty toolmaker SPX Corp. faced higher input costs and acquisition integration issues. Stocks that bolstered Fund performance included mini-mill steelmaker the International Steel Group, which capitalized on pricing power enhancements and rising global demand. Life and health insurer UICI also advanced, having reported strong quarterly results and better-than-expected loss ratios. Meanwhile, Ultra Petroleum Corp. moved higher as higher energy prices enabled this emerging exploration and production firm to double earnings and cash flow. 30 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? A. A late-period cyclical rally revealed broad participation as investors once again turned their attention to the sound economic underpinnings that seemingly prevail. With stocks currently trading at a 22% discount to our estimate of intrinsic worth, our system indicates that clear value exists in the marketplace. Assuming a dissipation of investor concerns, we maintain that this rally is sustainable and could very well endure over the next six to 12 months. With premiums still hovering at five-year lows, we will continue to write shorter- dated calls with the belief that premium yields will soon rebound. PERFORMANCE HIGHLIGHTS September 30, 2004 - While the Fund had positive performance during the fiscal year, its call writing strategy limited upside potential, as lower implied volatility diminished option premiums, which fell to five-year lows. - An underweighted Energy sector, along with industry exposure to apparel retail, health care distributors and Internet software & services, hampered relative performance. - Among the Fund's poorest performing stocks were Cardinal Health Inc., New Century Financial Corp. and SPX Corp. - Positive performance was driven by overweight positions in the Materials, Industrials and Consumer Discretionary sectors, as well as contributions from the apparel & accessories, construction & farm machinery, diversified chemicals industries. - Stocks that boosted Fund performance included International Steel Group, UICI and Ultra Petroleum Corp. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. The Chicago Board Options Exchange (CBOE) SPX Volatility Index reflects a market estimate of future volatility, based on the weighted average of the implied volatilities for a wide range of strikes. Management Overview 31 Management Overview (continued) ICON Covered Call Fund SECTOR COMPOSITION September 30, 2004 Industrials 20.9% Financial 16.7% Materials 14.2% Consumer Discretionary 13.6% Information Technology 10.3% Health Care 9.2% Leisure & Consumer Staples 8.4% Energy 5.9% Telecommunications & Utilities 2.8%
Percentages are based upon net assets. 32 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Covered Call Fund-Class I 10/1/02 10.53% N/A 17.10% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% 19.55% ------------------------------------------------------------------------------------------- ICON Covered Call Fund-Class C 11/21/02 9.69% N/A 13.11% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% 14.14% ------------------------------------------------------------------------------------------- ICON Covered Call Fund-Class Z 5/6/04 N/A N/A 3.34%* ------------------------------------------------------------------------------------------- S&P 1500 Index 1.02%* -------------------------------------------------------------------------------------------
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 limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON COVERED CALL FUND-CLASS I S&P 1500 INDEX ------------------------------ -------------- 10/1/02 $10000 $10000 3/31/03 $10050 $10450 9/30/03 $12400 $12469 3/31/04 $13799 $14308 9/30/04 $13706 $14285
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. Management Overview 33 31 Management Overview (continued) ICON Covered Call Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Covered Call Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first set of lines in the table below provide information about actual account values and actual expenses, (with actual net expenses being limited to 2.20%, 1.45% and 1.20% based on a contractual commitment). The Example below includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses, and interest expense or dividends on short positions taken by the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second set of lines in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. 34 Management Overview 32
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04** --------------------------------------------------------------------------------------------- CLASS C --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 990.10 $10.95 --------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,014.00 $11.08 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS I --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 993.30 $ 7.23 --------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,017.75 $ 7.31 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS Z --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,033.40 $ 4.57 --------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,015.58 $ 4.53 (5% return before expenses) ---------------------------------------------------------------------------------------------
* Class Z shares commenced operations May 6, 2004. ** Expenses are equal to the Fund's six-month expense ratios after limitation, if any, of 2.20% (Class C), 1.45% (Class I), and 1.12% (Class Z), annualized, multiplied by the average account value over the period, multiplied by 183/366, 183/366 and 147/366 respectively to reflect the one-half year period or date of inception. Management Overview 35 Schedule of Investments ICON Covered Call Fund September 30, 2004
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 102.1% UNITED STATES OF AMERICA 99.7% CONSUMER DISCRETIONARY 13.6% APPAREL ACCESSORIES & LUXURY GOODS 3.7% 16,500 Polo Ralph Lauren Corporation(x) $ 600,105 21,300 Quiksilver, Inc.(a) (x) 541,446 10,500 V.F. Corporation(x) 519,225 ------------ 1,660,776 COMPUTER & ELECTRONICS RETAIL 1.0% 8,400 Best Buy Co., Inc.(x) 455,616 CONSUMER ELECTRONICS 1.1% 4,500 Harman International Industries, Incorporated(x) 484,875 HOME IMPROVEMENT RETAIL 2.5% 17,600 The Home Depot, Inc.(x) 689,920 10,300 The Sherwin- Williams Company(x) 452,788 ------------ 1,142,708 HOMEBUILDING 1.0% 9,700 Toll Brothers, Inc.(a)(x) 449,401 HOUSEWARES & SPECIALTIES 1.0% 7,900 The Yankee Candle Company, Inc.(a)(x) 228,784 12,700 Tupperware Corporation(x) 215,646 ------------ 444,430 MOTORCYCLE MANUFACTURERS 1.2% 8,700 Harley-Davidson, Inc.(x) 517,128 SPECIALTY STORES 1.3% 7,500 Michaels Stores, Inc.(x) 444,075 3,600 O'Reilly Automotive, Inc.(a)(x) 137,844 ------------ 581,919 TIRES & RUBBER 0.8% 18,500 Cooper Tire & Rubber Company(x) 373,145 ------------ TOTAL CONSUMER DISCRETIONARY 6,109,998 ENERGY 4.1% OIL & GAS EQUIPMENT & SERVICES 0.7% 9,100 Offshore Logistics, Inc.(a)(x) 313,222
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- OIL & GAS EXPLORATION & PRODUCTION 2.5% 7,000 Newfield Exploration Co.(a)(x) $ 428,680 14,000 Ultra Petroleum Corp.(a)(x) 686,700 ------------ 1,115,380 OIL & GAS REFINING, MARKETING & TRANSPORTATION 0.9% 7,500 Ashland Inc.(x) 420,600 ------------ TOTAL ENERGY 1,849,202 FINANCIAL 16.7% CONSUMER FINANCE 1.0% 6,000 Capital One Financial Corporation(x) 443,400 DIVERSIFIED BANKS 1.7% 5,800 Bank of America Corporation(x) 251,314 8,500 Comerica Incorporated(x) 504,475 ------------ 755,789 INSURANCE BROKERS 0.9% 11,000 Hilb Rogal and Hobbs Company(x) 398,420 INVESTMENT BANKING & BROKERAGE 1.8% 11,200 A.G. Edwards, Inc.(x) 387,744 4,300 Goldman Sachs Group, Inc.(x) 400,932 ------------ 788,676 LIFE & HEALTH INSURANCE 3.4% 8,800 Delphi Financial Group, Inc.(x) 353,496 10,000 Torchmark Corporation(x) 531,800 19,800 UICI(x) 648,252 ------------ 1,533,548 MULTI-LINE INSURANCE 2.2% 6,700 Hartford Financial Services Group, Inc.(x) 414,931 9,700 Loews Corporation(x) 567,450 ------------ 982,381 REAL ESTATE INVESTMENT TRUST 1.1% 8,200 New Century Financial Corporation(x) 493,804
36 Schedule of Investments
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- REGIONAL BANKS 2.7% 10,800 BB&T Corporation(x) $ 428,652 12,000 East West Bancorp, Inc.(x) 403,080 15,000 Hibernia Corporation(x) 396,150 ------------ 1,227,882 THRIFTS & MORTGAGE FINANCE 1.9% 9,000 IndyMac Bancorp, Inc.(x) 325,800 13,500 Doral Financial Corp.(x) 559,845 ------------ 885,645 TOTAL FINANCIAL 7,509,545 HEALTH CARE 9.2% BIOTECHNOLOGY 1.1% 8,900 Amgen Inc.(a)(x) 504,452 HEALTH CARE DISTRIBUTORS 0.9% 19,000 Priority Healthcare Corporation(a)(x) 382,850 HEALTH CARE EQUIPMENT 1.0% 8,700 Respironics, Inc.(a)(x) 464,928 HEALTH CARE SERVICES 0.5% 9,000 RehabCare Group, Inc.(a)(x) 207,270 HEALTH CARE SUPPLIES 1.4% 20,800 PolyMedica Corporation(x) 640,640 MANAGED HEALTH CARE 4.3% 10,400 AMERIGROUP Corporation(a)(x) 585,000 10,400 CIGNA Corporation(x) 724,152 11,750 Coventry Health Care, Inc.(a)(x) 627,097 ------------ 1,936,249 ------------ TOTAL HEALTH CARE 4,136,389 INDUSTRIALS 20.9% AEROSPACE & DEFENSE 2.2% 10,000 Alliant Techsystems Inc.(a)(x) 605,000 7,000 Northrop Grumman Corporation(x) 373,310 ------------ 978,310 AIR FREIGHT & LOGISTICS 1.3% 14,000 CNF Inc.(x) 573,860 BUILDING PRODUCTS 0.7% 9,600 Masco Corporation(x) 331,488
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS 1.7% 7,500 Oshkosh Truck Corporation(x) $ 427,950 5,000 The Toro Company(x) 341,500 ------------ 769,450 DIVERSIFIED COMMERCIAL SERVICES 0.9% 14,500 NCO Group, Inc.(a)(x) 390,775 EMPLOYMENT SERVICES 1.0% 32,300 Labor Ready, Inc.(a)(x) 452,846 ENVIRONMENTAL SERVICES 1.9% 5,500 Stericycle, Inc.(a)(x) 252,450 19,200 Waste Connections, Inc.(a)(x) 608,256 ------------ 860,706 INDUSTRIAL MACHINERY 2.8% 20,800 Flowserve Corporation(a)(x) 502,944 12,700 Reliance Steel & Aluminum Co.(x) 504,190 3,500 Ingersoll Rand Company -- Class A(x) 237,895 ------------ 1,245,029 RAILROADS 1.5% 18,000 Burlington Northern Santa Fe Corporation(x) 689,580 TRADING COMPANIES & DISTRIBUTORS 1.3% 9,700 W.W. Grainger, Inc.(x) 559,205 TRUCKING 5.6% 9,000 Arkansas Best Corporation(x) 329,580 34,150 Knight Transportation, Inc.(a)(x) 731,493 26,000 Yellow Roadway Corporation(a)(x) 1,219,140 6,700 J.B. Hunt Transport Services, Inc.(x) 248,831 ------------ 2,529,051 ------------ TOTAL INDUSTRIALS 9,380,300 INFORMATION TECHNOLOGY 10.3% APPLICATION SOFTWARE 1.0% 10,000 Intuit Inc.(a)(x) 454,000
Schedule of Investments 37 Schedule of Investments (continued) ICON Covered Call Fund September 30, 2004
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMUNICATIONS EQUIPMENT 0.9% 15,200 Comtech Telecommunications Corp.(a)(x) $ 411,920 COMPUTER STORAGE & PERIPHERALS 0.8% 12,300 SanDisk Corporation(a)(x) 358,176 DATA PROCESSING & OUTSOURCED SERVICES 1.1% 11,000 Computer Sciences Corporation(a)(x) 518,100 ELECTRONIC EQUIPMENT MANUFACTURERS 1.0% 9,200 Mettler-Toledo International Inc.(a)(x) 434,424 HOME ENTERTAINMENT SOFTWARE 0.8% 10,700 Take-Two Interactive Software, Inc.(a)(x) 351,495 INTERNET SOFTWARE & SERVICES 1.3% 11,900 Digital River, Inc.(a)(x) 354,382 7,600 j2 Global Communications, Inc.(a)(x) 240,084 ------------ 594,466 IT CONSULTING & OTHER SERVICES 1.2% 18,000 Cognizant Technology Solutions Corporation(a)(x) 549,180 SEMICONDUCTOR EQUIPMENT 0.7% 8,800 Cabot Microelectronics Corporation(a)(x) 319,000 SEMICONDUCTORS 0.7% 14,700 Texas Instruments Incorporated(x) 312,816 TECHNOLOGY DISTRIBUTORS 0.8% 11,000 Global Imaging Systems, Inc.(a)(x) 341,880 ------------ TOTAL INFORMATION TECHNOLOGY 4,645,457 LEISURE & CONSUMER STAPLES 8.4% AGRICULTURAL PRODUCTS 1.0% 9,600 Corn Products International, Inc.(x) 442,560 BREWERS 0.8% 5,500 Adolph Coors Company(x) 373,560 DISTILLERS & VINTNERS 0.8% 10,400 Constellation Brands, Inc.(a)(x) 395,824
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- PACKAGED FOODS & MEATS 1.4% 17,000 Sara Lee Corporation(x) $ 388,620 8,400 Smithfield Foods, Inc.(a)(x) 210,000 ------------ 598,620 PHOTOGRAPHIC PRODUCTS 1.1% 15,500 Eastman Kodak Company(x) 499,410 RESTAURANTS 1.0% 18,300 Sonic Corp.(a)(x) 469,029 TOBACCO 2.3% 5,800 Reynolds American Inc.(x) 394,632 15,200 UST Inc.(x) 611,952 ------------ 1,006,584 ------------ TOTAL LEISURE & CONSUMER STAPLES 3,785,587 MATERIALS 14.2% ALUMINUM 1.0% 14,100 Alcoa Inc.(x) 473,619 COMMODITY CHEMICALS 2.6% 9,700 Georgia Gulf Corporation(x) 432,523 23,500 Headwaters Incorporated(a)(x) 725,210 ------------ 1,157,733 CONSTRUCTION MATERIALS 2.4% 8,000 Eagle Materials Inc.(x) 570,400 10,600 Lafarge North America Inc.(x) 497,034 ------------ 1,067,434 DIVERSIFIED CHEMICALS 1.0% 9,000 FMC Corporation(a)(x) 437,130 FERTILIZERS & AGRICULTURAL CHEMICALS 0.9% 6,500 The Scotts Company(a)(x) 416,975 METAL & GLASS CONTAINERS 2.5% 48,500 Owens-Illinois, Inc.(a)(x) 776,000 15,500 Pactiv Corporation(a)(x) 360,375 ------------ 1,136,375 SPECIALTY CHEMICALS 1.0% 8,300 A. Schulman, Inc.(x) 182,932 7,000 Albemarle Corporation(x) 245,630 ------------ 428,562
38 Schedule of Investments
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- STEEL 2.8% 23,300 Steel Dynamics, Inc.(x) $ 899,846 15,900 Worthington Industries, Inc.(x) 339,465 ------------ 1,239,311 ------------ TOTAL MATERIALS 6,357,139 TELECOMMUNICATIONS & UTILITIES 2.2% INTEGRATED TELECOMMUNICATION SERVICES 1.7% 11,000 Golden Telecom, Inc.(x) 313,830 17,400 SBC Communications Inc.(x) 451,530 ------------ 765,360 WIRELESS TELECOMMUNICATION SERVICES 0.5% 10,900 Nextel Communications, Inc.(a)(x) 259,856 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 1,025,216 ------------ TOTAL UNITED STATES OF AMERICA 44,798,833 ------------ AMERICAN DEPOSITARY RECEIPT 0.6% MEXICO 0.6% TELECOMMUNICATIONS & UTILITIES 0.6% WIRELESS TELECOMMUNICATION SERVICES 0.6% 7,000 America Movil S.A. de C.V.(x) 273,210 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 273,210 ------------ TOTAL MEXICO 273,210 ------------ TOTAL AMERICAN DEPOSITARY RECEIPT 273,210
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- CANADA 0.7% ENERGY 0.7% INTEGRATED OIL & GAS 0.7% 10,000 Suncor Energy, Inc.(x) $ 320,100 ------------ TOTAL ENERGY 320,100 ------------ TOTAL CANADA 320,100 BAHAMAS 1.1% ENERGY 1.1% OIL & GAS REFINING & MARKETING & TRANSPORTATION 1.1% 11,000 Teekay Shipping Corporation(x) 473,991 ------------ TOTAL ENERGY 473,991 ------------ TOTAL BAHAMAS 473,991 ------------ TOTAL COMMON STOCKS (COST $42,225,740) 45,866,134 SHORT-TERM INVESTMENT 0.4% $174,557 American Family Demand Note, 1.4525%# $ 174,557 ------------ TOTAL SHORT-TERM INVESTMENT (COST $174,557) 174,557 ------------ TOTAL INVESTMENTS 102.5% (COST $42,400,297) 46,040,691 ------------ LIABILITIES LESS OTHER ASSETS (2.5%) (1,111,645) ------------ NET ASSETS 100.0% $44,929,046 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. (x) Portion or all of this security is pledged as collateral for call options written. Schedule of Investments 39 36 Schedule of Written Options ICON Covered Call Fund September 30, 2004
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- CALL OPTIONS A. Schulman, Inc. Expiration November 2004, Exercise Price $20.00 50 $ 10,625 Expiration November 2004, Exercise Price $22.50 25 1,438 A.G. Edwards, Inc. Expiration October 2004, Exercise Price $35.00 67 3,350 Expiration November 2004, Exercise Price $35.00 45 5,400 Adolph Coors Company Expiration November 2004, Exercise Price $65.00 29 11,020 Expiration November 2004, Exercise Price $70.00 26 2,795 Albemarle Corporation Expiration October 2004, Exercise Price $35.00 70 4,725 Alcoa Inc. Expiration November 2004, Exercise Price $32.50 126 24,255 Expiration November 2004, Exercise Price $35.00 15 975 Alliant Techsystems Inc. Expiration November 2004, Exercise Price $60.00 100 20,250 America Movil S.A. de C.V. Expiration November 2004, Exercise Price $40.00 58 6,380
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- AMERIGROUP Corporation Expiration October 2004, Exercise Price $55.00 104 $ 22,360 Amgen Inc. Expiration October 2004, Exercise Price $60.00 89 1,780 Arkansas Best Corporation Expiration October 2004, Exercise Price $35.00 72 14,220 Ashland Inc. Expiration October 2004, Exercise Price $55.00 75 11,437 Bank of America Corporation Expiration October 2004, Exercise Price $45.00 48 480 Expiration November 2004, Exercise Price $45.00 10 350 BB&T Corporation Expiration October 2004, Exercise Price $40.00 54 1,485 Expiration November 2004, Exercise Price $40.00 27 1,755 Best Buy Co., Inc. Expiration October 2004, Exercise Price $55.00 84 6,300 Burlington Northern Santa Fe Corporation Expiration November 2004, Exercise Price $35.00 60 21,600 Expiration November 2004, Exercise Price $40.00 120 5,400
40 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Cabot Microelectronics Corporation(a) Expiration October 2004, Exercise Price $35.00 44 $ 8,800 Expiration October 2004, Exercise Price $40.00 44 1,100 Capital One Financial Corporation Expiration October 2004, Exercise Price $75.00 60 6,000 CIGNA Corporation Expiration October 2004, Exercise Price $70.00 16 2,000 Expiration November 2004, Exercise Price $75.00 88 7,040 CNF Inc. Expiration October 2004, Exercise Price $42.50 70 2,625 Expiration November 2004, Exercise Price $40.00 70 15,400 Cognizant Technology Solutions Corporation Expiration October 2004, Exercise Price $30.00 150 16,125 Expiration November 2004, Exercise Price $30.00 30 6,300 Comerica Incorporated Expiration October 2004, Exercise Price $60.00 48 2,520 Expiration November 2004, Exercise Price $60.00 37 4,625 Computer Sciences Corporation Expiration October 2004, Exercise Price $50.00 110 1,100
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Comtech Telecommunications Corp. Expiration October 2004, Exercise Price $25.00 62 $ 14,570 Expiration November 2004, Exercise Price $30.00 90 7,650 Constellation Brands, Inc. Expiration October 2004, Exercise Price $37.50 104 10,660 Cooper Tire & Rubber Company Expiration October 2004, Exercise Price $20.00 96 4,560 Expiration November 2004, Exercise Price $22.50 89 1,113 Corn Products International, Inc. Expiration November 2004, Exercise Price $50.00 96 4,080 Coventry Health Care, Inc. Expiration October 2004, Exercise Price $55.00 117 4,972 Delphi Financial Group, Inc. Expiration October 2004, Exercise Price $40.00 75 5,812 Digital River, Inc. Expiration October 2004, Exercise Price $30.00 97 8,730 Expiration November 2004, Exercise Price $30.00 22 4,895 Doral Financial Corp. Expiration October 2004, Exercise Price $40.00 86 15,695 Expiration October 2004, Exercise Price $45.00 49 613
Schedule of Written Options 41 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2004
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Eagle Materials Inc. Expiration October 2004, Exercise Price $70.00 10 $ 1,975 Expiration November 2004, Exercise Price $75.00 70 7,875 East West Bancorp, Inc. Expiration October 2004, Exercise Price $32.50 60 8,550 Expiration October 2004, Exercise Price $35.00 60 1,050 Eastman Kodak Company Expiration November 2004, Exercise Price $35.00 155 6,587 Flowserve Corporation Expiration November 2004, Exercise Price $25.00 208 13,520 FMC Corporation Expiration November 2004, Exercise Price $50.00 90 11,475 Georgia Gulf Corporation Expiration November 2004, Exercise Price $45.00 97 16,732 Global Imaging Systems, Inc. Expiration October 2004, Exercise Price $30.00 110 14,575 Golden Telecom, Inc. Expiration November 2004, Exercise Price $30.00 88 7,700 Goldman Sachs Group, Inc. Expiration October 2004, Exercise Price $95.00 36 2,340
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Harley-Davidson, Inc. Expiration October 2004, Exercise Price $60.00 87 $ 9,570 Harman International Industries, Incorporated Expiration November 2004, Exercise Price $110.00 45 18,000 Hartford Financial Services Group, Inc. Expiration October 2004, Exercise Price $60.00 50 11,375 Expiration November 2004, Exercise Price $65.00 17 978 Headwaters Incorporated Expiration October 2004, Exercise Price $30.00 185 24,050 Expiration November 2004, Exercise Price $30.00 26 5,655 Hibernia Corporation Expiration October 2004, Exercise Price $25.00 58 8,555 Hilb Rogal and Hobbs Company Expiration October 2004, Exercise Price $35.00 88 12,100 Expiration January 2005, Exercise Price $40.00 12 510 IndyMac Bancorp, Inc. Expiration November 2004, Exercise Price $35.00 68 13,260 Ingersoll-Rand Company - Class A Expiration October 2004, Exercise Price $65.00 5 1,675 Expiration October 2004, Exercise Price $70.00 30 1,425
42 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Intuit Inc. Expiration October 2004, Exercise Price $45.00 65 $ 6,500 Expiration November 2004, Exercise Price $47.50 35 3,325 J.B. Hunt Transport Services, Inc. Expiration November 2004, Exercise Price $35.00 33 10,395 Expiration November 2004, Exercise Price $40.00 34 2,465 j2 Global Communications, Inc. Expiration October 2004, Exercise Price $30.00 53 10,732 Expiration November 2004, Exercise Price $35.00 23 2,070 Knight Transportation, Inc. Expiration October 2004, Exercise Price $22.50 149 2,608 Expiration November 2004, Exercise Price $22.50 192 11,040 Labor Ready, Inc. Expiration November 2004, Exercise Price $12.50 223 39,582 Expiration November 2004, Exercise Price $15.00 100 3,750 Lafarge North America Inc. Expiration November 2004, Exercise Price $45.00 80 19,600
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Loews Corporation Expiration October 2004, Exercise Price $55.00 39 $ 14,040 Expiration October 2004, Exercise Price $60.00 44 1,320 Expiration November 2004, Exercise Price $60.00 14 1,330 Masco Corporation Expiration October 2004, Exercise Price $35.00 39 780 Expiration November 2004, Exercise Price $35.00 57 3,848 Mettler-Toledo International Inc. Expiration November 2004, Exercise Price $45.00 15 4,500 Expiration November 2004, Exercise Price $50.00 77 2,888 Michaels Stores, Inc. Expiration October 2004, Exercise Price $60.00 75 6,750 NCO Group, Inc. Expiration November 2004, Exercise Price $25.00 87 20,010 Expiration December 2004, Exercise Price $30.00 58 2,465 New Century Financial Corporation Expiration November 2004, Exercise Price $60.00 33 15,015 Expiration November 2004, Exercise Price $65.00 49 12,005
Schedule of Written Options 43 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2004
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Newfield Exploration Co. Expiration October 2004, Exercise Price $60.00 11 $ 2,063 Expiration November 2004, Exercise Price $65.00 59 3,982 Nextel Communications, Inc.(a) Expiration October 2004, Exercise Price $22.50 97 15,035 Expiration November 2004, Exercise Price $25.00 12 900 Northrop Grumman Corporation Expiration October 2004, Exercise Price $50.00 39 13,260 Expiration November 2004, Exercise Price $55.00 19 1,473 Offshore Logistics, Inc. Expiration November 2004, Exercise Price $35.00 91 11,147 O'Reilly Automotive, Inc. Expiration October 2004, Exercise Price $40.00 22 495 Expiration November 2004, Exercise Price $40.00 14 1,085 Oshkosh Truck Corporation Expiration November 2004, Exercise Price $60.00 75 7,687
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Owens-Illinois, Inc. Expiration October 2004, Exercise Price $15.00 312 $ 35,880 Expiration November 2004, Exercise Price $15.00 77 11,165 Expiration November 2004, Exercise Price $17.50 96 2,880 Pactiv Corporation Expiration October 2004, Exercise Price $22.50 29 2,610 Expiration October 2004, Exercise Price $25.00 126 1,575 Polo Ralph Lauren Corporation Expiration November 2004, Exercise Price $40.00 165 4,950 PolyMedica Corporation Expiration October 2004, Exercise Price $30.00 164 18,450 Priority Healthcare Corporation Expiration October 2004, Exercise Price $20.00 180 11,250 Expiration October 2004, Exercise Price $25.00 10 125 Quiksilver, Inc. Expiration October 2004, Exercise Price $25.00 170 16,575 RehabCare Group, Inc. Expiration October 2004, Exercise Price $22.50 63 6,142 Expiration November 2004, Exercise Price $25.00 27 1,283
44 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Reliance Steel & Aluminum Co. Expiration October 2004, Exercise Price $40.00 116 $ 10,730 Expiration December 2004, Exercise Price $45.00 11 1,073 Respironics, Inc. Expiration October 2004, Exercise Price $55.00 87 4,132 Reynolds American Inc. Expiration October 2004, Exercise Price $65.00 29 10,295 Expiration November 2004, Exercise Price $70.00 29 5,365 SanDisk Corporation Expiration October 2004, Exercise Price $30.00 123 11,685 Sara Lee Corporation Expiration October 2004, Exercise Price $22.50 126 6,615 Expiration November 2004, Exercise Price $22.50 27 2,093 SBC Communications Inc. Expiration October 2004, Exercise Price $27.50 29 145 Expiration November 2004, Exercise Price $27.50 116 1,450 Smithfield Foods, Inc. Expiration October 2004, Exercise Price $25.00 18 1,035 Expiration November 2004, Exercise Price $25.00 58 5,945
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Sonic Corp. Expiration October 2004, Exercise Price $25.00 116 $ 10,150 Expiration November 2004, Exercise Price $25.00 37 4,902 Steel Dynamics, Inc. Expiration October 2004, Exercise Price $40.00 47 3,408 Expiration November 2004, Exercise Price $40.00 152 25,460 Stericycle, Inc. Expiration October 2004, Exercise Price $45.00 28 4,060 Expiration October 2004, Exercise Price $50.00 17 170 Expiration November 2004, Exercise Price $50.00 10 400 Suncor Energy, Inc. Expiration November 2004, Exercise Price $30.00 55 14,850 Expiration November 2004, Exercise Price $35.00 45 2,250 Take-Two Interactive Software, Inc. Expiration October 2004, Exercise Price $35.00 7 158 Expiration November 2004, Exercise Price $37.50 100 3,250 Teekay Shipping Corporation Expiration October 2004, Exercise Price $40.00 44 14,740 Expiration November 2004, Exercise Price $45.00 66 7,590
Schedule of Written Options 45 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2004
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Texas Instruments Incorporated Expiration October 2004, Exercise Price $22.50 30 $ 750 Expiration November 2004, Exercise Price $25.00 117 2,925 The Home Depot, Inc. Expiration October 2004, Exercise Price $37.50 153 27,922 The Scotts Company Expiration October 2004, Exercise Price $65.00 55 3,713 The Sherwin-Williams Company Expiration October 2004, Exercise Price $40.00 89 35,600 Expiration November 2004, Exercise Price $45.00 14 1,085 The Toro Company Expiration October 2004, Exercise Price $70.00 40 2,500 Expiration November 2004, Exercise Price $70.00 10 1,875 The Yankee Candle Company, Inc. Expiration November 2004, Exercise Price $30.00 79 5,332 Toll Brothers, Inc. Expiration October 2004, Exercise Price $50.00 97 970 Torchmark Corporation Expiration October 2004, Exercise Price $50.00 85 27,200 Expiration November 2004, Exercise Price $55.00 15 750
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Tupperware Corporation Expiration October 2004, Exercise Price $17.50 100 $ 1,250 Expiration November 2004, Exercise Price $17.50 27 1,148 UICI Expiration October 2004, Exercise Price $30.00 198 58,410 Ultra Petroleum Corp. Expiration November 2004, Exercise Price $50.00 140 40,600 UST Inc. Expiration October 2004, Exercise Price $40.00 126 8,505 V.F. Corporation Expiration October 2004, Exercise Price $50.00 105 4,988 W.W. Grainger, Inc. Expiration October 2004, Exercise Price $55.00 15 3,975 Expiration November 2004, Exercise Price $55.00 68 22,440 Expiration November 2004, Exercise Price $60.00 14 840 Waste Connections, Inc. Expiration October 2004, Exercise Price $30.00 96 16,320 Worthington Industries, Inc. Expiration October 2004, Exercise Price $20.00 88 12,540 Expiration November 2004, Exercise Price $22.50 71 3,727
46 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES MARKET EXERCISE PRICE PER CONTRACT) VALUE ------------------------------------------------- Yellow Roadway Corporation Expiration October 2004, Exercise Price $45.00 106 $ 23,320 Expiration November 2004, Exercise Price $50.00 154 13,475 ---------- Total Options Written (Premiums received $1,035,052) 11,776 $1,376,038
The accompanying notes are an integral part of the financial statements. Schedule of Written Options 47 Management Overview ICON Equity Income Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 85.9% Common Stocks 76.1% Preferred Stocks 4.0% Convertible Preferred Stocks 5.8% Top 10 Equity Holdings 16.2% Number of Stocks 108 Options Purchased Call Options 0.2% Number of Securities on Which Options Have Been Purchased 6 Bonds & Short-Term Investments 13.3% Convertible Corporate Bonds 3.9% Corporate Bonds 8.6% Short-Term Investments 0.8% Number of Bonds 18 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 The Allstate Corporation 1.9% Steel Technologies Inc. 1.9% Methanex Corporation 1.9% Bank of America Corporation 1.7% Kimberly-Clark Corporation 1.6% Textron Inc. 1.5% Tidewater Inc. 1.5% PolyMedica Corporation 1.4% CIGNA Corporation 1.4% Smith & Nephew plc 1.4% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Equity Income Fund, Class I gained 19.69% for the fiscal year ended September 30, 2004, while its Class C shares appreciated 18.56%. Both returns outpaced the 14.58% advance for the Fund's benchmark, the S&P 1500 Index. Meanwhile, the Fund's Class Z shares increased 8.12% since their May 10, 2004 inception compared to a 3.71% return for the benchmark over the same period. Total returns for other periods as of September 30, 2004 are listed on page 52. Having maintained an equity tilt toward economically sensitive sectors during the period, the Fund outperformed the market during cyclical upturns, but lagged when dramatic pullbacks favored more defensive-oriented sectors. Although our valuation and relative strength metrics continued to support a recovery-driven theme, the lack of consistent cyclical leadership detracted from overall performance. Meanwhile, the Fund's focus on longer-maturity bonds worked in its favor as benchmark Treasury yields remained virtually unchanged, despite persistent fears that rates would move appreciably higher. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. While our system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to- earnings (P/E) basis. This was corroborated by the outperformance of S&P/Barra Value Indexes over their growth counterparts for the one-year period ended September 30, 2004. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Widespread expectations that long-term interest rates would trend higher failed to materialize when fixed-income investors extended maturities in conjunction with three Federal Reserve rate hikes. Consequently, longer rates fell amid indications that Fed tightening at the short end would keep inflation in check. Given these favorable conditions, our system continued to support a recovery-based theme, featuring an eventual upside move in economically sensitive industries. 48 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager However, an extended first-half rally dissipated against a cloud of uncertainty, as rising oil prices, geopolitical tensions and election-year rhetoric fueled investor concerns. Although underlying fundamentals improved incrementally, fear-driven theme rotations sent the market into a volatile trading range, quickly extinguishing any move toward a sustained cyclical rally. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. The Fund's bond exposure enabled it to dampen some of the extreme volatility during the period. Given rate pressures in premium-priced shorter-dated issues, the Fund's value-driven tilt toward longer maturities worked to its advantage. Whereas high-yield corporate debt bolstered first-half performance, declining risk premiums favored a shift to government and agency securities -- ultimately the largest contributors to Fund performance for the period. Meanwhile, we more heavily weighted the Financials sector, which boosted overall dividend yield and relative performance. Also contributing to performance were overweight positions in the Materials sector and the steel industry, which produced market-leading returns while continuing to exhibit further upside potential, based on valuation and relative strength. Among the Fund's leading company contributors, commercial services giant Cendant Corp. benefited from margin improvements and strong sales in its core travel and real estate businesses. Elsewhere, crude oil transporter Knightsbridge Tankers Ltd. profited from the runup in oil prices, while yielding a substantial dividend payout. In contrast, stocks that detracted from Fund performance over the 12 months included commodity fiber producer Wellman Inc., which struggled with weak demand and rising input costs. Also retreating on weaker-than-expected orders was SpectraLink Corp., a maker of workplace wireless communication systems. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC MARKET? A. We believe the backdrop of economic strength and stable interest rates coupled with widespread value and the sustainability of the late-period advance creates a positive setting for the market at large. With economic growth seemingly in line with sustainable Federal Reserve targets, we see no reason why long rates must rise appreciably above current range-bound levels, given their 20-year secular decline. For that reason, we will continue to rely on valuation-related fundamentals in seeking out suitable dividend- paying equities and fixed-income opportunities. Management Overview 49 Management Overview (continued) ICON Equity Income Fund PERFORMANCE HIGHLIGHTS September 30, 2004 - The Fund's bond exposure and value-driven tilt toward longer maturities contributed to performance, while a lack of consistent sector leadership proved to be a detractor to returns. - While high-yield corporate debt bolstered first-half performance, a valuation-based shift to government and agency securities enhanced overall returns. - A heavily weighted Financials sector boosted dividend yield and relative performance, while overweight positions in Materials and steel contributed market-leading returns. - Stocks that aided returns included Cendant Corp. and Knightsbridge Tankers Ltd., while Wellman Inc. and SpectraLink Corp. were among the poorest performers. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. 50 Management Overview SECTOR COMPOSITION September 30, 2004 Financial 20.6% Industrials 16.0% Materials 12.4% Consumer Discretionary 10.5% Leisure & Consumer Staples 10.1% Health Care 9.3% Telecommunications & Utilities 8.8% Information Technology 6.6% Energy 4.3%
Percentages are based upon common stock positions and net assets. Management Overview 51 Management Overview (continued) ICON Equity Income Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Equity Income Fund-Class I 10/1/02 19.69% N/A 22.21% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% 19.55% ------------------------------------------------------------------------------------------- ICON Equity Income Fund-Class C 11/8/02 18.56% N/A 18.67% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% 14.64% ------------------------------------------------------------------------------------------- ICON Equity Income Fund-Class Z 5/10/04 N/A N/A 8.12%* ------------------------------------------------------------------------------------------- S&P 1500 Index 3.71%* -------------------------------------------------------------------------------------------
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 limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON EQUITY INCOME FUND-CLASS I S&P 1500 INDEX ------------------------------- -------------- 10/1/02 $10000 $10000 3/31/03 $10091 $10450 9/30/03 $12482 $12469 3/31/04 $14940 $14308 9/30/04 $14927 $14285
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. 52 Management Overview FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Equity Income Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first set of lines in the table below provide information about actual account values and actual expenses, (with actual net expenses being limited to 2.20%, 1.45% and 1.20% based on a contractual commitment). The Example below includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses, and interest expense or dividends on short positions taken by the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second set of lines in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. Management Overview 53 50 Management Overview (continued) ICON Equity Income Fund
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04** --------------------------------------------------------------------------------------------- CLASS C --------------------------------------------------------------------------------------------- Actual Expense $1,000.00 $ 995.30 $10.97 --------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,014.00 $11.08 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS I --------------------------------------------------------------------------------------------- Actual Expense $1,000.00 $ 999.10 $ 6.65 --------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,018.35 $ 6.71 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS Z --------------------------------------------------------------------------------------------- Actual Expense $1,000.00 $1,081.20 $ 4.05 --------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,015.75 $ 3.93 (5% return before expenses) ---------------------------------------------------------------------------------------------
* Class Z shares commenced operations May 10, 2004. ** Expenses are equal to the Fund's six-month expense ratios after limitation if any, of 2.20% (Class C), 1.33% (Class I), and 0.97% (Class Z), annualized, multiplied by the average account value over the period, multiplied by 183/366, 183/366 and 143/366 respectively to reflect the one-half year period or date of inception. 54 Management Overview Schedule of Investments ICON Equity Income Fund September 30, 2004
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 76.1% UNITED STATES OF AMERICA 67.1% CONSUMER DISCRETIONARY 7.0% APPAREL ACCESSORIES & LUXURY GOODS 2.4% 7,900 Kellwood Company $ 287,955 71,000 Oshkosh B'Gosh, Inc. 1,434,200 22,600 V. F. Corporation 1,117,570 ------------ 2,839,725 APPAREL RETAIL 0.8% 15,900 The Cato Corporation 353,775 26,500 Limited Brands 590,685 ------------ 944,460 AUTOMOBILE MANUFACTURERS 1.0% 28,300 General Motors Corporation 1,202,184 HOME IMPROVEMENT RETAIL 1.0% 28,100 The Sherwin- Williams Company 1,235,276 HOUSEHOLD APPLIANCES 0.3% 10,800 Snap-on Incorporated 297,648 TIRES & RUBBER 1.5% 18,900 Bandag, Incorporated 827,820 50,300 Cooper Tire & Rubber Company 1,014,551 ------------ 1,842,371 ------------ TOTAL CONSUMER DISCRETIONARY 8,361,664 ENERGY 2.4% INTEGRATED OIL & GAS 0.4% 5,300 ConocoPhillips 439,105 OIL & GAS EQUIPMENT & SERVICES 1.5% 56,000 Tidewater Inc. 1,822,800 OIL & GAS REFINING, MARKETING & TRANSPORTATION 0.5% 10,600 Ashland Inc. 594,448 ------------ TOTAL ENERGY 2,856,353
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- FINANCIAL 14.2% ASSET MANAGEMENT & CUSTODY BANKS 2.7% 30,000 American Capital Strategies, Ltd. $ 940,200 29,800 The Bank of New York Company, Inc. 869,266 83,000 MCG Capital Corporation 1,440,880 ------------ 3,250,346 DIVERSIFIED BANKS 1.7% 47,294 Bank of America Corporation 2,049,249 INSURANCE BROKERS 1.9% 42,500 Aon Corporation 1,221,450 32,000 Arthur J. Gallagher & Co. 1,060,160 ------------ 2,281,610 LIFE & HEALTH INSURANCE 0.5% 12,000 Lincoln National Corporation 564,000 MULTI-LINE INSURANCE 2.3% 48,300 American Financial Group, Inc. 1,443,687 21,000 Loews Corporation 1,228,500 ------------ 2,672,187 OTHER DIVERSIFIED FINANCIAL SERVICES 0.8% 24,500 JPMorgan Chase & Co. 973,385 PROPERTY & CASUALTY INSURANCE 1.9% 48,000 The Allstate Corporation 2,303,520 REAL ESTATE INVESTMENT TRUSTS 0.3% 13,200 General Growth Properties, Inc. 409,200 REGIONAL BANKS 1.0% 29,000 BB&T Corporation 1,151,010 THRIFTS & MORTGAGE FINANCE 1.1% 32,700 Countrywide Financial Corporation 1,288,053 ------------ TOTAL FINANCIAL 16,942,560 HEALTH CARE 5.4% HEALTH CARE DISTRIBUTORS 0.9% 43,500 Owens & Minor, Inc. 1,104,900 HEALTH CARE EQUIPMENT 0.6% 41,900 PerkinElmer, Inc. 721,518
Schedule of Investments 55 Schedule of Investments (continued) ICON Equity Income Fund September 30, 2004
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- HEALTH CARE SUPPLIES 1.4% 55,800 PolyMedica Corporation $ 1,718,640 MANAGED HEALTH CARE 1.4% 24,000 CIGNA Corporation 1,671,120 PHARMACEUTICALS 1.1% 24,000 Abbott Laboratories 1,016,640 11,200 Bristol-Myers Squibb Company 265,104 ------------ 1,281,744 ------------ TOTAL HEALTH CARE 6,497,922 INDUSTRIALS 15.6% AEROSPACE & DEFENSE 3.4% 42,600 Goodrich Corporation 1,335,936 26,300 Lockheed Martin Corporation 1,467,014 32,000 Raytheon Company 1,215,360 ------------ 4,018,310 AIR FREIGHT & LOGISTICS 0.5% 13,700 Ryder System, Inc. 644,448 BUILDING PRODUCTS 2.7% 128,700 Apogee Enterprises, Inc. 1,664,091 45,200 Masco Corporation 1,560,756 ------------ 3,224,847 COMMERCIAL PRINTING 1.0% 38,000 R.R. Donnelley & Sons Company 1,190,160 CONSTRUCTION & FARM MACHINERY & HEAVY TRUCKS 0.8% 7,300 Caterpillar Inc. 587,285 20,400 Federal Signal Corporation 379,032 ------------ 966,317 ELECTRICAL COMPONENTS & EQUIPMENT 0.8% 7,900 Roper Industries, Inc. 453,934 8,300 Cooper Industries, Ltd. 489,700 ------------ 943,634 INDUSTRIAL CONGLOMERATES 1.5% 28,500 Textron Inc. 1,831,695
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- INDUSTRIAL MACHINERY 1.6% 8,400 Briggs & Stratton Corporation $ 682,080 11,100 Harsco Corporation 498,390 40,700 Stewart & Stevenson Services, Inc. 719,169 ------------ 1,899,639 MARINE 0.4% 14,000 Alexander & Baldwin, Inc. 475,160 OFFICE SERVICES & SUPPLIES 1.1% 27,000 Brady Corporation 1,316,790 RAILROADS 1.3% 40,500 Burlington Northern Santa Fe Corporation 1,551,555 TRADING COMPANIES & DISTRIBUTORS 0.5% 16,800 Applied Industrial Technologies, Inc. 600,432 ------------ TOTAL INDUSTRIALS 18,662,987 INFORMATION TECHNOLOGY 1.4% APPLICATION SOFTWARE 0.9% 11,300 FactSet Research Systems Inc. 544,660 27,100 Jack Henry & Associates, Inc. 508,667 ------------ 1,053,327 DATA PROCESSING & OUTSOURCED SERVICES 0.5% 19,300 StarTek, Inc. 605,248 ------------ TOTAL INFORMATION TECHNOLOGY 1,658,575 LEISURE & CONSUMER STAPLES 6.8% FOOD RETAIL 1.0% 49,000 Albertson's, Inc. 1,172,570 HOUSEHOLD PRODUCTS 1.6% 30,000 Kimberly-Clark Corporation 1,937,700 PACKAGED FOODS & MEATS 0.7% 54,300 Lance, Inc. 876,945 PHOTOGRAPHIC PRODUCTS 0.9% 33,200 Eastman Kodak Company 1,069,704
56 Schedule of Investments
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- TOBACCO 2.6% 21,800 Reynolds American Inc. $ 1,483,272 40,000 UST Inc. 1,610,400 ------------ 3,093,672 ------------ TOTAL LEISURE & CONSUMER STAPLES 8,150,591 MATERIALS 8.2% ALUMINUM 0.3% 11,500 Alcoa Inc. 386,285 CONSTRUCTION MATERIALS 2.3% 16,800 Eagle Materials Inc. 1,197,840 30,000 Vulcan Materials Company 1,528,500 ------------ 2,726,340 DIVERSIFIED CHEMICALS 1.4% 18,000 Eastman Chemical Company 855,900 13,500 PPG Industries, Inc. 827,280 ------------ 1,683,180 PAPER PRODUCTS 0.9% 91,000 Glatfelter 1,127,490 SPECIALTY CHEMICALS 1.4% 23,200 The Lubrizol Corporation 802,720 33,700 Quaker Chemical Corporation 813,855 ------------ 1,616,575 STEEL 1.9% 87,600 Steel Technologies Inc. 2,244,050 ------------ TOTAL MATERIALS 9,783,920 TELECOMMUNICATIONS & UTILITIES 6.1% ELECTRIC UTILITIES 1.7% 31,600 Alliant Energy Corporation 786,208 51,500 Duquesne Light Holdings Inc. 924,940 9,100 IDACORP, Inc 264,446 ------------ 1,975,594 GAS UTILITIES 0.3% 6,900 Atmos Energy Corporation 173,811 5,700 Peoples Energy Corporation 237,576 ------------ 411,387
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- INTEGRATED TELECOMMUNICATION SERVICES 0.9% 53,232 Sprint Corporation $ 1,071,560 MULTI-UTILITIES & UNREGULATED POWER 1.3% 39,200 Duke Energy Corporation 897,288 23,600 Energy East Corporation 594,248 ------------ 1,491,536 WATER UTILITIES 1.9% 45,000 American States Water Company 1,120,500 40,000 California Water Service Group 1,174,800 ------------ 2,295,300 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 7,245,377 ------------ TOTAL UNITED STATES OF AMERICA 80,159,949 AMERICAN DEPOSITARY RECEIPTS 4.6% BRAZIL 1.6% MATERIALS 0.8% PAPER PRODUCTS 0.8% 28,700 Aracruz Celulose S.A. 950,544 ------------ TOTAL MATERIALS 950,544 TELECOMMUNICATIONS & UTILITIES 0.8% WIRELESS TELECOMMUNICATIONS SERVICES 0.8% 34,000 Telemig Celular Participacoes 968,320 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 968,320 ------------ TOTAL BRAZIL 1,918,864 MEXICO 1.1% CONSTRUCTION MATERIALS 1.1% 48,034 Cemex S.A. de C.V. 1,351,677 ------------ TOTAL MEXICO 1,351,677 NETHERLANDS 0.5% FINANCIAL 0.5% OTHER DIVERSIFIED FINANCIAL SERVICES 0.5% 21,409 ING Groep N.V. 541,220 ------------ TOTAL FINANCIAL 541,220 ------------ TOTAL NETHERLANDS 541,220
Schedule of Investments 57 Schedule of Investments (continued) ICON Equity Income Fund September 30, 2004
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- UNITED KINGDOM 1.4% HEALTH CARE SUPPLIES 1.4% HEALTH CARE 1.4% 36,000 Smith & Nephew plc $ 1,668,600 ------------ TOTAL HEALTH CARE 1,668,600 ------------ TOTAL UNITED KINGDOM 1,668,600 ------------ TOTAL AMERICAN DEPOSITARY RECEIPTS 5,480,361 BERMUDA 1.3% ENERGY 1.3% OIL & GAS REFINING, MARKETING & TRANSPORTATION 1.3% 50,900 Knightsbridge Tankers Ltd. 1,577,900 ------------ TOTAL ENERGY 1,577,900 ------------ TOTAL BERMUDA 1,577,900 BRITISH VIRGIN ISLANDS 1.2% INFORMATION TECHNOLOGY 1.2% ELECTRONIC EQUIPMENT MANUFACTURERS 1.2% 70,000 Nam Tai Electronics, Inc. 1,494,500 ------------ TOTAL INFORMATION TECHNOLOGY 1,494,500 ------------ TOTAL BRITISH VIRGIN ISLANDS 1,494,500 CANADA 1.9% MATERIALS 1.9% COMMODITY CHEMICALS 1.9% 147,100 Methanex Corporation 2,216,797 ------------ TOTAL MATERIALS 2,216,797 ------------ TOTAL CANADA 2,216,797 ------------ TOTAL COMMON STOCKS (COST $80,792,236) 90,929,507 PREFERRED STOCKS 4.0% UNITED STATES OF AMERICA 3.5% CONSUMER DISCRETIONARY 0.3% HOUSEHOLD APPLIANCES 0.3% 15,000 Maytag Corporation, 7.875%, 8-1-31 397,350 ------------ TOTAL CONSUMER DISCRETIONARY 397,350 FINANCIAL 1.9% CONSUMER FINANCE 0.3% 16,000 MBNA Corporation, 7.500%, Series A 410,400
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- CONSUMER LOANS 1.1% 26,000 General Motors Acceptance Corporation, 7.350%, 8-8-32 $ 669,240 27,000 Ford Motor Credit Company, 7.600%, 3-01-32 702,270 ------------ 1,371,510 PROPERTY & CASUALTY INSURANCE 0.3% 12,200 Ambac Financial Group, Inc., 7.000%, 10-17-51 319,640 REGIONAL BANKS 0.2% 6,600 Bank One Capital Corporation, 8.000%, 1-30-31 175,890 ------------ TOTAL FINANCIAL 2,277,440 HEALTH CARE 0.4% MANAGED HEALTH CARE 0.4% 18,200 Aetna Inc., 8.500%, 8-31-41 489,762 ------------ TOTAL HEALTH CARE 489,762 LEISURE & CONSUMER STAPLES 0.9% MOVIES & ENTERTAINMENT 0.9% 38,000 The Walt Disney Company, 7.000%, 11-1-31 1,007,380 ------------ TOTAL LEISURE & CONSUMER STAPLES 1,007,380 ------------ TOTAL UNITED STATES OF AMERICA 4,171,932 CANADA 0.5% INFORMATION TECHNOLOGY 0.5% OFFICE ELECTRONICS 0.5% 18,100 Xerox Capital LLC, 6.540%, 2-28-06, Series A 600,687 ------------ TOTAL INFORMATION TECHNOLOGY 600,687 ------------ TOTAL CANADA 600,687 ------------ TOTAL PREFERRED STOCKS (COST $4,807,239) 4,772,619 CONVERTIBLE PREFERRED STOCKS 5.8% UNITED STATES OF AMERICA 5.4% CONSUMER DISCRETIONARY 0.9% SPECIALTY STORES 0.9% 23,200 Toy "R" Us, Inc., 6.250%, 8-16-05 1,114,992 ------------ TOTAL CONSUMER DISCRETIONARY 1,114,992
58 Schedule of Investments
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- ENERGY 0.6% ELECTRIC INTEGRATED 0.6% 14,400 TXU Corp., 8.750%, 11-16-05, Series C $ 750,240 ------------ TOTAL ENERGY 750,240 HEALTH CARE 0.4% HEALTH CARE DISTRIBUTORS 0.4% 9,000 Omnicare, Inc., 4.000%, 6-15-33 427,500 ------------ TOTAL HEALTH CARE 427,500 INDUSTRIALS 0.4% AEROSPACE & DEFENSE 0.4% 4,000 Northrop Grumman Corporation, 7.000%, 4-4-21 524,000 ------------ TOTAL INDUSTRIALS 524,000 LEISURE & CONSUMER STAPLES 1.1% DISTILLERS & VINTNERS 1.1% 39,000 Constellation Brands, Inc., 5.750%, 9-1-06 1,277,250 ------------ TOTAL LEISURE & CONSUMER STAPLES 1,277,250 INFORMATION TECHNOLOGY 0.8% TECHNOLOGY DISTRIBUTORS 0.8% 17,000 Pioneer Standard Fin. Trust, 6.75%, 3-31-28 947,750 ------------ TOTAL INFORMATION TECHNOLOGY 947,750 MATERIALS 0.4% PAPER PACKAGING 0.4% 4,200 Chesapeake Energy Corporation, 6.750%, 12-31-49 428,778 ------------ TOTAL MATERIALS 428,778 TELECOMMUNICATIONS & UTILITIES 0.8% ELECTRIC UTILITIES 0.3% 16,200 Ameren Corporation, 9.750%, 5-15-05 444,852 GAS UTILITIES 0.2% 4,300 KeySpan Corporation, 8.750%, 5-16-05 227,900
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- MULTI-UTILITIES & UNREGULATED POWER 0.3% 10,500 Sempra Energy, 8.500%, 5-17-05 $ 325,080 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 997,832 ------------ TOTAL UNITED STATES OF AMERICA 6,468,342 AMERICAN DEPOSITARY RECEIPT 0.4% TELECOMMUNICATIONS & UTILITIES 0.4% INTEGRATED TELECOMMUNICATION SERVICES 0.4% 8,600 Philippine Long Distance Telephone Company, 3.500%, 12-31-49, Series III 427,850 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 427,850 ------------ TOTAL AMERICAN DEPOSITARY RECEIPT 427,850 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (COST $6,120,026) 6,896,192 CALL OPTIONS PURCHASED (100 SHARES PER CONTRACT) 0.2% UNITED STATES OF AMERICA 0.2% CONSUMER DISCRETIONARY 0.1% AUTOMOBILE MANUFACTURERS 0.0% 400 Ford Motor Company Expiration January 2006, Exercise Price $20.00 11,000 HOME IMPROVEMENT RETAIL 0.1% 123 Lowe's Companies, Inc. Expiration January 2007, Exercise Price $65.00 62,730 ------------ TOTAL CONSUMER DISCRETIONARY 73,730 FINANCIAL 0.1% INVESTMENT BANKING & BROKERAGE 0.1% 125 Morgan Stanley Expiration January 2007, Exercise Price $60.00 49,375
Schedule of Investments 59 Schedule of Investments (continued) ICON Equity Income Fund September 30, 2004
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- LIFE & HEALTH INSURANCE 0.0% 150 Prudential Financial, Inc. Expiration January 2005, Exercise Price $50.00 $ 15,375 ------------ TOTAL FINANCIAL 64,750 HEALTH CARE 0.0% MANAGED HEALTH CARE 0.0% 50 Aetna, Inc. Expiration October 2004, Exercise Price $100.00 7,875 ------------ TOTAL HEALTH CARE 7,875 INFORMATION TECHNOLOGY 0.0% OFFICE ELECTRONICS 0.0% 1,100 XEROX Corporation Expiration January 2006, Exercise Price $20.00 52,250 ------------ TOTAL INFORMATION TECHNOLOGY 52,250 ------------ TOTAL UNITED STATES OF AMERICA 198,605 ------------ TOTAL CALL OPTIONS PURCHASED (COST $318,757) 198,605 CONVERTIBLE CORPORATE BONDS 3.9% UNITED STATES OF AMERICA 3.9% FINANCIAL 1.0% CONSUMER FINANCE 1.0% 1,230,000 Providian Financial Corporation, 3.250%, 8-15-05 1,211,550 ------------ TOTAL FINANCIAL 1,211,550 HEALTH CARE 1.2% PHARMACEUTICALS 1.2% 1,500,000 King Pharmaceuticals, Inc., 2.750%, 11-15-21 1,447,500 ------------ TOTAL HEALTH CARE 1,447,500 INFORMATION TECHNOLOGY 0.8% COMPUTER STORAGE & PERIPHERALS 0.2% 177,000 Adaptec, Inc., 3.000%, 3-5-07 177,000
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- DATA PROCESSING & OUTSOURCED SERVICES 0.1% 158,000 The BISYS Group, Inc., 4.000%, 3-15-06, (Acquired 1-30-04; Cost $161,162)* $ 154,840 SEMICONDUCTORS 0.5% 600,000 International Rectifier Corporation, 4.250%, 7-15-07 591,000 ------------ TOTAL INFORMATION TECHNOLOGY 922,840 LEISURE & CONSUMER STAPLES 0.2% BROADCASTING & CABLE TV 0.1% 135,000 Mediacom Communications Corporation, 5.250%, 7-1-06 131,288 PHOTOGRAPHIC PRODUCTS 0.1% 110,000 Eastman Kodak Company, 3.375%, 10-15-33, (Acquired 1-30-04; Cost $134,369)* 138,600 ------------ TOTAL LEISURE & CONSUMER STAPLES 269,888 TELECOMMUNICATIONS & UTILITIES 0.7 WIRELESS TELECOMMUNICATION SERVICES 0.7% 790,000 China Mobile Limited, 2.250%, 11-3-05 785,062 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 785,062 ------------ TOTAL UNITED STATES OF AMERICA 4,636,840 ------------ TOTAL CONVERTIBLE CORPORATE BONDS (COST $4,659,509) 4,636,840 CORPORATE BONDS 8.6% UNITED STATES OF AMERICA 8.6% CONSUMER DISCRETIONARY 2.2% AUTOMOBILE MANUFACTURERS 1.4% 1,600,000 DaimlerChrysler AG, 6.50%, 11-15- 13 1,736,016 HOME IMPROVEMENT RETAIL 0.8% 800,000 Lowe's Companies, Inc., 8.250%, 6-1-10 964,802 ------------ TOTAL CONSUMER DISCRETIONARY 2,700,818
