-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NfbH0d/fd0bZYJkKcCNK/64JBkylMvAMk6N6v3amwPESXhJadKlAp0iavH7vZTy1 KuIsfv2EOvJkDVMp/mL5og== 0001035704-05-000719.txt : 20051208 0001035704-05-000719.hdr.sgml : 20051208 20051208161434 ACCESSION NUMBER: 0001035704-05-000719 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20050930 FILED AS OF DATE: 20051208 DATE AS OF CHANGE: 20051208 EFFECTIVENESS DATE: 20051208 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ICON FUNDS CENTRAL INDEX KEY: 0001025770 IRS NUMBER: 752676133 STATE OF INCORPORATION: MA FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-07883 FILM NUMBER: 051252587 BUSINESS ADDRESS: STREET 1: 5299 DTC BOULEVARD STREET 2: SUITE 1200 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 BUSINESS PHONE: 3037901600 MAIL ADDRESS: STREET 1: 5299 DTC BOULEVARD STREET 2: SUITE 1200 CITY: GREENWOOD VILLAGE STATE: CO ZIP: 80111 N-CSR 1 d30941nvcsr.txt FORM N-CSR ------------------------- OMB APPROVAL ------------------------- OMB Number: 3235-0570 Expires: October 31, 2006 Estimated average burden hours per response: 19.3 ------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-07883 -------------------------------------------- ICON FUNDS - ------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) 5299 DTC Blvd. Suite 1200 Greenwood Village, CO 80111 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip code) Erik L. Jonson 5299 DTC Blvd. Suite 1200 Greenwood Village, CO 80111 - ------------------------------------------------------------------------------- (Name and address of agent for service) Registrant's telephone number, including area code: 303-790-1600 --------------------- Date of fiscal year end: September 30, 2005 ---------------------- Date of reporting period: September 30, 2005 --------------------- Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles. A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507. ITEM 1. REPORTS TO STOCKHOLDERS. . 2005 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 16 ICON Covered Call Fund 25 ICON Equity Income Fund 42 ICON Long/Short Fund 51 SIX MONTH HYPOTHETICAL EXPENSE EXAMPLE (UNAUDITED) 60 FINANCIAL STATEMENTS 63 FINANCIAL HIGHLIGHTS 70 NOTES TO FINANCIAL STATEMENTS 74 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 86 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 87 OTHER INFORMATION (UNAUDITED) 89
[RECYCLE LOGO] About This Report (unaudited) 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, 2005, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's holdings as of September 30, 2005 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 Research Systems, and Lehman Brothers. About This Report 3 Message from ICON Funds (unaudited) - -------------------------------------------------------------------------------- Equity markets proved especially volatile during the period, retreating when concerns intensified, then rallying when anxiety abated. - -------------------------------------------------------------------------------- Thank you for your continued investment in the ICON U.S. Diversified Funds and welcome to those shareholders receiving this report for the first time. As you may know, ICON employs bottom-up industry rotation in pursuit of industries which our system indicates are poised to outperform the broader market. Our focus on valuation continued to serve the Funds well, as the ICON system directed us toward underpriced industries that played a part in moving the market higher despite inherent skepticism on the part of less informed investors. CLIMBING A WALL OF WORRY Of the many sayings associated with the financial markets, one of my favorites is "Wall Street climbs a wall of worry." Given the market's performance over the past year, one would be hard pressed to find fault with such a claim. Although stocks recorded solid gains over the course of the Funds' fiscal year, the path was fraught with numerous difficulties. Investors grappled with uncertainties stemming from rising oil prices and monetary tightening, mostly centered on conflicting fears of economic slowdown and mounting inflation. Equity markets proved especially volatile in this setting, retreating when concerns intensified, then rallying when anxiety abated. This was particularly evident during Hurricanes Katrina and Rita, as investors reacted to day-to-day, even minute-to-minute, fluctuations in oil futures. However, it is our view that these price swings were the result of amateur macroeconomic conjecture that was inconsistent with professional analysts who specialize in forecasting corporate earnings. AVOIDING THE GUESSING GAME When analyzing individual stocks, two of the key variables we apply to our valuation equation include average earnings per share (EPS) and estimated long- term earnings growth rates (LTG). In order to ensure the most realistic projections, ICON Advisers subscribes to the highly respected Thomson Financial I/B/E/S database service, which surveys equity analysts for their estimates of future corporate earnings and respective growth rates. Based on these estimates, the fallout from Katrina and Rita has resulted in slight near-term revisions to quarterly EPS, but few modifications to the LTG that we consider. In our equation, marginal EPS adjustments over one or two quarters typically have a negligible impact on overall value. Given the steady outlook for LTG, analysts view the storms' effects as temporary and not a threat to our current valuation calculations or long-term growth forecasts. 4 Message from ICON Funds We frequently see events that affect near-term earnings per share but seldom trigger a change in our analysis of the forward five-year growth outlook. [CRAIG T. CALLAHAN PHOTO] Craig T. Callahan President We frequently see events that affect one or two quarters of EPS but seldom trigger a change in our analysis of the forward five-year growth outlook. Less informed investors often react, incorrectly we believe, to those events and tilt their portfolios toward areas that are instinctively poised to benefit, irrespective of known fundamentals. ICON does not participate in that guessing game. Our experience tells us to stick with computing value and not react to events that do not impact our estimate of intrinsic value. As a result, we made no changes to Fund compositions based strictly on damage attributed to the hurricanes. - -------------------------------------------------------------------------------- Our experience tells us to stick with computing value and not react to events that do not impact our estimate of intrinsic value. - -------------------------------------------------------------------------------- Meanwhile, bonds remained subdued during the period, reflecting much of the same event-driven volatility that plagued the stock market. Nevertheless, our assessment of valuation continues to suggest that investors have overstated the impact of higher short-term interest rates and perceived inflationary pressures. Monetary tightening, in our view, presents no compelling reason for higher long-term rates, while limited pricing power has curbed inflationary impulses, despite rising energy prices. Although initially favoring long-term corporate bonds, weakening relative strength and valuation concerns have tilted our exposure to the ultra-short end of the yield curve. A MORE UNIFORM DISTRIBUTION OF VALUE At period-end, the average value-to-price ratio (V/P) for our domestic equity database indicated that stocks were priced at 20% below our estimate of fair value. In other words, we believe prices would need to advance 20% on average over the coming year in order to reach fair value. That being said, markets rarely move in a straight line and random news events can in fact disrupt a move to the upside. Moreover, value is a moving target and highly susceptible to changes in earnings, growth rates, risk, and interest rates. Despite all these variables, valuation gaps are expected, whereas extraneous events and their impact are generally unpredictable. What are current valuation gaps telling us? Looking at the benchmark S&P 1500 Index, we are seeing a significant increase in the average V/P for large-cap stocks for the first time since 1997. Although we define industry leadership by value and relative strength and not by market capitalization, a more uniform distribution of value suggests that an upward move from here could be very broad and include the long-lagging large-cap segment. Message from ICON Funds 5 Message from ICON Funds (continued) Since the Energy-, Healthcare-, Utilities-, and Materials-related industries we have favored during the past year have featured small- and mid-cap companies, our value-driven avoidance of large-caps proved beneficial. However, given a significant portion of the rally since October 2002 had a low-quality bias, our penchant for holding high-quality companies may have detracted from overall returns. Should large-caps ultimately come back into favor, we are tilted more heavily toward them than we have been historically. Should high-quality companies return to their historical risk-adjusted leadership, the Funds are well-situated to take advantage of their strength. OVERPRICED INDUSTRIES ARE FEW We continue to see positive trends in corporate earnings, economic fundamentals and company valuations, and believe the setting looks favorable for a broad move to the upside. Our analysis shows that overpriced industries are few and far between, even within the Energy sector, yet we believe there appears to be a lack of leadership among Consumer-related industries, though value is widespread. In closing, we wish to thank you for the privilege of guiding you through these challenging markets. For current market updates, as well as up-to-date Fund performance and account information, we invite you to visit our website at www.iconadvisers.com. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and President of the Adviser Consider the investment objectives, risks, charges, expenses, and share classes of each ICON Fund carefully before investing. The prospectus contains this and other information about the Funds and is available by visiting www.iconadvisers.com or calling 1-800-764-0442. Please read the prospectus carefully before investing. 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. An investment in a region fund may involve greater risk and volatility than a more diversified fund. Investments in foreign securities may entail unique risks, including political, market, and currency risks. 6 Message from ICON Funds Management Overview ICON Bond Fund - -------------------------------------------------------------------------------- PORTFOLIO COMPOSITION September 30, 2005 Corporate Bonds 50.2% Investment Grade 30.1% Non-Investment Grade 20.1% U.S. Governments and Agencies 34.4% Foreign Government Bonds 0.6% Short-Term Investments 11.4% Percentages are based upon net assets. PORTFOLIO HIGHLIGHTS September 30, 2005 Number of Bonds(1) 113 Weighted average maturity(1) 8.3 Years Weighted average duration(1) 4.7 Years 30-Day SEC Yield (after expense limitation) - Class I 4.24% 30-Day SEC Yield (before expense limitation) - Class I 4.11% Yield is for the Fund's Class I shares. Yield for the Fund's other share classes will vary due to differences in charges and expenses. (1) Excludes cash and cash equivalents. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARK? A. For the fiscal year ended September 30, 2005, the ICON Bond Fund returned 1.05% for Class I shares, 0.47% for Class C shares and 1.30% for Class Z shares, underperforming the 3.38% return of the Lehman Brothers U.S. Universal Index, the Fund's benchmark, over the same period. Total returns for other periods as of September 30, 2005 appear on page 11. Q. WHICH MARKET FACTORS INFLUENCED THE FUND'S RELATIVE PERFORMANCE? A. The interest rate environment posed what Federal Reserve Chairman Alan Greenspan referred to during the period as a "conundrum." Although the Fed raised short-term interest rates to 3.75% from 1.75% in an attempt to ward off inflation, many investors were taken aback when range-bound long rates did not follow suit. As the spread between long and short rates diminished, a relatively flat yield curve benefited the Fund's initial tilt toward longer-duration bonds. However, this positioning worked against Fund performance later in the period as external factors ranging from inflationary pressures to slowing economic growth, both of which were attributed to the rising cost of oil and ongoing Federal Reserve policy calling for higher short-term interest rates, eroding the value of interest rate-sensitive long-term bonds. Consequently, the Fund's weighted average duration was steadily reduced during the second half of the fiscal year in conjunction with relative strength metrics that by period-end clearly favored shorter-dated issues. Although this rotation was consistent with our readings, ultimately the move to shorter maturities failed to stem losses associated with the Fund's prior long-term bias. Beyond these macro-driven events, relative performance also suffered after a mid-year earnings warning issued by Fund holding General Motors produced a widespread sell-off in automotive-related debt. The subsequent downgrading of GM credits to non-investment grade status further burdened the Fund, which saw declines in its automotive-related positions. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs a quantitative methodology, identifying bonds we believe to be underpriced relative to market price. The Fund may go anywhere in its pursuit of potential market themes, without limitations on maturity or duration (interest-rate sensitivity). The Fund does not attempt to predict interest rate movements. ICON calculates proprietary value-to-price ratios that consider the combined effects of income stream, yield curve characteristics and risk. By combining valuation with relative strength, the Fund aims to maximize total return Management Overview 7 Management Overview (continued) ICON Bond Fund (income plus capital appreciation) by focusing on securities poised to perform in the bond market. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. At the beginning of the period, long-term interest rates well within trading levels established by their prolonged secular decline, thus, favorable valuation readings initially led the Fund to overweight longer-duration corporate bonds. However, this strategy was later changed as longer-duration bonds, given their greater sensitivity to changing interest rates, relative strength weakened when benchmark yields trended higher. As a result, a number of longer-term positions were either trimmed or sold off, with the proceeds reinvested predominantly in highly liquid overnight and 30-day corporate paper. A pullback in high-yield bonds also detracted from Fund performance. With risk premiums declining following a strong two-year run, the sector appeared to have run its course. Consequently, the Fund continued to trim its high- yield exposure on declining relative strength, as tight credit spreads left little room for further contraction or capital appreciation. Nevertheless, longer-duration agency and corporate issues such as Fannie Mae and Cincinnati Financial Corp. contributed to Fund performance, as did holdings in long-term U.S. Treasuries. In contrast, General Motors Corp., Citigroup Inc., Chesapeake & Potomac Telephone Co., and New Jersey Bell Telephone Co. all detracted from performance on weakness in their respective industry groups. The Fund continued to hold these credits at period-end, because it had not met our sell criteria. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE BOND MARKET? A. While we continue to see more compelling value in longer corporate maturities, relative strength dissipated rapidly following recent inflationary concerns. Likewise, high-yield bonds have value, but miss the relative strength component required in our model. Given the current environment, however, we remain focused on investing in shorter-term, highly liquid securities, and are poised to respond should relative strength conditions change. 8 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager PERFORMANCE HIGHLIGHTS September 30, 2005 - - Initially, relatively flat yield curve initially benefited the Fund's tilt toward longer-duration bonds, but later worked against performance as long rates trended higher. - - The Fund's move to shorter-dated issues failed to stem losses associated with its prior long-term bias. - - In select cases, relative performance suffered after a General Motors earnings warning and subsequent GM credit downgrades produced declines in the Fund's automotive-related holdings. - - Longer-duration bonds issued by Fannie Mae and Cincinnati Financial Corp. contributed positively to Fund performance, as did long-term U.S. Treasuries. - - General Motors Corp., Citigroup Inc., Chesapeake & Potomac Telephone Co., and New Jersey Bell Telephone Co. credits all detracted from Fund performance. Management Overview 9 Management Overview (continued) ICON Bond Fund TOP 10 BOND HOLDINGS September 30, 2005 U.S. Treasury, 8.88%, 2/15/19 2.6% Federal Home Loan Bank (FHLB), 5.38%, 8/15/18 2.3% U.S. Treasury, 5.25%, 11/15/28 2.0% Federal National Mortgage Association (FNMA), 7.13%, 1/15/30 1.9% DaimlerChrysler NA Holding, 8.50%, 1/18/31 1.8% Federal Home Loan Mortgage Corp. (FHLMC), 5.05%, 2/28/13 1.8% Federal Home Loan Mortgage Corp. (FHLMC), 5.16%, 2/27/15 1.8% Federal National Mortgage Association (FNMA), 5.00%, 3/9/15 1.8% U.S. Treasury, 2.00%, 5/15/06 1.8% Federal Home Loan Bank (FHLB), 3.50%, 3/21/06 1.7%
Percentages are based upon net assets. CREDIT QUALITY DIVERSIFICATION September 30, 2005 AAA 2.2% AA 3.3% A 38.2% BBB 30.0% BB 13.1% B 12.0% CCC 1.2%
Percentages based on total investments less commercial paper. Ratings based on Standard and Poors. 10 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION - ------------------------------------------------------------------------------------------- ICON Bond Fund - Class I 9/30/02 1.05% N/A 4.84% - ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 3.38% N/A 4.97% - ------------------------------------------------------------------------------------------- ICON Bond Fund - Class C 10/21/02 0.47% N/A 5.12% - ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 3.38% N/A 5.75% - ------------------------------------------------------------------------------------------- ICON Bond Fund - Class Z 5/6/04 1.30% N/A 4.02% - ------------------------------------------------------------------------------------------- Lehman Brothers U.S. Universal Index 3.38% N/A 5.52% - -------------------------------------------------------------------------------------------
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. VALUE OF A $10,000 INVESTMENT through September 30, 2005
LEHMAN BROTHERS U.S. UNIVERSAL ICON BOND FUND - CLASS I INDEX ------------------------ ------------------------------ 9/30/02 10000 10000 10053 10200 10245 10385 10854 10706 9/30/03 10820 10714 11070 10795 11422 11083 10984 10812 9/30/04 11406 11186 11527 11330 11404 11266 11744 11615 9/30/05 11528 11565
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 11 Schedule of Investments ICON Bond Fund September 30, 2005
PRINCIPAL AMOUNT VALUE - --------------------------------------------- CORPORATE BONDS (50.2%) $ 200,000 Ace Capital Trust II, 9.70%, 04/01/30 $ 263,729 220,000 Ace INA Holdings, Inc., 8.88%, 08/15/29 289,755 400,000 Afc Capital Trust I, 8.21%, 02/03/27 433,434 618,000 AK Steel Corp., 7.88%, 02/15/09 599,460 275,000 Allied Waste North America, 5.75%, 02/15/11 256,438 500,000 Ameritech Capital Funding, 6.55%, 01/15/28 513,583 500,000 Amkor Technology, Inc., 9.25%, 02/15/08 468,749 400,000 Archer-Daniels- Midland Co., 8.38%, 04/15/17 506,276 112,000 Avnet, Inc., 8.00%, 11/15/06 117,040 240,000 Axa SA, 8.60%, 12/15/30 315,959 410,000 Bell Atlantic Maryland, 8.30%, 08/01/31 500,578 500,000 Bell Telephone Co. of Pennsylvania, 6.00%, 12/01/28 486,608 500,000 Boeing Co., 8.75%, 08/15/21 680,835 500,000 Boeing Corp., 6.88%, 11/01/06 511,333 350,000 Capital One Financial Corp., 6.88%, 02/01/06 352,742 1,020,000 Cigna Corp., 8.25%, 01/01/07 1,060,774 450,000 Cincinnati Financial Corp., 6.90%, 05/15/28 504,388 133,000 Citigroup, Inc., 6.88%, 02/15/98 152,806 250,000 CNA Financial Corp., 7.25%, 11/15/23 264,275 400,000 Comcast Cable Communications, 8.88%, 05/01/17 508,155
PRINCIPAL AMOUNT VALUE - --------------------------------------------- $ 700,000 Countrywide Home Loan, 5.50%, 02/01/07 $ 707,613 114,000 Cox Communications, Inc., 7.63%, 06/15/25 131,317 470,000 DaimlerChrysler NA Holding, 4.13%, 03/07/07 465,085 1,250,000 DaimlerChrysler NA Holding, 8.50%, 01/18/31 1,513,377 260,000 Dillards, Inc., 9.50%, 09/01/09 280,800 675,000 Eastman Kodak Co., 6.38%, 06/15/06 677,295 589,000 Fairfax Financial Holdings, 7.75%, 04/26/12 565,440 500,000 Farmers Insurance Capital Notes*, 7.20%, 07/15/48 515,585 500,000 Federal Express Corp., 7.60%, 07/01/97 596,165 6,000 First American Financial, 7.55%, 04/01/28 6,879 760,000 First Data Corp., 4.70%, 11/01/06 760,508 600,000 First Tennessee Bank, 3.74%, 11/18/05 599,968 500,000 Ford Motor Credit Co., 7.38%, 02/01/11 478,253 283,000 Ford Motor Credit Co., 5.25%, 03/21/11 232,578 250,000 General Electric Capital Corp., 2.85%, 01/30/06 248,990 354,000 General Electric Capital Corp., 7.38%, 01/19/10 390,651 600,000 General Motors Acceptance Corp., 6.13%, 08/28/07 590,638 700,000 General Motors Acceptance Corp., 7.20%, 01/15/11 623,000 600,000 General Motors Acceptance Corp., 8.25%, 07/15/23 466,500
12 Schedule of Investments
PRINCIPAL AMOUNT VALUE - --------------------------------------------- $ 750,000 General Motors Acceptance Corp., 6.75%, 05/01/28 $ 519,375 665,000 Goldman Sachs Group, Inc., 5.15%, 01/15/14 665,888 900,000 GTE Corp., 6.94%, 04/15/28 983,838 600,000 Halliburton Co., 6.00%, 08/01/06 605,878 545,000 Hilton Hotels Corp., 7.50%, 12/15/17 622,040 670,000 Household Finance Co., 5.88%, 02/01/09 691,433 750,000 IBM Corp., 2.38%, 11/01/06 733,961 725,000 International Lease Finance Corp., 2.95%, 05/23/06 718,652 450,000 John Hancock*, 7.38%, 02/15/24 538,587 455,000 JP Morgan Chase & Co., 6.75%, 08/15/08 480,506 688,000 JP Morgan Chase Capital, 5.88%, 03/15/35 673,453 1,055,000 Liberty Mutual Group*, 6.50%, 03/15/35 978,434 220,000 Lion Connecticut Holding, 7.25%, 08/15/23 260,080 675,000 Lowe's Cos., Inc., 6.88%, 02/15/28 800,724 500,000 Marsh Supermarkets, Inc., 8.88%, 08/01/07 488,750 550,000 Mediacom Broadband Llc, 11.00%, 07/15/13 592,625 750,000 Morgan Stanley, 4.75%, 04/01/14 723,574 500,000 Motorola, Inc., 6.50%, 11/15/28 549,010 400,000 New Jersey Bell Telephone, 7.85%, 11/15/29 466,951 122,000 NLV Financial Corp.*, 6.50%, 03/15/35 117,731
PRINCIPAL AMOUNT VALUE - --------------------------------------------- $ 500,000 Nortel Networks, Ltd., 6.13%, 02/15/06 $ 500,000 829,000 Owens Illinois, Inc., 8.10%, 05/15/07 849,725 400,000 Phillip Morris Cos., 7.65%, 07/01/08 427,354 500,000 Phillips Petroleum, 8.75%, 05/25/10 584,611 400,000 PNC Funding Corp., 5.25%, 11/15/15 403,766 300,000 Private Export Funding, Series B, 6.49%, 07/15/07 309,671 750,000 Prudential Financial, Inc., 5.40%, 06/13/35 714,812 600,000 PSEG Power Corp., 6.95%, 06/01/12 654,579 426,000 Qwest Corp., 6.13%, 11/15/05 426,000 350,000 Royal Caribbean Cruises, 6.75%, 03/15/08 360,938 382,000 SBC Communications, Inc., 6.25%, 03/15/11 405,658 213,000 Semco Energy, Inc., 6.40%, 11/25/08 208,386 500,000 Sprint Capital Corp., 7.13%, 01/30/06 504,114 500,000 Target Corp., 3.38%, 03/01/08 487,278 500,000 Tennessee Gas Pipeline, 7.00%, 10/15/28 496,089 727,000 Textron Financial Corp., 2.75%, 06/01/06 719,766 500,000 Tyco International, Ltd., 6.13%, 11/01/08 517,913 500,000 Tyson Foods, Inc., 7.00%, 01/15/28 546,616 100,000 Union Carbide Corp., 6.79%, 06/01/25 100,000 250,000 Union Carbide Corp., 7.50%, 06/01/25 266,842
Schedule of Investments 13 Schedule of Investments (continued) ICON Bond Fund September 30, 2005
PRINCIPAL AMOUNT VALUE - --------------------------------------------- $ 550,000 Union Tank Car Co., 7.13%, 02/01/07 $ 567,559 500,000 United Rentals NA, Inc., 7.00%, 02/15/14 463,750 500,000 Wisconsin Power & Light Co., 7.00%, 06/15/07 517,361 ----------- TOTAL CORPORATE BONDS (COST $42,318,312) 41,881,837 U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS (34.4%) 700,000 Federal Farm Credit Bank, 4.00%, 12/05/06 696,981 255,000 Federal Farm Credit Bank, 5.90%, 08/04/08 264,796 750,000 Federal Home Loan Bank, 3.35%, 03/03/06 748,007 1,400,000 Federal Home Loan Bank, 3.50%, 03/21/06 1,395,746 1,000,000 Federal Home Loan Bank, 4.00%, 02/12/10 978,838 450,000 Federal Home Loan Bank, 5.88%, 02/15/11 475,694 405,000 Federal Home Loan Bank, 4.80%, 03/19/13 399,290 1,850,000 Federal Home Loan Bank, 5.38%, 08/15/18 1,942,962 750,000 Federal Home Loan Bank, 5.50%, 02/14/20 740,966 500,000 Federal Home Loan Bank, 5.50%, 03/03/20 493,566 1,150,000 Federal Home Loan Mortgage Corp., 5.13%, 07/15/12 1,183,301 1,500,000 Federal Home Loan Mortgage Corp., 5.05%, 02/28/13 1,490,447 457,000 Federal Home Loan Mortgage Corp., 5.00%, 09/15/14 452,084
PRINCIPAL AMOUNT VALUE - --------------------------------------------- $1,500,000 Federal Home Loan Mortgage Corp., 5.16%, 02/27/15 $ 1,489,814 400,000 Federal Home Loan Mortgage Corp., 5.00%, 12/15/15 393,673 550,000 Federal Home Loan Mortgage Corp., 5.00%, 09/09/16 538,997 975,000 Federal Home Loan Mortgage Corp., 5.25%, 07/27/17 962,129 370,000 Federal Home Loan Mortgage Corp., 5.00%, 10/29/13 366,622 1,000,000 Federal National Mortgage Association, 2.88%, 10/15/05 999,639 270,000 Federal National Mortgage Association, 3.10%, 07/28/08 257,816 1,500,000 Federal National Mortgage Association, 5.00%, 03/09/15 1,483,300 500,000 Federal National Mortgage Association, 5.00%, 04/17/15 494,087 280,000 Federal National Mortgage Association, 4.50%, 05/21/15 270,830 1,000,000 Federal National Mortgage Association, 5.00%, 07/09/18 955,446 475,000 Federal National Mortgage Association, 5.25%, 04/15/19 465,058 1,250,000 Federal National Mortgage Association, 7.13%, 01/15/30 1,623,715 800,000 Tennessee Valley Authority, 5.63%, 01/18/11 839,407 1,000,000 U.S. Treasury, 1.63%, 10/31/05 998,511
14 Schedule of Investments
PRINCIPAL AMOUNT VALUE - --------------------------------------------- $1,500,000 U.S. Treasury, 2.00%, 05/15/06 $ 1,481,543 1,500,000 U.S. Treasury, 8.88%, 02/15/19 2,148,809 1,500,000 U.S. Treasury, 5.25%, 11/15/28 1,633,946 ----------- TOTAL U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS (COST $28,699,942) 28,666,020 COMMERCIAL PAPER (11.4%) 1,004,000 American General Corp., 3.81%, 11/14/05 999,331 1,000,000 Citibank Funding, 3.80%, 10/07/05 999,367 1,000,000 Citigroup, Inc., 3.76%, 10/14/05 998,642 1,003,000 DaimlerChrysler AG, 3.93%, 10/31/05 999,714 1,000,000 Ford Motor Co., 4.17%, 10/06/05 999,421 1,000,000 Ford Motor Co., 4.17%, 10/07/05 999,305 500,000 General Electric Capital Corp., 3.21%, 10/05/05 499,822
PRINCIPAL AMOUNT VALUE - --------------------------------------------- $1,000,000 General Electric Capital Corp., 3.72%, 10/21/05 $ 997,933 1,001,000 General Motors Corp., 4.20%, 10/13/05 999,599 1,006,000 HSBC Holdings Plc, 3.85%, 11/28/05 999,760 ----------- TOTAL COMMERCIAL PAPER (COST $9,492,894) 9,492,894 FOREIGN GOVERNMENT BOND (0.6%) 500,000 Federal Republic Of Brazil, 9.38%, 04/07/08 544,500 ----------- TOTAL FOREIGN GOVERNMENT BONDS (COST $549,275) 544,500 ----------- TOTAL INVESTMENTS 96.6% (COST $81,060,423) 80,585,251 OTHER ASSETS LESS LIABILITIES 3.4% 2,822,861 ----------- TOTAL NET ASSETS 100.0% $83,408,112 ===========
The accompanying notes are an integral part of the financial statements. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. * 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 obligation. Schedule of Investments 15 Management Overview ICON Core Equity Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 98.3% Top 10 Equity Holdings 15,7% Number of Stocks 104 Short-Term Investments 2.0% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Ultra Petroleum Corp. 2.0% Grant Prideco, Inc. 1.7% CIGNA Corp. 1.7% America Movil S.A. De C.V. - ADR 1.7% Labor Ready, Inc. 1.6% Patterson-UTI Energy, Inc. 1.5% Nabors Industries, Ltd. 1.5% National-OilWell Varco, Inc. 1.4% WellChoice, Inc. 1.3% Express Scripts, Inc. 1.3% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. For the fiscal year ended September 30, 2005, the ICON Core Equity Fund returned 18.47% for Class I shares, 17.49% for Class C shares and 18.22% for Class Z shares, outperforming the 13.45% return of the S&P 1500 Index, the Fund's benchmark, over the same period. Total returns for other periods as of September 30, 2005 appear on page 21. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Fund's ability to capture upside in top-performing industry groups while minimizing the impact of prospective detractors played a key role in generating favorable returns. Given the overhang of turbulent markets and an absence of sustained leadership, a disciplined focus on those industries our analysis indicated would offer the most attractive combination of value and relative strength proved effective in helping the Fund finish the fiscal year ahead of the broader averages. A strong tilt toward economically sensitive industries resulted in relative outperformance during a sharp fourth-quarter upturn. However, as the cyclical theme weakened during the first quarter of 2005, the Fund lost ground and was repositioned to include more defensive-oriented industries. This positioning proved favorable during the second half of the period, as increased exposure to the Energy sector boosted returns. With attractive valuations across a wide spectrum of industries, the Fund maintained exposure to all of the nine economic sectors. Each of these contributed to the Fund's positive return, as investors appeared to recognize the intrinsic worth indicated by our valuation model. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of valuation with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the broader market. 16 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 Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Despite strong underlying fundamentals at the company level, investors grappled with a host of distractions, most notably surging oil prices and the threat of higher inflation. At the same time, the rekindling of inflationary pressures raised concerns that the Federal Reserve's protracted policy of measured monetary tightening might ultimately constrict economic growth. This convergence of conflicting fears affected on investor sentiment throughout the period, culminating in a mid-April calendar year low for the benchmark S&P 1500 Index. As less disciplined investors appeared to give up on the domestic equity market, ICON's value-to-price ratio reached its calendar year high, indicating that stocks were priced approximately 25% below our then current estimates of fair value. While this metric reflected the extreme pessimism that existed at the time, interest rates hovered near 50-year lows, oil was well below its inflation-adjusted peak, and reported earnings as well as forward expectations remained robust. Equity prices subsequently rallied as market fundamentals seemingly overcame the human emotion. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Leading industry contributors represented a diverse group and included managed health care, oil & gas exploration & production, wireless telecommunication services, health care services, human resource & employment services, and construction materials. In contrast, industries such as building products, leisure products, insurance brokers, specialty chemicals, motorcycle manufacturers, and healthcare equipment were all meaningful detractors of Fund performance. On a relative basis, the Fund's valuation-related overweight in the managed health care industry generated the largest positive impact on performance versus the benchmark. Meanwhile, the Fund's lack of exposure to the integrated oil & gas industry, which ICON's analysis deemed to be overvalued, produced the largest negative effect. Individual stocks that enhanced Fund performance included independent exploration and production concern Ultra Petroleum Corp., which recorded a company-best triple-digit increase in second-quarter earnings. Wireless communications provider America Movil, S.A. de C.V. also advanced, having expanded into 13 countries and acquiring 66 million subscribers in just over five years of operations. Additionally, temporary staffing firm Labor Ready Inc. relied on revenue gains and strategic acquisitions to grow net income and gross margins, while managed healthcare provider CIGNA Corp. benefited from favorable business trends in HMO stocks. Management Overview 17 Management Overview (continued) ICON Core Equity Fund Conversely, building product manufacturers Griffon Corp. and ElkCorp worked against Fund performance. Griffon posted significant earnings declines stemming from higher raw material costs, while ElkCorp struggled with production delays and higher operating costs. Elsewhere, motorsports collectible and apparel marketer Action Performance Companies Inc. saw revenue reductions in its mass merchandiser and wholesale markets. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? A. With widespread value and attractive company fundamentals still present in the domestic equity market, we believe stocks have considerable upside in a move toward our analysis of fair value. As we head into the new fiscal year, our quantitative work indicates that industries standing to benefit from a worldwide economic expansion remain undervalued. Accordingly, we will monitor this broad theme closely, looking for pullback to further concentrate in these industries. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund's ability to capture upside in top-performing industries while minimizing the impact of detractors played a key role in generating favorable returns. - - Leading industry contributors represented a diverse group and included managed health care, oil & gas exploration & production, wireless telecommunications services, health care services, human resource & employment services, and construction materials. - - Industries such as building products, leisure products, insurance brokers, specialty chemicals, motorcycle manufacturers, and health care equipment were all meaningful detractors of Fund performance. - - Individual stocks that enhanced Fund performance included Ultra Petroleum Corp., America Movil, S.A. de C.V., Labor Ready Inc., and CIGNA Corp. - - Company holdings that worked against Fund performance included Griffon Corp., ElkCorp and Action Performance Companies Inc. 18 Management Overview SECTOR COMPOSITION September 30, 2005 Healthcare 19.8% Industrials 16.3% Financial 12.5% Energy 11.8% Information Technology 9.9% Materials 9.5% Consumer Discretionary 8.2% Telecommunication and Utilities 7.7% Leisure and Consumer Staples 2.6%
Percentages are based upon net assets. Management Overview 19 Management Overview (continued) ICON Core Equity Fund INDUSTRY COMPOSITION September 30, 2005 Managed Health Care 6.5% Health Care Distributors 4.6% Oil & Gas Equipment & Services 4.6% Health Care Services 4.4% Oil & Gas Drilling 4.2% Steel 3.6% Construction & Farm Machinery & Heavy Trucks 3.5% Biotechnology 3.3% Life & Health Insurance 3.3% Oil & Gas Exploration & Production 3.0% Human Resource & Employment Services 2.7% Construction Materials 2.4% Investment Banking & Brokerage 2.4% Multi-Line Insurance 2.4% Communications Equipment 2.2% Aerospace & Defense 2.1% Catalog Retail 2.1% Computer Storage & Peripherals 2.1% Trading Companies & Distributors 2.0% Wireless Telecommunication Services 2.0% Diversified Metals & Mining 1.9% Water Utilities 1.9% Home Building 1.8% Marine 1.8% Railroads 1.8% Internet Software Services 1.6% Property & Casualty Insurance 1.6% Semiconductors 1.6% Apparel Retail 1.5% Asset Management & Custody Banks 1.5% Fertilizers & Agricultural Chemicals 1.5% Consumer Finance 1.4% Electric Utilities 1.4% Multi-Utilities 1.3% Technology Distributors 1.3% Health Care Facilities 1.2% Building Products 1.1% Home Improvement Retail 1.1% Food Distributors 1.0% Integrated Telecommunication Services 1.0% IT Consulting & Other Services 1.0% Airlines 0.9% Apparel Accessories & Luxury Goods 0.9% Drug Retail 0.8% Food Retail 0.8% Computer & Electronics Retail 0.7% Commercial Printing 0.5%
20 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION - ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class I 10/12/00 18.47% N/A 9.20% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 1.13% - ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class C 11/28/00 17.49% N/A 7.27% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 0.89% - ------------------------------------------------------------------------------------------- ICON Core Equity Fund - Class Z 5/6/04 18.22% N/A 17.42% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 10.21% - -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Since Inception performance results for Class C shares include returns for certain time periods that were restated as of June 8, 2004. Class Z shares are available only to institutional investors. VALUE OF A $10,000 INVESTMENT through September 30, 2005 [LINE CHART]
ICON CORE EQUITY FUND - CLASS I S&P 1500 INDEX ------------------------------- -------------- 10/12/00 10000 10000 11850 10031 10810 8861 12680 9444 9/30/01 10040 8037 12456 8963 13234 9049 12048 7887 9/30/02 9717 6525 9461 7054 8715 6818 10515 7890 9/30/03 11374 8135 12571 9140 13001 9336 13072 9498 9/30/04 13072 9320 14556 10218 14167 10015 14659 10187 9/30/05 15487 10574
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 10/12/00 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 21 Schedule of Investments ICON Core Equity Fund September 30, 2005
SHARES VALUE - --------------------------------------------- COMMON STOCKS (98.3%) 28,800 A.G. Edwards, Inc. $ 1,261,728 32,300 AFLAC, Inc. 1,463,190 64,600 Agrium, Inc. 1,419,262 112,200 America Movil S.A. De C.V. - ADR 2,953,104 34,400 American Financial Corp.(a) 1,415,216 34,700 American Financial Group, Inc. 1,177,371 61,400 American States Water Co. 2,054,444 26,500 AmerisourceBergen Corp. 2,048,450 23,400 AmerUs Group Co. 1,342,458 35,700 Arrow Electronics, Inc.(a) 1,119,552 49,200 Avnet, Inc.(a) 1,202,940 27,450 Best Buy Co., Inc. 1,194,899 30,800 California Water Service Group 1,268,960 39,000 Caremark Rx, Inc.(a) 1,947,270 32,600 Celgene Corp.(a) 1,770,832 24,330 Cemex S.A. De C.V. - ADR 1,272,459 25,500 CIGNA Corp. 3,005,430 62,300 Coldwater Creek, Inc.(a) 1,571,206 54,100 Community Health Systems, Inc.(a) 2,099,621 32,400 Companhia Vale do Rio Doce - ADR 1,421,064 19,900 Coventry Health Care, Inc.(a) 1,711,798 89,200 CP Ships, Ltd. 1,902,636 44,700 CSX Corp. 2,077,656 21,000 Cummins, Inc. 1,847,790 50,200 CVS Corp. 1,456,302 34,500 D.R. Horton, Inc. 1,249,590 62,800 Digene Corp.(a) 1,789,800 13,500 Eagle Materials, Inc. 1,638,495 60,600 El Paso Electric Co.(a) 1,263,510 17,400 ElkCorp 622,398
SHARES VALUE - --------------------------------------------- 56,600 Energy Partners, Ltd.(a) $ 1,767,052 36,000 Express Scripts, Inc.(a) 2,239,200 67,400 Falconbridge, Ltd. 1,800,928 26,700 Fastenal Co. 1,631,103 29,000 First American Corp. 1,324,430 44,900 First Cash Financial Services, Inc.(a) 1,181,768 23,900 FirstEnergy Corp. 1,245,668 32,300 Freeport-McMoran Copper & Gold, Inc. 1,569,457 6,300 Google, Inc.(a) 1,993,698 74,400 Grant Prideco, Inc.(a) 3,024,360 23,100 Griffon Corp.(a) 568,260 51,900 HCC Insurance Holdings, Inc. 1,480,707 42,800 Health Net, Inc.(a) 2,025,296 32,400 Helmerich & Payne, Inc. 1,956,636 44,500 Henry Schein, Inc.(a) 1,896,590 46,900 Investment Technology Group, Inc.(a) 1,388,240 16,100 j2 Global Communications, Inc.(a) 650,762 20,100 John H. Harland Co. 892,440 29,700 Jos. A. Bank Clothiers, Inc.(a) 1,283,634 38,800 Joy Global, Inc. 1,957,848 24,100 Kirby Corp.(a) 1,191,263 20,900 L-3 Communications Holdings, Inc. 1,652,563 105,900 Labor Ready, Inc.(a) 2,716,335 20,900 Lafarge North America, Inc. 1,413,049 13,000 Lehman Brothers Holding, Inc. 1,514,240 32,400 Lockheed Martin Corp. 1,977,696 43,400 Logitech International S.A. - ADR(a) 1,768,550
22 Schedule of Investments
SHARES VALUE - --------------------------------------------- 30,300 Lowe's Cos., Inc. $ 1,951,320 17,800 Marvell Technology Group, Ltd.(a) ) 820,758 44,100 McKesson HBOC, Inc. 2,092,545 31,000 MedcoHealth Solutions, Inc.(a) 1,699,730 46,300 Mellon Financial Corp. 1,480,211 27,800 MetLife, Inc. 1,385,274 64,600 Monster Worldwide, Inc.(a) 1,983,866 58,100 MSC Industrial Direct Co., Inc. - Class A 1,927,177 35,000 Nabors Industries, Ltd.(a) 2,514,050 36,900 National-OilWell Varco, Inc.(a) 2,428,020 74,500 NETGEAR, Inc.(a) 1,792,470 36,200 NICE Systems, Ltd. - ADR (a) 1,635,516 35,700 Nokia Corp. - ADR 603,687 25,200 Norfolk Southern Corp. 1,022,112 29,200 Omnicare, Inc. 1,641,916 72,500 Patterson-UTI Energy, Inc. 2,615,800 55,900 Philippine Long Distance Telephone Co.- ADR 1,702,155 31,800 Polo Ralph Lauren Corp. 1,599,540 23,900 Prudential Financial, Inc. 1,614,684 134,400 PSS World Medical, Inc.(a) 1,792,896 23,900 Public Service Enterprise Group, Inc. 1,538,204 45,900 Pulte Homes, Inc. 1,970,028 39,800 Reliance Steel & Aluminum Co. 2,106,614 70,900 Rimage Corp.(a) 1,890,903 53,900 Safeway, Inc. 1,379,840 57,500 Satyam Computer Services, Ltd. - ADR 1,737,650
SHARES VALUE - --------------------------------------------- 29,100 Selective Insurance Group, Inc. $ 1,422,990 15,600 Simpson Manufacturing Co., Inc. 610,584 61,000 SkyWest, Inc. 1,636,020 24,200 Sprint Corp. (FON Group) 575,476 21,800 State Street Corp. 1,066,456 40,900 Steel Dynamics, Inc. 1,388,964 48,100 Steel Technologies, Inc. 1,247,233 50,000 Superior Energy Services, Inc.(a) 1,154,500 40,100 TECO Energy, Inc. 722,602 55,100 Texas Instruments, Inc. 1,867,890 39,900 The Manitowoc Co., Inc. 2,004,975 13,700 The Scotts Miracle-Gro Co. 1,204,641 73,900 The Sportsman's Guide, Inc.(a) 2,017,470 61,200 Ultra Petroleum Corp.(a) 3,481,056 49,400 United Natural Foods, Inc.(a) 1,746,784 31,000 United Therapeutics Corp.(a) 2,163,800 37,700 UnitedHealth Group, Inc. 2,118,740 44,800 Urban Outfitters, Inc.(a) 1,317,120 20,000 Weatherford International, Ltd.(a) 1,373,200 30,400 WellChoice, Inc.(a) 2,307,359 45,400 World Acceptance Corp.(a) 1,153,614 ------------ TOTAL COMMON STOCKS (COST $145,034,270) 170,189,644
Schedule of Investments 23 Schedule of Investments (continued) ICON Core Equity Fund September 30, 2005
PRINCIPAL AMOUNT VALUE - --------------------------------------------- SHORT-TERM INVESTMENTS (2.0%) $3,483,868 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# $ 3,483,868 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $3,483,868) 3,483,868 ------------ TOTAL INVESTMENTS 100.3% (COST $148,518,138) 173,673,512 LIABILITIES LESS OTHER ASSETS (0.3)% (583,372) ------------ TOTAL NET ASSETS 100.0% $173,090,140 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt 24 Schedule of Investments Management Overview ICON Covered Call Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 105.6% Top 10 Equity Holdings 17.1% Number of Stocks 109 Short-Term Investments 0.4% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Ultra Petroleum Corp. 2.2% America Movil S.A. De C.V. - ADR 1.9% Eagle Materials, Inc. 1.8% Pulte Homes, Inc. 1.8% CIGNA Corp. 1.7% Companhia Vale do Rio Doce - ADR 1.6% Patterson-UTI Energy, Inc. 1.6% National-OilWell Varco, Inc. 1.5% Universal Forest Products, Inc. 1.5% Grant Prideco, Inc. 1.5% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. For the fiscal year ended September 30, 2005, the ICON Covered Call Fund returned 9.21% for Class I shares, 8.31% for Class C shares and 9.42% for Class Z shares, underperforming the 13.45% return of its benchmark, the S&P 1500 Index, over the same period. Total returns for other periods as of September 30, 2005 appear on page 30. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Conflicting markets served to neutralize the Fund's call writing strategy during the reporting period and consequently worked against relative performance. When stocks advanced, as they did in broad fashion over the course of the fiscal year, the Fund was unable to keep pace as calls written against the underlying securities restricted upside potential. However, as stocks experienced sharp, volatile swings, as was also the case during the fiscal year, implied or expected volatility as measured by the CBOE Market Volatility Index (VIX) registered well below its 15-year historical average. Since lower expected volatility typically results in lower option premiums, income levels, which were already at a near-term bottom, fell to a 15-year trough, further limiting the Fund's return potential. Even so, the Fund's downside cushion remained intact, thereby reducing overall volatility versus the benchmark. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the broader market. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Investors faced myriad distractions during the period as surging oil prices and mounting inflation threats overshadowed strong underlying fundamentals at the company and macroeconomic level. Moreover, the rekindling of inflationary pressures raised concerns that the Federal Reserve would overshoot neutral targets for monetary tightening and ultimately constrict economic growth. Management Overview 25 Management Overview (continued) ICON Covered Call Fund As conflicting fears intensified throughout the fiscal year, investor sentiment wavered, culminating in a mid-April calendar year low for the benchmark S&P 1500 Index. While our valuation metrics reflected this heightened pessimism, in reality, interest rates hovered near 50-year lows, oil was well below its inflation-adjusted peak, and earnings expectations remained robust. Equity prices subsequently rallied as emotion seemingly gave way to fundamentals. Given historically low levels of implied volatility and call option premiums, the Fund continued to write shorter-dated options (one to two months) rather than lock in the relatively low call premiums offered by longer-dated options (three to six months). By doing so, the Fund focused on exploiting the rapid rate of decay prior to expiration, while exercising patience for an eventual upward regression in premium levels. Although this tactic was in keeping with our valuation-driven methodology, with premiums at historical lows, it served to temper Fund performance. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. From a broad sector perspective, Healthcare and Industrials contributed the most to Fund performance, while Leisure and Consumer Staples and Consumer Discretionary added the least. However, each of the nine sectors we track contributed positively to overall Fund performance, as stocks continued in their broad but often erratic rise that began in March 2003. Of the leading industry contributors to Fund performance, managed health care was the most heavily weighted during the period, reportedly benefiting from a positive outlook for continued earnings-per-share growth. Oil & gas exploration & production reflected longstanding strength in energy prices, while construction materials, a top-performing industry for much of the period, moved higher as a result of Hurricane Katrina. Conversely, major industry detractors included steel, apparel retail and computer hardware. Steel stocks languished in conjunction with moderating demand before rebounding in the aftermath of Hurricane Katrina. Apparel retail experienced selling pressure on concerns that higher gas prices would curb consumer spending. Meanwhile, computer hardware faced increasing headwinds as competitive pricing pressures accelerated. Turning to individual stocks, primary contributors to Fund returns included independent oil & gas developer Ultra Petroleum Corp., which recorded a company-best triple-digit increase in quarterly earnings. Wireless communications provider America Movil S.A. de C.V. also advanced, having acquired 66 million subscribers in 13 countries in its first five years of operation. Additionally, managed health care group CIGNA Corp. benefited from favorable trends in HMO stocks, while construction products company Eagle Materials Inc. saw increased revenues on higher demand. 26 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager In contrast, mini-mill steel producer Steel Dynamics Inc. encountered rising input costs and pricing cuts as inventories exceeded demand. Diagnostic Products Corp. also retreated when the maker of immunodiagnostic systems posted lower-than-expected earnings on disappointing instrument revenue. Elsewhere, life and health insurer UICI tumbled after announcing that it had settled class action suits challenging its relationship with member associations. Although the Fund continued to hold Steel Dynamics on improving fundamentals, Diagnostic Products and UICI were sold as relative strength declined. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? A. Despite lingering macroeconomic concerns, our analysis indicates that investment fundamentals continue to look promising for the domestic equity market. With stocks still trading at a discount to our fair value estimates, we believe markets are poised to trend higher, particularly within those industries that stand to benefit from increasing demands on energy, raw materials and heavy equipment. As these groups constitute some of the strongest and most undervalued in the market, we will continue to monitor them closely, looking for pullbacks to further concentrate our positions. At the same time, we cannot predict if and when the historically low option premiums that marked the fiscal year will revert to more normal levels. For that reason, we will keep a close eye on premium levels and will look to write longer-dated options should conditions improve. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund's investment strategy somewhat hampered relative performance, as calls written against the underlying securities restricted upside potential in a rising market. - - Lower implied volatility sent option premiums below their 15-year historical average, limiting the Fund's premium yield and return potential. - - Industries that contributed to performance included managed health care, oil & gas exploration & production and construction materials, while steel, apparel retail and computer hardware detracted from Fund performance. - - Primary individual stocks that aided performance included Ultra Petroleum Corp, America Movil S.A. de C.V., CIGNA Corp., and Eagle Materials Inc. - - Stocks that detracted from Fund performance included Steel Dynamics Inc., Diagnostic Products Corp. and UICI. Management Overview 27 Management Overview (continued) ICON Covered Call Fund SECTOR COMPOSITION September 30, 2005 Industrials 19.8% Healthcare 16.0% Energy 15.9% Materials 13.4% Telecommunication and Utilities 9.9% Financial 9.7% Information Technology 9.6% Consumer Discretionary 8.1% Leisure and Consumer Staples 3.2%