60 Schedule of Investments
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- FINANCIAL 2.9% CONSUMER LOANS 1.7% 750,000 Ford Motor Credit Co., 7.000%, 10-1-13 $ 792,966 1,288,000 Household Finance Corporation, 4.750%, 7-15-13 1,275,232 ------------ 2,068,198 INVESTMENT BANKING & BROKERAGE 0.6% 750,000 Morgan Stanley, 4.750%, 4-1-14 726,057 ------------ LIFE & HEALTH INSURANCE 0.6% 750,000 Prudential Financial, Inc. 5.750%, 7-15-33 734,432 ------------ TOTAL FINANCIAL 3,528,687 HEALTH CARE 0.5% MANAGED HEALTH CARE 0.5% 500,000 Lion Connecticut Holding, 6.970%, 8-15-36 565,295 ------------ TOTAL HEALTH CARE 565,295 INFORMATION TECHNOLOGY 1.9% OFFICE ELECTRONICS 1.9% 2,100,000 Xerox Corporation, 7.625%, 6-15-13(a) 2,268,000 ------------ TOTAL INFORMATION TECHNOLOGY 2,268,000
SHARES, CONTRACTS OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- LEISURE & CONSUMER STAPLES 1.1% HOTELS, RESORTS & CRUISE LINES 0.9% 1,000,000 Royal Caribbean Cruises, 7.250%, 3-15-18 $ 1,055,000 RESTAURANTS 0.2% 225,000 McDonald's Corp., 5.000%, 9-30-16 218,027 ------------ TOTAL LEISURE & CONSUMER STAPLES 1,273,027 ------------ TOTAL UNITED STATES OF AMERICA 10,335,827 ------------ TOTAL CORPORATE BONDS (COST $10,310,398) 10,335,827 SHORT-TERM INVESTMENTS 0.8% VARIABLE RATE DEMAND NOTE 0.8% 1,009,023 American Family Demand Note, 1.4525%# $ 1,009,023 ------------ TOTAL VARIABLE RATE DEMAND NOTE 1,009,023 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,009,023) 1,009,023 ------------ TOTAL INVESTMENTS 99.4% (COST $108,017,188) 118,778,613 ------------ OTHER ASSETS LESS LIABILITIES 0.6% 672,014 ------------ NET ASSETS 100.0% $119,450,627 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. * Security was acquired pursuant to Rule 144A of the Securities Act of 1933 and may be deemed to be restricted for resale. Dates shown on securities are due dates of the obligations. Schedule of Investments 61 Management Overview ICON Long/Short Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 97.8% Top 10 Long Equity Holdings 14.5% Number of Stocks 108 Number of Short Positions 4 Short-Term Investments 4.0% Percentages are based upon net assets. TOP 10 LONG EQUITY HOLDINGS September 30, 2004 The Mosaic Co. 1.7% Knight Transportation, Inc. 1.5% Yellow Roadway Corporation 1.5% Norfolk Southern Corporation 1.5% Teekay Shipping Corporation 1.5% Curtiss-Wright Corporation 1.4% Burlington Northern Santa Fe Corporation 1.4% Arkansas Best Corporation 1.4% The Goodyear Tire & Rubber Company 1.3% Northrop Grumman Corporation 1.3% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Long/Short Fund, Class I gained 17.42% for the fiscal year ended September 30, 2004, while its Class C shares appreciated 16.61%. Both returns outpaced the Fund's benchmark, the S&P 1500 Index, which returned 14.58%. The Fund's Class Z shares returned -0.36% since their May 6, 2004 inception compared to a 1.02% return for the benchmark over the same period. Total returns for other periods as of September 30, 2004 are listed on page 66. Despite these gains, the lack of consistent sector leadership detracted from overall Fund performance, as sharp and sudden theme reversals dominated the investment landscape. Nevertheless, our valuation and relative strength metrics continued to support a recovery-based theme, resulting in an economically sensitive portfolio tilt. Consequently, the Fund outperformed the market during cyclical upturns, but lagged when dramatic pullbacks favored more defensive-oriented sectors. Although the Fund was most heavily weighted toward the strongly performing mid-cap segment during the period, the Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. While the ICON system does not consider investment style, the Fund benefited from a value bias during the period as measured on a traditional price-to-earnings (P/E) basis. Based on S&P/Barra Index data, value stocks outperformed their growth counterparts during the fiscal year, suggesting that portfolio composition worked in the Fund's favor. At the same time, the Fund's underweight exposure to certain growth stocks relative to the benchmark detracted slightly from relative performance. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. A range-bound market characterized the investment environment, as rising oil prices, the war on terror, economic setbacks, and election-year anxiety all weighed heavily on investor sentiment. Frequent rotations between cyclical and defensive-oriented sectors indicated an absence of leadership, 62 Management Overview [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager with markets turning increasingly volatile amid a climate of fear and uncertainty. Our system saw things differently, however, as valuation and relative strength metrics suggested that prevailing economic improvements would support an eventual move to the upside. While subsequent upturns were in fact led by economically sensitive sectors, downturns saw renewed strength among more defensive issues. In this "tug-of-war" setting, cyclical rallies were easily extinguished, but poised to gain traction should economic fears give way to fundamental realities. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Our industry focus worked to the Fund's advantage, as overweight long positions in steel and consumer finance delivered benchmark-beating returns while still maintaining strong value-to-price and relative strength readings. Enhanced exposure to the Materials sector also played an important role, with the metals group capitalizing on rising global demand and higher prices. Moreover, interest rate sensitive stocks continued to benefit from an ongoing secular decline, even as the Federal Reserve initiated a much-anticipated tightening cycle. Conversely, overweight positions in Internet software & services and airlines detracted from performance. Internet software & services fell victim to fear- based selling that diminished its relative strength while airlines struggled with competitive pressures and rising fuel costs, even though the industry represented compelling value. In accordance with the Fund's shorting discipline, which focuses on industries that our system indicates are both overpriced and declining in relative strength, short positions were initiated in the semiconductors, semiconductor equipment and systems software industries. While these positions contributed to performance as the Information Technology sector declined on valuation concerns, they were later covered as value became more evident. Looking at the Fund's leading individual long stock contributors, Steel Dynamics, Inc. advanced as pricing power and rising global demand boosted the mini-mill steelmaker's quarterly results. Middle-market auto finance company AmeriCredit Corp. also rallied, having posted better-than-expected income growth in its core business. Elsewhere, ongoing gains in its automotive OEM business combined with cost reductions drove expanded earnings for audio system supplier Harman International Industries, Inc. Meanwhile, long stocks that detracted from performance included drug distributor Cardinal Health Inc., which retreated on accounting probes and was subsequently sold. Corinthian Colleges Inc., a provider of for-profit Management Overview 63 Management Overview (continued) ICON Long/Short Fund post-secondary education services, also faced regulatory issues and was removed from the portfolio. Facing slowing revenues and the resignation of its CFO, collectibles marketer Action Performance Companies, Inc. was liquidated on declining relative strength. The Fund is not market neutral; the proportion of long and short positions depends on the availability of underpriced and overpriced industries, and our evaluation of market conditions. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? A. Value remains relatively broad, while the measured economic expansion appears sustainable. Assuming an eventual breakout to the upside, we will continue to rely on our methodology as the most sensible way to capture anticipated cyclical leadership. In light of this, we currently see few short candidates, though the potential exists should stock prices exceed our estimate of fair value. PERFORMANCE HIGHLIGHTS September 30, 2004 - Although the Fund benefited from its ability to own long and short positions, overall Fund performance was hampered by sharp and sudden theme reversals and the lack of consistent sector leadership. - Positive performance was driven by overweight long positions in steel and consumer finance, while overweight positions in Internet software & services and airlines detracted from performance. - Short positions in the semiconductors, semiconductor equipment and systems software industries contributed to performance but were later covered as value became more evident. - Stocks that contributed significantly to performance included Steel Dynamics, Inc., AmeriCredit Corp. and Harman International Industries, Inc. - Among the Fund's weakest individual performers were Cardinal Health Inc., Corinthian Colleges Inc. and Action Performance Companies, Inc. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. 64 Management Overview SECTOR COMPOSITION September 30, 2004 Industrials 18.5% Materials 15.7% Consumer Discretionary 11.8% Information Technology 11.0% Financial 10.5% Leisure & Consumer Staples 8.6% Health Care 7.5% Telecommunications & Utilities 7.1% Energy 7.1%
Percentages are based upon long positions and net assets. Management Overview 65 Management Overview (continued) ICON Long/Short Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON Long/Short Fund-Class I 10/1/02 17.42% N/A 18.73% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% 19.55% ------------------------------------------------------------------------------------------- ICON Long/Short Fund-Class C 10/17/02 16.61% N/A 14.83% ------------------------------------------------------------------------------------------- S&P 1500 Index 14.58% 17.13% ------------------------------------------------------------------------------------------- ICON Long/Short Fund-Class Z 5/6/04 N/A N/A -0.36%* ------------------------------------------------------------------------------------------- S&P 1500 Index 1.02%* -------------------------------------------------------------------------------------------
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 limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [BAR CHART] 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. 66 Management Overview FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Long/Short Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first set of lines in the table below provide information about actual account values and actual expenses, (with actual net expenses being limited to 2.30%, 1.55% and 1.30% based on a contractual commitment). The Example below includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses, dividends on short positions taken by the Fund. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second set of lines in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. Management Overview 67 Management Overview (continued) ICON Long/Short Fund
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04** --------------------------------------------------------------------------------------------- CLASS C --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 973.10 $11.35 --------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,013.50 $11.58 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS I --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 976.20 $ 7.66 --------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,017.25 $ 7.81 (5% return before expenses) --------------------------------------------------------------------------------------------- CLASS Z --------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 996.40 $ 5.21 --------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,014.86 $ 5.27 (5% return before expenses) ---------------------------------------------------------------------------------------------
* Class Z shares commenced operations May 6, 2004. ** Expenses are equal to the Fund's six-month expense ratios after limitation, if any, of 2.30% (Class C), 1.55% (Class I) and 1.30% (Class Z), annualized, multiplied by the average account value over the period, multiplied by 183/366, 183/366 and 147/366 respectively to reflect the one-half year or date of inception. 68 Management Overview Schedule of Investments ICON Long/Short Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- COMMON STOCKS 97.8% UNITED STATES OF AMERICA 89.2% CONSUMER DISCRETIONARY 11.3% APPAREL RETAIL 1.3% 12,200 The Dress Barn, Inc.(a) $ 212,890 11,500 The Gymboree Corporation(a) 165,600 ------------ 378,490 AUTOMOBILE MANUFACTURERS 1.2% 13,300 Ford Motor Company 186,865 3,500 General Motors Corporation 148,680 ------------ 335,545 CATALOG RETAIL 1.0% 16,400 Insight Enterprises, Inc.(a) 276,176 COMPUTER & ELECTRONICS RETAIL 1.2% 6,200 Best Buy Co., Inc. 336,288 HOMEBUILDING 1.1% 8,100 Hovnanian Enterprises, Inc.(a) 324,810 HOME IMPROVEMENT RETAIL 1.9% 10,100 Building Materials Holding Corporation 277,952 6,700 The Home Depot, Inc. 262,640 ------------ 540,592 HOUSEWARES & SPECIALTIES 1.1% 5,800 Newell Rubbermaid Inc. 116,232 11,000 Tupperware Corporation 186,780 ------------ 303,012 TIRES & RUBBER 2.5% 16,200 Cooper Tire & Rubber Company 326,754 35,300 The Goodyear Tire & Rubber Company(a) 379,122 ------------ 705,876 ------------ TOTAL CONSUMER DISCRETIONARY 3,200,789
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- ENERGY 5.6% OIL & GAS EQUIPMENT & SERVICES 2.2% 8,500 Maverick Tube Corporation(a) $ 261,885 11,300 National-Oilwell, Inc.(a) 371,318 ------------ 633,203 OIL & GAS EXPLORATION & PRODUCTION 2.8% 7,400 Patina Oil & Gas Corporation 218,818 6,300 Petroleum Development Corporation(a) 276,066 5,900 Ultra Petroleum Corp.(a) 289,395 ------------ 784,279 OIL & GAS REFINING, MARKETING & TRANSPORTATION 0.6% 3,100 Ashland Inc. 173,848 ------------ TOTAL ENERGY 1,591,330 FINANCIAL 9.8% CONSUMER FINANCE 2.7% 11,500 Cash America International, Inc. 281,290 12,700 Providian Financial Corporation(a) 197,358 12,000 World Acceptance Corporation(a) 279,000 ------------ 757,648 INSURANCE BROKERS 1.1% 5,400 Aon Corporation 155,196 4,000 Hilb Rogal and Hobbs Company 144,880 ------------ 300,076 LIFE & HEALTH INSURANCE 2.1% 7,500 Protective Life Corporation 294,825 4,300 StanCorp Financial Group, Inc. 306,160 ------------ 600,985 MULTI-LINE INSURANCE 1.2% 5,300 HCC Insurance Holdings, Inc. 159,795 3,000 Loews Corporation 175,500 ------------ 335,295
Schedule of Investments 69 Schedule of Investments (continued) ICON Long/Short Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- PROPERTY & CASUALTY INSURANCE 1.6% 4,100 Philadelphia Consolidated Holding Corp.(a) $ 225,992 6,100 Selective Insurance Group, Inc. 226,920 ------------ 452,912 THRIFTS & MORTGAGE FINANCE 1.1% 7,600 Doral Financial Corp. 315,172 ------------ TOTAL FINANCIAL 2,762,088 HEALTH CARE 7.5% HEALTH CARE SERVICES 2.6% 13,300 Dendrite International, Inc.(a) 214,396 3,100 Quest Diagnostics Incorporated 273,482 7,650 Renal Care Group, Inc.(a) 246,559 ------------ 734,437 MANAGED HEALTH CARE 4.9% 2,900 Anthem, Inc.(a) 253,025 7,200 Centene Corporation(a) 306,576 3,900 CIGNA Corporation 271,557 5,200 Coventry Health Care, Inc.(a) 277,524 3,800 UnitedHealth Group Incorporated 280,212 ------------ 1,388,894 ------------ TOTAL HEALTH CARE 2,123,331 INDUSTRIALS 18.5% AEROSPACE & DEFENSE 5.0% 7,100 Curtiss-Wright Corporation 406,333 10,000 EDO Corporation 277,500 6,000 Lockheed Martin Corporation 334,680 7,100 Northrop Grumman Corporation 378,643 ------------ 1,397,156
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- AIRLINES 2.1% 24,100 Frontier Airlines, Inc.(a) $ 185,088 23,200 Northwest Airlines Corporation(a) 190,472 15,100 SkyWest, Inc. 227,255 ------------ 602,815 BUILDING PRODUCTS 0.6% 7,300 Griffon Corporation(a) 154,030 COMMERCIAL PRINTING 0.7% 6,700 John H. Harland Company 210,045 EMPLOYMENT SERVICES 0.9% 10,200 Labor Ready, Inc.(a) 143,004 13,100 Spherion Corporation(a) 102,442 ------------ 245,446 INDUSTRIAL MACHINERY 1.9% 7,800 The Manitowoc Company, Inc. 276,588 9,800 Watts Water Technologies, Inc. 263,130 ------------ 539,718 RAILROADS 2.9% 10,600 Burlington Northern Santa Fe Corporation 406,086 13,900 Norfolk Southern Corporation 413,386 ------------ 819,472 TRUCKING 4.4% 10,900 Arkansas Best Corporation 399,158 20,000 Knight Transportation, Inc.(a) 428,400 9,000 Yellow Roadway Corporation(a) 422,010 ------------ 1,249,568 ------------ TOTAL INDUSTRIALS 5,218,250 INFORMATION TECHNOLOGY 9.1% COMMUNICATIONS EQUIPMENT 1.8% 21,200 NETGEAR, Inc.(a) 259,064 27,000 SpectraLink Corporation 256,500 ------------ 515,564
70 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- COMPUTER STORAGE & PERIPHERALS 2.1% 22,800 Overland Storage, Inc.(a) $ 318,972 13,700 Synaptics Incorporated(a) 276,192 ------------ 595,164 HOME ENTERTAINMENT SOFTWARE 1.3% 15,900 Activision, Inc.(a) 220,533 7,800 THQ Inc.(a) 151,788 ------------ 372,321 INTERNET SOFTWARE & SERVICES 2.1% 9,900 Digital River, Inc.(a) 294,822 9,500 j2 Global Communications, Inc.(a) 300,105 ------------ 594,927 SEMICONDUCTORS 1.0% 9,300 Cree, Inc.(a) 283,929 TECHNOLOGY DISTRIBUTORS 0.8% 12,300 Agilysys, Inc. 212,667 ------------ TOTAL INFORMATION TECHNOLOGY 2,574,572 LEISURE & CONSUMER STAPLES 8.6% FOOD DISTRIBUTORS 1.6% 8,800 Central European Distribution Corporation(a) 196,592 5,300 Nash Finch Company 166,685 19,300 Spartan Stores, Inc.(a) 77,393 ------------ 440,670 PACKAGED FOODS & MEATS 3.6% 5,500 General Mills, Inc. 246,950 6,900 H.J. Heinz Company 248,538 7,500 Ralcorp Holdings, Inc.(a) 270,750 11,200 Sara Lee Corporation 256,032 ------------ 1,022,270 PHOTOGRAPHIC PRODUCTS 1.2% 10,500 Eastman Kodak Company 338,310
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- TOBACCO 2.2% 3,700 Altria Group, Inc. $ 174,048 3,300 Reynolds American, Inc. 224,532 5,200 Universal Corporation 232,128 ------------ 630,708 ------------ TOTAL LEISURE & CONSUMER STAPLES 2,431,958 MATERIALS 15.0% COMMODITY CHEMICALS 1.4% 7,300 Headwaters Incorporated(a) 225,278 7,500 Lyondell Chemical Company 168,450 ------------ 393,728 CONSTRUCTION MATERIALS 2.6% 5,000 Eagle Materials Inc. 356,500 7,600 Florida Rock Industries, Inc. 372,324 ------------ 728,824 DIVERSIFIED CHEMICALS 2.8% 2,800 Eastman Chemical Company 133,140 3,400 FMC Corporation(a) 165,138 18,900 Hercules Incorporated(a) 269,325 13,200 Penford Corporation 229,812 ------------ 797,415 FERTILIZERS & AGRICULTURAL CHEMICALS 2.3% 27,200 The Mosaic Co.(a) 473,008 2,800 The Scotts Company(a) 179,620 ------------ 652,628 METAL & GLASS CONTAINERS 2.6% 23,000 Owens-Illinois, Inc.(a) 368,000 15,900 Pactiv Corporation(a) 369,675 ------------ 737,675
Schedule of Investments 71 Schedule of Investments (continued) ICON Long/Short Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- STEEL 3.3% 14,700 Allegheny Technologies, Inc. $ 268,275 9,000 Steel Dynamics, Inc. 347,580 12,000 Steel Technologies Inc. 307,404 ------------ 923,259 ------------ TOTAL MATERIALS 4,233,529 TELECOMMUNICATIONS & UTILITIES 3.8% MULTI-UTILITIES & UNREGULATED POWER 3.8% 6,400 Constellation Energy Group 254,976 11,100 ONEOK, Inc. 288,822 7,000 Sempra Energy 253,330 29,800 Sierra Pacific Resources(a) 266,710 ------------ 1,063,838 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 1,063,838 ------------ TOTAL UNITED STATES OF AMERICA 25,199,685 AMERICAN DEPOSITARY RECEIPTS 4.0% BRAZIL 0.4% TELECOMMUNICATIONS & UTILITIES 0.4% WIRELESS TELECOMMUNICATION SERVICES 0.4% 3,700 Telemig Celular Participacoes S.A. 105,376 ------------ TOTAL BRAZIL 105,376 ISRAEL 0.6% WIRELESS TELECOMMUNICATION SERVICES 0.6% 22,500 Partner Communications Company, Ltd (a) 154,125 ------------ TOTAL ISRAEL 154,125 MEXICO 1.40% MATERIALS 0.7% CONSTRUCTION MATERIALS 0.7% 7,205 Cemex S.A. de C.V. 202,749 ------------ TOTAL MATERIALS 202,749 ------------ TELECOMMUNICATIONS & UTILITIES 0.7% WIRELESS TELECOMMUNICATION SERVICES 0.7% 5,100 America Movil S.A. de C.V. 199,053 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 199,053 ------------ TOTAL MEXICO 401,802
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- RUSSIA 1.6% TELECOMMUNICATIONS & UTILITIES 1.6% WIRELESS TELECOMMUNICATION SERVICES 1.6% 1,900 AO VimpelCom(a) $ 206,720 1,700 Mobile Telesystems 246,483 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 453,203 ------------ TOTAL RUSSIA 453,203 TOTAL AMERICAN DEPOSITARY RECEIPTS 1,114,506 BERMUDA 1.7% FINANCIAL 0.7% REINSURANCE 0.7% 4,000 RenaissanceRe Holdings Ltd. 206,320 ------------ TOTAL FINANCIAL 206,320 INFORMATION TECHNOLOGY 1.0% SEMICONDUCTORS 1.0% 10,600 Marvell Technology Group Ltd.(a) 276,978 ------------ TOTAL INFORMATION TECHNOLOGY 276,978 ------------ TOTAL BERMUDA 483,298 CHINA 0.9% INFORMATION TECHNOLOGY 0.9% SEMICONDUCTORS 0.9% 23,100 O2Micro International Limited(a) 248,094 ------------ TOTAL INFORMATION TECHNOLOGY 248,094 ------------ TOTAL CHINA 248,094 GERMANY 0.5% CONSUMER DISCRETIONARY 0.5% AUTOMOBILE MANUFACTURERS 0.5% 3,700 DaimlerChrysler AG 153,254 ------------ TOTAL CONSUMER DISCRETIONARY 153,254 ------------ TOTAL GERMANY 153,254
72 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- BAHAMAS 1.5% ENERGY 1.5% OIL & GAS REFINING, MARKETING & TRANSPORTATION 1.5% 9,500 Teekay Shipping Corporation $ 409,355 ------------ TOTAL ENERGY 409,355 ------------ TOTAL BAHAMAS 409,355 ------------ TOTAL COMMON STOCKS (COST $25,664,773) 27,608,192
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- SHORT-TERM INVESTMENT 4.0% VARIABLE RATE DEMAND NOTE 4.0% $1,130,824 American Family Demand Note, 1.453%# $ 1,130,824 ------------ TOTAL SHORT-TERM INVESTMENT (COST $1,130,824) 1,130,824 TOTAL INVESTMENTS 101.8% (COST $26,795,597) 28,739,016 ------------ LIABILITIES LESS OTHER ASSETS (1.8%) (511,224) ------------ NET ASSETS 100.0% $ 28,227,792 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. Dates shown on securities are due dates of the obligations. Schedule of Investments 73 Schedule of Short Securities ICON Long/Short Fund September 30, 2004
SHORT SECURITIES SHARES MARKET VALUE ----------------------------------------------- Arch Coal, Inc.(a) 8,400 $ 298,116 Massey Energy Company(a) 10,800 312,444 Pride International, Inc.(a) 16,000 316,640 Rowan Companies, Inc.(a) 12,100 319,440 ------ ------------ TOTAL SHORT SECURITIES (PROCEEDS OF $959,216) 47,300 $ 1,246,640
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security 74 Schedule of Short Securities Statements of Assets and Liabilities September 30, 2004
ICON ICON ICON ICON ICON CORE COVERED EQUITY LONG/SHORT BOND FUND EQUITY FUND CALL FUND INCOME FUND FUND ----------- ------------ ----------- ------------ ----------- ASSETS Investments, at cost $58,580,849 $ 84,598,203 $42,400,297 $108,017,188 $26,795,597 ----------- ------------ ----------- ------------ ----------- Investments, at value 60,289,161 101,186,366 46,040,691 118,778,613 28,739,016 Cash - 3,716 141,741 15,443 - Cash-segregated account - - - - 350,460 Deposits for short sales - - - - 1,465,488 Receivables: Fund shares sold 1,039,416 725,515 202,859 612,754 178,144 Investments sold - 684,973 99,791 - 733,654 Interest 897,956 23 394 221,613 1,594 Dividends - 55,233 38,053 174,546 34,152 Expense reimbursements by Adviser - - 11,008 32,545 10,014 Other assets 3,193 5,011 2,241 6,186 1,383 ----------- ------------ ----------- ------------ ----------- Total Assets 62,229,726 102,660,837 46,536,778 119,841,700 31,513,905 ----------- ------------ ----------- ------------ ----------- LIABILITIES Options written, at value (premiums received of $0, $0, $1,035,052, $0 and $0, respectively) - - 1,376,038 - - Common stocks sold short, at value (proceeds of $0, $0, $0, $0 and $959,216, respectively) - - - - 1,246,640 Payables: Due to custodian bank - - - 63,099 - Investments bought - 2,040,415 118,906 - 1,962,862 Fund shares redeemed 238,117 14,045 13,144 37,884 4,137 Distributions due to shareholders 602 - - 37,526 - Advisory fees & fee waiver recoupment 33,418 59,507 26,669 105,705 18,618 Accrued distribution fees 12,431 51,628 9,668 24,224 7,157 Fund accounting, custodial and transfer agent fees 14,740 18,163 12,961 19,708 11,239 Income and excise tax payable - - - 32,545 - Administration fees 2,368 3,874 1,739 4,594 998 Accrued expenses 54,807 63,395 48,607 65,788 34,462 ----------- ------------ ----------- ------------ ----------- Total Liabilities 356,483 2,251,027 1,607,732 391,073 3,286,113 ----------- ------------ ----------- ------------ ----------- NET ASSETS - ALL SHARE CLASSES $61,873,243 $100,409,810 $44,929,046 $119,450,627 $28,227,792 =========== ============ =========== ============ =========== NET ASSETS - CLASS I $61,501,903 $ 47,272,841 $42,962,368 $117,551,593 $24,479,671 =========== ============ =========== ============ =========== NET ASSETS - CLASS C $ 370,669 $ 53,101,085 $ 1,963,502 $ 1,884,636 $ 3,715,942 =========== ============ =========== ============ =========== NET ASSETS - CLASS Z $ 671 $ 35,884 $ 3,176 $ 14,398 $ 32,179 =========== ============ =========== ============ =========== NET ASSETS CONSIST OF Paid-in capital $59,651,948 $ 91,960,171 $39,988,278 $107,158,720 $25,120,554 Accumulated undistributed net investment income/ (loss) 153,123 - - 690,514 - Accumulated undistributed net realized gain/(loss) from investments 359,860 (8,138,524) 1,641,360 839,968 1,451,243 Unrealized appreciation/(depreciation) on securities, written options and securities sold short 1,708,312 16,588,163 3,299,408 10,761,425 1,655,995 ----------- ------------ ----------- ------------ ----------- NET ASSETS $61,873,243 $100,409,810 $44,929,046 $119,450,627 $28,227,792 =========== ============ =========== ============ =========== Shares outstanding (unlimited shares authorized, no par value) Class I 5,846,396 3,699,472 3,242,917 8,203,736 1,758,443 Class C 35,163 4,280,222 150,399 132,093 270,710 Class Z 64 2,805 239 1,005 2,309 Net asset value (offering price and redemption price per share) Class I $ 10.52 $ 12.78 $ 13.25 $ 14.33 $ 13.92 Class C $ 10.54 $ 12.41 $ 13.06 $ 14.27 $ 13.73 Class Z $ 10.51 $ 12.79 $ 13.29 $ 14.33 $ 13.94
The accompanying notes are an integral part of the financial statements. Financial Statements 75 Statements of Operations For the year ended September 30, 2004
ICON ICON ICON ICON ICON CORE COVERED EQUITY LONG/SHORT BOND FUND EQUITY FUND CALL FUND INCOME FUND FUND ---------- ----------- ---------- ----------- ---------- INVESTMENT INCOME Interest $2,604,226 $ 10,940 $ 15,738 $ 374,729 $ 20,525 Dividends (net of foreign tax of $0, $3,007, $1,846, $11,627, and $904, respectively) - 644,594 273,976 2,850,418 156,919 ---------- ----------- ---------- ----------- ---------- Total Investment Income 2,604,226 655,534 289,714 3,225,147 177,444 ---------- ----------- ---------- ----------- ---------- EXPENSES Advisory fees 280,439 663,062 234,218 672,154 134,488 Distribution fees: Class I 116,059 107,900 75,978 221,402 36,038 Class C 2,686 452,357 8,370 10,548 14,190 Fund accounting, custodial and transfer agent fees 104,787 116,740 105,180 114,511 74,548 Administration fees 23,336 43,067 15,378 44,019 7,722 Audit fees 14,962 28,396 9,918 29,344 4,979 Registration fees Class I 19,181 16,481 19,372 21,998 15,158 Class C 15,637 17,285 13,413 14,534 13,283 Legal fees 1,899 3,696 1,221 3,226 588 Insurance expense 4,301 6,934 1,716 3,240 840 Trustee fees and expenses 4,010 7,402 2,580 6,724 1,343 Shareholder reports 20,056 27,192 13,002 30,441 6,568 Income and excise tax - - - 50,981 - Interest expense 104 6,978 4,829 - 13,294 Dividends on short positions - - - - 29,468 Other expenses 11,935 19,203 12,641 10,950 10,399 ---------- ----------- ---------- ----------- ---------- Total expenses before expense (reimbursement)/recoupment 619,392 1,516,693 517,816 1,234,072 362,906 ---------- ----------- ---------- ----------- ---------- Expense (reimbursement)/recoupment by Adviser due to expense limitation agreement (9,844) - (58,657) 55,807 (77,195) Expense reimbursement by Adviser for income and excise tax paid - - - (50,981) - ---------- ----------- ---------- ----------- ---------- Net Expenses 609,548 1,516,693 459,159 1,238,898 285,711 ---------- ----------- ---------- ----------- ---------- NET INVESTMENT INCOME (LOSS) 1,994,678 (861,159) (169,445) 1,986,249 (108,267) ---------- ----------- ---------- ----------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investment transactions 772,882 5,419,845 2,561,170 1,009,178 1,506,399 Written options - - (345,031) - - Securities sold short - - - - 356,149 ---------- ----------- ---------- ----------- ---------- Total net realized gain 772,882 5,419,845 2,216,139 1,009,178 1,862,548 ---------- ----------- ---------- ----------- ---------- Change in net unrealized appreciation/(depreciation) on securities, written options and securities sold short (160,120) 6,605,972 701,636 6,839,072 108,880 ---------- ----------- ---------- ----------- ---------- Net realized and unrealized gain on investments 612,762 12,025,817 2,917,775 7,848,250 1,971,428 ---------- ----------- ---------- ----------- ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,607,440 $11,164,658 $2,748,330 $9,834,499 $1,863,161 ========== =========== ========== =========== ==========
The accompanying notes are an integral part of the financial statements. 76 Financial Statements THIS PAGE INTENTIONALLY LEFT BLANK Statements of Changes in Net Assets
ICON BOND FUND ICON CORE EQUITY FUND --------------------------------------- --------------------------------------- FOR THE YEAR OCTOBER 1, 2002* YEAR ENDED (INCEPTION) TO YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 1,994,678 $ 1,401,247 $ (861,159) $ (467,910) Net realized gain/(loss) from investment transactions, written options and securities sold short 772,882 (294,006) 5,419,845 (3,558,157) Change in unrealized appreciation/ (depreciation) on securities, written options and securities sold short (160,120) 1,868,432 6,605,972 13,315,101 ------------------ ------------------ ------------------ ------------------ Net increase in net assets resulting from operations 2,607,440 2,975,673 11,164,658 9,289,034 ------------------ ------------------ ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class I (1,972,705) (1,387,266) - - Class C (11,095) (7,464) - - Class Z (10) - - - Net realized gains Class I - - - - Class C - - - - Class Z - - - - ------------------ ------------------ ------------------ ------------------ Net decrease from dividends and distributions (1,983,810) (1,394,730) - - ------------------ ------------------ ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold Class I 33,416,648 56,519,622 16,988,164 15,777,863 Class C 342,757 372,769 18,403,784 17,459,010 Class Z 645 35,784 Reinvested dividends and distributions Class I 1,971,854 1,384,911 - - Class C 10,191 7,462 - - Class Z 10 - - - Shares repurchased Class I (13,848,513) (20,136,882) (13,079,331) (25,007,736) Class C (241,960) (130,844) (6,132,345) (14,463,137) Class Z - - (1,884) - ------------------ ------------------ ------------------ ------------------ Net increase/(decrease) from fund share transactions 21,651,632 38,017,038 16,214,172 (6,234,000) ------------------ ------------------ ------------------ ------------------ Total net increase in net assets 22,275,262 39,597,981 27,378,830 3,055,034 NET ASSETS Beginning of period 39,597,981 - 73,030,980 69,975,946 ------------------ ------------------ ------------------ ------------------ End of period $ 61,873,243 $ 39,597,981 $100,409,810 $ 73,030,980 ================== ================== ================== ==================
The accompanying notes are an integral part of the financial statements. 78 Financial Statements
ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND --------------------------------------- --------------------------------------- --------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR OCTOBER 1, 2002* OCTOBER 1, 2002* OCTOBER 1, 2002* YEAR ENDED (INCEPTION) TO YEAR ENDED (INCEPTION) TO YEAR ENDED (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ $ (169,445) $ (93,978) $ 1,986,249 $ 555,722 $ (108,267) $ (48,508) 2,216,139 513,942 1,009,178 491,012 1,862,548 (172,889) 701,636 2,597,772 6,839,072 3,922,353 108,880 1,547,115 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 2,748,330 3,017,736 9,834,499 4,969,087 1,863,161 1,325,718 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ - - (1,955,243) (551,309) - - - - (18,936) (4,458) - - - - (169) - - - (813,994) - - - (122,911) - (11,304) - - - (7,238) - - - - - - - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ (825,298) - (1,974,348) (555,767) (130,149) - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 28,282,997 21,535,397 84,251,666 44,637,115 21,568,653 10,958,821 1,905,597 177,231 1,466,895 637,549 3,489,408 436,593 3,139 13,644 32,109 802,492 - 1,849,956 528,515 121,354 - 10,975 - 17,806 4,458 7,238 - - - 169 - - - (9,000,921) (3,564,680) (18,768,921) (7,026,892) (8,589,480) (2,533,670) (127,212) (36,737) (296,277) (138,508) (129,159) (192,805) - - (19) - - - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 21,877,067 18,111,211 68,534,919 38,642,237 16,500,123 8,668,939 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 23,800,099 21,128,947 76,395,070 43,055,557 18,233,135 9,994,657 21,128,947 - 43,055,557 - 9,994,657 - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ $44,929,046 $21,128,947 $119,450,627 $43,055,557 $28,227,792 $ 9,994,657 ================== ================== ================== ================== ================== ==================
Financial Statements 79 Statements of Changes in Net Assets (continued)
ICON BOND FUND ICON CORE EQUITY FUND --------------------------------------- --------------------------------------- FOR THE YEAR OCTOBER 1, 2002* YEAR ENDED (INCEPTION) TO YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ ------------------ ------------------ TRANSACTIONS IN FUND SHARES Shares sold Class I 3,199,688 5,630,081 1,380,045 1,599,134 Class C 32,748 36,999 1,535,906 1,836,853 Class Z 63 - 2,959 - Reinvested dividends and distributions Class I 188,665 135,559 - - Class C 979 726 - - Class Z 1 - - - Shares repurchased Class I (1,319,789) (1,987,808) (1,060,722) (2,665,419) Class C (23,478) (12,811) (511,842) (1,544,876) Class Z - (154) ------------------ ------------------ ------------------ ------------------ Net increase/(decrease) 2,078,877 3,802,746 1,346,192 (774,308) ------------------ ------------------ ------------------ ------------------ Shares outstanding beginning of period 3,802,746 - 6,636,307 7,410,615 ------------------ ------------------ ------------------ ------------------ Shares outstanding end of period 5,881,623 3,802,746 7,982,499 6,636,307 ================== ================== ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities and written options) Purchase of securities (including short sale transactions) $14,692,029 $32,843,432 $117,495,384 $121,427,409 Proceeds from sales of securities (including short sale transactions) 14,436,998 4,586,062 101,917,674 129,023,828 Purchases of long-term U.S. government securities 22,260,709 14,995,428 - - Proceeds from sales of long-term U.S. government securities 1,889,387 8,399,209 - - ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ 153,123 $ 12,040 $ - $ - ================== ================== ================== ==================
* The offering of Class I shares commenced on October 1, 2002. The offering of Class C shares commenced on October 21, 2002 (ICON Bond Fund), November 21, 2002 (ICON Covered Call Fund), November 8, 2002 (ICON Equity Income Fund), and October 17, 2002 (ICON Long/Short Fund). The offering of Class Z shares commenced on May 6, 2004 for all Funds except Equity Income, which commenced on May 10, 2004. The accompanying notes are an integral part of the financial statements. 80 Financial Statements
ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND --------------------------------------- --------------------------------------- --------------------------------------- FOR THE YEAR FOR THE YEAR FOR THE YEAR OCTOBER 1, 2002* OCTOBER 1, 2002* OCTOBER 1, 2002* YEAR ENDED (INCEPTION) TO YEAR ENDED (INCEPTION) TO YEAR ENDED (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 2,169,073 2,020,657 5,938,018 4,069,794 1,570,724 1,055,319 147,349 15,317 104,841 60,013 257,198 42,776 239 - 995 - 2,309 - 63,040 - 128,188 47,549 9,511 - 877 - 1,248 405 574 - - - 12 - - - (681,412) (328,441) (1,336,866) (642,948) (632,107) (245,004) (9,841) (3,303) (21,597) (12,817) (9,606) (20,232) - (1) - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 1,689,325 1,704,230 4,814,838 3,521,996 1,198,603 832,859 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 1,704,230 - 3,521,996 - 832,859 - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 3,393,555 1,704,230 8,336,834 3,521,996 2,031,462 832,859 ================== ================== ================== ================== ================== ================== $74,412,247 $45,565,265 $111,360,137 $47,049,615 $38,171,546 $19,387,249 53,342,570 28,417,692 44,139,424 9,058,288 22,620,730 11,575,765 - - - - - - - - - - - - $ - $ - $ 690,514 $ 14,605 $ - $ - ================== ================== ================== ================== ================== ==================
Financial Statements 81 Financial Highlights
ICON BOND FUND ------------------------------------------ CLASS I FOR THE YEAR CLASS I OCTOBER 1, 2002 FOR THE YEAR ENDED (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ Net asset value, beginning of period $ 10.41 $ 10.00 ------------------ ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment income(x) 0.45 0.42 Net realized and unrealized gains/(losses) on investments 0.10 0.38 ------------------ ------------------ Total from investment operations 0.55 0.80 ------------------ ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.44) (0.39) Distributions from net realized gains 0.00 0.00 ------------------ ------------------ Total distributions (0.44) (0.39) ------------------ ------------------ Net asset value, end of period $ 10.52 $ 10.41 ================== ================== Total return* 5.41% 8.19% Net assets, end of period (in thousands) $61,502 $39,338 Average net assets for the period (in thousands) $46,295 $33,787 Ratio of expenses to average net assets(a) Before expense limitation/recoupment 1.29% 1.45% After expense limitation/recoupment 1.30% 1.30% Ratio of net investment income to average net assets(a) Before expense limitation/recoupment 4.28% 4.01% After expense limitation/recoupment 4.27% 4.16% Portfolio turnover rate(b) 37.98% 41.65%
(x) Calculated using the average share method. * The total return calculation is for the period indicated. (a) Annualized for periods less than a year. (b) Portfolio turnover is calculated at the Fund level. The rate shown is for the longest period indicated of the three share classes. The accompanying notes are an integral part of the financial statements. 82 Financial Highlights
ICON BOND FUND ---------------------------------------------------------------------------- CLASS C CLASS Z FOR THE PERIOD FOR THE PERIOD CLASS C OCTOBER 21, 2002 MAY 6, 2004 FOR THE YEAR ENDED (INCEPTION) TO (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ $10.42 $ 9.79 $10.26 ------------------ ------------------ ------------------ 0.38 0.37 0.46 0.12 0.60 (0.02) ------------------ ------------------ ------------------ 0.50 0.97 0.44 ------------------ ------------------ ------------------ (0.38) (0.34) (0.19) 0.00 0.00 0.00 ------------------ ------------------ ------------------ (0.38) (0.34) (0.19) ------------------ ------------------ ------------------ $10.54 $10.42 $10.51 ================== ================== ================== 4.83% 9.98% 4.33% $ 371 $ 260 $ 1 $ 317 $ 199 $ 1 6.84% 2.05% 0.86% 1.90% 1.90% 0.86% 3.63% 3.48% 4.60% 8.57% 3.63% 4.60% 37.98% 41.65% 37.98%
Financial Highlights 83 Financial Highlights (continued)
ICON CORE EQUITY FUND --------------------------------------------------------------------------------- CLASS I FOR THE PERIOD CLASS I CLASS I CLASS I OCTOBER 12, 2000 FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 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) (0.07) (0.04) (0.07) (0.05) Net realized and unrealized gains/(losses) on investments 1.73 1.66 (0.20) 0.09 ------------------ ------------------ ------------------ ------------------ Total from investment operations 1.66 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 $ 12.78 $ 11.12 $ 9.50 $ 10.04 ================== ================== ================== ================== Total return* 14.93% 17.05% (3.23)% 0.40% Net assets, end of period (in thousands) $47,273 $37,603 $42,232 $23,261 Average net assets for the period (in thousands) $43,044 $34,007 $37,577 $23,802 Ratio of expenses to average net assets(a) 1.33% 1.39% 1.36% 1.60% Ratio of net investment loss to average net assets(a) (0.59)% (0.37)% (0.58)% (0.36)% Portfolio turnover rate(b) 116.26% 188.07% 107.82% 124.61%
(x) Calculated using the average share method. * The total return calculation is for the period indicated. (a) Annualized for periods less than a year. (b) Portfolio turnover is calculated at the Fund level. The rate shown is for the longest period indicated of the three share classes. + The total return for the Class C shares for the period November 28, 2000 (inception) to September 30, 2001 has been restated due to a mathematical error. The previous total return was (0.20%) (See Note 7). The accompanying notes are an integral part of the financial statements. 84 Financial Highlights
ICON CORE EQUITY FUND ----------------------------------------------------------------------------------------------------------- CLASS C CLASS Z FOR THE PERIOD FOR THE PERIOD CLASS C CLASS C CLASS C NOVEMBER 28, 2000 MAY 6, 2004 FOR THE YEAR ENDED FOR THE YEAR ENDED FOR THE YEAR ENDED (INCEPTION) TO (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2002 SEPTEMBER 30, 2001 SEPTEMBER 30, 2004 ------------------- ------------------- ------------------- ------------------- ------------------- $ 10.88 $ 9.36 $ 9.98 $10.62 $12.07 ------------------- ------------------- ------------------- ------------------- ------------------- (0.16) (0.11) (0.15) (0.10) (0.03) 1.69 1.63 (0.20) (0.54) 0.75 ------------------- ------------------- ------------------- ------------------- ------------------- 1.53 1.52 (0.35) (0.64) 0.72 ------------------- ------------------- ------------------- ------------------- ------------------- 0.00 0.00 0.00 0.00 0.00 0.00 0.00 (0.27) 0.00 0.00 ------------------- ------------------- ------------------- ------------------- ------------------- 0.00 0.00 (0.27) 0.00 0.00 ------------------- ------------------- ------------------- ------------------- ------------------- $ 12.41 $ 10.88 $ 9.36 $ 9.98 $12.79 =================== =================== =================== =================== =================== 14.06% 16.24% (4.07)% (6.03)%+ 5.97% $53,101 $35,428 $27,744 $6,324 $ 36 $45,114 $30,459 $19,849 $2,920 $ 32 2.08% 2.14% 2.11% 2.23% 1.12% (1.34)% (1.12)% (1.33)% (1.24)% (0.28)% 116.26% 188.07% 107.82% 124.61% 116.26%
Financial Highlights 85 Financial Highlights (continued)
ICON COVERED CALL FUND ------------------------------------------ CLASS I FOR THE YEAR CLASS I OCTOBER 1, 2002 FOR THE YEAR ENDED (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ Net asset value, beginning of period $ 12.40 $ 10.00 ------------------ ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment (loss)(x) (0.07) (0.07) Net realized and unrealized gains on investments 1.36 2.47 ------------------ ------------------ Total from investment operations 1.29 2.40 ------------------ ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 Distributions from net realized gains (0.44) 0.00 ------------------ ------------------ Total distributions (0.44) 0.00 ------------------ ------------------ Net asset value, end of period $ 13.25 $ 12.40 ================== ================== Total return* 10.53% 24.00% Net assets, end of period (in thousands) $42,962 $20,981 Average net assets for the period (in thousands) $30,305 $14,544 Ratio of expenses to average net assets(a) Before expense limitation 1.60% 2.07% After expense limitation 1.45% 1.45% Ratio of net investment income/(loss) to average net assets(a) Before expense limitation (0.67)% (1.27)% After expense limitation (0.52)% (0.65)% Portfolio turnover rate(b) 167.57% 184.24%
(x) Calculated using the average share method. * The total return calculation is for the period indicated. (a) Annualized for periods less than a year. (b) Portfolio turnover is calculated at the Fund level. The rate shown is for the longest period indicated of the three share classes. The accompanying notes are an integral part of the financial statements. 86 Financial Highlights
ICON COVERED CALL FUND ---------------------------------------------------------------------------- CLASS C CLASS Z FOR THE PERIOD FOR THE PERIOD CLASS C NOVEMBER 21, 2002 MAY 6, 2004 FOR THE YEAR ENDED (INCEPTION) TO (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ $12.32 $10.75 $12.86 ------------------ ------------------ ------------------ (0.16) (0.17) (0.01) 1.34 1.74 0.44 ------------------ ------------------ ------------------ 1.18 1.57 0.43 ------------------ ------------------ ------------------ 0.00 0.00 0.00 (0.44) 0.00 0.00 ------------------ ------------------ ------------------ (0.44) 0.00 0.00 ------------------ ------------------ ------------------ $13.06 $12.32 $13.29 ================== ================== ================== 9.69% 14.60% 3.34% $1,964 $ 148 $ 3 $ 838 $ 50 $ 2 3.89% 2.83% 1.12% 2.20% 2.20% 1.12% (2.93)% (2.13)% (0.11)% (1.23)% (1.50)% (0.11)% 167.57% 184.24% 167.57%
Financial Highlights 87 Financial Highlights (continued)
ICON EQUITY INCOME FUND ------------------------------------------- CLASS I FOR THE YEAR CLASS I OCTOBER 1, 2002 FOR THE YEAR ENDED (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ Net asset value, beginning of period $ 12.22 $ 10.00 ------------------ ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment income(x) 0.31 0.25 Net realized and unrealized gains on investments 2.09 2.20 ------------------ ------------------ Total from investment operations 2.40 2.45 ------------------ ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.29) (0.23) Distributions from net realized gains 0.00 0.00 ------------------ ------------------ Total distributions (0.29) (0.23) ------------------ ------------------ Net asset value, end of period $ 14.33 $ 12.22 ================== ================== Total return* 19.69% 24.72% Net assets, end of period (in thousands) $117,552 $42,474 Average net assets for the period (in thousands) $ 88,318 $25,288 Ratio of expenses to average net assets(a) Before expense limitation/recoupment 1.35% 1.72% After expense limitation/recoupment 1.37% 1.45% Ratio of net investment income/(loss) to average net assets(a) Before expense limitation/recoupment 2.25% 2.23% After expense limitation/recoupment 2.23% 2.30% Portfolio turnover rate(b) 51.84% 35.17%
(x) Calculated using the average share method. * The total return calculation is for the period indicated. (a) Annualized for periods less than a year. (b) Portfolio turnover is calculated at the Fund level. The rate shown is for the longest period indicated of the three share classes. (c) The limitation on expenses for Class Z shares occurred when the Adviser reimbursed the Fund for excise and income taxes incurred during the period (Note 5). These expenses were extraordinary expenses not subject to the contractual expense limitation discussed in Note 2. The accompanying notes are an integral part of the financial statements. 88 Financial Highlights
ICON EQUITY INCOME FUND ------------------------------------------------------------------------ CLASS C CLASS Z FOR THE PERIOD FOR THE PERIOD CLASS C NOVEMBER 8, 2002 MAY 10, 2004 FOR THE YEAR ENDED (INCEPTION) TO (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ $12.21 $10.63 $13.43 ------------------ ------------------ ------------------ 0.20 0.16 0.39 2.06 1.59 0.70 ------------------ ------------------ ------------------ 2.26 1.75 1.09 ------------------ ------------------ ------------------ (0.20) (0.17) (0.19) 0.00 0.00 0.00 ------------------ ------------------ ------------------ (0.20) (0.17) (0.19) ------------------ ------------------ ------------------ $14.27 $12.21 $14.33 ================== ================== ================== 18.56% 16.63% 8.12% $1,885 $ 581 $ 14 $1,053 $ 348 $ 12 3.47% 2.48% 1.11% 2.20% 2.20% 0.97%(c) 0.12% 1.10% 2.62% 1.40% 1.38% 2.76% 51.84% 35.17% 51.84%
Financial Highlights 89 Financial Highlights (continued)
ICON LONG/SHORT FUND ------------------------------------------ CLASS I FOR THE YEAR CLASS I OCTOBER 1, 2002 FOR THE YEAR ENDED (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ Net asset value, beginning of period $ 12.00 $10.00 ------------------ ------------------ INCOME FROM INVESTMENT OPERATIONS Net investment (loss)(x) (0.08) (0.07) Net realized and unrealized gains/(losses) on investments 2.16 2.07 ------------------ ------------------ Total from investment operations 2.08 2.00 ------------------ ------------------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income 0.00 0.00 Distributions from net realized gains (0.16) 0.00 ------------------ ------------------ Total distributions (0.16) 0.00 ------------------ ------------------ Net asset value, end of period $ 13.92 $12.00 ================== ================== Total return* 17.42% 20.00% Net assets, end of period (in thousands) $24,480 $9,726 Average net assets for the period (in thousands) $14,374 $6,997 Ratio of expenses to average net assets(a) Before expense limitation 2.15% 3.09% After expense limitation(c) 1.74% 1.55% Ratio of net investment income/(loss) to average net assets(a) Before expense limitation (1.03)% (2.20)% After expense limitation (0.62)% (0.66)% Portfolio turnover rate(b) 148.32% 162.25%
(x) Calculated using the average share method. * The total return calculation is for the period indicated. (a) Annualized for periods less than a year. (b) Portfolio turnover is calculated at the Fund level. The rate shown is for the longest period indicated of the three share classes. (c) The Fund's operating expenses, not including dividends on short positions, are contractually limited to 2.30% for Class C, 1.55% for Class I, and 1.30% for Class Z. The ratios in these financial highlights reflect the limitation including the dividends on short positions. The accompanying notes are an integral part of the financial statements. 90 Financial Highlights
ICON LONG/SHORT FUND ---------------------------------------------------------------------------- CLASS C CLASS Z FOR THE PERIOD FOR THE PERIOD CLASS C OCTOBER 17, 2002 MAY 6, 2004 FOR THE YEAR ENDED (INCEPTION) TO (INCEPTION) TO SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ $11.92 $10.61 $13.99 ------------------ ------------------ ------------------ (0.18) (0.15) (0.04) 2.15 1.46 (0.01) ------------------ ------------------ ------------------ 1.97 1.31 (0.05) ------------------ ------------------ ------------------ 0.00 0.00 0.00 (0.16) 0.00 0.00 ------------------ ------------------ ------------------ (0.16) 0.00 0.00 ------------------ ------------------ ------------------ $13.73 $11.92 $13.94 ================== ================== ================== 16.61% 12.35% (0.36)% $3,716 $ 269 $ 32 $1,417 $ 186 $ 29 3.70% 3.84% 1.98% 2.49% 2.30% 1.76% (2.57)% (2.99)% (0.50)% (1.35)% (1.45)% (0.28)% 148.32% 162.25% 148.32%