Percentages are based upon net assets. 28 Management Overview INDUSTRY COMPOSITION September 30, 2005 Oil & Gas Equipment & Services 5.6% Construction Materials 5.4% Managed Health Care 5.0% Steel 4.9% Oil & Gas Drilling 4.4% Construction & Farm Machinery & Heavy Trucks 4.3% Oil & Gas Exploration & Production 3.8% Biotechnology 3.7% Railroads 3.4% Health Care Services 3.1% Trading Companies & Distributors 3.1% Diversified Metals & Mining 3.0% Multi-Line Insurance 2.8% Multi-Utilities 2.7% Life & Health Insurance 2.6% Wireless Telecommunication Services 2.6% Electric Utilities 2.4% Building Products 2.3% Home Building 2.3% Construction & Engineering 1.9% Internet Software Services 1.9% Food Distributors 1.8% Investment Banking & Brokerage 1.8% Semiconductors 1.8% Human Resource & Employment Services 1.7% Gas Utilities 1.6% IT Consulting & Other Services 1.6% Aerospace & Defense 1.5% Health Care Distributors 1.5% Communications Equipment 1.3% Property & Casualty Insurance 1.3% Data Processing & Outsourced Services 1.2% Application Software 1.1% Catalog Retail 1.1% Consumer Electronics 1.1% Consumer Finance 1.1% Apparel Accessories & Luxury Goods 1.0% Computer & Electronics Retail 1.0% Integrated Oil & Gas 1.0% Coal & Consumable Fuels 0.9% Health Care Equipment 0.9% Home Improvement Retail 0.9% Marine 0.9% Apparel Retail 0.8% Food Retail 0.8% Health Care Supplies 0.7% Pharmaceuticals 0.7% Electronic Equipment Manufacturers 0.6% Health Care Facilities 0.6% Independent Power Producers & Energy Traders 0.6% Tobacco 0.6% Airlines 0.5% Trucking 0.3% Computer Storage & Peripherals 0.1%
Management Overview 29 Management Overview (continued) ICON Covered Call Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION - ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class I 9/30/02 9.21% N/A 14.39% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 17.46% - ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class C 11/21/02 8.31% N/A 11.41% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 13.90% - ------------------------------------------------------------------------------------------- ICON Covered Call Fund - Class Z 5/6/04 9.42% N/A 9.04% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 10.21% - -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. VALUE OF A $10,000 INVESTMENT through September 30, 2005 [LINE GRAPH]
ICON COVERED CALL FUND - CLASS I S&P 1500 INDEX -------------------------------- -------------- 9/30/02 10000 10000 10490 10811 10050 10450 11770 12093 9/30/03 12400 12469 13541 14009 13799 14308 13944 14557 9/30/04 13706 14285 14568 15661 14416 15349 14470 15613 9/30/05 14966 16206
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 30 Management Overview Schedule of Investments ICON Covered Call Fund September 30, 2005
SHARES VALUE - -------------------------------------------- COMMON STOCKS (105.6%) 6,200 A.G. Edwards, Inc.(x) $ 271,622 7,800 Aetna, Inc.(x) 671,892 12,500 AFLAC, Inc.(x) 566,250 4,500 Altria Group, Inc.(x) 331,695 41,700 America Movil S.A. De C.V. - ADR(x) 1,097,544 7,300 American Electric Power Co., Inc.(x) 289,810 7,700 Apache Corp.(x) 579,194 8,500 AstraZeneca Plc - ADR(x) 400,350 12,900 Best Buy Co., Inc.(x) 561,537 20,500 BHP Billiton Ltd. - ADR(x) 700,690 13,200 Burlington Northern Santa Fe Corp.(x) 789,360 8,300 CACI International, Inc. - Class A(a)(x) 502,980 8,200 Capital One Financial Corp.(x) 652,064 8,800 Caterpillar, Inc.(x) 517,000 14,700 Celgene Corp.(a)(x) 798,504 15,500 Cemex S.A. De C.V. - ADR(x) 810,650 21,000 Ceradyne, Inc.(a)(x) 770,280 8,300 CIGNA Corp.(x) 978,238 3,800 CNF Transportation, Inc.(x) 199,500 8,300 Cognizant Technology Solutions Corp.(a)(x) 386,697 24,300 Coldwater Creek, Inc.(a)(x) 612,846 21,400 Companhia Vale do Rio Doce - ADR(x) 938,604 6,000 Constellation Energy Group, Inc.(x) 369,600 8,750 Coventry Health Care, Inc.(a)(x) 752,675 24,800 CP Ships Ltd.(x) 528,984 12,000 CSX Corp.(x) 557,760 6,700 Cummins, Inc.(x) 589,533 7,600 D.R. Horton, Inc.(x) 275,272 17,500 Digene Corp.(a)(x) 498,750 9,100 Digital River, Inc.(a)(x) 317,135 8,800 Eagle Materials, Inc.(x) 1,068,056 13,300 ElkCorp(x) 475,741 6,400 Equitable Resources, Inc.(x) 249,984
SHARES VALUE - -------------------------------------------- 8,500 Fastenal Co.(x) $ 519,265 12,100 FirstEnergy Corp.(x) 630,652 3,700 FPL Group, Inc.(x) 176,120 11,200 Freeport-McMoran Copper & Gold, Inc.(x) 544,208 24,500 Gevity HR, Inc.(x) 667,380 3,200 Goodrich Corp.(x) 141,888 1,100 Google, Inc.(a)(x) 348,106 21,300 Grant Prideco, Inc.(a)(x) 865,845 17,500 Granite Construction, Inc.(x) 669,200 6,100 Harman International Industries, Inc.(x) 623,847 15,200 Headwaters, Inc.(a)(x) 568,480 9,500 Health Net, Inc.(a)(x) 449,540 4,700 Henry Schein, Inc.(a)(x) 200,314 8,000 International Rectifier Corp.(a)(x) 360,640 10,800 j2 Global Communications, Inc.(a)(x) 436,536 6,000 Jacobs Engineering Group, Inc.(a)(x) 404,400 4,600 Jos. A. Bank Clothiers, Inc.(a)(x) 198,812 15,000 Joy Global, Inc.(x) 756,900 17,600 Labor Ready, Inc.(a)(x) 451,440 10,300 Lafarge North America, Inc.(x) 696,383 3,200 Lehman Brothers Holding, Inc.(x) 372,736 19,400 LifeCell Corp.(a)(x) 419,622 8,800 Loews Corp.(x) 813,208 7,500 Lone Star Technologies, Inc.(a)(x) 416,925 8,200 Lowe's Cos., Inc.(x) 528,080 5,431 Marathon Oil Corp.(x) 374,359 14,300 McKesson HBOC, Inc.(x) 678,535 13,600 MedcoHealth Solutions, Inc.(a)(x) 745,688 12,100 MetLife, Inc.(x) 602,943 11,600 Nabors Industries, Ltd.(a)(x) 833,228 14,000 Nam Tai Electronics, Inc. - ADR(x) 356,020 11,700 Nash Finch Co.(x) 493,623 13,600 National-OilWell Varco, Inc.(a)(x) 894,880 30,200 NETGEAR, Inc.(a)(x) 726,612
Schedule of Investments 31 Schedule of Investments (continued) ICON Covered Call Fund September 30, 2005
SHARES VALUE - -------------------------------------------- 7,000 Newfield Exploration Co.(a)(x) $ 343,700 4,900 NII Holdings, Inc. - Class B(a)(x) 413,805 14,800 Norfolk Southern Corp.(x) 600,288 11,300 Omnicare, Inc.(x) 635,399 15,000 Oshkosh Truck Corp.(x) 647,400 25,200 Patterson-UTI Energy, Inc.(x) 909,216 6,200 Peabody Energy Corp.(x) 522,970 17,200 Performance Food Group Co.(a)(x) 542,832 2,500 PG&E Corp.(x) 98,125 11,600 Polo Ralph Lauren Corp.(x) 583,480 8,300 PPL Corp. 268,339 5,500 Prudential Financial, Inc.(x) 371,580 7,200 Psychiatric Solutions, Inc.(a)(x) 390,456 12,600 Public Service Enterprise Group, Inc.(x) 810,936 24,100 Pulte Homes, Inc.(x) 1,034,372 7,700 Questar Corp.(x) 678,524 14,400 Reliance Steel & Aluminum Co.(x) 762,192 18,200 Resources Connection, Inc.(a)(x) 539,266 11,800 Respironics, Inc.(a)(x) 497,724 3,200 Rio Tinto Plc - ADR(x) 525,760 18,700 Safeway, Inc.(x) 478,720 900 SanDisk Corp.(a)(x) 43,425 15,200 Selective Insurance Group, Inc.(x) 743,280 14,000 Sempra Energy(x) 658,840 10,400 SkyWest, Inc.(x) 278,928 28,800 Sonic Solutions(a)(x) 619,200 20,700 Steel Dynamics, Inc.(x) 702,972
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- 17,100 Steel Technologies, Inc. $ 443,403 3,500 Suncor Energy, Inc.(x) 211,855 32,800 Superior Energy Services, Inc.(a)(x) 757,352 19,900 Texas Instruments, Inc.(x) 674,610 3,500 The Goldman Sachs Group, Inc.(x) 425,530 10,800 The Hartford Financial Services Group, Inc.(x) 833,436 22,400 Ultra Petroleum Corp.(a)(x) 1,274,112 14,900 Unit Corp.(a)(x) 823,672 9,400 United Surgical Partners International, Inc.(a)(x) 367,634 11,700 United Therapeutics Corp.(a)(x) 816,660 15,300 Universal Forest Products, Inc.(x) 876,996 10,000 Urban Outfitters, Inc.(a)(x) 294,000 13,300 W-H Energy Services, Inc.(a)(x) 431,186 13,700 Watsco, Inc.(x) 727,607 15,500 Wesco International, Inc.(a)(x) 524,985 ----------- TOTAL COMMON STOCKS (COST $51,489,306) 61,261,979 SHORT-TERM INVESTMENTS (0.4%) $225,939 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05(#) 225,939 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $225,939) 225,939 ----------- TOTAL INVESTMENTS 106.0% (COST $51,715,245) 61,487,918 LIABILITIES LESS OTHER ASSETS (6.0)% (3,485,835) ----------- TOTAL NET ASSETS 100.0% $58,002,083 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt x Portion or all of this security is pledged as collateral for call options written. 32 Schedule of Investments Schedule of Written Options ICON Covered Call Fund September 30, 2005
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Aetna, Inc. Expiration October 2005 Exercise Price $85.00 39 $ 9,945 Expiration November 2005 Exercise Price $85.00 39 15,990 AFLAC, Inc. Expiration November 2005 Exercise Price $45.00 125 19,063 A.G. Edwards, Inc. Expiration November 2005 Exercise Price $45.00 62 5,425 Altria Group, Inc. Expiration October 2005 Exercise Price $70.00 23 10,810 Expiration December 2005 Exercise Price $75.00 22 6,930 America Movil S.A. de C.V. - ADR Expiration October 2005 Exercise Price $25.00 279 46,035 Expiration November 2005 Exercise Price $25.00 138 30,015 American Electric Power, Inc. Expiration November 2005 Exercise Price $40.00 36 2,700 Expiration November 2005 Exercise Price $37.50 37 9,158 Apache Corp. Expiration January 2006 Exercise Price $75.00 52 30,160 Expiration November 2005 Exercise Price $80.00 25 4,688
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- AstraZeneca Plc Expiration October 2005 Exercise Price $45.00 11 $ 2,750 Expiration October 2005 Exercise Price $50.00 43 753 Expiration November 2005 Exercise Price $45.00 31 9,533 Best Buy Co., Inc. Expiration November 2005 Exercise Price $42.50 57 14,820 Expiration December 2005 Exercise Price $47.50 72 8,640 BHP Billiton Ltd. Expiration November 2005 Exercise Price $35.00 205 23,063 Burlington Northern Santa Fe Corp. Expiration January 2006 Exercise Price $60.00 66 22,110 Expiration November 2005 Exercise Price $60.00 66 14,520 CACI International, Inc. Expiration October 2005 Exercise Price $60.00 58 13,195 Expiration December 2005 Exercise Price $65.00 25 4,750 Capital One Financial Corp. Expiration October 2005 Exercise Price $80.00 50 8,375 Expiration October 2005 Exercise Price $85.00 16 400 Expiration November 2005 Exercise Price $80.00 16 4,120
Schedule of Written Options 33 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2005
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Caterpillar, Inc. Expiration October 2005 Exercise Price $60.00 60 $ 5,700 Expiration November 2005 Exercise Price $57.50 28 8,400 Celgene Corp. Expiration January 2006 Exercise Price $60.00 65 25,350 Expiration October 2005 Exercise Price $55.00 82 21,935 Cemex SA - ADR Expiration January 2006 Exercise Price $55.00 16 4,160 Expiration November 2005 Exercise Price $50.00 39 15,015 Expiration November 2005 Exercise Price $55.00 100 14,500 Ceradyne, Inc. Expiration December 2005 Exercise Price $35.00 170 67,150 Expiration December 2005 Exercise Price $40.00 40 7,100 CIGNA Corp. Expiration October 2005 Exercise Price $115.00 83 36,105 CNF, Inc. Expiration October 2005 Exercise Price $50.00 19 6,270 Expiration November 2005 Exercise Price $47.50 19 10,735
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Cognizant Technology Solutions Corp. Expiration October 2005 Exercise Price $45.00 41 $ 10,148 Expiration October 2005 Exercise Price $50.00 17 510 Expiration November 2005 Exercise Price $45.00 25 9,500 Coldwater Creek, Inc. Expiration January 2006 Exercise Price $30.00 74 9,805 Expiration October 2005 Exercise Price $25.00 121 16,638 Expiration October 2005 Exercise Price $30.00 48 360 Companhia Vale Do Rio Doce - ADR Expiration January 2006 Exercise Price $50.00 64 12,480 Expiration November 2005 Exercise Price $45.00 150 24,375 Constellation Energy Group Expiration January 2006 Exercise Price $65.00 20 3,500 Expiration October 2005 Exercise Price $60.00 40 9,000 Coventry Health Care, Inc. Expiration January 2006 Exercise Price $90.00 26 9,230 Expiration November 2005 Exercise Price $85.00 61 24,705 CP Ships Ltd. Expiration October 2005 Exercise Price $22.50 248 3,100
34 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- CSX Corp. Expiration October 2005 Exercise Price $45.00 60 $ 11,250 Expiration November 2005 Exercise Price $45.00 60 15,450 Cummins, Inc. Expiration October 2005 Exercise Price $85.00 30 12,300 Expiration December 2005 Exercise Price $90.00 17 6,290 Expiration December 2005 Exercise Price $95.00 20 3,800 D.R. Horton, Inc. Expiration November 2005 Exercise Price $35.00 38 10,545 Expiration November 2005 Exercise Price $40.00 38 2,565 Digene Corp. Expiration October 2005 Exercise Price $30.00 146 8,030 Expiration November 2005 Exercise Price $30.00 29 4,713 Digital River, Inc. Expiration November 2005 Exercise Price $35.00 46 10,235 Expiration December 2005 Exercise Price $40.00 45 4,838 Eagle Materials, Inc. Expiration January 2006 Exercise Price $125.00 8 7,360 Expiration October 2005 Exercise Price $115.00 64 45,440 Expiration October 2005 Exercise Price $120.00 16 5,920
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- ElkCorp. Expiration January 2006 Exercise Price $40.00 53 $ 9,408 Expiration November 2005 Exercise Price $35.00 80 21,600 Equitable Resources, Inc. Expiration October 2005 Exercise Price $37.50 20 3,550 Expiration December 2005 Exercise Price $40.00 12 1,260 Expiration December 2005 Exercise Price $37.50 32 7,520 Fastenal Co. Expiration November 2005 Exercise Price $60.00 60 19,050 Expiration November 2005 Exercise Price $65.00 25 2,000 Firstenergy Corp. Expiration January 2006 Exercise Price $55.00 60 4,800 Expiration October 2005 Exercise Price $50.00 61 14,488 FPL Group, Inc. Expiration October 2005 Exercise Price $45.00 30 8,250 Freeport-McMoran, Copper & Gold, Inc. Expiration January 2006 Exercise Price $50.00 73 20,258 Expiration November 2005 Exercise Price $45.00 39 17,550
Schedule of Written Options 35 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2005
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Gevity HR, Inc. Expiration February 2006 Exercise Price $30.00 56 $ 7,980 Expiration November 2005 Exercise Price $25.00 189 52,920 Goodrich Corp. Expiration November 2005 Exercise Price $45.00 32 4,480 Google, Inc. Expiration October 2005 Exercise Price $310.00 3 4,215 Expiration October 2005 Exercise Price $300.00 5 10,025 Expiration December 2005 Exercise Price $320.00 3 5,190 Granite Construction, Inc. Expiration December 2005 Exercise Price $35.00 75 33,750 Expiration December 2005 Exercise Price $40.00 100 17,750 Grant Prideco, Inc. Expiration October 2005 Exercise Price $40.00 81 14,378 Expiration November 2005 Exercise Price $40.00 132 37,950 Harman International Industries Expiration October 2005 Exercise Price $105.00 20 4,500 Expiration October 2005 Exercise Price $100.00 41 19,475 Headwaters, Inc. Expiration November 2005 Exercise Price $40.00 152 17,860
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Health Net, Inc. Expiration January 2006 Exercise Price $47.50 48 $ 16,920 Expiration November 2005 Exercise Price $47.50 47 9,518 Henry Schein, Inc. Expiration January 2006 Exercise Price $45.00 19 2,613 Expiration October 2005 Exercise Price $40.00 16 4,800 Expiration October 2005 Exercise Price $45.00 12 330 International Rectifier Corp. Expiration November 2005 Exercise Price $45.00 32 7,200 Expiration December 2005 Exercise Price $45.00 24 6,900 Expiration December 2005 Exercise Price $50.00 24 2,280 j2 Global Communications, Inc. Expiration October 2005 Exercise Price $40.00 54 7,560 Expiration December 2005 Exercise Price $40.00 54 16,200 Jacobs Engineering Group, Inc. Expiration October 2005 Exercise Price $65.00 42 13,440 Expiration November 2005 Exercise Price $70.00 18 2,835 Jos. A Bank Clothiers, Inc. Expiration October 2005 Exercise Price $40.00 46 16,560
36 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Joy Global, Inc. Expiration January 2006 Exercise Price $55.00 52 $ 12,740 Expiration October 2005 Exercise Price $50.00 98 19,600 Labor Ready, Inc. Expiration November 2005 Exercise Price $25.00 35 7,088 Expiration November 2005 Exercise Price $22.50 141 50,055 Lafarge North America, Inc. Expiration October 2005 Exercise Price $65.00 46 15,870 Expiration October 2005 Exercise Price $70.00 57 3,848 Lehman Brothers Holdings, Inc. Expiration January 2006 Exercise Price $120.00 7 2,730 Expiration October 2005 Exercise Price $115.00 6 1,860 Expiration November 2005 Exercise Price $115.00 19 8,170 Lifecell Corp. Expiration November 2005 Exercise Price $22.50 135 18,563 Expiration December 2005 Exercise Price $25.00 59 7,375 Loews Corp. Expiration October 2005 Exercise Price $90.00 88 29,040 Lone Star Technologies, Inc. Expiration November 2005 Exercise Price $60.00 75 15,188
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Lowe's Cos., Inc. Expiration January 2006 Exercise Price $70.00 25 $ 3,875 Expiration November 2005 Exercise Price $65.00 57 13,538 Marathon Oil Corp. Expiration October 2005 Exercise Price $70.00 13 1,918 Expiration November 2005 Exercise Price $70.00 41 11,173 McKesson Corp. Expiration January 2006 Exercise Price $50.00 45 6,413 Expiration November 2005 Exercise Price $47.50 98 16,170 Medco Health Solutions, Inc. Expiration October 2005 Exercise Price $55.00 136 16,660 MetLife, Inc. Expiration October 2005 Exercise Price $50.00 121 10,285 Nabors Industries, Ltd. Expiration October 2005 Exercise Price $70.00 74 25,160 Expiration December 2005 Exercise Price $75.00 42 14,490 Nam Tai Electronics, Inc. - ADR Expiration December 2005 Exercise Price $25.00 140 25,550
Schedule of Written Options 37 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2005
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Nash Finch Co. Expiration October 2005 Exercise Price $40.00 26 $ 6,760 Expiration November 2005 Exercise Price $40.00 39 12,870 Expiration November 2005 Exercise Price $45.00 52 4,810 National-OilWell Varco, Inc. Expiration October 2005 Exercise Price $65.00 87 23,925 Expiration November 2005 Exercise Price $70.00 49 11,638 NetGear, Inc. Expiration October 2005 Exercise Price $25.00 169 10,563 Expiration December 2005 Exercise Price $25.00 133 23,940 Newfield Exploration Co. Expiration November 2005 Exercise Price $50.00 23 5,118 Expiration December 2005 Exercise Price $50.00 47 14,100 NII Holdings, Inc. Expiration December 2005 Exercise Price $80.00 20 16,200 Expiration December 2005 Exercise Price $85.00 29 15,370 Norfolk Southern Corp. Expiration November 2005 Exercise Price $40.00 148 27,010
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Omnicare, Inc. Expiration October 2005 Exercise Price $55.00 28 $ 6,650 Expiration December 2005 Exercise Price $55.00 28 11,620 Expiration December 2005 Exercise Price $60.00 57 10,688 Oshkosh Truck Corp. Expiration January 2006 Exercise Price $45.00 60 10,950 Expiration October 2005 Exercise Price $42.50 90 11,700 Patterson-UTI Energy, Inc. Expiration January 2006 Exercise Price $37.50 101 28,533 Expiration November 2005 Exercise Price $35.00 151 43,790 Peabody Energy Corp. Expiration November 2005 Exercise Price $85.00 22 10,230 Expiration December 2005 Exercise Price $90.00 40 15,400 Performance Food Group Co. Expiration October 2005 Exercise Price $30.00 86 15,265 Expiration December 2005 Exercise Price $30.00 52 13,260 PG & E Corp. Expiration December 2005 Exercise Price $40.00 25 2,438
38 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Polo Ralph Lauren Corp. Expiration January 2006 Exercise Price $55.00 58 $ 9,280 Expiration November 2005 Exercise Price $50.00 58 13,775 Prudential Financial, Inc. Expiration November 2005 Exercise Price $65.00 22 8,800 Expiration December 2005 Exercise Price $65.00 17 7,310 Expiration December 2005 Exercise Price $70.00 16 2,600 Psychiatric Solutions, Inc. Expiration October 2005 Exercise Price $55.00 18 2,385 Expiration December 2005 Exercise Price $55.00 54 17,820 Public Service Enterprise Group, Inc. Expiration October 2005 Exercise Price $65.00 84 9,240 Expiration December 2005 Exercise Price $70.00 42 2,730 Pulte Homes, Inc. Expiration October 2005 Exercise Price $45.00 126 6,615 Expiration October 2005 Exercise Price $42.50 115 18,688 Questar Corp. Expiration November 2005 Exercise Price $85.00 54 32,130 Expiration November 2005 Exercise Price $90.00 23 7,590
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Reliance Steel & Aluminium Co. Expiration October 2005 Exercise Price $50.00 115 $ 40,250 Expiration December 2005 Exercise Price $50.00 29 15,080 Resources Connection, Inc. Expiration November 2005 Exercise Price $30.00 182 25,025 Respironics, Inc. Expiration January 2006 Exercise Price $40.00 47 17,625 Expiration October 2005 Exercise Price $40.00 71 17,573 Rio Tinto Plc - ADR Expiration November 2005 Exercise Price $160.00 32 28,480 Safeway, Inc. Expiration October 2005 Exercise Price $25.00 187 20,103 SanDisk Corp. Expiration January 2006 Exercise Price $42.50 4 3,300 Expiration November 2005 Exercise Price $47.50 5 1,900 Selective Insurance Group, Inc. Expiration November 2005 Exercise Price $50.00 46 5,175 Expiration December 2005 Exercise Price $50.00 106 17,225 Sempra Energy Expiration October 2005 Exercise Price $45.00 140 34,650 SkyWest, Inc. Expiration October 2005 Exercise Price $25.00 104 21,060
Schedule of Written Options 39 Schedule of Written Options (continued) ICON Covered Call Fund September 30, 2005
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Sonic Solutions Expiration November 2005 Exercise Price $20.00 101 $ 23,230 Expiration November 2005 Exercise Price $22.50 187 17,298 Steel Dynamics, Inc. Expiration January 2006 Exercise Price $35.00 91 25,935 Expiration November 2005 Exercise Price $30.00 49 23,520 Expiration November 2005 Exercise Price $35.00 67 11,725 Steel Technologies, Inc. Expiration October 2005 Exercise Price $25.00 86 12,255 Expiration January 2006 Exercise Price $25.00 85 32,088 Suncor Energy, Inc. Expiration October 2005 Exercise Price $60.00 18 4,950 Expiration December 2005 Exercise Price $60.00 17 8,925 Superior Energy Services, Inc. Expiration October 2005 Exercise Price $22.50 58 6,815 Expiration December 2005 Exercise Price $20.00 135 51,975 Expiration December 2005 Exercise Price $25.00 135 13,500
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Texas Instruments, Inc. Expiration October 2005 Exercise Price $35.00 60 $ 1,950 Expiration November 2005 Exercise Price $32.50 139 31,275 The Goldman Sachs Group, Inc. Expiration January 2006 Exercise Price $125.00 11 4,070 Expiration November 2005 Exercise Price $120.00 24 10,080 The Hartford Financial Services Group, Inc. Expiration November 2005 Exercise Price $75.00 43 16,340 Expiration December 2005 Exercise Price $75.00 65 27,950 Ultra Petroleum Corp. Expiration November 2005 Exercise Price $55.00 168 92,400 Expiration December 2005 Exercise Price $50.00 21 19,950 United Surgical Partners International Expiration November 2005 Exercise Price $37.50 94 25,145 United Therapeutics Corp. Expiration October 2005 Exercise Price $70.00 22 5,665 Expiration October 2005 Exercise Price $75.00 64 5,280 Expiration November 2005 Exercise Price $75.00 31 10,153
40 Schedule of Written Options
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- Universal Forest Products, Inc. Expiration January 2006 Exercise Price $60.00 90 $ 30,375 Expiration October 2005 Exercise Price $60.00 25 1,938 Expiration November 2005 Exercise Price $55.00 38 15,960 Universal Health Services Expiration October 2005 Exercise Price $55.00 45 9,338 Expiration December 2005 Exercise Price $55.00 104 48,360 Urban Outfitters, Inc. Expiration October 2005 Exercise Price $27.50 60 13,650 Expiration November 2005 Exercise Price $30.00 40 5,700
UNDERLYING SECURITY/ CONTRACTS EXPIRATION DATE/ (100 SHARES EXERCISE PRICE PER CONTRACT) VALUE - ------------------------------------------------- W-H Energy Services, Inc. Expiration January 2006 Exercise Price $35.00 67 $ 12,563 Expiration October 2005 Exercise Price $30.00 66 17,800 Watsco, Inc. Expiration October 2005 Exercise Price $50.00 68 23,800 Expiration November 2005 Exercise Price $50.00 69 28,635 Wesco International, Inc. Expiration January 2006 Exercise Price $35.00 116 29,000 Expiration October 2005 Exercise Price $35.00 39 2,438 ------------- ---------- Total Options Written 13,261 $3,088,445 ============= ========== (Premiums received $2,471,399)
The accompanying notes are an integral part of the financial statements. Schedule of Written Options 41 Management Overview ICON Equity Income Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities Common Stocks 87.6% Preferred Stocks 0.4% Convertible Preferred Stocks 1.7% Top 10 Equity Holdings 16.0% Number of Stocks 102 Options Purchased Call Options 0.5% Number of Securities on Which Options Have Been Purchased 6 Bonds & Short-Term Investments Convertible Corporate Bonds 0.4% Corporate Bonds 5.5% U.S. Government and Agencies 2.6% Short-Term Investments 2.0% Number of Bonds 14 Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Patterson-UTI Energy, Inc. 1.8% Fidelity National Financial, Inc. 1.8% Caterpillar, Inc. 1.7% Diamond Offshore Drilling, Inc. 1.7% Apogee Enterprises, Inc. 1.7% Eagle Materials, Inc. 1.5% Altria Group, Inc. 1.5% Loews Corp. 1.5% Alpharma, Inc. - Class A 1.4% Hewlett-Packard Co. 1.4% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. For the fiscal year ended September 30, 2005, the ICON Equity Income Fund returned 12.71% for Class I shares, 11.71% for Class C shares and 12.89% for Class Z shares, underperforming the 13.45% return of its benchmark, the S&P 1500 Index, over the same period. Total returns for other periods as of September 30, 2005 appear on page 47. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Despite capturing broad upside in the equity portion, the Fund surrendered a portion of its gains during the period, as weakness in the steel industry and its exposure to the fixed income markets led to relative underperformance. Behind this weakness were external factors ranging from inflation fears to a short-term slowdown in economic growth, both of which were related to the rising cost of oil and ongoing Federal Reserve policy calling for higher short-term interest rates. The interest rate environment posed what Federal Reserve Chairman Alan Greenspan referred to during the period as a "conundrum." Although the Fed raised short-term interest rates to 3.75% from 1.75% in an attempt to stave off inflation, many investors were taken aback when market-driven long rates did not follow suit. As the spread between long- and short-term rates diminished, a relatively flat yield curve benefited the Fund's initial tilt toward longer-duration bonds. However, this positioning later worked against performance as long rates trended higher, eroding earlier price gains. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying equity and debt securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as these measures do not adequately represent, in our view, intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the broader market. 42 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Despite a positive finish, stocks encountered considerable resistance in their move toward our analysis of fair value. Surging oil prices and monetary tightening presented formidable distractions, as investors allowed their emotions to be swayed by conflicting fears of economic slowdown and mounting inflation. Against this backdrop, equity and debt markets alternated between broad advances and volatile sideways trading, often tracking sharp, sudden shifts in investor sentiment. Hurricanes Katrina and Rita added to the uncertainty, as economic forecasts envisioned near-term reductions in GDP growth followed possible inflationary pressures due to projected rebuild spending. For much of the period, however, this lack of clarity obscured the fact that, on a company and macroeconomic level, fundamentals were generally positive. For example, interest rates continued to hover at 50-year lows, oil prices were well below their inflation-adjusted peak of the late 1970s, and reported earnings remained robust. As such, when investors appeared to set aside their emotion-induced fears, as was seemingly the case following the mid-April calendar year low, stocks rallied in recognition of the favorable setting. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. A diverse group of leading industries contributed positively to Fund performance, including construction materials, managed health care and railroads. Although a top-performing industry for much of the period, construction materials moved higher in the aftermath of Hurricane Katrina. Meanwhile, managed health care capitalized on a positive outlook for continued earnings-per-share growth, whereas railroads benefited from ongoing economic expansion. In contrast, steel saw its prior leadership position evaporate on speculation of a slowdown in the Chinese economy, and finished the period as a net detractor of Fund performance. Strength in the Healthcare sector and relative weakness in the Financial sector resulted in a redeployment of assets in the these sectors. Additionally, the Fund's fixed income holdings detracted from returns. Although our process guides us to emphasize specific industries and securities, it may result in investments concentrated within a given capitalization range. Such was the case during the period, where an overweight position in mid-cap stocks produced the strongest overall returns. The Fund's allocation toward small-cap stocks proved detrimental, whereas stock selection in the large-cap arena produced several of the Fund's top performers. Leading managed health care provider CIGNA Corp. benefited from significant earnings growth in line with favorable business trends for HMO stocks. Heavy Management Overview 43 Management Overview (continued) ICON Equity Income Fund equipment manufacturer Caterpillar Inc. also added to performance, as sales gains among its most profitable markets and rising global demand boosted the stock. Likewise, construction products company Eagle Materials Inc. recorded impressive revenue expansion on higher demand. Meanwhile, Big Three automaker General Motors Corp. detracted from Fund performance, having struggled amid massive losses, declines in global market share and rising raw material costs. Multi-line insurer AON Corp. also came under pressure when it agreed to settle a lawsuit stemming from the New York State Attorney General's investigation into insurance industry practices. Elsewhere, mini-mill steel producer Steel Dynamics Inc. faced rising input costs and pricing cuts as inventories exceeded demand. All three positions were sold as relative strength declined. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE DOMESTIC MARKETS? A. Given widespread value within the broader equity market, we continue to favor dividend-paying stocks over convertible and other fixed income instruments, whose value is tied to interest rate movements. At the same time, with economic growth seemingly in line with Federal Reserve targets, we see no reason why yields must rise appreciably above current levels. Nevertheless, based on current valuation and relative strength metrics, we remain focused on shorter-duration securities, which are less sensitive to changes in interest rates. PERFORMANCE HIGHLIGHTS September 30, 2005 - - Despite capturing broad upside amid challenging equity markets, the Fund surrendered a portion of its gains as bond market weakness led to relative underperformance. - - A diverse group of industries, including construction materials, managed health care and railroads, contributed positively to Fund performance, while steel and the broad Financials sector were relative detractors. - - CIGNA Corp., Caterpillar Inc. and Eagle Materials Inc. were among the Fund's leading company contributors. - - Stocks that detracted from Fund performance included General Motors Corp., AON Corp. and Steel Dynamics Inc. 44 Management Overview SECTOR COMPOSITION September 30, 2005 Financial 16.8% Industrials 13.5% Telecommunication and Utilities 12.1% Healthcare 12.0% Consumer Discretionary 9.9% Energy 9.0% Materials 9.0% Information Technology 7.6% Leisure and Consumer Staples 5.8%
Percentages are based upon common stock positions and net assets. Management Overview 45 Management Overview (continued) ICON Equity Income Fund INDUSTRY COMPOSITION September 30, 2005 Multi-Utilities 3.7% Construction Materials 3.6% Multi-Line Insurance 3.5% Managed Health Care 3.4% Oil & Gas Drilling 3.3% Integrated Oil & Gas 3.2% Property & Casualty Insurance 3.2% Thrifts & Mortgage Insurance 3.1% Health Care Services 3.0% Water Utilities 3.0% Building Products 2.8% Life & Health Insurance 2.7% Steel 2.6% Construction & Farm Machinery & Heavy Trucks 2.5% Integrated Telecommunication Services 2.5% Automobile Manufacturers 2.4% Asset Management & Custody Banks 2.2% Household Products 2.1% Oil & Gas Equipment & Services 2.1% Specialized Consumer Services 2.0% Aerospace & Defense 1.8% Other Diversified Financial Services 1.8% Diversified Metals & Mining 1.7% Investment Banking & Brokerage 1.7% Health Care Facilities 1.5% Marine 1.5% Tobacco 1.5% Trading Companies & Distributors 1.5% Computer Hardware 1.4% Health Care Equipment 1.4% Pharmaceuticals 1.4% Electronic Equipment Manufacturers 1.2% Semiconductors 1.2% Commercial Printing 1.1% Computer Storage & Peripherals 1.1% Wireless Telecommunication Services 1.0% Housewares & Specialties 0.9% Automotive Retail 0.8% Catalog Retail 0.8% Computer & Electronics Retail 0.8% Data Processing & Outsourced Services 0.8% Fertilizers & Agricultural Chemicals 0.8% Food Distributors 0.8% Health Care Distributors 0.8% Home Improvement Retail 0.8% Leisure Products 0.8% Railroads 0.8% Communications Equipment 0.7% Consumer Electronics 0.7% Consumer Finance 0.7% Household Appliances 0.7% Human Resource & Employment Services 0.7% Industrial Machinery 0.7% Broadcast & Cable TV 0.6% Independent Power Producers & Energy Traders 0.6% Internet Software Services 0.6% IT Consulting & Other Services 0.6% Gas Utilities 0.5%
46 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION - ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class I 9/30/02 12.71% N/A 18.93% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 17.46% - ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class C 11/8/02 11.71% N/A 16.22% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 14.23% - ------------------------------------------------------------------------------------------- ICON Equity Income Fund - Class Z 5/10/04 12.89% N/A 15.40% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 12.40% - -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. VALUE OF A $10,000 INVESTMENT through September 30, 2005 [LINE GRAPH]
ICON EQUITY INCOME FUND - CLASS I S&P 1500 INDEX ------------------------------- -------------- 9/30/02 10000 10000 10819 10811 10091 10450 12073 12093 9/30/03 12482 12469 14475 14009 14940 14308 15016 14557 9/30/04 14928 14285 16146 15661 15847 15349 16192 15613 9/30/05 16822 16206
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 47 Schedule of Investments ICON Equity Income Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - ---------------------------------------------- COMMON STOCKS (87.2%) 29,400 A.G. Edwards, Inc. $ 1,288,014 31,600 Alliant Energy Corp. 920,508 76,800 Alpharma, Inc. - Class A 1,910,016 26,800 Altria Group, Inc. 1,975,428 8,689 Ameren Corp. 464,775 25,900 American Capital Strategies, Ltd. 949,494 30,300 American Financial Group, Inc. 1,028,079 45,000 American States Water Co. 1,505,700 128,700 Apogee Enterprises, Inc. 2,200,770 24,200 Atmos Energy Corp. 683,650 26,300 Barnes Group, Inc. 943,118 24,500 Baxter International, Inc. 976,815 23,800 Best Buy Co., Inc. 1,036,014 31,400 BHP Billiton Ltd. - ADR 1,073,252 36,400 BJ Services Co. 1,310,036 40,000 California Water Service Group 1,648,000 68,600 Callaway Golf Co. 1,035,174 14,800 Canadian National Railway Co. 1,050,652 30,100 Caremark Rx, Inc.(a) 1,502,893 38,600 Caterpillar, Inc. 2,267,750 32,234 Cemex S.A. De C.V. - ADR 1,685,838 109,300 CenterPoint Energy, Inc. 1,625,291 18,700 Chevron Corp. 1,210,451 24,100 Church & Dwight Co. 890,254 15,800 CIGNA Corp. 1,862,188 32,700 Cognex Corp. 983,289 17,100 Colgate-Palmolive Co. 902,709 33,200 Computer Programs & Systems, Inc. 1,146,728 56,700 CP Ships Ltd. 1,209,411 12,600 Cummins, Inc. 1,108,674 31,300 DaimlerChrysler AG 1,662,656 37,000 Diamond Offshore Drilling, Inc. 2,266,250 50,700 Diana Shipping, Inc. 836,550
SHARES OR PRINCIPAL AMOUNT VALUE - ---------------------------------------------- 28,500 Digital Insight Corp.(a) $ 742,710 16,800 Eagle Materials, Inc. 2,039,016 52,700 Fidelity National Financial, Inc. 2,346,204 33,500 First American Corp. 1,529,945 23,500 Freeport-McMoran Copper & Gold, Inc. 1,141,865 40,400 Gevity HR, Inc. 1,100,496 33,800 Golden Telecom, Inc. 1,067,066 21,900 Goodrich Corp. 971,046 9,400 Harman International Industries, Inc. 961,338 65,000 Hewlett-Packard Co. 1,898,000 232,400 Hooper Holmes, Inc. 913,332 46,700 Horace Mann Educators Corp. 923,726 26,600 IndyMac Bancorp, Inc. 1,052,828 10,300 Infosys Technologies, Ltd. 765,084 40,709 ING Group N.V. - ADR 1,212,721 44,600 Jackson Hewitt Tax Services, Inc. 1,066,386 11,700 L-3 Communications Holdings, Inc. 925,119 58,000 Lennox International, Inc. 1,589,780 18,500 Lincoln National Corp. 962,370 21,000 Loews Corp. 1,940,610 34,600 Logitech International S.A. - ADR(a) 1,409,950 28,100 Manor Care, Inc. 1,079,321 21,300 Manpower, Inc. 945,507 25,505 Marathon Oil Corp. 1,758,060 36,700 MBNA Corp. 904,288 53,700 MCG Capital Corp. 905,919 21,500 McKesson HBOC, Inc. 1,020,175 17,200 Medtronic, Inc. 922,264 34,600 Mellon Financial Corp. 1,106,162
48 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE - ---------------------------------------------- 28,400 MSC Industrial Direct Co., Inc. - Class A $ 942,028 25,100 Nam Tai Electronics, Inc. - ADR 638,293 24,500 Nash Finch Co. 1,033,655 48,600 NiSource, Inc. 1,178,550 21,100 Nucor Corp. 1,244,689 26,300 Old Republic International Corp. 701,421 65,400 Patterson-UTI Energy, Inc. 2,359,632 31,300 Philippine Long Distance Telephone Co. - ADR 953,085 16,400 Procter & Gamble Co. 975,144 20,000 Protective Life Corp. 823,600 38,000 R.R. Donnelley & Sons Co. 1,408,660 16,700 Royal Dutch Shell - Class A - ADR 1,096,188 6,700 Royal Dutch Petroleum Co. 420,760 8,599 Sempra Energy 404,669 75,100 Southwest Water Co. 1,088,950 76,200 SpectraLink Corp. 971,550 53,232 Sprint Corp. (FON Group) 1,265,857 51,300 Steel Technologies, Inc. 1,330,209 155,400 Stewart Enterprises, Inc. - Class A 1,030,302 83,000 TECO Energy, Inc. 1,495,660 47,600 Telecomunicacoes de Sao Paulo S.A. - ADR 946,288 32,300 Texas Instruments, Inc. 1,094,970 9,000 The Bear Stearns Cos., Inc. 987,750 11,800 The Scotts Miracle- Gro Co. 1,037,574 37,000 The Sportsman's Guide, Inc.(a) 1,010,100 28,200 Tidewater, Inc. 1,372,494 50,600 Tupperware Corp. 1,152,668 32,900 United Auto Group, Inc. 1,087,016
SHARES OR PRINCIPAL AMOUNT VALUE - ---------------------------------------------- 25,200 United Surgical Partners International, Inc.(a) $ 985,572 49,600 UnumProvident Corp. 1,016,800 18,200 Vulcan Materials Co. 1,350,622 16,300 W.W. Grainger, Inc. 1,025,596 22,500 WellChoice, Inc.(a) 1,707,750 12,400 Whirlpool Corp. 939,548 52,200 Worthington Industries, Inc. 1,097,766 ------------ TOTAL COMMON STOCKS (COST $101,578,481) 116,537,131 CONVERTIBLE PREFERRED STOCKS (1.7%) 4,000 Northrop Grumman Corp., 7.00%, 04/04/21 484,000 9,000 Omnicare, Inc., 4.00%, 06/15/33 653,625 8,600 Philippine Long Distance Telephone Co., 3.50%, 12/31/49, Series III 451,500 14,400 TXU Corp., 8.75%, 11/16/05, Series C 733,824 ------------ TOTAL CONVERTIBLE PREFERRED STOCKS (COST $1,736,376) 2,322,949 PREFERRED STOCKS (0.4%) 18,200 Aetna, Inc., 8.50%, 8/31/41 469,742 ------------ TOTAL PREFERRED STOCKS (COST $501,382) 469,742 CORPORATE BONDS (5.5%) $ 500,000 Aetna, Inc., 6.97%, 08/15/36 588,491 800,000 AFC Capital Trust I, 8.20%, 02/03/27 866,867 1,000,000 DaimlerChrysler AG, 6.50%, 11/15/13 1,057,286 750,000 General Motors, 6.75%, 05/01/28 519,375 1,288,000 Household Finance Corp., 4.75%, 07/15/13 1,257,129 800,000 Lowe's Companies, Inc., 8.25%, 06/01/10 920,084 750,000 Mediacom Broadband LLC, 11.00%, 07/15/13 808,125
Schedule of Investments 49 Schedule of Investments (continued) ICON Equity Income Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - ---------------------------------------------- $ 750,000 Prudential Financial, Inc., 5.75%, 07/15/33 $ 751,998 575,000 United Rentals NA, Inc., 7.75%, 11/15/13 554,875 ------------ TOTAL CORPORATE BONDS (COST $7,351,294) 7,324,230 CONVERTIBLE CORPORATE BONDS (0.4%) 600,000 International Rectifier Corp., 4.25%, 07/15/07 579,000 ------------ TOTAL CONVERTIBLE CORPORATE BONDS (COST $583,500) 579,000 U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS (2.6%) 1,323,000 Freddie Mac, 5.16%, 02/27/15 1,314,015 258,000 Freddie Mac, 5.00%, 09/29/17 251,374 750,000 U.S. Treasury, 8.75%, 05/15/17 1,038,984 750,000 U.S. Treasury, 5.25%, 11/15/28 816,973 ------------ TOTAL U.S. GOVERNMENT AND U.S. GOVERNMENT AGENCY BONDS (COST $3,396,292) 3,421,346 CALL OPTIONS PURCHASED (0.5%) 84 Aetna, Inc. Expiration January 2006, Exercise Price $60.00 225,960 200 Allmerica Financial Corp. Expiration February 2006, Exercise price $40.00 74,000
SHARES OR PRINCIPAL AMOUNT VALUE - ---------------------------------------------- 83 Cooper Cameron Corp. Expiration January 2008, Exercise price $80.00 $ 98,355 147 Digene Corp. Expiration March 2006, Exercise price $45.00 2,573 123 Lowe's Companies, Inc. Expiration January 2007, Exercise price $65.00 103,320 125 Prudential Financial, Inc. Expiration January 2006, Exercise price $60.00 108,125 ------------ TOTAL CALL OPTIONS PURCHASED (COST $273,971) 612,333 SHORT-TERM INVESTMENTS (2.0%) $2,679,436 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# 2,679,436 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $2,679,436) 2,679,436 ------------ TOTAL INVESTMENTS (COST $118,100,732) 100.3% 133,946,167 LIABILITIES LESS OTHER ASSETS (0.3%) (381,563) ------------ TOTAL NET ASSETS (100.0%) $133,564,604 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt Dates shown on securities are due dates of the obligations. 50 Schedule of Investments Management Overview ICON Long/Short Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 99.1% Top 10 Long Equity Holdings 15.6% Number of Long Stocks 98 Number of Short Positions 1 Short-Term Investments 0.0% Percentages are based upon net assets. TOP 10 LONG EQUITY HOLDINGS September 30, 2005 Ultra Petroleum Corp. 2.0% Canadian Pacific Railway, Ltd. 2.0% Netease.com, Inc. 1.6% United Surgical Partners International, Inc. 1.5% Grant Prideco, Inc. 1.5% KCS Energy, Inc. 1.4% National-OilWell Varco, Inc. 1.4% Universal Forest Products, Inc. 1.4% America Movil S.A. De C.V. - ADR 1.4% Companhia Vale do Rio Doce - ADR 1.4% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. For the fiscal year ended September 30, 2005, the ICON Long/Short Fund returned 18.69% for Class I shares, 17.68% for Class C shares and 18.96% for Class Z shares, outpacing the 13.45% return of the S&P 1500 Index, the Fund's benchmark, over the same period. Total returns for other periods as of September 30, 2005 appear on page 56. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Fund's focus on identifying underpriced industries demonstrating market leadership contributed positively to relative performance. Overweight industry positions within the Healthcare and Materials sectors as well as exposure to industries positioned to benefit from economic expansion also served to boost fiscal-year returns. In contrast, although the Fund's short exposure fluctuated during the period, short positions worked against overall performance, as industries our system judged as expensive continued to exhibit sustained relative strength. Although our process guides us to emphasize specific industries and securities, it may result in investments concentrated within a given capitalization range. Such was the case during the period, in which stock selection among large-cap stocks helped performance despite the Fund's significant underweight in this range. A combination of industry and stock selection within the mid-cap range also helped the Fund. Given persistently turbulent markets during the period, ICON's disciplined methodology proved quite effective in keeping the Fund well ahead of the broader averages. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are either underpriced or overpriced regardless of their location on the conventional style grid. The ICON system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. In doing so, the Fund seeks to maximize returns by playing both sides of our valuation methodology. For that reason, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with improving relative strength on the long side, and declining relative strength on the short side, we aim to capture leading industry themes that we believe are poised to outperform the broader market. Management Overview 51 Management Overview (continued) ICON Long/Short Fund It is important to note that the Fund is not market neutral; the proportion of long and short positions depends on the availability of underpriced and overpriced industries, as well as ICON's evaluation of market conditions. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. The reporting period was characterized by extreme choppiness, as rising oil prices and perceived inflationary pressures distracted already skittish investors. Although underlying economic and corporate fundamentals remained generally positive throughout, the uncertainty produced severe crosscurrents, which intensified in the wake of Hurricanes Katrina and Rita. Against this backdrop, stocks initially rallied, as investors appeared to set aside their oil- and inflation-induced worries. By late December, however, energy prices resumed their powerful climb, once again stoking inflation concerns while raising fears that the Federal Reserve would overshoot neutral targets for monetary tightening and ultimately constrict economic growth. As conflicting fears of economic slowdown and mounting inflation heightened during the early months of 2005, investor sentiment wavered, culminating in a mid-April calendar year low for the benchmark S&P 1500 Index. While our valuation metrics reflected this growing pessimism, in reality, interest rates hovered near 50-year lows, oil was well below its inflation-adjusted peak, and earnings expectations remained robust. Stocks subsequently rallied on recognition of this favorable setting, before settling into a storm-related trading range as the period came to a close. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. The Fund captured leadership on the long side across a wide range of industries, including overweight positions in the top-performing construction materials and managed health care groups. Industries that typically benefit from economic expansion, such as railroads and home building, also added to performance, as did industries that benefited from rising petroleum prices, such as oil & gas exploration & production. Long-side industries that hampered Fund performance included computer hardware, consumer finance, pharmaceuticals, and insurance brokers, all of which possessed compelling value, yet lesser degrees of relative strength. Likewise, the Fund's short positions generally proved a drag on performance, as seemingly expensive industries continued to trend visibly higher. In accordance with the Fund's shorting discipline, industry positions identified by our methodology to be both overpriced and declining in relative strength were initiated in coal, systems software, casinos & gaming, application software, specialized finance, semiconductor equipment, and air freight & logistics. By period-end, virtually all had been covered in conjunction with a broad summertime rally. At the company level, long stocks that contributed to performance included independent oil & gas developer Ultra Petroleum Corp., which reported a 52 Management Overview [J.C. Waller III PHOTO] J.C. Waller, III Portfolio Manager company-best triple-digit increase in quarterly earnings. Building Materials Holding Corp., an operator of retail centers aimed at professional contractors, also advanced, citing robust sales gains and improving gross margins. Elsewhere, China-based Web portal Netease.com Inc. posted robust net profits as gaming revenues surged. Among the Fund's weakest individual long holdings was consumer finance company Cash America International Inc., which slid when Federal regulators unveiled new guidelines governing secured non-recourse loans. Networking equipment supplier UTStarcom Inc. also detracted, having fallen on unexpected quarterly losses and pricing pressures. Meanwhile, independent energy company Petroleum Development Corp. warned that escalating day rates and tight rig availability could ultimately impede development plans. All three were sold during the period on declining relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE DOMESTIC EQUITY MARKET? A. While lingering concerns continue to make for a difficult environment, our analysis indicates that the domestic equity market remains positioned for an eventual upside move toward our evaluation of fair value. This is particularly true, in our view, of industries with leverage to worldwide economic expansion, as well as increasing global demand on energy, raw materials and heavy equipment. Although these groups comprise some of the strongest and most undervalued in the market, the outlook for shorting opportunities is much less sanguine. Therefore, we will continue to keep a close eye on valuation and relative strength in order to capitalize on developing market themes. PERFORMANCE HIGHLIGHTS September 30, 2005 - - Leadership on the long side was captured by overweighting industries including construction materials and managed health care, while poorer- performing industries included computer hardware, consumer finance and pharmaceuticals. - - Short positions in coal, systems software, casinos & gaming, application software, specialized finance, semiconductor equipment, and air freight & logistics by and large worked against Fund performance. - - Long stocks that contributed to Fund performance included Ultra Petroleum Corp., Building Materials Holding Corp. and Netease.com Inc. - - Among the Fund's weakest long holdings were Cash America International Inc., UTStarcom Inc. and Petroleum Development Corp. Management Overview 53 Management Overview (continued) ICON Long/Short Fund SECTOR COMPOSITION September 30, 2005 Industrials 19.5% Healthcare 17.1% Energy 15.0% Materials 13.9% Telecommunication and Utilities 10.0% Financial 9.1% Information Technology 8.7% Consumer Discretionary 4.6% Leisure and Consumer Staples 1.2%
Percentages are based upon long positions and net assets. 54 Management Overview INDUSTRY COMPOSITION September 30, 2005 Construction Materials 5.7% Oil & Gas Drilling 5.4% Oil & Gas Equipment & Services 5.2% Steel 5.1% Oil & Gas Exploration & Production 4.4% Managed Health Care 3.8% Railroads 3.8% Health Care Distributors 3.5% Health Care Services 3.4% Investment Banking & Brokerage 3.4% Multi-Utilities 2.9% Biotechnology 2.8% Construction & Farm Machinery & Heavy Trucks 2.7% Diversified Metals & Mining 2.7% Health Care Facilities 2.7% Internet Software Services 2.7% Computer Storage & Peripherals 2.4% Apparel Accessories & Luxury Goods 2.3% Multi-Line Insurance 2.3% Wireless Telecommunication Services 2.3% Building Products 2.2% Aerospace & Defense 2.0% Construction & Engineering 2.0% Trading Companies & Distributors 1.9% Life & Health Insurance 1.8% Electric Utilities 1.7% Property & Casualty Insurance 1.7% IT Consulting & Other Services 1.6% Communications Equipment 1.5% Human Resource & Employment Services 1.5% Catalog Retail 1.4% Gas Utilities 1.4% Airlines 1.2% Marine 1.2% Food Retail 1.1% Commercial Printing 1.0% Home Improvement Retail 1.0% Water Utilities 1.0% Pharmaceuticals 0.9% Independent Power Producers & Energy Traders 0.6% Data Processing & Outsourced Services 0.5% Fertilizers & Agricultural Chemicals 0.4%
Management Overview 55 Management Overview (continued) ICON Long/Short Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION - ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class I 9/30/02 18.69% N/A 18.70% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 17.46% - ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class C 10/17/02 17.68% N/A 15.79% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 15.87% - ------------------------------------------------------------------------------------------- ICON Long/Short Fund - Class Z 5/6/04 18.96% N/A 12.88% - ------------------------------------------------------------------------------------------- S&P 1500 Index 13.45% N/A 10.21% - -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. The Adviser has agreed to limit certain Fund expenses; without these limitations, returns would have been lower. The limitation provisions may be terminated in the future. Class Z shares are available only to institutional investors. VALUE OF A $10,000 INVESTMENT through September 30, 2005 [LINE GRAPH]
ICON LONG/SHORT FUND - CLASS I S&P 1500 INDEX ------------------------------ -------------- 9/30/02 10000 10000 9760 10811 8880 10450 11039 12093 9/30/03 12000 12469 13453 14009 14435 14308 14455 14557 9/30/04 14091 14285 15897 15661 15751 15349 15699 15613 9/30/05 16726 16206
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund's Class I shares on the Class' inception date of 9/30/02 to a $10,000 investment made in an unmanaged securities index on that date. Performance for the Fund's other share classes will vary due to differences in charges and expenses. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. 56 Management Overview Schedule of Investments ICON Long/Short Fund September 30, 2005
SHARES VALUE - --------------------------------------------- COMMON STOCKS (99.1%) 15,300 A.G. Edwards, Inc. $ 670,293 28,000 A.S.V., Inc.(a) 634,200 36,000 America Movil S.A. De C.V. - ADR 947,520 10,500 American States Water Co. 351,330 11,000 AmerisourceBergen Corp. 850,300 9,000 AmerUs Group Co. 516,330 12,200 AstraZeneca Plc - ADR 574,620 18,000 Barrett Business Services, Inc.(a) 411,300 10,000 Berry Petroleum Co. 666,900 26,000 BHP Billiton, Ltd. - ADR 888,680 10,600 Burlington Northern Santa Fe Corp. 633,880 8,000 CACI International, Inc. - Class A(a) 484,800 8,000 California Water Service Group 329,600 8,900 Canadian National Railway Co. 631,811 30,900 Canadian Pacific Railway, Ltd. 1,327,464 5,600 Celgene Corp.(a) 304,192 16,405 Cemex S.A. De C.V. - ADR 857,982 23,000 CenterPoint Energy, Inc. 342,010 20,400 Ceradyne, Inc.(a) 748,272 7,200 CIGNA Corp. 848,592 20,900 Community Health Systems, Inc.(a) 811,129 21,600 Companhia Vale do Rio Doce - ADR 947,376 6,400 Constellation Energy Group, Inc. 394,240 37,000 CP Ships, Ltd. 789,210 27,000 Digene Corp.(a) 769,500 7,200 Eagle Materials, Inc. 873,864 38,000 El Paso Electric Co.(a) 792,300 5,800 EMCOR Group, Inc.(a) 343,940 14,000 Express Scripts, Inc.(a) 870,800 10,500 Fastenal Co. 641,445 7,300 Fiserv, Inc.(a) 334,851 11,400 Florida Rock Industries, Inc. 730,626 21,500 Gildan Activewear, Inc.(a) 821,945
SHARES VALUE - --------------------------------------------- 24,500 Grant Prideco, Inc.(a) $ 995,925 29,550 HCC Insurance Holdings, Inc. 843,062 7,300 Headwaters, Inc.(a) 273,020 14,700 Helmerich & Payne, Inc. 887,733 15,500 Henry Schein, Inc.(a) 660,610 17,500 Insight Enterprises, Inc.(a) 325,500 37,500 J. Jill Group, Inc.(a) 593,250 18,200 j2 Global Communications, Inc.(a) 735,644 5,500 Jacobs Engineering Group, Inc.(a) 370,700 15,200 John H. Harland Co. 674,880 16,000 Joy Global, Inc. 807,360 35,000 KCS Energy, Inc.(a) 963,550 30,000 Kforce, Inc.(a) 309,000 25,000 Komag, Inc.(a) 799,000 10,200 Labor Ready, Inc.(a) 261,630 7,000 Lafarge North America, Inc. 473,270 7,300 Lehman Brothers Holding, Inc. 850,304 10,000 Lockheed Martin Corp. 610,400 19,800 Logitech International S.A. - ADR(a) 806,850 10,000 Lowe's Cos., Inc. 644,000 7,000 Martin Marietta Materials, Inc. 549,220 16,700 McKesson HBOC, Inc. 792,415 15,300 MedcoHealth Solutions, Inc.(a) 838,899 15,400 Mobile Telesystems - ADR 626,472 19,000 MSC Industrial Direct Co., Inc. - Class A 630,230 13,000 Nabors Industries, Ltd.(a) 933,790 14,500 National-OilWell Varco, Inc.(a) 954,100 11,700 Netease.com, Inc.(a) 1,053,117 15,000 NETGEAR, Inc.(a) 360,900 14,500 NICE Systems, Ltd. - ADR(a) 655,110 10,000 Omnicare, Inc. 562,300 19,000 Oneok, Inc. 646,380 24,200 Oregon Steel Mills, Inc.(a) 675,180 26,000 Patterson-UTI Energy, Inc. 938,080
Schedule of Investments 57 Schedule of Investments (continued) ICON Long/Short Fund September 30, 2005
SHARES VALUE - --------------------------------------------- 21,300 PG&E Corp. $ 836,025 14,500 Polo Ralph Lauren Corp. 729,350 6,000 POSCO - ADR(a) 339,360 7,500 Protective Life Corp. 308,850 13,000 Reliance Steel & Aluminum Co. 688,090 5,700 Rio Tinto Plc - ADR 936,510 30,000 Safeway, Inc. 768,000 20,000 Satyam Computer Services, Ltd. - ADR 604,400 11,400 Selective Insurance Group, Inc. 557,460 45,000 Semco Energy, Inc.(a) 296,550 22,000 Sierra Pacific Resources(a) 326,700 13,000 Simpson Manufacturing Co., Inc. 508,820 29,200 SkyWest, Inc. 783,144 4,300 StanCorp Financial Group, Inc. 362,060 33,800 Steel Technologies, Inc. 876,434 45,000 TECO Energy, Inc. 810,900 6,100 The Goldman Sachs Group, Inc. 741,638 8,300 The Hartford Financial Services Group, Inc. 640,511
SHARES VALUE - --------------------------------------------- 7,800 The Manitowoc Co., Inc. $ 391,950 2,800 The Scotts Miracle-Gro Co. 246,204 24,000 Ultra Petroleum Corp.(a) 1,365,119 17,000 Unit Corp.(a) 939,760 25,950 United Surgical Partners International, Inc.(a) 1,014,905 12,000 United Therapeutics Corp.(a) 837,600 14,600 UnitedHealth Group, Inc. 820,520 16,600 Universal Forest Products, Inc. 951,512 15,500 URS Corp.(a) 626,045 20,500 W-H Energy Services, Inc.(a) 664,610 15,100 W.R. Berkley Corp. 596,148 13,000 Weatherford International, Ltd.(a) 892,580 11,800 WellChoice, Inc.(a) 895,620 ----------- TOTAL INVESTMENTS 99.1% (COST $54,960,637) 66,600,558 OTHER ASSETS LESS LIABILITIES 0.9% 622,558 ----------- TOTAL NET ASSETS 100.0% $67,223,116 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. ADR American Depositary Receipt 58 Schedule of Investments Schedule of Short Securities ICON Long/Short Fund September 30, 2005
SHARES SHORT SECURITIES VALUE - -------------------------------------------- 50,000 eSPEED, Inc.(a) $379,000 -------- TOTAL SHORT SECURITIES (PROCEEDS OF $441,316) $379,000 ========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. Schedule of Investments 59 Six Month Hypothetical Expense Example September 30, 2005 (unaudited) EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. 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 various ICON Funds and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/05 - 9/30/05). ACTUAL EXPENSES The first set of lines in the table for each Fund provide information about actual account values and actual expenses. The Example includes, but is not limited to, management fees, 12b-1 fees, fund accounting, custody and transfer agent fees. However, the Example does not include client specific fees, such as the $10.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for each Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second set of lines in the table for each Fund provide information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. 60 Expense Example
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/05 9/30/05 4/1/05-9/30/05* 4/1/05-9/30/05 - ------------------------------------------------------------------------------------------------- ICON BOND FUND - ------------------------------------------------------------------------------------------------- CLASS I - ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,010.80 $ 5.14 1.02% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.89 5.16 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS C - ------------------------------------------------------------------------------------------------- Actual period return 1,000.00 1,007.70 8.20 1.63% - ------------------------------------------------------------------------------------------------- Hypothetical 1,000.00 1,016.83 8.24 - ------------------------------------------------------------------------------------------------- CLASS Z - ------------------------------------------------------------------------------------------------- Actual period return 1,000.00 1,010.70 4.28 0.85% - ------------------------------------------------------------------------------------------------- Hypothetical 1,000.00 1,020.74 4.31 - ------------------------------------------------------------------------------------------------- ICON CORE EQUITY FUND - ------------------------------------------------------------------------------------------------- CLASS I - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,093.10 6.61 1.26% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.68 6.38 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS C - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,088.90 10.73 2.05% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,014.72 10.35 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS Z - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,089.30 9.85 1.88% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,015.57 9.50 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON COVERED CALL FUND - ------------------------------------------------------------------------------------------------- CLASS I - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,038.10 7.41 1.45% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.73 7.33 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS C - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,034.30 11.17 2.19% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,014.02 11.06 (5% return before expenses) - -------------------------------------------------------------------------------------------------
Expense Example 61 Six Month Hypothetical Expense Example (continued) September 30, 2005 (unaudited)
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/05 9/30/05 4/1/05-9/30/05* 4/1/05-9/30/05 - ------------------------------------------------------------------------------------------------- CLASS Z - ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,039.60 $ 6.34 1.24% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.78 6.28 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON EQUITY INCOME FUND - ------------------------------------------------------------------------------------------------- CLASS I - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,061.60 6.51 1.26% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.68 6.38 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS C - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,056.70 11.29 2.19% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,014.02 11.06 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS Z - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,062.00 6.87 1.33% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.33 6.73 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON LONG/SHORT FUND - ------------------------------------------------------------------------------------------------- CLASS I - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,061.80 8.01 1.55% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.23 7.84 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS C - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,057.50 11.81 2.29% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,013.52 11.56 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS Z - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,063.60 6.67 1.29% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.53 6.53 (5% return before expenses) - -------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six month expense ratio annualized, multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. 62 Expense Example Statements of Assets and Liabilities September 30, 2005
ICON ICON ICON ICON ICON CORE COVERED EQUITY LONG/SHORT BOND FUND EQUITY FUND CALL FUND INCOME FUND FUND ----------- ------------ ----------- ------------- ----------- ASSETS Investments, at cost $81,060,423 $148,518,138 $51,715,245 $118,100,732 $54,960,637 ----------- ------------ ----------- ------------- ----------- Investments, at value 80,585,251 173,673,512 61,487,918 133,946,167 66,600,558 Cash - - - - - Deposits for short sales - - - - 1,022,778 Receivables: Fund shares sold 363,947 695,118 30,432 218,284 269,092 Investments sold 2,548,886 3,291,143 1,381,648 1,511,250 1,442,593 Interest 969,791 314 20 140,611 - Dividends - 44,434 42,977 258,176 31,974 Expense reimbursements by Advisor 11,392 - 24,419 2,552 1,129 Other assets 16,390 20,365 12,197 18,543 14,327 ----------- ------------ ----------- ------------- ----------- Total Assets 84,495,657 177,724,886 62,979,611 136,095,583 69,382,451 ----------- ------------ ----------- ------------- ----------- LIABILITIES Options written, at value (premiums received of $0, $0, $2,471,399, $0 and $0, respectively) - - 3,088,445 - - Common stocks sold short, at value (proceeds of $0, $0, $0, $0 and $441,316, respectively) - - - - 379,000 Payables: Due to custodian bank 499,888 - 692,297 - 1,648,056 Investments bought 467,180 4,353,892 1,080,349 2,211,522 - Fund shares redeemed 7,868 29,841 7,604 105,564 7,220 Distributions due to shareholders 3,878 - - 38,362 - Advisory fees & fee waiver recoupment 41,225 104,354 35,291 81,707 54,239 Accrued distribution fees 17,318 80,094 13,223 28,553 20,250 Fund accounting fees 1,683 3,409 1,191 2,669 1,317 Transfer agent fees 3,877 9,820 3,163 6,071 3,103 Administration fees 3,258 6,598 2,231 5,166 2,548 Trustee fees 3,138 4,303 2,778 3,805 2,889 Accrued expenses 38,232 42,435 50,956 47,560 40,713 ----------- ------------ ----------- ------------- ----------- Total Liabilities 1,087,545 4,634,746 4,977,528 2,530,979 2,159,335 ----------- ------------ ----------- ------------- ----------- NET ASSETS - ALL SHARE CLASSES $83,408,112 $173,090,140 $58,002,083 $133,564,604 $67,223,116 =========== ============ =========== ============= =========== NET ASSETS - CLASS I $82,415,030 $ 93,780,302 $54,346,825 $129,680,619 $53,157,913 =========== ============ =========== ============= =========== NET ASSETS - CLASS C $ 987,886 $ 78,144,757 $ 3,651,842 $ 3,861,049 $13,925,251 =========== ============ =========== ============= =========== NET ASSETS - CLASS Z $ 5,196 $ 1,165,081 $ 3,416 $ 22,936 $ 139,952 =========== ============ =========== ============= =========== NET ASSETS CONSIST OF Paid-in capital $83,899,681 $141,157,278 $50,243,368 $108,690,093 $56,806,971 Accumulated undistributed net investment income/(loss) (4,435) - - 485,602 - Accumulated undistributed net realized gain/(loss) from investments (11,962) 6,777,488 (1,396,912) 8,543,474 (1,286,092) Unrealized appreciation/(depreciation) on investments, written options and securities sold short (475,172) 25,155,374 9,155,627 15,845,435 11,702,237 ----------- ------------ ----------- ------------- ----------- NET ASSETS $83,408,112 $173,090,140 $58,002,083 $133,564,604 $67,223,116 =========== ============ =========== ============= =========== Shares outstanding (unlimited shares authorized, no par value) Class I 8,112,176 6,194,981 3,915,790 8,211,738 3,324,887 Class C 97,053 5,358,109 269,236 245,782 890,655 Class Z 512 77,076 245 1,453 8,721 Net asset value (offering and redemption price per share) Class I $ 10.16 $ 15.14 $ 13.88 $ 15.79 $ 15.99 Class C $ 10.18 $ 14.58 $ 13.56 $ 15.71 $ 15.63 Class Z $ 10.15 $ 15.12 $ 13.94 $ 15.79 $ 16.05
The accompanying notes are an integral part of the financial statements. Financial Statements 63 Statements of Operations For the year ended September 30, 2005
ICON ICON ICON ICON ICON CORE COVERED EQUITY LONG/SHORT BOND FUND EQUITY FUND CALL FUND INCOME FUND FUND ----------- ----------- ----------- ----------- ----------- INVESTMENT INCOME Interest $ 3,539,321 $ 76,460 $ 1,974 $ 931,302 $ 25,263 Dividends - 1,208,996 515,551 3,208,487 557,213 Foreign taxes withheld - (3,186) (139) (15,141) (1,400) ----------- ----------- ----------- ----------- ----------- Total Investment Income 3,539,321 1,282,270 517,386 4,124,648 581,076 ----------- ----------- ----------- ----------- ----------- EXPENSES Advisory fees 432,662 1,021,548 396,030 1,007,707 476,178 Distribution fees: Class I 177,963 173,781 124,473 328,298 117,753 Class C 7,858 664,742 29,091 30,182 88,334 Fund accounting fees 42,276 45,702 41,516 48,330 40,065 Transfer agent fees 56,190 101,388 38,085 89,666 35,429 Administration fees 34,823 65,773 25,507 64,936 27,123 Registration fees: Class I 14,921 14,154 13,551 17,214 14,010 Class C 13,140 13,496 13,033 13,146 13,416 Custody fees 14,270 24,417 99,501 28,560 15,611 Insurance expense 3,494 5,497 2,451 6,761 1,532 Trustee fees and expenses 8,277 14,446 6,930 16,085 6,071 Interest expense 138 34 15,556 1,360 9,151 Dividends on short positions - - - - 13,982 Other expenses 67,500 97,246 48,470 99,536 42,168 ----------- ----------- ----------- ----------- ----------- Total expenses before expense (reimbursement)/recoupment 873,512 2,242,224 854,194 1,751,781 900,823 ----------- ----------- ----------- ----------- ----------- Expense (reimbursement)/recoupment by Advisor due to expense limitation agreement (76,145) - (67,070) (11,894) 45,739 ----------- ----------- ----------- ----------- ----------- Net Expenses 797,367 2,242,224 787,124 1,739,887 946,562 ----------- ----------- ----------- ----------- ----------- NET INVESTMENT INCOME (LOSS) 2,741,954 (959,954) (269,738) 2,384,761 (365,486) ----------- ----------- ----------- ----------- ----------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from: Investment transactions (11,900) 14,916,012 3,036,502 8,340,028 257,625 Written options - - (3,965,764) - - Securities sold short - - - - (1,543,717) Foreign currency translations - - - (1,615) - ----------- ----------- ----------- ----------- ----------- Total net realized gain/(loss) (11,900) 14,916,012 (929,262) 8,338,413 (1,286,092) ----------- ----------- ----------- ----------- ----------- Change in net unrealized appreciation/(depreciation) on investments, written options and securities sold short (2,183,484) 8,567,211 5,856,219 5,084,010 10,046,242 ----------- ----------- ----------- ----------- ----------- Net realized and unrealized gain/(loss) on investments (2,195,384) 23,483,223 4,926,957 13,422,423 8,760,150 ----------- ----------- ----------- ----------- ----------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $ 546,570 $22,523,269 $ 4,657,219 $15,807,184 $ 8,394,664 =========== =========== =========== =========== ===========
The accompanying notes are an integral part of the financial statements. 64 Financial Statements THIS PAGE INTENTIONALLY LEFT BLANK Statement of Changes in Net Assets
ICON BOND FUND ICON CORE EQUITY FUND ---------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 2,741,954 $ 1,994,678 $ (959,954) $ (861,159) Net realized gain/(loss) from investments transactions, written options and securities sold short (11,900) 772,882 14,916,012 5,419,845 Change in net unrealized appreciation/(depreciation) on investments, written options and securities sold short (2,183,484) (160,120) 8,567,211 6,605,972 ------------------ ------------------ ------------------ ------------------ Net increase/(decrease) in net assets resulting from operations 546,570 2,607,440 22,523,269 11,164,658 ------------------ ------------------ ------------------ ------------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income Class I (2,853,077) (1,972,705) - - Class C (31,705) (11,095) - - Class Z (101) (10) - - Net realized gains Class I (338,815) - - - Class C (4,379) - - - Class Z (6) - - - ------------------ ------------------ ------------------ ------------------ Net decrease from dividends and distributions (3,228,083) (1,983,810) - - ------------------ ------------------ ------------------ ------------------ FUND SHARE TRANSACTIONS Shares sold Class I 68,872,908 33,416,648 58,022,225 16,988,164 Class C 1,493,441 342,757 24,404,517 18,403,784 Class Z 4,736 645 1,088,280 35,784 Reinvested dividends and distributions Class I 3,161,012 1,971,854 - - Class C 34,828 10,191 - - Class Z 106 10 - - Shares repurchased Class I (48,473,705) (13,848,513) (23,305,845) (13,079,331) Class C (876,763) (241,960) (10,044,802) (6,132,345) Class Z (181) - (7,314) (1,884) ------------------ ------------------ ------------------ ------------------ Net increase/(decrease) from fund share transactions 24,216,382 21,651,632 50,157,061 16,214,172 ------------------ ------------------ ------------------ ------------------ Total net increase/(decrease) in net assets 21,534,869 22,275,262 72,680,330 27,378,830 NET ASSETS Beginning of period 61,873,243 39,597,981 100,409,810 73,030,980 ------------------ ------------------ ------------------ ------------------ End of period $ 83,408,112 $ 61,873,243 $173,090,140 $100,409,810 ================== ================== ================== ==================
66 Financial Statements
ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND --------------------------------------- --------------------------------------- --------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ $ (269,738) $ (169,445) $ 2,384,761 $ 1,986,249 $ (365,486) $ (108,267) (929,262) 2,216,139 8,338,413 1,009,178 (1,286,092) 1,862,548 5,856,219 701,636 5,084,010 6,839,072 10,046,242 108,880 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 4,657,219 2,748,330 15,807,184 9,834,499 8,394,664 1,863,161 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ - - (2,332,579) (1,955,243) - - - - (30,549) (18,936) - - - - (410) (169) - - (2,014,072) (813,994) (690,470) - (1,266,628) (122,911) (97,417) (11,304) (13,763) - (183,354) (7,238) (118) - (103) - (1,524) - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ (2,111,607) (825,298) (3,067,874) (1,974,348) (1,451,506) (130,149) ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 22,320,205 28,282,997 40,993,500 84,251,666 48,606,994 21,568,653 2,209,902 1,905,597 2,071,831 1,466,895 10,192,112 3,489,408 727 3,139 9,609 13,644 101,583 32,109 1,901,482 802,492 2,824,292 1,849,956 1,158,739 121,354 88,746 10,975 36,636 17,806 163,651 7,238 118 - 513 169 1,524 - (15,241,634) (9,000,921) (44,139,761) (18,768,921) (26,815,665) (8,589,480) (751,331) (127,212) (418,636) (296,277) (1,348,857) (129,159) (790) - (3,317) (19) (7,915) - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 10,527,425 21,877,067 1,374,667 68,534,919 32,052,166 16,500,123 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 13,073,037 23,800,099 14,113,977 76,395,070 38,995,324 18,233,135 44,929,046 21,128,947 119,450,627 43,055,557 28,227,792 9,994,657 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ $ 58,002,083 $44,929,046 $133,564,604 $119,450,627 $ 67,223,116 $28,227,792 ================== ================== ================== ================== ================== ==================
Financial Statements 67 Statements of Changes in Net Assets (continued)
ICON BOND FUND ICON CORE EQUITY FUND ---------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ ------------------ TRANSACTIONS IN FUND SHARES Shares sold Class I 6,619,646 3,199,688 4,143,039 1,380,045 Class C 142,887 32,748 1,818,535 1,535,906 Class Z 455 63 74,785 2,959 Reinvested dividends and distributions Class I 304,338 188,665 - - Class C 3,347 979 - - Class Z 10 1 - - Shares repurchased Class I (4,658,204) (1,319,789) (1,647,530) (1,060,722) Class C (84,344) (23,478) (740,648) (511,842) Class Z (17) - (514) (154) ------------------ ------------------ ------------------ ------------------ Net increase/(decrease) 2,328,118 2,078,877 3,647,667 1,346,192 ------------------ ------------------ ------------------ ------------------ Shares outstanding beginning of period 5,881,623 3,802,746 7,982,499 6,636,307 ------------------ ------------------ ------------------ ------------------ Shares outstanding end of period 8,209,741 5,881,623 11,630,166 7,982,499 ================== ================== ================== ================== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities and written options) Purchase of securities (including short sale transactions) $30,243,959 $14,692,029 $230,365,019 $117,495,384 Proceeds from sales of securities (including short sale transactions) 18,795,990 14,436,998 183,339,859 101,917,674 Purchases of long-term U.S. government securities 27,647,371 22,260,709 - - Proceeds from sales of long-term U.S. government securities 28,497,651 1,889,387 - - ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ (4,435) $ 153,123 $ - $ - ================== ================== ================== ==================
The accompanying notes are an integral part of the financial statements. 68 Financial Statements
ICON COVERED CALL FUND ICON EQUITY INCOME FUND ICON LONG/SHORT FUND --------------------------------------- --------------------------------------- --------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 1,669,418 2,169,073 2,741,457 5,938,018 3,261,050 1,570,724 168,643 147,349 139,266 104,841 700,414 257,198 54 239 633 995 6,835 2,309 141,902 63,040 183,923 128,188 77,095 9,511 6,733 877 2,394 1,248 11,065 574 9 - 34 12 101 - (1,138,447) (681,412) (2,917,378) (1,336,866) (1,771,701) (632,107) (56,539) (9,841) (27,971) (21,597) (91,534) (9,606) (57) - (219) (1) (524) - ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 791,716 1,689,325 122,139 4,814,838 2,192,801 1,198,603 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 3,393,555 1,704,230 8,336,834 3,521,996 2,031,462 832,859 ------------------ ------------------ ------------------ ------------------ ------------------ ------------------ 4,185,271 3,393,555 8,458,973 8,336,834 4,224,263 2,031,462 ================== ================== ================== ================== ================== ================== $92,623,516 $74,412,247 $187,781,662 $111,360,137 $83,387,797 $38,171,546 86,038,491 53,342,570 188,205,266 44,139,424 57,223,650 22,620,730 - - 1,564,975 - - - - - - - - - $ - $ - $ 485,602 $ 690,514 $ - $ - ================== ================== ================== ================== ================== ==================
Financial Statements 69 Financial Highlights
INCOME FROM INVESTMENT OPERATIONS ---------------------------------------- NET REALIZED NET ASSET NET AND TOTAL VALUE, INVESTMENT AND UNREALIZED FROM BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS --------- ---------- -------------- ---------- ICON BOND FUND CLASS I+ Year Ended September 30, 2005 $10.52 0.40 (0.29) 0.11 Year Ended September 30, 2004 $10.41 0.45 0.10 0.55 September 30, 2002 (inception) to September 30, 2003 $10.00 0.42 0.38 0.80 CLASS C Year Ended September 30, 2005 $10.54 0.33 (0.28) 0.05 Year Ended September 30, 2004 $10.42 0.38 0.12 0.50 October 21, 2002 (inception) to September 30, 2003 $ 9.79 0.37 0.60 0.97 CLASS Z Year Ended September 30, 2005 $10.51 0.42 (0.28) 0.14 May 6, 2004 (inception) to September 30, 2004 $10.26 0.46 (0.02) 0.44 ICON CORE EQUITY FUND CLASS I Year Ended September 30, 2005 $12.78 (0.05) 2.41 2.36 Year Ended September 30, 2004 $11.12 (0.07) 1.73 1.66 Year Ended September 30, 2003 $ 9.50 (0.04) 1.66 1.62 Year Ended September 30, 2002 $10.04 (0.07) (0.20) (0.27) October 12, 2000 (inception) to September 30, 2001 $10.00 (0.05) 0.09 0.04 CLASS C Year Ended September 30, 2005 $12.41 (0.15) 2.32 2.17 Year Ended September 30, 2004 $10.88 (0.16) 1.69 1.53 Year Ended September 30, 2003 $ 9.36 (0.11) 1.63 1.52 Year Ended September 30, 2002 $ 9.98 (0.15) (0.20) (0.35) November 28, 2000 (inception) to September 30, 2001 $10.62 (0.10) (0.54) (0.64) CLASS Z Year Ended September 30, 2005 $12.79 (0.14) 2.47 2.33 May 6, 2004 (inception) to September 30, 2004 $12.07 (0.03) 0.75 0.72 ICON COVERED CALL FUND CLASS I+ Year Ended September 30, 2005 $13.25 (0.06) 1.26 1.20 Year Ended September 30, 2004 $12.40 (0.07) 1.36 1.29 September 30, 2002 (inception) to September 30, 2003 $10.00 (0.07) 2.47 2.40 CLASS C Year Ended September 30, 2005 $13.06 (0.16) 1.23 1.07 Year Ended September 30, 2004 $12.32 (0.16) 1.34 1.18 November 21, 2002 (inception) to September 30, 2003 $10.75 (0.17) 1.74 1.57 CLASS Z Year Ended September 30, 2005 $13.29 (0.03) 1.25 1.22 May 6, 2004 (inception) to September 30, 2004 $12.86 (0.01) 0.44 0.43 LESS DIVIDENDS AND DISTRIBUTIONS ------------------------------------------ DIVIDENDS NET FROM DISTRIBUTIONS TOTAL ASSET NET FROM NET DIVIDENDS VALUE, INVESTMENT REALIZED AND END OF INCOME GAINS DISTRIBUTIONS PERIOD ---------- ------------- ------------- --------- ICON BOND FUND CLASS I+ Year Ended September 30, 2005 (0.41) (0.06) (0.47) $10.16 Year Ended September 30, 2004 (0.44) - (0.44) $10.52 September 30, 2002 (inception) to September 30, 2003 (0.39) - (0.39) $10.41 CLASS C Year Ended September 30, 2005 (0.35) (0.06) (0.41) $10.18 Year Ended September 30, 2004 (0.38) - (0.38) $10.54 October 21, 2002 (inception) to September 30, 2003 (0.34) - (0.34) $10.42 CLASS Z Year Ended September 30, 2005 (0.44) (0.06) (0.50) $10.15 May 6, 2004 (inception) to September 30, 2004 (0.19) - (0.19) $10.51 ICON CORE EQUITY FUND CLASS I Year Ended September 30, 2005 - - - $15.14 Year Ended September 30, 2004 - - - $12.78 Year Ended September 30, 2003 - - - $11.12 Year Ended September 30, 2002 - (0.27) (0.27) $ 9.50 October 12, 2000 (inception) to September 30, 2001 - - - $10.04 CLASS C Year Ended September 30, 2005 - - - $14.58 Year Ended September 30, 2004 - - - $12.41 Year Ended September 30, 2003 - - - $10.88 Year Ended September 30, 2002 - (0.27) (0.27) $ 9.36 November 28, 2000 (inception) to September 30, 2001 - - - $ 9.98 CLASS Z Year Ended September 30, 2005 - - - $15.12 May 6, 2004 (inception) to September 30, 2004 - - - $12.79 ICON COVERED CALL FUND CLASS I+ Year Ended September 30, 2005 - (0.57) (0.57) $13.88 Year Ended September 30, 2004 - (0.44) (0.44) $13.25 September 30, 2002 (inception) to September 30, 2003 - - - $12.40 CLASS C Year Ended September 30, 2005 - (0.57) (0.57) $13.56 Year Ended September 30, 2004 - (0.44) (0.44) $13.06 November 21, 2002 (inception) to September 30, 2003 - - - $12.32 CLASS Z Year Ended September 30, 2005 - (0.57) (0.57) $13.94 May 6, 2004 (inception) to September 30, 2004 - - - $13.29
70 Financial Highlights
RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO AVERAGE AVERAGE NET ASSETS(A) NET ASSETS(A) NET ASSETS, AVERAGE NET ---------------------- ------------------------ END OF ASSETS FOR BEFORE AFTER BEFORE AFTER PORTFOLIO TOTAL PERIOD THE PERIOD EXPENSE EXPENSE EXPENSE EXPENSE TURNOVER RETURN* (IN THOUSANDS) (IN THOUSANDS) LIMITATION LIMITATION LIMITATION LIMITATION RATE(B) ------- -------------- -------------- ---------- ---------- ----------- ----------- --------- 1.05% $82,415 $71,253 1.18% 1.10% 3.72% 3.80% 76.28% 5.41% $61,502 $46,295 1.29% 1.30% 4.28% 4.27% 37.98% 8.19% $39,338 $33,787 1.45% 1.30% 4.01% 4.16% 41.65% 0.47% $ 988 $ 926 3.42% 1.69% 1.46% 3.19% 76.28% 4.83% $ 371 $ 317 6.84% 1.90% 3.63% 8.57% 37.98% 9.98% $ 260 $ 199 2.05% 1.90% 3.48% 3.63% 41.65% 1.30% $ 5 $ 2 74.28% 0.84% (69.41)% 4.03% 76.28% 4.33% $ 1 $ 1 0.86% 0.86% 4.60% 4.60% 37.98% 18.47% $93,780 $69,660 1.27% N/A (0.33)% N/A 136.82% 14.93% $47,273 $43,044 1.33% N/A (0.59)% N/A 116.26% 17.05% $37,603 $34,007 1.39% N/A (0.37)% N/A 188.07% (3.23)% $42,232 $37,577 1.36% N/A (0.58)% N/A 107.82% 0.40% $23,261 $23,802 1.60% N/A (0.36)% N/A 124.61% 17.49% $78,145 $66,561 2.04% N/A (1.10)% N/A 136.82% 14.06% $53,101 $45,114 2.08% N/A (1.34)% N/A 116.26% 16.24% $35,428 $30,459 2.14% N/A (1.12)% N/A 188.07% (4.07)% $27,744 $19,849 2.11% N/A (1.33)% N/A 107.82% (6.03)% $ 6,324 $ 2,920 2.23% N/A (1.24)% N/A 124.61% 18.22% $ 1,165 $ 229 1.76% N/A (0.94)% N/A 136.82% 5.97% $ 36 $ 32 1.12% N/A (0.28)% N/A 116.26% 9.21% $54,347 $49,938 1.54% 1.45% (0.57)% (0.48)% 159.35% 10.53% $42,962 $30,305 1.60% 1.45% (0.67)% (0.52)% 167.57% 24.00% $20,981 $14,544 2.07% 1.45% (1.27)% (0.65)% 184.24% 8.31% $ 3,652 $ 2,914 2.80% 2.20% (1.80)% (1.20)% 159.35% 9.69% $ 1,964 $ 838 3.89% 2.20% (2.93)% (1.23)% 167.57% 14.60% $ 148 $ 50 2.83% 2.20% (2.13)% (1.50)% 184.24% 9.42% $ 3 $ 3 53.94% 1.20% (52.97)% (0.23)% 159.35% 3.34% $ 3 $ 2 1.12% 1.12% (0.11)% (0.11)% 167.57%
Financial Highlights 71 Financial Highlights (continued)
INCOME FROM INVESTMENT OPERATIONS ---------------------------------------- NET ASSET NET NET REALIZED VALUE, INVESTMENT AND UNREALIZED TOTAL FROM BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS --------- ---------- -------------- ---------- ICON EQUITY INCOME FUND CLASS I+ Year Ended September 30, 2005 $14.33 0.27 1.54 1.81 Year Ended September 30, 2004 $12.22 0.31 2.09 2.40 September 30, 2002 (inception) to September 30, 2003 $10.00 0.25 2.20 2.45 CLASS C Year Ended September 30, 2005 $14.27 0.13 1.54 1.67 Year Ended September 30, 2004 $12.21 0.20 2.06 2.26 November 8, 2002 (inception) to September 30, 2003 $10.63 0.16 1.59 1.75 CLASS Z Year Ended September 30, 2005 $14.33 0.28 1.55 1.83 May 10, 2004 (inception) to September 30, 2004 $13.43 0.39 0.70 1.09 ICON LONG/SHORT FUND(D) CLASS I+ Year Ended September 30, 2005 $13.92 (0.08) 2.65 2.57 Year Ended September 30, 2004 $12.00 (0.08) 2.16 2.08 September 30, 2002 (inception) to September 30, 2003 $10.00 (0.07) 2.07 2.00 CLASS C Year Ended September 30, 2005 $13.73 (0.19) 2.59 2.40 Year Ended September 30, 2004 $11.92 (0.18) 2.15 1.97 October 17, 2002 (inception) to September 30, 2003 $10.61 (0.15) 1.46 1.31 CLASS Z Year Ended September 30, 2005 $13.94 (0.05) 2.66 2.61 May 6, 2004 (inception) to September 30, 2004 $13.99 (0.04) (0.01) (0.05) LESS DIVIDENDS AND DISTRIBUTIONS ------------------------------------------ DIVIDENDS DISTRIBUTIONS NET ASSET FROM NET FROM NET TOTAL VALUE, INVESTMENT REALIZED DIVIDENDS AND END OF INCOME GAINS DISTRIBUTIONS PERIOD ---------- ------------- ------------- --------- ICON EQUITY INCOME FUND CLASS I+ Year Ended September 30, 2005 (0.27) (0.08) (0.35) $15.79 Year Ended September 30, 2004 (0.29) - (0.29) $14.33 September 30, 2002 (inception) to September 30, 2003 (0.23) - (0.23) $12.22 CLASS C Year Ended September 30, 2005 (0.15) (0.08) (0.23) $15.71 Year Ended September 30, 2004 (0.20) - (0.20) $14.27 November 8, 2002 (inception) to September 30, 2003 (0.17) - (0.17) $12.21 CLASS Z Year Ended September 30, 2005 (0.29) (0.08) (0.37) $15.79 May 10, 2004 (inception) to September 30, 2004 (0.19) - (0.19) $14.33 ICON LONG/SHORT FUND(D) CLASS I+ Year Ended September 30, 2005 - (0.50) (0.50) $15.99 Year Ended September 30, 2004 - (0.16) (0.16) $13.92 September 30, 2002 (inception) to September 30, 2003 - - - $12.00 CLASS C Year Ended September 30, 2005 - (0.50) (0.50) $15.63 Year Ended September 30, 2004 - (0.16) (0.16) $13.73 October 17, 2002 (inception) to September 30, 2003 - - - $11.92 CLASS Z Year Ended September 30, 2005 - (0.50) (0.50) $16.05 May 6, 2004 (inception) to September 30, 2004 - - - $13.94
(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. (c) The limitation on expenses for Class Z shares occurred when the Advisor reimbursed the Fund for excise and income taxes incurred during the period (Note 2). These expenses were extraordinary expenses not subject to the contractual expense limitation discussed in Note 2. (d) The Fund's operating expenses, not including dividends on short positions, are contractually limited to 2.30% for Class C, 1.55% for Class I, and 1.30% for Class Z. The ratios in these financial highlights reflect the limitation, including the dividends on short positions. + The Fund has changed its originally stated inception date of October 1, 2002 to September 30, 2002. The accompanying notes are an integral part of the financial statements. 72 Financial Highlights
RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO AVERAGE AVERAGE NET ASSETS(A) NET ASSETS(A) NET ASSETS, AVERAGE NET ---------------------- ----------------------- END OF ASSETS FOR BEFORE AFTER BEFORE AFTER PORTFOLIO TOTAL PERIOD THE PERIOD EXPENSE EXPENSE EXPENSE EXPENSE TURNOVER RETURN* (IN THOUSANDS) (IN THOUSANDS) LIMITATION LIMITATION LIMITATION LIMITATION RATE(B) ------- -------------- -------------- ---------- ---------- ---------- ---------- --------- 12.71% $129,681 $131,412 1.27% 1.27% 1.79% 1.79% 143.82% 19.69% $117,552 $88,318 1.35% 1.37% 2.25% 2.23% 51.84% 24.72% $42,474 $25,288 1.72% 1.45% 2.23% 2.30% 35.17% 11.71% $ 3,861 $ 3,026 2.53% 2.20% 0.53% 0.86% 143.82% 18.56% $ 1,885 $ 1,053 3.47% 2.20% 0.12% 1.40% 51.84% 16.63% $ 581 $ 348 2.48% 2.20% 1.10% 1.38% 35.17% 12.89% $ 23 $ 20 9.37% 1.20% (6.31)% 1.86% 143.82% 8.12% $ 14 $ 12 1.11% 0.97%(c) 2.62% 2.76% 51.84% 18.69% $53,158 $47,211 1.58% 1.58% (0.53)% (0.53)% 112.06% 17.42% $24,480 $14,374 2.15% 1.74% (1.03)% (0.62)% 148.32% 20.00% $ 9,726 $ 6,997 3.09% 1.55% (2.20)% (0.66)% 162.25% 17.68% $13,925 $ 8,860 2.37% 2.32% (1.35)% (1.31)% 112.06% 16.61% $ 3,716 $ 1,417 3.70% 2.49% (2.57)% (1.35)% 148.32% 12.35% $ 269 $ 186 3.84% 2.30% (2.99)% (1.45)% 162.25% 18.96% $ 140 $ 89 3.07% 1.33% (2.07)% (0.33)% 112.06% (0.36)% $ 32 $ 29 1.98% 1.76% (0.50)% (0.28)% 148.32%
Financial Highlights 73 Notes to Financial Statements September 30, 2005 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 September 30, 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 shareholder servicing costs and each Class has exclusive voting rights with respect to its distribution plan. There are currently 12 other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. Each Fund is authorized to issue an unlimited number of no par shares. The investment objective of the Bond Fund is maximum total return. The investment objective of the Core Equity Fund is long-term capital appreciation with a secondary objective of capital preservation. The investment objective of the Covered Call Fund is modest capital appreciation and to maximize realized gains from writing covered call options. The investment objective of the Equity Income Fund is modest capital appreciation and income. The investment objective of the Long/Short Fund is capital appreciation. The Funds may have elements of risk, including the risk of loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investing in fixed income securities such as bonds involves interest rate risk. When interest rates rise, the value of fixed income securities generally decreases. Additionally, the Bond Fund may invest in medium- and lower-quality debt securities. High-yield bonds involve a greater risk of default and price volatility than U.S. government and other high-quality bonds. The Covered Call Fund invests in call options; call options involve certain risks, such as limited gains and lack of liquidity of the underlying securities, and are not suitable for all investors. The Long/Short Fund invests short in securities; there are risks associated with selling short, including the risk that the Long/Short Fund may have to cover its short position at a higher price than the short sale, resulting in a loss. The Fund's loss on a short sale is potentially unlimited as a loss occurs when the value of a security sold short increases. There are also risks associated with small and mid-cap investing, including limited product lines, less liquidity and small market share. Investments in foreign securities and currency transactions may involve certain considerations and risks not typically 74 Notes to Financial Statements 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. In addition, in the normal course of business, the Funds may enter into various agreements that provide for general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as any potential exposure involves future claims that may be made against each Fund. However, based on experience, the Funds expect the risk of loss to be remote. 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 closing price at the close of regular trading on the New York Stock Exchange (the "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by a Fund at the NASDAQ Official Closing Price provided by NASDAQ each business day. The Funds use pricing services to report the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board of Trustees ("Board") or pursuant to procedures approved by the Board. The valuation assigned to fair-valued securities for purposes of calculating a Fund's net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes obtained from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than sixty days are valued in accordance with the evaluated bid price supplied by the pricing service. The evaluated bid price supplied by the pricing Notes to Financial Statements 75 Notes to Financial Statements (continued) service is a matrix system which considers such factors as security prices, yields, maturities and ratings. 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. Prior to February 22, 2005, London closing exchange rates were used to convert foreign security values into U.S. dollars. After that date, currency rates as of the close of the New York Stock Exchange were used to convert foreign security values into U.S. dollars. 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. 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, 2005. FOREIGN CURRENCY TRANSLATION The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange daily. Income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Net unrealized appreciation or depreciation on investments and foreign currency translations arise from changes in the value of assets and liabilities, resulting from changes in the exchange rates and changes in market prices of securities held. 76 Notes to Financial Statements 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. The Funds did not enter into any forward foreign currency contracts during the year ended September 30, 2005. FUTURES CONTRACTS The Funds may invest in financial futures contracts for the purpose of hedging their existing securities or securities it intends to purchase against fluctuations in fair value caused by changes in prevailing markets. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the underlying hedged assets. The Funds held no financial futures contracts during the year ended September 30, 2005. OPTIONS TRANSACTIONS The Covered Call Fund writes (sells) call options as part of its normal investment activities. Each Fund may write (sell) put and call options only if it owns an offsetting position in the underlying security. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. Such liability is subject to off balance sheet risks to the extent of any future increases in market value of the written options. If an Notes to Financial Statements 77 Notes to Financial Statements (continued) 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 a closing sale transaction, a gain or loss is realized. If the Fund exercises a call, the cost of the security acquired is increased by the premium paid for the call. If the Fund exercises a put option, a gain or loss is realized from the sale of the underlying security, and the proceeds from such a sale are decreased by the premium originally paid. Written and purchased options are non-income producing securities. SHORT SALES The Long/Short Fund may engage in short sales (selling securities it does not own) as part of its normal investment activities. These short sales are collateralized by cash equivalents or securities held with the Fund's prime broker and segregated account at the Fund's custodian. The collateral required is determined daily by reference to the market value of the short positions. Such collateral for the Fund is held by one broker. Dividend expense on short sales is treated as an expense on the Statement of Operations. Liabilities for securities sold short are reported at market value in the Statement of Assets and Liabilities. Such liabilities are subject to off-balance sheet risk to the extent of any future increases in market value of the securities sold short. The ultimate liability for securities sold short 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 gains. 78 Notes to Financial Statements 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. Other Funds distribute income, if any, annually. 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 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. Discounts and premiums on securities purchased are amortized over the life of the respective securities. INVESTMENT TRANSACTIONS Security transactions are accounted for no later than one business day after trade date. However, for financial reporting purposes security transactions are accounted for on 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. 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 Notes to Financial Statements 79 Notes to Financial Statements (continued) average daily nets assets of the Bond Fund, 0.75% of average daily net assets of the Core Equity, Covered Call and Equity Income Funds, and 0.85% of average daily net assets of the Long/Short Fund. ICON has contractually agreed to limit its investment advisory fee and/or reimburse certain of the Funds' operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that the Funds' operating expenses do not exceed 1.60% for Class C, 1.00% for Class I and 0.75% for Class Z shares of the Bond Fund effective January 29, 2005. Prior to that date, ICON had contractually agreed to limit the expenses of the Bond Fund to 1.90% for Class C, 1.30% for Class I and 1.05% for Class Z shares. ICON has also contractually agreed to limit its investment advisory fee and/or reimburse certain operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) to the extent necessary to ensure that operating expenses do not exceed 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. The Bond Fund expense limitation will continue in effect until at least January 31, 2016 and the expenses limitation for the other Funds will continue until at least January 31, 2016. To the extent ICON reimburses or absorbs fees and expenses, it may seek payment of such amounts for up to three years after the expenses were reimbursed or absorbed. A Fund will make no such payment, however, if the total Fund operating expenses exceed the expense limits in effect at the time the expenses were reimbursed or at the time these payments are proposed. As of September 30, 2005 the following amounts are still available for recoupment by the Advisor based upon their potential expiration dates:
2006 2007 2008 - ----------------------------------------------------------------------------------- ICON Bond Fund $50,621 $ 9,844 $76,145 ICON Covered Call Fund 90,063 58,657 67,070 ICON Equity Income Fund 69,536 - 11,894 ICON Long/Short Fund 63,570 77,195 -
TRANSFER AGENT, CUSTODY AND ACCOUNTING FEES U.S. Bank N.A. ("U.S. Bank") and U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provided domestic custodial services, transfer agent services and fund accounting for the Funds for various portions of the year ended September 30, 2005. U.S. Bank served as the custodian until April 24, 2005 and transfer agent until April 17, 2005. For these services the Trust paid 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 80 Notes to Financial Statements $1.5 billion. U.S. Bancorp served as the fund accountant until March 31, 2005, for which they were paid a minimum fee for fund accounting of $45,000 on the Core Equity Fund; $58,250 on the Bond Fund, Covered Call Fund, and Long/ Short Fund; and $48,750 on the Equity Income Fund on the first $100 million of average net assets. Any amount above $100 million was 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 was charged 0.0125% on any amount over $100 million and 0.0075% on any amount over $200 million. The Trust also paid for various out-of-pocket costs incurred by U.S. Bancorp that are estimated to be 0.02% of average daily net assets. Effective April 1, 2005, the Trust retained BISYS Fund Services Ohio, Inc. ("BISYS") as Fund Accounting Agent for the Funds. For its services, the Trust pays BISYS 0.03% on the first $1.75 billion of Trust Assets, 0.0175% on assets over $1.75 billion and up to $5 billion, and 0.01% on assets in excess of $5 billion. Effective April 18, 2005, the Trust retained Brown Brothers Harriman ("BBH") as custodian of the Trust's investments. For domestic custody services, the Trust pays BBH 0.0065% on the first $50 million of average net assets and 0.0050% on domestic assets above $50 million, plus certain transaction charges. For foreign custody services, the Trust pays BBH 0.03% on foreign assets plus certain transaction charges. Effective April 25, 2005, the Trust retained Boston Financial Data Services, Inc. as the Trust's transfer agent. For these services, the Trust pays an account fee of $13.25 per open account, $7.00 per networked account, $1.80 per closed account, plus certain other transaction and cusip charges. ADMINISTRATIVE SERVICES The Trust has entered into an administrative services agreement with ICON pursuant to which ICON oversees the administration of the Trust's business and affairs, including regulatory reporting and all necessary office space, equipment, personnel and facilities. This agreement provides for an annual fee to ICON of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. The administrative services agreement provides that ICON will not be liable for any error of judgment, mistake of law, or any loss suffered by the Trust in connection with matters to which the administrative services agreement relates, except for a loss resulting from willful misfeasance, bad faith or negligence by ICON in the performance of its duties. For the period October 1, 2004 through March 31, 2005, U.S. Bancorp provided sub-administration services to ICON for a sub-administration fee of Notes to Financial Statements 81 Notes to Financial Statements (continued) 0.02% on the Trust's first $1.5 billion of average daily net assets and 0.015% on assets above $1.5 billion, subject to a minimum annual fee of $140,000. Effective April 1, 2005, ICON entered into a sub-administration agreement with BISYS pursuant to which BISYS assists ICON with the administration and business affairs of the Trust. For its services, ICON pays BISYS at an annual rate of 0.025% on the first $1.75 billion of Trust assets and 0.015% on assets above $1.75 billion. DISTRIBUTION FEES The Funds have adopted a Distribution Plan pursuant to Rule 12b-1 under the 1940 Act ("12b-1 Plan") under which the Funds are authorized to compensate the Funds' distributor, ICON Distributors, Inc. ("IDI") (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, 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. The total amount paid under the 12b-1 plans by the Funds is shown in the Statement of Operations. RELATED PARTIES Certain Officers and Directors of ICON are also Officers and Trustees of the Funds; however, such Officers and Trustees (with the exception of the Chief Compliance Officer, "CCO") receive no compensation from the Funds. The CCO's salary is paid 90% by the Funds and 10% by the Adviser. For the year ended September 30, 2005, the total related amounts paid by the Trust under this arrangement are included in Other Expenses on the Statements of Operations. Some of the 12b-1 amounts received by IDI, discussed in the Distribution Fees, has been used to offset various shareholder servicing costs incurred by the Advisor. For the year ended September 30, 2005 this amount was $73,221. 3. LINE OF CREDIT The Funds had entered into Lines of Credit agreements with U.S. Bank through March 31, 2005 that allowed the Funds to borrow funds, subject to certain conditions for temporary purposes. Interest on these borrowings was calculated at prime. A commitment fee of $500 per line of credit has been paid by each 82 Notes to Financial Statements Fund. The maximum borrowing was limited to 25% of eligible securities held by the portfolio subject to the following maximums:
AVERAGE AVERAGE U.S. BANK BBH MAXIMUM BORROWING BORROWING - ---------------------------------------------------------------------------- ICON Bond Fund** $ 9,000,000 $196,500 $499,969 ICON Core Equity Fund 15,000,000 - 114,824 ICON Covered Call Fund** 7,000,000 605,487 489,372 ICON Equity Income Fund 25,000,000 943,000 542,771 ICON Long/Short Fund** 3,000,000 292,556 712,668
** Fund had outstanding borrowings as of September 30, 2005. This agreement was terminated when the custody was transferred to BBH. Effective April 18, 2005, the Funds entered into Lines of Credit agreements with BBH; the maximum borrowing is limited to 25% of eligible securities held by the portfolio subject to a maximum borrowing limit by the Trust of $115 million. Interest is charged at LIBOR plus 2.00% which was 5.86% at September 30, 2005. 4. OPTIONS CONTRACTS WRITTEN The number of option contracts written and the premiums received by the ICON Covered Call Fund during the year ended September 30, 2005, were as follows:
NUMBER OF PREMIUMS CONTRACTS RECEIVED - ------------------------------------------------------------------------------------- Options outstanding, beginning of period 11,776 $ 1,035,052 Options written during period 64,942 15,066,770 Options expired during period (11,040) (2,258,304) Options closed during period (49,393) (10,730,372) Options exercised during period (3,024) (641,747) --------- ------------ Options outstanding, end of period 13,261 $ 2,471,399 ========= ============
5. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryforwards. Notes to Financial Statements 83 Notes to Financial Statements (continued) The tax characteristics of dividends and distributions paid to shareholders during the fiscal year ended September 30, 2005, were as follows:
DISTRIBUTIONS PAID FROM ----------------------- TAX TOTAL ORDINARY NET LONG- TOTAL TAXABLE RETURN OF DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS CAPITAL PAID - ------------------------------------------------------------------------------------------------------ ICON Bond Fund $2,799,032 $343,200 $3,142,232 $ - $3,142,232 ICON Covered Call Fund 1,404,286 707,268 2,111,554 53 2,111,607 ICON Equity Income Fund 2,443,441 704,336 3,147,777 - 3,147,777 ICON Long/Short Fund 605,334 845,915 1,451,249 257 1,451,506
Accumulated capital losses noted below represent net capital loss carryforwards as of September 30, 2005 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions.
FUND AMOUNTS EXPIRES - ----------------------------------------------------------------------------- ICON Covered Call Fund $ 621,989 2013 ICON Long/Short Fund 387,875 2013
During the year ended September 30, 2005, the following capital loss carryforwards were used: ICON Core Equity Fund $8,138,524
Net capital losses incurred after October 31, and within the taxable year are deemed to arise on the first business day of the Funds' next taxable year. For the year ended September 30, 2005, the fund deferred to October 1, 2005 post October capital losses:
CAPITAL FUND LOSSES - ----------------------------------------------------------------------- ICON Bond Fund $ 31,259 ICON Covered Call Fund 18,744 ICON Long/Short Fund 898,217
As of September 30, 2005, the components of accumulated earnings (deficit) on a tax basis was as follows:
TOTAL UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ACCUMULATED ORDINARY NET LONG- ACCUMULATED DISTRIBUTIONS CAPITAL AND APPRECIATION EARNINGS FUND INCOME TERM GAINS EARNINGS PAYABLE OTHER LOSSES (DEPRECIATION) (DEFICITS) - -------------------------------------------------------------------------------------------------------------------------------- ICON Bond Fund $ 9,909 $ 8,831 $ 18,740 $ (3,878) $ (31,259) $ (475,172) $ (491,569) ICON Core Equity Fund - 6,777,488 6,777,488 - - 25,155,374 31,932,862 ICON Covered Call Fund - - - - (640,733) 8,399,448 7,758,715 ICON Equity Income Fund 1,017,712 7,933,959 8,951,671 (532,110) - 16,454,950 24,874,511 ICON Long/Short Fund - - - - (1,286,092) 11,702,237 10,416,145
84 Notes to Financial Statements As of September 30, 2005, book cost for financial reporting purposes is substantially the same for federal income tax purposes and differs from fair value by net unrealized appreciation/(depreciation) of securities as follows:
UNREALIZED UNREALIZED NET APPRECIATION COST APPRECIATION (DEPRECIATION) (DEPRECIATION) - ----------------------------------------------------------------------------------------- ICON Bond Fund $ 81,060,423 $ 531,831 ($1,007,003) ($475,172) ICON Core Equity Fund 148,518,138 26,071,293 (915,919) 25,155,374 ICON Covered Call Fund 50,000,025 9,543,359 (1,143,911) 8,399,448 ICON Equity Income Fund 117,491,217 17,724,435 (1,269,485) 16,454,950 ICON Long/Short Fund 54,519,321 12,068,438 (366,201) 11,702,237
6. SEGREGATED ACCOUNT AND SHORT SALE COLLATERAL As of September 30, 2005 the ICON Long/Short Fund had securities or cash deposits with the counterparty to the short sales in the amount of $1,022,778 as collateral for the short sales. Notes to Financial Statements 85 Report of Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of the ICON Diversified Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, short 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 "Funds") at September 30, 2005, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Denver, Colorado November 28, 2005 86 Report of Accounting Firm Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 17 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, 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, 54, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and served as the Chief Investment Officer (1991 to 2004) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 55. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 56. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager, Trinity Investment Management Corporation (1989 to 2001). GREGORY KELLAM SCOTT, 57. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was Senior Vice President - Law, General Counsel and Secretary of GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Trustees and Officers 87 Board of Trustees and Fund Officers (continued) (unaudited) Constituency for Africa (1997 to present) and serves as Executive Director of Indiana Civil Rights Commission (2005-present). R. MICHAEL SENTEL, 57. 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, 52. 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, 54. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and served as the Chief Investment Officer (1991 to 2004). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. ERIK L. JONSON, 56. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception and from May 20, 2005 to November 15, 2005 Acting Secretary. 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). 88 Trustees and Officers Other Information (unaudited) ALL FUNDS RENEWAL OF INVESTMENT ADVISORY AGREEMENT. In determining to renew the investment advisory agreements between ICON Funds (the "Trust") and ICON Advisers, Inc. ("ICON" or the "Adviser") the Board requested, was provided with and reviewed data with respect to ICON, its personnel, and the services to be provided to each Fund by ICON under the Trust's Investment Advisory Agreement dated October 9, 1996, as amended (related to the Sector, Foreign and Core Equity Funds) and under the Trust's Investment Advisory Agreement dated July 9, 2002 and effective October 1, 2002, as amended (related to the Specialty Funds - Bond, Covered Call, Equity Income and Long/Short Funds) (collectively, the "Advisory Agreements"). The data included information concerning advisory, distribution and administrative services provided to the Funds by ICON and its related companies; information concerning other businesses of those companies; comparative data related to exchange traded funds versus the Sector Funds; and comparative data obtained from Lipper Analytical Services related to Fund performance and Fund expenses. On August 8, 2005, the Board of Trustees, including all of the Trustees that are not "interested persons" of the Trust (the "Independent Trustees"), approved continuation of the Advisory Agreements with the Adviser for each Fund for an additional one-year term commencing October 1, 2005. The Independent Trustees were represented by independent legal counsel throughout the process. Prior to acting on the matter, the Independent Trustees met separately as a group in private sessions with their independent legal counsel to review and discuss the foregoing information and also met with management to discuss responses to questions raised during the process. In addition, the Independent Trustees received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the agreement. In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed information relating to the Adviser's operations and personnel. Among other things, the Adviser provided biographical information on its professional staff and descriptions of its organizational and management structure. In the course of their deliberations the Board evaluated, among other things, information relating to the investment philosophy, strategies and techniques used in managing each Fund, the qualifications and experience of the Adviser's investment personnel, the Adviser's compliance programs, the Adviser's brokerage practices, including the extent to which the Adviser obtains research through "soft dollar" arrangements with the Funds' brokerage, and the financial and non-financial resources available to provide services required under the Advisory Agreement. Other Information 89 Other Information (continued) (unaudited) In considering the reasonableness of the fee payable to the Adviser for managing each Fund, the Board reviewed, among other things, financial statements of the Adviser and an analysis of the profitability to the Adviser and its affiliates of their relationship with each Fund over various time periods, which analysis identified all revenues and other benefits received by the Adviser and its affiliates from managing each Fund, the costs associated with providing such services and the resulting profitability to the Adviser and its affiliates. The Board considered the current and anticipated asset levels of each Fund and the willingness of the Adviser to waive fees and pay expenses of the Funds from time to time to limit the total expenses of the Funds. The Board concluded that the profitability to the Adviser and its affiliates from their relationship with the Funds is not excessive and that the Adviser is not realizing material benefits from economies of scale that would warrant adjustments to the fees for any Fund at this time. The Board of Trustees concluded that, in light of the nature, extent and quality of the services provided by the Adviser and the levels of profitability associated with providing these services, the fees charged by the Adviser under the Advisory Agreements to each Fund are reasonable. The Board of Trustees considered: 1. In connection with reviewing data bearing upon the nature, quality, and extent of services furnished by ICON to each Fund, the Board assessed data concerning ICON's staffing, systems and facilities. The Board also assessed ICON's non-Trust business to see if there are any initiatives that would dilute service to the Trust. It was noted: A. That the breadth and the quality of investment advisory and other services being provided to each Fund is satisfactory, as evidenced in part by the performance record of each Fund compared with the performance records of a peer group of comparable funds; B. That ICON has made significant expenditures in the past year and in prior years to ensure that it has the sophisticated systems and the highly trained personnel necessary for it to be able to continue to provide quality service to the Funds' shareholders, including the dedication of substantial resources to ICON's investment and trading departments; and C. That the Board is satisfied with the research, portfolio management, and trading services, among others, being provided by ICON to the Funds, and is charging fair, reasonable, and competitive fees. 2. In connection with reviewing data bearing upon the costs of services to be provided and profits to be realized by ICON and its related companies from the relationship with the Trust, the Board considered the Lipper comparative data, data concerning ICON's soft-dollar arrangements, data from independent reviews of compliance procedures, costs borne by ICON in providing advisory services to each Fund and the profitability of ICON in light of the estimated 90 Other Information profitability analyses which had been provided by ICON, other benefits to ICON from serving as the Funds' adviser, and ICON's financial statements. A. With respect to the soft-dollar arrangements the Board assessed all facets of the arrangements - including the quality of trade execution. It was noted that ICON receives research assistance from the use of soft dollars generated from Fund portfolio transactions and that such research assists ICON in providing quality investment advisory services to the Funds and other accounts to which it provides advisory services. The Board concluded that the arrangements are consistent with Fund brokerage practices and benefit the Funds and their shareholders. B. The Board noted that ICON benefits from serving directly as investment adviser and administrative agent, and through its affiliate, as the principal underwriter for the Funds. With respect to the distribution services, the Board noted that proceeds of the Trust's distribution plans pursuant to Rule 12b-1 under the 1940 Act for the International Equity and Specialty Funds are paid to ICON's affiliate and that the distributor has not profited from plan proceeds as all of the proceeds have been or will be used to cover distribution and marketing expenses. In this regard, the Trustees noted that marketing efforts have been successful as evidenced by Fund asset levels. With respect to the administrative fee paid to ICON, the Board reviewed the comparative data related to those services. The Board also considered the compliance experience in these service areas and concluded that the services provided by ICON and its affiliates to the Funds are satisfactory and that the profits derived from providing the services are competitive and reasonable. C. The Board also noted the risks assumed by ICON in providing investment advisory, distribution and administrative services (including compliance) to each Fund, including the capital commitments which have been made in the past and which continue to be made by ICON to ensure the continuation of the highest quality of service to the Funds is made with the recognition that the Funds' advisory relationship with ICON can be terminated at any time and must be renewed on an annual basis. 3. In connection with assessing data bearing upon the fairness of fee arrangements, the Board used data from Lipper, Inc. concerning funds of similar size and funds of larger size, as well as data concerning ICON's other clients: A. In this regard the Board noted that the Trust had recently changed fund accounting, transfer agent and custodial service providers; and that the expense numbers in the comparative data did not reflect the lower fees to be charged by the current service providers. Other Information 91 Other Information (continued) (unaudited) B. The advisory fee structures of the Funds were considered in comparison with advisory fees and expense ratios of other similarly-managed funds as set forth in the comparative data. It was noted that contractual advisory fees for the Sector Funds were higher than fees for similar funds; but that the Sector Funds' expense ratios were competitive and in most instances lower than those of similarly-managed Funds. It was noted that contractual advisory fees for the International Funds were above the average fees for similar funds; and that the Funds' expense ratios were competitive in light of their size. It was noted that contractual advisory fees for the Specialty Funds were in line with fees for similar funds; and that, with the exception of the Bond Fund, the Specialty Funds' expense ratios were lower than those of similarly-managed Funds. It was noted that contractual advisory fee for the Core Equity Fund was below the average fee for similar funds; and that its expense ratio was lower than those of similarly-managed Funds. C. In connection with assessing advisory fees and expense ratios it was noted ICON has contractually agreed to impose expense limitations on the International Equity and the Specialty Funds at a cost to ICON. D. It was noted that generally the fees paid to ICON for managing other institutional accounts (such as pension plans) are not lower than the fees paid by similarly-managed Funds; however, to the extent such fees are lower, it is due to the fact that such accounts are less costly for ICON to manage. E. It was noted that the advisory and other fees payable by the Funds to ICON are essentially fees which would be similar to those which would have resulted solely from "arm's-length" bargaining, and may well be lower than fees arrived solely from such arm's-length negotiation. 92 Other Information 4. The Board considered the extent to which economies of scale could be realized as a Fund grows in assets and whether the Fund's fees reflect these economies of scale for the benefit of Fund shareholders. In the regard the Board noted the Adviser's commitment to establish breakpoints in its investment advisory fees at elevated asset levels commencing during the next fiscal year. Based on these considerations, among others, the Board, including all of the Independent Trustees, concluded that the continuation of the advisory agreement was in the best interests of each Fund and its shareholders, the services to be performed under the agreement were services required for the operation of the Funds, ICON had provided satisfactory advisory services to the Funds in the past, and the fees for the advisory services which ICON would perform and other benefits from the relationship with the Trust and consistent with fees paid by similar funds, are reasonable in light of the comparative data, and would be within the range of what would have been negotiated at arm's length in light of the circumstances. SUPPLEMENTAL TAX INFORMATION For corporate shareholders, the following percentage of the total ordinary income dividends paid during the fiscal year ended September 30, 2005, qualify for the corporate dividends received deduction for the following Funds:
DIVIDENDS RECEIVED FUND DEDUCTION - ----------------------------------------------------------------------- ICON Equity Income Fund 52.31%
For the fiscal year ended September 30, 2005, the following Funds paid qualified dividend income of:
FUND AMOUNT - ------------------------------------------------------------------------ ICON Covered Call Fund $ 227,916 ICON Equity Income Fund 2,443,441 ICON Long/Short Fund 125,486
The Funds designate the following amounts as long term capital gain distributions qualifying for the maximum 15% income tax rate for individuals:
FUND AMOUNT - ---------------------------------------------------------------------- ICON Bond Fund $343,200 ICON Covered Call Fund 707,268 ICON Equity Income Fund 704,336 ICON Long/Short Fund 845,915
Other Information 93 PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month-end. Each ICON Fund also files a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q are available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A 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 is available at www.iconadvisers.com or on the SEC's website at www.sec.gov. FOR MORE INFORMATION This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor. 94 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 55452 Boston, MA 02205-8165 In Person ICON Funds 5299 DTC Boulevard, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
[ICON FUNDS LOGO] 1-800-764-0442 www.iconadvisers.com I-149-DIV . 2005 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 26 SIX MONTH HYPOTHETICAL EXPENSE EXAMPLE (UNAUDITED) 37 FINANCIAL STATEMENTS 39 FINANCIAL HIGHLIGHTS 46 NOTES TO FINANCIAL STATEMENTS 48 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 58 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 59 OTHER INFORMATION (UNAUDITED) 61
[RECYCLE LOGO] About This Report (unaudited) HISTORICAL RETURNS All total returns mentioned in this report account for the change in a Fund's per-share price and the reinvestment of any dividends, capital gain distributions, and tax return of capital. If your account is set up to receive Fund distributions in cash rather than to reinvest them, your actual return may differ from these figures. The Funds' performance results do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. The Adviser reimbursed certain fees of the Fund. If not for these reimbursements, performance would have been lower. Past performance does not guarantee future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Performance results represent past performance, and current performance may be higher or lower. Please call 1-800-764-0442 or visit www.iconadvisers.com for performance results current to the most recent month-end. PORTFOLIO DATA This report reflects ICON's views, opinions and portfolio holdings as of September 30, 2005, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's holdings as of September 30, 2005 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology primarily considers company-specific factors beyond financial data, various company factors may impact a stock's performance, and therefore, Fund performance. There are risks associated with mutual fund investing, including the 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 the security price and reinvestment of dividends and distributions (except as noted), but does not reflect the costs of managing a mutual fund. The total return figures for the Morgan Stanley Capital International (MSCI) indexes assume change in security prices and the deduction of local taxes. The Funds' portfolios may significantly differ in holdings and composition from the indexes. Individuals cannot invest directly in an index. - - The unmanaged MSCI Europe Index comprises approximately 600 stocks traded in developed markets from 15 European countries. The capitalization-weighted index attempts to capture at least 60% of investable capitalization in those markets subject to constraints governed by industry representation, maximum liquidity, maximum float, and minimum cross-ownership. - - The unmanaged MSCI All Country Pacific Index comprises stocks traded in the developed and emerging markets of the Pacific Basin (Australia, China, Hong Kong, Indonesia, Japan, Korea, Malaysia, New Zealand, Philippines, Singapore, Taiwan and Thailand). The capitalization-weighted index attempts to capture at least 60% of investable capitalization in those markets subject to constraints governed by industry representation, maximum liquidity, maximum float, and minimum cross-ownership. - - The MSCI All Country World Index ex-United States (ACWI ex-U.S.) is a leading unmanaged benchmark of international stock performance. The capitalization-weighted index is representative of the performance of securities of companies located in developed and emerging markets outside of the United States. - - The unmanaged Bloomberg European 500 Index measures the weighted average performance in U.S. dollars of the 500 most highly capitalized European companies. Index returns and statistical data included in this report are provided by Bloomberg and FactSet Research Systems. About This Report 3 Message from ICON Funds (unaudited) - -------------------------------------------------------------------------------- Overpriced industries are few and far between, even within the richly valued Energy sector. - -------------------------------------------------------------------------------- Thank you for your continued investment in the ICON Foreign Funds and welcome to those of you receiving this report for the first time. As you may know, ICON employs bottom-up industry rotation in pursuit of leading themes which our analysis shows are poised to outperform the broader market. Our focus on valuation continued to serve the Funds well, directing us toward underpriced industries that played a part in moving foreign markets higher despite inherent skepticism on the part of investors. STRONG GAINS OVERSEAS While overseas markets recorded impressive gains that outpaced the broad U.S. averages, the path was still fraught with numerous difficulties. Investors grappled with uncertainties stemming from rising oil prices, political uncertainty and currency revaluation, leading to fears of economic slowdown and weaker corporate earnings. Equity markets proved especially volatile in this setting, trading sideways when concerns intensified, and then rallying when anxiety abated. However, as U.S. investors seemingly overreacted to intraday moves in oil futures during Hurricanes Katrina and Rita, the impact of higher oil was noticeably more muted overseas. Despite perceived energy-related pressures that appear intuitive to many investors, Asian economies continued to benefit from strong domestic and global demand, structural reforms and increased capital spending, while European companies, ever more receptive to cost-cutting and consolidation, posted solid gains across a number of sectors. DIVERSIONS IN GLOBAL LEADERSHIP Although country selection is not a primary consideration of our methodology, it remains a key secondary factor given regional economic differences and periodic diversions in global industry leadership. Although it has been our contention that industry leadership often crosses both country and regional borders, recent events prove the exception to the rule. Such was the case during the fiscal year for the Consumer Discretionary sector, which exhibited considerable strength in Asian markets and discernible weakness in European markets. Conversely, the Telecommunication & Utilities sector performed well in Europe while faltering in Asia. At the same time, the Industrials sector recorded robust performance across both regions in conjunction with worldwide growth in infrastructure spending. For many international investors, however, the buzz clearly centered on China. From an economic and domestic consumption perspective, this makes perfect sense. The progress there has been nothing short of dramatic. Nevertheless, from an investment perspective, the environment is one of widespread value but 4 Message from ICON Funds While overseas markets recorded impressive gains that outpaced the broad U.S. averages, the path was still fraught with numerous difficulties. [CRAIG T. CALLAHAN PHOTO] Craig T. Callahan President limited relative strength. While maintaining market-weight exposure, we have found far more compelling opportunities within the surrounding region among companies that stand to benefit from China's phenomenal growth. With the revaluation of the yuan, a number of these include net exporters domiciled in South Korea and Japan. - -------------------------------------------------------------------------------- The strength of the ICON system is its ability to view each region individually with respect to its value characteristics. - -------------------------------------------------------------------------------- WHAT ARE VALUATION GAPS SAYING? At period-end, our overall value-to-price ratio (V/P) for the stocks in our foreign database was calculated to be 1.35, indicating that equities would need to advance 35% on average over the coming year in order to reach our determination of fair value. That being said, markets rarely move in a straight line and random news events can in fact disrupt a move to the upside. Moreover, value is a moving target and highly susceptible to changes in earnings, growth rates, risk, and interest rates. Despite these variables, valuation gaps are calculable, whereas random events and their impact are generally unpredictable. In that regard, the strength of the ICON system is most apparent, given its ability to view each region individually with respect to its value characteristics. What are current valuation gaps telling us? The Asia-Pacific region as a whole remains the most attractive according to our analysis, offering deeper discounts than either Europe or the United States. Despite an already strong showing, the Industrials sector continues to feature an attractive combination of value and relative strength across its respective industries. The Financial and Materials sectors also appear poised to assume leadership roles, as industries with leverage to rising domestic demand reflect regional expectations for economic recovery. Meanwhile, Telecommunication & Utilities and Leisure and Consumer Staples are demonstrating visible signs of weakness in light of an environment that increasingly seems to favor economically sensitive industries. Europe, on the other hand, while already closing a greater portion of its valuation gap, remains undervalued according to our methodology. Nevertheless, European markets continue to face high unemployment and more moderate growth prospects, yet significantly lower inflationary pressures. Shifting sector leadership appears tilted toward Materials and Information Message from ICON Funds 5 Message from ICON Funds (continued) Technology, although Energy and Industrials may continue to exhibit residual strength. In contrast, the Leisure and Consumer Staples and Consumer Discretionary sectors will likely lag, as defensive- and consumer-oriented industries encounter lingering regional weakness. OVERPRICED INDUSTRIES ARE FEW We continue to see positive trends in corporate earnings, economic fundamentals and company valuations, and believe the setting looks favorable for a broad move to the upside. Our analysis shows that overpriced industries are few and far between, even within the richly valued Energy sector, which enjoyed an impressive run during the period. In closing, we wish to thank you for the privilege of guiding you through these challenging markets. For current market updates, as well as up-to-date Fund performance and account information, we invite you to visit our website at www.iconadvisers.com. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and President of the Adviser Consider the investment objectives, risks, charges, expenses, and share classes of each ICON Fund carefully before investing. The prospectus contains this and other information about the Funds and is available by visiting www.iconadvisers.com or calling 1-800-764-0442. Please read the prospectus carefully before investing. 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. An investment in a region fund may involve greater risk and volatility than a more diversified fund. Investments in foreign securities may entail unique risks, including political, market, and currency risks. 6 Message from ICON Funds Management Overview ICON Asia-Pacific Region Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 95.2% Top 10 Equity Holdings 15.1% Number of Stocks 127 Short-Term Investments 4.4% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Hanjin Heavy Industries & Construction Co., Ltd. 1.7% Komatsu, Ltd. 1.7% Mitsubishi UFJ Financial Group, Inc. 1.6% Kobe Steel, Ltd. 1.6% Sumitomo Metal Industries, Ltd. 1.5% Zinifex, Ltd. 1.5% Yamada Denki Co., Ltd. 1.5% Rio Tinto, Ltd. 1.4% INI Steel Co. 1.4% Sumitomo Mitsui Financial Group, Inc. 1.2% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Asia-Pacific Region Fund appreciated 38.12% for the fiscal year ended September 30, 2005, outpacing its benchmark, the MSCI All Country Pacific Index, which returned 29.34% over the same period. Total returns for other periods as of September 30, 2005 appear on page 13. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. On average, Asian markets outperformed U.S. and European shares during the period, having traded at deeper discounts and thus closing a wider valuation gap in their comparatively steady move toward fair value. Performance also benefited from the Fund's valuation-related tilt toward small- and medium-capitalization stocks, which our system guided us to actively overweight versus the predominantly large-cap benchmark. A corresponding underweight in large-cap securities in the region further boosted returns, as stock selections in Asian small- and mid-caps surpassed their larger counterparts. Against this backdrop, the Fund kept pace with its benchmark during the first half of the reporting period, but then overtook the large-cap dominated index in the second half to finish well ahead of regional market averages. While our focus on leading industry themes enhanced relative performance over the course of the fiscal year, foreign exchange fluctuations had little or no bearing on returns as the U.S. dollar strengthened against the yen and other Asian currencies. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying Asia-Pacific region securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization, investment style or country origin, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as these measures do not, in our view, adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical or projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of valuation with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. Management Overview 7 Management Overview (continued) ICON Asia-Pacific Region Fund Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. With cyclical themes driving market advances at the opening and closing stages of the fiscal year, wholesale volatility characterized everything in between. Temporary disruptions created by the tsunami of late December 2004 were seen as catalysts for the ensuing choppiness, even though there were few signs that the disaster would impart lasting long-term effects on the region's economic development. As near-term concerns receded, Asian markets were expected to remain key contributors to global economic growth, supported by healthy domestic and worldwide demand, structural reform, increased capital spending, and improved economic integration. At the country level, our analysis indicated that Japan may have turned a corner late in the period on reports that its deflationary economy might finally be on the upswing. Although some observers remained skeptical, given numerous false starts and continued low consumer confidence, bank-lending rates, domestic demand and export growth all saw steady improvement. Meanwhile, in a move aimed at moderating overly robust export activity, China adopted a more flexible currency policy, thereby boosting the value of the yuan. This was viewed as favorable for shares of net exporters domiciled in Japan and South Korea, which, unlike a number of local Chinese equities, stand to actually benefit from China's ongoing economic expansion. Moreover, South Korean stocks received a lift as domestic investors increased their exposure to local shares. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Fund performance was driven by continued strong showings in cyclical sectors such as Industrials and Consumer Discretionary. Industrials, in particular, benefited from an active overweight, resulting in broad participation throughout the sector. Industry standouts included construction & farm machinery & heavy trucks and industrial machinery, which were linked to regional strength in shipbuilding. As for Consumer Discretionary, relative strength in distributors and apparel retail proved favorable, as Japan's retail-and consumer-related industries strengthened at period-end. Among the Fund's leading company contributors, shipbuilder Hanjin Heavy Industries & Construction capitalized on rising demand for vessels equipped to transport liquefied natural gas. Likewise, shares of industrial products manufacturer Sumitomo Metal Industries, Ltd. rose to a five-year high on lucrative contract wins in the oil and gas development space, while KS Energy Services Ltd., a provider of hydraulic-based products for the shipbuilding and oil and gas industries, benefited from increased offshore exploration and production activities. 8 Management Overview [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager [SCOTT SNYDER PHOTO] Scott Snyder Assistant Portfolio Manager In contrast, Telecommunication & Utilities and Financials were the Fund's poorest-performing sectors during the period on a relative basis. From an industry perspective, weakness in integrated telecommunication services was noteworthy, while an underweight in diversified banks prevented the Fund from capturing a greater level of upside return. Primary detractors albeit insignificant (approximately .50%) to performance included Samyang Corp., a maker of food products and pharmaceuticals, which dropped for no apparent reason and petrochemical producer Hanwha Chemical Corp. also retreated, having posted lower-than-expected quarterly results on weakness in their industrial explosives and trading divisions. Elsewhere, container manufacturer Singamas Container Holdings Ltd. came under pressure for no apparent reason. All three companies were removed from the Fund as their relative strength declined. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE ASIA-PACIFIC REGION? A. Although improving fundamentals are driving the region's robust economic growth, our investment process remains focused on demonstrated industry valuation and relative strength. With current calculations still supporting a cyclical theme, we would expect to see continued leadership within the Industrials sector and emerging leadership among Financials and Materials. Meanwhile, lagging sectors such as Telecommunication & Utilities and Leisure and Consumer Staples have contributed to ongoing volatility. PERFORMANCE HIGHLIGHTS September 30, 2005 - - Fund performance benefited from a valuation-related tilt toward small- and mid-cap stocks, which our methodology led us to overweight versus the large-cap dominated benchmark. - - While our focus on leading industry themes enhanced relative performance during the period, foreign currency fluctuations had little or no bearing. - - Fund performance was driven by continued strong showings in cyclical sectors such as Industrials and Consumer Discretionary, while defensive-oriented Telecommunication & Utilities and Financials were the poorest-performing sectors during the period on a relative basis. - - Among the Fund's leading company contributors were Hanjin Heavy Industries & Construction, Sumitomo Metal Industries and KS Energy Services Ltd. - - Primary albeit insignificant (approximately .50%) company detractors included Samyang Corp. Hanwha Chemical Corp. and Singamas Container Holdings Ltd. Management Overview 9 Management Overview (continued) COUNTRY COMPOSITION September 30, 2005 Japan 45.2% South Korea 23.3% Australia 7.0% Taiwan 5.4% Singapore 5.3% Hong Kong 4.0% China 1.6% Indonesia 1.1% Netherlands 1.0% New Zealand 0.7% Malaysia 0.6%
Percentages are based upon net assets. SECTOR COMPOSITION September 30, 2005 Industrials 20.2% Financial 16.0% Materials 15.4% Consumer Discretionary 14.8% Information Technology 9.0% Energy 6.3% Leisure and Consumer Staples 5.1% Healthcare 4.8% Telecommunication and Utilities 3.6%
Percentages are based upon net assets. 10 Management Overview INDUSTRY COMPOSITION September 30, 2005 Diversified Banks 5.7% Construction & Farm Machinery & Heavy Trucks 5.0% Diversified Metals & Mining 4.6% Steel 4.4% Industrial Machinery 4.2% Trading Companies & Distributors 3.6% Property & Casualty Insurance 3.2% Construction & Engineering 3.0% Diversified Chemicals 2.9% Apparel Retail 2.8% Oil & Gas Exploration & Production 2.6% Real Estate Management & Development 2.4% Department Stores 2.2% Electronic Equipment Manufacturers 2.2% Oil & Gas Refining & Marketing 2.2% Computer Hardware 2.1% Gas Utilities 2.0% Health Care Facilities 2.0% Regional Banks 1.9% Consumer Finance 1.9% Internet Software & Services 1.9% Construction Materials 1.9% Automobile Manufacturers 1.7% Semiconductors 1.5% Computer & Electronics Retail 1.5% Diversified Commercial & Professional Services 1.4% Distributors 1.3% Air Freight & Logistics 1.3% Electric Utilities 1.2% Catalog Retail 1.0%