Financial Highlights 91 Notes to Financial Statements September 30, 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, Class I, Class C and Class Z. All classes have equal rights as to earnings, assets and voting privileges except that each Class may bear different distribution fees, registration costs and each Class has exclusive voting rights with respect to its distribution plan. 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, such as limited gains and lack of liquidity of the underlying securities, and are not suitable for all investors. The Long/Short Fund invests short in securities; there are risks associated with selling short, including the risk that the Long/Short Fund may have to cover its short position at a higher price than the short sale, resulting in a loss. The Fund's loss on a short sales is potentially unlimited as a loss occurs when the value of a security sold short increases. There are also risks associated with small and mid-cap investing, including limited product lines, less liquidity and small market share. 92 Notes to Financial Statements The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of income and expenses during the reporting period. Actual results could differ from these estimates. 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. 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. Foreign securities traded in countries outside of the Western Hemisphere are fair valued daily by utilizing the quotations of an independent pricing service, unless the Funds' adviser determines that use of another valuation methodology is appropriate. The pricing service uses statistical analyses and quantitative models to adjust local market prices using factors such as subsequent movement and changes in the prices of indexes, securities and exchange rates in other markets in determining fair value as of the time a Fund calculates its net asset value. 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 Notes to Financial Statements 93 Notes to Financial Statements (continued) 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 year ended September 30, 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. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. Such liability is subject to off balance sheet risks to the extent of any future increases in market value of the written options. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. If a written put option is assigned, 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 94 Notes to Financial Statements a closing sale transaction, a gain or loss is realized. If the Fund exercises a call, the cost of the security acquired is increased by the premium paid for the call. If the Fund exercises a put option, a gain or loss is realized from the sale of the underlying security, and the proceeds from such a sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities. SHORT SALES. The Long/Short Fund may engage in short sales (selling securities it does not own) as part of its normal investment activities. These short sales are collateralized by cash equivalents or securities with the Fund's prime broker and segregated account at the Fund's custodian. The collateral required is determined daily by reference to the market value of the short positions. Such collateral for the Fund is held by one broker. Dividend expense on short sales is treated as an expense on the Statement of Operations. Liabilities for securities sold short are reported at market value in the financial statements. Such liabilities are subject to off-balance sheet risk to the extent of any future increases in market value of the securities sold short. The ultimate liability for securities sold short could exceed the liabilities recorded in the Statement of Assets and Liabilities. Liabilities for securities sold short are closed out by purchasing the applicable securities for delivery to the Fund's prime broker. INCOME TAXES. The Funds intend to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code and, accordingly, the Funds will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that they intend to make sufficient distributions of net investment income and net realized capital 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. Notes to Financial Statements 95 Notes to Financial Statements (continued) INVESTMENT INCOME. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the securities received. Interest income is accrued as earned. Discounts and premiums on securities purchased are amortized over the life of the respective securities. INVESTMENT TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses on securities sold are determined on the basis of identified cost. ALLOCATION OF INCOME AND EXPENSES. Each class of a Fund's shares bears expenses incurred specifically on its behalf and, in addition, each class bears a portion of general expenses, based upon relative net assets of each class. Expenses which cannot be directly attributed to a specific fund in the Trust are apportioned between all funds in the Trust based upon relative net assets. In calculating the net asset value per share of each class, investment income, realized and unrealized gains and losses and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEES. ICON Advisers, Inc. ("ICON") serves as investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 0.60% of average daily nets assets of the Bond Fund, 0.75% of average daily net assets of the Core Equity, Covered Call and Equity Income Funds, and 0.85% of average daily net assets of the Long/Short Fund. 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, 1.30% for Class I and 1.05% for Class Z shares of the Bond Fund, 2.20% for Class C, 1.45% for Class I and 1.20% for Class Z shares of the Covered Call and Equity Income Funds, and 2.30% for Class C, 1.55% for Class I and 1.30% for Class Z 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 96 Notes to Financial Statements expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed. For the year ended September 30, 2004, ICON's net reimbursement/(recoupment) $15,700 on Class C and $(5,856) on Class I shares of the Bond Fund; $14,239 on Class C and $44,418 on Class I shares of the Covered Call Fund; $12,851 on Class C and $(68,658) (prior to reimbursement by ICON for excise and income tax) on Class I shares of the Equity Income Fund; and $17,311 on Class C and $59,859 on Class I shares and $25 on Class Z shares of the Long/Short Fund, respectively. These expense reimbursements are subject to recovery by ICON based on a rolling three-year period. During the period, ICON paid an excise and income tax liability for the Equity Income Fund in the amount of $50,981. 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 0.055% on the first $500 million of average daily net assets, 0.05% on the next $1 billion of average daily net assets, and 0.04% on the average daily net assets in excess of $1.5 billion. The Funds paid 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 through July 2004. As of August 1 these minimums increased to $45,000 on Core Equity Fund, $58,250 on Bond Fund, Covered Call Fund and Long/Short Fund and $48,750 on the Equity Income Fund due to the addition of the Z shares. Any amount above $100 million is charged 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 for the Bond Fund, Covered Call Fund, Equity Income Fund and the Long/Short Fund. The Core Equity Fund is charged 0.0125% on any amount over $100 million and 0.0075% on any amount over $200 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. Notes to Financial Statements 97 Notes to Financial Statements (continued) 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 year ended September 30, 2004 the total amounts paid or payable to IDI pursuant to the 12b-1 Plan were $2,686 on Class C shares and $116,059 on Class I shares of the Bond Fund, $452,537 on Class C shares and $107,900 on Class I shares of the Core Equity Fund, $8,370 on Class C shares and $75,978 on Class I shares of the Covered Call Fund, $10,548 on Class C shares and $221,402 on Class I shares of the Equity Income Fund, and $14,190 on Class C shares and $36,038 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. LINE OF CREDIT The Funds have entered into Lines of Credit agreements with U.S. Bank that allows the Funds to borrow funds, subject to certain conditions for temporary or emergency purposes. Interest is calculated at prime, 4.75% at September 30, 2004. The maximum borrowing is limited to 25% of eligible securities held by the portfolio subject to the following maximums: ICON Bond Fund $ 9,000,000 ICON Core Equity Fund $15,000,000 ICON Covered Call Fund $ 7,000,000 ICON Equity Income Fund $25,000,000 ICON Long/Short Fund $ 3,000,000
There was no amount outstanding on the line of credit for any of the Funds as of September 30, 2004. A commitment fee of $500 per line of credit has been paid by each Fund. 98 Notes to Financial Statements 4. OPTIONS CONTRACTS WRITTEN The number of option contracts written and the premiums received by the ICON Covered Call Fund during the year period ended September 30, 2004, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED ---------------------------------------------------------------------------------------- Options outstanding, beginning of period 3,334 $ 241,662 Options written during period 72,803 5,337,013 Options expired during period (30,458) (1,822,445) Options closed during period (28,855) (2,325,840) Options assigned during period (5,048) (395,338) ------------------- ------------------- Options outstanding, end of period 11,776 $ 1,035,052 =================== ===================
5. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryovers. The tax character of distributions paid during the periods indicated were as follows:
ORDINARY LONG-TERM RETURN OF TOTAL INCOME CAPITAL GAIN CAPITAL DISTRIBUTIONS -------------------------------------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 ICON Bond Fund $1,983,810 $ -- $ -- $1,963,810 ICON Core Equity Fund -- -- -- -- ICON Covered Call Fund 825,244 54 -- 825,298 ICON Equity Income Fund 1,974,348 -- -- 1,974,348 ICON Long/Short Fund 102,417 27,732 -- 130,149 YEAR ENDED SEPTEMBER 30, 2003 ICON Bond Fund 1,394,730 -- -- 1,394,730 ICON Core Equity Fund -- -- -- -- ICON Covered Call Fund -- -- -- -- ICON Equity Income Fund 555,767 -- -- 555,767 ICON Long/Short Fund -- -- -- --
Notes to Financial Statements 99 Notes to Financial Statements (continued) The aggregate composition by Fund of unrealized capital appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2004 are as follows:
FEDERAL TAX UNREALIZED UNREALIZED NET COST APPRECIATION (DEPRECIATION) APPRECIATION --------------------------------------------------------------------------------------------- ICON Bond Fund $ 58,580,849 $ 1,917,539 $ (209,227) $ 1,708,312 ICON Core Equity Fund 84,598,203 17,489,902 (901,739) 16,588,163 ICON Covered Call Fund 41,835,498 3,889,259 (1,060,104) 2,829,155 ICON Equity Income Fund 108,075,826 12,810,978 (2,108,191) 10,702,787 ICON Long/Short Fund 25,836,381 2,730,295 (1,074,300) 1,655,995
Accumulated capital losses noted below represent net capital loss carryovers as of September 30, 2004 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. During the year ended September 30, 2004, the following capital loss carryforwards were used: ICON Bond Fund $ 716 ICON Core Equity Fund 3,759,872 ICON Covered Call Fund -- ICON Equity Income Fund -- ICON Long/Short Fund 445
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.
UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED ORDINARY LONG-TERM POST OCTOBER CAPITAL LOSSES INCOME GAIN DEFERRALS --------------------------------------------------------------------------------------------- ICON Bond Fund $ -- $ 153,122 $359,860 $ -- ICON Core Equity Fund 8,138,524 -- -- -- ICON Covered Call Fund -- 1,404,286 707,268 -- ICON Equity Income Fund -- 690,544 898,315 -- ICON Long/Short Fund -- 605,334 845,915 --
The ICON Equity Income Fund generated taxable income during the year ended September 30, 2003, which was not distributed to the Fund's shareholders within the time prescribed by the Internal Revenue Code. This excess income is taxable at the corporate rate of 35% and is also subject to excise tax. The Fund's Adviser has agreed to voluntarily reimburse the Fund for the aggregate amount of the corporate and excise tax on this income in excess of the distributions to shareholders. 100 Notes to Financial Statements 6. SEGREGATED ACCOUNT AND SHORT SALE COLLATERAL As of September 30, 2004 the ICON Long/Short Fund had securities or cash deposits with the counterparty to the Short Sales in the amount of $1,465,488 as collateral for the short sales. Additionally, the Fund had cash segregated at the custodian in the amount of $350,460 as collateral for the short sales. 7. TOTAL RETURN RESTATEMENT The ICON Core Equity Fund, Class C has restated its total return for the period ended September 30, 2001 from (0.20%) to (6.03%). The resulting decrease in total return of 5.83% was due to a mathematical error. 8. INDEMNIFICATIONS In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against each Fund that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. Notes to Financial Statements 101 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of the ICON Diversified Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, short sales and written options and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Bond Fund, ICON Core Equity Fund, ICON Covered Call Fund, ICON Equity Income Fund, and ICON Long/Short Fund (five of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2004, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. As discussed in Note 7 to the financial statements, the ICON Core Equity Fund, Class C has restated its total return for the period ended September 30, 2001. PricewaterhouseCoopers LLP /s/ PricewaterhouseCoopers LLP Denver, Colorado November 19, 2004 102 Report of Accounting Firm Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 18 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, addresses and principal occupations are set forth below. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 53, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and Chief Investment Officer (1991 to present) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 54. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 57. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager, Trinity Investment Management Corporation (1989 to 2001). GREGORY KELLAM SCOTT, 56. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was Senior Vice President -- Law, General Counsel and Secretary, GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott Trustees and Officers 103 Board of Trustees and Fund Officers (continued) (unaudited) is also a member of the National Board of Directors of the Constituency for Africa (1997 to present). R. MICHAEL SENTEL, 56. Mr. Sentel has been a Trustee of the Funds since their inception. Mr. Sentel is a Senior Attorney with the U.S. Department of Education (1996 to present). Mr. Sentel also provides legal representation as a sole practitioner with an emphasis on corporate and transactional law. He served as general counsel to numerous public companies and served on the board of directors of one of these clients. Mr. Sentel began his legal career with the U.S. Securities and Exchange Commission's Division of Enforcement and became a branch chief. Later he served as the section chief for the Professional Liability Section of the Federal Deposit Insurance Corp. with responsibility for the Rocky Mountain Region (1991 to 1994). JONATHAN F. ZESCHIN, 51. Mr. Zeschin has been a Trustee of the Funds since November 2002. Mr. Zeschin is President and Founder of ESSENTIAL Advisers, Inc., a wealth management and investment advisory firm (2000 to present) and was Managing Partner of JZ Partners LLC, a business consulting firm for investment management companies (1998 to 2002). Mr. Zeschin was previously President of Founders Asset Management LLC, an investment management company (1995 to 1998) and Executive Vice President, INVESCO Funds Group, an investment advisory company (1992 to 1995). Mr. Zeschin was previously a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to 2004); and was previously a Director of the Wasatch Funds (2002 to 2004). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 53. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and Chief Investment Officer (1991 to present). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. ERIK L. JONSON, 55. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception. Mr. Jonson is also Chief Financial Officer (1996 to present) and Executive Vice President (2004 to present) and was previously Vice President (1998 to 2004) of ICON Advisers; Chief Financial Officer, Secretary and Director (1996 to present) of IM&R; and Executive Vice President (2004 to present) and Treasurer (2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) and Vice President, (2002 to 2004) of IDI; and Executive Vice President and Treasurer of ICON Insurance Agency, Inc. (2004 to present). 104 Trustees and Officers ANDRA C. OZOLS, 43. Ms. Ozols has been a Vice President and Secretary of the Funds since March 2002. She previously served in that capacity in 1998. Ms. Ozols is also Executive Vice President (2004 to present), General Counsel and Secretary (2002 to present) and was previously Vice President (2002 to 2004) of ICON Advisers; Executive Vice President (2004 to present) and Secretary (2002 to present) and was previously Vice President (2002 to 2004) of IDI; Director (June 2003 to present) of IM&R; and Executive Vice President and Secretary of ICON Insurance Agency, Inc. (2004 to present). Ms. Ozols was previously Vice President (1999 to 2002) and Assistant General Counsel (October 1998 to February 2002) of Founders Asset Management LLC; and was previously a Branch Chief (1993 to 1995) and Enforcement Attorney (1990 to 1995 and 1996 to 1998) with the U.S. Securities and Exchange Commission. The Trustees and Officers of the Funds may be contacted at 5299 DTC Boulevard, Suite 1200, Greenwood Village, Colorado 80111. Additional information about the Funds' Trustees and Officers is available in the Funds' Statement of Additional Information, which can be obtained free of charge by calling 1-800-764-0442 or by visiting www.iconadvisers.com. Trustees and Officers 105 Other Information (unaudited) QUALIFYING DIVIDEND INCOME For the year ended September 30, 2004, the following distributions represented qualified dividend income: ICON Covered Call Fund 16.90% ICON Equity Income Fund 91.76% ICON Long/Short Fund 20.73% 106 Other Information PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month-end. Beginning March 1, 2005, each ICON Fund will file a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q will be available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A description of the policies and procedures the ICON Funds use to vote proxies is available at www.iconadvisers.com; without charge upon request by calling 1-800-764-0442; or on the SEC's website at www.sec.gov. Information about how the ICON Funds voted proxies related to each Fund's portfolio securities during the 12-month period ended June 30, 2004 is available at www.iconadvisers.com or on the SEC's website at www.sec.gov. This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor. 107 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, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
[ICON FUNDS LOGO] 1-800-764-0442 www.iconadvisers.com ICRPANNUDIV I-142-DIV . 2004 Annual Report Investment Update ICON FOREIGN FUNDS ICON ASIA-PACIFIC REGION FUND ICON EUROPE FUND ICON INTERNATIONAL EQUITY FUND [ICON FUNDS LOGO] Table of Contents ABOUT THIS REPORT (UNAUDITED) 2 MESSAGE FROM ICON FUNDS (UNAUDITED) 4 MANAGEMENT OVERVIEWS (UNAUDITED) AND SCHEDULES OF INVESTMENTS ICON Asia-Pacific Region Fund 7 ICON Europe Fund 17 ICON International Equity Fund 27 FINANCIAL STATEMENTS 39 FINANCIAL HIGHLIGHTS 45 NOTES TO FINANCIAL STATEMENTS 48 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 55 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 56 OTHER INFORMATION (UNAUDITED) 59
LOGO About This Report HISTORICAL RETURNS All total returns mentioned in this report account for the change in a Fund's per-share price and the reinvestment of any dividends, capital gain distributions, and tax return of capital. If your account is set up to receive Fund distributions in cash rather than to reinvest them, your actual return may differ from these figures. The Funds' performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconadvisers.com for performance results current to the most recent month-end. PORTFOLIO DATA This report reflects ICON's views, opinions and portfolio holdings as of September 30, 2004, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's percentage holdings as of September 30, 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, these factors 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 About This Report 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 Morgan Stanley Capital International (MSCI) indexes assume change in security prices and the deduction of local taxes. The Funds' portfolios may significantly differ in holdings and composition from the indexes. Individuals cannot invest directly in an index. - The unmanaged MSCI Europe 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 Index comprises stocks traded in the developed and emerging markets of the Pacific Basin (Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand). The capitalization-weighted index attempts to capture at least 60% of investable capitalization in those markets subject to constraints governed by industry representation, maximum liquidity, maximum float, and minimum cross-ownership. - The MSCI All Country World Index ex-United States (ACWI ex-U.S.) is a leading unmanaged benchmark of international stock performance. The capitalization-weighted index is representative of the performance of securities of companies located in developed and emerging markets outside of the United States. - The unmanaged Bloomberg European 500 Index measures the weighted average performance in U.S. dollars of the 500 most highly capitalized European companies. Index returns and statistical data included in this report are provided by Bloomberg and FactSet. About This Report 3 Dear ICON Shareholder: -------------------------------------------------------------------------------- While the themeless markets have not necessarily made for a negative environment, it has made for a difficult one. -------------------------------------------------------------------------------- ICON's disciplined investment methodology focuses on the identification of changing industry themes that our system indicates are favorably positioned to outperform the broader market. During the early months of the Funds' fiscal year, economically sensitive sectors drove nearly all of the 23.15% annual gain in the broad benchmark MSCI All Country World Index ex-U.S. Later in the fiscal year, despite a number of peaks and valleys, overseas markets traded in a sideways manner, offering few signs of a clear direction. Within this trading range, economically sensitive sectors such as Materials, Consumer Discretionary, Information Technology, and Industrials have led during market advances, yet in complete and extreme theme reversals, they suffered the most amid subsequent pullbacks, as defensive-oriented sectors such as Healthcare, Utilities and Consumer Staples demonstrated passing strength. With such notable exceptions as the steel and oil & gas refining, marketing & transportation industries, the behavior of most overseas markets during the past 12 months has been themeless. EXTRANEOUS EVENTS HAVE DISTRACTED INVESTORS While the themeless markets have not necessarily made for a negative environment, it has made for a difficult one. Considering the backdrop of mostly favorable underlying fundamentals, from inflation to interest rates to corporate earnings, the pause has proven increasingly frustrating for a number of investors, pushing many to the sidelines. Although we view this lull as an interruption to the rally that was underway last year, it appears to us that investors have become distracted by extraneous events, such as rising oil prices, higher interest rates, terrorism, and the U.S. presidential election. Despite our longstanding belief that stock prices are driven by fundamentals and value, it is not unusual for these and other distractions to create a temporary disconnect for investors. We would never presume to cast doubt on any investor for experiencing these concerns. On an emotional level, they are very real and fueled on a daily basis by the media. However, due to their unpredictability, these fears play no role in ICON's valuation system. Moreover, we currently see little or no evidence to support the overstated influence they are currently exerting. FAVORABLE UNDERLYING FUNDAMENTALS With respect to rising oil prices, we have detected an unusually strong negative correlation this year relative to stock prices, meaning that when the price of oil has increased, stocks, as measured by the Standard & Poor's 500 Index, have declined. While this makes intuitive sense, historically we have found just the opposite: a fairly low if not slightly positive correlation between oil prices and 4 Message from ICON Funds We continue to monitor industry leadership rather than engage in the futile exercise of timing market bottoms. [CRAIG T. CALLAHAN PHOTO] Craig T. Callahan Chairman and Chief Investment Officer stock prices. Whereas this recent negative correlation has been extreme, we expect it will be brief. At the same time, higher oil prices did not lead to higher inflation, as many had anticipated. One need only look at the Consumer Price Index, which experienced moves of -0.1% in July and +0.1% in August. Long-term interest rates, as measured by the 10-year Treasury Note yield, also declined during the summer months, puzzling skeptics who expected that rates would trend higher. However, as fixed-income investors extended maturities in conjunction with the Federal Reserve's short-term rate hikes, longer-term yields fell amid signals that the tightening would keep inflation in check. As for the U.S. presidential election, that's a guessing game we routinely avoid, as it is inconsistent with our valuation-driven system. New legislation typically encounters many levels of compromise, and it would be years before its impact on corporate earnings could be determined. Pharmaceutical stocks, for example, have been cited as an area that could face legislative and regulatory hurdles based on election results. However, we believe these companies' prospects are more dependent on the aging population and the demand for new treatments than they are on election outcomes. POSITIONED TO PARTICIPATE That being said, overseas markets continued to exhibit a high degree of correlation, having reacted in a similar fashion to many of the same extraneous events that impacted U.S. stocks. Our valuation readings have guided us to follow the same strategy we employ domestically, focusing on value and investing in industries we expect to lead. Although some country-by-country differences must be considered, industry rotations are typically based on market themes rather than country fundamentals. As a result of valuation and relative strength readings during the period, we more heavily weighted the Materials and Industrials sectors, and toward period-end, increased the Funds' exposure to Information Technology. With stock prices in the sector generally declining and corporate earnings on the rise, our value/price ratios are once again attractive. It now appears to us that this Message from ICON Funds 5 leadership trend could continue and we believe we are positioned to participate should a sustainable rally emerge. RALLIES SELDOM OFFER INVITATIONS At the end of the period, our analysis indicated that European and Asian markets were undervalued by 20% and 31%, respectively. For that reason, we remain invested, riding through this period with the expectation that after the breakout from the current scenario, stocks will resume their path toward fair value. Last year reminded us that rallies seldom offer invitations, and often materialize without a significant triggering event. Still, we continue to monitor industry leadership and theme identification closely, rather than engage in the futile exercise of attempting to time market bottoms. In closing, I wish to again thank you for the opportunity to help guide you through these challenging markets. For ongoing market updates, as well as up- to-date Fund, performance, and account information, we invite you to visit our new website at www.iconadvisers.com. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and Chief Investment Officer of the Adviser 6 Message from ICON Funds Management Overview ICON Asia-Pacific Region Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 98.5% Top 10 Equity Holdings 24.3% Number of Stocks 75 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Kawasaki Kisen Kaisha, Ltd. 2.8% Hopewell Holdings Limited 2.8% Sumitomo Metal Industries, Ltd. 2.7% Techtronic Industries Company Limited 2.5% China Merchants Holdings International Company Limited 2.5% Zhejiang Expressway Co., Ltd. 2.4% Sumitomo Heavy Industries, Ltd. 2.4% Komatsu Ltd. 2.1% Hoya Corporation 2.1% Jiangxi Copper Company Ltd. 2.0% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Asia-Pacific Region Fund advanced 7.51% for the fiscal year ended September 30, 2004, trailing its benchmark, the MSCI All Country Pacific Index, which returned 15.19% over the same period. Total returns for other periods as of September 30, 2004 are listed on page 11. Although Asian markets reflected the extreme volatility that permeated U.S. markets, Asian shares traded at deeper discounts throughout the period and therefore closed a wider valuation gap. However, their slight return advantage over U.S. shares did not translate to the Fund's relative performance, which suffered due to disparities in sector and industry allocations versus its benchmark. The Fund is managed using an all-cap strategy, meaning it invests in Asia- Pacific securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. While the ICON system does not consider investment style, the Fund had a neutral value/growth stance relative to its broad benchmark during the period, as measured on a traditional price-to-earnings (P/E) basis. This positioning had a minimal effect on overall performance. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. A sideways or themeless market characterized the investment environment for much of the fiscal year, as leadership shifted sharply and suddenly between cyclical and defensive-oriented sectors. Market advances typically favored economically sensitive sectors, while event-driven downturns favored more defensive issues. Whether triggered by rising oil prices, geopolitical tensions or economic setbacks, global markets settled into a trading range that capped early-period gains. Nevertheless, our system continued to support a recovery-based theme, as evidenced by encouraging developments across the entire Asia-Pacific Region. The emergence of a cyclical growth trend has fostered widespread improvements, ranging from robust expansion in China to internal recovery in Japan, while declining interest rates and credit quality enhancements have bolstered domestic investment. Management Overview 7 Management Overview (continued) ICON Asia-Pacific Region Fund Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. An active underweight in the Financials sector, specifically lack of exposure to diversified banking giants Mitsubishi Tokyo Financial Group and Mizuho Financial Group, worked against Fund performance. The same held true for the Healthcare sector, where our avoidance of drugmakers Takeda Pharmaceutical Co., Ltd. and Sankyo Co., Ltd., based on their high prices, detracted on an opportunity cost level. Conversely, an overweight in the Industrials sector lifted relative performance, driven by gains in the marine and industrial machinery groups. While their combination of deep discounts and relative strength contributed positively to fiscal-year returns, our active underweight in Telecommunication & Utilities also proved advantageous given the sector's lagging performance. Among the Fund's leading individual stock detractors, Kookmin Bank, a provider of commercial banking services, came under pressure when its chief executive officer was convicted of improperly cutting the company's 2003 corporate tax bill. Telecommunication services provider China Unicom Ltd. also declined after reporting profits that fell short of analysts' expectations. Elsewhere, construction & engineering contractor Sunway Holdings Inc. proceeded to acquire its outstanding shares in order to privatize the company. These three holdings were sold as their long-term earnings forecasts caused concern and as we identified other sector and industry opportunities. In contrast, measurable contributors to Fund performance included Jiangxi Copper Co. Ltd., as supply-demand factors sent copper prices to a 15-year high. Cargo shippers Kawasaki Kisen Kaisha Ltd. and China Shipping Development also advanced as China's economic expansion enabled both to boost freight rates. Meanwhile, Denway Motors Ltd., owners of Guangzhou Honda, benefited from mounting consumer demand and rising sales. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE ASIA-PACIFIC REGION? A. 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. While regional forecasts call for sustained economic growth and improving corporate fundamentals, we continue to be guided by our methodology. With valuation and relative strength readings already supporting ongoing leadership in the heavily weighted Industrials and Materials sectors, new opportunities within the Energy sector are emerging as well. 8 Management Overview [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2004 - Disparities in sector and industry allocations vs. its benchmark detracted from the Fund's relative performance. - Stocks that hurt performance during the period included Kookmin Bank, China Unicom Ltd. and Sunway Holdings Inc. - Active underweights in the Financials and Healthcare sectors worked against relative performance, as diversified banks and pharmaceuticals boosted benchmark returns. - An overweight in the Industrials sector lifted relative performance, driven by gains in the marine and industrial machinery groups. - Among the Fund's strongest-performing holdings during the period were Jiangxi Copper Co. Ltd., Kawasaki Kisen Ltd., China Shipping Development, and Denway Motors Ltd. Management Overview 9 Management Overview (continued) ICON Asia-Pacific Region Fund TOP COUNTRIES September 30, 2004 Japan 51.0% Hong Kong 18.1% China 7.9% Singapore 5.5% Australia 5.4% Malaysia 4.3% South Korea 3.9% Indonesia 1.3% New Zealand 1.1%
Percentages are based upon net assets. TOP SECTORS September 30, 2004 Industrials 25.2% Financial 17.1% Materials 14.2% Consumer Discretionary 12.7% Leisure & Consumer Staples 10.6% Information Technology 8.3% Telecommunication & Utilities 5.4% Energy 2.5% Health Care 2.4%
Percentages are based upon net assets. 10 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 2/25/97 ----------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund 7.51% -5.43% -2.55% ----------------------------------------------------------------------------------------- MSCI All Country Pacific Index 15.19% -2.49% -0.96% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative index can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [BAR CHART] 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. Management Overview 11 Management Overview (continued) ICON Asia-Pacific Region Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Asia-Pacific Region Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 906.80 $9.20 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,015.35 $9.72 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.93% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 12 Management Overview Schedule of Investments ICON Asia-Pacific Region Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- COMMON STOCKS 98.5% AUSTRALIA 5.4% ENERGY 1.4% INTEGRATED OIL & GAS 1.4% 56,000 Origin Energy Limited $ 247,180 ----------- TOTAL ENERGY 247,180 FINANCIAL 2.8% DIVERSIFIED BANKS 2.8% 6,500 Commonwealth Bank of Australia 142,559 8,949 National Australia Bank Limited 174,994 12,000 Westpac Banking Corporation 153,910 ----------- 471,463 ----------- TOTAL FINANCIAL 471,463 MATERIALS 1.2% DIVERSIFIED CHEMICALS 1.2% 16,000 Orica Limited 201,395 ----------- TOTAL MATERIALS 201,395 ----------- TOTAL AUSTRALIA 920,038 CHINA 7.9% INDUSTRIALS 5.9% HIGHWAY & RAILTRACKS 4.1% 646,000 Jiangsu Expressway Company Ltd. 278,564 636,000 Zhejiang Expressway Co., Ltd. 414,673 ----------- 693,237 MARINE 1.8% 354,000 China Shipping Development Company Limited 301,553 ----------- TOTAL INDUSTRIALS 994,790 MATERIALS 2.0% DIVERSIFIED METALS & MINING 2.0% 595,000 Jiangxi Copper Company Ltd. 348,386 ----------- TOTAL MATERIALS 348,386 ----------- TOTAL CHINA 1,343,176 HONG KONG 18.1% CONSUMER DISCRETIONARY 3.5% HOUSEHOLD APPLIANCES 2.5% 220,000 Techtronic Industries Company Limited 432,931
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- TEXTILES 1.0% 202,000 Texwinca Holdings Limited $ 170,779 ----------- TOTAL CONSUMER DISCRETIONARY 603,710 FINANCIAL 3.4% MULTI-SECTOR HOLDINGS 1.5% 213,700 Swire Pacific Limited 257,648 REAL ESTATE MANAGEMENT & DEVELOPMENT 0.9% 16,000 Sun Hung Kai Properties Limited 150,796 SPECIALIZED FINANCE 1.0% 78,000 Hong Kong Exchanges & Clearing Limited 177,504 ----------- TOTAL FINANCIAL 585,948 INDUSTRIALS 8.6% AIRLINES 1.7% 168,800 Cathay Pacific Airways Limited 289,396 HIGHWAYS & RAILTRACKS 2.8% 225,000 Hopewell Holdings Limited 468,982 INDUSTRIAL CONGLOMERATES 4.1% 282,000 China Merchants Holdings International Company Limited 423,612 51,000 Citic Pacific Limited 131,214 77,000 Shanghai Industrial Holdings Limited 140,007 ----------- 694,833 ----------- TOTAL INDUSTRIALS 1,453,211 LEISURE & CONSUMER STAPLES 1.6% HOTELS, RESORTS & CRUISE LINES 1.6% 364,000 The Hongkong and Shanghai Hotels, Limited 266,088 ----------- TOTAL LEISURE & CONSUMER STAPLES 266,088 TELECOMMUNICATIONS & UTILITIES 1.0% ELECTRIC UTILITIES 1.0% 30,000 CLP Holdings Limited 171,553 ----------- TOTAL TELECOMMUNICATIONS & UTILITIES 171,553 ----------- TOTAL HONG KONG 3,080,510
Schedule of Investments 13 Schedule of Investments (continued) ICON Asia-Pacific Region Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- INDONESIA 1.3% FINANCIAL 1.3% DIVERSIFIED BANKS 1.3% 550,000 PT Bank Danamon Indonesia $ 224,191 ----------- TOTAL FINANCIAL 224,191 ----------- TOTAL INDONESIA 224,191 JAPAN 51.0% CONSUMER DISCRETIONARY 7.8% APPAREL RETAIL 0.8% 6,000 AOYAMA TRADING Co., Ltd. 136,293 AUTO PARTS & EQUIPMENT 2.0% 7,100 DENSO CORPORATION 167,825 17,000 NGK SPARK PLUG Co., Ltd. 176,991 ----------- 344,816 AUTOMOBILE MANUFACTURERS 1.7% 1,800 HONDA MOTOR CO., LTD. 87,302 5,400 Toyota Motor Corporation 205,672 ----------- 292,974 CONSUMER ELECTRONICS 1.1% 13,700 Sharp Corporation 188,479 MOTORCYCLE MANUFACTURERS 1.1% 12,000 Yamaha Motor Co., Ltd. 181,393 TIRES & RUBBER 1.1% 10,000 BRIDGESTONE CORPORATION 185,744 ----------- TOTAL CONSUMER DISCRETIONARY 1,329,699 ENERGY 1.1% OIL & GAS REFINING, MARKETING & TRANSPORTATION 1.1% 61,000 COSMO OIL COMPANY, LIMITED 177,223 ----------- TOTAL ENERGY 177,223 FINANCIAL 8.4% CONSUMER FINANCE 3.0% 3,000 AEON CREDIT SERVICE CO., LTD. 170,522 2,000 ORIX Corporation 204,558 2,000 Promise Co., Ltd. 130,923 ----------- 506,003 DIVERSIFIED BANKS 0.8% 25 Sumitomo Mitsui Financial Group, Inc. 142,881
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- REAL ESTATE MANAGEMENT & DEVELOPMENT 1.0% 16,000 Sumitomo Realty & Development Co., Ltd. $ 170,362 REGIONAL BANKS 3.6% 31,000 THE BANK OF FUKUOKA, LTD. 148,124 28,000 The Bank of Yokohama, Ltd. 150,443 41,000 The Joyo Bank, Ltd. 165,180 20,000 THE SHIZUOKA BANK, LTD. 150,582 ----------- 614,329 ----------- TOTAL FINANCIAL 1,433,575 HEALTH CARE 2.4% PHARMACEUTICALS 2.4% 7,600 Eisai Co., Ltd. 207,064 9,100 FUJISAWA PHARMACEUTICAL COMPANY LIMITED 205,334 ----------- 412,398 ----------- TOTAL HEALTH CARE 412,398 INDUSTRIALS 8.3% CONSTRUCTION & FARM MACHINERY 2.1% 56,000 KOMATSU LTD. 360,558 INDUSTRIAL MACHINERY 2.4% 140,000 SUMITOMO HEAVY INDUSTRIES, LTD.(a) 413,920 MARINE 2.8% 70,000 Kawasaki Kisen Kaisha, Ltd. 479,004 TRUCKING 1.0% 18,000 Seino Transportation Co., Ltd. 161,297 ----------- TOTAL INDUSTRIALS 1,414,779 INFORMATION TECHNOLOGY 7.0% ELECTRONIC EQUIPMENT MANUFACTURERS 3.9% 3,400 HOYA CORPORATION 356,368 3,000 NIDEC CORPORATION 302,661 ----------- 659,029 IT CONSULTING & OTHER SERVICES 1.3% 6,500 TIS Inc. 219,728 SYSTEMS SOFTWARE 1.8% 10,000 FUJI SOFT ABC INCORPORATED 314,077 ----------- TOTAL INFORMATION TECHNOLOGY 1,192,834
14 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- LEISURE & CONSUMER STAPLES 5.7% DRUG RETAIL 0.7% 5,000 Matsumotokiyoshi Co., Ltd. $ 126,646 FOOD RETAIL 2.0% 6,000 FamilyMart Co., Ltd. 160,771 5,000 LAWSON, INC. 173,452 ----------- 334,223 HYPERMARKETS AND SUPER CENTERS 0.8% 4,000 ITO-YOKADO CO., LTD. 137,156 PACKAGED FOODS & MEATS 2.2% 32,000 Meiji Dairies Corporation 184,251 63,000 NIPPON SUISAN KAISHA, Ltd. 187,103 ----------- 371,354 ----------- TOTAL LEISURE & CONSUMER STAPLES 969,379 MATERIALS 9.3% ALUMINUM 2.0% 153,000 Nippon Light Metal Company, Ltd. 341,682 COMMODITY CHEMICALS 1.0% 38,000 TORAY INDUSTRIES, INC. 176,056 DIVERSIFIED METALS & MINING 1.9% 46,000 Sumitomo Metal Mining Co., Ltd. 319,202 STEEL 4.4% 120,000 NIPPON STEEL CORPORATION 285,588 393,000 Sumitomo Metal Industries, Ltd. 466,922 ----------- 752,510 ----------- TOTAL MATERIALS 1,589,450 TELECOMMUNICATIONS & UTILITIES 1.0% ELECTRIC UTILITIES 1.0% 9,100 Kyushu Electric Power Company, Incorporated~ 170,499 ----------- TOTAL TELECOMMUNICATIONS & UTILITIES 170,499 ----------- TOTAL JAPAN 8,689,836 MALAYSIA 4.3% INDUSTRIALS 0.9% BUILDING PRODUCTS 0.9% 122,000 Hume Industries (Malaysia) Berhad~ 148,968 ----------- TOTAL INDUSTRIALS 148,968
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- LEISURE & CONSUMER STAPLES 1.1% AGRICULTURAL PRODUCTS 1.1% 110,000 PPB Group Berhad~ $ 189,605 ----------- TOTAL LEISURE & CONSUMER STAPLES 189,605 TELECOMMUNICATIONS & UTILITIES 2.3% INTEGRATED TELECOMMUNICATION 0.9% 55,000 Telekom Malaysia Berhad 162,123 WIRELESS TELECOMMUNICATION SERVICES 1.4% 105,000 Maxis Communications Berhad 234,931 ----------- TOTAL TELECOMMUNICATIONS & UTILITIES 397,054 ----------- TOTAL MALAYSIA 735,627 NEW ZEALAND 1.1% TELECOMMUNICATIONS & UTILITIES 1.1% GAS UTILITIES 1.1% 86,400 NGC Holdings Limited 182,219 ----------- TOTAL TELECOMMUNICATIONS & UTILITIES 182,219 ----------- TOTAL NEW ZEALAND 182,219 SINGAPORE 5.5% CONSUMER DISCRETIONARY 1.4% DISTRIBUTORS 1.4% 48,000 Jardine Cycle & Carriage Limited 235,168 ----------- TOTAL CONSUMER DISCRETIONARY 235,168 FINANCIAL 1.2% DIVERSIFIED BANKS 1.2% 24,679 United Overseas Bank Limited 200,853 ----------- TOTAL FINANCIAL 200,853 INDUSTRIALS 1.0% INDUSTRIAL CONGLOMERATES 1.0% 37,000 Keppel Corporation Limited 173,641 ----------- TOTAL INDUSTRIALS 173,641 INFORMATION TECHNOLOGY 1.3% ELECTRONIC MANUFACTURING SERVICES 1.3% 22,200 Venture Corporation Limited 217,666 ----------- TOTAL INFORMATION TECHNOLOGY 217,666
Schedule of Investments 15 Schedule of Investments (continued) ICON Asia-Pacific Region Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- LEISURE & CONSUMER STAPLES 0.6% BREWERS 0.6% 13,335 Fraser & Neave Limited $ 109,994 ----------- TOTAL LEISURE & CONSUMER STAPLES 109,994 ----------- TOTAL SINGAPORE 937,322 SOUTH KOREA 3.9% INDUSTRIALS 0.6% MARINE 0.6% 12,000 Hyundai Merchant Marine Co., Ltd.(a) 99,891 ----------- TOTAL INDUSTRIALS 99,891 LEISURE & CONSUMER STAPLES 1.6% TOBACCO 1.6% 10,000 KT&G Corporation~ 264,438 ----------- TOTAL LEISURE & CONSUMER STAPLES 264,438
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- MATERIALS 1.7% STEEL 1.7% 2,000 POSCO $ 298,159 ----------- TOTAL MATERIALS 298,159 ----------- TOTAL SOUTH KOREA 662,488 ----------- TOTAL COMMON STOCKS (COST $15,086,573) 16,775,407 OTHER ASSETS IN EXCESS OF LIABILITIES 1.5% 271,805 ----------- NET ASSETS 100.0% $17,047,212 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ~ All securities were fair valued (Note 1) as of September 30, 2004 unless noted with a ~. Total value of securities fair valued was $16,001,897. 16 Schedule of Investments Management Overview ICON Europe Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 98.7% Top 10 Equity Holdings 26.2% Number of Stocks 67 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Ascom Holding AG 3.7% Buzzi Unicem S.p.A. 3.1% Camaieu 2.9% Georg Fischer AG 2.7% Grupo Empresarial Ence, S.A. 2.5% Vivendi Universal SA 2.3% Kuoni Reisen Holding AG 2.3% PubliGroupe S.A. 2.3% RHI AG 2.2% Smedvig ASA 2.2% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Europe Fund appreciated 22.26% for the fiscal year ended September 30, 2004, outpacing the 17.89% return for the Bloomberg European 500 Index, but trailing the 26.02% return for the MSCI Europe 15 Index. Total returns for other periods as of September 30, 2004 are listed on page 21. European markets remained highly correlated to the U.S. market during the period, reflecting the early-period cyclical rally and subsequent volatility that characterized the broad U.S. market. However, because European issues were generally priced at deeper relative discounts, they closed a significantly wider valuation gap and outperformed domestic equities by a considerable margin. The Fund is managed using an all-cap strategy, meaning it invests in European securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Despite an absence of leadership, the Fund benefited from an overall growth bias, 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 measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? a. While a cyclical theme pointed to a recovering global economy, Europe remained entrenched in a low-growth scenario amid lingering high unemployment and diminished consumer confidence. Rising commodity prices added to the uncertainty, although currency gains, particularly in the widely adopted euro, offset their impact. Meanwhile, incremental improvements in export growth and corporate investment were also seen as encouraging and proved to be settling influences. However, in the wake of heightened geopolitical tensions, market leadership turned sporadic, with frequent rotations between economically sensitive and defensive industries. Even so, our system viewed these abrupt theme reversals as temporary, and as a result, we continued to position the Fund with a sustainable, recovery-driven rally in mind. Management Overview 17 Management Overview (continued) ICON Europe Fund Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Clearly, the most significant shift in the Fund's composition during the period was its transition in late January 2004 from the ICON South Europe Region Fund to the ICON Europe Fund. As part of the portfolio's expanded mandate, the Fund now invests in equity securities anywhere in Europe. This strategy had emerged as the increasing correlation of investment themes across national borders convinced us that the Fund could benefit from a broader scope, compared to its prior focus, which emphasized country rotation. The Materials sector was one of the Fund's more dominant themes during the period, having benefited from an overweight position that emphasized the top-performing steel and construction materials industries. Wireless telecommunication services in the Telecommunication & Utilities sector also continued to demonstrate leadership while narrowing a sizable valuation gap, as did communications equipment, among the Fund's leading industry contributors relative to the benchmark. Limited exposure to the Energy sector, specifically integrated oil & gas, proved detrimental to relative performance. Valuation and relative strength readings did not support this sector's dramatic move, which exceeded fair value when oil prices started to spike. Among the Fund's foremost company contributors, telecommunication services firm Anscom Holding AG profited from strong operating results, including improved order intake and lower net losses. Steelmaker Arcelor NPV also advanced as rising global demand pushed steel prices to robust levels. Elsewhere, media giant Vivendi Universal soared on the announcement of its pending merger with NBC. Conversely, Europe's largest perfume retailer Marionnaud Parfumeries SA detracted from Fund performance, as rising costs weakened earnings. Deteriorating relative strength led us to liquidate the position at a loss. Meanwhile, defense contractor Societe d'Applications Generales d'Electricite et de Macanique and electronic component supplier Epcos AG both retreated as earnings setbacks pressured their stocks. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE EUROPEAN MARKET? a. Forecasts call for modest economic growth within the European market, reflecting a broad-based global expansion driven by a cyclical recovery. Low real interest rates could lead to improved business and consumer spending, which in turn could fuel an upturn in employment rolls. Whether or not this comes to pass, we continue to be guided by our methodology, which has identified valuation and relative strength across a 18 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager number of sectors and industries. The Materials sector, specifically steel and diversified metals & mining, remains attractive, while Financials and its constituent diversified financial services industry offer compelling buying opportunities. PERFORMANCE HIGHLIGHTS September 30, 2004 - European issues were generally priced at deeper relative discounts than U.S. equities, leading to considerable outperformance as prices moved toward fair value. - Dominant themes included an overweighted Materials sector, specifically steel and construction materials, as well as wireless telecommunication services and communications equipment in the Telecommunication & Utilities sector. - Among the Fund's strongest-performing holdings during the period were Ascom Holding AG, Arcelor NPV and Vivendi Universal. - Conversely, an underweighted Energy sector proved detrimental to relative performance. - Stocks that hurt performance during the period included Marionnaud Parfumeries, Societe d'Applications Generales d'Electricite et de Macanique and Epcos AG. Management Overview 19 Management Overview (continued) ICON Europe Fund TOP COUNTRIES September 30, 2004 Switzerland 20.1% France 15.8% Austria 11.3% Italy 8.1% Spain 7.3% Germany 7.0% Belgium 5.2% United Kingdom 4.1% Portugal 4.0% Norway 3.3%
Percentages are based upon net assets. TOP SECTORS September 30, 2004 Industrials 21.7% Materials 16.4% Consumer Discretionary 11.0% Leisure & Consumer Staples 10.7% Financial 9.9% Telecommunications & Utilities 9.4% Energy 8.0% Information Technology 6.5% Health Care 5.1%
Percentages are based upon net assets. 20 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 2/20/97 ----------------------------------------------------------------------------------------- ICON Europe Fund 22.26% 3.57% 6.38% ----------------------------------------------------------------------------------------- MSCI Europe 15 Index 26.02% 0.68% 6.46% ----------------------------------------------------------------------------------------- Bloomberg European 500 Index 17.89% -1.73% 5.59% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The 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. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [BAR CHART] 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. Management Overview 21 Management Overview (continued) ICON Europe Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Europe Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,012.60 $11.02 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,014.05 $11.03 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 2.19% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 22 Management Overview Schedule of Investments ICON Europe Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- COMMON AND PREFERRED STOCKS 98.7% ADR -- AMERICAN DEPOSITARY RECEIPTS 4.7% RUSSIA 2.3% TELECOMMUNICATIONS & UTILITIES 2.3% WIRELESS TELECOMMUNICATION SERVICES 2.3% 785 AO VimpelCom(a)~ $ 85,408 695 Mobile Telesystems~ 100,768 ---------- TOTAL RUSSIA 186,176 GREECE 1.2% TELECOMMUNICATION & UTILITIES 1.2% WIRELESS TELECOMMUNICATION SERVICES 1.2% 5,700 STET Hellas Telecommunications S.A.~ 93,993 ---------- TOTAL GREECE 93,993 TURKEY 1.2% TELECOMMUNICATION & UTILITIES 1.2% WIRELESS TELECOMMUNICATION SERVICES 1.2% 7,992 Turkcell Illetisim Hizmetteri -- Turkey A.S. Coj~ 89,590 ---------- TOTAL TURKEY 89,590 ---------- TOTAL TELECOMMUNICATIONS & UTILITIES 369,759 ---------- TOTAL ADR -- AMERICAN DEPOSITARY RECEIPTS 369,759 AUSTRIA 11.3% ENERGY 1.5% INTEGRATED OIL & GAS 1.5% 500 OMV AG 115,466 ---------- TOTAL ENERGY 115,466 INDUSTRIALS 5.3% AIRLINES 1.0% 6,135 Austrian Airlines/ Osterreichische Luftverkehrs AG(a) 77,683 BUILDING PRODUCTS 1.3% 2,700 Wienerberger AG 101,475 ENVIRONMENTAL SERVICES 1.4% 4,530 BWT AG 112,489 INDUSTRIAL MACHINERY 1.6% 2,100 VA Technologie AG(a) 124,123 ---------- TOTAL INDUSTRIALS 415,770
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- MATERIALS 4.5% CONSTRUCTION MATERIALS 2.2% 7,895 RHI AG(a) $ 174,927 STEEL 2.3% 1,000 Boehler-Uddeholm AG 92,477 1,500 voestalpine AG 85,160 ---------- 177,637 ---------- TOTAL MATERIALS 352,564 ---------- TOTAL AUSTRIA 883,800 BELGIUM 5.2% HEALTH CARE 2.2% PHARMACEUTICALS 2.2% 3,155 UCB SA 168,419 ---------- TOTAL HEALTH CARE 168,419 INDUSTRIALS 0.8% ELECTRICAL COMPONENTS & EQUIPMENT 0.8% 1,000 Bekaert NV 62,546 ---------- TOTAL INDUSTRIALS 62,546 INFORMATION TECHNOLOGY 1.2% ELECTRONIC EQUIPMENT MANUFACTURERS 1.2% 1,105 Barco NV 95,228 ---------- TOTAL INFORMATION TECHNOLOGY 95,228 TELECOMMUNICATION & UTILITIES 1.0% WIRELESS TELECOMMUNICATION SERVICES 1.0% 1,135 Mobistar SA(a) 81,246 ---------- TOTAL TELECOMMUNICATIONS & UTILITIES 81,246 ---------- TOTAL BELGIUM 407,439 CANADA 1.0% ENERGY 1.0% OIL & GAS EQUIPMENT & SERVICES 1.0% 4,700 Enerflex Systems Ltd.~ 75,056 ---------- TOTAL ENERGY 75,056 ---------- TOTAL CANADA 75,056 DENMARK 1.0% INDUSTRIALS 1.0% TRUCKING 1.0% 1,500 DSV A/S 79,276 ---------- TOTAL INDUSTRIALS 79,276 ---------- TOTAL DENMARK 79,276
Schedule of Investments 23 Schedule of Investments (continued) ICON Europe Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- FINLAND 1.6% HEALTH CARE 0.7% PHARMACEUTICALS 0.7% 4,000 Orion Oyj~ $ 54,751 ---------- TOTAL HEALTH CARE 54,751 MATERIALS 0.9% FERTILIZERS & AGRICULTURAL CHEMICALS 0.9% 4,880 Kemira Oyj 67,996 ---------- TOTAL MATERIALS 67,996 ---------- TOTAL FINLAND 122,747 FRANCE 15.8% CONSUMER DISCRETIONARY 3.0% APPAREL RETAIL 3.0% 2,570 Camaieu 230,646 ---------- TOTAL CONSUMER DISCRETIONARY 230,646 FINANCIAL 2.1% DIVERSIFIED BANKS 2.1% 1,820 Societe Generale 161,531 ---------- TOTAL FINANCIAL 161,531 HEALTH CARE 0.7% PHARMACEUTICALS 0.7% 800 Sanofi-Aventis 58,200 ---------- TOTAL HEALTH CARE 58,200 INDUSTRIALS 1.8% BUILDING PRODUCTS 1.8% 2,780 Compagnie de Saint- Gobain 143,004 ---------- TOTAL INDUSTRIALS 143,004 INFORMATION TECHNOLOGY 1.6% COMMUNICATIONS EQUIPMENT 1.6% 1,320 Sagem SA 126,693 ---------- TOTAL INFORMATION TECHNOLOGY 1.6% 126,693 LEISURE & CONSUMER STAPLES 2.3% MOVIES & ENTERTAINMENT 2.3% 7,097 Vivendi Universal SA(a) 182,371 ---------- TOTAL LEISURE & CONSUMER STAPLES 182,371 MATERIALS 2.8% CONSTRUCTION MATERIALS 2.8% 1,140 Imerys SA 76,098 1,640 Lafarge SA 143,290 ---------- 219,388 ---------- TOTAL MATERIALS 219,388
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- TELECOMMUNICATION & UTILITIES 1.5% WIRELESS TELECOMMUNICATION SERVICES 1.5% 2,995 Bouygues SA $ 112,650 ---------- TOTAL TELECOMMUNICATION & UTILITIES 112,650 ---------- TOTAL FRANCE 1,234,483 GERMANY 7.0% CONSUMER DISCRETIONARY 2.7% AUTOMOBILE MANUFACTURERS 1.3% 2,500 DaimlerChrysler AG 103,349 TIRES & RUBBER 1.4% 2,000 Continental AG 108,702 ---------- TOTAL CONSUMER DISCRETIONARY 212,051 FINANCIAL 0.9% MULTI-LINE INSURANCE 0.9% 715 Allianz AG 71,943 ---------- TOTAL FINANCIAL 71,943 INDUSTRIALS 1.0% CONSTRUCTION & ENGINEERING 1.0% 3,000 Hochtief AG 73,997 ---------- TOTAL INDUSTRIALS 73,997 LEISURE & CONSUMER STAPLES 0.8% BROADCASTING & CABLE TV 0.8% 3,455 ProSiebenSat.1 Media AG Preferred Stock 63,151 ---------- TOTAL LEISURE & CONSUMER STAPLES 63,151 MATERIALS 1.6% DIVERSIFIED CHEMICALS 0.9% 2,500 Bayer AG 68,425 STEEL 0.7% 2,920 ThyssenKrupp AG 56,756 ---------- TOTAL MATERIALS 125,181 ---------- TOTAL GERMANY 546,323 GREECE 0.7% ENERGY 0.7% OIL & GAS REFINING, MARKETING & TRANSPORTATION 0.7% 6,210 Hellenic Petroleum S.A. 51,510 ---------- TOTAL ENERGY 51,510 ---------- TOTAL GREECE 51,510 ITALY 8.1% CONSUMER DISCRETIONARY 0.9% AUTO PARTS & EQUIPMENT 0.9% 10,500 Brembo S.p.A. 69,870 ---------- TOTAL CONSUMER DISCRETIONARY 69,870
24 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- FINANCIAL 2.5% DIVERSIFIED BANKS 2.5% 18,160 Banca Intesa S.p.A. $ 69,219 11,339 SanPaolo IMI S.p.A. 128,069 ---------- 197,288 ---------- TOTAL FINANCIAL 197,288 LEISURE & CONSUMER STAPLES 1.6% BROADCASTING & CABLE TV 1.6% 10,847 Mediaset S.p.A. 123,377 ---------- TOTAL LEISURE & CONSUMER STAPLES 123,377 MATERIALS 3.1% CONSTRUCTION MATERIALS 3.1% 18,220 Buzzi Unicem S.p.A. 241,223 ---------- TOTAL MATERIALS 241,223 ---------- TOTAL ITALY 631,758 LUXEMBOURG 1.0% MATERIALS 1.0% STEEL 1.0% 4,480 Arcelor 83,077 ---------- TOTAL MATERIALS 83,077 ---------- TOTAL LUXEMBOURG 83,077 NETHERLANDS 1.5% ENERGY 1.5% INTEGRATED OIL & GAS 1.5% 2,300 Royal Dutch Petroleum Company 118,635 ---------- TOTAL ENERGY 118,635 ---------- TOTAL NETHERLANDS 118,635 NORWAY 3.3% ENERGY 3.3% OIL & GAS DRILLING 2.2% 13,200 Smedvig ASA 172,852 OIL & GAS EXPLORATION & PRODUCTION 1.1% 1,150 Norsk Hydro ASA 83,909 ---------- TOTAL ENERGY 256,761 ---------- TOTAL NORWAY 256,761
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- PORTUGAL 4.0% LEISURE & CONSUMER STAPLES 1.8% FOOD RETAIL 1.8% 12,715 Jeronimo Martins, SGPS, S.A.(a) $ 143,403 ---------- TOTAL LEISURE & CONSUMER STAPLES 143,403 TELECOMMUNICATION & UTILITIES 2.2% INTEGRATED TELECOMMUNICATION 2.2% 15,500 Portugal Telecom, SGPS, S.A. 171,008 ---------- TOTAL TELECOMMUNICATIONS & UTILITIES 171,008 ---------- TOTAL PORTUGAL 314,411 SPAIN 7.3% INDUSTRIALS 2.9% CONSTRUCTION & ENGINEERING 1.9% 4,000 Fomento de Construcciones y Contratas S.A. 148,730 HIGHWAYS & RAILTRACKS 1.0% 4,300 Abertis Infraestructuras S.A. 80,468 ---------- TOTAL INDUSTRIALS 229,198 LEISURE & CONSUMER STAPLES 1.9% RESTAURANTS 1.9% 75,000 TelePizza, S.A. 144,767 ---------- TOTAL LEISURE & CONSUMER STAPLES 144,767 MATERIALS 2.5% PAPER PRODUCTS 2.5% 7,200 Grupo Empresarial Ence, S.A. 199,005 ---------- TOTAL MATERIALS 199,005 ---------- TOTAL SPAIN 572,970 SWEDEN 1.0% FINANCIAL 1.0% DIVERSIFIED BANKS 1.0% 10,100 Nordea Bank AB 82,744 ---------- TOTAL FINANCIAL 82,744 ---------- TOTAL SWEDEN 82,744
Schedule of Investments 25 Schedule of Investments (continued) ICON Europe Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- SWITZERLAND 20.1% CONSUMER DISCRETIONARY 2.3% ADVERTISING 2.3% 621 PubliGroupe S.A. $ 180,935 ---------- TOTAL CONSUMER DISCRETIONARY 180,935 FINANCIAL 3.4% DIVERSIFIED CAPITAL MARKETS 3.4% 4,170 Credit Suisse Group 133,195 1,904 UBS AG 134,173 ---------- 267,368 ---------- TOTAL FINANCIAL 267,368 HEALTH CARE 1.5% PHARMACEUTICALS 1.5% 1,157 Roche Holding AG 119,844 ---------- TOTAL HEALTH CARE 119,844 INDUSTRIALS 6.9% BUILDING PRODUCTS 1.1% 110 Geberit AG 85,631 INDUSTRIAL MACHINERY 5.8% 850 Georg Fischer AG(a) 212,141 435 Schindler Holding AG 135,309 355 Sulzer AG 106,586 ---------- 454,036 ---------- TOTAL INDUSTRIALS 539,667 INFORMATION TECHNOLOGY 3.7% COMMUNICATIONS EQUIPMENT 3.7% 21,238 Ascom Holding AG(a) 285,688 ---------- TOTAL INFORMATION TECHNOLOGY 285,688 LEISURE & CONSUMER STAPLES 2.3% HOTELS, RESORTS & CRUISE LINES 2.3% 490 Kuoni Reisen Holding AG 181,703 ---------- TOTAL LEISURE & CONSUMER STAPLES 181,703 ---------- TOTAL SWITZERLAND 1,575,205
SHARES OR PRINCIPAL AMOUNT VALUE -------------------------------------------- UNITED KINGDOM 4.1% CONSUMER DISCRETIONARY 2.1% HOMEBUILDING 2.1% 5,400 Barratt Developments plc $ 55,273 7,500 George Wimpey plc 54,709 11,300 Taylor Woodrow plc 53,819 ---------- 163,801 ---------- TOTAL CONSUMER DISCRETIONARY 163,801 INDUSTRIALS 2.0% AEROSPACE & DEFENSE 2.0% 34,010 Rolls-Royce Group plc 156,107 ---------- TOTAL INDUSTRIALS 156,107 ---------- TOTAL UNITED KINGDOM 319,908 ---------- TOTAL COMMON STOCKS (COST $6,304,121) 7,725,862 OTHER ASSETS LESS LIABILITIES 1.5% 100,218 ---------- NET ASSETS 100.0% $7,826,080 ==========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ~ All securities were fair valued (Note 1) as of September 30, 2004 unless noted with a ~. Total value of securities fair valued was $7,226,296. 26 Schedule of Investments Management Overview ICON International Equity Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 100.2% Top 10 Equity Holdings 16.0% Number of Stocks 97 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Puma AG Rudolf Dassler Sport 1.9% Smedvig ASA 1.8% Georg Fischer AG 1.7% OMV AG 1.7% DSV A/S 1.6% Skandia Forsakrings AB 1.5% Global Railway Industries Ltd. 1.5% Kawasaki Kisen Kaisha, Ltd. 1.5% Grupo Elektra S.A. de C.V. 1.4% AWG plc 1.4% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON International Fund, Class Z advanced 26.79% for the fiscal year ended September 30, 2004, outpacing its benchmark, the MSCI All Country World Index ex-U.S., which returned 23.15%. The Fund's Class I shares returned -3.38% since their February 6, 2004 inception compared to a 2.13% return for the benchmark, while its Class C shares returned -6.55% since their February 19, 2004 inception compared to a -0.84% return for the benchmark over the same period. Total returns for other periods as of September 30, 2004 are listed on page 31. A simultaneous global recovery benefited the Fund during the period, as overseas markets demonstrated highly correlated, yet often volatile moves toward fair value. Although benchmark disparities and lagging returns worked against the Fund's Asia-Pacific holdings, our overall focus on valuation-driven sector rotation proved advantageous, given the deeper relative discounts at which foreign stocks were trading versus their U.S. counterparts. The Fund is managed using an all-cap strategy, meaning it invests in international securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for overseas industry leadership no matter where it emerges. Despite our focus on valuation, the Fund benefited from a presumed growth bias during the period, as measured on a traditional price-to-earnings (P/E) basis. This tilt likely reflects the Fund's sizable exposure to economically sensitive industries, which, according to our system, may sustain an eventual broad move to the upside. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Consistent with a nascent global recovery, our system continued to detect a cyclical theme in which economically sensitive industries would assume market dominance. However, the period was in fact marked by frequent theme reversals, triggered by event-driven downturns that favored defensive issues. We viewed these abrupt range-bound moves as temporary interruptions, and instead saw incremental improvements as a sign that expansion-related leadership could solidify. Management Overview 27 Management Overview (continued) ICON International Equity Fund At the regional level, Europe remained entrenched in a low-growth scenario amid lingering high unemployment and diminished consumer confidence. Nevertheless, currency gains helped offset the effects of rising commodity prices, but did not hinder export growth or corporate investment. Japan stayed on its newly forged path of internal recovery as monetary reforms proliferated and deflation concerns subsided. Asia's high-growth stature, however, continued to be defined by the rapid emergence of China as an economic powerhouse. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Clearly, the most significant shift in the Fund's composition during the period was its conversion in late January 2004 from the ICON North Europe Region Fund to the ICON International Equity Fund. As part of its expanded mandate, the Fund may now invest in equity securities anywhere in the world excluding the United States. This strategy had emerged as the increasing correlation of investment themes across national borders convinced us that the Fund could benefit from a broader scope, compared to its prior focus, which emphasized country rotation. Against this backdrop, much of the Fund's restructuring centered on sector allocation rather than country weightings. For example, the Fund's active overweight in Information Technology, specifically semiconductors and semiconductor equipment, coupled with valuation-related rotations yielded strong relative returns. The Fund's underweight in Leisure and Consumer Staples aided relative performance, as did capitalizing on value and relative strength in selected Leisure industries broadcasting & cable TV and casinos & gaming. Meanwhile, below-average exposure in Financials and constituent industry diversified banks, particularly the absence of benchmark bellwether HSBC Holdings Plc, hurt relative returns. Within the Materials sector, the Fund's steel component performed well, although an underweight position in diversified metals & mining offset those gains. As for individual holdings that made measurable contributions, semiconductor equipment company ASML Holding NV advanced on industry-leading market share gains in its core photolithography business, while microchip designer ARM Holdings Plc benefited from an improved current-year outlook. Elsewhere, broadcast media company Carlton Communications projected significant cost synergies from its pending merger with rival firm Granada Plc, but was ultimately liquidated due to valuation concerns. In contrast, Fund performance came under pressure when China Overseas Land & Investment Ltd. experienced a slowdown in international real estate markets. Integrated steel producer Companhia Siderurgica Nacional faced 28 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager earnings shortfalls and regional liquidity concerns, even as the global steel industry logged impressive gains. Moreover, discount air carrier Ryanair Holdings Plc tumbled when the company reported its first-ever profit warning and was subsequently sold from the Fund. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE INTERNATIONAL MARKET? A. Given the increasing correlation of global industry themes, we believe it is critical to focus on market leadership regardless of country origin or benchmark allocations. Although we anticipate a broad-based, recovery-driven expansion, our quantitative methodology indicates ongoing strength in Materials and Industrials, with compelling opportunities emerging in Energy and Financials. PERFORMANCE HIGHLIGHTS September 30, 2004 Valuation-driven sector rotations proved highly advantageous, given the deep relative discounts at which foreign stocks were trading. - Active overweighting and industry rotations in Information Technology, specifically semiconductors and semiconductor equipment, produced strong relative returns. - Among the Fund's strongest-performing holdings during the period were ASML Holding NV, ARM Holdings Plc and Carlton Communications. - Below-average exposure in Financials and diversified banks hurt relative returns during the period, while underweight positions in the diversified metals & mining industry offset gains in steel. - Stocks that hurt performance during the period included China Overseas Land & Investment Ltd., Companhia Siderurgica Nacional and Ryanair Holdings Plc. Management Overview 29 Management Overview (continued) ICON International Equity Fund TOP COUNTRIES September 30, 2004 Japan 26.0% Germany 10.3% Canada 8.8% Austria 8.6% United Kingdom 6.7% Spain 4.9% Mexico 4.3% Switzerland 3.6% Sweden 3.6% Norway 3.1%
Percentages are based upon net assets. TOP SECTORS September 30, 2004 Industrials 21.5% Financial 16.9% Consumer Discretionary 16.6% Materials 14.3% Energy 10.2% Health Care 6.3% Telecommunication & Utilities 6.2% Leisure & Consumer Staples 6.0% Information Technology 2.2%
Percentages are based upon net assets. 30 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION ------------------------------------------------------------------------------------------- ICON International Equity Fund-Class Z 2/18/97 26.79% 2.94% 5.87% ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S. 23.15% 0.49% 3.85% ------------------------------------------------------------------------------------------- ICON International Equity Fund-Class I 2/6/04 N/A N/A -3.38%* ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S. 2.13%* ------------------------------------------------------------------------------------------- ICON International Equity Fund-Class C 2/19/04 N/A N/A -6.55%* ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S. -0.84%* -------------------------------------------------------------------------------------------
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 Fund's name and investment strategy changed effective January 29, 2004. The Fund's past performance would have been different if the current strategy had been in effect. Class Z shares are available only to grandfathered and institutional investors. * Not annualized. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON INTERNATIONAL EQUITY FUND- CLASS Z MSCI ACWI EX-U.S. ------------------------------- ----------------- 2/18/97 10000.00 10000.00 9/30/97 11060.00 11225.40 9/30/98 11841.00 9749.68 9/30/99 13354.00 13007.80 9/30/00 14747.00 13647.00 9/30/01 10280.00 9649.94 9/30/02 8538.00 8390.48 9/30/03 12176.00 10826.00 9/30/04 15438.00 13332.30
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class Z shares on the Class' inception date of 2/18/97 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends, capital gain distributions and tax return of capital but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 31 Management Overview (continued) ICON International Equity Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXPENSE EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON International Equity Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). 32 Management Overview ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04* 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- CLASS C ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 977.80 $ 14.88 ---------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,009.95 $ 15.12 (5% return before expenses) ---------------------------------------------------------------------------------------------- CLASS I ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 979.60 $ 11.33 ---------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,013.55 $ 11.53 (5% return before expenses) ---------------------------------------------------------------------------------------------- CLASS Z ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 980.60 $ 9.85 ---------------------------------------------------------------------------------------------- Hypothetical $1,000.00 $1,015.05 $ 10.02 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratios of 3.01% (Class C), 2.29% (Class I) and 1.99% (Class Z) annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. Management Overview 33 Schedule of Investments ICON International Equity Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- COMMON STOCKS 100.2% ADR -- AMERICAN DEPOSITORY RECEIPTS 3.0% MEXICO 1.1% MATERIALS 1.1% CONSTRUCTION MATERIALS 1.1% 4,803 Cemex S.A. de C.V.~ $ 135,156 ----------- TOTAL MATERIALS 135,156 ----------- TOTAL MEXICO 135,156 RUSSIA 1.9% TELECOMMUNICATION & UTILITIES 1.9% WIRELESS TELECOMMUNICATION SERVICES 1.9% 1,200 AO VimpelCom(a)~ 130,560 800 Mobile Telesystems~ 115,992 ----------- 246,552 ----------- TOTAL TELECOMMUNICATION & UTILITIES 246,552 ----------- TOTAL RUSSIA 246,552 ----------- TOTAL ADR -- AMERICAN DEPOSITORY RECEIPTS 381,708 AUSTRALIA 1.8% HEALTH CARE 1.0% BIOTECHNOLOGY 1.0% 6,000 CSL Limited 123,918 ----------- TOTAL HEALTH CARE 123,918 LEISURE & CONSUMER STAPLES 0.8% AGRICULTURAL PRODUCTS 0.8% 74,550 Futuris Corporation Limited 102,873 ----------- TOTAL LEISURE & CONSUMER STAPLES 102,873 ----------- TOTAL AUSTRALIA 226,791 AUSTRIA 8.6% ENERGY 1.7% INTEGRATED OIL & GAS 1.7% 931 OMV AG 214,997 ----------- TOTAL ENERGY 214,997 INDUSTRIALS 4.5% AIRLINES 0.9% 8,500 Austrian Airlines/ Osterreichische Luftverkehrs AG(a) 107,629 AIRPORT SERVICES 1.0% 2,000 Flughafen Wien AG 121,937 BUILDING PRODUCTS 1.3% 4,500 Wienerberger AG 169,125
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- INDUSTRIAL MACHINERY 1.3% 2,800 VA Technologie AG(a) $ 165,498 ----------- TOTAL INDUSTRIALS 564,189 MATERIALS 2.4% CONSTRUCTION MATERIALS 1.1% 6,400 RHI AG(a) 141,803 STEEL 1.3% 1,790 Boehler-Uddeholm AG 165,534 ----------- TOTAL MATERIALS 307,337 ----------- TOTAL AUSTRIA 1,086,523 BELGIUM 1.3% FINANCIAL 1.3% DIVERSIFIED BANKS 1.3% 2,465 KBC Bankverzekeringsholding 160,806 ----------- TOTAL FINANCIAL 160,806 ----------- TOTAL BELGIUM 160,806 CANADA 8.8% CONSUMER DISCRETIONARY 2.3% GENERAL MERCHANDISE STORES 1.3% 4,200 Canadian Tire Corporation, Limited~ 164,841 HOME IMPROVEMENT RETAIL 1.0% 4,500 RONA Inc.(a)~ 119,972 ----------- TOTAL CONSUMER DISCRETIONARY 284,813 ENERGY 1.1% OIL & GAS EQUIPMENT & SERVICES 1.1% 8,700 Enerflex Systems Ltd.~ 138,933 ----------- TOTAL ENERGY 138,933 INDUSTRIALS 2.0% AIRLINES 0.5% 6,900 WestJet Airlines Ltd.(a)~ 71,696 CONSTRUCTION & FARM MACHINERY 1.5% 40,900 Global Railway Industries Ltd.(a)~ 186,151 ----------- TOTAL INDUSTRIALS 257,847 MATERIALS 3.4% ALUMINUM 1.0% 2,761 Alcan Inc.~ 131,976
34 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- FOREST PRODUCTS 0.8% 10,200 Norbord Inc.~ $ 99,054 PAPER PRODUCTS 0.2% 2,040 Fraser Papers Inc.(a)~ 25,807 STEEL 1.4% 5,148 Dofasco Inc.~ 173,288 ----------- TOTAL MATERIALS 430,125 ----------- TOTAL CANADA 1,111,718 CHINA 2.1% INDUSTRIALS 2.1% HIGHWAYS & RAILTRACKS 1.0% 190,000 Zhejiong Expressway Co., Ltd. 123,880 MARINE 1.1% 172,000 China Shipping Development Company Limited 146,517 ----------- TOTAL INDUSTRIALS 270,397 ----------- TOTAL CHINA 270,397 DENMARK 2.6% FINANCIAL 1.0% DIVERSIFIED BANKS 1.0% 4,585 Danske Bank A/S 120,743 ----------- TOTAL FINANCIAL 120,743 INDUSTRIALS 1.6% TRUCKING 1.6% 3,900 DSV A/S 206,117 ----------- TOTAL INDUSTRIALS 206,117 ----------- TOTAL DENMARK 326,860 FINLAND 3.1% HEALTH CARE 1.0% PHARMACEUTICALS 1.0% 9,200 Orion Oyj~ 125,927 ----------- TOTAL HEALTH CARE 125,927 INDUSTRIALS 1.1% BUILDING PRODUCTS 1.1% 4,150 Uponor Oyj 147,018 ----------- TOTAL INDUSTRIALS 147,018 LEISURE & CONSUMER STAPLES 1.0% AGRICULTURAL PRODUCTS 1.0% 50,000 Raisio Group Plc~ 122,958 ----------- TOTAL LEISURE & CONSUMER STAPLES 122,958 ----------- TOTAL FINLAND 395,903
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- FRANCE 2.1% ENERGY 1.0% INTEGRATED OIL & GAS 1.0% 600 Total SA $ 122,542 ----------- TOTAL ENERGY 122,542 INDUSTRIALS 1.1% BUILDING PRODUCTS 1.1% 2,900 Compagnie de Saint-Gobain 149,177 ----------- TOTAL INDUSTRIALS 149,177 ----------- TOTAL FRANCE 271,719 GERMANY 10.3% CONSUMER DISCRETIONARY 5.1% APPAREL & ACCESSORIES 1.1% 5,576 Hugo Boss AG 148,747 FOOTWEAR 1.9% 900 Puma AG Rudolf Dassler Sport 240,613 SPECIALTY STORES 0.9% 3,747 Douglas Holding AG 111,827 TIRES & RUBBER 1.2% 2,806 Continental AG 152,509 ----------- TOTAL CONSUMER DISCRETIONARY 653,696 HEALTH CARE 2.3% HEALTH CARE DISTRIBUTORS 1.2% 2,300 Celesio AG 156,645 PHARMACEUTICALS 1.1% 2,100 Schering AG 132,025 ----------- TOTAL HEALTH CARE 288,670 LEISURE & CONSUMER STAPLES 0.8% HYPERMARKETS & SUPER CENTERS 0.8% 2,382 Metro AG 106,017 ----------- TOTAL LEISURE & CONSUMER STAPLES 106,017 MATERIALS 2.1% INDUSTRIAL GASES 1.1% 2,391 Linde AG 137,834 STEEL 1.0% 6,500 ThyssenKrupp AG 126,340 ----------- TOTAL MATERIALS 264,174 ----------- TOTAL GERMANY 1,312,557
Schedule of Investments 35 Schedule of Investments (continued) ICON International Equity Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- HONG KONG 1.3% LEISURE & CONSUMER STAPLES 1.3% HOTELS, RESORTS & CRUISE LINES 1.3% 152,000 Shangri-La Asia Limited $ 163,709 ----------- TOTAL LEISURE & CONSUMER STAPLES 163,709 ----------- TOTAL HONG KONG 163,709 JAPAN 26.0% CONSUMER DISCRETIONARY 5.3% AUTOMOBILE MANUFACTURERS 1.2% 4,000 Toyota Motor Corporation 152,350 DEPARTMENT STORES 0.7% 12,000 The Daimaru, Inc. 92,256 HOMEBUILDINGS 0.9% 2,700 DAITO TRUST CONSTRUCTION CO., LTD. 109,369 HOUSEHOLD APPLIANCES 1.1% 10,000 Makita Corporation 141,280 HOUSEWARES & SPECIALTIES 0.6% 18,000 NORITAKE CO., LIMITED 70,213 MOTORCYCLE MANUFACTURERS 0.8% 7,000 Yamaha Motor Co., Ltd. 105,813 ----------- TOTAL CONSUMER DISCRETIONARY 671,281 ENERGY 2.5% OIL & GAS EXPLORATION & PRODUCTION 1.2% 28,000 TEIKOKU OIL CO., LTD. 155,333 OIL & GAS REFINING, MARKETING & TRANSPORTATION 1.3% 26,000 NIPPON OIL CORPORATION 164,055 ----------- TOTAL ENERGY 319,388 FINANCIAL 9.3% CONSUMER FINANCE 3.5% 2,000 ACOM CO., LTD 124,088 3,800 Credit Saison Co., Ltd. 117,202 1,000 ORIX Corporation 102,279 1,500 Promise Co., Ltd. 98,192 ----------- 441,761
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- PROPERTY & CASUALTY INSURANCE 0.7% 10,000 Mitsui Sumitomo Insurance Company, Limited $ 82,649 REGIONAL BANKS 5.1% 24,000 The 77 Bank, Ltd. 134,855 27,000 THE BANK OF FUKUOKA, LTD. 129,011 27,000 The Bank of Yokohama, Ltd. 145,070 29,000 The Joyo Bank, Ltd. 116,834 17,000 THE SHIZUOKA BANK, LTD. 127,995 ----------- 653,765 ----------- TOTAL FINANCIAL 1,178,175 HEALTH CARE 2.0% HEALTH CARE DISTRIBUTORS 1.0% 5,000 SUZUKEN CO., LTD. 129,606 PHARMACEUTICALS 1.0% 4,500 Eisai Co., Ltd. 122,604 ----------- TOTAL HEALTH CARE 252,210 INDUSTRIALS 5.4% INDUSTRIAL MACHINERY 0.9% 9,000 KOMORI CORPORATION 114,564 MARINE 1.4% 27,000 Kawasaki Kisen Kaisha, Ltd. 184,759 TRADING COMPANIES & DISTRIBUTORS 2.0% 13,000 MITSUI & CO., LTD. 108,984 19,000 SUMITOMO CORPORATION 141,546 ----------- 250,530 TRUCKING 1.1% 15,000 Seino Transportation Co., Ltd. 134,415 ----------- TOTAL INDUSTRIALS 684,268 MATERIALS 1.5% METAL & GLASS CONTAINERS 0.7% 6,000 TOYO SEIKAN KAISHA, LTD. 92,664
36 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SPECIALTY CHEMICALS 0.8% 13,000 NIPPON SHOKUBAI CO., LTD. $ 97,076 ----------- TOTAL MATERIALS 189,740 ----------- TOTAL JAPAN 3,295,062 MEXICO 4.3% CONSUMER DISCRETIONARY 1.4% COMPUTER & ELECTRONICS RETAIL 1.4% 26,100 Grupo Elektra S.A. de C.V.~ 175,061 ----------- TOTAL CONSUMER DISCRETIONARY 175,061 INDUSTRIALS 0.9% INDUSTRIAL CONGLOMERATES 0.9% 30,000 Alfa, S.A.~ 113,291 ----------- TOTAL INDUSTRIALS 113,291 LEISURE & CONSUMER STAPLES 1.1% SOFT DRINKS 1.1% 33,000 Fomento Economico Mexicano, S.A. de C.V.~ 145,573 ----------- TOTAL LEISURE & CONSUMER STAPLES 145,573 MATERIALS 0.2% STEEL 0.2% 10,197 Hylsamex, S.A. de C.V.(a) ~ 20,864 ----------- TOTAL MATERIALS 20,864 TELECOMMUNICATION & UTILITIES 0.7% WIRELESS TELECOMMUNICATION SERVICES 0.7% 48,220 America Movil S.A. de C.V.~ 94,008 ----------- TOTAL TELECOMMUNICATION & UTILITIES 94,008 ----------- TOTAL MEXICO 548,797 NETHERLANDS 3.0% ENERGY 1.2% INTEGRATED OIL & GAS 1.2% 2,900 Royal Dutch Petroleum Company 149,583 ----------- TOTAL ENERGY 149,583 MATERIALS 1.8% DIVERSIFIED CHEMICALS 0.9% 3,355 Akzo Nobel N.V. 118,703
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- SPECIALTY CHEMICALS 0.9% 2,140 DSM NV $ 111,834 ----------- TOTAL MATERIALS 230,537 ----------- TOTAL NETHERLANDS 380,120 NORWAY 3.1% ENERGY 1.8% OIL & GAS DRILLING 1.8% 17,485 Smedvig ASA 228,964 ----------- TOTAL ENERGY 228,964 INFORMATION TECHNOLOGY 1.3% COMMUNICATIONS EQUIPMENT 1.3% 73,414 Nera ASA 163,087 ----------- TOTAL INFORMATION TECHNOLOGY 163,087 ----------- TOTAL NORWAY 392,051 SPAIN 4.9% ENERGY 0.9% INTEGRATED OIL & GAS 0.9% 5,230 Repsol YPF, S.A. 114,831 ----------- TOTAL ENERGY 114,831 LEISURE & CONSUMER STAPLES 1.0% RESTAURANTS 1.0% 65,925 TelePizza, S.A. 127,250 ----------- TOTAL LEISURE & CONSUMER STAPLES 127,250 MATERIALS 0.8% STEEL 0.8% 7,200 Acerinox, S.A. 99,786 ----------- TOTAL MATERIALS 99,786 TELECOMMUNICATION & UTILITIES 2.2% ELECTRIC UTILITIES 1.2% 6,700 Union Fenosa, S.A. 152,607 WATER UTILITIES 1.0% 7,000 Sociedad General de Aquas de Barcelona, S.A. 123,373 ----------- TOTAL TELECOMMUNICATION & UTILITIES 275,980 ----------- TOTAL SPAIN 617,847 SWEDEN 3.6% FINANCIAL 2.5% DIVERSIFIED BANKS 1.0% 16,000 Nordea Bank AB 131,079
Schedule of Investments 37 Schedule of Investments (continued) ICON International Equity Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- LIFE & HEALTH INSURANCE 1.5% 47,767 Skandia Forsakrings AB $ 189,687 ----------- TOTAL FINANCIAL 320,766 INDUSTRIALS 1.1% CONSTRUCTION & FARM MACHINERY 1.1% 3,907 Volvo AB 138,195 ----------- TOTAL INDUSTRIALS 138,195 ----------- TOTAL SWEDEN 458,961 SWITZERLAND 3.6% INDUSTRIALS 1.7% INDUSTRIAL MACHINERY 1.7% 880 Georg Fischer AG(a) 219,628 ----------- TOTAL INDUSTRIALS 219,628 INFORMATION TECHNOLOGY 0.9% COMPUTER STORAGE & PERIPHERALS 0.9% 2,500 Logitech International S.A.(a) 121,145 ----------- TOTAL INFORMATION TECHNOLOGY 121,145 MATERIALS 1.0% SPECIALTY CHEMICALS 1.0% 200 Givaudan SA 121,855 ----------- TOTAL MATERIALS 121,855 ----------- TOTAL SWITZERLAND 462,628 UNITED KINGDOM 6.7% CONSUMER DISCRETIONARY 2.5% DEPARTMENT STORES 0.8% 17,000 Marks & Spencer Group plc 105,610
SHARES OR PRINCIPAL AMOUNT VALUE --------------------------------------------- HOMEBUILDING 1.7% 13,000 George Wimpey plc $ 94,829 5,000 The Berkeley Group plc 114,475 ----------- 209,304 ----------- TOTAL CONSUMER DISCRETIONARY 314,914 FINANCIAL 2.8% DIVERSIFIED BANKS 1.8% 11,000 Abbey National plc 111,369 12,293 Barclays PLC 117,707 ----------- 229,076 LIFE & HEALTH INSURANCE 1.0% 71,980 Legal & General Group plc 129,496 ----------- TOTAL FINANCIAL 358,572 TELECOMMUNICATION & UTILITIES 1.4% WATER UTILITIES 1.4% 14,061 AWG plc 174,653 4,668,252 AWG plc -- Redemption Shares 7,941 ----------- 182,594 ----------- TOTAL TELECOMMUNICATION & UTILITIES 182,594 ----------- TOTAL UNITED KINGDOM 856,080 ----------- TOTAL COMMON STOCKS (COST $11,423,804) 12,720,237 LIABILITIES LESS OTHER ASSETS (0.2%) (23,101) ----------- NET ASSETS 100.0% $12,697,136 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security ~ All securities were fair valued (Note 1) as of September 30, 2004 unless notes with a ~. Total value of securities fair valued was $10,429,129. 38 Schedule of Investments Statements of Assets and Liabilities September 30, 2004
ICON ICON ASIA-PACIFIC ICON INTERNATIONAL REGION FUND EUROPE FUND EQUITY FUND ------------ ----------- ------------- ASSETS Investments, at cost $15,086,573 $6,304,121 $11,423,804 ------------ ----------- ------------- Investments, at value 16,775,407 7,725,862 12,720,237 Cash 225,182 98,447 - Receivables: Fund shares sold 63,076 28,437 58,018 Interest 257 10 106 Dividends 56,320 14,324 36,824 Other assets 930 419 681 ------------ ----------- ------------- Total Assets 17,121,172 7,867,499 12,815,866 ------------ ----------- ------------- LIABILITIES Payables: Due to custodian bank - - 34,304 Fund shares redeemed 13,778 3,721 37,110 Advisory fees 14,207 6,394 10,427 Accrued distribution fees - - 753 Fund accounting, custodial and transfer agent fees 17,578 9,147 15,398 Administration fees 661 303 493 Accrued expenses 27,736 21,854 20,245 ------------ ----------- ------------- Total Liabilities 73,960 41,419 118,730 ------------ ----------- ------------- NET ASSETS - ALL SHARE CLASSES $17,047,212 $7,826,080 $12,697,136 ============ =========== ============= NET ASSETS - CLASS I $ - $ - $ 3,211,198 ============ =========== ============= NET ASSETS - CLASS C $ - $ - $ 183,266 ============ =========== ============= NET ASSETS - CLASS Z $ - $ - $ 9,302,672 ============ =========== ============= NET ASSETS CONSIST OF Paid-in capital $25,081,904 $7,238,624 $ 9,936,859 Accumulated undistributed net investment income/(loss) 26,459 (757) - Accumulated undistributed net realized (loss) from investments (9,027,521) (478,847) 2,140,885 Accumulated net realized (loss) from foreign currency translations (722,489) (355,178) (677,440) Unrealized appreciation: on securities and other assets and liabilities denominated in foreign currency 1,688,859 1,422,238 1,296,832 ------------ ----------- ------------- NET ASSETS $17,047,212 $7,826,080 $12,697,136 ============ =========== ============= Total Shares outstanding (unlimited shares authorized, no par value) 2,086,349 650,610 1,198,308 ------------ ----------- ------------- Class I - - 303,357 Class C - - 17,376 Class Z - - 877,575 Net asset value (offering price and redemption price per share) $ 8.17 $ 12.03 - Class I - - $ 10.59 Class C - - $ 10.55 Class Z - - $ 10.60
The accompanying notes are an integral part of the financial statements. Financial Statements 39 Statements of Operations For the year ended September 30, 2004
ICON ICON ASIA-PACIFIC ICON INTERNATIONAL REGION FUND EUROPE FUND EQUITY FUND ------------ ----------- ------------- INVESTMENT INCOME Interest $ 888 $ 435 $ 1,240 Dividends 342,164 155,579 270,932 Foreign taxes withheld (27,626) (21,663) (31,459) ------------ ----------- ------------- Total Investment Income 315,426 134,351 240,713 ------------ ----------- ------------- EXPENSES Advisory fees 150,167 72,495 114,455 Distribution fees: Class I - - 3,141 Class C - - 988 Fund accounting, custodial and transfer agent fees 76,901 44,971 66,730 Administration fees 7,358 3,561 5,617 Audit fees 1,759 847 1,739 Registration fees 23,522 21,030 14,823 Legal fees 634 342 424 Insurance expense 851 710 786 Trustee fees and expenses 1,107 706 946 Shareholder reports 7,401 4,353 6,033 Interest expense - 6 190 Other expenses 15,705 13,040 15,990 ------------ ----------- ------------- Total Expenses 285,405 162,061 231,862 ------------ ----------- ------------- NET INVESTMENT INCOME (LOSS) 30,021 (27,710) 8,851 ------------ ----------- ------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Net realized gain from investment transactions 176,502 1,242,857 3,949,314 Net realized (loss) from foreign currency translations (3,454) (765) (2,877) Change in unrealized net appreciation/(depreciation): on securities 115,520 365,112 (1,454,672) on other assets and liabilities denominated in foreign currency 81 263 (339) ------------ ----------- ------------- Net realized and unrealized gain on investments 288,649 1,607,467 2,491,426 ------------ ----------- ------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $318,670 $1,579,757 $ 2,500,277 ============ =========== =============
The accompanying notes are an integral part of the financial statements. 40 Financial Statements Statements of Changes in Net Assets
ICON ASIA-PACIFIC REGION FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income $ 30,021 $ 45,529 Net realized gain from investment transactions 176,502 745,694 Net realized gain/(loss) from foreign currency translations (3,454) (1,457) Change in unrealized appreciation on securities and foreign currency translations 115,601 868,520 ------------------ ------------------ Net increase in net assets resulting from operations 318,670 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 20,963,976 6,269,616 Reinvested dividends and distributions 39,063 - Shares repurchased (10,319,543) (8,770,250) ------------------ ------------------ Net increase/(decrease) from fund share transactions 10,683,496 (2,500,634) ------------------ ------------------ Total net increase/(decrease) in net assets 10,963,002 (842,348) NET ASSETS Beginning of period 6,084,210 6,926,558 ------------------ ------------------ End of period $ 17,047,212 $ 6,084,210 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 2,524,850 879,754 Reinvested dividends and distributions 4,835 - Shares repurchased (1,241,267) (1,302,144) ------------------ ------------------ Net increase/(decrease) 1,288,418 (422,390) Shares outstanding beginning of period 797,931 1,220,321 ------------------ ------------------ Shares outstanding end of period 2,086,349 797,931 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ 18,808,223 $ 5,375,821 Proceeds from sales of securities 8,416,715 7,711,768 Purchases of long-term U.S. government securities - - Proceeds from sales of long-term U.S. government securities - - ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ 26,459 $ 39,163 ================== ==================
* The tax character of distributions to shareholders from net investment income for the period ending September 30, 2004 is ordinary income. The accompanying notes are an integral part of the financial statements. Financial Statements 41 Statements of Changes in Net Assets (continued)
ICON EUROPE FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment (loss) $ (27,710) $ (19,824) Net realized gain from investment transactions 1,242,857 558,317 Net realized gain/(loss) from foreign currency translations (765) 691 Change in unrealized appreciation on securities and foreign currency translations 365,375 1,568,069 ------------------ ------------------ Net increase in net assets resulting from operations 1,579,757 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 5,686,345 21,160,657 Reinvested dividends and distributions - - Shares repurchased (8,702,471) (18,624,601) ------------------ ------------------ Net increase/(decrease) from fund share transactions (3,016,126) 2,536,056 ------------------ ------------------ Total net increase/(decrease) in net assets (1,436,369) 4,643,309 NET ASSETS Beginning of period 9,262,449 4,619,140 ------------------ ------------------ End of period $ 7,826,080 $ 9,262,449 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 505,470 2,507,561 Reinvested dividends and distributions - - Shares repurchased (796,013) (2,190,470) ------------------ ------------------ Net increase/(decrease) (290,543) 317,091 Shares outstanding beginning of period 941,153 624,062 ------------------ ------------------ Shares outstanding end of period 650,610 941,153 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ 5,496,870 $ 8,271,751 Proceeds from sales of securities 8,124,419 6,013,474 Purchases of long-term U.S. government securities - - Proceeds from sales of long-term U.S. government securities - - ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ (757) $ - ================== ==================
The accompanying notes are an integral part of the financial statements. 42 Financial Statements
ICON INTERNATIONAL EQUITY FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income $ 8,851 $ 75,481 Net realized gain from investment transactions 3,949,314 120,749 Net realized gain/(loss) from foreign currency translations (2,877) 3,777 Change in unrealized appreciation/(depreciation) on securities and foreign currency translations (1,455,011) 2,997,553 ------------------ ------------------ Net increase in net assets resulting from operations 2,500,277 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 3,425,609 - Class C 267,290 - Class Z 3,833,056 10,203,582 Reinvested dividends and distributions Class I - - Class C - - Class Z 57,394 84,466 Shares repurchased Class I (265,090) - Class C (75,175) - Class Z (7,575,790) (11,035,500) ------------------ ------------------ Net (decrease) from fund share transactions (332,706) (747,452) ------------------ ------------------ Total net increase in net assets 2,109,637 2,365,513 NET ASSETS Beginning of period 10,587,499 8,221,986 ------------------ ------------------ End of period $12,697,136 $ 10,587,499 ================== ==================
* The tax character of distributions to shareholders from net investment income for the periods ending September 30, 2004 and September 30, 2003 is ordinary income. The accompanying notes are an integral part of the financial statements. Financial Statements 43 Statements of Changes in Net Assets (continued)
ICON INTERNATIONAL EQUITY FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ TRANSACTIONS IN FUND SHARES Shares sold Class I 328,830 - Class C 24,806 - Class Z 375,261 1,344,165 Reinvested dividends and distributions Class I - - Class C - - Class Z 5,845 13,781 Shares repurchased Class I (25,473) - Class C (7,430) - Class Z (762,885) (1,478,885) ------------------ ------------------ Net (decrease) (61,046) (120,939) Shares outstanding beginning of period 1,259,354 1,380,293 ------------------ ------------------ Shares outstanding end of period 1,198,308 1,259,354 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $12,810,296 $ 8,232,853 Proceeds from sales of securities 13,098,694 8,866,056 Purchases of long-term U.S. government securities - - Proceeds from sales of long-term U.S. government securities - - ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME $ - $ - ================== ==================
The accompanying notes are an integral part of the financial statements. 44 Financial Statements Financial Highlights
ICON ASIA-PACIFIC REGION FUND ---------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2004 2003 2002 2001 2000 ------- ------ ------- ------- ------- Net asset value, beginning of period $ 7.62 $ 5.68 $ 6.81 $ 10.25 $ 10.87 ------- ------ ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.02 0.04 (0.19) 0.07 0.03 Net realized and unrealized gains/(losses) on investments 0.55 1.90 (0.91) (3.51) (0.65) ------- ------ ------- ------- ------- Total from investment operations 0.57 1.94 (1.10) (3.44) (0.62) ------- ------ ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.02) - - - - Distributions from net realized gains - - - - - Return of Capital - - (0.03) - - ------- ------ ------- ------- ------- Total distributions - - (0.03) - - ------- ------ ------- ------- ------- Net asset value, end of period $ 8.17 $ 7.62 $ 5.68 $ 6.81 $ 10.25 ======= ====== ======= ======= ======= Total return 7.51% 34.15% (16.29)% (33.56)% (5.70)% Net assets, end of period (in thousands) $17,047 $6,084 $ 6,927 $19,684 $25,710 Average net assets for the period (in thousands) 14,976 6,683 12,142 18,749 32,629 Ratio of expenses to average net assets 1.91% 1.98% 1.66% 1.70% 1.53% Ratio of net investment income/(loss) to average net assets 0.20% 0.68% (0.23)% 0.75% 0.24% Portfolio turnover rate 58.62% 81.44% 14.43% 55.58% 101.88%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. Financial Highlights 45 Financial Highlights (continued)
ICON EUROPE FUND ------------------------------------------------------ YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 ------ ------ ------ ------ ------ Net asset value, beginning of period $ 9.84 $ 7.40 $ 8.13 $10.14 $10.12 ------ ------ ------ ------ ------ INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss) (0.04) (0.02)(x) (0.04)(x) 0.05(x) 0.02(x) Net realized and unrealized gains/(losses) on investments 2.23 2.46 (0.67) (2.06) - ------ ------ ------ ------ ------ Total from investment operations 2.19 2.44 (0.71) (2.01) 0.02 ------ ------ ------ ------ ------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - (0.02) - - Distributions from net realized gains - - - - - ------ ------ ------ ------ ------ Total distributions - - (0.02) - - ------ ------ ------ ------ ------ Net asset value, end of period $12.03 $ 9.84 $ 7.40 $ 8.13 $10.14 ====== ====== ====== ====== ====== Total return 22.26% 32.97% (8.76)% (19.82)% 0.20% Net assets, end of period (in thousands) $7,826 $9,262 $4,619 $7,397 $6,560 Average net assets for the period (in thousands) 7,230 6,774 5,706 7,935 7,109 Ratio of expenses to average net assets 2.24% 1.87% 2.14% 1.96% 1.80% Ratio of net investment income/(loss) to average net assets (0.38)% (0.29)% (0.42)% 0.55% 0.18% Portfolio turnover rate 78.57% 101.37% 12.26% 84.49% 62.17%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 46 Financial Highlights
ICON INTERNATIONAL EQUITY FUND --------------------------------------------------------------------------------------- CLASS I CLASS C FOR THE PERIOD FOR THE PERIOD FEBRUARY 6, FEBRUARY 19, 2004 2004 (INCEPTION) TO (INCEPTION) TO CLASS Z SEPTEMBER 30, SEPTEMBER 30, YEAR ENDED SEPTEMBER 30, 2004 2004 2004 2004 2003 2002 2001 2000 -------------- -------------- ------- ------- ------- ------- ------- Net asset value, beginning of period $10.96 $11.29 $ 8.41 $ 5.96 $ 7.24 $ 11.79 $ 11.74 -------------- -------------- ------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.04 (0.02) 0.01 0.06 0.04 0.09 0.04 Net realized and unrealized gains/(losses) on investments (0.41) (0.72) 2.24 2.45 (1.25) (3.31) 1.21 -------------- -------------- ------- ------- ------- ------- ------- Total from investment operations (0.37) (0.74) 2.25 2.51 (1.21) (3.22) 1.25 -------------- -------------- ------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - (0.06) - (0.04) - - Distributions from net realized gains - - - (0.06) - (1.33) (1.20) Return of capital - - - - (0.03) - - -------------- -------------- ------- ------- ------- ------- ------- Total distributions - - (0.06) (0.06) (0.07) (1.33) (1.20) -------------- -------------- ------- ------- ------- ------- ------- Net asset value, end of period $10.59 $10.55 $ 10.60 $ 8.41 $ 5.96 $ 7.24 $ 11.79 ============== ============== ======= ======= ======= ======= ======= Total return* (3.38)% (6.55)% 26.79% 42.60% (16.94)% (30.29)% 10.43% Net assets, end of period (in thousands) $3,211 $ 183 $ 9,303 $10,587 $ 8,222 $14,196 $33,315 Average net assets for the period (in thousands) 1,960 162 10,063 8,571 13,347 18,204 29,412 Ratio of expenses to average net assets(a) 2.32% 3.06% 1.98% 2.00% 1.72% 1.65% 1.52% Ratio of net investment income/(loss) to average net assets(a) 0.44% (0.16)% 0.03% 0.88% 0.48% 0.97% 0.30% Portfolio turnover rate 117.74%(b) 117.74%(b) 117.74%(b) 98.91% 91.99% 41.67% 34.24%
(x) Calculated using the average share method. * The total return calculation is for the period indicated. (a) Annualized for periods less than one year. (b) Portfolio turnover is calculated at the Fund level and therefore represents the year ended September 30, 2004. The accompanying notes are an integral part of the financial statements. Financial Highlights 47 Notes to Financial Statements September 30, 2004 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Asia-Pacific Region Fund ("Asia-Pacific Region Fund"), ICON Europe Fund ("Europe Fund") (formerly ICON South Europe Fund) and ICON International Equity Fund ("International Equity Fund") (formerly ICON North Europe 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 Class I, Class C and Class Z. All classes have equal rights as to earnings, assets and voting privileges except that each Class may bear different distribution fees and registration costs and each Class has exclusive voting rights with respect to its distribution plan. There are 15 other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. Each Fund is authorized to issue an unlimited number of no par shares. The 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 and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar-denominated transactions as a result of, among other factors, the possibility of lower government supervision and regulation of foreign securities markets and the possibility of political or economic instability. 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 48 Notes to Financial Statements 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. Foreign securities traded in countries outside of the Western Hemisphere are fair valued daily by utilizing the quotations of an independent pricing service, unless the Funds' adviser determines that use of another valuation methodology is appropriate. The pricing service uses statistical analyses and quantitative models to adjust local market prices using factors such as subsequent movement and changes in the prices of indexes, securities and exchange rates in other markets in determining fair value as of the time a Fund calculates its net asset value. 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 Notes to Financial Statements 49 Notes to Financial Statements (continued) 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 annual period ended September 30, 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. 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. No forward foreign currency contracts were entered into during the year ended September 30, 2004. 50 Notes to Financial Statements OPTIONS TRANSACTIONS. Each Fund may write put and call options only if it, among other things, (i) owns an offsetting position in the underlying security or (ii) maintains cash or other liquid assets in an amount equal to or greater than its obligation under the option. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. If a written put option is exercised, the cost of the security acquired is decreased by the premium originally received. As a writer of an option, a Fund has no control over whether the underlying securities are subsequently sold (call) or purchased (put) and, as a result, bears the market risk of an unfavorable change in the price of the security underlying the written option. Each Fund may also purchase put and call options. When a Fund purchases a 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. No option transactions were entered into during the year ended September 30, 2004. 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 Notes to Financial Statements 51 Notes to Financial Statements (continued) 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. In calculating the net asset value of the shares in the various classes of the International Equity Fund, investment income, realized and unrealized gains and losses and expenses other than class specific expenses are allocated daily to each class of shares based upon the proportion of net assets of each class at the beginning of each day. 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. 52 Notes to Financial Statements 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. The Class I shareholders pay an annual 12b-1 and service fee of 0.25% of average daily net assets. The Class C shareholders pay an annual 12b-1 and service fee of 1.00% of average daily net assets. For the year ended September 30, 2004 the total amounts paid or payable to IDI pursuant to the 12b-1 Plan were $988 on Class C shares and $3,141 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. Notes to Financial Statements 53 Notes to Financial Statements (continued) 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, 2004 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.