Management Overview 11 Management Overview (continued) INDUSTRY COMPOSITION (continued) September 30, 2005 Photographic Products 1.0% Apparel Accessories & Luxury Goods 1.0% Specialty Chemicals 0.9% Industrial Conglomerates 0.9% Tobacco 0.9% Personal Products 0.9% Electronic Manufacturing Services 0.9% Health Care Services 0.8% Motorcycle Manufacturers 0.8% Heavy Electrical Equipment 0.8% Integrated Oil & Gas 0.8% Reinsurance 0.8% Specialty Stores 0.7% Household Products 0.7% Auto Parts & Equipment 0.7% Gold 0.7% Pharmaceuticals 0.7% Leisure Products 0.7% Oil & Gas Equipment & Services 0.7% Hotels Resorts & Cruise Lines 0.6% Homefurnishing Retail 0.5% Health Care Supplies 0.5% Electrical Components & Equipment 0.5% Data Processing & Outsourced Services 0.5% Integrated Telecommunication Services 0.4% Biotechnology 0.4% Commercial Printing 0.3% Health Care Distributors 0.3% Home Entertainment Software 0.2%
12 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 2/25/97 - ----------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund 38.12% 2.07% 1.49% - ----------------------------------------------------------------------------------------- MSCI All Country Pacific Index 29.34% 3.47% 2.16% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
ICON ASIA - PACIFIC REGION MSCI ALL COUNTRY PACIFIC INDEX -------------------------- ------------------------------ 2/25/97 10000 10000 9550 9496 11320 11163 9/30/97 9940 9656 8270 7530 8310 7839 7360 7011 9/30/98 6089 6079 7759 7789 8569 8616 9809 9715 9/30/99 10870 10541 13170 12277 11620 12234 10870 11455 9/30/00 10251 10133 9611 8764 9011 8111 8711 8183 9/30/01 6811 6673 6766 6946 6625 7264 6424 7446 9/30/02 5701 6499 6053 6356 5801 5976 6584 6819 9/30/03 7648 8066 8695 8921 9067 10020 8323 9510 9/30/04 8222 9291 9044 10578 9287 10505 9519 10439 9/30/05 11356 12017
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 13 Schedule of Investments ICON Asia-Pacific Region Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (95.2%) 141,780 Acer, Inc. $ 283,472 12,000 Aisin Seiki Co., Ltd. 342,108 17,000 Amano Corp. 264,175 1,400 Amorepacific Corp. 423,700 5,800 ARRK Corp. 322,261 25,500 BHP Billiton, Ltd. 434,789 7,000 C Uyemura & Co., Ltd. 271,252 22,400 Cheil Industries, Inc. 482,882 36,000 Cheung Kong Infrastructure Holdings, Ltd. 120,546 1,058,000 China Resources Land, Ltd. 310,736 185,000 Commerce Asset- Holding Berhad 275,011 102,000 Cosmo Oil Co., Ltd. 549,241 10,800 Credit Saison Co., Ltd. 476,830 6,600 CSL, Ltd. 193,328 11,000 Culture Convenience Club Co., Ltd. 363,269 17,000 Dacom Corp.(a) 216,371 25,600 Daegu Bank 311,792 16,000 Daewoo Engineering & Construction Co., Ltd. 179,368 31,500 Daifuku Co., Ltd. 428,730 101,000 Daihen Corp. 403,667 57,000 Dainippon Ink & Chemicals, Inc. 188,113 15,000 Doosan Heavy Industries & Construction Co., Ltd. 283,450 56,000 Fuji Electric Holdings Co., Ltd. 223,571 682,000 GES International, Ltd. 369,698 276,000 Goodpack, Ltd. 271,237 4,900 GS Home Shopping Inc. 511,053 9,400 Hana Tour Service Inc. 314,243
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 38,600 Hanjin Heavy Industries & Construction Co., Ltd. $ 822,902 13,500 Hanjin Transportation Co., Ltd. 354,190 86,900 Healthscope, Ltd. 417,270 30,000 High Tech Computer Corp. 368,691 87,286 Hon Hai Precision Industry Co., Ltd. 408,659 37 Hoosiers Corp. 143,749 9,000 Horiba, Ltd. 217,159 5,400 Hoya Corp.v 182,774 1,800 Hoya Corp. 60,925 9,100 Hyundai Department Store H&S Co., Ltd. 432,651 6,000 Hyundai Department Stores Co., Ltd. 404,001 9,000 Hyundai Development Co. 284,575 2,600 Hyundai Heavy Industries Co., Ltd. 193,730 47,000 Hyundai Marine & Fire Insurance Co., Ltd. 467,050 4,000 Hyundai Motor Co. 313,463 9,400 Ibiden Co., Ltd. 393,776 29,300 Industrial Bank of Korea 371,889 25,400 INI Steel Co. 658,628 40 Inpex Corp. 310,098 69,600 James Hardie Industries NV 476,468 122,000 Japan Steel Works, Ltd. 455,725 15 Japan Tobacco, Inc. 236,894 21,000 JGC Corp. 385,867 90,000 Johnson Health Tech Co., Ltd. 331,466 141,000 Kawasaki Heavy Industries, Ltd. 358,051 76 Kenedix, Inc. 254,249 102,000 Keppel Land, Ltd. 223,720 8,700 Kia Motors Corp. 163,162 7,000 Kobayashi Pharmaceutical Co., Ltd. 237,389
14 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 250,000 Kobe Steel, Ltd. $ 762,251 60,000 Komatsu, Ltd. 820,619 6,300 Kookmin Bank 373,179 9,200 Korea Electric Power Corp. 314,651 41,400 Korean Reinsurance Co. 382,363 243,600 KS Energy Services, Ltd. 323,343 5,100 KT&G Corp. 220,819 30,250 Largan Precision Co., Ltd. 272,361 8,400 LG Engineering and Construction Corp. 333,928 6,300 LG Household & Health Care, Ltd.v 361,673 34,000 LG Insurance Co., Ltd. 445,850 96,000 Li & Fung, Ltd. 222,369 229,000 Lihir Gold, Ltd.(a) 335,105 121,000 Marubeni Corp. 565,025 16,600 Marui Co., Ltd. 281,428 31,900 MediaTek, Inc. 302,403 9,000 Mediceo Holdings Co., Ltd. 143,928 29,900 Mitsubishi Corp. 591,755 107,000 Mitsubishi Materials Corp. 379,544 61 Mitsubishi UFJ Financial Group, Inc. 798,808 46,000 Mitsui & Co., Ltd. 577,669 26,000 Mitsui Sumitomo Insurance Co., Ltd. 302,784 5,000 Namco Bandai Holdings, Inc.(a)v 83,260 4,600 Netease.com, Inc.--ADR(a)v 414,046 3,000 NHN Corp.(a) 510,591 42,000 Nippon Mining Holdings, Inc. 331,195 37,000 Nissan Chemical Industries, Ltd. 466,855 3,100 Nitori Co., Ltd. 260,117 2,500 Orix Corp. 453,182 8,700 Pal Co., Ltd. 509,745 184,000 Parkway Holdings, Ltd. 235,634 466,000 PetroChina Co., Ltd. 389,573
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 485,000 Ports Design, Ltd. $ 551,481 149,870 Premier Image Technology Corp. 221,235 27,300 Primary Health Care, Ltd. 216,520 1,288,000 PT Perusahaan Gas Negara 523,441 15,400 Rio Tinto, Ltd. 695,011 96,700 Ryman Healthcare, Ltd. 331,788 7,400 S1 Corp. 356,604 380 Samsung Electronics Co., Ltd. 215,246 258,000 SembCorp Industries, Ltd. 458,255 302,000 SembCorp Marine, Ltd. 535,127 2,900 Shimamura Co., Ltd. 322,714 9,240 Shinhan Financial Group Co., Ltd. 322,266 152,000 Showa Denko K.K 488,497 189,340 Siliconware Precision Industries Co. 193,106 55,000 Singapore Petroleum Co., Ltd. 192,040 208,000 Sino Land Co., Ltd. 253,863 10,000 Sogo Medical Co., Ltd. 197,211 25,000 Sompo Japan Insurance, Inc. 332,815 77,000 Sumitomo Heavy Industries, Ltd. 548,859 210,000 Sumitomo Metal Industries, Ltd. 739,003 63 Sumitomo Mitsui Financial Group, Inc. 596,550 30,000 Suruga Bank, Ltd. 330,583 116,000 Taiheiyo Cement Corp. 435,223 32,000 Takashimaya Co., Ltd. 408,769 51,000 Teikoku Oil Co., Ltd. 552,143 50,000 The Joyo Bank, Ltd. 306,052 22,000 Toho Gas Co., Ltd. 96,214 6,000 Tohoku Electric Power Co., Inc. 133,684 7,200 Toyota Motor Corp. 332,287
Schedule of Investments 15 Schedule of Investments (continued) ICON Asia-Pacific Region Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 4,700 Trans Cosmos, Inc. $ 220,179 169,000 Ube Industries, Ltd. 457,263 8,706 Unimicron Technology Corp. 6,458 230,000 Vision Grande Group Holdings, Ltd.(a) 145,632 139,000 Wintek Corp. 225,163 14,700 Woodside Petroleum, Ltd. 402,902 466,000 Xinao Gas Holdings, Ltd. 366,386 9,300 Yamada Denki Co., Ltd. 708,287 19,800 Yamaha Motor Co., Ltd. 410,416 2,549 Yuhan Corp. 334,675 203,003 Zinifex, Ltd. 708,698 ----------- TOTAL COMMON STOCKS (COST $39,946,416) 46,382,763
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- SHORT-TERM INVESTMENTS (4.4%) $1,924,150 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# $ 1,924,150 120 Brown Brothers Harriman Time Deposit - Australian Dollar, 4.55%, 10/01/05# 120 209,092 Brown Brothers Harriman Time Deposit - Hong Kong Dollar, 2.25%, 10/01/05# 209,092 24 Brown Brothers Harriman Time Deposit - Singapore Dollar, 1.27%, 10/01/05# 24 34 Brown Brothers Harriman Time Deposit - New Zealand Dollar, 5.75%, 10/01/05# 34 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $2,133,420) 2,133,420 ----------- TOTAL INVESTMENTS 99.6% (COST $42,079,836) 48,516,183 ----------- OTHER ASSETS LESS LIABILITIES 0.4% 204,719 ----------- TOTAL NET ASSETS 100.0% $48,720,902 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. v All common stocks were fair valued (Note 1) as of September 30, 2005 unless noted with a v. Total value of common stocks fair valued was $45,341,010. 16 Schedule of Investments Management Overview ICON Europe Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 96.6% Top 10 Equity Holdings 16.8% Number of Stocks 104 Short-Term Investments 2.7% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 SolarWorld AG 2.1% Vallourec S.A. 2.0% DSV A/S 1.9% Oesterrichische Elekrizitaitswirts AG - Class A 1.8% EVS Broadcast Equipment S.A. 1.6% Logitech International S.A. 1.5% BHP Billiton PLC 1.5% Xstrata Plc 1.5% Fast Search & Transfer ASA 1.5% Capio AB 1.4% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Europe Fund appreciated 30.34% for the fiscal year ended September 30, 2005, outpacing returns of 27.41% for the Bloomberg European 500 Index and 24.99% for the MSCI Europe Index, the Fund's benchmarks, over the same period. Total returns for other periods as of September 30, 2005 appear on page 23. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. On average, European markets outperformed U.S. shares during the period, having traded at deeper discounts and thus closing a wider valuation gap in their move toward fair value. Performance also benefited from the Fund's valuation-related tilt toward small- and medium-capitalization stocks, which our methodology led us to actively overweight versus the large-cap dominated benchmark. Although ICON does not utilize market capitalization as a valuation measure, the Fund's bias contributed positively to returns. While our primary focus on leading industry themes enhanced relative returns over the course of the fiscal year, foreign exchange fluctuations detracted slightly from performance as the U.S. dollar strengthened against the euro and other European currencies. Nevertheless, the overall impact was minimal, even though the Fund maintained direct exposure to the underlying equities. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying European securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization, investment style or country origin, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as these measures do not, in our view, adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of valuation with relative strength (RS), we aim to capture leading industry themes which we believe are poised to outperform the sector benchmark. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Despite four consecutive quarters of healthy gains, European markets experienced considerable choppiness in conjunction with conflicting economic and corporate fundamentals. As such, while earnings expectations Management Overview 17 Management Overview (continued) ICON Europe Fund were generally robust, consumer confidence and personal consumption turned increasingly negative. Concurrently, nominal inflation pressures were no match for continued high unemployment and slowing economic growth. Nowhere was this more evident than in the United Kingdom, which eased monetary policy in response to lingering weakness in household spending and business investment. Germany, Europe's largest economy, also faced considerable headwinds as national elections failed to muster a clear majority, putting a damper on forward growth expectations. Nevertheless, globalization and economic integration continued to be viewed as key to sustaining a broad recovery, evidenced by the ongoing expansion of the European Union. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Fund performance was driven by continued strength in the highly cyclical Industrials sector, which benefited from active overweighting and broad industry participation. Industry standouts included industrial machinery and construction & engineering, both of which were linked to global gains in infrastructure spending. At the same time, defensive-oriented sectors such as Healthcare and Telecommunication & Utilities also contributed to relative returns, as overweights in the health care distributors and electric utilities industries augmented performance. Among the Fund's leading company contributors, pharmaceutical marketer Meda AB benefited from strategic acquisitions that added asthma and pain medications to its growing pipeline of treatments. Meanwhile, SolarWorld AG, a developer of solar power systems, took steps to expand its supply base in order to meet rising global demand for solar cells. Also attributing positively was trucking and logistics company DSV A/S, which benefited from consolidation trends that proved accretive to quarterly results. In contrast, Leisure and Consumer Staples and Consumer Discretionary were the Fund's poorest-performing sectors during the period. From an industry perspective, underweighting and underperformance in packaged foods & meats detracted from Fund performance, as did lackluster returns in casinos & gaming and homebuilding. At the company level, principal detractors included specialty pharmaceutical maker Altana AG, which tumbled after a joint development venture was terminated in the clinical study phase. Elsewhere, online gaming operator Sportingbet PLC experienced a sizable sell-off on fears that increased competition would lead to slowing revenue growth. Both companies were ultimately removed from the Fund as their relative strength declined. 18 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager [SCOTT SNYDER PHOTO] Scott Snyder Assistant Portfolio Manager Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE EUROPEAN MARKET? A. Although fundamental concerns continue to loom over the European market, our analysis indicates that value remains widespread amid shifts in sector leadership. While the Energy and Industrials sectors may demonstrate residual strength, emerging themes have been detected in Materials (diversified metals & mining) and Information Technology (communications equipment and internet software & services). Conversely, Consumer-related sectors reflect ongoing weakness in consumer confidence and personal consumption. That being the case, we remain committed to our discipline, seeking out value and relative strength among industries poised to outperform the sector benchmark. PERFORMANCE HIGHLIGHTS September 30, 2005 - - Our focus on leading industry themes enhanced relative performance during the period, as did the Fund's valuation-related weight in small-and mid-cap stocks. - - Foreign exchange fluctuations detracted slightly from performance as the U.S. dollar strengthened against the euro and other European currencies. - - Active overweighting in the Industrials and Health Care sectors drove Fund performance, while underweighting and underperformance in Leisure and Consumer Staples and Consumer Discretionary hurt overall returns. - - Leading company contributors during the period included Meda AB, SolarWorld AG and DSV A/S. - - Companies that detracted from Fund performance included Altana AG and Sportingbet PLC. Management Overview 19 Management Overview (continued) ICON Europe Fund COUNTRY COMPOSITION September 30, 2005 Germany 16.3% France 11.2% United Kingdom 10.8% Switzerland 7.3% Netherlands 7.9% Sweden 5.8% Austria 5.4% Norway 5.3% Denmark 4.9% Finland 4.7% Belgium 4.7% Spain 3.6% Greece 2.9% Poland 2.2% Italy 1.5% Russia 1.1% Ireland 1.0%
Percentages are based upon net assets. SECTOR COMPOSITION September 30, 2005 Industrials 21.5% Healthcare 13.5% Information Technology 13.3% Energy 12.5% Materials 10.6% Financial 7.7% Consumer Discretionary 7.0% Telecommunication and Utilities 6.9% Leisure and Consumer Staples 3.6%
Percentages are based upon net assets. 20 Management Overview INDUSTRY COMPOSITION September 30, 2005 Integrated Oil & Gas 5.8% Industrial Machinery 5.6% Diversified Metals & Mining 5.2% Electric Utilities 4.7% Health Care Equipment 4.5% Communications Equipment 3.7% Construction & Engineering 3.6% Health Care Facilities 3.4% Diversified Banks 2.6% Pharmaceuticals 2.6% Internet Software & Services 2.5% Steel 2.5% Oil & Gas Equipment & Services 2.4% Oil & Gas Exploration & Production 2.4% Tires & Rubber 2.3% It Consulting & Other Services 2.1% Automobile Manufacturers 1.9% Trucking 1.9% Health Care Distributors 1.9% Electronic Equipment Manufacturers 1.9% Multi-Line Insurance 1.7% Aerospace & Defense 1.7% Electrical Components & Equipment 1.7% Systems Software 1.5% Diversified Commercial & Professional Services 1.5% Computer Storage & Peripherals 1.5% Packaged Foods & Meats 1.5%
Management Overview 21 Management Overview (continued) ICON Europe Fund INDUSTRY COMPOSITION (continued) September 30, 2005 Oil & Gas Refining & Marketing 1.3% Specialty Stores 1.2% Health Care Supplies 1.2% Heavy Electrical Equipment 1.1% Human Resource & Employment Services 1.1% Specialty Chemicals 1.0% Trading Companies & Distributors 1.0% Building Products 1.0% Specialized Finance 1.0% Apparel Retail 1.0% Multi-Utilities 1.0% Marine 1.0% Leisure Products 0.9% Fertilizers & Agricultural Chemicals 0.9% Real Estate Management & Development 0.9% Asset Management & Custody Banks 0.8% Brewers 0.7% Real Estate Investment Trusts 0.7% Water Utilities 0.7% Oil & Gas Drilling 0.6% Construction Materials 0.6% Apparel Accessories & Luxury Goods 0.5% Airport Services 0.5% Wireless Telecommunication Services 0.5% Tobacco 0.4% Diversified Chemicals 0.4%
22 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 2/20/97 - ----------------------------------------------------------------------------------------- ICON Europe Fund 30.34% 9.16% 8.92% - ----------------------------------------------------------------------------------------- MSCI Europe Index 24.99% 4.11% 8.46% - ----------------------------------------------------------------------------------------- Bloomberg European 500 Index 27.41% -1.59% 7.92% - -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2005 [LINE GRAPH]
BLOOMBERG EUROPEAN 500 ICON EUROPE FUND MSCI EUROPE INDEX INDEX ---------------- ----------------- ---------------------- 2/20/97 10000 10000 10000 9800 10308 10154 10700 11239 11402 9/30/97 11899 12178 12471 12381 12197 12596 15104 14684 15466 15603 15450 16093 9/30/98 12625 13233 12886 15068 15722 15212 14245 15401 15808 13197 15364 16760 9/30/99 13435 15555 16514 14365 18272 20766 13848 18298 21916 14459 17732 21215 9/30/00 13462 16447 20888 14180 16784 19775 12653 14181 17706 11551 13937 18795 9/30/01 10794 12255 15220 11141 13488 17198 11980 13479 17566 12459 12905 14899 9/30/02 9850 9963 11517 10396 11049 12062 9623 10038 10728 11899 12286 12509 9/30/03 13097 12772 12835 15173 15374 14220 15812 15519 14770 16092 15898 15228 9/30/04 16011 16095 15131 18487 18662 16040 18500 18759 16828 18287 18665 17829 9/30/05 20869 20117 19278
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 23 Schedule of Investments ICON Europe Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (96.6%) 6,700 Actividades de Construccion y Servicios, S.A. $ 195,487 2,300 Altadis, S.A. 103,101 1,200 Andritz AG 119,790 4,100 AstraZeneca Plc 191,529 6,000 Axalto Holding NV(a) 220,315 32,400 BAE Systems Plc 196,574 1,200 Bank Austria Creditanstalt 134,564 4,000 Bank Pekao SA 221,306 4,000 Bank Zachodni WBK SA 152,008 2,500 Bayer AG 91,977 2,200 Bayerische Motoren Werke AG 103,310 7,900 Beter Bed Holding N.V. 283,571 20,300 BG Group Plc 192,491 21,800 BHP Billiton PLC 352,240 1,680 Boehler - Uddeholm AG 282,750 2,400 Bouygues SA 111,512 8,720 Buzzi Unicem S.p.A 137,260 17,000 Cadbury Schweppes Plc 171,658 16,900 Capio AB(a) 333,906 1,500 Celesio AG 131,208 2,800 Charles Voegele Holding AG 228,580 2,200 Coloplast A/S Class B 134,171 2,800 Continental AG 230,447 13,200 Corporacion Mapfre, S.A. 226,869 18,000 Curanum AG 121,862 1,290 Dem Allianz AG 174,249 42,000 Det Norske Oljeselskap ASA 263,715 2,400 Deutsche Boerse AG 229,125 4,700 DIS Deutscher Industries Service AG 247,385 20,600 DOF ASA 101,278 4,150 DSV A/S 441,524 4,600 Elekta AB - B Shares 210,610 6,900 Eni S.p.A 204,652 4,350 Eurofins Scientific(a) 183,775 10,400 EVS Broadcast Equipment S.A. 374,233
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 91,700 Fast Search & Transfer ASA(a) $ 346,981 4,200 Folli - Follie SA 125,829 2,200 Fomento de Construcciones y Contratas S.A. 131,284 1,900 Fresenius AG-PFDv 263,143 8,300 Fugro N.V.(a) 250,494 5,370 Groupe Steria SCA 293,241 34,700 HiQ International AB 203,100 3,000 Hochtief AG 133,523 8,000 Homeserve Plc 155,939 4,250 InBev N.V. 168,352 47,700 Intracom S.A. 330,955 18,600 Jumbo S.A. 212,439 2,900 K+S AG 203,886 17,900 Kingspan Group Plcv 230,163 460 Kobenhavns Lufthavne A/S 115,258 6,300 Leoni AG 200,756 8,800 Logitech International S.A.(a) 355,864 4,400 Lukoil - ADRv 253,440 23,300 Lundin Petroleum AB(a) 294,175 6,600 Man Group Plc 192,848 8,050 Neste Oil Oyj(a) 297,117 600 Nestle S.A. 176,271 1,000 Nobel Biocare Holding AG 235,810 12,600 Nokian Renkaat Oyj(a) 298,608 1,215 Oesterrichische Elekrizitaitswirts AG - Class A 426,743 2,400 Omega Pharma SAv 135,495 4,900 OMV AG 290,934 4,000 OPG Groep N.V. 303,506 2,900 Option N.V.(a) 158,990 5,625 Orpea(a) 331,549 7,500 Pinguely-Haulotte 149,581 23,600 PlasmaSelect AG(a) 209,498 130 Porsche AG 99,886 7,300 Ramirent Oyj 173,810 6,400 Red Electrica de Espana 182,963 14,000 Renishaw Plc 211,453 4,200 Rio Tinto Plc(a) 172,097 1,500 Roche Holding AG(a) 208,452
24 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- 4,600 Royal Dutch Shell Plcv $ 151,850 1,700 RWE AG 112,451 2,600 SBM Offshore N.V. 217,111 810 Sjaelso Gruppen A/S 202,631 6,000 Smedvig ASA 147,009 820 Societe Generale 93,675 13,100 Softbank SA 132,740 3,300 SolarWorld AG 492,991 9,500 SSAB Svenskt Stal AB 287,965 5,400 Stada Arzneimittel AG 193,300 3,300 Stork N.V. 163,641 4,000 Suez Lyonnaise Des Eaux S.A. 115,557 525 Sulzer AG 266,606 26,600 Temenos Group AG(a) 225,631 875 Total SA 238,161 2,230 Umicore, S.A. 243,674 1,100 Unibail 159,493 7,200 United Internet AG 234,208 5,500 Univar N.V. 238,255 9,500 Vacon Oyj 194,101 975 Vallourec S.A. 474,829 30,800 Vedanta Resources Plc 325,902 5,000 Veidekke ASA 136,672 10,400 Vestas Wind Systems AS(a) 251,638 2,800 Vinci S.A.(a) 241,197 4,020 Volkswagen AG 247,982 4,000 Wartsila OYJ - B Shares 127,447 5,600 WaveLight Laser Technologie AG 124,899 6,500 Wilhelm Wilhelmsen ASA 227,859 13,400 Xstrata Plc 347,760 3,400 Zodiac S.A. 200,834 ----------- TOTAL COMMON STOCKS (COST $19,099,915) 22,441,534
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- SHORT-TERM INVESTMENTS (2.7%) $200,511 Brown Brothers Harriman Time Deposit - Danish Krone, 1.28%, 10/01/05# $ 200,511 416,735 Brown Brothers Harriman Time Deposit - Euro, 1.29%, 10/01/05# 416,735 63 Brown Brothers Harriman Time Deposit - British Pound, 3.59%, 10/01/05# 63 40 Brown Brothers Harriman Time Deposit - Norwegian Kroner, 1.13%, 10/01/05# 40 20,748 Brown Brothers Harriman Time Deposit - Swedish Krona, 0.65%, 10/01/05# 20,748 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $638,097) 638,097 ----------- TOTAL INVESTMENTS 99.3% (COST $19,738,012) 23,079,631 ----------- OTHER ASSETS LESS LIABILITIES 0.7% 163,120 ----------- TOTAL NET ASSETS 100.0% $23,242,751 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. v All common stocks were fair valued (Note 1) as of September 30, 2005 unless noted with a v. Total value of common stocks fair valued was $21,407,443. ADR American Depositary Receipt. Schedule of Investments 25 Management Overview ICON International Equity Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 98.9% Top 10 Equity Holdings 14.3% Number of Stocks 125 Short-Term Investments 2.6% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 SolarWorld AG 1.7% Kobe Steel, Ltd. 1.5% Vallourec S.A. 1.5% Mitsubishi UFJ Financial Group, Inc. 1.5% DSV A/S 1.4% SembCorp Marine, Ltd. 1.4% Hyundai Heavy Industries Co., Ltd. 1.4% Rio Tinto, Ltd. 1.3% PAL Co., Ltd. 1.3% Hanjin Heavy Industries & Construction Co., Ltd. 1.3% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. For the fiscal year ended September 30, 2005, the ICON International Equity Fund returned 32.90% for Class I shares, 29.56% for Class C shares and 33.57% for Class Z shares, outpacing the 29.48% return of the MSCI All Country World Index ex-U.S., the Fund's benchmark, over the same period. Total returns for other periods as of September 30, 2005 appear on page 33. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Broad regional participation across Asia-Pacific and European markets benefited overall Fund performance, as foreign shares continued to trade at deeper discounts and close wider valuation gaps than U.S. stocks. However, foreign exchange fluctuations detracted slightly from real returns, as the U.S. dollar strengthened against the euro, the yen and other foreign currencies. Nevertheless, the full impact was minimal, even though the Fund maintained direct currency exposure in the underlying equities. Despite these factors, the Fund's focus on leading industry themes was the primary driver of enhanced relative performance during the period. Secondarily, a valuation-related tilt toward medium-capitalization stocks, which our methodology led us to actively overweight versus the large-cap dominated benchmark, further boosted relative returns. Although ICON does not utilize market capitalization as a valuation measure, the Fund's residual bias proved favorable, as selections in international mid-caps generally outperformed their larger counterparts. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying international securities we believe are underpriced regardless of their location on the conventional style grid or in the world. Our system is not limited by restrictions on market capitalization, investment style or country origin, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as these measures do not in our view adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Even as cyclical themes propelled healthy advances at the opening and closing stages of the fiscal year, foreign markets experienced considerable choppiness in conjunction with external events and conflicting 26 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 [SCOTT SNYDER PHOTO] Scott Snyder Assistant Portfolio Manager fundamentals. Despite temporary tsunami-related disruptions, Asian markets by and large saw continued robust expansion. Japan, in fact, may have finally turned a corner, as late-period reports pointed to a reversal in its prolonged deflationary malaise. Meanwhile, China's revaluation of the yuan was viewed as a favorable first step in its embrace of structural reforms. Europe, however, was more a study in contrasts. While earnings expectations were generally upbeat, consumer confidence and personal consumption turned decidedly negative. Nominal inflation pressures were of little consequence given continued high unemployment and lingering weakness. Even as the United Kingdom eased monetary policy, the uncertain outcome of Germany's national elections put a damper on forward growth projections. Nevertheless, globalization and economic integration, as evidenced by an expanding European Union, continued to be viewed as key to sustaining a broad recovery. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Fund performance was driven by continued strength in the highly cyclical Industrials sector, which benefited from active overweighting and broad industry participation. Industry standouts included industrial machinery and construction & farm machinery & heavy trucks, both of which were linked to energy-related expansion in Asia-Pacific shipbuilding and global gains in infrastructure spending. At the same time, defensive-oriented sectors such as Healthcare also contributed positively, reflecting market leadership in the health care distributors group. Alongside these sector and industry leaders, top-performing company contributors included pharmaceutical marketer Meda AB, which benefited from strategic acquisitions that added asthma and pain medications to its growing product lineup. Likewise, trucking and logistics company DSV A/S capitalized on consolidation trends that proved accretive to quarterly results, while specialty steel producer Boehler-Uddeholm AG tapped acquired growth to meet rising demand for high-alloy products. Regional weightings also played a role in overall performance, as the Fund benefited from a European tilt during most of the fiscal year, before shifting more toward Asia-Pacific. Although country selection is not a primary consideration of our investment methodology, it is a secondary factor given regional economic differences and periodic diversions in global industry leadership. In contrast, the Energy sector detracted from relative performance, despite contributing positively on an absolute basis. Having underweighted the sector due to valuation and relative strength concerns, each of the constituent industries, in particular oil & gas exploration & production, continued to move higher, ultimately to the detriment of Fund performance in terms of opportunity cost. Management Overview 27 Management Overview (continued) ICON International Equity Fund At the company level, principal detractors included specialty pharmaceutical maker Altana AG, which tumbled after a joint development venture was terminated in the clinical study phase. Sports equipment marketer Shimano Inc. also retreated as the company cut net income forecasts, citing competition from lower-priced Chinese imports. Elsewhere, container manufacturer Singamas Container Holdings Ltd. came under pressure due to relocation and production delays. All three were ultimately removed from the Fund as their relative strength declined. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE INTERNATIONAL EQUITY MARKET? A. On the whole, international equities continue trade at substantial discounts to domestic stocks, according to our analysis, yet industry leadership appears to be in a period of transition and, in certain cases, global diversion. While industry selection primarily drives our investment methodology, we are well aware of regional moves and consider them carefully in our decision-making process. To illustrate the point, according to current valuation calculations, Asia is demonstrating strength in Consumer Discretionary, weakness in Information Technology, while Europe is exhibiting strength in Information Technology, weakness in Consumer Discretionary. That being the case, we remain committed to our discipline, seeking out value and relative strength wherever it may emerge. PERFORMANCE HIGHLIGHTS September 30, 2005 - - Broad regional participation across Asia-Pacific and European markets benefited overall Fund performance. - - Leading industry themes were the primary drivers of relative Fund performance, while a valuation-related tilt toward medium-capitalization stocks boosted returns versus the large-cap dominated benchmark. - - Continued strength in the highly cyclical Industrial sector and the defensive-oriented Health Care sector contributed positively to relative performance, while an underweight in the Energy sector proved detrimental. - - Top-performing companies that contributed to performance included Meda AB, DSV A/S and Boehler-Uddeholm AG. - - Principal detractors to performance included Altana AG, Shimano Inc. and Singamas Container Holdings Ltd. 28 Management Overview COUNTRY COMPOSITION September 30, 2005 Japan 26.8% South Korea 11.3% Germany 6.5% Netherlands 4.6% United Kingdom 4.3% Switzerland 4.2% Spain 4.1% Taiwan 3.8% Australia 3.7% Singapore 3.5% Norway 3.3% France 3.1% Finland 2.7% Denmark 2.6% Austria 2.5% Sweden 1.9% Hong Kong 1.8% Belgium 1.7% Mexico 1.7% Canada 1.5% Brazil 1.1% Russia 0.8% Cayman Islands 0.5% Indonesia 0.5% Ireland 0.4%
Percentages are based upon net assets. Management Overview 29 Management Overview (continued) ICON International Equity Fund SECTOR COMPOSITION September 30, 2005 Industrials 23.3% Materials 13.3% Financial 11.4% Energy 10.8% Consumer Discretionary 10.6% Information Technology 9.8% Healthcare 9.1% Telecommunication and Utilities 7.2% Leisure and Consumer Staples 3.4%
Percentages are based upon net assets. INDUSTRY COMPOSITION September 30, 2005 Industrial Machinery 4.7% Diversified Banks 4.2% Steel 4.1% Construction & Farm Machinery & Heavy Trucks 4.0% Diversified Metals & Mining 4.0% Electric Utilities 3.9% Integrated Oil & Gas 3.7% Diversified Chemicals 2.8% Oil & Gas Equipment & Services 2.8% Apparel Retail 2.6% Construction & Engineering 2.6% Internet Software & Services 2.6% Health Care Facilities 2.6% Trading Companies & Distributors 2.5% Health Care Equipment 2.5% Department Stores 2.4% Pharmaceuticals 2.1% Property & Casualty Insurance 2.1% Oil & Gas Exploration & Production 2.0% Oil & Gas Refining & Marketing 1.8% Multi-Line Insurance 1.6%
30 Management Overview INDUSTRY COMPOSITION (continued) September 30, 2005 Specialty Chemicals 1.5% Computer Hardware 1.5% Trucking 1.4% Electrical Components & Equipment 1.4% Health Care Distributors 1.3% Computer & Electronics Retail 1.2% Real Estate Management & Development 1.2% Gas Utilities 1.2% Automobile Manufacturers 1.2% Regional Banks 1.2% Consumer Finance 1.1% Construction Materials 1.0% Leisure Products 1.0% Human Resource & Employment Services 1.0% Semiconductors 1.0% Household Products 0.9% Apparel Accessories & Luxury Goods 0.9% Computer Storage & Peripherals 0.9% Diversified Commercial & Professional Services 0.9% Communications Equipment 0.9% Aerospace & Defense 0.9%
Management Overview 31 Management Overview (continued) ICON International Equity Fund INDUSTRY COMPOSITION (continued) September 30, 2005 It Consulting & Other Services 0.8% Electronic Equipment Manufacturers 0.8% Industrial Conglomerates 0.8% Distributors 0.8% Multi-Utilities 0.8% Wireless Telecommunication Services 0.7% Air Freight & Logistics 0.7% Electronic Manufacturing Services 0.7% Packaged Foods & Meats 0.7% Tires & Rubber 0.7% Marine 0.7% Specialty Stores 0.7% Home Entertainment Software 0.6% Oil & Gas Drilling 0.6% Water Utilities 0.5% Homefurnishing Retail 0.5% Biotechnology 0.5% Airport Services 0.5% Commercial Printing 0.5% Photographic Products 0.4% Tobacco 0.4% Building Products 0.3%
32 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
INCEPTION SINCE DATE 1 YEAR 5 YEARS INCEPTION - ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class I 2/6/04 32.90% N/A 16.37% - ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S 29.48% N/A 18.49% - ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class C 2/19/04 29.56% N/A 12.58% - ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S 29.48% N/A 16.78% - ------------------------------------------------------------------------------------------- ICON International Equity Fund - Class Z 2/18/97 33.57% 6.93% 8.76% - ------------------------------------------------------------------------------------------- MSCI ACWI ex-U.S 29.48% 4.81% 6.54% - -------------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. Class Z shares are available only to grandfathered and institutional investors. VALUE OF A $10,000 INVESTMENT through September 30, 2005 [LINE GRAPH]
ICON INTERNATIONAL EQUITY FUND CLASS Z MSCI ACWI EX-U.S. ------------------------------ ----------------- 2/18/97 10000 10000 10230 10028 10570 11330 9/30/97 11060 11225 11281 10258 12900 11659 13562 11486 9/30/98 11841 9750 13001 11741 12171 12019 12728 12580 9/30/99 13354 13008 15698 15370 15585 15490 15159 14858 9/30/00 14747 13647 14340 13052 12239 11337 12224 11322 9/30/01 10280 9650 11145 10508 11145 10680 10901 10397 9/30/02 8538 8390 9077 8966 8382 8312 10684 9961 9/30/03 12175 10826 14897 12678 15742 13291 15232 13199 9/30/04 15436 13332 17589 15387 17621 15438 17447 15436 9/30/05 20619 17262
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 33 Schedule of Investments ICON International Equity Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (98.9%) 5,600 Actividades de Construccion y Servicios, S.A. $ 163,392 3,000 Altadis, S.A. 134,480 183,000 America Movil S.A. de C.V.v 241,289 1,600 Andritz AG 159,720 10,200 Anglo Irish Bank Corp., Plc 139,399 5,000 ARRK Corp. 277,811 4,700 AstraZeneca Plc 219,557 7,000 Atco Ltd., Class Iv 254,173 45,600 BAE Systems Plc 276,660 11,000 Banco Santander Central Hispano, S.A. 144,708 27,300 BG Group Plc 258,867 19,700 BHP Billiton PLC 318,308 1,590 Boehler - Uddeholm AG 267,603 14,500 Capio AB(a) 286,487 6,203 Cemex, S.A. de C.V.--ADRv 324,417 3,400 Charles Voegele Holding AG 277,561 13,300 Cheil Industries, Inc. 286,711 56,000 Cheung Kong Infrastructure Holdings, Ltd. 187,516 2,806 Continental AG 230,941 14,800 Corporacion Mapfre, S.A. 254,368 68,881 Cosmo Oil Co., Ltd. 370,903 6,500 Culture Convenience Club Co., Ltd. 214,659 13,000 Daegu Bank 158,332 18,000 Daifuku Co., Ltd. 244,989 33,700 Det Norske Oljeselskap ASA 211,600 6,000 DIS Deutscher Industries Service AG 315,811 12,800 Doosan Heavy Industries & Construction Co., Ltd. 241,877 5,480 DSM NV 215,434 4,400 DSV A/S 468,121
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 6,900 Elekta AB - B Shares $ 315,914 6,600 Enagas 118,709 7,700 EVS Broadcast Equipment S.A. 277,076 107,200 Fast Search & Transfer ASA(a) 405,631 7,600 Fugro N.V.(a) 229,368 38,000 Fuji Electric Holdings Co., Ltd. 151,709 439,000 GES International, Ltd. 237,973 5,000 Groupe Steria SCA 273,036 2,500 Grupo Ferrovial, S.A. 208,265 19,300 Hanjin Heavy Industries & Construction Co., Ltd. 411,451 9,000 Hanjin Transportation Co. 236,127 59,300 Healthscope Ltd. 284,743 19,200 High Tech Computer Corp. 235,962 50,219 Hon Hai Precision Industry Co., Ltd. 235,119 45 Hoosiers Corp. 174,829 11,000 Horiba 265,417 5,500 Hyundai Department Store H&S Co., Ltd. 261,492 6,000 Hyundai Heavy Industries Co., Ltd. 447,069 39,400 Hyundai Marine & Fire Insurance Co., Ltd. 391,527 14,000 Inchon Iron & Steel Co. 363,024 20,000 Industrial Bank of Korea 253,849 24 Inpex Corp. 186,058 13,000 JGC Corp. 238,871 86,400 Johnson Health Tech. Co., Ltd 318,207 7,800 Kia Motors Corp. 146,283 161,000 Kobe Steel, Ltd. 490,888 640 Kobenhavns Lufthavne A/S 160,360 2,100 Kone Oyj(a)v 142,582 4,000 Korea Electric Power Corp. 136,805
34 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 146,560 KS Technology, Ltd. $ 194,537 15,450 Largan Precision Co., Ltd. 139,107 4,500 Leoni AG 143,397 5,000 LG Household & Health Carev 287,042 6,900 Logitech International S.A.(a) 279,029 4,300 Lukoil - ADRv 247,680 60,000 Marubeni Corp. 280,178 15,200 MARUI Co., Ltd. 257,693 33,000 MediaTek, Inc. 312,831 11,000 Mediceo Holdings Co., Ltd. 175,912 36 Mitsubishi UFJ Financial Group, Inc. 471,428 23,000 Mitsui & Co., Ltd. 288,834 11,000 Namco Bandai Holdings, Inc.(a)v 183,172 800 Nestle S.A. 235,028 1,250 NHN Corp. 212,646 64,000 Nippon Steel Corp. 240,917 28,000 Nippon Mining Holdings Corp. 220,797 24,000 Nissan Chemical Industries, Ltd. 302,825 2,000 Nitori Co., Ltd. 167,818 5,500 NKT Holding A/S 233,868 1,200 Nobel Biocare Holding AG 282,972 1,115 Oesterrichische Elekrizitaitswirts AG - Class A 391,620 3,200 OPG Groep N.V. 242,805 1,900 Orix Corp. 344,418 4,500 Orpea(a) 265,240 7,100 PAL Co., Ltd. 415,999 5,000 Petroleo Brasileiro, S.A.--ADRv 357,449 25,000 PlasmaSelect AG(a) 221,926 140,000 Ports Design, Ltd. 159,190 360,000 PT Perusahaan Gas Negara 146,304 12,400 Qiagen N.V.(a) 161,488 5,230 Repsol YPF, S.A. 168,937 9,250 Rio Tinto, Ltd. 417,457
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 1,800 Roche Holding AG(a) $ 250,143 4,800 Royal Dutch Shell Plcv 158,452 16,600 Sampo Oyj 263,446 2,800 SBM Offshore N.V. 233,812 148,000 SembCorp Industries, Ltd. 262,875 264,000 SembCorp Marine, Ltd. 467,793 98,000 Showa Denko K.K 314,952 182,000 Sino Land Co., Ltd. 222,130 7,300 Smedvig ASA 178,861 7,000 Sociedad General de Aguas de Barcelona, S.A. 170,062 3,690 SolarWorld AG 551,255 22,000 Sompo Japan Insurance, Inc. 292,877 6,300 Stada Arzneimittel AG 225,517 5,560 Stockmann Oyj Abp - B Shares 225,329 42,000 Sumitomo Heavy Industries, Ltd. 299,378 40 Sumitomo Mitsui Financial Group, Inc. 378,761 20,000 Suruga Bank Ltd. 220,389 23,000 Takashimaya Co. 293,803 28,000 Toho Gas Co., Ltd. 122,454 6,600 Trican Well Service, Ltd.(a)v 240,274 105,000 Ube Industries, Ltd. 284,099 2,400 Umicore, S.A. 262,250 6,800 United Internet AG 221,196 5,900 Univar N.V. 255,583 4,150 Uponor Oyj 95,958 7,400 Vacon Oyj 151,194 975 Vallourec S.A. 474,830 28,800 Vedanta Resources Plc 304,741 238,000 Vision Grande Group Holdings, Ltd. 150,698 3,800 Volkswagen AG 234,411 6,300 Wilhelm Wilhelmsen ASA 220,848
Schedule of Investments 35 Schedule of Investments (continued) ICON International Equity Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 8,800 Woodside Petroleum, Ltd. $ 241,193 5,300 YAMADA DENKI Co., Ltd. 403,647 70,000 Zinifex, Ltd.(a) 244,375 ----------- TOTAL COMMON STOCKS (COST $26,459,430) 32,112,168 SHORT-TERM INVESTMENTS (2.6%) $ 196 Brown Brothers Harriman Time Deposit - Australian Dollar, 4.55%, 10/01/05# 196 84 Brown Brothers Harriman Time Deposit - Canadian Dollar, 1.85%, 10/01/05# 84 18 Brown Brothers Harriman Time Deposit - Danish Krone, 1.28%, 10/01/05# 18 691,297 Brown Brothers Harriman Time Deposit - Euro, 1.29%, 10/01/05# 691,297
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- $ 164,269 Brown Brothers Harriman Time Deposit - Hong Kong Dollar, 2.25%, 10/01/05# $ 164,269 5 Brown Brothers Harriman Time Deposit - Norwegian Kroner, 1.13%, 10/01/05# 5 31 Brown Brothers Harriman Time Deposit - Swedish Krona, 0.65%, 10/01/05# 31 4 Brown Brothers Harriman Time Deposit - Singapore Dollar, 1.27%, 10/01/05# 4 ----------- TOTAL SHORT-TERM INVESTMENTS (COST $855,904) 855,904 ----------- TOTAL INVESTMENTS 101.5% (COST $27,315,334) 32,968,072 ----------- LIABILITIES LESS OTHER ASSETS (1.5)% (503,383) ----------- TOTAL NET ASSETS 100.0% $32,464,689 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. v All common stocks were fair valued (Note 1) as of September 30, 2005 unless noted with a v. Total value of common stocks fair valued was $29,675,638. ADR American Depositary Receipt 36 Schedule of Investments Six Month Hypothetical Expense Example September 30, 2005 (unaudited) EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. 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 various ICON Funds and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/05 - 9/30/05). ACTUAL EXPENSES The first line in the table for each Fund provides information about actual account values and actual expenses. The Example includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example does not include client specific fees, such as the $10.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for each Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. Expense Example 37 Six Month Hypothetical Expense Example (continued) September 30, 2005 (unaudited)
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/05 9/30/05 4/1/05-9/30/05* 4/1/05-9/30/05 - ------------------------------------------------------------------------------------------------- ICON ASIA-PACIFIC REGION FUND - ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,222.80 $ 9.42 1.69% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,016.53 8.54 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON EUROPE FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,128.10 9.28 1.74% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,016.28 8.79 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON INTERNATIONAL EQUITY FUND - ------------------------------------------------------------------------------------------------- CLASS I - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,168.20 9.78 1.80% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,015.98 9.10 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS C - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,163.40 14.64 2.70% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,011.46 13.61 (5% return before expenses) - ------------------------------------------------------------------------------------------------- CLASS Z - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,170.10 8.21 1.51% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,017.43 7.64 (5% return before expenses) - -------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six month expense ratio annualized, multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. 38 Expense Example Statements of Assets and Liabilities September 30, 2005
ICON ICON ASIA-PACIFIC ICON INTERNATIONAL REGION FUND EUROPE FUND EQUITY FUND ------------ ----------- ------------- ASSETS Investments, at cost $42,079,836 $19,738,012 $27,315,334 ----------- ----------- ----------- Investments, at value 48,516,183 23,079,631 32,968,072 Cash 17,905 - 249,124 Receivables: Fund shares sold 1,987,414 330,349 72,396 Investments sold 927,713 645,920 761,233 Interest 365 226 246 Dividends 65,131 12,104 27,666 Foreign security reclaims - 19,545 7,011 Other assets 15,136 15,224 17,086 ----------- ----------- ----------- Total Assets 51,529,847 24,102,999 34,102,834 ----------- ----------- ----------- LIABILITIES Payables: Due to custodian bank - 580,716 - Investments bought 2,725,743 221,162 1,580,138 Fund shares redeemed 9,046 - - Advisory fees 31,569 19,247 19,660 Accrued distribution fees - - 3,906 Fund accounting fees 773 472 624 Transfer agent fees 1,505 1,026 1,908 Administration fees 1,497 913 1,208 Trustee fees 2,509 2,320 2,421 Accrued expenses 36,303 34,392 28,280 ----------- ----------- ----------- Total Liabilities 2,808,945 860,248 1,638,145 ----------- ----------- ----------- NET ASSETS - ALL SHARE CLASSES $48,720,902 $23,242,751 $32,464,689 =========== =========== =========== NET ASSETS - CLASS I $ - $ - $15,375,785 =========== =========== =========== NET ASSETS - CLASS C $ - $ - $ 1,622,434 =========== =========== =========== NET ASSETS - CLASS Z $ - $ - $15,466,470 =========== =========== =========== NET ASSETS CONSIST OF Paid-in capital $50,099,686 $18,652,901 $24,800,936 Accumulated undistributed net investment income/(loss) 15,964 (35,841) (4,090) Accumulated undistributed net realized gain/(loss) from investments (7,066,810) 1,730,943 2,770,457 Accumulated net realized gain/(loss) from foreign currency translations (755,156) (452,880) (745,915) Unrealized appreciation/(depreciation): on investments and other assets and liabilities denominated in foreign currency 6,427,218 3,347,628 5,643,301 ----------- ----------- ----------- NET ASSETS $48,720,902 $23,242,751 $32,464,689 =========== =========== =========== Shares outstanding (unlimited shares authorized, no par value) 4,330,516 1,482,607 2,509,923 ----------- ----------- ----------- Class I - - 1,190,709 Class C - - 129,511 Class Z - - 1,189,703 Net asset value (offering and redemption price per share) $ 11.25 $ 15.68 $ - Class I $ - $ - $ 12.91 Class C $ - $ - $ 12.53 Class Z $ - $ - $ 13.00
The accompanying notes are an integral part of the financial statements. Financial Statements 39 Statements of Operations For the year ended September 30, 2005
ICON ICON ASIA-PACIFIC ICON INTERNATIONAL REGION FUND EUROPE FUND EQUITY FUND ------------ ----------- ------------- INVESTMENT INCOME Interest $ 8,804 $ 7,652 $ - Dividends 374,261 457,355 540,665 Foreign taxes withheld (43,855) (71,257) (77,090) ---------- ---------- ---------- Total Investment Income 339,210 393,750 463,575 ---------- ---------- ---------- EXPENSES Advisory fees 151,409 166,252 206,961 Distribution fees: Class I - - 19,731 Class C - - 6,396 Fund accounting fees 21,942 24,145 25,493 Transfer agent fees 12,901 10,643 18,125 Custody fees 49,620 49,771 51,795 Administration fees 7,258 8,041 9,992 Audit fees 16,184 16,161 16,744 Registration fees 17,470 18,168 20,207 Insurance expense 1,010 465 750 Trustee fees and expenses 3,103 2,878 3,358 Interest expense 2,700 2,343 3,476 Other expenses 10,326 9,132 11,028 ---------- ---------- ---------- Total expenses before expense (reimbursement)/recoupment 293,923 307,999 394,056 ---------- ---------- ---------- Expense (reimbursement)/recoupment by Adviser due to expense limitation agreement - - (10,556) ---------- ---------- ---------- Net Expenses 293,923 307,999 383,500 ---------- ---------- ---------- NET INVESTMENT INCOME (LOSS) 45,287 85,751 80,075 ---------- ---------- ---------- NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS AND FOREIGN CURRENCY TRANSACTIONS Net realized gain/(loss) from investment transactions 1,927,462 2,088,483 2,007,770 Net realized gain/(loss) from foreign currency translations (32,667) (97,702) (68,475) Change in unrealized net appreciation/(depreciation) on investments 4,738,359 1,925,390 4,346,469 ---------- ---------- ---------- Net realized and unrealized gain/(loss) on investments 6,633,154 3,916,171 6,285,764 ---------- ---------- ---------- NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $6,678,441 $4,001,922 $6,365,839 ========== ========== ==========
The accompanying notes are an integral part of the financial statements. 40 Financial Statements THIS PAGE INTENTIONALLY LEFT BLANK Statements of Changes in Net Assets