UNDISTRIBUTED ACCUMULATED UNDISTRIBUTED LONG-TERM CAPITAL CAPITAL LOSSES ORDINARY INCOME GAIN LOSSES --------------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $9,631,893 $26,459 0 0 ICON Europe Fund 832,262 0 0 0 ICON International Equity Fund 0 $66,857 $1,396,592 0
During the year ended September 30, 2004 the ICON Asia-Pacific Region Fund utilized capital loss carryforwards of $137,275, the ICON Europe Fund utilized capital loss carryforwards of $1,244,634 and the ICON International Equity Fund utilized capital loss carryforwards of $2,433,905. The aggregate composition by Fund of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2004 are as follows:
FEDERAL UNREALIZED UNREALIZED TAX COST APPRECIATION (DEPRECIATION) NET APPRECIATION --------------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $15,204,702 $2,296,655 $(725,950) $1,570,705 ICON Europe Fund 6,304,121 1,597,892 (176,151) 1,421,741 ICON International Equity Fund 11,423,804 1,704,043 (407,610) 1,296,433
4. INDEMNIFICATIONS In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against each Fund that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. 54 Notes to Financial Statements Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of the ICON Foreign Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Asia-Pacific Region Fund, ICON Europe Fund (formerly known as "ICON South Europe Region Fund") and ICON International Equity Fund (formerly known as "ICON North Europe Region Fund") (three of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2004, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods indicated, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP /s/ PricewaterhouseCoopers LLP Denver, Colorado November 17, 2004 Report of Accounting Firm 55 Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 18 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, addresses and principal occupations are set forth below. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 53, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and Chief Investment Officer (1991 to present) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 54. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 57. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager, Trinity Investment Management Corporation (1989 to 2001). GREGORY KELLAM SCOTT, 56. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was previously Senior Vice President -- Law, General Counsel and Secretary, GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Constituency for Africa (1997 to present). 56 Trustees and Officers R. MICHAEL SENTEL, 56. Mr. Sentel has been a Trustee of the Funds since their inception. Mr. Sentel is a Senior Attorney with the U.S. Department of Education (1996 to present). Mr. Sentel also provides legal representation as a sole practitioner with an emphasis on corporate and transactional law. He served as general counsel to numerous public companies and served on the board of directors of one of these clients. Mr. Sentel began his legal career with the U.S. Securities and Exchange Commission's Division of Enforcement and became a branch chief. Later he served as the section chief for the Professional Liability Section of the Federal Deposit Insurance Corp. with responsibility for the Rocky Mountain Region (1991 to 1994). JONATHAN F. ZESCHIN, 51. Mr. Zeschin has been a Trustee of the Funds since November 2002. Mr. Zeschin is President and Founder of ESSENTIAL Advisers, Inc., a wealth management and investment advisory firm (2000 to present) and was Managing Partner of JZ Partners LLC, a business consulting firm for investment management companies (1998 to 2002). Mr. Zeschin was previously President of Founders Asset Management LLC, an investment management company (1995 to 1998) and Executive Vice President, INVESCO Funds Group, an investment advisory company (1992 to 1995). Mr. Zeschin was previously a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to 2004); and was previously a Director of the Wasatch Funds (2002 to 2004). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 53. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and Chief Investment Officer (1991 to present). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. ERIK L. JONSON, 55. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception. Mr. Jonson is also Chief Financial Officer (1996 to present) and Executive Vice President (2004 to present) and was previously Vice President (1998 to 2004) of ICON Advisers; Chief Financial Officer, Secretary and Director (1996 to present) of IM&R; Executive Vice President (2004 to present) and Treasurer (2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) and Vice President, (2002 to 2004) of IDI; and Executive Vice President and Treasurer of ICON Insurance Agency, Inc. (2004 to present). ANDRA C. OZOLS, 43. Ms. Ozols has been a Vice President and Secretary of the Funds since March 2002. She previously served in that capacity in 1998. Trustees and Officers 57 Board of Trustees and Fund Officers (continued) (unaudited) Ms. Ozols is also Executive Vice President (2004 to present), General Counsel and Secretary (2002 to present) and was previously Vice President (2002 to 2004) of ICON Advisers; Executive Vice President (2004 to present) and Secretary (2002 to present) and was previously Vice President (2002 to 2004) of IDI; Director (June 2003 to present) of IM&R; and Executive Vice President and Secretary of ICON Insurance Agency, Inc. (2004 to present). Ms. Ozols was previously Vice President (1999 to 2002) and Assistant General Counsel (October 1998 to February 2002) of Founders Asset Management LLC; and was previously a Branch Chief (1993 to 1995) and Enforcement Attorney (1990 to 1995 and 1996 to 1998) with the U.S. Securities and Exchange Commission. The Trustees and Officers of the Funds may be contacted at 5299 DTC Boulevard, Suite 1200, Greenwood Village, Colorado 80111. Additional information about the Funds' Trustees and Officers is available in the Funds' Statement of Additional Information, which can be obtained free of charge by calling 1-800-764-0442 or by visiting www.iconadvisers.com. 58 Trustees and Officers Other Information (unaudited) QUALIFYING DIVIDEND INCOME Of the amount distributed in the fiscal year ended September 30, 2004 for the ICON Asia-Pacific Region Fund, 0.28% represents qualified dividend income. Of the amount distributed in the fiscal year ended September 30, 2004 for the ICON International Equity Fund, 100% represents qualified dividend income. Other Information 59 PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month-end. Beginning March 1, 2005, each ICON Fund will file a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q will be available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A description of the policies and procedures the ICON Funds use to vote proxies is available at www.iconadvisers.com; without charge upon request by calling 1-800-764-0442; or on the SEC's website at www.sec.gov. Information about how the ICON Funds voted proxies related to each Fund's portfolio securities during the 12-month period ended June 30, 2004 is available at www.iconadvisers.com or on the SEC's website at www.sec.gov. This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor. 60 [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, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
[ICON FUNDS LOGO] 1-800-764-0442 www.iconadvisers.com ICRPANNUINTL I-141-FOR 2004 Annual Report Investment Update ICON SECTOR FUNDS ICON CONSUMER DISCRETIONARY FUND ICON ENERGY FUND ICON FINANCIAL FUND ICON HEALTHCARE FUND ICON INDUSTRIALS FUND ICON INFORMATION TECHNOLOGY FUND ICON LEISURE AND CONSUMER STAPLES FUND ICON MATERIALS FUND ICON TELECOMMUNICATION & UTILITIES FUND ICON SHORT-TERM FIXED INCOME FUND [ICON FUNDS LOGO] Table of Contents ABOUT THIS REPORT (UNAUDITED) 2 MESSAGE FROM ICON FUNDS (UNAUDITED) 4 MANAGEMENT OVERVIEWS (UNAUDITED) AND SCHEDULES OF INVESTMENTS ICON Consumer Discretionary Fund 7 ICON Energy Fund 15 ICON Financial Fund 24 ICON Healthcare Fund 32 ICON Industrials Fund 41 ICON Information Technology Fund 50 ICON Leisure and Consumer Staples Fund 59 ICON Materials Fund 67 ICON Telecommunication & Utilities Fund 75 ICON Short-Term Fixed Income Fund 83 FINANCIAL STATEMENTS 88 FINANCIAL HIGHLIGHTS 102 NOTES TO FINANCIAL STATEMENTS 112 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 120 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 121 OTHER INFORMATION (UNAUDITED) 124
[RECYCLE LOGO] About This Report HISTORICAL RETURNS All total returns mentioned in this report account for the change in a Fund's per-share price and the reinvestment of any dividends, capital gain distributions, and tax return of capital. If your account is set up to receive Fund distributions in cash rather than to reinvest them, your actual return may differ from these figures. The Funds' performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconadvisers.com for performance results current to the most recent month-end. PORTFOLIO DATA This report reflects ICON's views, opinions, and portfolio holdings as of September 30, 2004, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security, or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's percentage holdings as of September 30, 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 About This Report COMPARATIVE INDEXES The comparative indexes discussed in this report are meant to provide a basis for judging the Funds' performance against specific securities indexes. Each index shown accounts for both change in security price and reinvestment of dividends and distributions (except as noted), but does not reflect the costs of managing a mutual fund. The Funds' portfolios may significantly differ in holdings and composition from the indexes. Individuals cannot invest directly in an index. - The unmanaged Standard & Poor's (S&P) Super Composite 1500 Index is a broad-based capitalization-weighted index comprising 1,500 stocks of large- cap, mid-cap, and small-cap U.S. companies. - The capitalization-weighted S&P 1500 Sector and Industry Indexes are based on specific classifications determined by S&P. - The unmanaged NASDAQ Composite ("NASDAQ") Index is a broad-based capitalization-weighted index of all NASDAQ National Market and Small-Cap stocks. - 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. About This Report 3 Dear ICON Shareholder: -------------------------------------------------------------------------------- We are riding through this period with the expectation that after the breakout from the current scenario, stocks will resume their path toward fair value. -------------------------------------------------------------------------------- I'd like to welcome the many shareholders who have joined the ICON sector funds since our last report. As you may know, ICON believes the stock market experiences themes, in which certain industries and sectors lead the market for periods of time. At ICON, we perform value-based, bottom-up industry rotation to identify undervalued industries within each sector. We apply this system to all the ICON sector funds as well as the ICON diversified equity funds, including the ICON Core Equity, Covered Call, Equity Income, International Equity and Long/Short Funds. ICON's disciplined investment methodology focuses on the identification of changing industry themes that our system indicates are favorably positioned to outperform the broader market. During the early months of the Funds' fiscal year, economically sensitive sectors drove nearly all of the 14.58% annual gain in the broad benchmark S&P 1500 Index through September 30, 2004. Later in the fiscal year, despite a number of peaks and valleys, the market traded in a sideways manner, offering few signs of a clear direction. Within this trading range, economically sensitive consumer and industrial industries have led during market advances, yet in complete and extreme theme reversals they suffered the most amid subsequent declines. With such notable exceptions as the steel and oil & gas refining & marketing & transportation industries, the behavior of the U.S. stock market over the past 12 months has been themeless. EXTRANEOUS EVENTS HAVE DISTRACTED INVESTORS While the themeless market has not necessarily made for a negative environment, it has made for a difficult one. Considering the backdrop of mostly favorable underlying fundamentals, from inflation to interest rates to corporate earnings, the pause has proven increasingly frustrating for a number of investors, pushing many to the sidelines. Although we view this lull as an interruption to the rally that was underway last year, it appears to us that investors have become distracted by extraneous events, such as rising oil prices, higher interest rates, terrorism, and the presidential election. Despite our longstanding belief that stock prices are driven by fundamentals and value, it is not unusual for these and other distractions to create a temporary disconnect for investors. We would never presume to cast doubt on any investor for experiencing these concerns. On an emotional level, they are very real and fueled on a daily basis by the media. However, due to their unpredictability, these fears play no role in ICON's valuation system. Moreover, we currently see little or no evidence to support the overstated influence they are currently exerting. 4 Message from ICON Funds We continue to monitor industry leadership rather that engage in the futile exercise of timing market bottoms. [CRAIG T. CALLAHAN PHOTO] Craig T. Callahan Chairman and Chief Investment Officer FAVORABLE UNDERLYING FUNDAMENTALS Starting with the overall economy, scores of investors seem to view the current setting of moderate economic growth as inadequate, desiring a return to the higher growth, yet unsustainable environment of the late 1990s. Nevertheless, the Federal Reserve continues to pursue this rational scenario, balancing sustainable moderate growth with low inflation. Even though these efforts have been largely successful, there continues to be considerable reluctance on the part of many investors to embrace these new, and we believe more favorable, conditions. With respect to rising oil prices, we have detected an unusually strong negative correlation this year relative to stock prices, meaning that when the price of oil has increased, stocks, as measured by the S&P 500 Index, have declined. While this makes intuitive sense, historically we have found just the opposite: a fairly low if not slightly positive correlation between oil prices and stock prices. Whereas this recent negative correlation has been extreme, we expect it will be brief. At the same time, higher oil prices did not lead to higher inflation, as many had anticipated. One need only look at the Consumer Price Index, which experienced moves of -0.1% in July and +0.1% in August. Long-term interest rates, as measured by the 10-year Treasury Note yield, also declined during the summer months, puzzling skeptics who expected that rates would trend higher. However, as fixed-income investors extended maturities in conjunction with the Federal Reserve's short-term rate hikes, longer-term yields fell amid signals that the tightening would keep inflation in check. As for the presidential election, that's a guessing game we routinely avoid, as it is inconsistent with our valuation-driven system. New legislation typically encounters many levels of compromise, and it would be years before its impact on corporate earnings could be determined. Pharmaceutical stocks, for example, have been cited as an area that could face legislative and regulatory hurdles based on election results. However, we believe these companies' prospects are more dependent on the aging population and the demand for new treatments than they are on election outcomes. Message from ICON Funds 5 RALLIES SELDOM OFFER INVITATIONS At the end of the period, our analysis indicated that the general U.S. domestic market was undervalued by approximately 22%. For that reason, we are riding through this period with the expectation that after the breakout from the current scenario, stocks will resume their path toward fair value. Last year reminded us that rallies seldom offer invitations, and often materialize without a significant triggering event. Still, we continue to monitor industry leadership and theme identification closely, rather than engage in the futile exercise of attempting to time market bottoms. In closing, I wish to again thank you for the opportunity to help guide you through these challenging markets. For ongoing market updates, as well as up-to-date Fund, performance, and account information, we invite you to visit our new website at www.iconadvisers.com. Yours truly, /s/ Craig T. Callahan, DBA Craig T. Callahan, DBA Chairman of the Board of Trustees and Chief Investment Officer of the Adviser The unmanaged S&P 500 Index is a market value-weighted index of large-cap common stocks considered representative of the broad market. The Consumer Price Index is the primary indicator of U.S. inflation and is used to make cost-of-living adjustments to billions of dollars in benefit payments. 6 Message from ICON Funds Management Overview ICON Consumer Discretionary Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 99.6% Top 10 Equity Holdings 28.4% Number of Stocks 56 Short-Term Investments 0.8% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Quiksilver, Inc. 3.5% Winnebago Industries, Inc. 3.4% Eagle Materials Inc. 3.2% eBay Inc. 3.0% Polo Ralph Lauren Corporation 2.9% Best Buy Co., Inc. 2.7% The Home Depot, Inc. 2.7% Fossil, Inc. 2.4% PETsMART, Inc. 2.3% Lowe's Companies, Inc. 2.3% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Consumer Discretionary Fund gained 7.72% for the fiscal year ended September 30, 2004, trailing the 15.11% return of its sector-specific benchmark, the S&P 1500 Consumer Discretionary Index, as well as the 14.58% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2004 are listed on page 11. The highly cyclical nature of the sector proved advantageous during an early-period rally, yet ultimately worked against the Fund when a fear- driven, summertime sell-off diluted returns. The Fund's tilt toward underpriced small-and mid-cap stocks also detracted from relative performance, as large-caps were the primary positive contributor to our market-cap weighted sector-specific benchmark. While the Fund held positions in many of these large-cap names, its exposure to each was below the benchmark weight. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Although ICON's system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. More than two-thirds of the Fund's holdings possessed below-average P/E valuations, accounting for the majority of the Fund's positive performance. This is corroborated by independent data detailing the outperformance of S&P/Barra Value Indexes over their S&P/Barra Growth counterparts for the one-year period ended September 30, 2004. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. A "Jekyll & Hyde" market dominated the investment environment during the period, as an extended first-half rally dissipated amid extreme fear and uncertainty. Within this volatile trading range, rising oil prices, geopolitical tensions, economic setbacks, and election-year rhetoric all weighed heavily on investor sentiment. However, as these concerns intensified, the swings grew more pronounced, quickly extinguishing any move toward a sustained cyclical rally. Management Overview 7 Management Overview (continued) ICON Consumer Discretionary Fund In this setting, upturns were typically led by cyclical sectors, while defensive issues prevailed during the downturns, resulting in a slight negative bias that held back second-half returns. Nonetheless, our valuation and relative strength readings continued to support a recovery-based theme, driven by sustainable economic growth, low interest rates and nominal inflation. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. Primary industry detractors during the period included auto parts & equipment and apparel retail. Higher steel prices and cost of goods sold hurt the auto parts group, while rising gas prices impaired apparel retailers' distribution of goods. Although home improvement retail contributed to positive absolute returns, it was underweight compared to our sector-specific benchmark and detracted from relative performance. In contrast, leading industry contributors included specialty stores, the Fund's largest overall weighting, as well as homebuilding, which continued to benefit from a resilient housing market and historically low interest rates. Other top performers during the period included apparel, accessories & luxury goods, auto manufacturers, and consumer electronics. It should be pointed out that the S&P 1500 Consumer Discretionary Index comprises certain industries that are not represented in the Fund's investment universe. These industries are instead considered for investment within the ICON Leisure and Consumer Staples Fund since they better reflect that fund's more defensive nature. Although a number of these industries outperformed the broader market during the period, they were not represented in the Fund. On the company level, principal detractors included structural component maker Tower Automotive, Inc., which came under pressure as bloated car inventories and lackluster demand limited production schedules. Apparel retailer Talbots Inc. also faltered when weakening consumer spending led to an inventory buildup. Likewise, video game retailer Electronics Boutique Holdings Corp. suffered as holiday sales expectations led to overheated valuations. All three stocks were sold during the period as their relative strength declined. Among the Fund's leading contributors, recreational vehicle manufacturer Winnebago Industries Inc. saw significant increases in demand and order backlog. Fossil Inc., a marketer of moderately priced watches, also advanced as overseas expansion boosted earnings. Elsewhere, ongoing gains in its automotive OEM business, particularly in multimedia systems, drove expanded earnings for audio system supplier Harman International Industries, Inc. 8 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE CONSUMER DISCRETIONARY SECTOR? A. A late-period cyclical rally revealed broad participation as investors once again acknowledged the sound economic underpinnings that seemingly prevail. With stocks currently trading at a 22% discount to our estimate of intrinsic worth, our system indicates that clear value exists in both the sector and the market. Assuming a dissipation of investor concerns, we maintain that this rally is sustainable and could very well endure over the next six to 12 months. In such a scenario, we would anticipate that cyclical sectors such as Consumer Discretionary could outperform the broader market. PERFORMANCE HIGHLIGHTS September 30, 2004 - The Fund's tilt toward underpriced small- and mid-cap stocks detracted from relative returns as high-performance large-caps dominated the sector-specific benchmark. - Industry laggards included auto parts & equipment, apparel retail and home improvement retail, which contributed positive returns, yet still detracted from relative performance. - Among the Fund's poorest-performing stocks were Tower Automotive, Inc., Talbots Inc. and Electronics Boutique Holdings Corp. - Specialty stores, the Fund's largest industry weighting, drove positive performance, as did homebuilding, consumer electronics, and apparel, accessories & luxury goods. - Stocks that boosted Fund performance included Winnebago Industries Inc., Fossil Inc. and Harman International Industries, Inc. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. Management Overview 9 Management Overview (continued) ICON Consumer Discretionary Fund TOP 10 INDUSTRIES as of September 30, 2004 Specialty Stores 14.3% Apparel, Accessories & Luxury Goods 13.1% Home Improvement Retail 9.0% Homebuilding 8.8% Apparel Retail 8.5% Automobile Manufacturers 7.1% General Merchandise Stores 5.2% Tire & Rubber 4.8% Computer & Electronics Retail 4.6% Department Stores 3.8%
Percentages are based upon net assets. 10 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 7/9/97 --------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund 7.72% 5.60% 3.70% --------------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 15.11% 0.14% 6.46% --------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 5.02% ---------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The performance of the S&P 1500 Consumer Discretionary Index includes the reinvestment of dividends and capital gain distributions beginning on January 1, 2002. Additional information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON CONSUMER S&P 1500 CONSUMER DISCRETIONARY FUND DISCRETIONARY INDEX S&P 1500 INDEX ------------------ ------------------- -------------- 7/9/97 10000.00 10000.00 10000.00 9/30/97 10970.00 10892.00 10597.00 9/30/98 7870.00 11778.30 11262.20 9/30/99 9899.00 15612.20 14338.50 9/30/00 9449.00 15340.70 16547.70 9/30/01 9172.00 12045.00 12289.70 9/30/02 10360.00 11064.80 9976.42 9/30/03 12069.00 16661.20 12439.30 9/30/04 13001.00 15725.00 14251.50
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 7/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 11 Management Overview (continued) ICON Consumer Discretionary Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Consumer Discretionary Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 917.00 $6.33 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.40 $6.66 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.32% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 12 Management Overview Schedule of Investments ICON Consumer Discretionary Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 99.6% UNITED STATES OF AMERICA 98.2% CONSUMER DISCRETIONARY 92.9% APPAREL, ACCESSORIES & LUXURY GOODS 13.1% 87,500 DHB Industries, Inc.(a) $ 1,242,500 120,050 Fossil, Inc.(a) 3,714,347 76,400 Kenneth Cole Productions, Inc. 2,149,896 121,400 Polo Ralph Lauren Corporation 4,415,318 208,600 Quiksilver, Inc.(a) 5,302,612 62,600 V. F. Corporation 3,095,570 ------------ 19,920,243 APPAREL RETAIL 8.5% 89,600 Abercrombie & Fitch Co. 2,822,400 99,750 Aeropostale, Inc.(a) 2,613,450 73,400 Chico's FAS, Inc.(a) 2,510,280 98,000 Jos. A. Bank Clothiers, Inc.(a) 2,712,640 107,600 Pacific Sunwear of California, Inc.(a) 2,264,980 ------------ 12,923,750 AUTOMOBILE MANUFACTURERS 5.7% 50,800 Monaco Coach Corporation 1,099,820 87,200 Thor Industries, Inc. 2,308,184 150,100 Winnebago Industries, Inc. 5,199,464 ------------ 8,607,468 CATALOG RETAIL 1.3% 112,600 Insight Enterprises, Inc.(a) 1,896,184 COMPUTER & ELECTRONICS RETAIL 4.6% 76,000 Best Buy Co., Inc. 4,122,240 153,400 GameStop Corporation(a) 2,839,434 ------------ 6,961,674 CONSUMER ELECTRONICS 1.7% 23,600 Harman International Industries, Incorporated 2,542,900
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- DEPARTMENT STORES 3.8% 62,800 Federated Department Stores, Inc. $ 2,853,004 61,900 Kohl's Corporation(a) 2,982,961 ------------ 5,835,965 FOOTWEAR 2.5% 26,000 NIKE, Inc. 2,048,800 31,400 The Timberland Company(a) 1,783,520 ------------ 3,832,320 GENERAL MERCHANDISE STORES 5.2% 212,500 Big Lots, Inc.(a) 2,598,875 97,800 Dollar Tree Stores, Inc.(a) 2,635,710 57,500 Target Corporation 2,601,875 ------------ 7,836,460 HOMEBUILDING 8.8% 70,000 D.R. Horton, Inc. 2,317,700 58,600 Hovnanian Enterprises, Inc.(a) 2,349,860 31,100 Meritage Homes Corporation(a) 2,444,460 49,800 Pulte Homes, Inc. 3,056,226 69,400 Toll Brothers, Inc.(a) 3,215,302 ------------ 13,383,548 HOME FURNISHINGS 2.0% 38,100 Mohawk Industries, Inc.(a) 3,024,759 HOME IMPROVEMENT RETAIL 9.0% 107,500 Building Materials Holding Corporation 2,958,400 103,400 The Home Depot, Inc. 4,053,280 65,000 Lowe's Companies, Inc. 3,532,750 71,900 The Sherwin- Williams Company 3,160,724 ------------ 13,705,154 HOUSEHOLD APPLIANCES 1.0% 42,100 Craftmade International, Inc. 831,054 24,300 Helen of Troy Limited(a) 661,446 ------------ 1,492,500
Schedule of Investments 13 Schedule of Investments (continued) ICON Consumer Discretionary Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- HOUSEWARES & SPECIALTIES 1.7% 30,400 Blyth, Inc. $ 939,360 37,000 Tupperware Corporation 628,260 36,500 The Yankee Candle Company, Inc.(a) 1,057,040 ------------ 2,624,660 INTERNET RETAIL 3.0% 49,400 eBay Inc.(a) 4,541,836 MOTORCYCLE MANUFACTURERS 1.9% 49,200 Harley-Davidson, Inc. 2,924,448 SPECIALTY STORES 14.3% 95,400 Barnes & Noble, Inc.(a) 3,529,800 56,300 Cost Plus, Inc.(a) 1,991,894 75,400 Dick's Sporting Goods, Inc.(a) 2,685,748 32,600 Michaels Stores, Inc. 1,930,246 85,100 O'Reilly Automotive, Inc.(a) 3,258,479 125,100 PETsMART, Inc. 3,551,589 66,300 Staples, Inc. 1,977,066 99,200 Zale Corporation(a) 2,787,520 ------------ 21,712,342 TIRE & RUBBER 4.8% 68,200 Bandag, Incorporated 2,987,160 76,100 Cooper Tire & Rubber Company 1,534,937 263,800 The Goodyear Tire & Rubber Company(a) 2,833,212 ------------ 7,355,309 ------------ TOTAL CONSUMER DISCRETIONARY 141,121,520
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- INFORMATION TECHNOLOGY 2.1% HOME ENTERTAINMENT SOFTWARE 2.1% 97,600 Take-Two Interactive Software, Inc.(a) $ 3,206,160 ------------ TOTAL INFORMATION TECHNOLOGY 3,206,160 MATERIALS 3.2% CONSTRUCTION MATERIALS 3.2% 67,511 Eagle Materials Inc. 4,813,534 ------------ TOTAL MATERIALS 4,813,534 ------------ TOTAL UNITED STATES OF AMERICA 149,141,214 GERMANY 1.4% CONSUMER DISCRETIONARY 1.4% AUTOMOBILE MANUFACTURERS 1.4% 52,700 DaimlerChrysler AG 2,182,834 ------------ TOTAL CONSUMER DISCRETIONARY 2,182,834 ------------ TOTAL GERMANY 2,182,834 ------------ TOTAL COMMON STOCKS (COST $129,511,727) 151,324,048 SHORT-TERM INVESTMENTS 0.8% VARIABLE RATE DEMAND NOTE 0.8% $1,181,308 American Family Demand Note, 1.4525%# 1,181,308 ------------ TOTAL VARIABLE RATE DEMAND NOTE 1,181,308 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,181,308) 1,181,308 ------------ TOTAL INVESTMENTS 100.4% (COST $130,693,035) 152,505,356 ------------ LIABILITIES LESS OTHER ASSETS (0.4%) (583,612) ------------ NET ASSETS 100.0% $151,921,744 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. 14 Schedule of Investments Management Overview ICON Energy Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 95.7% Top 10 Equity Holdings 31.6% Number of Stocks 62 Short-Term Investments 7.2% Percentages are based upon net assets TOP 10 EQUITY HOLDINGS September 30, 2004 Ultra Petroleum Corp. 4.8% Cal Dive International, Inc. 3.7% Teekay Shipping Corporation 3.4% Petroleo Brasileiro S.A. 3.2% National-Oilwell, Inc. 3.1% Patina Oil & Gas Corporation 3.0% Headwaters Incorporated 2.8% Maverick Tube Corporation 2.6% Suncor Energy, Inc. 2.5% Hydril 2.5% Percentages are based upon net assets -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Energy Fund gained 59.20% for the fiscal year ended September 30, 2004, comparing favorably to the 46.24% return for its sector-specific benchmark, the S&P 1500 Energy Index, as well as the 14.58% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2004 are listed on page 19. Independent analysis worked to the Fund's advantage during the period, as valuation and relative strength readings led us to overweight certain industries relative to the S&P 1500 Energy Index. While the overall group spent much of the calendar year trading close to our fair value estimates, the Fund was underweight in industries whose relative strength lagged in comparison. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Although the ICON system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. While this bias was similar to that of the Fund's sector-specific benchmark, the Fund's higher P/E stocks also contributed positively to performance as part of a broad sector advance. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this ratio as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Energy stock prices reflected the sharp spike in crude oil prices, which climbed by approximately 70% as measured by the Bloomberg West Texas Intermediate Cushing Spot Index for the 12-month period ending September 30, 2004. The broad scope of this advance was further evidenced by the historically high correlation between the price of oil and returns for the S&P 500 Energy Index in calendar year 2004. From a macro perspective, a number of reasons have been cited for the phenomenal rise in oil prices. Supply concerns and output uncertainty appear to have been driving forces, as friction between the Russian government and top oil producer Yukos (not a Fund holding), tensions in Nigeria, Iraqi insurgency, and hurricane-related production delays in the Gulf of Mexico all fueled fears. Management Overview 15 Management Overview (continued) ICON Energy Fund Through it all, industry leadership remained consistent, with the oil & gas refining & marketing & transportation, oil & gas equipment & services and oil & gas exploration & production industries turning in the strongest showings. In fact, out of the 132 industries that comprise the broad-based S&P 1500 Index, oil & gas refining & marketing & transportation and oil & gas exploration & production were among the period's top 10 leaders. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. Based on valuation and relative strength, the Fund profited from overweight positions in leading industries such as oil & gas refining, marketing & transportation, oil & gas equipment & services and oil & gas exploration & production. Although the integrated oil & gas industry and the oil & gas drilling industry produced solid returns, the Fund's low exposure compared to the benchmark reaped rewards as other industries outperformed. Smaller capitalization stocks were among the Fund's top performers during the period. For example, Ultra Petroleum Corp. moved higher when analysts upgraded this emerging exploration and production firm. Also advancing were Patina Oil & Gas Corp. and Teekay Shipping Corp. Patina saw ongoing production growth and higher realized prices boost quarterly results, while Teekay continued to benefit from higher shipping rates. Many energy stocks performed strongly during the period, but several holdings did detract slightly from returns, including oil services giant Schlumberger Ltd., as investors registered disappointment that its first-quarter earnings report was in line with expectations. We sold the stock as its relative strength weakened. Elsewhere, marine support services provider GulfMark Offshore, Inc. fell when it reported net quarterly losses stemming from difficulties in its North Sea operations. The company's valuation and relative strength continued to be strong, along with other stocks in this group, and we continued to own it at period-end. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE ENERGY SECTOR? A. Although our analysis currently views the sector as fairly valued, certain industries and stocks remain attractive. The best bargains appear to be in oil & gas refining & marketing & transportation and as a result we have increased the Fund's exposure in these areas. At the same time, oil & gas drilling appears a bit expensive and will be watched closely. Given the rise in stock prices during the fiscal year, we are cautiously optimistic going forward, assuming valuations do not overheat. 16 Management Overview [J.C. WALLER III, PORTFOLIO MANAGER PHOTO] J.C. Waller, III Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2004 - Smaller capitalization stocks were among the Fund's top performers during the period. - Ultra Petroleum Corp., Patina Oil & Gas Corp. and Teekay Shipping Corp. all made significant contributions to overall Fund performance. - Overweight positions in the oil & gas refining, marketing & transportation, oil & gas equipment & services and oil & gas exploration & production industries performed favorably relative to the Fund's sector-specific benchmark. - Stocks that detracted from performance during the period included Schlumberger Ltd. and GulfMark Offshore, Inc. The Bloomberg West Texas Intermediate Cushing Crude Oil Spot Price Index is an index which represents the price of crude oil per barrel in U.S. dollars. Management Overview 17 Management Overview (continued) ICON Energy Fund TOP INDUSTRIES September 30, 2004 Oil & Gas Exploration & Production 25.8% Oil & Gas Equipment & Services 24.1% Oil & Gas Refining, Marketing & Transportation 18.1% Integrated Oil & Gas 16.3% Oil & Gas Drilling 5.1% Commodity Chemicals 2.8% Construction & Engineering 1.8% Industrial Machinery 1.7%
Percentages are based upon net assets. 18 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 11/5/97 ----------------------------------------------------------------------------------------- ICON Energy Fund 59.20% 24.48% 13.63% ----------------------------------------------------------------------------------------- S&P 1500 Energy Index 46.24% 8.82% 7.19% ----------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 4.46% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON ENERGY FUND S&P 1500 ENERGY INDEX S&P 1500 INDEX ---------------- --------------------- -------------- 11/5/97 10000.0 10000.0 10000.0 9/30/98 6350.0 8920.19 10679.6 9/30/99 8082.0 10578.6 13596.8 9/30/00 13359.0 12515.6 15691.6 9/30/01 12486.0 10566.0 11654.0 9/30/02 13114.0 9493.07 9460.34 9/30/03 15174.0 11038.2 11795.8 9/30/04 24157.0 16142.4 13514.2
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. Management Overview 19 Management Overview (continued) ICON Energy Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Energy Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,199.00 $7.37 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.30 $6.76 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.34% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 20 Management Overview Schedule of Investments ICON Energy Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- COMMON STOCKS 95.7% UNITED STATES OF AMERICA 69.9% ENERGY 64.5% INTEGRATED OIL & GAS 1.2% 15,800 ConocoPhillips $ 1,309,030 50,000 Marathon Oil Corporation 2,064,000 ------------ 3,373,030 OIL & GAS DRILLING 3.2% 19,100 Helmerich & Payne, Inc. 547,979 15,600 Noble Corporation(a) 701,220 136,600 Patterson-UTI Energy, Inc. 2,604,962 153,000 Unit Corporation(a) 5,367,240 ------------ 9,221,401 OIL & GAS EQUIPMENT & SERVICES 24.1% 301,000 Cal Dive International, Inc.(a) 10,721,620 114,500 FMC Technologies, Inc.(a) 3,824,300 35,000 GulfMark Offshore, Inc.(a) 571,550 164,700 Hydril(a) 7,073,865 239,400 Maverick Tube Corporation(a) 7,375,914 271,800 National- Oilwell, Inc.(a) 8,931,348 88,700 Oceaneering International, Inc.(a) 3,267,708 65,100 Offshore Logistics, Inc.(a) 2,240,742 317,800 Oil States International, Inc.(a) 5,942,860 34,200 SEACOR Holdings Inc.(a) 1,598,850 466,700 Superior Energy Services, Inc.(a) 6,029,764 147,300 TETRA Technologies, Inc.(a) 4,573,665 118,000 Tidewater Inc. 3,840,900 164,000 W-H Energy Services, Inc.(a) 3,403,000 ------------ 69,396,086
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- OIL & GAS EXPLORATION & PRODUCTION 25.8% 24,200 Anadarko Petroleum Corporation $ 1,605,912 50,000 Berry Petroleum Company 1,836,500 200,000 Chesapeake Energy Corporation 3,166,000 117,514 Cimarex Energy Co.(a) 4,105,939 129,300 Comstock Resources, Inc.(a) 2,704,956 116,600 Denbury Resources Inc.(a) 2,961,640 133,000 Encore Acquisition Company(a) 4,588,500 202,300 Harvest Natural Resources, Inc.(a) 3,358,180 105,800 Newfield Exploration Company(a) 6,479,192 21,200 Noble Energy, Inc. 1,234,688 294,936 Patina Oil & Gas Corporation 8,721,258 94,100 Penn Virginia Corporation 3,725,419 75,000 Petroleum Development Corporation(a) 3,286,500 175,500 Range Resources Corporation 3,069,495 147,600 Remington Oil & Gas Corporation(a) 3,874,500 283,100 Ultra Petroleum Corp.(a) 13,886,055 169,075 XTO Energy, Inc. 5,491,556 ------------ 74,096,290 OIL & GAS REFINING, MARKETING & TRANSPORTATION 10.2% 97,400 Ashland Inc. 5,462,192 119,500 Frontier Oil Corporation 2,821,395 122,500 General Maritime Corporation(a) 4,266,675 267,000 OMI Corporation 4,277,340 79,000 Overseas Shipholding Group, Inc. 3,921,560
Schedule of Investments 21 Schedule of Investments (continued) ICON Energy Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- 30,400 Sunoco, Inc. $ 2,248,992 534,300 The Williams Companies, Inc. 6,465,030 ------------ 29,463,184 ------------ TOTAL ENERGY 185,549,991 INDUSTRIALS 2.6% CONSTRUCTION & ENGINEERING 0.9% 95,400 URS Corporation(a) 2,545,272 INDUSTRIAL MACHINERY 1.7% 205,200 Flowserve Corporation(a) 4,961,736 ------------ TOTAL INDUSTRIALS 7,507,008 MATERIALS 2.8% COMMODITY CHEMICALS 2.8% 263,400 Headwaters Incorporated(a) 8,128,524 ------------ TOTAL MATERIALS 8,128,524 ------------ TOTAL UNITED STATES OF AMERICA 201,185,523 AMERICAN DEPOSITARY RECEIPT 8.2% BRAZIL 3.2% ENERGY 3.2% INTEGRATED OIL & GAS 3.2% 261,800 Petroleo Brasileiro S.A. -- ADR 9,228,450 ------------ TOTAL ENERGY 9,228,450 ------------ TOTAL BRAZIL 9,228,450 CHINA 1.3% ENERGY 1.3% INTEGRATED OIL & GAS 1.3% 69,300 China Petroleum and Chemical Corporation -- ADR 2,844,765 15,100 PetroChina Company Limited -- ADR 811,776 ------------ TOTAL ENERGY 3,656,541 ------------ TOTAL CHINA 3,656,541 ITALY 1.4% ENERGY 1.4% INTEGRATED OIL & GAS 1.4% 36,000 Eni S.p.A. -- ADR 4,042,800 ------------ TOTAL ENERGY 4,042,800 ------------ TOTAL ITALY 4,042,800
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- NETHERLANDS 0.9% ENERGY 0.9% CONSTRUCTION & ENGINEERING 0.9% 83,800 Chicago Bridge & Iron Company N.V. -- ADR $ 2,513,162 ------------ TOTAL ENERGY 2,513,162 ------------ TOTAL NETHERLANDS 2,513,162 SPAIN 1.4% ENERGY 1.4% INTEGRATED OIL & GAS 1.4% 187,300 Repsol YPF, S.A. -- ADR 4,105,616 ------------ TOTAL ENERGY 4,105,616 ------------ TOTAL SPAIN 4,105,616 ------------ TOTAL AMERICAN DEPOSITARY RECEIPTS 23,546,569 BAHAMAS 3.4% ENERGY 3.4% OIL & GAS REFINING & MARKETING & TRANSPORTATION 3.4% 225,100 Teekay Shipping Corporation 9,699,559 ------------ TOTAL ENERGY 9,699,559 ------------ TOTAL BAHAMAS 9,699,559 BERMUDA 2.3% ENERGY 2.3% OIL & GAS REFINING & MARKETING & TRANSPORTATION 2.3% 186,100 Tsakos Energy Navigation Ltd. 6,541,415 ------------ TOTAL ENERGY 6,541,415 ------------ TOTAL BERMUDA 6,541,415
22 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- UNITED KINGDOM 3.5% ENERGY 3.5% INTEGRATED OIL & GAS 1.3% 85,700 Shell Transport & Trading Company plc $ 3,814,507 ------------ OIL & GAS REFINING, MARKETING & TRANSPORTATION 2.2% 60,000 Frontline Limited 2,831,400 225,000 Top Tankers, Inc.(a) 3,597,750 ------------ 6,429,150 ------------ TOTAL ENERGY 10,243,657 ------------ TOTAL UNITED KINGDOM 10,243,657 CANADA 8.4% ENERGY 8.4% INTEGRATED OIL & GAS 6.5% 119,700 Petro-Canada 6,218,415 156,200 PetroKazakhstan Inc. 5,352,974 223,100 Suncor Energy, Inc. 7,141,431 ------------ 18,712,820 ------------ OIL & GAS DRILLING 1.9% 94,900 Precision Drilling Corporation(a) 5,456,750 ------------ TOTAL ENERGY 24,169,570 ------------ TOTAL CANADA 24,169,570 ------------ TOTAL COMMON STOCKS (COST $215,785,751) 275,386,293