ICON ASIA-PACIFIC REGION FUND ---------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ OPERATIONS Net investment income/(loss) $ 45,287 $ 30,021 Net realized gain/(loss) from investment transactions 1,927,462 176,502 Net realized gain/(loss) from foreign currency translations (32,667) (3,454) Change in net unrealized appreciation/(depreciation) on investments and foreign currency translations 4,738,359 115,601 ------------ ------------ Net increase/(decrease) in net assets resulting from operations 6,678,441 318,670 ------------ ------------ DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income (26,459) (39,164)* Class I - - Class C - - Class Z - - Net realized gains - - Class I - - Class C - - Class Z - - ------------ ------------ Net decrease from dividends and distributions (26,459) (39,164) ------------ ------------ FUND SHARE TRANSACTIONS Shares sold 39,085,269 20,963,976 Class I - - Class C - - Class Z - - Reinvested dividends and distributions 26,163 39,063 Class I - - Class C - - Class Z - - Shares repurchased (14,089,724) (10,319,543) Class I - - Class C - - Class Z - - ------------ ------------ Net increase/(decrease) from fund share transactions 25,021,708 10,683,496 ------------ ------------ Total net increase/(decrease) in net assets 31,673,690 10,963,002 NET ASSETS Beginning of period 17,047,212 6,084,210 ------------ ------------ End of period $ 48,720,902 $ 17,047,212 ============ ============
* The tax character of distributions to shareholders from net investment income for the period ending September 30, 2004 is ordinary income. 42 Financial Statements
ICON EUROPE FUND ICON INTERNATIONAL EQUITY FUND ---------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ ------------------ $ 85,751 $ (27,710) $ 80,075 $ 8,851 2,088,483 1,242,857 2,007,770 3,949,314 (97,702) (765) (68,475) (2,877) 1,925,390 365,375 4,346,469 (1,455,011) ----------- ----------- ----------- ----------- 4,001,922 1,579,757 6,365,839 2,500,277 ----------- ----------- ----------- ----------- - - - - - - - - - - - - - - - (57,934)* - - - - - - (422,167) - - - (37,935) - - - (1,003,360) - ----------- ----------- ----------- ----------- - - (1,463,462) (57,934) ----------- ----------- ----------- ----------- 19,527,704 5,686,345 - - - - 10,807,776 3,425,609 - - 1,464,926 267,290 - - 5,520,800 3,833,056 - - - - - - 407,049 - - - 36,352 - - - 994,866 57,394 (8,112,955) (8,702,471) - - - - (1,176,471) (265,090) - - (248,111) (75,175) - - (2,942,011) (7,575,790) ----------- ----------- ----------- ----------- 11,414,749 (3,016,126) 14,865,176 (332,706) ----------- ----------- ----------- ----------- 15,416,671 (1,436,369) 19,767,553 2,109,637 7,826,080 9,262,449 12,697,136 10,587,499 ----------- ----------- ----------- ----------- $23,242,751 $ 7,826,080 $32,464,689 $12,697,136 =========== =========== =========== ===========
Financial Statements 43
ICON ASIA-PACIFIC REGION FUND ---------------------------------------- YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ TRANSACTIONS IN FUND SHARES Shares sold 3,865,936 2,524,850 Class I - - Class C - - Class Z - - Reinvested dividends and distributions 2,994 4,835 Class I - - Class C - - Class Z - - Shares repurchased (1,624,763) (1,241,267) Class I - - Class C - - Class Z - - ----------- ----------- Net increase/(decrease) 2,244,167 1,288,418 ----------- ----------- Shares outstanding beginning of period 2,086,349 797,931 ----------- ----------- Shares outstanding end of period 4,330,516 2,086,349 =========== =========== PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding short-term securities) Purchase of securities $53,438,824 $18,808,223 Proceeds from sales of securities 30,360,825 8,416,715 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ 15,964 $ 26,459 =========== ===========
The accompanying notes are an integral part of the financial statements. 44 Financial Statements
ICON EUROPE FUND ICON INTERNATIONAL EQUITY FUND ---------------------------------------- ---------------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 SEPTEMBER 30, 2005 SEPTEMBER 30, 2004 ------------------ ------------------ ------------------ ------------------ 1,406,104 505,470 - - - - 953,897 328,830 - - 131,856 24,806 - - 481,231 375,261 - - - - - - 37,655 - - - 3,420 - - - 91,777 5,845 (574,107) (796,013) - - - - (104,200) (25,473) - - (23,141) (7,430) - - (260,880) (762,885) ----------- ---------- ----------- ----------- 831,997 (290,543) 1,311,615 (61,046) ----------- ---------- ----------- ----------- 650,610 941,153 1,198,308 1,259,354 ----------- ---------- ----------- ----------- 1,482,607 650,610 2,509,923 1,198,308 =========== ========== =========== =========== $33,678,756 $5,496,870 $41,768,432 $12,810,296 24,639,660 8,124,419 28,810,442 13,098,694 $ (35,841) $ (757) $ (4,090) $ - =========== ========== =========== ===========
Financial Statements 45 Financial Highlights
INCOME FROM INVESTMENT OPERATIONS ---------------------------------------- NET ASSET NET NET REALIZED VALUE, INVESTMENT AND UNREALIZED TOTAL FROM BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT OF PERIOD (LOSS) (X) ON INVESTMENTS OPERATIONS --------- ---------- -------------- ---------- ICON ASIA-PACIFIC REGION FUND Year Ended September 30, 2005 $ 8.17 0.03 3.08 3.11 Year Ended September 30, 2004 $ 7.62 0.02 0.55 0.57 Year Ended September 30, 2003 $ 5.68 0.04 1.90 1.94 Year Ended September 30, 2002 $ 6.81 (0.19) (0.91) (1.10) Year Ended September 30, 2001 $10.25 0.07 (3.51) (3.44) ICON EUROPE FUND Year Ended September 30, 2005 $12.03 0.07 3.58 3.65 Year Ended September 30, 2004 $ 9.84 (0.04) 2.23 2.19 Year Ended September 30, 2003 $ 7.40 (0.02) 2.46 2.44 Year Ended September 30, 2002 $ 8.13 (0.04) (0.67) (0.71) Year Ended September 30, 2001 $10.14 0.05 (2.06) (2.01) ICON INTERNATIONAL EQUITY FUND CLASS I Year Ended September 30, 2005 $10.59 0.04 3.25 3.29 February 6, 2004 (inception) to September 30, 2004 $10.96 0.04 (0.41) (0.37) CLASS C Year Ended September 30, 2005 $10.55 (0.14) 3.09 2.95 February 19, 2004 (inception) to September 30, 2004 $11.29 (0.02) (0.72) (0.74) CLASS Z Year Ended September 30, 2005 $10.60 0.06 3.31 3.37 Year Ended September 30, 2004 $ 8.41 0.01 2.24 2.25 Year Ended September 30, 2003 $ 5.96 0.06 2.45 2.51 Year Ended September 30, 2002 $ 7.24 0.04 (1.25) (1.21) Year Ended September 30, 2001 $11.79 0.09 (3.31) (3.22) LESS DIVIDENDS AND DISTRIBUTIONS ------------------------------------------------------- DIVIDENDS DISTRIBUTIONS TOTAL FROM NET FROM NET DIVIDENDS INVESTMENT REALIZED RETURN AND INCOME GAINS OF CAPITAL DISTRIBUTIONS ---------- ------------- ---------- ------------- ICON ASIA-PACIFIC REGION FUND Year Ended September 30, 2005 (0.03) - - (0.03) Year Ended September 30, 2004 (0.02) - - (0.02) Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - - (0.03) (0.03) Year Ended September 30, 2001 - - - - ICON EUROPE FUND Year Ended September 30, 2005 - - - - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 (0.02) - - (0.02) Year Ended September 30, 2001 - - - - ICON INTERNATIONAL EQUITY FUND CLASS I Year Ended September 30, 2005 - (0.97) - (0.97) February 6, 2004 (inception) to September 30, 2004 - - - - CLASS C Year Ended September 30, 2005 - (0.97) - (0.97) February 19, 2004 (inception) to September 30, 2004 - - - - CLASS Z Year Ended September 30, 2005 - (0.97) - (0.97) Year Ended September 30, 2004 (0.06) - - (0.06) Year Ended September 30, 2003 - (0.06) - (0.06) Year Ended September 30, 2002 (0.04) - (0.03) (0.07) Year Ended September 30, 2001 - (1.33) - (1.33)
(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 accompanying notes are an integral part of the financial statements. 46 Financial Highlights
RATIO OF NET INVESTMENT RATIO OF EXPENSES TO INCOME TO AVERAGE AVERAGE NET ASSETS(A) NET ASSETS(A) ------------------------- ------------------------- NET ASSET AVERAGE NET BEFORE AFTER BEFORE AFTER VALUE, NET ASSETS, ASSETS EXPENSE EXPENSE EXPENSE EXPENSE END OF TOTAL END OF PERIOD FOR THE PERIOD LIMITATION/ LIMITATION/ LIMITATION/ LIMITATION/ PERIOD RETURN * (IN THOUSANDS) (IN THOUSANDS) RECOUPMENT RECOUPMENT RECOUPMENT RECOUPMENT --------- -------- -------------- -------------- ----------- ----------- ----------- ----------- $11.25 38.12% $48,721 $15,225 1.93% N/A 0.30% N/A $ 8.17 7.51% $17,047 $14,976 1.91% N/A 0.20% N/A $ 7.62 34.15% $ 6,084 $ 6,683 1.98% N/A 0.68% N/A $ 5.68 (16.29)% $ 6,927 $12,142 1.66% N/A (0.23)% N/A $ 6.81 (33.56)% $19,684 $18,749 1.70% N/A 0.75% N/A $15.68 30.34% $23,243 $16,665 1.85% N/A 0.51% N/A $12.03 22.26% $ 7,826 $ 7,230 2.24% N/A (0.38)% N/A $ 9.84 32.97% $ 9,262 $ 6,774 1.87% N/A (0.29)% N/A $ 7.40 (8.76)% $ 4,619 $ 5,706 2.14% N/A (0.42)% N/A $ 8.13 (19.82)% $ 7,397 $ 7,935 1.96% N/A 0.55% N/A $12.91 32.90% $15,376 $ 7,921 2.02% 1.97% 0.27% 0.32% $10.59 (3.38)% $ 3,211 $ 1,960 2.32% N/A 0.44% N/A $12.53 29.56% $ 1,622 $ 643 4.52% 3.51% (2.23)% (1.22)% $10.55 (6.55)% $ 183 $ 162 3.06% N/A (0.16)% N/A $13.00 33.57% $15,466 $12,184 1.68% 1.68% 0.51% 0.51% $10.60 26.79% $ 9,303 $10,063 1.98% N/A 0.03% N/A $ 8.41 42.60% $10,587 $ 8,571 2.00% N/A 0.88% N/A $ 5.96 (16.94)% $ 8,222 $13,347 1.72% N/A 0.48% N/A $ 7.24 (30.29)% $14,196 $18,204 1.65% N/A 0.97% N/A PORTFOLIO TURNOVER RATE (B) ----------------- 185.84% 58.62% 81.44% 14.43% 55.58% 153.55% 78.57% 101.37% 12.26% 84.49% 139.23% 117.74% 139.23% 117.74% 139.23% 117.74% 98.91% 91.99% 41.67%
Financial Highlights 47 Notes to Financial Statements September 30, 2005 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Asia-Pacific Region Fund ("Asia-Pacific Region Fund"), ICON Europe Fund ("Europe Fund") and ICON International Equity Fund ("International Equity Fund") are series funds (individually a "Fund" and collectively, the "Funds"). The Funds are part of the ICON Funds (the "Trust"), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end investment management company. The International Equity Fund offers three classes of shares Class I, Class C and Class Z. All classes have equal rights as to earnings, assets and voting privileges except that each Class may bear different distribution fees, registration costs and shareholder servicing costs and each Class has exclusive voting rights with respect to its distribution plan. There are 14 other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. Each Fund is authorized to issue an unlimited number of no par shares. The Funds primarily invest in foreign securities; the Asia-Pacific Region Fund and Europe Fund primarily invest in companies whose principal business activities fall within specific regions. The investment objective of each Fund is long-term capital appreciation. The Funds may have elements of risk, including the loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investments in foreign securities and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar-denominated transactions as a result of, among other factors, the possibility of lower government supervision and regulation of foreign securities markets and the possibility of political or economic instability. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity, and small market share. In addition, in the normal course of business the Funds may enter into various agreements that provide for general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as any potential exposure involves future claims that may be made against each Fund. However, based on experience, the Funds expect the risk of loss to be remote. 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. 48 Notes to Financial Statements INVESTMENT VALUATION The Funds' securities and other assets are valued at the closing price at the close of the regular trading session of the New York Stock Exchange (the "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that (a) securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by 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 report the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/ dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board or pursuant to procedures approved by the Board. The valuation assigned to fair-valued securities for purposes of calculating a Fund's net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than sixty days are valued in accordance with the evaluated bid price supplied by the pricing service. The evaluated bid price supplied by the pricing service is a matrix system which considers such factors as security prices, yields, maturities and ratings. Short-term securities with remaining maturities of sixty days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. Prior to February 22, 2005, London closing exchange rates were used to convert foreign security values into U.S. dollars. After that date, currency rates as of the close of the New York Stock Exchange were used to convert foreign security values into U.S. dollars. 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 Notes to Financial Statements 49 Notes to Financial Statements (continued) in other markets in determining fair value as of the time a Fund calculates its net asset value. REPURCHASE AGREEMENTS Repurchase agreements, if held by the Funds, are fully collateralized by U.S. Government securities and such collateral is in the possession of the Funds' custodian. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements including accrued interest. In the event of default on the obligation to repurchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. No repurchase agreements were purchased or sold by the Funds during the year ended September 30, 2005. FOREIGN CURRENCY TRANSLATION The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing rates of exchange daily. Income and expenses are translated into U.S. dollars at the prevailing exchange rate on the respective dates of the transactions. Purchases and sales of securities are translated into U.S. dollars at the contractual currency exchange rates established at the time of each trade. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities held. Net unrealized appreciation or depreciation on investments and foreign currency translations arise from changes in the value of assets and liabilities, resulting from changes in the exchange rates and changes in market prices of securities held. FORWARD FOREIGN CURRENCY CONTRACTS The Funds may enter into short-term forward foreign currency contracts in connection with planned purchases or sales of securities as a hedge against fluctuations in foreign exchange rates pending the settlement of transactions in foreign securities. A forward foreign currency contract is an agreement between contracting parties to exchange an amount of currency at some future time 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 50 Notes to Financial Statements actually received. Any realized gain or loss incurred by the Funds due to foreign currency translation is included in the Statements of Operations. The Funds did not enter into any foreign currency contracts during the year ended September 30, 2005. FUTURES CONTRACTS The Funds may invest in financial futures contracts for the purpose of hedging their existing securities or securities it intends to purchase against fluctuations in fair value caused by changes in prevailing markets. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the underlying hedged assets. The Funds held no financial futures contracts during the year ended September 30, 2005. OPTIONS TRANSACTIONS Each Fund may write put and call options only if it owns an offsetting position in the underlying security. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. 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 Notes to Financial Statements 51 Notes to Financial Statements (continued) 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. The Funds did not enter into any option transactions during the year ended September 30, 2005. INCOME TAXES The Funds intend to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code and, accordingly, the Funds will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that they intend to make sufficient distributions of net investment income and net realized capital gains. Dividends received by shareholders of the Funds which are derived from foreign source income and foreign taxes paid by the Funds are to be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Funds. Dividends paid by the Funds from net investment income and distributions of net realized short-term gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Dividends and distributions to shareholders are recorded by the Funds on the ex-dividend/distribution date. The Funds distribute net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. 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 no later than one business day after trade date. However, for financial reporting purposes security transactions are accounted for on trade date. Gains and losses on securities sold are determined on the basis of identified cost. ALLOCATION OF INCOME AND EXPENSES Expenses which cannot be directly attributed to a specific fund in the Trust are apportioned between all funds based upon relative net assets. Each class of the International Equity Fund's bears expenses incurred specifically on its behalf 52 Notes to Financial Statements and, in addition, each class bears a portion of general expenses, based upon relative net assets of each class. 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. 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEES ICON Advisers, Inc. ("ICON") serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 1.00% of each Fund's average daily net assets. Effective May 1, 2005, ICON has contractually agreed to reimburse operating expenses (exclusive of brokerage, interest, taxes, and extraordinary expenses) of the International Equity Fund to the extent necessary to ensure that the Fund's operating expenses do not exceed 2.55% for Class C, 1.80% for Class I and 1.55% for Class Z. The International Equity Fund expense limitation will continue in effect until at least January 29, 2016. To the extent ICON reimburses or absorbs fees and expenses, it may seek payment of such amounts for up to three years after the expenses were reimbursed or absorbed. The International Equity 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, 2005, ICON's net reimbursement for the International Equity Fund was $10,556. This expense reimbursement is subject to recoupment by ICON based on a rolling three-year period. TRANSFER AGENT, CUSTODY AND ACCOUNTING FEES U.S. Bank, N.A. ("U.S. Bank") and U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provided domestic custodial services, transfer agent services and fund accounting for the Funds for various portions of the year ended September 30, 2005. U.S. Bank served as the custodian until April 17, 2005 and the transfer agent until April 24, 2005. For these services, the Trust paid 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. U.S. Bancorp served as the fund accountant until March 31, 2005, for which they were paid 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 Notes to Financial Statements 53 Notes to Financial Statements (continued) the balance of average daily net assets in excess of $1 billion for these services. The Funds also paid for various out-of-pocket costs incurred by U.S. Bank and U.S. Bancorp. U.S. Bancorp had entered into an agreement with JP Morgan Chase Co. ("Chase") on behalf of the Funds to provide international custodial services. The Funds paid an annual rate of 0.125% of average daily net assets plus a per trade transaction cost for these custodial services. Effective April 1, 2005, the Trust retained BISYS Fund Services Ohio, Inc. ("BISYS") as Fund Accounting Agent for the Funds. For its services, the Trust pays BISYS 0.03% on the first $1.75 billion of Trust Assets, 0.0175% on assets over $1.75 billion and up to $5 billion, and 0.01% on assets in excess of $5 billion. Effective April 18, 2005, the Trust retained Brown Brothers Harriman ("BBH") as custodian of the Trust's investments. For domestic custody services, the Trust pays BBH 0.0065% on the first $50 million of average net assets and 0.0050% on domestic assets above $50 million, plus certain transaction charges. For foreign custody services, the Trust pays BBH 0.03% on foreign assets plus certain transaction charges. Effective April 25, 2005, the Trust retained Boston Financial Data Services, Inc. as the Trust's transfer agent. For these services, the Trust pays an account fee of $13.25 per open account, $7.00 per networked account, $1.80 per closed account, plus certain other transaction and cusip charges. ADMINISTRATIVE SERVICES The Trust has entered into an administrative services agreement with ICON pursuant to which ICON oversees the administration of the Trust's business and affairs, including regulatory reporting and all necessary office space, equipment, personnel and facilities. This agreement provides for an annual fee to ICON of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. The administrative services agreement provides that ICON will not be liable for any error of judgment, mistake of law, or any loss suffered by the Trust in connection with matters to which the administrative services agreement relates, except for a loss resulting from willful misfeasance, bad faith or negligence by ICON in the performance of its duties. For the period October 1, 2004 through March 31, 2005, U.S. Bancorp provided sub-administration services to ICON for a sub-administration fee of 0.02% on the Trust's first $1.5 billion of average daily net assets and 0.015% on assets above $1.5 billion, subject to a minimum annual fee of $140,000. Effective April 1, 2005, ICON entered into a sub-administration agreement with BISYS pursuant to which BISYS assists ICON with the administration and business affairs of the 54 Notes to Financial Statements Trust. For its services, ICON pays BISYS at an annual rate of 0.025% on the first $1.75 billion of Trust assets and 0.015% on assets above $1.75 billion. DISTRIBUTION FEES The 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") (an affiliate of the adviser) for the sale and distribution of shares. Under the 12b-1 Plan, Class I shareholders of the International Equity Fund pay an annual 12b-1 and service fee of 0.25% of average daily net assets. The Class C shareholders of the International Equity Fund pay an annual 12b-1 and service fee of 1.00% of average daily net assets. RELATED PARTIES Certain Officers and Directors of ICON are also Officers and Trustees of the Funds; however, such Officers and Trustees (with the exception of the Chief Compliance Officer, "CCO") receive no compensation from the Funds. The CCO's salary is paid 90% by the Funds and 10% by the Adviser. For the year ended September 30, 2005, the total related amounts paid by the Trust under this agreement are included in Other Expenses on the Statement of Operations. 3. LINE OF CREDIT Effective April 18, 2005, the Funds entered into Lines of Credit agreements with BBH; the maximum borrowing is limited to 25% of eligible securities held by the portfolio subject to a maximum borrowing limit by the Trust of $115 million. Interest is charged at LIBOR plus 2.00% which was 5.86% at September 30, 2005.
AVERAGE BORROWING - ------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $198,875 ICON Europe Fund** 291,875 ICON International Equity Fund** 210,493
** Fund had outstanding borrowings as of September 30, 2005. 4. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryforwards. Notes to Financial Statements 55 Notes to Financial Statements (continued) The tax components of capital shown in the following tables represent losses or deductions the Funds may be able to offset against income and gains recognized in future years and post October loss deferrals. The accumulated losses noted in the following tables represent net capital loss carryforwards as of September 30, 2005 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions.
AMOUNT EXPIRATION DATE - ------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $2,249,864 September 30, 2007 3,254,268 September 30, 2009 1,330,946 September 30, 2010 952,529 September 30, 2011
During the year ended September 30, 2005 the ICON Asia-Pacific Region Fund and the ICON Europe Fund utilized capital loss carryforwards of $1,844,287 and $832,262, respectively. The tax characteristics of dividends paid to shareholders during the fiscal year ended September 30, 2005, were as follows:
TOTAL ORDINARY NET LONG- TOTAL TAXABLE DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS PAID - ------------------------------------------------------------------------------------------ ICON Asia-Pacific Region Fund $26,459 $ - $ 26,459 $ 26,459 ICON International Equity Fund 66,857 1,396,605 1,463,462 1,463,462
As of September 30, 2005, the components of accumulated earnings (deficit) on a tax basis was as follows:
TOTAL UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ACCUMULATED ORDINARY NET LONG- ACCUMULATED CAPITAL AND APPRECIATION EARNINGS FUND INCOME TERM GAINS EARNINGS OTHER LOSSES (DEPRECIATION) (DEFICITS) - ---------------------------------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $ 85,846 $ - $ 85,846 $(7,787,607) $6,322,977 $(1,378,784) ICON Europe Fund - 1,280,887 1,280,887 (35,841) 3,344,804 4,589,850 ICON International Equity Fund 796,102 1,303,681 2,099,783 - 5,563,970 7,663,753
56 Notes to Financial Statements The aggregate gross unrealized appreciation and depreciation of securities held by the Funds and the total cost of securities for federal tax purposes as of September 30, 2005, are noted below. Unrealized appreciation (depreciation) in the table below exclude appreciation (depreciation) on foreign currency transactions.
UNREALIZED UNREALIZED NET APPRECIATION FUND COST APPRECIATION (DEPRECIATION) (DEPRECIATION) - ----------------------------------------------------------------------------------------- ICON Asia-Pacific Region Fund $42,184,077 $6,537,393 $(205,287) $6,332,106 ICON Europe Fund 19,740,836 3,474,286 (135,491) 3,338,795 ICON International Equity Fund 27,394,665 5,688,439 (115,032) 5,573,407
Notes to Financial Statements 57 Report of Independent Registered Public Accounting Firm To the Board of Trustees 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 and ICON International Equity Fund (three of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2005, the results of each of their operations for the year then ended, the changes in each of their net assets for each of the two years in the period then ended and the financial highlights for each of the periods presented, in conformity with accounting principles generally accepted in the United States of America. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Funds' management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Denver, Colorado November 22, 2005 58 Report of Accounting Firm Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 17 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for assuring that the Funds are managed in the best interest of the Funds' shareholders. The Trustees, and their ages, 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, 54, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and served as the Chief Investment Officer (1991 to 2004) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 55. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 56. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager of Trinity Investment Management Corporation (1989 to 2001). GREGORY KELLAM SCOTT, 57. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was Senior Vice President -- Law, General Counsel and Secretary of GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Constituency for Africa (1997 to present) and serves as Executive Director of Indiana Civil Rights Commission (2005-present). Trustees and Officers 59 Board of Trustees and Fund Officers (continued) (unaudited) R. MICHAEL SENTEL, 57. 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, 52. 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, 54. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and served as the Chief Investment Officer (1991 to 2004). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. ERIK L. JONSON, 56. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception and from May 20, 2005 to November 15, 2005 acting Secretary. 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). 60 Trustees and Officers Other Information (unaudited) ALL FUNDS RENEWAL OF INVESTMENT ADVISORY AGREEMENT. In determining to renew the investment advisory agreements between ICON Funds (the "Trust") and ICON Advisers, Inc. ("ICON" or the "Adviser") the Board requested, was provided with and reviewed data with respect to ICON, its personnel, and the services to be provided to each Fund by ICON under the Trust's Investment Advisory Agreement dated October 9, 1996, as amended (related to the Sector, Foreign and Core Equity Funds) and under the Trust's Investment Advisory Agreement dated July 9, 2002 and effective October 1, 2002, as amended (related to the Specialty Funds -- Bond, Covered Call, Equity Income and Long/Short Funds) (collectively, the "Advisory Agreements"). The data included information concerning advisory, distribution and administrative services provided to the Funds by ICON and its related companies; information concerning other businesses of those companies; comparative data related to exchange traded funds versus the Sector Funds; and comparative data obtained from Lipper Analytical Services related to Fund performance and Fund expenses. On August 8, 2005, the Board of Trustees, including all of the Trustees that are not "interested persons" of the Trust (the "Independent Trustees"), approved continuation of the Advisory Agreements with the Adviser for each Fund for an additional one-year term commencing October 1, 2005. The Independent Trustees were represented by independent legal counsel throughout the process. Prior to acting on the matter, the Independent Trustees met separately as a group in private sessions with their independent legal counsel to review and discuss the foregoing information and also met with management to discuss responses to questions raised during the process. In addition, the Independent Trustees received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the agreement. In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed information relating to the Adviser's operations and personnel. Among other things, the Adviser provided biographical information on its professional staff and descriptions of its organizational and management structure. In the course of their deliberations the Board evaluated, among other things, information relating to the investment philosophy, strategies and techniques used in managing each Fund, the qualifications and experience of the Adviser's investment personnel, the Adviser's compliance programs, the Adviser's brokerage practices, including the extent to which the Adviser obtains research through "soft dollar" arrangements with the Funds' brokerage, and the financial and non-financial resources available to provide services required under the Advisory Agreement. Other Information 61 Other Information (continued) (unaudited) In considering the reasonableness of the fee payable to the Adviser for managing each Fund, the Board reviewed, among other things, financial statements of the Adviser and an analysis of the profitability to the Adviser and its affiliates of their relationship with each Fund over various time periods, which analysis identified all revenues and other benefits received by the Adviser and its affiliates from managing each Fund, the costs associated with providing such services and the resulting profitability to the Adviser and its affiliates. The Board considered the current and anticipated asset levels of each Fund and the willingness of the Adviser to waive fees and pay expenses of the Funds from time to time to limit the total expenses of the Funds. The Board concluded that the profitability to the Adviser and its affiliates from their relationship with the Funds is not excessive and that the Adviser is not realizing material benefits from economies of scale that would warrant adjustments to the fees for any Fund at this time. The Board of Trustees concluded that, in light of the nature, extent and quality of the services provided by the Adviser and the levels of profitability associated with providing these services, the fees charged by the Adviser under the Advisory Agreements to each Fund are reasonable. The Board of Trustees' considered: 1. In connection with reviewing data bearing upon the nature, quality, and extent of services furnished by ICON to each Fund, the Board assessed data concerning ICON's staffing, systems and facilities. The Board also assessed ICON's non-Trust business to see if there are any initiatives that would dilute service to the Trust. It was noted: A. That the breadth and the quality of investment advisory and other services being provided to each Fund is satisfactory, as evidenced in part by the performance record of each Fund compared with the performance records of a peer group of comparable funds; B. That ICON has made significant expenditures in the past year and in prior years to ensure that it has the sophisticated systems and the highly trained personnel necessary for it to be able to continue to provide quality service to the Funds' shareholders, including the dedication of substantial resources to ICON's investment and trading departments; and C. That the Board is satisfied with the research, portfolio management, and trading services, among others, being provided by ICON to the Funds, and is charging fair, reasonable, and competitive fees. 2. In connection with reviewing data bearing upon the costs of services to be provided and profits to be realized by ICON and its related companies from the relationship with the Trust, the Board considered the Lipper comparative data, data concerning ICON's soft-dollar arrangements, data from independent reviews of compliance procedures, costs borne by ICON in providing advisory services to each Fund and the profitability of ICON in light of the estimated 62 Other Information profitability analyses which had been provided by ICON, other benefits to ICON from serving as the Funds' adviser, and ICON's financial statements. A. With respect to the soft-dollar arrangements the Board assessed all facets of the arrangements -- including the quality of trade execution. It was noted that ICON receives research assistance from the use of soft dollars generated from Fund portfolio transactions and that such research assists ICON in providing quality investment advisory services to the Funds and other accounts to which it provides advisory services. The Board concluded that the arrangements are consistent with Fund brokerage practices and benefit the Funds and their shareholders. B. The Board noted that ICON benefits from serving directly as investment adviser and administrative agent, and through its affiliate, as the principal underwriter for the Funds. With respect to the distribution services, the Board noted that proceeds of the Trust's distribution plans pursuant to Rule 12b-1 under the 1940 Act for the International Equity and Specialty Funds are paid to ICON's affiliate and that the distributor has not profited from plan proceeds as all of the proceeds have been or will be used to cover distribution and marketing expenses. In this regard, the Trustees noted that marketing efforts have been successful as evidenced by Fund asset levels. With respect to the administrative fee paid to ICON, the Board reviewed the comparative data related to those services. The Board also considered the compliance experience in these service areas and concluded that the services provided by ICON and its affiliates to the Funds are satisfactory and that the profits derived from providing the services are competitive and reasonable. C. The Board also noted the risks assumed by ICON in providing investment advisory, distribution and administrative services (including compliance) to each Fund, including the capital commitments which have been made in the past and which continue to be made by ICON to ensure the continuation of the highest quality of service to the Funds is made with the recognition that the Funds' advisory relationship with ICON can be terminated at any time and must be renewed on an annual basis. 3. In connection with assessing data bearing upon the fairness of fee arrangements, the Board used data from Lipper, Inc. concerning funds of similar size and funds of larger size, as well as data concerning ICON's other clients: A. In this regard the Board noted that the Trust had recently changed fund accounting, transfer agent and custodial service providers; and that the expense numbers in the comparative data did not reflect the lower fees to be charged by the current service providers. Other Information 63 Other Information (continued) (unaudited) B. The advisory fee structures of the Funds were considered in comparison with advisory fees and expense ratios of other similarly-managed funds as set forth in the comparative data. It was noted that contractual advisory fees for the Sector Funds were higher than fees for similar funds; but that the Sector Funds' expense ratios were competitive and in most instances lower than those of similarly-managed Funds. It was noted that contractual advisory fees for the International Funds were above the average fees for similar funds; and that the Funds' expense ratios were competitive in light of their size. It was noted that contractual advisory fees for the Specialty Funds were in line with fees for similar funds; and that, with the exception of the Bond Fund, the Specialty Funds' expense ratios were lower than those of similarly-managed Funds. It was noted that contractual advisory fee for the Core Equity Fund was below the average fee for similar funds; and that its expense ratio was lower than those of similarly-managed Funds. C. In connection with assessing advisory fees and expense ratios it was noted ICON has contractually agreed to impose expense limitations on the International Equity and the Specialty Funds at a cost to ICON. D. It was noted that generally the fees paid to ICON for managing other institutional accounts (such as pension plans) are not lower than the fees paid by similarly-managed Funds; however, to the extent such fees are lower, it is due to the fact that such accounts are less costly for ICON to manage. , E. It was noted that the advisory and other fees payable by the Funds to ICON are essentially fees which would be similar to those which would have resulted solely from "arm's-length" bargaining, and may well be lower than fees arrived solely from such arm's-length negotiation. 4. The Board considered the extent to which economies of scale could be realized as a Fund grows in assets and whether the Fund's fees reflect these economies of scale for the benefit of Fund shareholders. In the regard the Board noted the Adviser's commitment to establish breakpoints in its investment advisory fees at elevated asset levels commencing during the next fiscal year. Based on these considerations, among others, the Board, including all of the Independent Trustees, concluded that the continuation of the advisory agreement was in the best interests of each Fund and its shareholders, the services to be performed under the agreement were services required for the operation of the Funds, ICON had provided satisfactory advisory services to the Funds in the past, and the fees for the advisory services which ICON would 64 Other Information perform and other benefits from the relationship with the Trust and consistent with fees paid by similar funds, are reasonable in light of the comparative data, and would be within the range of what would have been negotiated at arm's length in light of the circumstances. SUPPLEMENTAL TAX INFORMATION For the fiscal year ended September 30, 2005, the following Funds paid qualified dividend income of:
FUND AMOUNT - --------------------------------------------------------------------- ICON Asia-Pacific Region Fund $26,459 ICON International Equity Fund 66,857
The Funds designate the following amounts as long term capital gain distributions qualifying for the maximum 15% income tax rate for individuals:
FUND AMOUNT - ------------------------------------------------------------------------ ICON International Equity Fund $1,396,605
Other Information 65 PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month end. Each ICON Fund also files a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q are available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A 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 is available at www.iconadvisers.com or on the SEC's website at www.sec.gov. FOR MORE INFORMATION This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor 66 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 55452 Boston, MA 02205-8165 In Person ICON Funds 5299 DTC Boulevard, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
[ICON FUNDS LOGO] 1-800-764-0442 www.iconadvisers.com I-148-FOR . 2005 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 FUNDS LOGO] Table of Contents ABOUT THIS REPORT (UNAUDITED) 2 MESSAGE FROM ICON FUNDS (UNAUDITED) 4 MANAGEMENT OVERVIEW (UNAUDITED) AND SCHEDULE OF INVESTMENTS ICON Consumer Discretionary Fund 7 ICON Energy Fund 13 ICON Financial Fund 20 ICON Healthcare Fund 26 ICON Industrials Fund 33 ICON Information Technology Fund 40 ICON Leisure and Consumer Staples Fund 47 ICON Materials Fund 53 ICON Telecommunication & Utilities Fund 59 SIX MONTH HYPOTHETICAL EXPENSE EXAMPLE (UNAUDITED) 67 FINANCIAL STATEMENTS 70 FINANCIAL HIGHLIGHTS 78 NOTES TO FINANCIAL STATEMENTS 82 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM 92 BOARD OF TRUSTEES AND FUND OFFICERS (UNAUDITED) 93 OTHER INFORMATION (UNAUDITED) 95
[RECYCLE LOGO] About This Report (unaudited) 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, 2005, the end of the reporting period. The information is not a complete analysis of every aspect of any sector, industry, security, or the Funds. Opinions and forecasts regarding industries, companies and/or themes, and portfolio composition and holdings, are subject to change at any time based on market and other conditions, and should not be construed as a recommendation of any specific security. Each Fund's holdings as of September 30, 2005 are included in each Fund's Schedule of Investments. Certain companies' stock performance during the period is mentioned throughout the Management Overviews. While ICON's quantitative investment methodology primarily considers financial data, various company factors may impact a stock's performance, and therefore, Fund performance. There are risks associated with mutual fund investing, including the loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment concentrated in sectors and industries may involve greater risk and volatility than a more diversified investment. Investments in foreign securities 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 Research Systems. About This Report 3 Message from ICON Funds (unaudited) - -------------------------------------------------------------------------------- Equity markets proved especially volatile during the period, retreating when concerns intensified, then rallying when anxiety abated. - -------------------------------------------------------------------------------- Thank you for your continued investment in the ICON Sector Funds and welcome to those of you receiving this report for the first time. As you may know, ICON employs bottom-up industry rotation in pursuit of industries which our system indicates are poised to outperform the broader market. While we are recognized for our Sector Funds, we invite you to also consider the ICON U.S. Diversified Funds and the ICON Foreign Funds, depending on your investment objectives, risk tolerance and time horizon. No matter which ICON Fund you choose, such as the ICON Core Equity Fund, ICON Long/Short Fund or ICON Asia-Pacific Region Fund, each is powered by ICON's disciplined, value-based system. CLIMBING A WALL OF WORRY Of the many sayings associated with the financial markets, one of my favorites is "Wall Street climbs a wall of worry." Given the market's performance over the past year, one would be hard pressed to find fault with such a claim. Although stocks recorded solid gains over the course of the Funds' fiscal year, the path was fraught with numerous difficulties. Investors grappled with uncertainties stemming from rising oil prices and monetary tightening, mostly centered on conflicting fears of economic slowdown and mounting inflation. Equity markets proved especially volatile in this setting, retreating when concerns intensified, then rallying when anxiety abated. This was particularly evident during Hurricanes Katrina and Rita, as investors reacted to day-to-day, even minute-to-minute, fluctuations in oil futures. However, it is our view that these price swings were the result of amateur macroeconomic conjecture that was inconsistent with professional analysts who specialize in forecasting corporate earnings. AVOIDING THE GUESSING GAME When analyzing individual stocks, two of the key variables we apply to our valuation equation include estimated average earnings per share (EPS) and estimated long-term earnings growth rates (LTG). In order to ensure the most realistic projections, ICON Advisers subscribes to the highly respected Thomson Financial I/B/E/S database service, which surveys equity analysts for their estimates of future corporate earnings and respective growth rates. Based on these estimates, the fallout from Katrina and Rita has resulted in slight near-term revisions to quarterly EPS, but few modifications to the LTG that we consider. In our equation, marginal EPS adjustments over one or two quarters typically have a negligible impact on overall value. Given the steady outlook for LTG, analysts view the storms' effects as temporary and not a threat to our current valuation calculations or long-term growth forecasts. 4 Message from ICON Funds We frequently see events that affect near-term earnings per share but seldom trigger a change in our analysis of the forward five-year growth outlook. [CRAIG T. CALLAHAN PHOTO] Craig T. Callahan President - -------------------------------------------------------------------------------- Our experience tells us to stick with computing value and not react to events that do not impact our estimate of intrinsic value. - -------------------------------------------------------------------------------- We frequently see events that affect one or two quarters of EPS but seldom trigger a change in our analysis of the forward five-year growth outlook. Investors often react, incorrectly we believe, to those events and tilt their portfolios toward areas that are instinctively poised to benefit, irrespective of known fundamentals. ICON does not participate in that guessing game. Our experience tells us to stick with computing value and not react to events that do not impact our estimate of intrinsic value. As a result, we made no changes to Fund compositions based strictly on damage attributed to the hurricanes. A MORE UNIFORM DISTRIBUTION OF VALUE At period-end, the average value-to-price ratio (V/P) for our domestic equity database indicated that stocks were priced at 20% below our estimate of fair value. In other words, we believe prices would need to advance 20% on average in order to reach fair value. That being said, markets rarely move in a straight line and random news events can in fact disrupt a move to the upside. Moreover, value is a moving target and highly susceptible to changes in earnings, growth rates, risk, and interest rates. Despite all these variables, valuation gaps are expected, whereas external events and their impact are generally unpredictable. What are current valuation gaps telling us? Looking at the benchmark S&P 1500 Index, we are seeing a significant increase in the average V/P for large-cap stocks for the first time since 1997. Although we define industry leadership by value and relative strength and not by market capitalization, a more uniform distribution of value suggests that an upward move from here could be very broad and include the long-lagging large-cap segment. Since the Energy-, Healthcare-, Utilities-, and Materials-related industries we have favored during the past year have featured small- and mid-cap companies, our value-driven avoidance of large-caps proved beneficial. However, given a significant portion of the rally since October 2002 had a low-quality bias, our penchant for holding high-quality companies may have detracted from overall returns. Should large-caps ultimately come back into favor, we are tilted more heavily toward them than we have been historically. Should high-quality Message from ICON Funds 5 Message from ICON Funds (continued) (unaudited) companies return to their historical risk-adjusted leadership, the Funds are well-situated to take advantage of their strength. OVERPRICED INDUSTRIES ARE FEW We continue to see positive trends in corporate earnings, economic fundamentals and company valuations, and believe the setting looks favorable for a broad move to the upside. Our analysis shows that overpriced industries are few and far between, even within the Energy sector, yet we believe there appears to be a lack of leadership among Consumer-related industries, though value is widespread. In closing, we wish to thank you for the privilege of guiding you through these challenging markets. For current market updates, as well as up-to-date Fund performance and account information, we invite you to visit our website at www.iconadvisers.com. Yours truly, /s/ Craig T. Callahan Craig T. Callahan, DBA Chairman of the Board of Trustees and President of the Adviser Consider the investment objectives, risks, charges, expenses, and share classes of each ICON Fund carefully before investing. The prospectus contains this and other information about the Funds and is available by visiting www.iconadvisers.com or calling 1-800-764-0442. Please read the prospectus carefully before investing. 