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- SHORT-TERM INVESTMENTS 7.2% U.S. GOVERNMENT AGENCIES 7.1% $20,483,000 FHLB Discount Note, 1.3690%, 10-1-04 $ 20,483,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 20,483,000 VARIABLE RATE DEMAND NOTE 0.1% 102,054 American Family Demand Note, 1.4525%# 102,054 ------------ TOTAL VARIABLE RATE DEMAND NOTE 102,054 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $20,585,054) 20,585,054 ------------ TOTAL INVESTMENTS 102.9% (COST $236,370,805) 295,971,347 ------------ LIABILITIES LESS OTHER ASSETS (2.9%) (8,357,443) ------------ NET ASSETS 100.0% $287,613,904 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. ADR American Depositary Receipt Dates shown on securities are the due dates of the obligation. Schedule of Investments 23 Management Overview ICON Financial Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 99.7% Top 10 Equity Holdings 27.8% Number of Stocks 51 Short-Term Investments 0.2% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 JPMorgan Chase & Co. 3.5% Investors Financial Services Corp. 3.1% New Century Financial Corporation 3.0% Bank of America Corporation 3.0% Countrywide Financial Corporation 2.9% UICI 2.7% IndyMac Bancorp, Inc. 2.5% Providian Financial Corporation 2.4% Comerica Incorporated 2.4% ING Groep N.V. 2.3% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Financial Fund gained 24.53% for the fiscal year ended September 30, 2004, outpacing the 15.78% return for its sector-specific benchmark, the S&P 1500 Financials Index, as well as the 14.58% return for its broad benchmark, the S&P 1500 Index, over the same period. Total returns for other periods as of September 30, 2004 are listed on page 28. A favorable economic setting of moderate real GDP, nominal inflation and low interest rates did little to placate investors during the period, as extraneous events raised doubts about the sustainability of the yearlong recovery. With markets turning increasingly volatile amid a climate of fear and uncertainty, early-period gains came under severe pressure as sharp theme reversals took their toll. Nevertheless, the Fund outperformed its benchmark for the 12-month period. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Although ICON's system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. This is corroborated by independent data, which details the outperformance of S&P/Barra Value Indexes over their S&P/Barra Growth counterparts for the one-year period ended September 30, 2004. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Widespread expectations that long-term interest rates would trend higher failed to materialize when fixed-income investors extended maturities in conjunction with Federal Reserve rate hikes. Consequently, longer rates fell amid indications that the tightening would keep inflation in check. Given these favorable conditions, our system continued to support a recovery-based theme, driven by an eventual upside move in economically sensitive industries. Although underlying fundamentals remained positive, frequent fear-based rotations produced an absence of industry leadership. As rising oil prices, the war on terror, economic setbacks, and election-year rhetoric fueled 24 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager investor concerns, the market settled into a volatile trading range, quickly extinguishing any move toward a sustained cyclical or defensive rally. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. While the Financial sector was generally in line with the broader market during the period, the Fund's returns surpassed those benchmarks, benefiting from a concentrated weighting in the sector-leading consumer finance industry as well as strong contributions from the life & health insurance and real estate investment trusts industries. As the Fund's leading net contributor, consumer finance maintained a sizable weighting throughout the period, yet was dramatically reduced when selected companies exceeded fair value. Conversely, the Fund's exposure to regional banks increased appreciably on improving valuation and relative strength readings. However, the reinsurance industry was removed on relative strength concerns, having detracted from Fund performance due to hurricane-related losses. Among the Fund's top performers, middle-market auto finance company AmeriCredit Corp. turned in a strong showing, having posted better-than- expected income growth on higher loan volume. Meanwhile, life and health insurer UICI reported significant earnings upside, citing more favorable loss ratios in its Self Employed Agency division. High dividend payouts from subprime mortgage lender NovaStar Financial Inc. also contributed, although the real estate investment trust was later removed on valuation concerns. In contrast, measurable detractors included reinsurer Transatlantic Holdings, Inc., which fell due to moderating casualty rates and hurricane-related losses and was sold. Elsewhere, global investment banking giant Goldman Sachs Group Inc. succumbed to investor uncertainty surrounding Fed monetary policy and geopolitical events. The Fund sold Goldman Sachs but repurchased it shortly before period-end when it again met our valuation criteria. Title Insurance provider Stewart Information Services Corp. also retreated as rising costs and policy losses contributed to lower margins, and we liquidated the position. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE FINANCIALS SECTOR? A. A positive backdrop of strong economic growth and stable interest rates, coupled with widespread value, positions the sector to capitalize on an eventual upside move. Valuations are particularly attractive among asset management & custody banks and investment banking & brokerage, and the anticipated emergence of relative strength should spur a broad march toward fair value. Management Overview 25 Management Overview (continued) ICON Financial Fund PERFORMANCE HIGHLIGHTS September 30, 2004 - Our valuation model led us to small- and medium-capitalization companies, which aided relative performance as large-cap securities lagged. - AmeriCredit Corp., UICI and NovaStar Financial Inc. were among the Fund's strongest-performing holdings during the period. - A concentrated weighting in the sector-leading consumer finance industry and strong contributions from life & health insurance boosted Fund performance. - Conversely, the reinsurance industry had a negative impact on returns and was subsequently removed on relative strength concerns. - Stocks that detracted from performance during the period included Transatlantic Holdings, Inc., Goldman Sachs Group Inc. and Stewart Information Services Corp. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratios. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. 26 Management Overview TOP 10 INDUSTRIES September 30, 2004 Regional Banks 12.0% Life & Health Insurance 11.8% Consumer Finance 11.2% Investment Banking & Brokerage 9.9% Diversified Banks 8.7% Property & Casualty Insurance 8.7% Thrifts & Mortgage Finance 8.5% Multi-Line Insurance 7.4% Other Diversified Financial Services 7.2% Asset Management & Custody Banks 7.1%
Percentages are based upon net assets. Management Overview 27 Management Overview (continued) ICON Financial Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 7/1/97 ----------------------------------------------------------------------------------------- ICON Financial Fund 24.53% 15.24% 10.81% ----------------------------------------------------------------------------------------- S&P 1500 Financials Index 15.78% 8.07% 8.97% ----------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 5.28% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON FINANCIAL FUND S&P 1500 FINANCIALS INDEX S&P 1500 INDEX ------------------- ------------------------- -------------- 7/1/97 10000.0 10000.0 10000.0 9/30/97 10510.0 11141.0 10796.0 9/30/98 9411.0 10940.8 11473.7 9/30/99 10357.0 12642.3 14607.8 9/30/00 14307.0 16726.7 16858.4 9/30/01 15676.0 14787.3 12520.5 9/30/02 13813.0 12812.3 10163.8 9/30/03 16900.0 16097.1 12672.9 9/30/04 21045.0 18636.7 14519.1
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. 28 Management Overview FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Financial Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,000.00 $6.50 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.50 $6.56 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.30% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. Management Overview 29 Schedule of Investments ICON Financial Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- COMMON STOCKS 99.7% UNITED STATES OF AMERICA 97.4% FINANCIAL 97.4% ASSET MANAGEMENT & CUSTODY BANKS 7.1% 75,000 American Capital Strategies, Ltd. $ 2,350,500 61,200 The Bank of New York Company, Inc. 1,785,204 129,600 Investors Financial Services Corp. 5,848,848 98,300 SEI Investments Company 3,310,744 ------------ 13,295,296 CONSUMER FINANCE 11.2% 169,000 AmeriCredit Corp.(a) 3,528,720 40,300 Capital One Financial Corporation 2,978,170 172,300 Cash America International, Inc. 4,214,458 286,700 Metris Companies Inc.(a) 2,803,926 296,100 Providian Financial Corporation(a) 4,601,394 130,900 World Acceptance Corporation(a) 3,043,425 ------------ 21,170,093 DIVERSIFIED BANKS 8.7% 129,200 Bank of America Corporation 5,598,236 77,200 Comerica Incorporated 4,581,820 91,200 Wachovia Corporation 4,281,840 31,200 Wells Fargo & Company 1,860,456 ------------ 16,322,352 INSURANCE BROKERS 4.2% 70,700 Aon Corporation 2,031,918 72,500 Arthur J. Gallagher & Co. 2,401,925 94,800 Hilb Rogal and Hobbs Company 3,433,656 ------------ 7,867,499 INVESTMENT BANKING & BROKERAGE 9.9% 105,400 A.G. Edwards, Inc. 3,648,948 43,700 The Bear Stearns Companies Inc. 4,202,629 40,200 The Goldman Sachs Group, Inc. 3,748,248
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- 197,000 Investment Technology Group, Inc.(a) $ 3,014,100 81,000 Morgan Stanley 3,993,300 ------------ 18,607,225 LIFE & HEALTH INSURANCE 11.8% 91,600 AmerUs Group Co. 3,755,600 91,050 Delphi Financial Group, Inc. 3,657,479 60,900 Lincoln National Corporation 2,862,300 88,600 Prudential Financial, Inc. 4,167,744 38,500 StanCorp Financial Group, Inc. 2,741,200 157,400 UICI 5,153,276 ------------ 22,337,599 MULTI-LINE INSURANCE 7.4% 122,900 American Financial Group, Inc. 3,673,481 63,200 American International Group, Inc. 4,296,968 67,700 The Hartford Financial Services Group, Inc. 4,192,661 32,000 Loews Corporation 1,872,000 ------------ 14,035,110 OTHER DIVERSIFIED FINANCIAL SERVICES 4.9% 59,100 Citigroup Inc. 2,607,492 165,900 JPMorgan Chase & Co. 6,591,207 ------------ 9,198,699 PROPERTY & CASUALTY INSURANCE 8.7% 79,000 The Allstate Corporation 3,791,210 89,610 Fidelity National Financial, Inc. 3,414,141 82,200 SAFECO Corporation 3,752,430 52,700 Selective Insurance Group, Inc. 1,960,440 80,500 W. R. Berkley Corporation 3,393,880 ------------ 16,312,101 REAL ESTATE INVESTMENT TRUST 3.0% 94,700 New Century Financial Corporation 5,702,834
30 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- REGIONAL BANKS 12.0% 116,900 Associated Banc-Corp $ 3,748,983 92,400 BB&T Corporation 3,667,356 190,500 The Colonial BancGroup, Inc. 3,895,725 141,800 Hibernia Corporation 3,744,938 84,100 UCBH Holdings, Inc. 3,285,787 90,100 First BanCorp 4,351,830 ------------ 22,694,619 THRIFTS & MORTGAGE FINANCE 8.5% 137,100 Countrywide Financial Corporation 5,400,369 132,200 IndyMac Bancorp, Inc. 4,785,640 98,400 The PMI Group, Inc. 3,993,072 45,100 Doral Financial Corp. 1,870,297 ------------ 16,049,378 ------------ TOTAL FINANCIAL 183,592,805 ------------ TOTAL UNITED STATES OF AMERICA 183,592,805
SHARES OR PRINCIPAL AMOUNT MARKET VALUE -------------------------------------------- AMERICAN DEPOSITARY RECEIPT 2.3% NETHERLANDS 2.3% FINANCIAL 2.3% OTHER DIVERSIFIED FINANCIAL SERVICES 2.3% 174,658 ING Groep N.V. -- ADR $ 4,415,354 ------------ TOTAL FINANCIAL 4,415,354 ------------ TOTAL NETHERLANDS 4,415,354 ------------ TOTAL AMERICAN DEPOSITARY RECEIPT 4,415,354 ------------ TOTAL COMMON STOCKS (COST $160,208,440) 188,008,159 SHORT-TERM INVESTMENT 0.2% VARIABLE RATE DEMAND NOTE 0.2% $365,418 American Family Demand Note, 1.4525%# $ 365,418 ------------ TOTAL SHORT-TERM INVESTMENT (COST $365,418) 365,418 ------------ TOTAL INVESTMENTS 99.9% (COST $160,573,858) 188,373,577 ------------ OTHER ASSETS LESS LIABILITIES 0.1% 19,873 ------------ NET ASSETS 100.0% $188,393,450 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. ADR American Depositary Receipt Schedule of Investments 31 Management Overview ICON Healthcare Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 97.7% Top 10 Equity Holdings 28.8% Number of Stocks 63 Short-Term Investments 1.4% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 UnitedHealth Group Incorporated 4.2% Aetna Inc. 2.9% Coventry Health Care, Inc. 2.9% AMERIGROUP Corporation 2.9% Centene Corporation 2.8% The Cooper Companies, Inc. 2.8% Laboratory Corporation of America Holdings 2.7% Quest Diagnostics Incorporated 2.6% CIGNA Corporation 2.6% Anthem, Inc. 2.4% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Healthcare Fund gained 11.56% for the fiscal year ended September 30, 2004, outpacing the 5.99% return for its sector-specific benchmark, the S&P 1500 Healthcare Index, but trailing the 14.58% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2004 are listed on page 36. Avoidance of large-cap pharmaceuticals, a core component of the S&P 1500 Healthcare Index, bolstered Fund performance during the period. Although this avoidance was based on declining relative strength, the segment was pressured by investor concerns surrounding patent expirations, generic competition, reimportation, and Medicare reimbursement. The Fund further diverged from its sector-specific benchmark by emphasizing mid-cap stocks, which outpaced large-cap stocks. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. While the ICON system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. This bias deviated from the Fund's sector- specific benchmark, resulting in positive attribution for the Fund. Conversely, the Fund's holdings in higher P/E securities, often referred to as growth stocks, worked against performance relative to the benchmark. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard P/E as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this ratio as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. A sideways or themeless market characterized the investment environment during the fiscal year, as defensive-oriented sectors such as Healthcare exhibited intermittent strength. Market advances typically favored economically sensitive sectors, although their leadership sporadically encountered severe resistance, often triggered by extraneous events such as rising oil prices, terrorism, and election-year uncertainties. As a result, the widespread value detected by our system went largely unrealized within certain industries in the Healthcare sector. Budget deficits and their potential impact on government healthcare spending were believed to weigh heavily on investors. Also noteworthy was the disparity in industry 32 Management Overview [J.C. WALLER III PHOTO] J.C. Waller III Portfolio Manager returns, with managed health care and health care supplies leading at the expense of health care facilities, health care distributors and pharmaceuticals. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. Our methodology led us to aggressively overweight managed health care, the best-performing industry group within the sector, while liquidating pharmaceuticals, which indicated overall weakness. Both moves contributed positively to performance, as managed health care possessed strong value throughout, while the absence of pharmaceuticals by fiscal year-end insulated the Fund from the fallout associated with Merck's recall of a popular arthritis treatment. The Fund did not own Merck during the period. Among the Fund's top contributors to performance during the period were managed healthcare organizations Sierra Health Services and Aetna Inc. Sierra benefited from steady revenue and earnings growth, while keeping a lid on operating expenses. Aetna continued to boost enrollment levels in addition to paring administrative costs and unprofitable accounts. Elsewhere, contact lens maker The Cooper Companies, Inc. reported consistent earnings-per-share gains, while projecting further revenue growth from its pending acquisition of rival Ocular Sciences, Inc. (which the Fund did not own at period-end). In contrast, information services provider NDC Health Corp. struggled as its core pharmaceutical customer base faced a difficult operating environment. Drug distributor Cardinal Health Inc. also retreated, having seen its accounting practices come under regulatory scrutiny. Meanwhile, biopharmaceutical maker Cephalon Inc. grappled with competitive overhang as well as probes into its marketing practices. All were ultimately sold on declining relative strength. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE HEALTHCARE SECTOR? A. Value remains widespread in the Healthcare sector, even among industry standout managed health care. Given the breadth of stocks trading at substantial discounts to intrinsic value as well as the overall market, we anticipate that investor recognition will eventually spur a broad upward move in the sector toward fair value. With that in mind, we stick to our system in an attempt to identify industry leadership through the analysis of valuation and relative strength. Management Overview 33 Management Overview (continued) ICON Healthcare Fund PERFORMANCE HIGHLIGHTS September 30, 2004 - Medium capitalization stocks comprised the Fund's largest weighting and were among its top performers during the period. - Sierra Health Services, Aetna Inc. and The Cooper Companies, Inc. all made significant contributions to overall Fund performance. - Our methodology led us to aggressively overweight managed health care, the best-performing industry in the Index. - Conversely, our relative strength readings convinced us to avoid pharmaceuticals, indicating overall weakness. This segment lagged the sector during the period. - Stocks that detracted from performance during the period included NDC Health Corp., Cardinal Health Inc. and Cephalon Inc. 34 Management Overview TOP INDUSTRIES September 30, 2004 Managed Health Care 27.9% Health Care Services 25.3% Health Care Equipment 21.5% Health Care Facilities 10.6% Health Care Supplies 6.1% Health Care Distributors 3.7% Biotechnology 2.6%
Percentages are based upon net assets. Management Overview 35 Management Overview (continued) ICON Healthcare Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 2/24/97 ----------------------------------------------------------------------------------------- ICON Healthcare Fund 11.56% 14.94% 11.72% ----------------------------------------------------------------------------------------- S&P 1500 Healthcare Index 5.99% 3.38% 8.00% ----------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 6.42% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
S&P 1500 HEALTHCARE ICON HEALTHCARE FUND INDEX S&P 1500 INDEX -------------------- ------------------- -------------- 2/24/97 10000 10000 10000 9/30/97 11780 11169 11933 9/30/98 12224 14703 12682 9/30/99 11571 15192 16147 9/30/00 17976 19880 18634 9/30/01 18585 18850 13839 9/30/02 17539 14975 11234 9/30/03 20810 16927 14008 9/30/04 23199 17940 16048
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. 36 Management Overview FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Healthcare Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 970.90 $6.36 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.55 $6.51 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.29% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. Management Overview 37 Schedule of Investments ICON Healthcare Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 97.7% UNITED STATES OF AMERICA 96.1% HEALTH CARE 96.1% BIOTECHNOLOGY 2.0% 56,000 Genencor International Inc.(a) $ 898,800 50,000 Gen-Probe Incorporated(a) 1,993,500 122,800 Serologicals Corporation(a) 2,864,924 ------------ 5,757,224 HEALTH CARE DISTRIBUTORS 3.7% 106,500 McKesson Corporation 2,731,725 64,400 Henry Schein, Inc.(a) 4,012,764 184,500 Priority Healthcare Corporation(a) 3,717,675 ------------ 10,462,164 HEALTH CARE EQUIPMENT 21.5% 135,900 Baxter International Inc. 4,370,544 104,900 Beckman Coulter, Inc. 5,886,988 87,300 Becton, Dickinson and Company 4,513,410 79,200 Biosite Incorporated(a) 3,877,632 114,600 Boston Scientific Corporation(a) 4,553,058 113,400 CONMED Corporation(a) 2,982,420 71,600 DENTSPLY International Inc. 3,718,904 54,400 Hillenbrand Industries, Inc. 2,748,832 3,240 Hospira, Inc.(a) 99,144 108,000 Integra LifeSciences Holdings(a) 3,467,880 47,600 Invacare Corporation 2,189,600 144,500 Matthews International Corporation 4,895,660 99,500 Mine Safety Appliances Company 4,051,640 112,900 ResMed Inc.(a) 5,375,169
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 114,900 Respironics, Inc.(a) $ 6,140,256 55,200 Stryker Corporation 2,654,016 ------------ 61,525,153 HEALTH CARE FACILITIES 10.6% 172,700 AmSurg Corp.(a) 3,657,786 206,500 Community Health Systems Inc.(a) 5,509,420 174,900 LifePoint Hospitals, Inc.(a) 5,248,749 92,700 Manor Care, Inc. 2,777,292 136,200 Triad Hospitals, Inc.(a) 4,690,728 161,100 United Surgical Partners International, Inc.(a) 5,533,785 64,600 Universal Health Services, Inc. 2,810,100 ------------ 30,227,860 HEALTH CARE SERVICES 24.3% 208,500 American Healthways, Inc.(a) $ 6,069,435 90,500 Cerner Corporation(a) 3,915,030 172,100 Cross Country Healthcare, Inc.(a) 2,667,550 190,500 DaVita, Inc.(a) 5,934,075 169,700 Dendrite International, Inc.(a) 2,735,564 91,900 Express Scripts, Inc.(a) 6,004,746 175,000 Laboratory Corporation of America Holdings(a) 7,651,000 97,700 Lincare Holdings Inc.(a) 2,902,667 65,100 Pediatrix Medical Group, Inc.(a) 3,570,735 162,800 Pharmaceutical Product Development, Inc.(a) 5,860,800 85,400 Quest Diagnostics Incorporated 7,533,988 248,300 RehabCare Group, Inc.(a) 5,718,349
38 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 181,650 Renal Care Group, Inc.(a) $ 5,854,579 109,500 SFBC International, Inc.(a) 2,880,945 ------------ 69,299,463 HEALTH CARE SUPPLIES 6.1% 88,600 Arrow International, Inc. 2,649,140 116,700 The Cooper Companies, Inc. 7,999,785 81,500 Edwards Lifesciences Corporation(a) 2,730,250 74,100 ICU Medical, Inc.(a) 1,929,564 26,900 Osteotech, Inc.(a) 105,986 66,500 Sybron Dental Specialties, Inc.(a) 1,974,385 ------------ 17,389,110 MANAGED HEALTH CARE 27.9% 83,600 Aetna Inc. 8,354,148 144,800 AMERIGROUP Corporation(a) 8,145,000 77,900 Anthem, Inc.(a) 6,796,775 189,300 Centene Corporation(a) 8,060,394 105,000 CIGNA Corporation 7,311,150 153,700 Coventry Health Care, Inc.(a) 8,202,969 294,700 Humana Inc.(a) 5,888,106 80,000 Molina Healthcare Inc.(a) 2,840,000
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 126,600 PacifiCare Health Systems, Inc.(a) $ 4,646,220 23,200 Sierra Health Services, Inc.(a) 1,111,976 161,112 UnitedHealth Group Incorporated 11,880,399 175,700 WellChoice Inc.(a) 6,558,881 ------------ 79,796,018 ------------ TOTAL HEALTH CARE 274,456,992 ------------ TOTAL UNITED STATES OF AMERICA 274,456,992 ------------ AMERICAN DEPOSITARY RECEIPTS 1.6% IRELAND 1.0% HEALTH CARE 1.0% HEALTH CARE SERVICES 1.0% 90,500 ICON plc(a)(b) -- ADR 2,978,355 ------------ TOTAL HEALTH CARE 2,978,355 ------------ TOTAL IRELAND 2,978,355 SWITZERLAND 0.6% HEALTH CARE 0.6% BIOTECHNOLOGY 0.6% 107,100 Serono SA -- ADR 1,641,843 ------------ TOTAL HEALTH CARE 1,641,843 ------------ TOTAL SWITZERLAND 1,641,843 ------------ TOTAL AMERICAN DEPOSITARY RECEIPTS 4,620,198 ------------ TOTAL COMMON STOCKS (COST $246,224,426) 279,077,190
Schedule of Investments 39 Schedule of Investments (continued) ICON Healthcare Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- SHORT-TERM INVESTMENTS 1.4% U.S. GOVERNMENT AGENCIES 0.8% $2,226,000 FHLB Discount Note, 1.3690%, 10-1-04 $ 2,226,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 2,226,000 VARIABLE RATE DEMAND NOTE 0.6% 1,686,892 American Family Demand Note, 1.4525%# 1,686,892 ------------ TOTAL VARIABLE RATE DEMAND NOTE 1,686,892 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $3,912,892) 3,912,892 ------------ TOTAL INVESTMENTS 99.1% (COST $250,137,318) 282,990,082 ------------ OTHER ASSETS LESS LIABILITIES 0.9% 2,679,892 ------------ NET ASSETS 100.0% $285,669,974 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security (b) Not affiliated with ICON Funds or its adviser. # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. ADR American Depositary Receipt Dates shown on securities are the due dates of the obligation. 40 Schedule of Investments Management Overview ICON Industrials Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 99.3% Top 10 Equity Holdings 21.9% Number of Stocks 84 Short-Term Investments 3.2% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Armor Holdings, Inc. 2.5% L-3 Communications Holdings, Inc. 2.3% The Manitowoc Company, Inc. 2.3% Labor Ready, Inc. 2.3% Terex Corporation 2.3% Simpson Manufacturing Co., Inc. 2.2% Norfolk Southern Corporation 2.1% Masco Corporation 2.0% Reliance Steel & Aluminum Co. 2.0% Northrop Grumman Corporation 1.9% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Industrials Fund advanced 19.55% for the fiscal year ended September 30, 2004, trailing the 23.09% return for its sector-specific benchmark, the S&P 1500 Industrials Index, yet outpacing the 14.58% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2004 are listed on page 45. While valuation led us to emphasize small- and mid-cap stocks during the period, this bias detracted from relative performance as a number of sector heavyweights turned in stronger-than-expected results. Given the large-cap orientation and strong performance of the narrow benchmark, the Fund's lack of exposure to bellwethers such as United Parcel Service, Tyco International, United Technologies, General Electric Co., and Boeing proved detrimental. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Although the ICON system does not consider investment style, the Fund maintained a style-neutral bias during the period, balancing value and growth as measured on a traditional price-to-earnings (P/E) basis. Based on this standard valuation metric, performance attribution was virtually equal, with contributions to returns ascribed to both sides of the style grid. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Despite measured growth throughout the period in real GDP, manufacturing and industrial production, extraneous events such as rising oil prices, interest rate movements, terrorist activity, and election-year uncertainty distracted investors on a recurring basis. This created a "tug-of-war" between economically sensitive and more defensive-oriented sectors, resulting in a sideways or range-bound market for much of the fiscal year. Nevertheless, the overall environment appeared to be conducive for the Fund, as the Industrials sector tends to perform best during times of economic expansion. While business fundamentals were reported to have settled into a solid upward trend, the slower pace was unsettling to some investors. However, stronger levels of capital spending were viewed as Management Overview 41 Management Overview (continued) ICON Industrials Fund encouraging, leading to speculation that much of the sector would post better operating results in the months ahead. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. Based on valuation and relative strength, the Fund gravitated toward aerospace & defense, trucking and railroads during the period, all of which contributed to fiscal-year performance. Despite erratic government spending, defense contractors continued to benefit from ongoing military action in the Middle East. Meanwhile, despite higher fuel costs, trucking and railroads were among the best performers, as favorable business trends supported stronger shipping demand. In contrast, the diversified commercial services industry was plagued by regulatory concerns, as for-profit education providers experienced accounting and accreditation irregularities and were subsequently removed from the portfolio. Airlines experienced difficulties as rising fuel prices and pricing pressures contributed to weakness. Moreover, construction & engineering was trimmed in order to free up capital for other industries demonstrating sustainable market leadership, such as building products and industrial machinery. Leading individual stock contributors included Armor Holdings, Inc., a maker of specialized security systems, which was awarded seven new contracts by the U.S. Army. Metals processor Reliance Steel & Aluminum Co. also rallied, citing higher aluminum prices and rising demand. Elsewhere, diversified industrial manufacturer The Manitowoc Company, Inc. profited from its growing participation in homeland security. Holdings that detracted from performance included for-profit, post-secondary education companies Corinthian Colleges Inc. and Career Education Corp., both of which encountered legal issues and were subsequently sold. Elsewhere, discount carrier JetBlue Airways Corp. struggled amid competitive pressures and higher fuel costs, which offset revenue growth. All three stocks were sold during the period as their relative strength declined. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE INDUSTRIALS SECTOR? A. We believe that the economic expansion will continue to gain traction, though at a moderate pace, which should bode well for the sector as a whole. Assuming an eventual breakout to the upside from the current range-bound market, we continue to rely on valuation and relative strength as the most sensible way to capture economically sensitive leadership. Judging from recent readings, our system indicates that building products, trucking and railroads are positioned to lead this anticipated advance. 42 Management Overview [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2004 - The Industrials sector outperformed the broad market during the period although the Fund underperformed its sector-specific benchmark. - Valuation directed us toward small- and mid-cap stocks, which detracted from relative performance given the large-cap orientation of the Fund's sector-specific benchmark. - Among the Fund's strongest-performing holdings during the period were Armor Holdings Inc., Reliance Steel & Aluminum Co. and The Manitowoc Co. - Our methodology led us to hold sizable positions in the aerospace & defense, trucking and railroads industries, all of which contributed to fiscal-year performance. - Conversely, the diversified commercial services industry was plagued by regulatory concerns and was subsequently removed from the portfolio. - Stocks that detracted from performance during the period included Corinthian Colleges Inc., Career Education Corp. and JetBlue Airways Corp. Management Overview 43 Management Overview (continued) ICON Industrials Fund TOP 10 INDUSTRIES September 30, 2004 Aerospace & Defense 18.1% Industrial Machinery 14.5% Building Products 13.4% Railroads 10.3% Trucking 9.3% Construction, Farm Machinery & Heavy Trucks 5.8% Employment Services 5.7% Construction & Engineering 5.0% Diversified Commercial Services 4.9% Electrical Components & Equipment 3.5%
Percentages are based upon net assets. 44 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 5/9/97 ----------------------------------------------------------------------------------------- ICON Industrials Fund 19.55% 2.14% 3.13% ----------------------------------------------------------------------------------------- S&P 1500 Industrials Index 23.09% 2.88% 5.99% ----------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 6.32% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON INDUSTRIALS FUND S&P 1500 INDUSTRIALS INDEX S&P 1500 INDEX --------------------- -------------------------- -------------- 5/9/97 10000 10000 10000 9/30/97 12400 11623 11701 9/30/98 9663 10543 12435 9/30/99 11295 13339 15832 9/30/00 10807 15263 18271 9/30/01 10207 12296 13569 9/30/02 9502 10293 11015 9/30/03 10505 12492 13735 9/30/04 12558 15376 15735
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 5/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 45 Management Overview (continued) ICON Industrials Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Industrials Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,035.40 $ 6.62 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.50 $ 6.56 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.30% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 46 Management Overview Schedule of Investments ICON Industrials Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 99.3% UNITED STATES OF AMERICA 94.5% INDUSTRIALS 94.5% AEROSPACE & DEFENSE 17.0% 35,000 Alliant Techsystem, Inc.(a) $ 2,117,500 125,700 Armor Holdings, Inc.(a) 5,230,377 52,800 Curtiss-Wright Corporation 3,021,744 93,400 EDO Corporation 2,591,850 261,300 GenCorp Inc. 3,540,615 22,900 General Dynamics Corporation 2,338,090 121,900 Goodrich Corporation 3,822,784 71,600 L-3 Communications Holdings, Inc. 4,797,200 71,700 Lockheed Martin Corporation 3,999,426 76,400 Northrop Grumman Corporation 4,074,412 ------------ 35,533,998 AIRLINES 1.4% 172,900 Frontier Airlines, Inc.(a) 1,327,872 108,300 SkyWest, Inc. 1,629,915 ------------ 2,957,787 BUILDING PRODUCTS 13.4% 42,600 American Standard Companies Inc.(a) 1,657,566 50,000 American Woodmark Corporation 1,851,250 84,500 Apogee Enterprises, Inc. 1,092,585 110,200 ElkCorp 3,059,152 143,600 Griffon Corporation(a) 3,029,960 123,400 Masco Corporation 4,261,002 109,100 NCI Building Systems, Inc.(a) 3,480,290 72,900 Simpson Manufacturing Co., Inc. 4,607,280
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 47,000 Trex Company, Inc.(a) $ 2,081,160 93,500 York International Corporation 2,953,665 ------------ 28,073,910 COMMERCIAL PRINTING 0.4% 27,500 John H. Harland Company 862,125 CONSTRUCTION & ENGINEERING 4.1% 88,400 Dycom Industries, Inc.(a) 2,509,676 51,000 Fluor Corporation 2,270,520 109,000 Insituform Technologies, Inc.(a) 2,035,030 154,400 The Shaw Group Inc.(a) 1,852,800 ------------ 8,668,026 CONSTRUCTION, FARM MACHINERY & HEAVY TRUCKS 5.8% 14,000 Caterpillar Inc. 1,126,300 38,300 Lindsay Manufacturing Co. 1,027,589 55,300 Oshkosh Truck Corporation 3,155,418 109,000 Terex Corporation(a) 4,730,600 30,500 The Toro Company 2,083,150 ------------ 12,123,057 DIVERSIFIED COMMERCIAL SERVICES 4.9% 42,600 Bright Horizons Family Solutions, Inc.(a) 2,312,754 32,200 ChoicePoint Inc.(a) 1,373,330 42,400 Equifax Inc. 1,117,664 26,200 Portfolio Recovery Associates, Inc.(a) 770,018 137,300 Rollins, Inc. 3,335,017 63,100 SOURCECORP, Incorporated(a) 1,397,034 ------------ 10,305,817 ELECTRICAL COMPONENTS & EQUIPMENT 3.5% 79,000 AMETEK, Inc. 2,395,280 50,200 A.O. Smith Corporation 1,222,370 21,300 Hubbell Incorporated 954,879
Schedule of Investments 47 Schedule of Investments (continued) ICON Industrials Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 27,700 Regal-Beloit Corporation $ 670,063 34,800 Cooper Industries, Ltd. -- Class A 2,053,200 ------------ 7,295,792 EMPLOYMENT SERVICES 5.7% 111,800 Administaff, Inc.(a) 1,308,060 338,200 Labor Ready, Inc.(a) 4,741,564 278,900 On Assignment, Inc.(a) 1,238,316 42,300 Resources Connection, Inc.(a) 1,598,094 271,700 Spherion Corporation(a) 2,124,694 33,500 Volt Information Sciences, Inc.(a) 963,795 ------------ 11,974,523 ENVIRONMENTAL SERVICES 2.4% 49,400 Stericycle, Inc.(a) 2,267,460 88,800 Waste Connections, Inc.(a) 2,813,184 ------------ 5,080,644 INDUSTRIAL CONGLOMERATES 1.3% 44,200 Textron Inc. 2,840,734 INDUSTRIAL MACHINERY 14.5% 61,600 Albany International Corp. -- Class A 1,836,296 28,300 Briggs & Stratton Corporation 2,297,960 20,400 Eaton Corporation 1,293,564 140,500 Flowserve Corporation(a) 3,397,290 63,162 Graco Inc. 2,115,927 31,400 Harsco Corporation 1,409,860 109,500 Kaydon Corporation 3,150,315 134,900 The Manitowoc Company, Inc. 4,783,554 106,500 Reliance Steel & Aluminum Co. 4,228,050 91,600 Stewart & Stevenson Services, Inc. 1,618,572
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 38,700 Watts Water Technologies, Inc. -- Class A $ 1,039,095 49,000 Ingersoll Rand Company -- Class A 3,330,530 ------------ 30,501,013 MARINE 1.0% 27,400 Alexander & Baldwin, Inc. 929,956 28,000 Kirby Corporation(a) 1,124,200 ------------ 2,054,156 OFFICE SERVICES & SUPPLIES 2.3% 48,700 Brady Corporation 2,375,099 55,500 United Stationers Inc.(a) 2,408,700 ------------ 4,783,799 RAILROADS 7.5% 82,400 Burlington Northern Santa Fe Corporation 3,156,744 93,200 CSX Corporation 3,094,240 111,000 Genesee & Wyoming Inc.(a) 2,810,520 151,100 Norfolk Southern Corporation 4,493,714 193,000 RailAmerica, Inc.(a) 2,132,650 ------------ 15,687,868 TRUCKING 9.3% 81,400 Arkansas Best Corporation 2,980,868 138,300 Knight Transportation, Inc.(a) 2,962,386 91,325 Old Dominion Freight Line, Inc.(a) 2,631,073 142,300 Swift Transportation Co., Inc.(a) 2,393,486 75,400 USF Corporation 2,706,106
48 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 127,650 Werner Enterprises, Inc. $ 2,464,922 73,600 Yellow Roadway Corporation(a) 3,451,104 ------------ 19,589,945 ------------ TOTAL INDUSTRIALS 198,333,194 ------------ TOTAL UNITED STATES OF AMERICA 198,333,194 AMERICAN DEPOSITARY RECEIPTS 2.0% BRAZIL 1.1% INDUSTRIALS 1.1% AEROSPACE & DEFENSE 1.1% 86,700 Empresa Brasileira de Aeronautica S.A.(a) -- ADR 2,288,880 ------------ TOTAL INDUSTRIALS 2,288,880 ------------ TOTAL BRAZIL 2,288,880 NETHERLANDS 0.9% INDUSTRIALS 0.9% CONSTRUCTION & ENGINEERING 0.9% 61,000 Chicago Bridge & Iron Company N.V. -- ADR 1,829,390 ------------ TOTAL INDUSTRIALS 1,829,390 ------------ TOTAL NETHERLANDS 1,829,390 ------------ TOTAL AMERICAN DEPOSITARY RECEIPTS 4,118,270
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- CANADA 2.8% INDUSTRIALS 2.8% RAILROADS 2.8% 65,100 Canadian National Railway Company $ 3,157,350 103,700 CP Railway Limited 2,673,386 ------------ TOTAL INDUSTRIALS 5,830,736 ------------ TOTAL CANADA 5,830,736 ------------ TOTAL COMMON STOCKS (COST $170,661,701) 208,282,200 SHORT-TERM INVESTMENTS 3.2% U.S. GOVERNMENT AGENCIES 3.1% $6,572,000 FHLB Discount Note, 1.3690%, 10-1-04 6,572,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 6,572,000 VARIABLE RATE DEMAND NOTE 0.1% $ 116,039 American Family Demand Note, 1.4525%# 116,039 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $6,688,039) 6,688,039 ------------ TOTAL INVESTMENTS 102.5% (COST $177,349,740) 214,970,239 ------------ LIABILITIES LESS OTHER ASSETS (2.5%) (5,276,981) ------------ NET ASSETS 100.0% $209,693,258 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. ADR American Depositary Receipt Dates shown on securities are the due dates of the obligation. Schedule of Investments 49 Management Overview ICON Information Technology Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 100.3% Top 10 Equity Holdings 26.6% Number of Stocks 60 Short-Term Investments 0.6% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Cree, Inc. 3.3% j2 Global Communications, Inc. 3.2% Stratasys, Inc. 2.7% Synaptics Incorporated 2.6% Comtech Telecommunications Corp. 2.6% Cognizant Technology Solutions Corporation 2.6% Paxar Corporation 2.6% Mettler-Toledo International, Inc. 2.4% Xerox Corporation 2.3% EMC Corporation 2.3% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Information Technology Fund returned -4.47% for the fiscal year ended September 30, 2004, trailing its narrow benchmarks, the S&P 1500 Information Technology Index and the NASDAQ Composite Index, which returned 1.66% and 6.71%, respectively, while also lagging its broad benchmark, the S&P 1500 Index, which returned 14.58%. Total returns for other periods as of September 30, 2004 are listed on page 54. Market capitalization was the primary factor contributing to the Fund's underperformance during the period. In a value-driven tilt away from the largest issues in the S&P 1500 Information Technology Index, the Fund held sizable weightings in small- and mid-cap stocks. Although these smaller holdings possessed valuation characteristics that were stronger than their larger counterparts, they were severely punished in a broad and steep decline that began in early 2004. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. While the ICON system does not consider investment style, the Fund suffered from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. This bias deviated from the Fund's sector- specific benchmark, which typically emphasizes large-cap growth-oriented companies. As technology investors flocked to these larger-cap issues amid economic and geopolitical uncertainty, smaller shares perceived as more volatile were indiscriminately sold. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this ratio as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Lingering concerns ranging from oil-related inflationary pressures to anemic capital spending weighed heavily on the highly volatile Information Technology sector. An early-period follow-through rally was all but erased as tech shares traded sharply lower against the broader backdrop of an extended sideways market. With the sustainability of the economic recovery still in question, larger-cap tech stocks fared somewhat better than small- and mid- caps, although few were left unscathed as the summer doldrums set in. 50 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager However, following a mid-August sector low, tech shares rebounded strongly through the end of the period, as economic and inflation fears gave way to fundamental realities. Improving corporate profits and declining long-term interest rates swayed investors to finally recognize the value in smaller technology issues that our system had detected all along. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. Although our valuation metrics did not support the freefall in technology shares, two of the Fund's largest industry detractors, communications equipment and Internet software & services, fell victim to fear-driven selling. Communications equipment failed to demonstrate sustainable relative strength and was gradually reduced in order to broaden industry exposure and mitigate risk. Internet software & services, which had previously been a strong performer, was pared back as indiscriminate profit taking weakened it considerably. In their place, assets were redeployed into technology distributors and software-related industries (application software and home entertainment software), which proved to be among the Fund's strongest performers during the period. Valuation and relative strength readings justified significantly overweight positions relative to the sector-specific benchmark, and both weathered turbulent market conditions in a seemingly steady manner. Turning to individual stocks, noteworthy detractors included Open Text Corp., a developer of enterprise content management software, as summertime corporate spending cutbacks translated into disappointing quarterly results. Meanwhile, OSI Systems Inc., a maker of optoelectronic monitoring systems, struggled as softer sales, acquisition charges and litigation expenses hurt earnings per share. Sonic Solutions also retreated after the application software company reported first-quarter profits that matched Wall Street estimates. Among the Fund's leading contributors, IT services provider Cognizant Technology Solutions Corp. benefited from adding 40 new strategic clients in a three-month period. Financial software developer SS&C Technologies, Inc. reported better-than-expected quarterly revenue and earnings, but realized fair value and was subsequently sold. Elsewhere, semiconductor maker Marvell Technology Group Ltd. boosted revenue across a wide range of products, while increasing market share and operating margins. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE INFORMATION TECHNOLOGY SECTOR? A. The Information Technology sector emerged as a late-period market leader in a sharp and sudden rally that bounced off of mid-August lows. Moreover, at fiscal year-end, the average technology issue continued to trade at a 19% discount to our estimate of intrinsic value. This combination of strengthening Management Overview 51 Management Overview (continued) ICON Information Technology Fund stock prices and current valuation levels suggest to us that the sector is positioned to outperform the broader market over the next six to 12 months. PERFORMANCE HIGHLIGHTS September 30, 2004 - Although valuation directed us to smaller capitalization companies, the Fund's bias toward small- and mid-cap stocks produced disappointing results. - Stocks that detracted from performance during the period included Open Text Corp., OSI Systems Inc. and Sonic Solutions. - Our methodology led us to pare back communications equipment and Internet software & services, both of which fell victim to fear-driven selling. - Conversely, valuation and relative strength readings justified overweight positions in technology distributors and software-related industries, among the Fund's top performers for the period. - Among the Fund's best-performing holdings during the period were Cognizant Technology Solutions Corp., SS&C Technologies, Inc. and Marvell Technology Group Ltd. 52 Management Overview TOP 10 INDUSTRIES as of September 30, 2004 Semiconductors 12.7% Communications Equipment 11.0% Technology Distributors 10.5% IT Consulting & Other Services 8.8% Electronic Equipment Manufacturers 8.6% Data Processing & Outsourced Services 8.3% Computer Storage & Peripherals 8.1% Application Software 6.6% Internet Software & Services 6.1% Computer Hardware 5.7%
Percentages are based upon net assets. Management Overview 53 Management Overview (continued) ICON Information Technology Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 2/19/97 ----------------------------------------------------------------------------------------- ICON Information Technology Fund -4.47% 1.59% 11.39% ----------------------------------------------------------------------------------------- S&P 1500 Information Technology Index 1.66% -11.39% 4.22% ----------------------------------------------------------------------------------------- NASDAQ Composite Index 6.71% -6.80% 4.80% ----------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 6.36% -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON INFORMATION S&P 1500 INFORMATION NASDAQ COMPOSITE TECHNOLOGY FUND TECHNOLOGY INDEX INDEX S&P 1500 INDEX ---------------- -------------------- ---------------- -------------- 2/19/97 10000 10000 10000 10000 9/30/97 12960 12853 12379 11890 9/30/98 9569 14126 12492 12636 9/30/99 21006 25075 20319 16088 9/30/00 33451 30971 27224 18567 9/30/01 22447 12273 11140 13789 9/30/02 17209 8437 8742 11194 9/30/03 23799 13474 13388 13957 9/30/04 22735 13698 14287 15990
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. 54 Management Overview FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Information Technology Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 894.70 $ 6.44 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.20 $ 6.86 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.36% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. Management Overview 55 Schedule of Investments ICON Information Technology Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 100.3% UNITED STATES OF AMERICA 94.2% CONSUMER DISCRETIONARY 1.8% COMPUTER & ELECTRONICS RETAIL 1.8% 81,100 Best Buy Co., Inc. $ 4,398,864 ------------ TOTAL CONSUMER DISCRETIONARY 4,398,864 ------------ INFORMATION TECHNOLOGY 92.4% APPLICATION SOFTWARE 6.6% 129,700 Altiris, Inc.(a) 4,105,005 96,100 Intuit, Inc.(a) 4,362,940 173,600 Sonic Solutions(a) 2,833,152 128,000 Verint Systems, Inc.(a) 4,715,520 ------------ 16,016,617 COMMUNICATIONS EQUIPMENT 9.8% 134,100 ADTRAN, Inc. 3,041,388 194,000 Belden CDT, Inc. 4,229,200 236,900 Comtech Telecommunications Corp.(a) 6,419,990 204,100 Ditech Communications Corporation(a) 4,569,799 134,800 SafeNet, Inc.(a) 3,556,024 237,900 Tellabs, Inc.(a) 2,186,301 ------------ 24,002,702 COMPUTER HARDWARE 5.7% 113,500 Dell, Inc.(a) 4,040,600 71,200 Diebold, Incorporated 3,325,040 205,300 Stratasys, Inc.(a) 6,478,242 ------------ 13,843,882 COMPUTER STORAGE & PERIPHERALS 8.1% 50,900 Avid Technology, Inc.(a) 2,385,683 487,400 EMC Corporation(a) 5,624,596 186,800 SanDisk Corporation(a) 5,439,616 319,100 Synaptics Incorporated(a) 6,433,056 ------------ 19,882,951
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- DATA PROCESSING & OUTSOURCED SERVICES 8.3% 96,700 Affiliated Computer Services, Inc.(a) $ 5,383,289 114,100 Computer Sciences Corporation(a) 5,374,110 83,500 First Data Corporation 3,632,250 83,300 Fiserv, Inc.(a) 2,903,838 94,100 StarTek, Inc. 2,950,976 ------------ 20,244,463 ELECTRONIC EQUIPMENT MANUFACTURERS 8.6% 144,300 Amphenol Corporation(a) 4,943,718 119,000 Itron, Inc.(a) 2,076,550 121,600 Mettler-Toledo International, Inc.(a) 5,741,952 276,100 Paxar Corporation(a) 6,261,948 71,200 ARGON ST, Inc.(a) 1,993,600 ------------ 21,017,768 ELECTRONIC MANUFACTURING SERVICES 1.6% 134,100 Benchmark Electronics, Inc.(a) 3,996,180 HOME ENTERTAINMENT SOFTWARE 3.7% 178,800 Activision, Inc.(a) 2,479,956 117,500 Take-Two Interactive Software, Inc.(a) 3,859,875 134,900 THQ, Inc.(a) 2,625,154 ------------ 8,964,985 INTERNET SOFTWARE & SERVICES 6.1% 60,000 Ask Jeeves, Inc.(a) 1,962,600 170,900 Digital River, Inc.(a) 5,089,402 248,800 j2 Global Communications, Inc.(a) 7,859,592 ------------ 14,911,594 IT CONSULTING & OTHER SERVICES 8.8% 92,100 Anteon International Corporation(a) 3,375,465 100,700 CACI International, Inc.(a) 5,314,946
56 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 210,000 Cognizant Technology Solutions Corporation(a) $ 6,407,100 175,600 Forrester Research, Inc.(a) 2,676,144 70,000 SRA International, Inc.(a) 3,609,200 ------------ 21,382,855 OFFICE ELECTRONICS 2.3% 403,000 Xerox Corporation(a) 5,674,240 SEMICONDUCTOR EQUIPMENT 3.7% 111,000 Cabot Microelectronics Corporation(a) 4,023,750 60,000 KLA-Tencor Corp.(a) 2,488,800 58,600 Lam Research Corp.(a) 1,282,168 40,900 Varian Semiconductor Equipment Associates Inc.(a) 1,263,810 ------------ 9,058,528 SEMICONDUCTORS 8.6% 260,000 Cree, Inc.(a) 7,937,800 74,900 International Rectifier Corporation(a) 2,569,070 47,400 Maxim Integrated Products, Inc. 2,004,546 163,600 Microchip Technology Incorporated 4,391,024 187,400 Texas Instruments Incorporated 3,987,872 ------------ 20,890,312 TECHNOLOGY DISTRIBUTORS 10.5% 237,200 Agilysys, Inc. 4,101,188 143,800 Anixter International, Inc.(a) 5,045,942 176,700 Global Imaging Systems, Inc.(a) 5,491,836
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 347,100 Ingram Micro, Inc.(a) $ 5,588,310 143,300 Tech Data Corporation(a) 5,524,215 ------------ 25,751,491 ------------ TOTAL INFORMATION TECHNOLOGY 225,638,568 ------------ TOTAL UNITED STATES OF AMERICA 230,037,432 ------------ AMERICAN DEPOSITARY RECEIPTS 2.0% FINLAND 1.2% INFORMATION TECHNOLOGY 1.2% COMMUNICATIONS EQUIPMENT 1.2% 206,500 Nokia Oyj 2,833,180 ------------ TOTAL INFORMATION TECHNOLOGY 2,833,180 ------------ TOTAL FINLAND 2,833,180 MEXICO 0.8% TELECOMMUNICATION & UTILITIES 0.8% WIRELESS TELECOMMUNICATION SERVICES 0.8% 53,700 America Movil S.A. de C.V. Mexico 2,095,911 ------------ TOTAL TELECOMMUNICATION & UTILITIES 2,095,911 ------------ TOTAL MEXICO 2,095,911 TOTAL AMERICAN DEPOSITARY RECEIPTS 4,929,091 BERMUDA 2.2% INFORMATION TECHNOLOGY 2.2% SEMICONDUCTORS 2.2% 206,600 Marvell Technology Group Ltd.(a) 5,398,458 ------------ TOTAL INFORMATION TECHNOLOGY 5,398,458 ------------ TOTAL BERMUDA 5,398,458 ------------ CANADA 1.2% INFORMATION TECHNOLOGY 1.2% SEMICONDUCTORS 1.2% 184,700 ATI Technologies, Inc.(a) 2,831,451 ------------ TOTAL INFORMATION TECHNOLOGY 2,831,451 ------------ TOTAL CANADA 2,831,451 ------------
Schedule of Investments 57 Schedule of Investments (continued) ICON Information Technology Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- CHINA 0.7% INFORMATION TECHNOLOGY 0.7% SEMICONDUCTORS 0.7% 150,600 O2Micro International Limited(a) $ 1,617,444 ------------ TOTAL INFORMATION TECHNOLOGY 1,617,444 ------------ TOTAL CHINA 1,617,444 ------------ TOTAL COMMON STOCKS (COST $224,646,996) 244,813,876 SHORT-TERM INVESTMENTS 0.6% U.S. GOVERNMENT AGENCIES 0.6% $1,474,000 FHLB Discount Note, 1.3690%, 10-1-04 1,474,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 1,474,000
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- VARIABLE RATE DEMAND NOTE 0.0% 57,254 American Family Demand Note, 1.4525%# $ 57,254 ------------ VARIABLE RATE DEMAND NOTE TOTAL SHORT-TERM INVESTMENT (COST $1,531,254) 1,531,254 ------------ TOTAL INVESTMENTS 100.9% (COST $226,178,250) 246,345,130 ------------ LIABILITIES LESS OTHER ASSETS (0.9%) (2,092,727) ------------ NET ASSETS 100.0% $244,252,403 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. Dates shown on securities are the due dates of the obligation. 58 Schedule of Investments Management Overview ICON Leisure and Consumer Staples Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 99.9% Top 10 Equity Holdings 29.1% Number of Stocks 45 Short-Term Investments 1.4% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Eastman Kodak Company 3.5% Brunswick Corporation 3.3% JAKKS Pacific, Inc. 3.0% McDonald's Corporation 2.9% BJ's Wholesale Club, Inc. 2.9% Nash Finch Company 2.8% Sonic Corp. 2.7% CEC Entertainment, Inc. 2.7% Speedway Motorsports, Inc. 2.7% Reader's Digest Association, Inc. 2.6% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Leisure and Consumer Staples Fund appreciated 16.83% for the fiscal year ended September 30, 2004, outpacing its sector-specific benchmarks, the S&P 1500 Consumer Discretionary Index and the S&P 1500 Consumer Staples Index, which returned 15.11% and 8.63%, 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 14.58% over the same period. Total returns for other periods as of September 30, 2004 are listed on page 63. Despite a favorable environment that featured moderate economic growth and nominal inflation, markets turned increasingly volatile as investors focused on extraneous events. While the ensuing sideways market capped broad early-period gains, abrupt theme reversals supported the more cyclical Leisure industries, often at the expense of the more defensive Consumer Staples group. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Although our system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to- earnings (P/E) basis. This is corroborated by the outperformance of S&P/Barra Value Indexes over their S&P/Barra Growth counterparts for the one-year period ended September 30, 2004. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to- price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. A range-bound market characterized the investment environment for much of the fiscal year, as rising oil prices, the war on terror, economic sustainability, and election-year uncertainty weighed heavily on investor sentiment. Frequent rotations between cyclical and defensive-oriented industries indicated an absence of leadership, which only grew more pronounced as concerns intensified. Management Overview 59 Management Overview (continued) ICON Leisure and Consumer Staples Fund Nevertheless, our system continued to support a recovery-driven theme based on valuation and relative strength readings that anticipated an eventual upside move. Although underlying conditions remained favorable, attempts at a cyclical rally were easily extinguished, yet poised to gain traction should economic fears give way to fundamental realities. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. The Fund captured relative outperformance during the period from concentrated weightings in restaurants and leisure products, both leading cyclical industries. Hotels, resorts & cruise lines also recorded strong contributions, yet was significantly reduced when selected companies in this heavily weighted industry exceeded fair value. Restaurants, on the other hand, retained sizable exposure as valuation and relative strength readings suggested ongoing leadership. Conversely, soft drinks, distillers & vintners, and brewers proved to be net detractors, as defensive-oriented industries in the Consumer Staples sector exhibited declining relative strength. Within the Leisure industries, movies & entertainment was roundly pared when it failed to sustain what appeared to be nascent market leadership. Among the Fund's leading individual stock contributors, recreation marketer Brunswick Corp. saw strong improvements and market share gains across its three core product lines. Food wholesaler Nash Finch Co. also advanced as improved operating efficiencies and declining competitive pressures helped boost profits. Meanwhile, fast food operator CKE Restaurants Inc. benefited from modest growth in customer traffic coupled with higher check averages. In contrast, stocks that hurt Fund returns included supermarket operator Winn-Dixie Stores, Inc., which grappled with the deepening competitive threat from supercenters and warehouse club stores. NASCAR collectibles marketer Action Performance Companies, Inc. also struggled, having faced slowing revenues and management turnover. Elsewhere, educational toymaker LeapFrog Enterprises Inc., which the Fund owned, sold, and repurchased at the end of the period, tumbled as higher production costs eroded revenue gains. Yet, LeapFrog's value has held and it has performed well since the August 11, 2004 market low. Winn-Dixie and Action Performance Companies were ultimately sold on declining relative strength. 60 Management Overview [ROBERT STRAUS, CMT PHOTO] Derek Rollingson Portfolio Manager Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE LEISURE AND CONSUMER STAPLES SECTOR? A. Widespread value, both in the sector and the broader market, supports our belief that sustainable economic growth and continued low interest rates could drive an eventual move to the upside. Although we will need to be selective given leadership concerns in Consumer Staples, we see demonstrable relative strength in Leisure industries such as restaurants and leisure products. Based on our methodology, we anticipate that the sector can capitalize on that leadership and participate in a broad move toward fair value. PERFORMANCE HIGHLIGHTS September 30, 2004 - The ICON valuation model led us to small- and medium-capitalization companies in the sector, which aided relative performance. - Brunswick Corp., Nash Finch Co. and CKE Restaurants Inc. were among the Fund's strongest-performing holdings during the period. - Our methodology led us to hold concentrated weightings in restaurants, leisure products, and hotels, all of which contributed strongly to Fund performance. - Conversely, soft drinks, distillers & vintners, and brewers proved to be net detractors, as defensive-oriented industries experienced declining relative strength. - Stocks that detracted from performance during the period included Winn-Dixie Stores, Inc., Action Performance Companies, Inc. and LeapFrog Enterprises Inc. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. Management Overview 61 Management Overview (continued) ICON Leisure and Consumer Staples Fund TOP 10 INDUSTRIES September 30, 2004 Restaurants 14.7% Leisure Products 13.4% Food Distributors 7.0% Hotels, Resorts & Cruise Lines 5.9% Computer & Electronics Retail 5.4% Publishing 4.9% Agricultural Products 4.8% Distillers & Vinters 4.7% Leisure Facilities 4.6% Drug Retail 4.3%
Percentages are based upon net assets. 62 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 5/9/97 ----------------------------------------------------------------------------------------- ICON Leisure and Consumer Staples Fund 16.83% 10.64% 11.59% ----------------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 15.11% 0.14% 7.41% ----------------------------------------------------------------------------------------- S&P 1500 Consumer Staples Index 8.63% 2.57% 4.58% ----------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 6.33% -----------------------------------------------------------------------------------------
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. VALUE OF A $10,000 INVESTMENT through September 30, 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 9/30/97 11350 11749 10622 11703 9/30/98 11825 12705 11479 12437 9/30/99 13570 16840 12269 15835 9/30/00 14285 16547 12860 18274 9/30/01 14607 12992 12273 13572 9/30/02 17367 11935 12199 11017 9/30/03 19259 14736 12824 13737 9/30/04 22500 16962 13930 15738
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 5/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 63 Management Overview (continued) ICON Leisure and Consumer Staples Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Leisure and Consumer Staples Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 978.40 $6.63 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.30 $6.76 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.34% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 64 Management Overview Schedule of Investments ICON Leisure and Consumer Staples Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 99.9% UNITED STATES OF AMERICA 97.6% CONSUMER DISCRETIONARY 9.4% COMPUTER & ELECTRONICS RETAIL 5.4% 27,000 Best Buy Co., Inc. $ 1,464,480 44,600 Electronics Boutique Holdings Corp.(a) 1,520,860 81,100 GameStop Corporation(a) 1,501,161 ------------ 4,486,501 MOTORCYCLE MANUFACTURERS 2.1% 29,000 Harley-Davidson, Inc. 1,723,760 SPECIALTY STORES 1.9% 165,600 Trans World Entertainment Corporation(a) 1,617,912 ------------ TOTAL CONSUMER DISCRETIONARY 7,828,173 INFORMATION TECHNOLOGY 2.2% HOME ENTERTAINMENT SOFTWARE 2.2% 56,000 Take-Two Interactive Software, Inc.(a) 1,839,600 ------------ TOTAL INFORMATION TECHNOLOGY 1,839,600 LEISURE AND CONSUMER STAPLES 86.0% AGRICULTURAL PRODUCTS 4.8% 43,200 Corn Products International, Inc. 1,991,520 80,800 Fresh Del Monte Produce, Inc. 2,012,728 ------------ 4,004,248 BREWERS 2.0% 24,700 Adolph Coors Company 1,677,624 CASINOS & GAMING 4.2% 27,300 Harrah's Entertainment, Inc. 1,446,354 53,400 Shuffle Master, Inc.(a) 2,000,364 ------------ 3,446,718 DISTILLERS & VINTERS 4.7% 48,400 Constellation Brands, Inc. -- Class A(a) 1,842,104 52,200 The Robert Mondavi Corporation -- Class A(a) 2,044,674 ------------ 3,886,778
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- DRUG RETAIL 4.3% 38,600 CVS Corporation $ 1,626,218 81,800 Longs Drug Stores Corporation 1,979,560 ------------ 3,605,778 FOOD DISTRIBUTORS 7.0% 62,600 Central European Distribution Corporation(a) 1,398,484 74,000 Nash Finch Company 2,327,300 77,400 United Natural Foods, Inc.(a) 2,058,840 ------------ 5,784,624 HOTELS, RESORTS & CRUISE LINES 5.9% 20,600 Marriott International, Inc. 1,070,376 47,800 Royal Caribbean Cruises, Ltd. 2,084,080 36,700 Carnival Corporation 1,735,543 ------------ 4,889,999 HOUSEHOLD PRODUCTS 3.3% 41,900 Energizer Holdings, Inc.(a) 1,931,590 12,800 Kimberly-Clark Corporation 826,752 ------------ 2,758,342 HYPERMARKETS & SUPER CENTERS 2.8% 86,500 BJ's Wholesale Club, Inc.(a) 2,364,910 LEISURE FACILITIES 4.6% 32,600 International Speedway Corporation 1,626,740 65,900 Speedway Motorsports, Inc. 2,196,447 ------------ 3,823,187 LEISURE PRODUCTS 13.4% 73,800 Arctic Cat, Inc. 1,915,110 58,900 Brunswick Corporation 2,695,264 109,400 JAKKS Pacific, Inc.(a) 2,516,200 42,100 LeapFrog Enterprises, Inc.(a) 852,525 57,600 RC2 Corporation(a) 1,895,040 46,825 SCP Pool Corporation 1,252,101 ------------ 11,126,240
Schedule of Investments 65 Schedule of Investments (continued) ICON Leisure and Consumer Staples Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- MOVIES & ENTERTAINMENT 2.0% 72,900 The Walt Disney Company(a) $ 1,643,895 PACKAGED FOODS & MEATS 4.2% 47,300 J & J Snack Foods Corp.(a) 2,028,224 40,300 Ralcorp Holdings, Inc.(a) 1,454,830 ------------ 3,483,054 PHOTOGRAPHIC PRODUCTS 3.5% 89,100 Eastman Kodak Company 2,870,802 PUBLISHING 2.6% 150,100 Reader's Digest Association, Inc. 2,189,959 RESTAURANTS 14.7% 60,600 CEC Entertainment, Inc.(a) 2,227,050 55,100 Jack in the Box, Inc.(a) 1,748,323 314,800 Luby's, Inc.(a) 2,077,680 86,000 McDonald's Corporation 2,410,580 34,600 Red Robin Gourmet Burgers, Inc.(a) 1,510,982 87,500 Sonic Corp.(a) 2,242,625 ------------ 12,217,240 TOBACCO 2.0% 24,400 Reynolds American, Inc. 1,660,176 ------------ TOTAL LEISURE AND CONSUMER STAPLES 71,433,574 ------------ TOTAL UNITED STATES OF AMERICA 81,101,347
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- CANADA 2.3% LEISURE AND CONSUMER STAPLES 2.3% PUBLISHING 2.3% 53,900 The Thomson Corporation $ 1,869,791 ------------ TOTAL LEISURE AND CONSUMER STAPLES 1,869,791 ------------ TOTAL CANADA 1,869,791 ------------ TOTAL COMMON STOCKS (COST $69,214,650) 82,971,138 SHORT-TERM INVESTMENTS 1.4% U.S. GOVERNMENT AGENCIES 1.3% $1,095,000 FHLB Discount Note, 1.369%, 10-1-04 1,095,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 1,095,000 VARIABLE RATE DEMAND NOTE 0.1% $ 67,945 American Family Demand Note, 1.4525%# 67,945 ------------ TOTAL VARIABLE RATE DEMAND NOTE 67,945 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,162,945) 1,162,945 ------------ TOTAL INVESTMENTS 101.3% (COST $70,377,595) 84,134,083 ------------ LIABILITIES LESS OTHER ASSETS (1.3%) (1,111,654) ------------ NET ASSETS 100.0% $ 83,022,429 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. Dates shown on securities are the due dates of the obligation. 66 Schedule of Investments Management Overview ICON Materials Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 97.0% Top 10 Equity Holdings 24.2% Number of Stocks 62 Short-Term Investments 5.1% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 The Mosaic Co. 2.7% Millennium Chemicals, Inc. 2.6% PPG Industries, Inc. 2.6% Steel Dynamics, Inc. 2.5% Methanex Corporation 2.4% Steel Technologies, Inc. 2.3% Eagle Materials, Inc. 2.3% Alcan, Inc. 2.3% E.I. du Pont de Nemours and Company 2.3% Caraustar Industries, Inc. 2.2% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Materials Fund appreciated 46.61% for the fiscal year ended September 30, 2004, outpacing the 31.57% return for its sector-specific benchmark, the S&P 1500 Materials Index, as well as the 14.58% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2004 are listed on page 71. Although the broad market encountered volatility during the period, the Materials sector fared considerably better than its cyclical counterparts. Against a backdrop of improving economic fundamentals and rising global demand, the sector as a whole benefited from a recovery-driven advance toward fair value. Additionally, the Fund's overweight position in small- and mid-cap stocks contributed positively to performance as smaller capitalization stocks outperformed their large-cap counterparts. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. Although the ICON system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. This is borne out by returns for the S&P/Barra Value Indexes for the one-year period ended September 30, 2004, in which the S&P 500/Barra Value, S&P MidCap 400/Barra Value and S&P SmallCap 600/Barra Value Indexes outperformed their S&P/Barra Growth counterparts. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard P/E as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this ratio as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. While the broader market moved in a sideways direction for much of the fiscal year, the Materials sector recorded positive performance across all of its constituent industries. A stronger U.S. economy drove a portion of these gains, as demand for steel, specialty chemicals and raw materials accelerated, enabling producers to exercise pricing power after several dormant years. However, much of the domestic advance was aided by China's robust expansion, which has led to strong global demand for commodities and continued to support positive trends in global manufacturing and infrastructure development, despite signs that its government would take preemptive steps to moderate growth. This, along with other extraneous Management Overview 67 Management Overview (continued) ICON Materials Fund events, such as rising oil prices, terrorism and election-year uncertainties, distracted the markets from time to time. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. Our prior-year rotation into the steel industry made significant contributions to Fund performance during the period. As the Fund's largest industry weighting at period-end, steel delivered sector-leading returns, while continuing to exhibit further upside potential based on valuation and relative strength. In contrast, the Fund maintained limited exposure to gold, the sector laggard, on the grounds that it was overpriced compared to more compelling values. Commodity chemicals and fertilizers & agricultural chemicals, two new positions initiated at mid-period, were identified by our system as being underpriced and showing improving relative strength. Over the course of their second-half progress, both industries added to returns. Among the Fund's top contributors to performance, OM Group, Inc., a producer of metal-based specialty chemicals, reported sizeable year-over-year sales gains on strong demand for its line of cobalt products. Mini-mill steel producer Steel Dynamics, Inc. also advanced as strong global demand and rising prices offset the higher cost of raw materials. Meanwhile, platinum-group metals producer Stillwater Mining Company substantially boosted revenue in a palladium transaction with Russian mining company Norilsk (which the Fund does not own), yet it was subsequently sold due to low value/price measurements. Specific stocks that detracted from performance included commodity fiber producer Wellman Inc., which struggled with weak demand and rising input costs. Elsewhere, diversified chemicals company Solutia Inc. was sold at a loss on declining relative strength. The company subsequently filed for bankruptcy due to liabilities inherited from its former parent. Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE MATERIALS SECTOR? A. While our analysis currently indicates considerable upside potential within the overall market, the Materials sector is further along in its march toward fair value. That being said, we anticipate continued leadership in steel and to a lesser extent commodity chemicals. At the same time, given lower V/P levels, we are inclined to keep a more watchful eye on the sector, and anticipate that going forward we may exercise greater selectivity at the security level. 68 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2004 - Smaller capitalization stocks were among the Fund's top performers during the period. - OM Group Inc., Steel Dynamics Inc. and Stillwater Mining Company all made significant contributions to overall Fund performance. - Our methodology led us to hold a sizable position in steel, the best- performing industry in the Index. - Conversely, our valuation readings resulted in limited exposure to gold, which our system viewed as overpriced. This industry lagged the sector for the period. - Stocks that detracted from performance during the period included Wellman Inc. and Solutia Inc. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. Management Overview 69 Management Overview (continued) ICON Materials Fund TOP 10 INDUSTRIES September 30, 2004 Steel 17.6% Specialty Chemicals 12.5% Diversified Chemicals 11.0% Construction Materials 10.6% Commodity Chemicals 9.1% Fertilizers & Agricultural Chemicals 6.7% Paper Products 6.3% Metal & Glass Containers 6.3% Aluminum 5.7% Paper Packaging 3.8%
Percentages are based upon net assets. 70 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 5/5/97 --------------------------------------------------------------------------------------- ICON Materials Fund 46.61% 4.84% -0.49% --------------------------------------------------------------------------------------- S&P 1500 Materials Index 31.57% 6.90% 5.55% --------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 6.23% ---------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON MATERIALS FUND S&P 1500 MATERIALS INDEX S&P 1500 INDEX ------------------- ------------------------ -------------- 5/5/97 10000 10000 10000 9/30/97 10900 11391 11635 9/30/98 6818 9413 12366 9/30/99 7613 10685 15743 9/30/00 6759 8547 18169 9/30/01 6010 9755 13494 9/30/02 6014 9201 10954 9/30/03 6577 11335 13658 9/30/04 9642 14914 15648
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 5/5/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 71 Management Overview (continued) ICON Materials Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Materials Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,127.00 $7.23 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.20 $6.86 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.36% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 72 Management Overview Schedule of Investments ICON Materials Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE ----------------------------------------------- COMMON STOCKS 97.0% UNITED STATES OF AMERICA 85.4% INDUSTRIALS 1.4% TRADING COMPANIES & DISTRIBUTORS 1.4% 64,600 Hughes Supply, Inc. $ 1,942,522 ------------ TOTAL INDUSTRIALS 1,942,522 MATERIALS 84.0% ALUMINUM 3.4% 81,600 Alcoa, Inc. 2,740,944 89,300 Commonwealth Industries, Inc.(a) 834,062 102,600 IMCO Recycling, Inc.(a) 1,169,640 ------------ 4,744,646 COMMODITY CHEMICALS 6.7% 32,500 Georgia Gulf Corporation 1,449,175 98,800 Headwaters Incorporated(a) 3,048,968 52,400 Lyondell Chemical Company 1,176,904 173,500 Millennium Chemicals, Inc.(a) 3,679,935 ------------ 9,354,982 CONSTRUCTION MATERIALS 8.2% 45,600 Eagle Materials, Inc. 3,251,280 52,475 Florida Rock Industries, Inc. 2,570,750 50,700 Lafarge North America Inc. 2,377,323 25,100 Martin Marietta Materials, Inc. 1,136,277 40,100 Texas Industries, Inc. 2,062,744 ------------ 11,398,374 DIVERSIFIED CHEMICALS 11.0% 48,100 Cabot Corporation 1,855,217 74,500 E.I. du Pont de Nemours and Company 3,188,600 53,300 Eastman Chemical Company 2,534,415 65,700 Engelhard Corporation 1,862,595 47,900 FMC Corporation(a) 2,326,503 58,900 PPG Industries, Inc. 3,609,392 ------------ 15,376,722
SHARES OR PRINCIPAL AMOUNT MARKET VALUE ----------------------------------------------- DIVERSIFIED METALS & MINING 3.0% 59,000 Freeport-McMoRan Copper & Gold, Inc. $ 2,389,500 91,900 RTI International Metals, Inc.(a) 1,780,103 ------------ 4,169,603 FERTILIZERS & AGRICULTURAL CHEMICALS 4.4% 217,500 The Mosaic Co.(a) 3,782,325 36,000 The Scotts Company(a) 2,309,400 ------------ 6,091,725 INDUSTRIAL GASSES 1.9% 33,800 Air Products and Chemicals, Inc. $ 1,838,044 19,400 Praxair, Inc. 829,156 ------------ 2,667,200 METAL & GLASS CONTAINERS 6.3% 142,300 Crown Holdings, Inc.(a) 1,467,113 117,310 Myers Industries, Inc. 1,284,544 145,200 Owens-Illinois, Inc.(a) 2,323,200 57,700 Pactiv Corp.(a) 1,341,525 51,300 Silgan Holdings, Inc. 2,375,190 ------------ 8,791,572 PAPER PACKAGING 3.8% 184,900 Caraustar Industries, Inc.(a) 3,100,773 85,300 Sonoco Products Company 2,255,332 ------------ 5,356,105 PAPER PRODUCTS 5.2% 213,200 Buckeye Technologies, Inc.(a) 2,377,180 27,000 Georgia-Pacific Corp. 970,650 193,500 Glatfelter 2,397,465 48,500 Schweitzer-Mauduit International, Inc. 1,571,400 ------------ 7,316,695 SPECIALTY CHEMICALS 12.5% 77,600 Albemarle Corporation 2,722,984 33,600 Cambrex Corporation 737,520 55,300 Cytec Industries, Inc. 2,706,935 71,600 Great Lakes Chemical Corporation 1,832,960 65,900 Lubrizol Corp. 2,280,140
Schedule of Investments 73 Schedule of Investments (continued) ICON Materials Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE ----------------------------------------------- 84,100 OM Group, Inc.(a) $ 3,074,696 40,200 Rohm and Haas Company 1,727,394 139,300 RPM International, Inc. 2,458,645 ------------ 17,541,274 STEEL 17.6% 296,800 AK Steel Holding Corporation(a) 2,421,888 227,500 A.M. Castle & Co.(a) 2,309,125 22,900 Carpenter Technology Corporation 1,093,246 31,300 Commercial Metals Company 1,243,236 28,000 Nucor Corporation 2,558,360 57,600 Quanex Corporation 2,953,728 145,000 Ryerson Tull, Inc. 2,489,650 90,900 Steel Dynamics, Inc. 3,510,558 127,400 Steel Technologies, Inc. 3,263,606 132,100 Worthington Industries, Inc. 2,820,335 ------------ 24,663,732 ------------ TOTAL MATERIALS 117,472,630 ------------ TOTAL UNITED STATES 119,415,152 AMERICAN DEPOSITARY RECEIPTS 3.5% IRELAND 1.2% CONSTRUCTION MATERIALS 1.2% 72,500 CRH plc 1,714,625 ------------ TOTAL IRELAND 1,714,625 ------------ MEXICO 1.2% CONSTRUCTION MATERIALS 1.2% 58,476 Cemex S.A. de C.V. 1,645,515 ------------ TOTAL MEXICO 1,645,515 ------------ BRAZIL 1.1% PAPER PRODUCTS 1.1% 45,900 Aracruz Celulose S.A. 1,520,208 ------------ TOTAL BRAZIL 1,520,208 ------------ TOTAL MATERIALS 4,880,348 ------------ TOTAL AMERICAN DEPOSITARY RECEIPTS 4,880,348 ------------
SHARES OR PRINCIPAL AMOUNT MARKET VALUE ----------------------------------------------- CANADA 8.1% MATERIALS 8.1% ALUMINUM 2.3% 67,700 Alcan, Inc. $ 3,236,060 COMMODITY CHEMICALS 2.4% 225,700 Methanex Corporation 3,401,299 FERTILIZERS & AGRICULTURAL CHEMICALS 2.3% 172,600 Agrium, Inc. 3,065,376 GOLD 1.1% 68,400 Placer Dome, Inc. 1,359,792 54,200 Richmont Mines, Inc.(a) 215,716 ------------ 1,575,508 ------------ TOTAL MATERIALS 11,278,243 ------------ TOTAL CANADA 11,278,243 ------------ TOTAL COMMON STOCKS (COST $111,473,565) 135,573,743 SHORT-TERM INVESTMENTS 5.1% U.S. GOVERNMENT AGENCIES 5.0% $6,975,000 FHLB Discount Note, 1.3690%, 10-1-04 6,975,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 6,975,000 VARIABLE RATE DEMAND NOTE 0.1% 166,453 American Family Demand Note, 1.4525%# 166,453 ------------ TOTAL VARIABLE RATE DEMAND NOTE 166,453 ------------ TOTAL SHORT-TERM INVESTMENT (COST $7,141,453) 7,141,453 ------------ TOTAL INVESTMENTS 102.1% (COST $118,615,018) 142,715,196 ------------ LIABILITIES LESS OTHER ASSETS (2.1%) (2,876,877) ------------ NET ASSETS 100.0% $139,838,319 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. Dates shown on securities are due dates of the obligations. 74 Schedule of Investments Management Overview ICON Telecommunication & Utilities Fund -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2004 Equities 99.8% Top 10 Equity Holdings 33.8% Number of Stocks 44 Short-Term Investments 0.2% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2004 Sempra Energy 3.9% DTE Energy Company 3.8% Constellation Energy Group, Inc. 3.7% PNM Resources Inc. 3.5% FirstEnergy Corp. 3.4% Pinnacle West Capital Corporation 3.3% Duke Energy Corporation 3.3% Energy East Corporation 3.1% PG&E Corporation 2.9% FPL Group, Inc. 2.9% Percentages are based upon net assets. -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Telecommunication & Utilities Fund advanced 17.57% for the fiscal year ended September 30, 2004, trailing its narrow benchmarks, the S&P 1500 Telecommunication Services Index and the S&P 1500 Utilities Index, which returned 25.45% and 19.58%, respectively, while outpacing its broad benchmark, the S&P 1500 Index, which returned 14.58% over the same period. Total returns for other periods as of September 30, 2004 are listed on page 79. A valuation-driven tilt toward small- and mid-cap stocks accounted for much of the Fund's underperformance relative to the narrow benchmarks. Although our system consistently detected superior value in these smaller issues, the perceived safety of large-cap stocks bolstered defensive sectors such as Telecommunication & Utilities. As a result, the Fund, like the sector, outpaced the broader market, but failed to keep up with the large-cap-led narrow benchmarks. The Fund is managed using an all-cap strategy, meaning it invests in securities we believe are undervalued, regardless of their location on the conventional style grid. This investment approach is not limited by restrictions on market capitalization; the ICON system searches for potential industry leadership no matter where it emerges. While our system does not consider investment style, the Fund benefited from a value bias during the period, as measured on a traditional price-to-earnings (P/E) basis. This was corroborated by independent data, which detailed the outperformance of S&P/Barra Value Indexes over their growth counterparts for the one-year period ended September 30, 2004. For the record, the Fund does not utilize P/E ratio as a valuation measure. We regard it as a static proxy. Instead, we calculate a proprietary value-to-price ratio (V/P) for each industry and security. We view this measure as more meaningful since it considers the effects of earnings, projected growth, risk, and interest rates (opportunity cost). Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. A "Jekyll & Hyde" market dominated the investment environment during the period, as an extended first-half rally dissipated amid extreme fear and uncertainty. Within the volatile trading range that followed, rising oil prices, geopolitical tensions, economic setbacks, and election-year rhetoric all weighed heavily on investor sentiment. However, as these concerns intensified, the swings grew more pronounced, quickly extinguishing any moves toward a sustained cyclical rally. Management Overview 75 Management Overview (continued) ICON Telecommunication & Utilities Fund In this setting, upturns were typically led by economically sensitive sectors, while defensive issues prevailed during market downturns. In all, a slight negative bias held back second-half returns, even as our valuation and relative strength readings continued to support a recovery-based theme driven by sustainable economic growth, low interest rates and nominal inflation. Q. HOW DID INDIVIDUAL INDUSTRIES AND COMPANIES AFFECT FUND PERFORMANCE? A. Significant underweighting in integrated telecommunication services and electric utilities worked against relative Fund performance during the period. While we maintained broad company exposure to these industries relative to the narrow benchmarks, our value-based preference for smaller issues prevented us from fully participating in the gains recorded by the large-cap-oriented, sector-specific indexes. For example, three of the 15 constituent companies in the S&P 1500 Telecommunication Services Index comprised nearly two-thirds of the benchmark on a market-cap weighted basis. At the same time, 10 of the 83 companies comprising the S&P 1500 Utilities Index accounted for almost 44% of the benchmark on a market-cap weighted basis. That being said, our overweight position in wireless telecommunication services contributed positively to Fund performance on both an absolute and relative basis. Having stood out for much of the period due to strong valuation and relative strength metrics, we virtually doubled the Fund's weighting during the fiscal year as the industry enjoyed widespread global leadership. The wireless theme enjoyed worldwide strength during the period and Fund performance was aided by three overseas wireless telecommunications services operators. The American Depositary Receipts (ADRs) of Russia-based Mobile TeleSystems and Mexico's America Movil S.A. de C.V. both were measurable company contributors to Fund returns as they benefited from strong subscriber growth in their respective regions. Meanwhile, Philippine Long Distance Telephone Co., that country's leading telecommunication services provider, advanced on strong operating results. Among the Fund's poorest-performing stocks, Intrado Inc. fell as licensing revenue delays and cost writedowns led to lower-than-expected earnings for the provider of emergency response support services. Elsewhere, messaging services supplier j2 Global Communications, Inc. struggled as subscriber revenue experienced a double-digit decline. Wireless services provider Telemig Celular Participacoes S.A., another ADR in the Fund, also retreated as its CEO's pending retirement led to uncertainty regarding the company's future prospects. 76 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager Q. WHAT IS THE INVESTMENT OUTLOOK FOR THE TELECOMMUNICATION & UTILITIES SECTOR? A. Although our methodology continues to support a sustainable recovery-driven rally, the defensive nature of the sector does not lend itself to cyclical leadership. Nevertheless, we still see clear value in both the market and the sector, and as a result, are convinced that strong upside potential remains, assuming sound ongoing fundamentals and the tempering of investor concerns. PERFORMANCE HIGHLIGHTS September 30, 2004 - A valuation-driven tilt toward small- and mid-cap stocks accounted for the Fund's relative underperformance as large-caps bolstered defensive sectors. - Stocks that detracted from performance during the period included Intrado Inc., j2 Global Communications, Inc. and Telemig Celular Participacoes. - Our methodology led us to underweight integrated telecommunication services and electric utilities, which worked against Fund performance during the period. - Conversely, valuation and relative strength readings led us to overweight wireless telecommunication services, which enjoyed widespread global leadership. - Among the Fund's best-performing holdings during the period were the ADRs of Mobile TeleSystems, America Movil S.A. de C.V. and Philippine Long Distance Telephone Co. The unmanaged S&P/Barra Growth and Value indexes are constructed by dividing stocks in indexes according to book-to-price ratio. The Value index contains firms with higher book-to-price ratios; conversely, the Growth index has firms with lower book-to-price ratios. Both indexes are capitalization-weighted. Management Overview 77 Management Overview (continued) ICON Telecommunication & Utilities Fund TOP 10 INDUSTRIES September 30, 2004 Electric Utilities 32.0% Multi-Utilities & Unregulated Power 26.0% Integrated Telecommunication Services 11.1% Wireless Telecommunication Services 10.0% Gas Utilities 9.9% Communications Equipment 3.2% Water Utilities 3.0% Environmental Services 2.0% Oil & Gas Refining & Marketing & Transportation 1.4% Building Products 1.2%
Percentages are based upon net assets. 78 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 7/9/97 --------------------------------------------------------------------------------------- ICON Telecommunication & Utilities Fund 17.57% 0.61% 7.54% --------------------------------------------------------------------------------------- S&P 1500 Telecommunications Services Index 25.45% -14.31% -0.39% --------------------------------------------------------------------------------------- S&P 1500 Utilities Index 19.58% 2.54% 5.47% --------------------------------------------------------------------------------------- S&P 1500 Index 14.58% -0.12% 5.02% ---------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON S&P 1500 TELECOMMUNICATION & S&P 1500 UTILITIES TELECOMMUNICATIONS UTILITIES FUND INDEX SERVICES INDEX S&P 1500 INDEX ------------------- ------------------ ------------------ -------------- 7/9/97 10000 10000 10000 10000 9/30/97 10630 10417 12707 10597 9/30/98 14232 13226 15105 11262 9/30/99 16402 12967 21048 14339 9/30/00 18860 18732 17603 16548 9/30/01 15327 14540 13802 12290 9/30/02 11948 10056 5960 9976 9/30/03 14380 12292 7750 12439 9/30/04 16906 14699 9723 14251
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 7/9/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 79 Management Overview (continued) ICON Telecommunication & Utilities Fund FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Telecommunication & Utilities Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 977.80 $6.77 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,018.15 $6.91 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 1.37% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. 80 Management Overview Schedule of Investments ICON Telecommunication & Utilities Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- COMMON STOCKS 99.8% UNITED STATES OF AMERICA 89.6% ENERGY 1.4% OIL & GAS REFINING & MARKETING & TRANSPORTATION 1.4% 13,600 Kinder Morgan, Inc. $ 854,352 ------------ TOTAL ENERGY 854,352 INDUSTRIALS 3.2% BUILDING PRODUCTS 1.2% 11,700 Simpson Manufacturing Co., Inc. 739,440 ENVIRONMENTAL SERVICES 2.0% 38,250 Waste Connections, Inc.(a) 1,211,760 ------------ TOTAL INDUSTRIALS 1,951,200 INFORMATION TECHNOLOGY 3.2% COMMUNICATIONS EQUIPMENT 3.2% 27,400 Belden CDT Inc. 597,320 34,400 Comtech Telecommunications Corp.(a) 932,240 46,100 Tellabs, Inc.(a) 423,659 ------------ 1,953,219 ------------ TOTAL INFORMATION TECHNOLOGY 1,953,219 TELECOMMUNICATIONS & UTILITIES 81.8% ELECTRIC UTILITIES 32.0% 103,300 Allegheny Energy, Inc.(a) 1,648,668 94,700 Cleco Corporation 1,632,628 79,600 DPL Inc. 1,638,168 55,500 DTE Energy Company 2,341,545 50,100 FirstEnergy Corp. 2,058,108 25,800 FPL Group, Inc. 1,762,656 60,600 IDACORP, Inc. 1,761,036 60,500 PG&E Corporation(a) 1,839,200 49,300 Pinnacle West Capital Corporation 2,045,950 96,200 PNM Resources Inc. 2,165,462 15,700 PPL Corporation 740,726 ------------ 19,634,147 GAS UTILITIES 9.9% 45,000 Atmos Energy Corporation 1,133,550 80,100 NiSource Inc. 1,682,901
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- 48,500 Northwest Natural Gas Company $ 1,538,905 72,200 Southwestern Energy Company(a) 1,729,190 ------------ 6,084,546 INTEGRATED TELECOMMUNICATION SERVICES 7.5% 25,900 Golden Telecom, Inc. 738,927 50,200 SBC Communications Inc. 1,302,690 73,500 Sprint Corporation 1,479,555 27,500 Verizon Communications Inc. 1,082,950 ------------ 4,604,122 MULTI-UTILITIES & UNREGULATED POWER 26.0% 56,900 Constellation Energy Group, Inc. 2,266,896 87,600 Duke Energy Corporation 2,005,164 18,700 Energen Corporation 963,985 75,900 Energy East Corporation 1,911,162 15,500 Equitable Resources, Inc. 841,805 58,300 ONEOK, Inc. 1,516,966 32,700 Public Service Enterprise Group Incorporated 1,393,020 37,700 Questar Corporation 1,727,414 66,600 Sempra Energy 2,410,254 99,400 Sierra Pacific Resources(a) 889,630 ------------ 15,926,296 WATER UTILITIES 3.0% 24,100 American States Water Company 600,090 56,900 Aqua America Inc. 1,258,059 ------------ 1,858,149 WIRELESS TELECOMMUNICATION SERVICES 3.4% 47,400 Nextel Communications, Inc. -- Class A(a) 1,130,016 22,500 NII Holdings Inc.(a) 927,225 ------------ 2,057,241 ------------ TOTAL TELECOMMUNICATIONS & UTILITIES 50,164,501 ------------ TOTAL UNITED STATES OF AMERICA 54,923,272
Schedule of Investments 81 Schedule of Investments (continued) ICON Telecommunication & Utilities Fund September 30, 2004
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- AMERICAN DEPOSITARY RECEIPTS 10.2% PHILIPPINES 2.1% INTEGRATED TELECOMMUNICATION SERVICES 2.1% 52,900 Philippine Long Distance Telephone Company(a) $ 1,319,608 ------------ TOTAL PHILIPPINES 1,319,608 MEXICO 4.2% INTEGRATED TELECOMMUNICATION SERVICES 1.4% 27,600 Telefonos de Mexico SA de CV 890,652 WIRELESS TELECOMMUNICATION SERVICES 2.8% 43,500 America Movil S.A. de C.V. 1,697,805 ------------ TOTAL MEXICO 2,588,457 RUSSIA 3.9% WIRELESS TELECOMMUNICATION SERVICE 3.9% 10,300 AO VimpelCom 1,120,640 8,600 Mobile Telesystems 1,246,914 ------------ TOTAL WIRELESS TELECOMMUNICATION SERVICE 2,367,554 ------------ TOTAL RUSSIA 2,367,554 ------------ TOTAL AMERICAN DEPOSITARY RECEIPTS 6,275,619 ------------ TOTAL COMMON STOCKS (COST $51,735,028) 61,198,891
SHARES OR PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- SHORT-TERM INVESTMENT 0.2% VARIABLE RATE DEMAND NOTE 0.2% $122,511 American Family Demand Note, 1.4525%# $ 122,511 ------------ TOTAL SHORT-TERM INVESTMENT (COST $122,511) 122,511 ------------ TOTAL INVESTMENTS 100.0% (COST $51,857,539) 61,321,402 ------------ OTHER ASSETS LESS LIABILITIES 0.0% 3,961 ------------ NET ASSETS 100.0% $ 61,325,363 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security # Variable rate demand notes are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2004. 82 Schedule of Investments Management Overview ICON Short-Term Fixed Income Fund -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Short-Term Fixed Income Fund returned -0.05% for the fiscal year ended September 30, 2004, trailing its unmanaged benchmark, the Merrill Lynch 1-Year Treasury Bill Index, which returned 0.89%. Total returns for other periods as of September 30, 2004 are listed on page 84. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Having laid the groundwork for higher short-term interest rates, the Federal Reserve Board embarked upon a rare election-year policy shift, raising the target overnight lending rate to 1.75% from a 45-year low of 1.00%. The short end of the yield curve responded in kind, with the 3-Month U.S. Treasury Bill yield increasing from 0.943% at the beginning of the period to 1.705% at period-end. Despite these gains, the environment for cash equivalents remained largely unfavorable, as yields failed to keep pace with reported nominal inflation. Q. HOW WAS THE FUND MANAGED AND HOW DID THAT AFFECT PERFORMANCE? A. As existing short-term holdings matured and were subsequently liquidated during the period, 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. Although this strategy offered considerable flexibility in a rising rate environment, it failed to improve performance as the Fund's operating expenses continued to detract from overall returns. Q. WHY DID THE FUND CEASE OPERATIONS ON OCTOBER 27, 2004? A. Given its small asset base, high operating expenses, declining investment performance, and limited growth prospects, the Fund's Board of Trustees unanimously concluded that the Fund's continued operation would not be feasible and that a complete liquidation and termination would be in the best interests of the Fund's shareholders. Receipt of a Liquidating Distribution is a taxable event and it is urged that Fund shareholders consult their tax adviser regarding the tax consequences. Management Overview 83 Management Overview (continued) ICON Short-Term Fixed Income Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2004
SINCE INCEPTION 1 YEAR 5 YEARS 2/7/97 --------------------------------------------------------------------------------------- ICON Short-Term Fixed Income Fund -0.05% 1.68% 2.81% --------------------------------------------------------------------------------------- Merrill Lynch 1-Year U.S. Treasury Bill Index 0.89% 3.85% 4.41% ---------------------------------------------------------------------------------------
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. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. Following its liquidation on October 27, 2004, the Fund ceased operations. VALUE OF A $10,000 INVESTMENT through September 30, 2004 [LINE GRAPH]
ICON SHORT-TERM FIXED INCOME MERRILL LYNCH 1-YEAR U.S. TREASURY FUND BILL INDEX ---------------------------- ---------------------------------- 2/7/97 10000 10000 9/30/97 10307 10386 9/30/98 10984 11046 9/30/99 11372 11516 9/30/00 11878 12130 9/30/01 12252 13050 9/30/02 12369 13540 9/30/03 12367 13786 9/30/04 12361 13909
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. 84 Management Overview FUND EXPENSE EXAMPLE (UNAUDITED) September 30, 2004 EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. The ICON Funds do not charge these types of fees. Funds also incur various ongoing expenses, including management fees, distribution and/or service fees, and other fund expenses, which are indirectly paid by shareholders. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the ICON Short-Term Fixed Income Fund and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/04 - 9/30/04). ACTUAL EXPENSES The first line in the table below provides information about actual account values and actual expenses. The Example below includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example below does not include client specific fees, such as the $15.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. The Example also does not include portfolio trading commissions and related trading expenses. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds.