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. An investment in a region fund may involve greater risk and volatility than a more diversified fund. Investments in foreign securities may entail unique risks, including political, market, and currency risks. 6 Message from ICON Funds Management Overview ICON Consumer Discretionary Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 100.4% Top 10 Equity Holdings 29.3% Number of Stocks 58 Short-Term Investments 0.0% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Lowe's Cos., Inc. 4.3% The Home Depot, Inc. 3.3% Harman International Industries, Inc. 3.3% Target Corp. 2.9% Best Buy Co., Inc. 2.9% O'Reilly Automotive, Inc. 2.8% V.F. Corp. 2.7% Jos. A. Bank Clothiers, Inc. 2.5% Eagle Materials, Inc. 2.3% eBay, 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 appreciated 7.17% for the fiscal year ended September 30, 2005, outpacing the 6.62% return of its sector-specific benchmark, the S&P 1500 Consumer Discretionary Index, yet trailing the 13.45% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2005 appear on page 11. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. A value-driven, active investment style at the industry level enabled the Fund to be favorably positioned throughout the fiscal year. While this contributed to positive relative performance versus the sector-specific benchmark, much of the Fund's advance was recorded during the fourth quarter of 2004, a generally conducive period for cyclically oriented consumer industries. As this theme weakened in calendar year 2005 on concerns that rising oil prices and higher short-term interest rates would curb consumer spending, the Fund lost ground but continued to post reasonable gains. Nevertheless, Consumer Discretionary issues failed to keep pace with upside moves in the broader market, which generally favored more defensive-oriented sectors. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of valuation with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Rising oil prices and ongoing monetary tightening dominated the investment environment during the fiscal year, creating a volatile setting for Consumer Discretionary issues. Over the course of the reporting period, crude oil futures climbed in excess of $16 a barrel to more than $66 a barrel by period-end, a 33% increase. At the same time, the Federal Reserve, in an Management Overview 7 Management Overview (continued) ICON Consumer Discretionary Fund attempt to stave off any hint of future inflation, continued to raise short-term interest rates to 3.75% at year-end from 1.75% in October 2004. Against this backdrop, the S&P 1500 Consumer Discretionary Index rallied sharply from mid-October 2004 through the end of the calendar year, as investors appeared to temporarily set aside their oil- and inflation-related concerns. However, as these distractions resurfaced at the start of 2005, the index fell sharply on worries that higher energy prices would inhibit consumer spending. Although the broader market rebounded following a mid-April low, spending fears continued to weigh heavily on Consumer Discretionary issues, limiting gains for both the Fund and its sector-specific benchmark. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Among the industries that contributed to Fund performance were homebuilding, footwear and apparel retail, which on average comprised almost one-third of net assets, while accounting for nearly all of the Fund's fiscal-year total return. As the largest overall industry weight, on average, apparel retail held up well for most of the year before indiscriminate selling caused it to retreat late in the period. Homebuilding, on the other hand, remained strong throughout, as builders continued to benefit from historically low mortgage rates and generally favorable economic conditions. Such was the case for residential homebuilder Toll Brothers Inc., which generated record revenue and share earnings in line with demographic-driven demand for new homes. Building Materials Holding Corp., an operator of retail centers aimed at professional contractors, also turned in a strong showing, citing robust sales gains and improving gross margins. Elsewhere, specialty retailer Abercrombie & Fitch Co. reported impressive financial results thanks to strong brand loyalty and double-digit comparable-store sales. In contrast, principal industry detractors included homefurnishing retail, automobile manufacturers and specialty stores. Although specialty stores on average was the most heavily weighted of the three, homefurnishing retail and automobile manufacturers inflicted appreciably more damage as relative strength faltered during the period. As for individual detractors, specialty retailer Hot Topic Inc. came under pressure when management slashed its earnings guidance due to a projected drop-off in same-store sales. Recreational vehicle manufacturer Winnebago Industries Inc. also trended lower as weakening demand diminished the company's top and bottom lines. Meanwhile, higher operating costs and weather-related revenue shortfalls eroded profits for homefurnishing retailer Cost Plus Inc. All three were ultimately sold on declining relative strength. 8 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE CONSUMER DISCRETIONARY SECTOR? A. Heading into the new fiscal year, the Consumer Discretionary sector is, according to our analysis, the most undervalued of the nine sectors we track. Our quantitative analysis indicates that the intrinsic value of companies within the sector remains well above where their stocks are currently trading. While we cannot predict such a move, or its timing if one were to occur, we believe that ongoing concerns regarding energy prices and interest rates will ultimately give way to fundamental value. If this should come to pass, Consumer Discretionary issues could easily transform into next year's market leaders. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund's value-driven, active investment style at the industry level contributed to positive relative performance versus the sector-specific benchmark. - - Among the industries that contributed to performance were homebuilding, footwear and apparel retail, which together accounted for most of the Fund's fiscal-year total return. - - Principal industry detractors included homefurnishing retail, automobile manufacturers and specialty stores, with the latter two inflicting appreciably more damage as relative strength declined. - - Stocks that boosted Fund performance included Abercrombie & Fitch Co., Toll Brothers Inc. and Building Materials Holding Corp. - - Holdings that detracted from fiscal-year Fund performance included Hot Topic Inc., Winnebago Industries Inc and Cost Plus Inc. Management Overview 9 Management Overview (continued) ICON Consumer Discretionary Fund INDUSTRY COMPOSITION as of September 30, 2005 Apparel Retail 10.5% Home Building 10.0% Home Improvement Retail 9.5% Automotive Retail 7.9% Apparel Accessories & Luxury Goods 7.6% Catalog Retail 6.8% Auto Parts & Equipment 6.1% Automobile Manufacturers 5.6% Construction Materials 4.2% Department Stores 3.5% Consumer Electronics 3.2% Specialized Consumer Services 3.0% Computer & Electronics Retail 2.9% General Merchandise Stores 2.9% Housewares & Specialties 2.9% Specialty Stores 2.6% Footwear 2.5% Internet Retail 2.3% Home Furnishing Retail 1.9% Education Services 1.3% Tobacco 1.2% Distributors 0.8% Advertising 0.6% Packaged Foods & Meats 0.6%
Percentages are based upon net assets. 10 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 7/9/97 - ----------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund 7.17% 8.08% 4.11% - ----------------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 6.62% 1.79% 6.48% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 6.01% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
ICON CONSUMER S&P 1500 CONSUMER DISCRETIONARY FUND DISCRETIONARY INDEX S&P 1500 INDEX ------------------ ------------------- -------------- 7/9/97 10000 10000 10000 10970 10892 10597 9810 11268 10852 11141 13276 12321 10851 14327 12620 9/30/98 7870 11778 11262 10360 15109 13709 10032 16371 14207 11067 17232 15312 9/30/99 9899 15612 14339 10851 18199 16485 10503 17620 16994 9796 16082 16554 9/30/00 9448 15341 16548 9602 14752 15338 9756 13937 13550 11363 15401 14440 9/30/01 9172 12045 12290 12120 14467 13705 13379 14959 13837 13604 13358 12059 9/30/02 10360 11065 9976 9806 11319 10786 9080 11069 10425 11413 13277 12064 9/30/03 12068 13661 12439 13768 15642 13976 14176 16036 14275 14094 15910 14523 9/30/04 12999 15725 14251 14534 17895 15624 14207 17079 15313 14750 17108 15576 9/30/05 13932 16766 16168
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 Schedule of Investments ICON Consumer Discretionary Fund September 30, 2005
SHARES VALUE - -------------------------------------------- COMMON STOCKS (100.4%) 55,300 Aaron Rents, Inc. $ 1,169,595 72,000 Advance Auto Parts, Inc.(a) 2,784,960 136,100 Aftermarket Technology Corp.(a) 2,502,879 26,900 Altria Group, Inc. 1,982,799 121,900 Ann Taylor Stores Corp.(a) 3,236,445 43,100 AutoZone, Inc.(a) 3,588,075 113,150 Best Buy Co., Inc. 4,925,419 64,900 BorgWarner, Inc. 3,664,254 71,900 Brown Shoe Co., Inc. 2,372,700 15,100 Building Materials Holding Corp. 1,407,169 106,900 Cache, Inc.(a) 1,628,087 70,600 Cavco Industries, Inc.(a) 2,561,368 15,600 Centex Corp. 1,007,448 137,400 Coldwater Creek, Inc.(a) 3,465,228 106,666 D.R. Horton, Inc. 3,863,443 64,500 DaimlerChrysler AG 3,426,240 32,700 Eagle Materials, Inc. 3,968,799 94,500 eBay, Inc.(a) 3,893,400 66,600 Education Management Corp.(a) 2,147,184 51,000 Federated Department Stores, Inc. 3,410,370 31,100 Fortune Brands, Inc. 2,529,363 158,200 Gentex Corp. 2,752,680 75,100 Gildan Activewear, Inc. - Class A(a) 2,871,073 54,100 Harman International Industries, Inc. 5,532,807 68,900 Insight Enterprises, Inc.(a) 1,281,540 16,800 J & J Snack Foods Corp. 971,040 202,700 J. Jill Group, Inc.(a) 3,206,714 116,300 Jackson Hewitt Tax Services, Inc. 2,780,733 98,000 Jos. A. Bank Clothiers, Inc.(a) 4,235,560 46,200 Keystone Automotive Industries, Inc.(a) 1,331,022 52,100 Kohl's Corp.(a) 2,614,378
SHARES VALUE - -------------------------------------------- 45,800 Lafarge North America, Inc. $ 3,096,538 113,800 Lowe's Cos., Inc. 7,328,720 53,600 M/I Homes, Inc. 2,908,336 59,200 Matthews International Corp. - Class A 2,237,168 22,600 Nike, Inc. - Class B 1,845,968 170,200 O'Reilly Automotive, Inc.(a) 4,796,236 63,800 Oxford Industries, Inc. 2,878,656 78,100 Pacific Sunwear of California, Inc.(a) 1,674,464 89,200 Pulte Homes, Inc. 3,828,464 177,200 Quiksilver, Inc.(a) 2,560,540 41,800 Ryland Group, Inc. 2,859,956 117,550 Staples, Inc. 2,506,166 58,500 Talbots, Inc. 1,750,320 95,300 Target Corp. 4,948,929 89,500 The Cato Corp. 1,783,735 145,500 The Home Depot, Inc. 5,549,370 71,900 The Sherwin- Williams Co. 3,168,633 67,400 The Sports Authority, Inc.(a) 1,984,256 134,600 The Sportsman's Guide, Inc.(a) 3,674,580 89,100 Thor Industries, Inc. 3,029,400 33,800 Toyota Motor Corp. - ADR 3,122,106 105,500 Tupperware Corp. 2,403,290 65,800 United Auto Group, Inc. 2,174,032 110,600 Urban Outfitters, Inc.(a) 3,251,640 77,900 V.F. Corp. 4,515,863 24,700 Valassis Communications, Inc.(a) 962,806 54,600 Williams-Sonoma, Inc.(a) 2,093,910 ------------ TOTAL INVESTMENTS 100.4% (COST $157,856,022) 170,046,854 LIABILITIES LESS OTHER ASSETS (0.4)% (625,092) ------------ TOTAL NET ASSETS 100.0% $169,421,762 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. ADR American Depositary Receipt 12 Schedule of Investments Management Overview ICON Energy Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 96.0% Top 10 Equity Holdings 28.9% Number of Stocks 69 Short-Term Investments 2.7% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Petroleo Brasileiro S.A. - ADR 4.3% Ultra Petroleum Corp. 3.6% Grant Prideco, Inc. 3.1% National-OilWell Varco, Inc. 2.9% Patterson-UTI Energy, Inc. 2.8% Nabors Industries, Ltd. 2.7% Cal Dive International, Inc. 2.5% Petro-Canada 2.5% Unit Corp 2.3% Suncor Energy, Inc. 2.2% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Energy Fund appreciated 54.79% for the fiscal year ended September 30, 2005, outpacing the 49.95% return for its sector-specific benchmark, the S&P 1500 Energy Index and the 13.45% return of its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2005 appear on page 17. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Although a positive correlation between crude oil prices and energy stock prices benefited the Fund during the period, industry selection played a more crucial role in outperforming the S&P 1500 Energy Index. Initially, our valuation-related lack of exposure to bellwether integrated oil & gas companies worked against Fund performance, as Exxon Mobil, Occidental Petroleum and ConocoPhillips led the large-cap dominated index higher. The Fund also failed early in the period to benefit from leading industry group oil & gas refining & marketing, as our valuation model deemed it too rich to warrant meaningful exposure during the second half of the reporting period. However, as leadership shifted to the more heavily weighted oil & gas exploration & production, oil & gas equipment & services and oil & gas drilling industries late in the period, the Fund gained momentum and surpassed its benchmark. Much of this upward move reflected strength in medium-capitalization stocks, in which the Fund maintained an overweight position relative to its narrow benchmark. While not a primary consideration of the Fund's investment process, this valuation-driven focus on mid-caps proved advantageous to fiscal-year returns. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. Management Overview 13 Management Overview (continued) ICON Energy Fund Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. As continued strong demand in the face of limited supply pushed crude oil prices higher, Energy sector earnings strengthened, providing the necessary support for stock prices to trend higher. Rising demand among developing countries such as China and India further strained the delicate balance, as did temporary drilling, refining and shipping disruptions caused by Hurricanes Katrina and Rita. While headline risks and the ensuing fears of economic slowdown and mounting inflation pressured the broader market, energy stocks and energy-related mutual funds such as the ICON Energy Fund enjoyed significant inflows. Looking at the big picture, oil & gas refining & marketing finished the period as the leading industry group of the 139 industries tracked by Standard & Poor's, while oil- and gas-related industries dominated the list. Despite the phenomenal, yet volatile runup, the sector as a whole appeared to hover at or near our estimates of fair value. Nevertheless, certain industries and stocks remained underpriced according to our calculations, even as seemingly misguided talk of a bubble obscured underlying growth in reported earnings. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Overweight positions in oil & gas exploration & production and oil & gas equipment & services combined with a significant underweight in integrated oil & gas proved highly favorable for Fund performance during the period. While much of the sector lingered at our estimate of fair value, we found the large-cap dominated integrated oil & gas industry, which comprises approximately 60% of the sector-specific benchmark, to be less attractive from a valuation and relative strength standpoint. Conversely, while still contributing positively, certain names within the heavily overweighted oil & gas storage & transportation industry worked against Fund performance. Although the group was a leading contributor in calendar year 2004, it weakened considerably during the reporting period and was subsequently reduced. In trimming this exposure, proceeds were redirected toward the oil & gas drilling industry, where earnings-per-share growth led to more attractive valuations. Turning to the Fund's best-performing stocks, Brazil's national oil company Petroleo Brasileiro reported robust earnings growth in both its upstream and downstream operations, reflecting the impact of rising crude oil and gasoline prices. Also benefiting from higher commodity prices was offshore services company Cal Dive International, which saw considerable growth in output levels as well as drilling demand. Meanwhile, independent exploration and production firm Ultra Petroleum Corp. recorded a triple-digit increase in second-quarter earnings, the strongest quarter in the company's history. 14 Management Overview [J.C. WALLER III, PORTFOLIO MANAGER PHOTO] J.C. Waller, III Portfolio Manager In contrast, oil and gas developers Petroleum Development Corp. and Harvest Natural Resources Inc. saw their market value decline. Petroleum Development warned of escalating day rates and tight rig availability, which could ultimately impede development plans, while Harvest Natural Resources experienced drilling delays and production setbacks. Canadian energy company Petrokazakhstan, Inc. also retreated following news of a dispute in its joint venture with Kazakhstan-based Lukoil. All three stocks were ultimately sold due to our estimate of declining relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE ENERGY SECTOR? A. Going forward, we anticipate a continued upward trend in energy stock prices, but not without occasional pullbacks along the way. Although our current estimates indicate that this long-running sector theme is fairly valued, select industries and stocks, most notably in the oil & gas drilling and oil & gas equipment & services groups, remain, in our opinion, undervalued. Given our analysis of earnings, we have systematically increased the Fund's exposure to these industries, while reducing exposure to more expensive areas such as oil & gas refining and marketing. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund benefited during the period from a positive correlation between crude oil prices and energy stock prices. - - Overweight positions in oil & gas exploration & production and oil & gas equipment & services combined with a significant underweight in integrated oil & gas proved favorable for Fund performance. - - We found the large-cap dominated integrated oil & gas industry, which comprises approximately 60% of the sector-specific benchmark, to be less attractive from our valuation standpoint and relative strength. - - Petroleo Brasileiro, Ultra Petroleum Corp. and Cal Dive International Inc. were among the Fund's top-performing stocks. - - Stocks that saw their market value decline during the period included Petroleum Development Corp., Harvest Natural Resources and Petrokazakhstan, Inc. Management Overview 15 Management Overview (continued) ICON Energy Fund INDUSTRY COMPOSITION September 30, 2005 Oil & Gas Equipment & Services 25.8% Oil & Gas Exploration & Production 23.2% Integrated Oil & Gas 22.9% Oil & Gas Drilling 18.2% Oil & Gas Storage & Transportation 3.5% Construction Materials 1.2% Construction & Engineering 0.6% Industrial Machinery 0.4% Oil & Gas Refining & Marketing 0.2%
Percentages are based upon net assets. 16 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 11/5/97 - ----------------------------------------------------------------------------------------- ICON Energy Fund 54.79% 22.86% 18.17% - ----------------------------------------------------------------------------------------- S&P 1500 Energy Index 49.95% 14.10% 11.84% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 5.56% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
ICON ENERGY FUND S&P 1500 ENERGY INDEX S&P 1500 INDEX ---------------- --------------------- -------------- 11/5/97 10000 10000 10000 9100 9432 10291 9330 9872 11683 8630 9603 11967 9/30/98 6350 8920 10680 5723 8937 13000 6726 9455 13472 8164 10671 14520 9/30/99 8083 10579 13597 8600 10702 15632 11092 11203 16115 11872 11539 15698 9/30/00 13361 12516 15692 15363 12651 14545 15010 11875 12849 14202 12096 13693 9/30/01 12488 10566 11654 14856 11245 12997 16385 12350 13121 14823 11769 11435 9/30/02 13117 9493 9460 14004 10190 10228 13539 10230 9886 14857 10988 11440 9/30/03 15178 11038 11796 18580 12737 13253 20154 13460 13536 21649 14547 13772 9/30/04 24165 16142 13514 25672 16862 14816 28840 19815 14521 29882 20283 14771 9/30/05 37406 24205 15332
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 17 Schedule of Investments ICON Energy Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (96.0%) 84,700 Anadarko Petroleum Corp. $ 8,110,025 125,000 Apache Corp. 9,402,500 215,000 Atwood Oceanics, Inc.(a) 18,105,150 175,000 Berry Petroleum Co. 11,670,750 400,000 Cal Dive International, Inc.(a) 25,364,000 450,000 Chesapeake Energy Corp. 17,212,500 225,000 Chevron Corp. 14,564,250 300,000 China Petroleum and Chemical Corp. - ADR 13,578,000 215,014 Cimarex Energy Co.(a) 9,746,584 200,000 Comstock Resources, Inc.(a) 6,562,000 160,000 ConocoPhillips 11,185,600 200,000 Cooper Cameron Corp.(a) 14,786,000 100,000 Core Laboratories N.V.(a) 3,226,000 125,000 Dampskibsselskabet Torm - ADR 7,167,500 275,000 Denbury Resources, Inc.(a) 13,871,000 300,000 Diamond Offshore Drilling, Inc. 18,375,000 405,000 Encore Acquisition Co.(a) 15,734,249 375,000 Energy Partners, Ltd.(a) 11,707,500 36,000 ENI S.p.A. - ADR 5,331,600 100,000 Flowserve Corp.(a) 3,635,000 225,000 FMC Technologies, Inc.(a) 9,474,750 50,000 Frontier Oil Corp. 2,217,500
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 775,000 Grant Prideco, Inc.(a) $ 31,503,750 100,000 Gulf Island Fabrication, Inc. 2,875,000 325,000 Headwaters, Inc.(a) 12,155,000 300,000 Helmerich & Payne, Inc. 18,117,000 164,700 Hydril Co.(a) 11,305,008 575,000 KCS Energy, Inc.(a) 15,829,750 375,000 Lone Star Technologies, Inc.(a) 20,846,250 225,000 Lukoil - ADR 12,960,000 287,050 Marathon Oil Corp. 19,786,357 175,000 Maverick Tube Corp.(a) 5,250,000 375,000 Nabors Industries, Ltd.(a) 26,936,250 450,000 National- OilWell Varco, Inc.(a) 29,610,000 300,000 Newfield Exploration Co.(a) 14,730,000 500,000 Newpark Resources, Inc.(a) 4,210,000 180,000 Noble Corp. 12,322,800 42,400 Noble Energy, Inc. 1,988,560 196,000 Oceaneering International, Inc.(a) 10,468,360 160,000 Offshore Logistics(a) 5,920,000 475,000 Oil States International, Inc.(a) 17,247,250 775,000 Patterson-UTI Energy, Inc. 27,962,000 130,800 Penn Virginia Corp. 7,548,468 600,000 Petro-Canada 25,038,000 200,000 Petrochina Co., Ltd. - ADR 16,674,000 600,000 Petroleo Brasileiro S.A. - ADR 42,894,000
18 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 189,800 Precision Drilling Corp.(a) $ 9,338,160 300,000 Pride International, Inc.(a) 8,553,000 370,600 Range Resources Corp. 14,308,866 325,000 Remington Oil & Gas Corp.(a) 13,487,500 330,000 Repsol YPF S.A. - ADR 10,662,300 260,000 Royal Dutch Shell - Class A - ADR 17,066,400 280,149 Royal Dutch Shell - Class B - ADR 19,293,862 125,000 Spinnaker Exploration Co.(a) 8,086,250 360,000 Suncor Energy, Inc. 21,790,800 800,000 Superior Energy Services, Inc.(a) 18,472,000 50,000 Teekay Shipping Corp. 2,152,500 300,000 TETRA Technologies, Inc.(a) 9,366,000 534,300 The Williams Companies, Inc. 13,384,215 300,000 Tidewater, Inc. 14,601,000 500,000 Top Tankers, Inc. 7,510,000
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 325,000 Transocean, Inc.(a) $ 19,925,750 150,000 Tsakos Energy Navigation , Ltd. 5,403,000 635,000 Ultra Petroleum Corp.(a) 36,118,800 425,000 Unit Corp.(a) 23,494,000 153,000 URS Corp.(a) 6,179,670 300,000 W-H Energy Services, Inc.(a) 9,726,000 235,000 Weatherford International, Ltd.(a) 16,135,100 400,033 XTO Energy, Inc. 18,129,496 -------------- TOTAL COMMON STOCKS (COST $648,830,463) 968,389,930 SHORT-TERM INVESTMENTS (2.7%) $26,997,349 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# 26,997,349 -------------- TOTAL SHORT-TERM INVESTMENTS (COST $26,997,349) 26,997,349 -------------- TOTAL INVESTMENTS (COST $675,827,812) 98.7% 995,387,279 OTHER ASSETS LESS LIABILITIES 1.3% 13,570,562 -------------- TOTAL NET ASSETS 100.0% $1,008,957,841 ==============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt Schedule of Investments 19 Management Overview ICON Financial Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 99.9% Top 10 Equity Holdings 26.9% Number of Stocks 48 Short-Term Investments 0.3% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Investment Technology Group, Inc. 3.5% First American Corp. 2.9% Loews Corp. 2.9% Allmerica Financial Corp. 2.6% AmerUs Group Co. 2.5% UnumProvident Corp. 2.5% Prudential Financial, Inc. 2.5% American International Group, Inc. 2.5% LandAmerica Financial Group, Inc. 2.5% Mellon Financial Corp. 2.5% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Financial Fund gained 8.29% for the fiscal year ended September 30, 2005, outpacing the 7.02% return of its sector-specific benchmark, the S&P 1500 Financials Index, while trailing the 13.45% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2005 appear on page 24. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Financials sector fared poorly vs. the broad market during the period, and the Fund's underperformance relative to the S&P 1500 reflected yearlong weakness in the Financials sector. A valuation-driven tilt toward insurance-related industries provided a modest lift relative to the sector- specific benchmark. Also beneficial was the Fund's overweight position in medium-capitalization stocks, which proved to be the top-performing market capitalization segment within the S&P 1500 Financials Index. While this tilt toward mid-cap stocks, a by-product of our methodology, proved advantageous during the period, individual stock selection within large-capitalization stocks actually resulted in the best overall performance. Although our process guides us to emphasize specific industries and securities, it may result in investments concentrated within a given capitalization range. Such was the case for the Financials sector, where large- and mid-cap stocks produced the strongest relative returns. In contrast, the Fund's allocation to small-cap stocks relative to the benchmark proved detrimental, as it was the worst-performing area in the index. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as these measures do not, in our view, adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. 20 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Despite a positive finish, stocks encountered considerable resistance in their move toward our estimates of fair value. Surging oil prices and monetary tightening presented formidable distractions, as investors let their emotions be swayed by conflicting fears of economic slowdown and mounting inflation. Against this backdrop, market movements alternated between broad advances and volatile sideways trading, often tracking sharp, sudden shifts in investor sentiment. Hurricanes Katrina and Rita added to this uncertainty, as economic forecasts called for near-term reductions in real GDP growth followed by possible inflationary pressures due to projected rebuilding spending. In the Financials sector, the combined effects of rising interest rates and a flattening yield curve weighed heavily on the profit outlook for banks, while thrifts & mortgage finance struggled with slowing mortgage and refinancing originations. Fallout from the New York State Attorney General's probe into the insurance industry contributed to widespread headline risk, although insurance groups rebounded nicely as economic concerns triggered rotations into more recession-proof industries. Meanwhile, the investment banking & brokerage industry maintained a positive course due to increases in capital markets activity and commodity trading. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Industries that contributed to Fund returns included the life & health insurance, property & casualty insurance and multi-line insurance groups, all of which reportedly benefited from higher premium income and lower claim payouts. Investment banking & brokerage also turned in a solid showing as companies pursued growth through mergers and acquisitions. In contrast, regional banks, diversified banks and thrifts & mortgage finance were among the weakest industries in the Financials sector and consequently worked against Fund performance. By period-end, all three were either removed or significantly reduced on declining relative strength. Among the Fund's top individual performers, Investment Technology Group Inc., a provider of automated equity trading services, benefited from improved trading volumes and solid earnings growth. Investment manager Legg Mason Inc. also advanced, having significantly boosted assets under management with the acquisition of Citigroup's worldwide asset management business. Likewise, acquisitions enabled diversified financial services giant Prudential Financial Inc. to expand its global presence, particularly in rapidly expanding Asian insurance markets. Management Overview 21 Management Overview (continued) ICON Financial Fund Conversely, companies that detracted from Fund performance included global custody and mutual fund administrator Investors Financial Service Corp., which fell after warning that it would miss earnings growth targets due to narrower-than-expected investment spreads. Residential mortgage lender Countrywide Financial Corp. also came under pressure when the company revealed that it had uncovered accounting irregularities. Meanwhile, equity specialist firm LaBranche & Co., Inc. fell short of earnings expectations, citing unfavorable market conditions. All three were subsequently removed on declining relative strength, although LaBranche was later repurchased when its valuation became more attractive. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE FINANCIALS SECTOR? A. Given expectations for sustainable economic growth and relatively low interest rates, we continue to detect notable upside potential in the Financials sector. Despite their show of strength, insurance industries still carry attractive valuations and will likely maintain leadership positions. At the same time, banking industries are demonstrating significant value and will be monitored closely for future signs of emerging leadership. In what are still challenging conditions for the Financial sector, we remain committed to our discipline, with a keen eye toward valuation and relative strength. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund reflected yearlong weakness in the Financials sector, yet provided a modest lift relative to its sector-specific benchmark. - - Leading industry contributors included overweights in the life & health insurance, property & casualty insurance and multi-line insurance groups. - - Regional banks, diversified banks and thrifts & mortgage finance were among the sector's weakest industries and consequently worked against Fund performance. - - Investment Technology Group Inc., Legg Mason Inc. and Prudential Financial Inc. were among the Fund's top individual performers. - - Stocks that detracted from returns included Investors Financial Services Corp., Countrywide Financial Corp. and LaBranche & Co., Inc. 22 Management Overview INDUSTRY COMPOSITION September 30, 2005 Life & Health Insurance 17.9% Investment Banking & Brokerage 16.4% Consumer Finance 14.9% Multi-Line Insurance 13.4% Property & Casualty Insurance 13.0% Asset Management & Custody Banks 12.0% Regional Banks 3.9% Specialized Finance 3.6% Insurance Brokers 2.1% Reinsurance 1.4% Other Diversified Financial Services 1.3%
Percentages are based upon net assets. Management Overview 23 Management Overview (continued) ICON Financial Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 7/1/97 - ----------------------------------------------------------------------------------------- ICON Financial Fund 8.29% 9.76% 10.50% - ----------------------------------------------------------------------------------------- S&P 1500 Financials Index 7.02% 3.58% 8.73% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 6.24% - -----------------------------------------------------------------------------------------
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. Information about these performance results and the comparative indexes can be found on pages 2 and 3. VALUE OF A $10,000 INVESTMENT through September 30, 2005 [LINE GRAPH]
ICON FINANCIAL FUND S&P 1500 FINANCIALS INDEX S&P 1500 INDEX ------------------- ------------------------- -------------- 7/1/97 10000 10000 10000 10510 11141 10796 10526 12020 11056 12003 13426 12552 12294 13821 12857 9/30/98 9411 10941 11474 11267 13265 13967 11878 14190 14474 12442 14931 15600 9/30/99 10357 12642 14608 11074 13668 16795 11342 13923 17314 11366 13526 16865 9/30/00 14307 16727 16858 16613 17081 15626 15598 15435 13804 17694 16730 14711 9/30/01 15675 14787 12521 17047 15904 13963 17625 16526 14097 16375 15375 12285 9/30/02 13812 12812 10164 14014 13719 10988 13011 13027 10621 16193 15404 12291 9/30/03 16899 16097 12673 19659 18038 14238 21045 18958 14543 20714 18507 14796 9/30/04 21046 18637 14519 23264 20187 15917 21738 18903 15601 22129 19777 15869 9/30/05 22788 19945 16472
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. 24 Management Overview Schedule of Investments ICON Financial Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (99.9%) 98,500 A.G. Edwards, Inc. $ 4,315,285 91,000 AFLAC, Inc. 4,122,300 134,100 Allmerica Financial Corp.(a) 5,516,874 194,200 Amegy Bancorporation, Inc. 4,394,746 113,200 American Capital Strategies, Ltd. 4,149,912 64,000 American Express Co. 3,676,160 85,900 American International Group, Inc. 5,322,364 86,000 AmeriCredit Corp.(a) 2,052,820 93,600 AmerUs Group Co. 5,369,832 140,600 Aon Corp. 4,510,448 51,500 Capital One Financial Corp. 4,095,280 195,800 Cash America International, Inc. 4,062,850 126,700 China Life Insurance Co., Ltd. - ADR(a) 3,909,962 80,100 CIT Group, Inc. 3,618,918 89,900 CompuCredit Corp.(a) 3,993,358 96,000 Delphi Financial Group, Inc. 4,492,800 165,100 Eaton Vance Corp. 4,097,782 29,500 Everest Re Group, Ltd. 2,888,050 99,200 Financial Federal Corp. 3,948,160 136,200 First American Corp. 6,220,254 193,500 First Cash Financial Services, Inc.(a) 5,092,920 111,200 First Republic Bank 3,917,576 174,650 HCC Insurance Holdings, Inc. 4,982,765 131,800 Horace Mann Educators Corp. 2,607,004 247,000 Investment Technology Group, Inc.(a) 7,311,200 581,200 Labranche and Co., Inc.(a) 5,050,628 82,100 LandAmerica Financial Group, Inc. 5,307,765 37,700 Lehman Brothers Holding, Inc. 4,391,296
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 91,400 Lincoln National Corp. $ 4,754,628 65,800 Loews Corp. 6,080,578 177,700 MBNA Corp. 4,378,528 261,600 MCG Capital Corp. 4,413,192 162,300 Mellon Financial Corp. 5,188,731 70,100 Merrill Lynch & Co., Inc. 4,300,635 86,100 MetLife, Inc. 4,290,363 93,400 Northern Trust Corp. 4,721,370 58,000 Principal Financial Group, Inc. 2,747,460 79,100 Prudential Financial, Inc. 5,343,996 134,200 Raymond James Financial, Inc. 4,310,504 79,700 Selective Insurance Group, Inc. 3,897,330 74,600 SLM Corp. 4,001,544 88,600 St. Paul Travelers Cos., Inc. 3,975,482 57,700 State Street Corp. 2,822,684 85,500 Stewart Information Services Corp. 4,377,600 43,800 The Bear Stearns Cos., Inc. 4,807,050 49,700 The Hartford Financial Services Group, Inc. 3,835,349 261,300 UnumProvident Corp. 5,356,650 90,700 W.R. Berkley Corp. 3,580,836 ------------ TOTAL COMMON STOCKS (COST $187,784,348) 210,603,819 SHORT-TERM INVESTMENTS (0.3%) $599,055 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# 599,055 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $599,055) 599,055 ------------ TOTAL INVESTMENTS (COST $188,383,403) 100.2% 211,202,874 LIABILITIES LESS OTHER ASSETS (0.2)% (319,598) ------------ TOTAL NET ASSETS 100.0% $210,883,276 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt Schedule of Investments 25 Management Overview ICON Healthcare Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 97.2% Top 10 Equity Holdings 23.0% Number of Stocks 85 Short-Term Investments 3.3% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 McKesson HBOC, Inc. 2.8% AmerisourceBergen Corp. 2.7% Express Scripts, Inc. 2.6% Celgene Corp. 2.4% Henry Schein, Inc. 2.2% United Surgical Partners International, Inc. 2.1% Omnicare, Inc. 2.1% UnitedHealth Group, Inc. 2.1% Coventry Health Care, Inc. 2.0% Wellpoint, Inc. 2.0% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Healthcare Fund appreciated 31.39% for the fiscal year ended September 30, 2005, outperforming the 12.13% return for its sector-specific benchmark, the S&P 1500 Healthcare Index, as well as the 13.45% return for its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2005 appear on page 30. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Active overweight positions in the top-performing managed healthcare and healthcare services industries combined with a value-driven tilt toward medium-capitalization stocks relative to the sector benchmark accounted for the Fund's outperformance. While the emphasis on mid-cap securities was a residual of the Fund's investment process rather than a primary consideration, the larger relative weighting proved advantageous to fiscal-year returns. At the same time, limited exposure to large-cap pharmaceuticals, the sector laggard, resulted in positive performance. Given the apparent disparity of industry returns, it appears that investors did not fully recognize the widespread value that permeated the Healthcare sector during the reporting period. This was evidenced early in the period when election-year uncertainties weighed heavily on the sector in general and the highly politicized managed health care industry in particular. The phenomenon was short lived, however, and as the political rhetoric subsided, the industry recouped its losses and assumed its leadership status. Another interesting development involved the healthcare facilities industry, which surged amid a broad winter market decline, only to sell off during a summer rally. Conversely, healthcare distributors and healthcare services marched steadily higher throughout the period, while pharmaceuticals hinted at a new-year rebound that ultimately failed to materialize. Still, the Fund took the opportunity to selectively invest in pharmaceutical stocks, where bargains have been plentiful. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not adequately 26 Management Overview [J.C. WALLER III PHOTO] J.C. Waller, III Portfolio Manager represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. The reporting period was characterized by extreme choppiness, as rising oil prices and ongoing monetary tightening distracted investors. Although underlying economic and company fundamentals remained generally positive, the uncertainty produced severe crosscurrents, which intensified with Hurricanes Katrina and Rita. As market sentiment fluctuated between fears of economic slowdown and mounting inflation, stocks settled into a volatile sideways trading range. When these concerns subsided, stocks resumed their upward advance. Within the Healthcare sector, lingering difficulties, such as pricing pressures and increased generic competition, appeared to hamper the branded pharmaceuticals industry, which comprises nearly 50% of the S&P 1500 Healthcare Index. Hospital issues also retreated as storm-related closures in the Gulf region raised concerns over the group's earnings outlook. Meanwhile, the managed healthcare industry continued to demonstrate sustainable strength based on its attractive combination of steady operating margins and low relative valuations. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. The Fund benefited from an active overweight in the managed healthcare group, which accounted for nine of the top 10 contributing companies in the Fund during the period. The HMO segment features a number of well-managed businesses in addition to what we see as a powerful combination of value and relative strength. Healthcare services, another active overweight position, also contributed positively to overall performance, as rising revenues, growing demand and favorable demographic trends appear to be driving a move toward fair value. Among the Fund's leading individual contributors to performance were managed care companies WellPoint Inc., Aetna Inc. and Humana Inc. Acquisition-related growth enhanced WellPoint's profits and subscriber base, while Aetna and Humana relied on specialty product lines and new product offerings to boost enrollment and earnings. In contrast, pharmaceuticals hampered Fund returns, although the Fund's limited exposure helped relative to the benchmark. Given the presence of Management Overview 27 Management Overview (continued) ICON Healthcare Fund significant value, we have maintained the Fund's pharmaceutical position despite a current absence of sustainable relative strength. Individual companies that detracted from Fund performance included Martek Biosciences Corp., a producer of microalgae-based nutritional products, whose shares tumbled due to a demand-related inventory buildup among its larger customers. Medical device maker Boston Scientific Corp. also retreated, having reported declining sales and pricing pressures. Meanwhile, long-term care provider Kindred Healthcare Inc. faced revenue shortfalls resulting from lower admissions and Medicare payment reductions. All three stocks were ultimately sold due to our estimate of declining relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE HEALTHCARE SECTOR? A. We believe the Healthcare sector continues to offer broad upside potential. Our estimates indicated widespread value, while forward earnings growth projections generally appear strong and steady. Based on our analysis of value and relative strength, our system indicates the healthcare services and healthcare distributors industries may be poised to continue leadership roles, but we see little evidence to support a similar move in biotechnology. However, after a significant period of time, we have begun to accumulate positions in pharmaceutical stocks through exposure to the generic drug segment. PERFORMANCE HIGHLIGHTS September 30, 2005 - - Given the apparent disparity of industry returns, it appears that investors did not fully recognize the widespread value that permeated the Healthcare sector. - - Active overweight positions in industry standouts managed healthcare and healthcare services contributed positively to overall performance. - - Pharmaceuticals detracted from returns despite the Fund's limited exposure. - - Managed care companies WellPoint Inc., Aetna Inc. and Humana Inc. were among the Fund's strongest-performing holdings during the period. - - Stocks that detracted from performance during the period included Martek Biosciences Corp., Boston Scientific Corp. and Kindred Healthcare Inc. 28 Management Overview INDUSTRY COMPOSITION September 30, 2005 Health Care Services 23.6% Pharmaceuticals 14.3% Managed Health Care 14.1% Biotechnology 11.0% Health Care Equipment 10.4% Health Care Distributors 9.4% Health Care Facilities 8.0% Health Care Supplies 5.1% Specialized Consumer Services 0.8% Office Services & Supplies 0.5%
Percentages are based upon net assets. Management Overview 29 Management Overview (continued) ICON Healthcare Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 2/24/97 - ----------------------------------------------------------------------------------------- ICON Healthcare Fund 31.39% 11.14% 13.84% - ----------------------------------------------------------------------------------------- S&P 1500 Healthcare Index 12.13% 0.24% 8.47% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 7.22% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
S&P 1500 HEALTH CARE ICON HEALTHCARE FUND INDEX S&P 1500 INDEX -------------------- -------------------- -------------- 2/24/97 10000 10000 10000 9460 8940 9368 11080 11104 10981 11780 11169 11933 11644 11995 12221 13319 14014 13874 13813 14945 14211 9/30/98 12224 14703 12682 13427 16953 15438 13500 17464 15999 13863 16807 17243 9/30/99 11571 15192 16147 13938 15787 18564 15234 16050 19137 17042 19693 18642 9/30/00 17976 19880 18634 19936 21802 17272 18731 18405 15258 20498 18659 16261 9/30/01 18585 18850 13839 19303 19285 15434 19845 19189 15582 19524 16124 13580 9/30/02 17540 14975 11234 17523 15629 12146 17337 15824 11740 20236 17535 13585 9/30/03 20812 16927 14008 22981 18382 15738 23895 18439 16075 24777 18954 16354 9/30/04 23201 17940 16048 27102 18998 17594 27934 18932 17244 29598 19748 17540 9/30/05 30483 20115 18207
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. 30 Management Overview Schedule of Investments ICON Healthcare Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- COMMON STOCKS (97.2%) 158,200 Advanced Medical Optics, Inc.(a) $ 6,003,690 125,000 Aetna, Inc. 10,767,500 170,000 Affymetrix, Inc.(a) 7,859,100 220,000 Alpharma, Inc. - Class A 5,471,400 50,000 American Dental Partners, Inc.(a) 1,696,000 208,500 American Healthways, Inc.(a) 8,840,400 240,000 AmerisourceBergen Corp. 18,552,000 100,000 Amgen, Inc.(a) 7,967,000 215,000 AmSurg Corp.(a) 5,882,400 193,300 Arrow International, Inc. 5,451,060 200,000 AstraZeneca Plc - ADR 9,420,000 210,000 Baxter International, Inc. 8,372,700 79,200 Biosite, Inc.(a) 4,899,312 200,000 Bradley Pharmaceuticals, Inc.(a) 2,184,000 240,000 Caremark Rx, Inc.(a) 11,983,200 300,000 Celgene Corp.(a) 16,296,000 125,000 Cerner Corp.(a) 10,866,250 190,000 Chiron Corp.(a) 8,287,800 91,000 CIGNA Corp. 10,725,260 335,000 Community Health Systems, Inc.(a) 13,001,350 200,000 CONMED Corp.(a) 5,576,000 160,000 Coventry Health Care, Inc.(a) 13,763,200 172,100 Cross Country Healthcare, Inc.(a) 3,194,176 190,500 DaVita, Inc.(a) 8,776,335 300,000 Dendrite International, Inc.(a) 6,027,000 71,600 Dentsply International, Inc. 3,867,832
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- 138,700 Diagnostic Products Corp. $ 7,313,651 375,000 Digene Corp.(a) 10,687,500 81,500 Edwards Lifesciences Corp.(a) 3,619,415 156,000 Eli Lilly & Co. 8,349,120 280,000 Express Scripts, Inc.(a) 17,416,000 225,000 First Horizon Pharmaceutical Corp.(a) 4,470,750 150,000 Gilead Sciences, Inc.(a) 7,314,000 258,000 Health Net, Inc.(a) 12,208,560 200,000 HealthExtras, Inc.(a) 4,276,000 350,000 Henry Schein, Inc.(a) 14,917,000 115,000 Hi-Tech Pharmacal Co., Inc.(a) 3,459,200 8,400 Horizon Health Corp.(a) 228,228 243,200 Humana, Inc.(a) 11,644,416 70,100 Icon PLC- ADR(a) 3,505,000 300,000 IVAX Corp.(a) 7,908,000 125,000 Johnson & Johnson, Inc. 7,910,000 292,600 K-V Pharmaceutical Co.(a) 5,199,502 200,000 Laboratory Corp. of America Holdings(a) 9,742,000 200,000 LifeCell Corp.(a) 4,326,000 250,000 Lifepoint Hospitals, Inc.(a) 10,932,500 175,000 Lincare Holdings, Inc.(a) 7,183,750 280,000 Manor Care, Inc. 10,754,800 144,500 Matthews International Corp. - Class A 5,460,655 400,000 McKesson HBOC, Inc. 18,980,000 200,000 MedcoHealth Solutions, Inc.(a) 10,966,000 185,000 MGI Pharma, Inc.(a) 4,312,350 81,000 Mine Safety Appliances Co. 3,134,700
Schedule of Investments 31 Schedule of Investments (continued) ICON Healthcare Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- 450,000 Mylan Laboratories, Inc. $ 8,667,000 250,000 Omnicare, Inc. 14,057,500 200,000 Owens & Minor, Inc. 5,870,000 100,000 Parexel International Corp.(a) 2,009,000 150,000 Per-Se Technologies, Inc.(a) 3,099,000 296,000 Pfizer, Inc. 7,391,120 162,800 Pharmaceutical Product Development, Inc.(a) 9,362,628 100,000 Possis Medical, Inc.(a) 1,096,000 450,000 PSS World Medical, Inc.(a) 6,003,000 126,000 Psychiatric Solutions, Inc.(a) 6,832,980 125,000 Quest Diagnostics, Inc. 6,317,500 100,000 RehabCare Group, Inc.(a) 2,052,000 90,000 ResMed, Inc.(a) 7,168,500 285,000 Respironics, Inc.(a) 12,021,300 250,000 Salix Pharmaceuticals, Ltd.(a) 5,312,500 80,000 Sanofi-Aventis S.A. - ADR 3,324,000 128,200 Serologicals Corp.(a) 2,892,192 185,000 SFBC International, Inc.(a) 8,212,150 150,000 Stryker Corp. 7,414,500 110,300 Surmodics, Inc.(a) 4,267,507 66,500 Sybron Dental Specialties, Inc.(a) 2,765,070