BEGINNING ENDING EXPENSES PAID ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD 4/1/04 9/30/04 4/1/04-9/30/04* ---------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 999.80 $3.75 ---------------------------------------------------------------------------------------------- Hypothetical Example $1,000.00 $1,021.25 $3.79 (5% return before expenses) ----------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six-month expense ratio of 0.75% annualized, multiplied by the average account value over the period, multiplied by 183/366 to reflect the one-half year period. Management Overview 85 Schedule of Investments ICON Short-Term Fixed Income Fund September 30, 2004
PRINCIPAL AMOUNT MARKET VALUE --------------------------------------------- SHORT-TERM INVESTMENTS 100.3% CERTIFICATES OF DEPOSIT 4.2% $ 99,000 Fremont Invt, 1.20%, 10-14-04 $ 98,980 99,000 Lehman Brothers, 1.2%, 10-14-04 98,980 ------------ TOTAL CERTIFICATES OF DEPOSIT 197,960 ------------ U.S. GOVERNMENT AGENCIES 96.1% 4,488,000 Federal Home Loan Bank Discount Note, 1.369%, 10-01-04 4,488,000 ------------ TOTAL U.S. GOVERNMENT AGENCIES 4,488,000 ------------ TOTAL SHORT-TERM INVESTMENTS 4,685,960 ------------ TOTAL INVESTMENTS 100.3% (AMORTIZED COST $4,686,000) 4,685,960 ------------ LIABILITIES LESS OTHER ASSETS (0.3%) (15,390) ------------ NET ASSETS 100.0% $ 4,670,570 ============
The accompanying notes are an integral part of the financial statements. Dates shown on securities are the due dates of the obligation. 86 Schedule of Investments THIS PAGE INTENTIONALLY LEFT BLANK Statements of Assets and Liabilities September 30, 2004
ICON CONSUMER ICON ICON ICON DISCRETIONARY FUND ENERGY FUND FINANCIAL FUND HEALTHCARE FUND ------------------ ------------ -------------- --------------- ASSETS Investments, at cost $130,693,035 $236,370,805 $160,573,858 $250,137,318 ------------------ ------------ -------------- --------------- Investments, at value 152,505,356 295,971,347 188,373,577 282,990,082 Cash 1 2,514 9,842 - Receivables: Fund shares sold 251,199 6,153,037 291,640 655,708 Investments sold 4,553,324 - - 4,807,039 Interest 362 88 458 2,269 Dividends 105,172 314,646 139,481 16,501 Other assets 7,910 12,036 9,856 15,020 ------------------ ------------ -------------- --------------- Total Assets 157,423,324 302,453,668 188,824,854 288,486,619 ------------------ ------------ -------------- --------------- LIABILITIES Payables: Fund shares redeemed 84,466 175,365 152,191 405,903 Investments bought 5,167,942 14,310,782 - 1,988,328 Advisory fees 124,580 203,439 153,685 234,064 Expense limitation recoupment - - - - Fund accounting, custodial and transfer agent fees 36,370 61,717 43,823 67,445 Administration fees 5,891 11,025 7,309 11,080 Distributions due to shareholders - - - - Accrued expenses 82,331 77,436 74,396 109,825 ------------------ ------------ -------------- --------------- Total Liabilities 5,501,580 14,839,764 431,404 2,816,645 ------------------ ------------ -------------- --------------- NET ASSETS $151,921,744 $287,613,904 $188,393,450 $285,669,974 ================== ============ ============== =============== NET ASSETS CONSIST OF Paid-in capital $136,202,569 $235,660,816 $147,847,004 $251,940,361 Accumulated undistributed net investment income/(loss) - - 249,818 - Accumulated undistributed net realized gain/(loss) from investments (6,093,146) (7,647,454) 12,496,909 876,849 Unrealized appreciation/(depreciation) on securities 21,812,321 59,600,542 27,799,719 32,852,764 ------------------ ------------ -------------- --------------- NET ASSETS $151,921,744 $287,613,904 $188,393,450 $285,669,974 ================== ============ ============== =============== Shares outstanding (unlimited shares authorized, no par value) 11,960,771 13,188,421 14,098,525 20,857,551 Net asset value (offering price and redemption price per share) $ 12.70 $ 21.81 $ 13.36 $ 13.70
The accompanying notes are an integral part of the financial statements. 88 Financial Statements
ICON ICON LEISURE AND ICON ICON ICON INFORMATION CONSUMER ICON TELECOMMUNICATION SHORT-TERM FIXED INDUSTRIALS FUND TECHNOLOGY FUND STAPLES FUND MATERIALS FUND & UTILITIES FUND INCOME FUND ---------------- --------------- ------------ -------------- ----------------- ---------------- $177,349,740 $226,178,250 $70,377,595 $118,615,018 $51,857,539 $4,686,000 ---------------- --------------- ------------ -------------- ----------------- ---------------- 214,970,239 246,345,130 84,134,083 142,715,196 61,321,402 4,685,960 7,645 2,845 - 15,664 1,992 734 357,538 294,699 159,016 4,087,500 208,722 - - 8,912,630 6,831,268 2,720,093 2,858,417 - 53 226 358 53 181 1,106 154,902 99,944 106,265 143,418 139,634 - 10,156 10,138 6,536 6,423 3,199 - ---------------- --------------- ------------ -------------- ----------------- ---------------- 215,500,533 255,665,612 91,237,526 149,688,347 64,533,547 4,687,800 ---------------- --------------- ------------ -------------- ----------------- ---------------- 100,671 259,070 40,925 63,338 32,020 1,199 5,405,444 10,805,148 7,992,598 9,599,643 3,068,951 - 164,703 177,814 86,028 102,227 49,669 2,643 - - - - - 2,398 46,650 55,203 25,802 29,673 15,069 1,668 8,131 9,479 3,219 5,277 2,374 181 - - - - - - 81,676 106,495 66,525 49,870 40,101 9,141 ---------------- --------------- ------------ -------------- ----------------- ---------------- 5,807,275 11,413,209 8,215,097 9,850,028 3,208,184 17,230 ---------------- --------------- ------------ -------------- ----------------- ---------------- $209,693,258 $244,252,403 $83,022,429 $139,838,319 $61,325,363 $4,670,570 ================ =============== ============ ============== ================= ================ $196,354,307 $288,657,351 $59,001,769 $135,490,321 $56,133,428 $4,677,555 - - - 66,439 580,891 (117) (24,281,548) (64,571,828) 10,264,172 (19,818,619) (4,852,819) (6,828) 37,620,499 20,166,880 13,756,488 24,100,178 9,463,863 (40) ---------------- --------------- ------------ -------------- ----------------- ---------------- $209,693,258 $244,252,403 $83,022,429 $139,838,319 $61,325,363 $4,670,570 ================ =============== ============ ============== ================= ================ 19,939,767 30,910,744 5,723,523 15,446,848 9,275,792 515,363 $ 10.52 $ 7.90 $ 14.51 $ 9.05 $ 6.61 $ 9.06
Financial Statements 89 Statements of Operations For the year ended September 30, 2004
ICON CONSUMER ICON ICON ICON DISCRETIONARY FUND ENERGY FUND FINANCIAL FUND HEALTHCARE FUND ------------------ ----------- -------------- --------------- INVESTMENT INCOME Interest $ 9,866 $ 179,443 $ 13,347 $ 81,427 Dividends 1,695,111 1,413,695 2,696,528 545,727 Foreign taxes withheld (40,254) (132,168) (25,102) (5,954) ------------------ ----------- -------------- --------------- Total Investment Income 1,664,723 1,460,970 2,684,773 621,200 ------------------ ----------- -------------- --------------- EXPENSES Advisory fees 1,784,984 1,282,770 1,625,653 2,454,126 Fund accounting, custodial and transfer agent fees 271,627 230,554 248,652 384,838 Administration fees 87,620 64,263 79,745 120,549 Audit fees 20,868 15,072 19,002 28,772 Registration fees 31,389 34,452 30,992 35,207 Legal fees 7,622 4,340 6,599 9,465 Insurance expense 12,814 6,743 14,576 12,337 Trustee fees and expenses 14,126 11,291 13,497 18,857 Shareholder reports 43,307 32,729 41,433 55,263 Interest expense 33,713 84 19,078 - Other expenses 28,352 39,784 36,814 42,445 ------------------ ----------- -------------- --------------- Total expenses before expense reimbursement 2,336,422 1,722,082 2,136,041 3,161,859 Expense (reimbursement)/recoupment by Adviser due to expense limitation agreement - - - - ------------------ ----------- -------------- --------------- Net Expenses 2,336,422 1,722,082 2,136,041 3,161,859 ------------------ ----------- -------------- --------------- NET INVESTMENT INCOME (LOSS) (671,699) (261,112) 548,732 (2,540,659) ------------------ ----------- -------------- --------------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from investment transactions 17,989,808 6,377,507 17,877,672 10,762,480 Change in unrealized net appreciation/(depreciation) on securities (6,390,181) 51,219,049 13,429,005 6,619,577 ------------------ ----------- -------------- --------------- Net realized and unrealized gain/(loss) on investments 11,599,627 57,596,556 31,306,677 17,382,057 ------------------ ----------- -------------- --------------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $10,927,928 $57,335,444 $31,855,409 $14,841,398 ================== =========== ============== ===============
The accompanying notes are an integral part of the financial statements. 90 Financial Statements
ICON ICON LEISURE AND ICON ICON ICON INFORMATION CONSUMER ICON TELECOMMUNICATION SHORT-TERM FIXED INDUSTRIALS FUND TECHNOLOGY FUND STAPLES FUND MATERIALS FUND & UTILITIES FUND INCOME FUND ---------------- --------------- ------------ -------------- ----------------- ---------------- $ 41,877 $ 25,472 $ 12,335 $ 16,787 $ 6,812 $ 72,010 1,443,352 1,121,006 1,053,321 1,016,944 1,326,008 - (12,614) (21,185) (2,040) (7,518) (9,173) - ---------------- --------------- ------------ -------------- ----------------- ---------------- 1,472,615 1,125,293 1,063,616 1,026,213 1,323,647 72,010 ---------------- --------------- ------------ -------------- ----------------- ---------------- 1,801,490 2,828,350 1,048,013 686,842 543,803 29,781 277,755 406,636 167,289 120,353 91,166 8,058 88,789 139,882 50,611 34,110 26,711 2,228 21,102 33,023 12,253 8,067 6,364 532 38,278 50,365 27,233 30,402 27,182 14,575 7,582 13,104 4,321 2,431 2,239 165 8,126 21,605 8,458 5,382 3,924 861 15,169 24,604 8,209 5,952 4,486 428 37,567 64,125 27,557 17,273 17,727 1,510 6,797 101,399 14,443 6,786 2,186 - 19,253 18,834 22,028 21,286 16,973 9,491 ---------------- --------------- ------------ -------------- ----------------- ---------------- 2,321,908 3,701,927 1,390,415 938,884 742,761 67,629 - - - - - (26,776) ---------------- --------------- ------------ -------------- ----------------- ---------------- 2,321,908 3,701,927 1,390,415 938,884 742,761 40,853 ---------------- --------------- ------------ -------------- ----------------- ---------------- (849,293) (2,576,634) (326,799) 87,329 580,886 31,157 ---------------- --------------- ------------ -------------- ----------------- ---------------- 5,713,298 30,876,230 11,738,085 1,298,590 3,885,662 (3,008) 22,171,644 (41,133,606) 2,299,602 22,065,303 3,437,864 (25,574) ---------------- --------------- ------------ -------------- ----------------- ---------------- 27,884,942 (10,257,376) 14,037,687 23,363,893 7,323,526 (28,582) ---------------- --------------- ------------ -------------- ----------------- ---------------- $27,035,649 $(12,834,010) $13,710,888 $23,451,222 $7,904,412 $ 2,575 ================ =============== ============ ============== ================= ================
Financial Statements 91 Statements of Changes in Net Assets
ICON CONSUMER DISCRETIONARY FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ (671,699) $ (934,138) Net realized gain/(loss) from investment transactions 17,989,808 (3,833,114) Change in unrealized appreciation/(depreciation) on securities (6,390,181) 24,416,611 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 10,927,928 19,649,359 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions - - ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 62,754,370 74,163,195 Reinvested dividends and distributions - - Shares repurchased (71,825,277) (65,388,174) ------------------ ------------------ Net increase/(decrease) from fund share transactions (9,070,907) 8,775,021 ------------------ ------------------ Total net increase/(decrease) in net assets 1,857,021 28,424,380 NET ASSETS Beginning of period 150,064,723 121,640,343 ------------------ ------------------ End of period $151,921,744 $150,064,723 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 4,709,437 7,144,559 Reinvested dividends and distributions - - Shares repurchased (5,477,472) (6,440,247) ------------------ ------------------ Net increase/(decrease) (768,035) 704,312 Shares outstanding beginning of period 12,728,806 12,024,494 ------------------ ------------------ Shares outstanding end of period 11,960,771 12,728,806 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $213,763,244 $215,314,229 Proceeds from sales of securities 220,582,308 209,236,884 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ================== ==================
The accompanying notes are an integral part of the financial statements. 92 Financial Statements
ICON ENERGY FUND ---------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ (261,112) $ (219,166) Net realized gain/(loss) from investment transactions 6,377,507 (5,971,578) Change in unrealized appreciation/(depreciation) on securities 51,219,049 15,279,562 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 57,335,444 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 246,044,827 43,780,341 Reinvested dividends and distributions - - Shares repurchased (71,395,398) (101,459,945) ------------------ ------------------ Net increase/(decrease) from fund share transactions 174,649,429 (57,679,604) ------------------ ------------------ Total net increase/(decrease) in net assets 231,984,873 (48,590,786) NET ASSETS Beginning of period 55,629,031 104,219,817 ------------------ ------------------ End of period $287,613,904 $ 55,629,031 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 13,031,426 3,435,224 Reinvested dividends and distributions - - Shares repurchased (3,903,835) (8,177,227) ------------------ ------------------ Net increase/(decrease) 9,127,591 (4,742,003) Shares outstanding beginning of period 4,060,830 8,802,833 ------------------ ------------------ Shares outstanding end of period 13,188,421 4,060,830 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $184,627,946 $ 30,459,479 Proceeds from sales of securities 15,787,580 93,961,245 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ================== ==================
The accompanying notes are an integral part of the financial statements. Financial Statements 93 Statements of Changes in Net Assets (continued)
ICON FINANCIAL FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 548,732 $ 702,971 Net realized gain/(loss) from investment transactions 17,877,672 557,118 Change in unrealized appreciation/(depreciation) on securities 13,429,005 26,857,798 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 31,855,409 28,117,887 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (576,093)* (399,824)* Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions (576,093) (399,824) ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 99,493,912 76,466,734 Reinvested dividends and distributions 570,282 392,348 Shares repurchased (82,211,184) (75,431,900) ------------------ ------------------ Net increase/(decrease) from fund share transactions 17,853,010 1,427,182 ------------------ ------------------ Total net increase/(decrease) in net assets 49,132,326 29,145,245 NET ASSETS Beginning of period 139,261,124 110,115,879 ------------------ ------------------ End of period $188,393,450 $139,261,124 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 7,735,769 8,155,031 Reinvested dividends and distributions 47,802 42,462 Shares repurchased (6,605,919) (7,737,576) ------------------ ------------------ Net increase/(decrease) 1,177,652 459,917 Shares outstanding beginning of period 12,920,873 12,460,956 ------------------ ------------------ Shares outstanding end of period 14,098,525 12,920,873 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $204,755,026 $188,775,243 Proceeds from sales of securities 186,785,022 184,312,033 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ 249,818 $ 290,474 ================== ==================
* The tax character of distributions to shareholders from net investment income for the periods ending September 30, 2004 and September 30, 2003 is ordinary income. The accompanying notes are an integral part of the financial statements. 94 Financial Statements
ICON HEALTHCARE FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ (2,540,659) $ (1,014,408) Net realized gain/(loss) from investment transactions 10,762,480 (6,819,268) Change in unrealized appreciation/(depreciation) on securities 6,619,577 24,785,530 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 14,841,398 16,951,854 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions - - ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 196,893,511 116,684,705 Reinvested dividends and distributions - - Shares repurchased (67,323,826) (85,408,913) ------------------ ------------------ Net increase/(decrease) from fund share transactions 129,569,685 31,275,792 ------------------ ------------------ Total net increase/(decrease) in net assets 144,411,083 48,227,646 NET ASSETS Beginning of period 141,258,891 93,031,245 ------------------ ------------------ End of period $285,669,974 $141,258,891 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 14,262,864 10,595,794 Reinvested dividends and distributions - - Shares repurchased (4,910,162) (8,078,236) ------------------ ------------------ Net increase/(decrease) 9,352,702 2,517,558 Shares outstanding beginning of period 11,504,849 8,987,291 ------------------ ------------------ Shares outstanding end of period 20,857,551 11,504,849 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $249,051,968 $126,928,736 Proceeds from sales of securities 123,293,752 99,893,688 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ================== ==================
The accompanying notes are an integral part of the financial statements. Financial Statements 95 Statements of Changes in Net Assets (continued)
ICON INDUSTRIALS FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ (849,293) $ (450,789) Net realized gain/(loss) from investment transactions 5,713,298 (6,100,761) Change in unrealized appreciation/(depreciation) on securities 22,171,644 15,072,214 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 27,035,649 8,520,664 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions - - ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 119,436,391 90,962,271 Reinvested dividends and distributions - - Shares repurchased (69,333,095) (30,848,064) ------------------ ------------------ Net increase/(decrease) from fund share transactions 50,103,296 60,114,207 ------------------ ------------------ Total net increase/(decrease) in net assets 77,138,945 68,634,871 NET ASSETS Beginning of period 132,554,313 63,919,442 ------------------ ------------------ End of period $209,693,258 $132,554,313 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 11,909,801 10,993,513 Reinvested dividends and distributions - - Shares repurchased (7,036,857) (3,954,112) ------------------ ------------------ Net increase/(decrease) 4,872,944 7,039,401 Shares outstanding beginning of period 15,066,823 8,027,422 ------------------ ------------------ Shares outstanding end of period 19,939,767 15,066,823 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $132,934,226 $119,495,145 Proceeds from sales of securities 80,111,027 64,553,264 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ================== ==================
The accompanying notes are an integral part of the financial statements. 96 Financial Statements
ICON INFORMATION TECHNOLOGY FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ (2,576,634) $ (2,215,300) Net realized gain/(loss) from investment transactions 30,876,230 3,753,887 Change in unrealized appreciation/(depreciation) on securities (41,133,606) 69,595,068 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations (12,834,010) 71,133,655 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions - - ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 178,801,650 267,777,926 Reinvested dividends and distributions - - Shares repurchased (229,687,727) (106,562,014) ------------------ ------------------ Net increase/(decrease) from fund share transactions (50,886,077) 161,215,912 ------------------ ------------------ Total net increase/(decrease) in net assets (63,720,087) 232,349,567 NET ASSETS Beginning of period 307,972,490 75,622,923 ------------------ ------------------ End of period $ 244,252,403 $ 307,972,490 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 21,330,842 39,746,545 Reinvested dividends and distributions - - Shares repurchased (27,658,934) (15,146,622) ------------------ ------------------ Net increase/(decrease) (6,328,092) 24,599,923 Shares outstanding beginning of period 37,238,836 12,638,913 ------------------ ------------------ Shares outstanding end of period 30,910,744 37,238,836 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ 537,991,382 $ 453,451,611 Proceeds from sales of securities 591,381,665 293,739,149 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ================== ==================
The accompanying notes are an integral part of the financial statements. Financial Statements 97 Statements of Changes in Net Assets (continued)
ICON LEISURE AND CONSUMER STAPLES FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ (326,799) $ (412,917) Net realized gain/(loss) from investment transactions 11,738,085 (1,107,203) Change in unrealized appreciation/(depreciation) on securities 2,299,602 9,588,234 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 13,710,888 8,068,114 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions - - ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 52,673,531 39,239,478 Reinvested dividends and distributions - - Shares repurchased (65,709,303) (53,301,166) ------------------ ------------------ Net increase/(decrease) from fund share transactions (13,035,772) (14,061,688) ------------------ ------------------ Total net increase/(decrease) in net assets 675,116 (5,993,574) NET ASSETS Beginning of period 82,347,313 88,340,887 ------------------ ------------------ End of period $ 83,022,429 $ 82,347,313 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 3,663,087 3,467,652 Reinvested dividends and distributions - - Shares repurchased (4,572,081) (4,724,938) ------------------ ------------------ Net increase/(decrease) (908,994) (1,257,286) Shares outstanding beginning of period 6,632,517 7,889,803 ------------------ ------------------ Shares outstanding end of period 5,723,523 6,632,517 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $151,387,685 $112,992,030 Proceeds from sales of securities 163,795,587 125,691,402 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ================== ==================
The accompanying notes are an integral part of the financial statements. 98 Financial Statements
ICON MATERIALS FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 87,329 $ 236,659 Net realized gain/(loss) from investment transactions 1,298,590 (3,456,930) Change in unrealized appreciation/(depreciation) on securities 22,065,303 5,930,581 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 23,451,222 2,710,310 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (198,911)* (93,225)* Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions (198,911) (93,225) ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 111,162,483 14,151,946 Reinvested dividends and distributions 198,136 92,665 Shares repurchased (25,150,862) (45,505,812) ------------------ ------------------ Net increase/(decrease) from fund share transactions 86,209,757 (31,261,201) ------------------ ------------------ Total net increase/(decrease) in net assets 109,462,068 (28,644,116) NET ASSETS Beginning of period 30,376,251 59,020,367 ------------------ ------------------ End of period $139,838,319 $ 30,376,251 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 13,704,883 2,446,314 Reinvested dividends and distributions 26,174 15,406 Shares repurchased (3,179,704) (7,953,735) ------------------ ------------------ Net increase/(decrease) 10,551,353 (5,492,015) Shares outstanding beginning of period 4,895,495 10,387,510 ------------------ ------------------ Shares outstanding end of period 15,446,848 4,895,495 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $123,284,118 $ 52,868,818 Proceeds from sales of securities 41,285,979 80,253,664 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ 66,439 $ 178,021 ================== ==================
* The tax character of distributions to shareholders from net investment income for periods ending September 30, 2004 and September 30, 2003 is ordinary income. The accompanying notes are an integral part of the financial statements. Financial Statements 99 Statements of Changes in Net Assets (continued)
ICON TELECOMMUNICATION & UTILITIES FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 580,886 $ 1,088,542 Net realized gain/(loss) from investment transactions 3,885,662 (2,316,365) Change in unrealized appreciation/(depreciation) on securities 3,437,864 9,090,560 ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 7,904,412 7,862,737 ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (559,797)* (888,104)* Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions (559,797) (888,104) ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 26,477,305 28,972,038 Reinvested dividends and distributions 557,773 886,340 Shares repurchased (15,563,524) (60,690,304) ------------------ ------------------ Net increase/(decrease) from fund share transactions 11,471,554 (30,831,926) ------------------ ------------------ Total net increase/(decrease) in net assets 18,816,169 (23,857,293) NET ASSETS Beginning of period 42,509,194 66,366,487 ------------------ ------------------ End of period $ 61,325,363 $ 42,509,194 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 4,192,093 5,787,036 Reinvested dividends and distributions 94,538 174,133 Shares repurchased (2,487,287) (12,373,258) ------------------ ------------------ Net increase/(decrease) 1,799,344 (6,412,089) Shares outstanding beginning of period 7,476,448 13,888,537 ------------------ ------------------ Shares outstanding end of period 9,275,792 7,476,448 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ 69,915,069 $ 83,676,470 Proceeds from sales of securities 58,301,505 114,328,699 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ 580,891 $ 559,802 ================== ==================
* The tax character of distributions to shareholders from net investment income for periods ending September 30, 2004 and September 30, 2003 is ordinary income. The accompanying notes are an integral part of the financial statements. 100 Financial Statements
ICON SHORT-TERM FIXED INCOME FUND ------------------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, 2004 SEPTEMBER 30, 2003 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 31,157 $ 19,354 Net realized gain/(loss) from investment transactions (3,008) - Net realized gain/(loss) from foreign currency translations - - Change in unrealized appreciation/(depreciation) on securities (25,574) (23,336) ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 2,575 (3,982) ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (31,157)* (20,760)* Net realized gains - - ------------------ ------------------ Net decrease from dividends and distributions (31,157) (20,760) ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold 8,455,732 23,499,482 Reinvested dividends and distributions 30,300 20,010 Shares repurchased (9,952,885) (24,993,710) ------------------ ------------------ Net increase/(decrease) from fund share transactions (1,466,853) (1,474,218) ------------------ ------------------ Total net increase/(decrease) in net assets (1,495,435) (1,498,960) NET ASSETS Beginning of period 6,166,005 7,664,965 ------------------ ------------------ End of period $ 4,670,570 $ 6,166,005 ================== ================== TRANSACTIONS IN FUND SHARES Shares sold 931,859 2,570,121 Reinvested dividends and distributions 3,334 2,181 Shares repurchased (1,095,425) (2,733,550) ------------------ ------------------ Net increase/(decrease) (160,232) (161,248) Shares outstanding beginning of period 675,595 836,843 ------------------ ------------------ Shares outstanding end of period 515,363 675,595 ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-Term Securities) Purchase of securities $ - $ - Proceeds from sales of securities - - Purchases of long-term U.S. government securities - 1,005,625 Proceeds from sales of long-term U.S. government securities - - ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ (117) $ (117) ================== ==================
* The tax character of distributions to shareholders from net investment income for periods ending September 30, 2004 and September 30, 2003 is ordinary income. The accompanying notes are an integral part of the financial statements. Financial Statements 101 Financial Highlights
ICON CONSUMER DISCRETIONARY FUND --------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- -------- -------- -------- ------- Net asset value, beginning of period $ 11.79 $ 10.12 $ 8.96 $ 9.23 $ 9.67 -------- -------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.05) (0.08) (0.06) (0.01) (0.02) Net realized and unrealized gains/(losses) on investments 0.96 1.75 1.22 (0.26) (0.42) -------- -------- -------- -------- ------- Total from investment operations 0.91 1.67 1.16 (0.27) (0.44) -------- -------- -------- -------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - - - Distributions from net realized gains - - - - - -------- -------- -------- -------- ------- Total dividends and distributions - - - - - -------- -------- -------- -------- ------- Net asset value, end of period $ 12.70 $ 11.79 $ 10.12 $ 8.96 $ 9.23 ======== ======== ======== ======== ======= Total return 7.72% 16.50% 12.95% (2.93)% (4.55)% Net assets, end of period (in thousands) $151,922 $150,065 $121,640 $107,075 $40,894 Average net assets for the period (in thousands) 178,011 118,834 184,174 78,281 46,246 Ratio of expenses to average net assets 1.31% 1.40% 1.29% 1.37% 1.35% Ratio of net investment income/(loss) to average net assets (0.38)% (0.79)% (0.49)% (0.10)% (0.27)% Portfolio turnover rate 120.63% 174.51% 128.06% 88.20% 88.44%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 102 Financial Highlights
ICON ENERGY FUND ------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- ------- -------- ------- ------- Net asset value, beginning of period $ 13.70 $ 11.84 $ 11.29 $ 13.19 $ 7.98 -------- ------- -------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.04) (0.04) (0.08) 0.07 0.04 Net realized and unrealized gains/(losses) on investments 8.15 1.90 0.65 (0.76) 5.17 -------- ------- -------- ------- ------- Total from investment operations 8.11 1.86 0.57 (0.69) 5.21 -------- ------- -------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - (0.02) (0.09) - Distributions from net realized gains - - - (1.12) - -------- ------- -------- ------- ------- Total dividends and distributions - - (0.02) (1.21) - -------- ------- -------- ------- ------- Net asset value, end of period $ 21.81 $ 13.70 $ 11.84 $ 11.29 $ 13.19 ======== ======= ======== ======= ======= Total return 59.20% 15.71% 5.03% (6.53)% 65.29% Net assets, end of period (in thousands) $287,614 $55,629 $104,220 $36,945 $44,294 Average net assets for the period (in thousands) 127,920 74,883 71,434 49,195 29,564 Ratio of expenses to average net assets 1.35% 1.40% 1.35% 1.39% 1.36% Ratio of net investment income/(loss) to average net assets (0.20)% (0.29)% (0.61)% 0.54% 0.43% Portfolio turnover rate 13.42% 42.53% 26.30% 134.77% 123.70%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. Financial Highlights 103 Financial Highlights (continued)
ICON FINANCIAL FUND --------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- -------- -------- ------- -------- Net asset value, beginning of period $ 10.78 $ 8.84 $ 12.04 $ 12.26 $ 8.99 -------- -------- -------- ------- -------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.04 0.05 (0.01) 0.06 0.11 Net realized and unrealized gains/(losses) on investments 2.60 1.92 (1.08) 1.13 3.28 -------- -------- -------- ------- -------- Total from investment operations 2.64 1.97 (1.09) 1.19 3.39 -------- -------- -------- ------- -------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.06) (0.03) - (1.41) (0.12) Distributions from net realized gains - - (2.11) - - -------- -------- -------- ------- -------- Total dividends and distributions (0.06) (0.03) (2.11) (1.41) (0.12) -------- -------- -------- ------- -------- Net asset value, end of period $ 13.36 $ 10.78 $ 8.84 $ 12.04 $ 12.26 ======== ======== ======== ======= ======== Total return 24.53% 22.35% (11.88)% 9.57% 38.14% Net assets, end of period (in thousands) $188,393 $139,261 $110,116 $54,318 $100,404 Average net assets for the period (in thousands) 162,121 131,042 60,904 59,425 43,690 Ratio of expenses to average net assets 1.32% 1.34% 1.36% 1.41% 1.33% Ratio of net investment income/(loss) to average net assets 0.34% 0.54% (0.06)% 0.51% 1.14% Portfolio turnover rate 114.50% 142.77% 69.58% 174.41% 28.99%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 104 Financial Highlights
ICON HEALTHCARE FUND ------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- -------- ------- ------- ------- Net asset value, beginning of period $ 12.28 $ 10.35 $ 11.57 $ 11.93 $ 7.98 -------- -------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.14) (0.09) (0.12) (0.10) (0.08) Net realized and unrealized gains/(losses) on investments 1.56 2.02 (0.49) 0.51 4.34 -------- -------- ------- ------- ------- Total from investment operations 1.42 1.93 (0.61) 0.41 4.26 -------- -------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - - - Distributions from net realized gains - - (0.56) (0.77) (0.31) Return of Capital - - (0.05) - - -------- -------- ------- ------- ------- Total dividends and distributions - - (0.61) (0.77) (0.31) -------- -------- ------- ------- ------- Net asset value, end of period $ 13.70 $ 12.28 $ 10.35 $ 11.57 $ 11.93 ======== ======== ======= ======= ======= Total return 11.56% 18.65% (5.63)% 3.39% 55.35% Net assets, end of period (in thousands) $285,670 $141,259 $93,031 $33,646 $49,066 Average net assets for the period (in thousands) 244,742 120,068 44,042 35,981 38,688 Ratio of expenses to average net assets 1.29% 1.34% 1.39% 1.45% 1.38% Ratio of net investment income/(loss) to average net assets (1.04)% (0.84)% (1.05)% (0.98)% (0.74)% Portfolio turnover rate 52.72% 85.52% 104.90% 145.08% 115.05%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. Financial Highlights 105 Financial Highlights (continued)
ICON INDUSTRIALS FUND -------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- -------- -------- ------- ------- Net asset value, beginning of period $ 8.80 $ 7.96 $ 8.55 $ 9.07 $ 10.31 -------- -------- -------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.05) (0.05) (0.02) (0.02) 0.03 Net realized and unrealized gains/(losses) on investments 1.77 0.89 (0.57) (0.48) (0.47) -------- -------- -------- ------- ------- Total from investment operations 1.72 0.84 (0.59) (0.50) (0.44) -------- -------- -------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - (0.02) - Distributions from net realized gains - - - - (0.80) -------- -------- -------- ------- ------- Total dividends and distributions - - - (0.02) (0.80) -------- -------- -------- ------- ------- Net asset value, end of period $ 10.52 $ 8.80 $ 7.96 $ 8.55 $ 9.07 ======== ======== ======== ======= ======= Total return 19.55% 10.55% (6.90)% (5.55)% (4.32)% Net assets, end of period (in thousands) $209,693 $132,554 $ 63,919 $76,325 $22,068 Average net assets for the period (in thousands) 179,657 70,382 107,335 55,928 21,220 Ratio of expenses to average net assets 1.29% 1.43% 1.30% 1.38% 1.38% Ratio of net investment income/(loss) to average net assets (0.47)% (0.64)% (0.24)% (0.16)% 0.34% Portfolio turnover rate 45.77% 90.49% 99.22% 72.65% 72.90%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 106 Financial Highlights
ICON INFORMATION TECHNOLOGY FUND --------------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- -------- -------- -------- ------- Net asset value, beginning of period $ 8.27 $ 5.98 $ 7.80 $ 22.13 $ 19.00 -------- -------- -------- -------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss) (0.08) (0.08)(x) (0.10)(x) (0.10)(x) (0.05)(x) Net realized and unrealized gains/(losses) on investments (0.29) 2.37 (1.72) (4.03) 9.62 -------- -------- -------- -------- ------- Total from investment operations (0.37) 2.29 (1.82) (4.13) 9.57 -------- -------- -------- -------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - - - Distributions from net realized gains - - - (10.20) (6.44) -------- -------- -------- -------- ------- Total dividends and distributions - - - (10.20) (6.44) -------- -------- -------- -------- ------- Net asset value, end of period $ 7.90 $ 8.27 $ 5.98 $ 7.80 $ 22.13 ======== ======== ======== ======== ======= Total return (4.47)% 38.29% (23.33)% (32.90)% 59.24% Net assets, end of period (in thousands) $244,252 $307,972 $ 75,623 $118,851 $46,689 Average net assets for the period (in thousands) 282,062 190,287 189,972 99,875 56,279 Ratio of expenses to average net assets 1.31% 1.35% 1.31% 1.37% 1.35% Ratio of net investment income/(loss) to average net assets (0.91)% (1.16)% (1.09)% (0.90)% (0.23)% Portfolio turnover rate 189.67% 155.39% 190.09% 70.32% 137.69%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. Financial Highlights 107 Financial Highlights (continued)
ICON LEISURE AND CONSUMER STAPLES FUND ------------------------------------------------------------ YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- ------- ------- ------- ------- Net asset value, beginning of period $ 12.42 $ 11.20 $ 9.42 $ 9.24 $ 12.05 -------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) (0.04) (0.06) (0.07) (0.05) 0.01 Net realized and unrealized gains/(losses) on investments 2.13 1.28 1.85 0.26 0.25 -------- ------- ------- ------- ------- Total from investment operations 2.09 1.22 1.78 0.21 0.26 -------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income - - - (0.01) - Distributions from net realized gains - - - (0.02) (3.07) -------- ------- ------- ------- ------- Total dividends and distributions - - - (0.03) (3.07) -------- ------- ------- ------- ------- Net asset value, end of period $ 14.51 $ 12.42 $ 11.20 $ 9.42 $ 9.24 ======== ======= ======= ======= ======= Total return 16.83% 10.89% 18.90% 2.26% 5.27% Net assets, end of period (in thousands) $ 83,022 $82,347 $88,341 $41,162 $ 7,765 Average net assets for the period (in thousands) 104,515 80,928 86,202 41,086 18,029 Ratio of expenses to average net assets 1.33% 1.38% 1.34% 1.40% 1.51% Ratio of net investment income/(loss) to average net assets (0.31)% (0.51)% (0.55)% (0.50)% 0.13% Portfolio turnover rate 148.43% 139.54% 90.43% 148.23% 24.50%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 108 Financial Highlights
ICON MATERIALS FUND ------------------------------------------------------------ YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 -------- ------- ------- ------- ------- Net asset value, beginning of period $ 6.20 $ 5.68 $ 5.70 $ 6.49 $ 7.31 -------- ------- ------- ------- ------- INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.01 0.03 0.02 0.02 0.03 Net realized and unrealized gains/(losses) on investments 2.87 0.50 (0.01) (0.74) (0.85) -------- ------- ------- ------- ------- Total from investment operations 2.88 0.53 0.01 (0.72) (0.82) -------- ------- ------- ------- ------- LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.03) (0.01) (0.03) (0.07) - Distributions from net realized gains - - - - - -------- ------- ------- ------- ------- Total dividends and distributions (0.03) (0.01) (0.03) (0.07) - -------- ------- ------- ------- ------- Net asset value, end of period $ 9.05 $ 6.20 $ 5.68 $ 5.70 $ 6.49 ======== ======= ======= ======= ======= Total return 46.61% 9.36% 0.06% (11.07)% (11.22)% Net assets, end of period (in thousands) $139,838 $30,376 $59,020 $29,200 $18,162 Average net assets for the period (in thousands) 68,497 40,156 45,917 24,544 23,620 Ratio of expenses to average net assets 1.37% 1.47% 1.36% 1.47% 1.41% Ratio of net investment income/(loss) to average net assets 0.13% 0.59% 0.23% 0.40% 0.42% Portfolio turnover rate 59.48% 130.01% 74.55% 91.28% 91.76%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. Financial Highlights 109 Financial Highlights (continued)
ICON TELECOMMUNICATION & UTILITIES FUND ---------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 ------- ------- ------- ------- ------ Net asset value, beginning of period $ 5.69 4.78 $ 6.19 $ 8.13 $10.04 ------- ------- ------- ------- ------ INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.07 0.10 0.10 0.09 0.20 Net realized and unrealized gains/(losses) on investments 0.92 0.87 (1.45) (1.52) 0.99 ------- ------- ------- ------- ------ Total from investment operations 0.99 0.97 (1.35) (1.43) 1.19 ------- ------- ------- ------- ------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.07) (0.06) (0.06) (0.11) (0.16) Distributions from net realized gains - - - (0.40) (2.94) ------- ------- ------- ------- ------ Total dividends and distributions (0.07) (0.06) (0.06) (0.51) (3.10) ------- ------- ------- ------- ------ Net asset value, end of period $ 6.61 5.69 $ 4.78 $ 6.19 $ 8.13 ======= ======= ======= ======= ====== Total return 17.57% 20.36% (22.05)% (18.74)% 14.99% Net assets, end of period (in thousands) $61,325 $42,509 $66,366 $16,537 $8,619 Average net assets for the period (in thousands) 54,232 53,219 20,196 13,554 7,231 Ratio of expenses to average net assets 1.37% 1.41% 1.50% 1.54% 1.53% Ratio of net investment income/(loss) to average net assets 1.07% 2.05% 1.78% 1.22% 2.43% Portfolio turnover rate 108.81% 158.24% 137.81% 46.10% 41.86%
(x) Calculated using the average share method The accompanying notes are an integral part of the financial statements. 110 Financial Highlights
ICON SHORT-TERM FIXED INCOME FUND ------------------------------------------------------- YEAR ENDED SEPTEMBER 30, 2004 2003 2002 2001 2000 ------ ------ ------ ------- ------ Net asset value, beginning of period $ 9.13 $ 9.16 $ 9.14 $ 9.14 $ 9.15 ------ ------ ------ ------- ------ INCOME FROM INVESTMENT OPERATIONS Net investment income/(loss)(x) 0.05 0.02 0.05 0.26 0.39 Net realized and unrealized gains/(losses) on investments (0.05) (0.02) (0.00) 0.02 0.02 ------ ------ ------ ------- ------ Total from investment operations - - 0.05 0.28 0.41 ------ ------ ------ ------- ------ LESS DIVIDENDS AND DISTRIBUTIONS Dividends from net investment income (0.07) (0.03) (0.03) (0.28) (0.39) Distributions from net realized gains - - - - (0.03) Total dividends and distributions (0.07) (0.03) (0.03) (0.28) (0.42) ------ ------ ------ ------- ------ Net asset value, end of period $ 9.06 $ 9.13 $ 9.16 $ 9.14 $ 9.14 ====== ====== ====== ======= ====== Total return (0.05)% (0.02)% 0.96% 3.15% 4.45% Net assets, end of period (in thousands) $4,671 $6,166 $7,665 $20,338 $5,386 Average net assets for the period (in thousands) 4,539 7,255 7,643 6,276 5,367 Ratio of expenses to average net assets 0.90%+ 1.42%+ 1.35%+ 1.52% 1.52% Ratio of net investment income/(loss) to average net assets 0.69%+ 0.27%+ 0.52%+ 2.85% 4.16% Portfolio turnover rate 0.00% 0.00% 0.00% 0.00% 53.26%
(x) Calculated using the average share method + Includes expense waiver (Note 2). If this waiver had not been made, the ratio of expenses to average net assets would have been 1.49% for the year ended September 30, 2004, 1.43% in 2003 and 1.41% in 2002 the ratio of net investment income to average net assets would have been 0.10% for the year ended September 30, 2004, 0.26% in 2003 and 0.58% in 2002. The accompanying notes are an integral part of the financial statements. Financial Highlights 111 Notes to Financial Statements September 30, 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 ("Telecommunication & 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 and sectors. 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 112 Notes to Financial Statements 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. Foreign securities traded in countries outside of the Western Hemisphere are fair valued daily by utilizing the quotations of an independent pricing service, unless the Funds' adviser determines that use of another valuation methodology is appropriate. The pricing service uses statistical analyses and quantitative models to adjust local market prices using factors such as subsequent movement and changes in the prices of indexes, securities and exchange rates in other markets in determining fair value as of the time a Fund calculates its net asset value. The valuation assigned to fair-valued securities for purposes of calculating a Fund's 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 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 Notes to Financial Statements 113 Notes to Financial Statements (continued) obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. No repurchase agreements were purchased or sold by the Funds during the year ended September 30, 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. No forward foreign currency contracts were entered into during the year. OPTIONS TRANSACTIONS. Each Fund (other than the Short-Term Fixed Income Fund) may write put and call options only if it, among other things, (i) owns an offsetting position in the underlying security or (ii) maintains cash or other liquid assets in an amount equal to or greater than its obligation under the option. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current 114 Notes to Financial Statements 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. No option transactions were entered into during the year. 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. Notes to Financial Statements 115 Notes to Financial Statements (continued) 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. INVESTMENT TRANSACTIONS. Security transactions are accounted for as of trade date. Gains and losses realized 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 in the Trust based upon relative net assets. 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 Fund's operating expenses do not exceed 0.75%. Prior to December 1, 2003, ICON may have voluntarily waived a portion of its advisory fee. 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 year ended September 30, 2004, ICON reimbursed $29,174 and recouped $2,398 on shares of the Short-Term Fixed Income Fund. These expenses are subject to recovery by ICON based on a rolling three-year period. However, with the Short-Term Fixed Income Fund having ceased operations, ICON will not recoup any additional expenses. 116 Notes to Financial Statements 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 0.055% 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. 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. LINE OF CREDIT The Funds have entered into Lines of Credit agreements with U.S. Bank that allows the Funds to borrow funds, subject to certain conditions, for temporary or emergency purposes. Interest is calculated at prime, which was 4.75% at September 30, 2004. The maximum borrowing is limited to 25% of eligible securities held by the portfolio subject to the following maximums. ICON Consumer Discretionary Fund $ 30,000,000 ICON Energy Fund $ 30,000,000 ICON Financial Fund $ 35,250,000 ICON Healthcare Fund $ 50,000,000 ICON Industrials Fund $ 17,250,000 ICON Information Technology Fund $ 56,500,000 ICON Leisure and Consumer Staples Fund $ 19,250,000 ICON Materials Fund $ 15,000,000 ICON Telecommunication & Utilities Fund $ 8,750,000 ICON Short-Term Fixed Income Fund $ 1,750,000
There was no amount outstanding on the line of credit for any of the Funds as of September 30, 2004. A commitment fee of $500 per line of credit has been paid by each Fund. Notes to Financial Statements 117 Notes to Financial Statements (continued) 4. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryovers. The tax components of capital shown in the following tables represent losses or deductions the Funds may be able to offset against income and gains recognized in future years and post October loss deferrals. The accumulated losses noted in the following tables represent net capital loss carryovers as of September 30, 2004 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, 2012. In 2004, the Short-Term Fixed Income Fund incurred "post October" losses during the period from November 1, 2003 through September 30, 2004. These losses will be deferred for tax purposes and recognized in the year ending September 30, 2005.
ACCUMULATED UNDISTRIBUTED UNDISTRIBUTED POST OCTOBER CAPITAL LOSSES ORDINARY INCOME LONG-TERM GAIN DEFERRALS ---------------------------------------------------------------------------------------- ICON Consumer Discretionary $ 6,093,146 $ - $ - $ - ICON Energy Fund 7,535,248 - - - ICON Financial Fund - 4,356,214 8,570,377 - ICON Healthcare Fund - - 877,473 - ICON Industrials Fund 24,281,548 - - - ICON Information Technology Fund 64,435,458 - - - ICON Leisure and Consumer Staples Fund - - 10,402,210 - ICON Materials Fund 19,740,720 66,439 - - ICON Telecommunication & Utilities Fund 4,843,948 580,890 - - ICON Short-Term Fixed Income Fund 3,820 - - 3,008
During the year ended September 30, 2004, the following capital loss carryforwards were used: ICON Consumer Discretionary Fund $17,445,952 ICON Energy Fund 512,039 ICON Financial Fund 3,207,869 ICON Healthcare Fund 3,187,635 ICON Industrial Fund 707,191 ICON Information Technology Fund 30,004,747 ICON Leisure and Consumer Staples Fund 1,473,912 ICON Materials Fund 692,400 ICON Telecommunication & Utilities Fund 1,418,957
118 Notes to Financial Statements The difference between book and tax net appreciation and depreciation of investments is wash sale loss deferrals and corporate actions. The aggregate composition by Fund of unrealized appreciation and depreciation of investment securities for federal income tax purposes as of September 30, 2004 is as follows:
UNREALIZED UNREALIZED NET APPRECIATION FEDERAL TAX COST APPRECIATION (DEPRECIATION) (DEPRECIATION) -------------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund $130,693,035 $24,967,600 $ (3,155,279) $ 21,812,321 ICON Energy Fund 236,483,011 59,717,914 (229,578) 59,488,336 ICON Financial Fund 160,753,722 28,966,569 (1,346,714) 27,619,855 ICON Healthcare Fund 250,137,318 43,277,504 (10,425,366) 32,852,138 ICON Industrials Fund 177,349,740 41,313,464 (3,692,965) 37,620,499 ICON Information Technology Fund 226,314,619 25,620,346 (5,589,835) 20,030,511 ICON Leisure and Consumer Staples Fund 70,515,632 14,395,253 (776,802) 13,618,451 ICON Materials Fund 118,692,917 25,270,744 (1,248,465) 24,022,279 ICON Telecommunication & Utilities Fund 51,866,409 9,559,790 (104,797) 9,454,993 ICON Short-Term Fixed Income Fund 4,686,000 - (40) (40)
For the year ended September 30, 2004 the ICON Healthcare Fund and the ICON Information Technology Fund reclassed $2,540,659 and $2,576,634 respectively from accumulated undistributed net investment loss into paid-in capital. 5. SUBSEQUENT EVENT On October 27, 2004 the ICON Short-Term Fixed Income Fund redeemed all remaining shares and ceased operations. 6. INDEMNIFICATIONS In the normal course of business, the Funds enter into contracts that contain a variety of representations which provide general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as this would involve future claims that may be made against each Fund that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. Notes to Financial Statements 119 Report of Independent Registered Public Accounting Firm To the Board of Directors and Shareholders of the ICON Sector Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Consumer Discretionary Fund, ICON Energy Fund, ICON Financial Fund, ICON Healthcare Fund, ICON Industrials Fund, ICON Information Technology Fund, ICON Leisure and Consumer Staples Fund, ICON Materials Fund, ICON Telecommunication & Utilities Fund, and ICON Short-Term Fixed Income Fund (ten of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2004, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of securities at September 30, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. PricewaterhouseCoopers LLP /s/ PricewaterhouseCoopers LLP Denver, Colorado November 15, 2004 120 Report of Accounting Firm Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 18 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, addresses and principal occupations are set forth below. Trustees have no official term of office and generally serve until they resign or are not re-elected. INTERESTED TRUSTEE CRAIG T. CALLAHAN, 53, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and Chief Investment Officer (1991 to present) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 54. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 57. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager, Trinity Investment Management Corporation (1989 to 2001). GREGORY KELLAM SCOTT, 56. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was previously Senior Vice President -- Law, General Counsel and Secretary, GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Constituency for Africa (1997 to present). Trustees and Officers 121 Board of Trustees and Fund Officers (continued) (unaudited) R. MICHAEL SENTEL, 56. Mr. Sentel has been a Trustee of the Funds since their inception. Mr. Sentel is a Senior Attorney with the U.S. Department of Education (1996 to present). Mr. Sentel also provides legal representation as a sole practitioner with an emphasis on corporate and transactional law. He served as general counsel to numerous public companies and served on the board of directors of one of these clients. Mr. Sentel began his legal career with the U.S. Securities and Exchange Commission's Division of Enforcement and became a branch chief. Later he served as the section chief for the Professional Liability Section of the Federal Deposit Insurance Corp. with responsibility for the Rocky Mountain Region (1991 to 1994). JONATHAN F. ZESCHIN, 51. Mr. Zeschin has been a Trustee of the Funds since November 2002. Mr. Zeschin is President and Founder of ESSENTIAL Advisers, Inc., a wealth management and investment advisory firm (2000 to present) and was Managing Partner of JZ Partners LLC, a business consulting firm for investment management companies (1998 to 2002). Mr. Zeschin was previously President of Founders Asset Management LLC, an investment management company (1995 to 1998) and Executive Vice President, INVESCO Funds Group, an investment advisory company (1992 to 1995). Mr. Zeschin was previously a Director of the Young Americans Education Foundation and Young Americans Bank (1998 to 2004); and was previously a Director of the Wasatch Funds (2002 to 2004). THE OFFICERS OF THE FUNDS ARE: CRAIG T. CALLAHAN, 53. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and Chief Investment Officer (1991 to present). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI and President of ICON Insurance Agency Inc. (2004 to present). Dr. Callahan is also the Chief Investment Officer and Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. ERIK L. JONSON, 55. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception. Mr. Jonson is also Chief Financial Officer (1996 to present) and Executive Vice President (2004 to present) and was previously Vice President (1998 to 2004) of ICON Advisers; Chief Financial Officer, Secretary and Director (1996 to present) of IM&R; Executive Vice President (2004 to present) and Treasurer (2002 to present) and was previously Secretary/Treasurer, (1998 to 2002) and Vice President, (2002 to 2004) of IDI; and Executive Vice President and Treasurer of ICON Insurance Agency, Inc. (2004 to present). 122 Trustees and Officers ANDRA C. OZOLS, 43. Ms. Ozols has been a Vice President and Secretary of the Funds since March 2002. She previously served in that capacity in 1998. Ms. Ozols is also Executive Vice President (2004 to present), General Counsel and Secretary (2002 to present) and was previously Vice President (2002 to 2004) of ICON Advisers; Executive Vice President (2004 to present) and Secretary (2002 to present) and was previously Vice President (2002 to 2004) of IDI; Director (June 2003 to present) of IM&R; and Executive Vice President and Secretary of ICON Insurance Agency, Inc. (2004 to present). Ms. Ozols was previously Vice President (1999 to 2002) and Assistant General Counsel (October 1998 to February 2002) of Founders Asset Management LLC; and was previously a Branch Chief (1993 to 1995) and Enforcement Attorney (1990 to 1995 and 1996 to 1998) with the U.S. Securities and Exchange Commission. The Trustees and Officers of the Funds may be contacted at 5299 DTC Boulevard, Suite 1200, Greenwood Village, Colorado 80111. Additional information about the Funds' Trustees and Officers is available in the Funds' Statement of Additional Information, which can be obtained free of charge by calling 1-800-764-0442 or by visiting www.iconadvisers.com. Trustees and Officers 123 Other Information (unaudited) QUALIFIED DIVIDEND INCOME For the fiscal year ended September 30, 2004 the following Funds distributed qualified dividend income in the percentages shown: ICON Financial Fund 76.72% ICON Materials Fund 10.50% ICON Telecommunication & Utilities Fund 100.00% 124 Other Information PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month-end. Beginning March 1, 2005, each ICON Fund will file a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q will be available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A description of the policies and procedures the ICON Funds use to vote proxies is available at www.iconadvisers.com; without charge upon request by calling 1-800-764-0442; or on the SEC's website at www.sec.gov. Information about how the ICON Funds voted proxies related to each Fund's portfolio securities during the 12-month period ended June 30, 2004 is available at www.iconadvisers.com or on the SEC's website at www.sec.gov. This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor. 125 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, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
[ICON FUNDS LOGO] 1-800-764-0442 www.iconadvisers.com ICRPANNUSECT I-140-SEC Item 2. Code of Ethics. (a) ICON Funds ("Registrant") has adopted a code of ethics ("Code"), as defined in Item 2 of Form N-CSR, that applies to its Principal Executive Officer and Principal Financial Officer, regardless of whether these individuals are employed by the Registrant or a third party. The Registrant has not made any amendments to its Code during the covered period. A copy of the Code is available free of charge upon request by writing ICON Funds at P.O. Box 701, Milwaukee, WI 53201-0701 or calling 1-800-764-0442. (b) No information need be disclosed pursuant to this paragraph. (c) Not applicable. (d) Not applicable. (e) Not applicable. (f) (1) The Fund's Code of Ethics was previously filed with Form N-CSR dated December 1, 2003. (2) Not applicable. (3) See item 2(a) above. Item 3. Audit Committee Financial Expert. ICON Funds Board of Trustees has determined that each member of ICON Funds' Audit Committee is an "audit committee financial expert," as defined in Item 3 to Form N-CSR. The members of the Audit Committee include Glen F. Bergert, Chairman; R. Michael Sentel and Jonathan F. Zeschin, who are all "independent" under the standards set forth in Item 3 to Form N-CSR. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an "expert" for any puropse, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee finanical expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the Audit Committee and Board of Trustees in the absence of such designation or identification. Item 4. Principal Accountant Fees and Services. (a)(b)(c)(d) and (g) The Registrant has engaged its principal accountants, PricewaterhouseCoopers, LLP, ("independent accountants") to perform audit services and tax services during the past two fiscal years. The following table details the aggregate fees billed (or to be billed) for each of the last two fiscal years:
Fiscal year ended 9/30/04 Registrant Covered Entities 1 ---------- ---------------- Audit Fees 2 $261,500 N/A Non-Audit Fees Tax Fees 3 $ 91,300 $ 30,870 All Other Fees $ 6,300 4 $ 85,700 5 Total Non-Audit Fees $ 97,600 $116,570 Fiscal year ended 9/30/03 Registrant Covered Entities1 ---------- ---------------- Audit Fees 2 $247,000 N/A Non-Audit Fees Tax Fees 3 $ 86,940 $ 30,500 All Other Fees $ 8,000 6 $ 53,200 7 Total Non-Audit Fees $ 94,940 $ 83,700 1 Covered Entities include ICON Advisers, Inc. ("ICON Advisers"), investment adviser and administrator to the Registrant, as well as ICON Advisers' affiliated entities. 2 "Audit Fees" represents fees for performing an audit of the Registrant's annual financial statements or services that are normally provided by the independent accountants in connection with statutory and regulatory filings. 3 "Tax Fees" represent fees for tax return preparation, excise distribution calculations, quarterly tax compliance reviews, and tax planning and tax advice services provided in connection with the preparation and review of the Registrant's tax returns. ICON Advisers pays the fee for the quarterly tax compliance reviews under its Administration Agreement with the Registrant. 4 "All Other Fees" paid by the Registrant in fiscal year 2004 reflect agreed-upon procedures related to trade allocation review. 5 "All Other Fees" paid by Covered Entities in fiscal year 2004 reflect fees for agreed-upon procedures related to trade allocation review and fees related to verification of ICON Advisers' performance results pursuant to the Association for Investment Management and Research Performance Presentation Standards. 6 "All Other Fees" paid by the Registrant in fiscal year 2003 represent consulting on tax and audit issues related to new funds and review and issuance of a proxy consent. 7 "All Other Fees" paid by Covered Entities in fiscal year 2003 represent consulting on tax and audit issues related to new funds and tax issues related to qualification as a registered investment company.
(e) (1) The Audit Committee of the Registrant's Board of Trustees ("Board") is required to review and pre-approve all services to be provided by the independent accountants to the Registrant and Covered Entities to determine whether the services performed by the independent accountants impair their independence from the Registrant. The Audit Committee has delegated preapproval authority to the Chairman of the Audit Committee, subject to review and ratification by the full Audit Committee. (e) (2) All of the principal accountants' hours spent on auditing the Registrant's financial statements were attributed to work performed by full-time permanent employees of the independent accountants. 100% of the non-audit services provided by the independent accountants to either the Registrant or the Covered Entities were pre-approved by the Audit Committee. (f) Not applicable. (h) The Audit Committee of the Registrant's Board has considered whether the provision of services other than audit services performed by the independent accountants to the Registrant and Covered Entities is compatible with maintaining the independent accountants' independence in performing audit services. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Schedule of Investments. 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 to open-end investment companies. Item 8. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable to open-end investment companies. 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) are sufficient to ensure that the information required to be disclosed by the Registrant in this Form N-CSR was recorded, processed, summarized and reported within the required timeframes, 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 were no significant changes or corrective actions with regard to significant deficiencies or material weaknesses 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 controls 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 to open-end investment companies. (b) A certification of the Registrant's Principal Executive Officer and Principal Financial Officer, as required by 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is attached as EX99.906CERT. Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. ICON Funds By: /s/ Craig T. Callahan -------------------------------------- Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) Date: December 3, 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: December 3, 2004 By: /s/ Erik L. Jonson ---------------------------------------- Erik L. Jonson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Date: December 3, 2004