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- 200,000 Teva Pharmaceutical Industries, Ltd. ADR $ 6,684,000 135,000 The Cooper Cos., Inc. 10,342,350 100,000 Thermo Electron Corp.(a) 3,090,000 360,000 United Surgical Partners International, Inc.(a) 14,079,600 195,000 United Therapeutics Corp.(a) 13,611,000 250,024 UnitedHealth Group, Inc. 14,051,349 175,000 Ventiv Health, Inc.(a) 4,586,750 119,000 WellChoice, Inc.(a) 9,032,100 180,000 Wellpoint, Inc.(a) 13,647,600 268,500 West Pharmaceutical Services, Inc. 7,966,395 180,000 Wyeth 8,328,600 ------------ TOTAL COMMON STOCKS (COST $533,679,195) 663,505,253 SHORT-TERM INVESTMENTS (3.3%) $22,216,644 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# 22,216,644 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $22,216,644) 22,216,644 ------------ TOTAL INVESTMENTS 100.5% (COST $555,895,839) 685,721,897 LIABILITIES LESS OTHER ASSETS (0.05)% (2,962,558) ------------ TOTAL NET ASSETS 100.0% $682,759,339 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt 32 Schedule of Investments Management Overview ICON Industrials Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 98.6% Top 10 Equity Holdings 20.7% Number of Stocks 80 Short-Term Investments 1.4% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 The Manitowoc Co., Inc. 2.6% Goodrich Corp. 2.5% Labor Ready, Inc. 2.4% L-3 Communications Holdings, Inc. 2.3% Lockheed Martin Corp. 2.0% Northrop Grumman Corp. 1.9% SkyWest, Inc. 1.9% Joy Global, Inc. 1.7% Ceradyne, Inc. 1.7% American Science and Engineering, Inc. 1.7% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Industrials Fund advanced 20.72% for the fiscal year ended September 30, 2005, outperforming both the 9.47% return for its sector-specific benchmark, the S&P 1500 Industrials Index, and the 13.45% return of its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2005 appear on page 37. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. While ongoing economic expansion proved conducive for the Industrials sector, much of the Fund's relative performance can be attributed to industry selection within medium-capitalization companies and stock selection within the larger-capitalization space. However, most of the upward move reflected strength among mid-caps, in which the Fund maintained an overweight position relative to its sector-specific benchmark. Combined with an active underweight in large-caps, these valuation-related tilts proved advantageous to fiscal-year returns. For that reason, the Fund benefited from a lack of exposure to benchmark bellwethers General Electric and United Parcel Service, both of which underperformed the S&P 1500 Industrials Index. Although our analysis showed these securities were overvalued, which led to their exclusion, active underweighting or avoidance of heavily weighted benchmark components can amplify the attribution effect in either direction. This points to the highly delicate nature of comparisons to a market-cap weighted index, as our process focuses on specific industries and securities rather than a given capitalization range. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not, in our view, adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. Management Overview 33 Management Overview (continued) ICON Industrials Fund Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Positive overall trends in economic fundamentals and corporate earnings faced potent headwinds in the form of surging oil prices, inflation fears, monetary tightening and slowing growth. When investor anxiety abated, as was the case during the fourth quarter of 2004 and the second quarter of 2005, stocks embarked upon a broad advance. However, as market sentiment turned decidedly negative, most notably in the wake of Hurricanes Katrina and Rita, stocks entered into a volatile trading range, which served to moderate prior gains. Within the Industrials sector, this juxtaposition of concerns, namely the economic slowdown and inflationary pressures, at times proved a formidable obstacle for cyclically oriented industries. However, these fears were largely unwarranted, and as clear industry leadership emerged following a mid-April bottom, the sector moved steadily higher. Railroads, for example, actually benefited from higher commodity prices as rising demand for coal products boosted shipping volumes, while construction & engineering demonstrated considerable strength even before the lift provided by the anticipated rebuild of storm-ravaged areas. Through it all, our value discipline proved highly resilient, enabling the Fund to stay well ahead of its respective benchmarks. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Although a number of industries possessed both value and relative strength during the period, those making meaningful contributions to Fund performance included railroads, construction & engineering and human resource & employment services. Selected stock picks within the less-robust industrial machinery group also bolstered returns, while trucking weakened after a strong first half and was subsequently reduced. Further detracting from overall returns was the building products industry, as several key names failed to capitalize on favorable metrics. Individual companies that made a positive impact on performance during the period included temporary staffing firm Labor Ready Inc., which relied on revenue gains and strategic acquisitions to grow net income and gross margins. Personnel administration manager Administaff Inc. also advanced, having reported strong quarterly results on increased sales and improved client retention. Meanwhile, diversified manufacturer The Manitowoc Company Inc. received a major boost in sales and earnings from its expanding global crane business. In contrast, Trex Company Inc., a manufacturer of composite decking products, tumbled when the company unexpectedly warned of revenue and earnings-per-share shortfalls. Coinstar Inc., an operator of self-service coin 34 Management Overview [J.C. WALLER, III PHOTO] J.C. Waller, III Portfolio Manager conversion machines, also declined after reporting flat earnings despite a doubling of revenue. Elsewhere, Simpson Manufacturing Company Inc., a maker of construction connectors and fastening systems, reported declining gross margins due to increased material and marketing costs. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE INDUSTRIALS SECTOR? A. Despite inflationary concerns and higher input costs, in our view, value and relative strength remain widespread across the sector. Against this backdrop, certain industries such as construction & engineering, railroads and human resource & employment services have been notably resilient and should remain leaders, particularly as part of a so-called late cycle rally. We have also increased our exposure to the trading companies & distributors industry, which has shown promise in outperforming the broader market during market advances. Going forward, however, much will depend on the strength of the economic expansion, which while it should continue, may likely do so at a slower pace. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund's relative performance can be attributed to industry selection in the medium-capitalization range and stock selection in the larger- capitalization space. - - The Fund benefited from a lack of exposure to benchmark bellwethers General Electric and United Parcel Service, both of which underperformed the sector-specific benchmark. - - Industries making meaningful contributions to Fund performance included railroads, construction & engineering and human resource & employment services, while trucking and building products detracted from overall returns. - - Labor Ready Inc., Administaff Inc. and The Manitowoc Company Inc. were among the Fund's leading investments. - - Stocks that detracted from performance included Trex Company Inc., Coinstar Inc. and Simpson Manufacturing Company Inc. Management Overview 35 Management Overview (continued) ICON Industrials Fund INDUSTRY COMPOSITION September 30, 2005 Aerospace & Defense 22.7% Industrial Machinery 12.1% Construction & Farm Machinery & Heavy Trucks 11.2% Railroads 9.4% Trading Companies & Distributors 7.1% Human Resource & Employment Services 6.5% Construction & Engineering 4.9% Building Products 4.6% Electrical Components & Equipment 3.3% Marine 3.2% Commercial Printing 3.0% Airlines 2.8% Diversified Commercial & Professional Services 2.8% Environmental & Facilities Services 2.2% Industrial Conglomerates 1.1% Education Services 1.0% Office Services & Supplies 0.7%
Percentages are based upon net assets. 36 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 5/9/97 - ----------------------------------------------------------------------------------------- ICON Industrials Fund 20.72% 7.01% 5.08% - ----------------------------------------------------------------------------------------- S&P 1500 Industrials Index 9.47% 1.98% 6.40% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 7.15% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
ICON INDUSTRIALS FUND S&P 1500 INDUSTRIALS INDEX S&P 1500 INDEX --------------------- -------------------------- -------------- 5/9/97 10000 10000 10000 10790 10956 10767 12400 11623 11700 11605 11509 11982 12995 12970 13604 11819 12459 13934 9/30/98 9662 10543 12435 12226 12465 15137 11503 12572 15687 13080 14186 16907 9/30/99 11295 13339 15832 11402 14537 18202 11068 14412 18764 10568 14190 18278 9/30/00 10805 15263 18271 11888 15228 16935 10706 13632 14961 12055 15157 15943 9/30/01 10205 12296 13569 12079 14343 15133 13164 14377 15278 12114 12531 13315 9/30/02 9500 10293 11015 9536 10852 11909 8462 10266 11511 9680 11879 13320 9/30/03 10504 12492 13735 12032 14340 15431 12127 14277 15761 12807 15482 16035 9/30/04 12556 15376 15735 14466 17028 17251 14155 16729 16908 14023 16279 17198 9/30/05 15158 16832 17852
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 37 Schedule of Investments ICON Industrials Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (98.6%) 123,000 A.S.V., Inc.(a) $ 2,785,950 32,000 Administaff, Inc. 1,271,680 67,000 Alaska Air Group, Inc.(a) 1,947,020 89,000 Albany International Corp. - Class A 3,281,430 27,400 Alexander & Baldwin, Inc. 1,458,776 33,000 Alliant Techsystems, Inc.(a) 2,463,450 55,500 American Science and Engineering, Inc.(a) 3,640,245 37,800 American Standard Companies, Inc. 1,759,590 84,500 Apogee Enterprises, Inc. 1,444,950 91,000 Applied Industrial Technology, Inc. 3,265,080 63,000 Armor Holdings, Inc.(a) 2,709,630 90,000 Barnes Group, Inc. 3,227,400 60,000 Barrett Business Services, Inc.(a) 1,371,000 54,000 Bright Horizons Family Solutions, Inc.(a) 2,073,600 54,500 Burlington Northern Santa Fe Corp. 3,259,100 46,000 Canadian National Railway Co.-ADR 3,265,540 72,000 Canadian Pacific Railway, Ltd. 3,093,120 58,000 Caterpillar, Inc. 3,407,500 100,000 Ceradyne, Inc.(a) 3,668,000 125,000 CP Ships Ltd. 2,666,250 67,000 CSX Corp. 3,114,160 37,000 Cummins, Inc. 3,255,630 50,000 Curtiss-Wright Corp. 3,085,500 14,000 Eaton Corp. 889,700 28,000 ElkCorp 1,001,560 59,000 EMCOR Group, Inc.(a) 3,498,700
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 86,700 Empresa Brasileira de Aeronautica S.A. - ADR $ 3,346,620 74,000 Esterline Technologies Corp.(a) 2,803,860 50,000 Fastenal Co. 3,054,500 100,000 Flowserve Corp.(a) 3,635,000 125,000 FTI Consulting, Inc.(a) 3,157,500 95,000 General Cable Corp.(a) 1,596,000 22,900 General Dynamics Corp. 2,737,695 90,000 Genesee & Wyoming , Inc.(a) 2,853,000 121,900 Goodrich Corp. 5,405,046 94,000 Granite Construction, Inc. 3,594,560 42,000 Griffon Corp.(a) 1,033,200 27,100 Harsco Corp. 1,776,947 39,600 Ingersoll Rand Co. Ltd. - Class A 1,513,908 20,000 Jacobs Engineering Group, Inc.(a) 1,348,000 76,000 John H. Harland Co. 3,374,400 75,000 Joy Global, Inc. 3,784,500 46,700 Kaydon Corp. 1,326,747 110,000 Kforce, Inc.(a) 1,133,000 56,000 Kirby Corp.(a) 2,768,080 64,000 L-3 Communications Holdings, Inc. 5,060,480 200,000 Labor Ready, Inc.(a) 5,130,000 130,500 Lennox International, Inc. 3,577,005 86,000 Lincoln Electric Holdings, Inc. 3,388,400 71,700 Lockheed Martin Corp. 4,376,568 100,000 LSI Industries, Inc. 1,900,000 58,000 Manpower, Inc. 2,574,620 87,000 Monster Worldwide, Inc.(a) 2,671,770 50,000 Moog, Inc. - Class A(a) 1,476,000 90,000 MSC Industrial Direct Co., Inc. - Class A 2,985,300
38 Schedule of Investments
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 82,000 Norfolk Southern Corp. $ 3,325,920 76,400 Northrop Grumman Corp. 4,152,340 265,000 Orbital Sciences Corp.(a) 3,312,500 84,000 Oshkosh Truck Corp. 3,625,440 26,200 Portfolio Recovery Associates, Inc.(a) 1,131,316 84,000 R.R. Donnelley & Sons Co. 3,113,880 132,000 RailAmerica, Inc.(a) 1,570,800 50,000 Regal-Beloit Corp. 1,622,000 99,950 Rollins, Inc. 1,951,024 53,000 Roper Industries, Inc. 2,082,370 150,000 SkyWest, Inc. 4,023,000 21,800 Stericycle, Inc.(a) 1,245,870 35,000 Teleflex, Inc. 2,467,500 35,600 Terex Corp.(a) 1,759,708 47,000 The Boeing Co. 3,193,650 111,000 The Manitowoc Co., Inc. 5,577,750 48,000 The Middleby Corp.(a) 3,480,000 30,000 United Stationers, Inc.(a) 1,435,800
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 30,000 United Technologies Corp. $ 1,555,200 19,000 Universal Forest Products, Inc. 1,089,080 56,000 URS Corp.(a) 2,261,840 50,000 W.W. Grainger, Inc. 3,146,000 42,000 Waste Connections, Inc.(a) 1,473,360 90,000 Wesco International, Inc.(a) 3,048,300 48,700 West Corp.(a) 1,820,893 ------------ TOTAL COMMON STOCKS (COST $170,052,626) 213,752,808 SHORT-TERM INVESTMENTS (1.4%) $2,953,152 Brown Brothers Harriman Time Deposit, 3.24%, 10/1/05# 2,953,152 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $2,953,152) 2,953,152 ------------ TOTAL INVESTMENTS (COST $173,005,778) 100.0% 216,705,960 LIABILITIES LESS OTHER ASSETS 0.0% (70,352) ------------ TOTAL NET ASSETS 100.0% $216,635,608 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt Schedule of Investments 39 Management Overview ICON Information Technology Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 99.6% Top 10 Equity Holdings 30.4% Number of Stocks 63 Short-Term Investments 0.5% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Texas Instruments, Inc. 4.8% Google, Inc. - Class A 4.1% Fiserv, Inc. 3.1% Hewlett-Packard Co. 3.0% Anteon International Corp. 2.7% Satyam Computer Services, Ltd. 2.6% Logitech International S.A. 2.6% NICE Systems, Ltd. - ADR 2.5% NETGEAR, Inc. 2.5% Apple Computer, Inc. 2.5% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Information Technology Fund appreciated 10.13% for the fiscal year ended September 30, 2005, trailing its narrow benchmarks, the S&P 1500 Information Technology Index and the NASDAQ Composite Index, which returned 13.61% and 14.19%, respectively, while also lagging its broad benchmark, the S&P 1500 Index, which returned 13.45%. Total returns for other periods as of September 30, 2005 appear on page 44. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. The Fund's systematic investment approach worked against performance as the ICON system led to lower-than-average relative exposure to the robust semiconductors group and industry bellwether Intel Corp. Although the semiconductors group comprised on average the largest industry weight within the Fund, the decision to underweight was made because suitable opportunity was also detected among other Technology-related industries. As for Intel, the stock was seemingly not trading at a steep enough discount to warrant a more aggressive market-weight position. A similar scenario unfolded in the computer hardware industry, which also turned in a strong overall showing. While this group was among the Fund's most heavily weighted industries during the period, it was underexposed relative to the market-weighted index average. Within the industry, the Fund's scaled-down position in sector standout Apple Computer Inc. was not sufficient to keep pace with the narrow benchmark. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as these measures do not, in our view, adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the historical and projected effects of historical and estimated earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmark. 40 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. With rising oil prices, ongoing monetary tightening, and conflicting fears of mounting inflation and economic slowdown dominating the investment landscape, Information Technology issues endured severe volatility. As crude oil futures climbed in excess of $16 a barrel over the course of the fiscal year, the Federal Reserve maintained its policy of keeping inflation at bay, raising short-term interest rates to 3.75% at period-end from 1.75% in October 2004. While higher raw material costs and limited pricing power pressured profit margins, so too did the rising interest rate environment, which many believed would decrease the value of projected future earnings. Against this backdrop, Technology shares initially rallied, as investors appeared to set aside oil- and inflation- related fears, and instead focused on strong underlying fundamentals at the corporate and macroeconomic level. By mid-December, however, oil prices resumed their powerful surge, stoking inflation concerns while raising fears that a more aggressive stance toward monetary tightening might constrict economic growth. As these worries heightened, investors abandoned the highly cyclical sector, sending shares sharply lower on fear-based selling. This continued until April, when once again, fear seemingly gave way to fundamentals, lifting Technology stocks into solidly positive territory for the period. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Among the industries that made measurable contributions to Fund performance during the period were semiconductors, IT consulting & other services, and internet software & services. Conversely, principal industry detractors included systems software, computer & electronics retail, and office electronics. Because our quantitative model did not detect strong industry leadership within the Information Technology sector, the Fund avoided taking an aggressively high weighting in any of the 15 industries we track. Instead, the Fund maintained varying levels of exposure to each of the constituent groups, relying on our proprietary metrics to determine what in our view was the most appropriate allocation based on current valuation and relative strength readings. Turning to individual stocks, leading contributors to Fund performance included leading online Web search engine Google Inc., which reported record revenues on increased advertising spending. Global chipmaker Texas Instruments Inc. also gapped higher, having benefited from healthy growth in semiconductor demand and widening gross margins. Meanwhile, Cognizant Technology Solutions Corp., a provider of custom IT services, capitalized on Management Overview 41 Management Overview (continued) ICON Information Technology Fund positive outsourcing trends and expansion of its customer base through internal efforts and acquisitions. In contrast, companies that detracted from performance included Overland Storage Inc., which tumbled when the data protection provider reported quarterly and key account losses. Elsewhere, bar-code tag and labeling systems manufacturer Paxar Corp. posted flat quarterly revenues, reflecting softness in European markets. Also working against Fund performance was e-business infrastructure supplier InfoSpace Inc., which announced lower-than-expected second- and third-quarter profits. All three were ultimately sold on declining relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE INFORMATION TECHNOLOGY SECTOR? A. Having been among the market leaders during the second half of the fiscal year, the Information Technology sector remains, according to our analysis, underpriced relative to our fair value estimates and still possesses reasonable upside potential. While oil price and interest rate uncertainties continue to loom large, we believe these concerns do not reflect strong underlying fundamentals at the macroeconomic and individual company level. Should investor concerns give way to fundamental value, the sector will likely continue to rally. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund's systematic investment approach contributed to relative underperformance as the semiconductors and computer hardware industries were underexposed relative to the market-weighted benchmark. - - Because our quantitative model did not detect strong market leadership, the Fund did not take aggressively high industry weightings. - - Semiconductors, IT consulting & other services and internet software & services contributed to Fund performance, while systems software, computer & electronics retail, and office electronics detracted. - - Leading individual contributors during the period included Google Inc., Texas Instruments Inc. and Cognizant Technology Solutions Corp. - - Principal company detractors included Overland Storage Inc., Paxar Corp. and InfoSpace Inc. 42 Management Overview INDUSTRY COMPOSITION as of September 30, 2005 Communications Equipment 16.5% IT Consulting & Other Services 15.8% Semiconductors 12.5% Application Software 8.8% Internet Software Services 7.5% Computer Storage & Peripherals 7.3% Data Processing & Outsourced Services 6.5% Computer Hardware 6.5% Electronic Equipment Manufacturers 5.9% Technology Distributors 4.4% Systems Software 2.5% Health Care Distributors 1.7% Health Care Equipment 1.4% Electronic Manufacturing Services 1.1% Home Entertainment Software 0.7% Health Care Supplies 0.5%
Percentages are based upon net assets. Management Overview 43 Management Overview (continued) ICON Information Technology Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 2/19/97 - ----------------------------------------------------------------------------------------- ICON Information Technology Fund 10.13% -5.63% 11.25% - ----------------------------------------------------------------------------------------- S&P 1500 Information Technology Index 13.61% -12.86% 5.27% - ----------------------------------------------------------------------------------------- NASDAQ Composite Index 14.19% -9.73% 5.85% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 7.16% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
S&P 1500 ICON INFORMATION INFORMATION NASDAQ COMPOSITE TECHNOLOGY FUND TECHNOLOGY INDEX INDEX S&P 1500 INDEX ---------------- ---------------- ---------------- -------------- 2/19/97 10000 10000 10000 10000 9210 9036 8949 9334 10850 10958 10580 10941 12961 12853 12379 11890 10432 11312 11546 12176 11524 13581 13511 13824 11088 14584 13960 14160 9/30/98 9569 14126 12492 12636 13975 19383 16188 15382 15490 21379 18185 15941 19901 24062 19862 17181 9/30/99 21008 25075 20319 16088 29493 34155 30129 18496 36190 38844 33868 19068 33516 35387 29387 18574 9/30/00 33456 30971 27224 18567 33646 21169 18322 17209 28149 16075 13657 15203 32236 18117 16051 16202 9/30/01 22449 12273 11140 13789 29269 16476 14507 15378 29699 15416 13738 15525 23079 11450 10903 13530 9/30/02 17208 8437 8742 11194 17151 10296 9972 12101 15568 10196 10030 11697 20892 12127 12147 13536 9/30/03 23798 13474 13388 13957 25210 15226 15035 15681 25411 14887 14982 16016 24059 15249 15402 16295 9/30/04 22736 13698 14287 15990 26190 15568 16411 17530 23340 14420 15106 17181 23831 14661 15570 17477 9/30/05 25039 15563 16314 18141
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. 44 Management Overview Schedule of Investments ICON Information Technology Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (99.6%) 78,600 Activision, Inc.(a) $ 1,607,370 94,400 Amphenol Corp. - Class A 3,808,096 54,800 Analog Devices, Inc. 2,035,272 139,600 Anteon International Corp.(a) 5,969,296 100,600 Apple Computer, Inc.(a) 5,393,166 144,600 Arris Group, Inc.(a) 1,714,956 133,900 Arrow Electronics, Inc.(a) 4,199,104 132,100 Avnet, Inc.(a) 3,229,845 116,900 Avocent Corp.(a) 3,698,716 36,000 Baxter International, Inc. 1,435,320 80,100 CACI International, Inc. - Class A(a) 4,854,060 144,800 Checkpoint Systems, Inc.(a) 3,434,656 121,400 Cisco Systems, Inc.(a) 2,176,702 97,900 Cognizant Technology Solutions Corp.(a) 4,561,161 69,000 Cree, Inc.(a) 1,726,380 71,100 Digital River, Inc.(a) 2,477,835 216,100 EMC Corp.(a) 2,796,334 193,400 EPIQ Systems, Inc.(a) 4,219,988 116,100 Fair Issac Corp. 5,201,280 80,800 First Data Corp. 3,232,000 149,000 Fiserv, Inc.(a) 6,834,630 157,300 Gevity HR, Inc. 4,284,852 28,200 Google, Inc. - Class A(a) 8,924,172 87,300 Henry Schein, Inc.(a) 3,720,726 227,400 Hewlett-Packard Co. 6,640,080 33,200 Infosys Technologies, Ltd. - ADR 2,466,096 122,300 Ingram Micro, Inc.(a) 2,267,442 178,200 Intel Corp. 4,392,630 61,200 International Rectifier Corp.(a) 2,758,896 24,600 Intuit, Inc.(a) 1,102,326 34,300 Itron, Inc.(a) 1,566,138
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 54,000 j2 Global Communications, Inc.(a) $ 2,182,680 75,700 Jabil Circuit, Inc.(a) 2,340,644 113,600 Komag, Inc.(a) 3,630,656 139,000 Logitech International S.A. - ADR(a) 5,664,250 114,200 ManTech International Corp.(a) 3,016,022 29,300 Marvell Technology Group, Ltd. - ADR(a) 1,351,023 99,400 Maximus, Inc. 3,553,550 22,500 Mettler-Toledo International, Inc.(a) 1,147,050 156,300 Microchip Technology, Inc. 4,707,756 127,300 Microsoft Corp. 3,275,429 18,500 Millipore Corp.(a) 1,163,465 117,400 Nam Tai Electronics, Inc. 2,985,482 134,700 Neoware Systems, Inc.(a) 2,254,878 19,900 Netease.com, Inc. - ADR(a) 1,791,199 228,100 NETGEAR, Inc.(a) 5,488,086 121,900 NICE Systems, Ltd. - ADR(a) 5,507,442 315,900 Nokia Corp. - ADR 5,341,869 174,400 Oracle Corp.(a) 2,160,816 92,700 Qualcomm, Inc. 4,148,325 34,700 Research in Motion, Ltd. - ADR(a) 2,373,480 38,200 Respironics, Inc.(a) 1,611,276 69,800 Rimage Corp.(a) 1,861,566 44,400 SanDisk Corp.(a) 2,142,300 189,900 Satyam Computer Services, Ltd. - ADR 5,738,778 75,300 Scientific-Atlanta, Inc. 2,824,503 230,500 Sonic Solutions(a) 4,955,750 84,100 SRA International, Inc. - Class A(a) 2,983,868 310,700 Texas Instruments, Inc. 10,532,730 93,700 Verint Systems, Inc.(a) 3,836,078
Schedule of Investments 45 Schedule of Investments (continued) ICON Information Technology Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 124,700 ViaSat, Inc.(a) $ 3,198,555 46,800 WebEx Communications, Inc.(a) 1,147,068 153,200 Wipro, Ltd. - ADR 1,587,152 ------------ TOTAL COMMON STOCKS (COST $186,759,576) 219,233,251
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- SHORT-TERM INVESTMENTS (0.5%) $1,058,662 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# $ 1,058,662 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,058,662) 1,058,662 ------------ TOTAL INVESTMENTS (COST $187,818,238) 100.1% 220,291,913 LIABILITIES LESS OTHER ASSETS (0.1)% (218,483) ------------ TOTAL NET ASSETS 100.0% $220,073,430 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt 46 Schedule of Investments Management Overview ICON Leisure and Consumer Staples Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 101.0% Top 10 Equity Holdings 37.8% Number of Stocks 39 Short-Term Investments 0.0% Percentages are based upon net assets TOP 10 EQUITY HOLDINGS September 30, 2005 Papa John's International, Inc. 4.3% Safeway, Inc. 4.2% Performance Food Group Co. 4.1% Kroger Co. 4.1% J & J Snack Foods Corp. 4.0% Life Time Fitness, Inc. 3.7% United Natural Foods, Inc. 3.6% Nash Finch Co. 3.3% Casey's General Stores, Inc. 3.3% Dow Jones & Company, Inc. 3.2% Percentages are based upon net assets - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Leisure and Consumer Staples Fund advanced 5.01% for the fiscal year ended September 30, 2005, trailing its sector-specific benchmarks, the S&P 1500 Consumer Discretionary Index and the S&P 1500 Consumer Staples Index, which returned 6.62% and 12.07%, respectively. Although neither index is an ideal comparison individually, together they provide a suitable reference for the Fund's overall performance. Additionally, the Fund fell short of its broad benchmark, the S&P 1500 Index, which returned 13.45% over the same period. Total returns for other periods as of September 30, 2005 appear on page 51. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Several factors contributed to the Fund's lag in relative performance. First, while the Fund maintained a sizable position in Altria Group Inc. during the period, this exposure was significantly underweighted relative to the S&P 1500 Consumer Staples Index, which maintained an average weighted exposure of more than 10% of the index. Although a weighting of this magnitude in our view would have exposed Fund shareholders to undue risk, Altria accounted for approximately 43% of the S&P 1500 Consumer Staples Index's total 12-month return. Thus, the Fund's small position worked against relative performance. Secondly, the Fund's position in the poorly performing leisure products industry hampered performance. Finally, although our process guides us to emphasize specific industries and securities, it may result in investments concentrated within a given capitalization range. Such was the case during the fiscal year, in which the Fund's valuation-related bias toward small- and mid-cap stocks proved detrimental as large-caps within the Leisure and Consumer Staples sector outperformed. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as these measures do not, in our view, adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected Management Overview 47 Management Overview (continued) ICON Leisure and Consumer Staples Fund earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmarks. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Not unlike the broader market, both the Leisure and Consumer Staples segments came under pressure during the period as perceived fears overshadowed quantifiable improvements in economic and company fundamentals. Much of these concerns centered on consumer spending, which remained resilient despite speculation to the contrary. Nevertheless, Leisure-related industries underperformed as investors surmised that rising interest rates and higher energy prices would spur material declines in discretionary spending and corporate profits. Likewise, Consumer Staples industries were believed to be at risk as competitive pricing pressures made it difficult for companies to pass higher raw material costs through to consumers. These concerns heightened in the wake of Hurricanes Katrina and Rita, although storm-related price hikes by and large proved temporary. All told, the defensive characteristics associated with the segment enabled it to weather the volatility that often plagued more cyclically oriented industries. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. Fund performance suffered from exposure to the beleaguered leisure products and soft drinks industries, while stock selection in the personal products group detracted from overall gains. In contrast, primary industry contributors included food distributors, food retail and drug retail. Noteworthy shifts in industry weightings during the period included increases in food distributors, to approximately 14% of net assets at period-end, and food retail, from no representation to approximately 13% of net assets at period-end. While improving relative strength led to these industry rotations, the restaurants group was ultimately lowered to 8.6% from 14.7% of net assets as its relative strength declined. Although weak industry level performance prompted us to be more selective in our stock picking, several of the Fund's holdings were significant detractors. These included LeapFrog Enterprises Inc., which tumbled when the maker of learning products cited distribution issues and weak sales as reasons for its earnings shortfall. Restaurant operator O'Charley's Inc. also stumbled, as higher food and beverage costs coupled with lower sales rocked the casual dining chain. Elsewhere, 4 Kids Entertainment Inc. slid when the youth-oriented media group reported declines in licensing and 48 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager advertising revenue. These stocks were sold during the period as their declining relative strength met our sell criteria. Conversely, leading individual contributors included drug retailer Longs Drug Stores Corp., which saw gross margins widen after instituting improvements in its merchandise mix and inventory management. Competing drug retailer CVS Corp. also advanced, as acquisitions boosted its presence in the highly profitable Florida and Texas markets. Meanwhile, regional grocery operator Sparten Stores Inc. posted solid gains on higher margins in both its retail and distribution segments. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE LEISURE AND CONSUMER STAPLES SECTOR? A. Widespread value continues to dot the Leisure and Consumer Staples sector, although relative strength has been conspicuously weak. For that reason, we will be keeping tabs on the broadcasting & cable TV, leisure products, publishing, and restaurant industries for indications of emerging leadership. At the same time, with food retail and food distributors currently nearing our estimate of fair value, we will be on the lookout for signs that valuations have become stretched. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund's valuation-related bias toward small- and mid-cap stocks proved detrimental. - - Fund performance suffered from industry exposure to leisure products and soft drinks, in addition to stock selection in personal products. In addition, an underweight position in strong-performing Altria, Inc. hampered relative performance. - - Primary industry contributors included food distributors, food retail and drug retail. - - Several of the Fund's holdings led to its underperformance, including LeapFrog Enterprises Inc., O'Charley's Inc. and 4 Kids Entertainment Inc. - - Leading individual contributors to returns included Longs Drug Store Corp., CVS Corp. and Sparten Stores Inc. Management Overview 49 Management Overview (continued) ICON Leisure and Consumer Staples Fund INDUSTRY COMPOSITION September 30, 2005 Food Distributors 14.4% Food Retail 13.3% Packaged Foods & Meats 9.4% Publishing 9.2% Restaurants 8.7% Broadcast & Cable TV 6.7% Leisure Facilities 6.5% Personal Products 5.0% Catalog Retail 4.3% Computer & Electronics Retail 4.0% Drug Retail 3.1% Household Products 2.9% Leisure Products 2.8% Movies & Entertainment 2.6% Home Entertainment Software 2.4% Automobile Manufacturers 2.3% Consumer Electronics 2.1% Home Improvement Retail 1.3%
Percentages are based upon net assets. 50 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 5/9/97 - ----------------------------------------------------------------------------------------- ICON Leisure and Consumer Staples Fund 5.01% 10.59% 10.79% - ----------------------------------------------------------------------------------------- S&P 1500 Consumer Discretionary Index 6.62% 1.79% 7.31% - ----------------------------------------------------------------------------------------- S&P 1500 Consumer Staples Index 12.07% 3.95% 5.45% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 7.15% - -----------------------------------------------------------------------------------------
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, 2005 [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 10440 10706 10532 10769 11350 11749 10622 11703 11555 12154 11706 11985 12688 14320 12925 13606 12347 15454 13400 13937 9/30/98 11826 12705 11479 12437 13616 16298 14093 15140 14416 17659 13631 15689 15440 18587 13776 16910 9/30/99 13571 16840 12269 15835 13002 19631 13169 18205 12647 19006 12188 18768 13559 17347 12880 18282 9/30/00 14286 16547 12860 18274 14871 15912 13891 16938 15042 15034 12860 14963 17058 16612 13581 15946 9/30/01 14609 12992 12273 13572 18594 15605 12863 15136 21074 16136 14032 15281 20035 14409 13625 13317 9/30/02 17369 11935 12199 11017 16795 12210 12350 11911 16129 11940 11560 11513 18595 14322 12639 13323 9/30/03 19262 14736 12824 13737 21387 16872 13864 15434 22999 17298 14683 15764 23512 17161 14784 16038 9/30/04 22504 16962 13930 15738 25211 19303 15074 17254 25627 18422 15205 16911 24876 18454 15159 17202 9/30/05 23632 18085 15611 17855
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 51 Schedule of Investments ICON Leisure and Consumer Staples Fund September 30, 2005
SHARES VALUE - -------------------------------------------- COMMON STOCKS (101.0%) 28,500 Activision, Inc.(a) $ 582,825 17,650 Best Buy Co., Inc. 768,305 42,800 Bob Evans Farms, Inc. 971,988 31,700 Cablevision Systems Corp. - Class A(a) 972,239 66,500 Casey's General Stores, Inc. 1,542,800 35,000 Central European Distribution Corp(a) 1,490,650 36,900 Church & Dwight Co. 1,363,086 21,500 Coldwater Creek, Inc.(a) 542,230 51,700 CVS Corp. 1,499,817 39,600 Dow Jones & Company, Inc. 1,512,324 48,300 Emmis Communications Corp. - Class A(a) 1,066,947 40,400 GameStop Corp. - Class B(a) 1,146,956 9,900 Harman International Industries, Inc. 1,012,473 290,800 Image Entertainment, Inc.(a) 1,218,452 53,200 Interstate Bakeries Corp.(a) 497,420 33,200 J & J Snack Foods Corp. 1,918,960 34,600 J. Jill Group, Inc.(a) 547,372 95,200 Kroger Co.(a) 1,960,168 31,700 Lancaster Colony Corp. 1,363,100 52,600 Life Time Fitness, Inc.(a) 1,743,164 9,700 Lowe's Cos., Inc. 624,680
SHARES VALUE - -------------------------------------------- 32,900 McDonald's Corp. $ 1,101,821 29,200 McGraw-Hill Cos., Inc. 1,402,768 153,300 Mediacom Communications Corp.(a) 1,131,354 37,000 Nash Finch Co. 1,561,030 40,900 Papa John's International, Inc.(a) 2,049,908 41,500 Parlux Fragrances, Inc.(a) 1,209,310 62,200 Performance Food Group Co.(a) 1,963,032 126,000 Poore Brothers, Inc.(a) 686,700 78,400 Safeway, Inc. 2,007,040 38,300 SCP Pool Corp. 1,337,819 37,800 Speedway Motorsports, Inc. 1,373,274 35,000 The Sportsman's Guide, Inc.(a) 955,500 38,500 Thomson Corp. -- ADR 1,444,135 31,800 Thor Industries, Inc. 1,081,200 25,650 THQ, Inc.(a) 546,858 48,300 United Natural Foods, Inc.(a) 1,707,888 25,000 USANA Health Sciences, Inc.(a) 1,192,500 20,000 Weis Markets, Inc. 800,200 ----------- TOTAL INVESTMENTS 101.0% (COST $43,805,774) 47,898,293 LIABILITIES LESS OTHER ASSETS (1.0)% (488,040) ----------- TOTAL NET ASSETS 100.0% $47,410,253 ===========
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. ADR American Depositary Receipt 52 Schedule of Investments Management Overview ICON Materials Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 100.1% Top 10 Equity Holdings 38.0% Number of Stocks 40 Short-Term Investments 0.7% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 Eagle Materials, Inc. 4.2% Companhia Vale do Rio Doce 4.1% Freeport-McMoran Copper & Gold, Inc. - Class B 3.9% Rio Tinto Plc 3.8% Cemex S.A. De C.V. - ADR 3.8% BHP Billiton Ltd. - ADR 3.7% Martin Marietta Materials, Inc. 3.7% The Scotts Miracle-Gro Co. 3.6% Agrium, Inc. - ADR 3.6% Reliance Steel & Aluminum Co. 3.6% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Materials Fund gained 25.04% for the fiscal year ended September, 2005, outpacing the 4.58% return for its sector-specific benchmark, the S&P 1500 Materials Index, as well as the 13.45% return of its broad benchmark, the S&P 1500 Index. Total returns for other periods as of September 30, 2005 appear on page 57. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Although certain Materials-related industries struggled during the period, the Fund continued to capture solid upside in the heavily weighted construction materials and steel industries, both of which were fueled by ongoing gains in global economic growth. However, as rising raw material costs pressured corporate profit margins, the Fund's exposure to such industries as specialty chemicals, commodity chemicals and aluminum was substantially reduced. While these moves helped to offset some of the losses, the negative effects were not completely neutralized. Fund performance was aided by minimal exposure during the period to the three largest constituents in the S&P 1500 Materials Index, E.I. du Pont de Nemours and Co., Dow Chemical Co. and Alcoa Inc., which all suffered considerable losses. The Fund did not own any of these stocks at period-end. In a difficult sector, ICON's discipline prevailed, enabling the Fund to outpace its benchmarks. Moreover, our discipline manifested itself in a valuation-related tilt toward mid-cap stocks, a residual development that reaped positive rewards. Although our process guides us to emphasize specific industries and securities, it may result in investments concentrated within a given capitalization range. Such was the case for the Materials sector, where stocks with a market capitalization of between $1 billion and $4 billion produced the strongest overall returns. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E) as we believe these measures do not adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to Management Overview 53 Management Overview (continued) ICON Materials Fund capture leading industry themes that we believe are poised to outperform the sector benchmark. Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. Equity markets faced considerable volatility throughout the fiscal year as conflicting fears of higher inflation and economic slowdown distracted investors. Surging oil prices and ongoing monetary tightening exacerbated these concerns, sending stocks into a volatile sideways trading range. However, this lack of focus obscured the fact that corporate earnings and economic fundamentals were generally positive. When investors were confident enough to look beyond the uncertainties, stocks typically charted an upward move. Within the Materials sector, the environment was relatively conducive in certain industries given the group's positive correlation to expansionary cycles. Despite surging input costs, pricing power remained subdued, although inflation concerns arose in the aftermath of Hurricanes Katrina and Rita. Nevertheless, our analysis indicates that construction materials and steel continue to trade at sizable discounts to our estimates of their intrinsic value. Steel stocks declined earlier this year on moderating demand, but have since trended upward with renewed vigor. Gold stocks also revealed strength late in the period, trading at multi-year highs in conjunction with rising gold futures. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. With much of the sector coming under pressure during the second half of the fiscal year, the Fund's valuation-related tilt toward our evaluation of the top-performing construction materials and steel industries proved highly advantageous. Late-period strength in gold stocks also contributed to Fund performance, reflecting double-digit, year-over-year gains in the spot price for gold. At the same time, given the global nature of the Materials sector, the Fund increased its holdings in American Depository Receipts. Trading at relatively deeper discounts than U.S. stocks, these dollar-denominated shares of foreign companies generally closed a much wider valuation gap. Among the Fund's top contributors to performance, construction material producers Florida Rock Industries Inc. and Eagle Materials Inc. benefited from supply and demand factors and their anticipated impact on pricing and revenues. Meanwhile, precision engineered steel producer Quanex Corp. profited from robust earnings across the company's core high-growth markets. In contrast, the Fund's performance was hampered by its investments in the diversified chemicals and specialty chemicals industries, as concerns over rising raw material costs and tighter profit margins pressured these 54 Management Overview [DEREK ROLLINGSON PHOTO] Derek Rollingson Portfolio Manager petroleum-dependent segments. Our analysis of declining relative strength and lack of upside participation ultimately led to reduced exposure. Several individual companies had a particularly negative effect on fiscal year performance, including recycled packaging provider Caraustar Industries Inc., which saw its profits erode due to higher freight and fuel expenses. Likewise, precision bearing manufacturer NN Inc. lowered earnings forecasts as raw material and resin prices skyrocketed, while resin supplier Myers Industries, Inc. proved unsuccessful in implementing price increases and internal cost controls. All three stocks were sold due to our estimate of declining relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE MATERIALS SECTOR? A. In light of the pullback across several constituent industries, our analysis indicates the Materials sector continues to feature widespread value, particularly within the top-performing construction materials and steel groups. While these industries are expected to maintain their leadership position, certain groups, most notably gold, now appear expensive based on our valuation model. Consequently, we will monitor our gold positions closely for signs of overpricing or declining relative strength, while keeping a watchful eye on the underpriced chemical industries for signs of revitalization. PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund continued to capture solid upside in industries that were fueled by ongoing gains in global economic growth. - - The Fund's valuation-related tilt toward mid-cap stocks, a consequence of our investment process, reaped positive rewards. - - Certain industry groups, including construction materials and steel, aided performance while diversified chemicals and specialty chemicals detracted from performance. - - Florida Rock Industries Inc., Eagle Materials Inc. and Quanex Corporation were among the Fund's top individual contributors to performance. - - Stocks that detracted from performance included Caraustar Industries Inc., NN, Inc. and Myers Industries, Inc. Management Overview 55 Management Overview (continued) ICON Materials Fund INDUSTRY COMPOSITION September 30, 2005 Steel 24.2% Construction Materials 23.2% Diversified Metals & Mining 16.8% Fertilizers & Agricultural Chemicals 8.1% Gold 6.2% Construction & Farm Machinery & Heavy Trucks 4.8% Industrial Gases 4.5% Railroads 3.8% Specialty Chemicals 2.8% Precious Metals & Minerals 2.7% Aluminum 1.5% Paper Products 1.5%
Percentages are based upon net assets. 56 Management Overview AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 5/5/97 - ----------------------------------------------------------------------------------------- ICON Materials Fund 25.04% 12.27% 2.25% - ----------------------------------------------------------------------------------------- S&P 1500 Materials Index 4.58% 12.78% 5.43% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 7.07% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
ICON MATERIALS FUND S&P 1500 MATERIALS INDEX S&P 1500 INDEX ------------------- ------------------------ -------------- 5/5/97 10000 10000 10000 9730 10749 10707 10900 11391 11635 7606 10466 11916 8632 11582 13528 7586 11142 13857 9/30/98 6819 9413 12366 6800 9795 15053 6571 9728 15599 8060 11660 16813 9/30/99 7612 10685 15743 8372 11807 18100 7352 10523 18660 7092 9136 18176 9/30/00 6758 8547 18169 6400 10572 16841 6063 10046 14877 6643 11050 15855 9/30/01 6011 9755 13494 7062 11031 15048 8036 12210 15193 7814 11922 13241 9/30/02 6013 9201 10954 6184 10214 11842 5675 9429 11447 6322 10707 13246 9/30/03 6576 11335 13658 8449 13972 15345 8555 13824 15673 9098 14315 15946 9/30/04 9642 14914 15648 10914 16307 17155 10946 16578 16813 10593 15154 17103 9/30/05 12055 15598 17752
PAST PERFORMANCE IS NOT A GUARANTEE OF FUTURE RESULTS. The above graph compares a $10,000 investment made in the Fund on its inception date of 5/5/97 to a $10,000 investment made in unmanaged securities indexes on that date. The Fund's performance in this chart and the performance table assumes the reinvestment of dividends and capital gain distributions but does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Management Overview 57 Schedule of Investments ICON Materials Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- COMMON STOCKS (100.1%) 161,200 Agrium, Inc. - ADR $ 3,541,564 79,900 Airgas, Inc. 2,367,437 55,000 Aleris International, Inc.(a) 1,509,750 84,600 Anglo American Plc - ADR 2,554,920 37,200 Aracruz Celulose S.A. - ADR 1,509,576 119,800 Barrick Gold Corp. - ADR 3,480,190 109,200 BHP Billiton Ltd. - ADR 3,732,456 21,100 Burlington Northern Santa Fe Corp. 1,261,780 23,800 Caterpillar, Inc. 1,398,250 72,676 Cemex S.A. De C.V. - ADR 3,800,955 94,100 Companhia Vale do Rio Doce - ADR 4,127,226 85,500 Compania de Minas Buenaventura S.A.u. - ADR 2,654,775 68,200 CRH Plc - ADR 1,853,199 27,100 CSX Corp. 1,259,608 21,200 Cummins, Inc. 1,865,388 34,200 Eagle Materials, Inc. 4,150,853 102,500 Falconbridge, Ltd. 2,738,800 42,862 Florida Rock Industries, Inc. 2,747,026 79,400 Freeport-McMoran Copper & Gold, Inc. - Class B 3,858,046 39,300 Genesee & Wyoming , Inc.(a) 1,245,810 40,000 Gibraltar Industries, Inc. 914,800 89,800 Headwaters, Inc.(a) 3,358,520 50,900 Lafarge North America, Inc. 3,441,349 63,600 Lubrizol Corp. 2,755,788 47,300 Martin Marietta Materials, Inc. 3,711,158
SHARES OR PRINCIPAL AMOUNT VALUE - -------------------------------------------- 29,400 Nucor Corp. $ 1,734,306 111,400 Oregon Steel Mills, Inc.(a) 3,108,060 115,600 Placer Dome, Inc. - ADR 1,982,540 45,000 Praxair, Inc. 2,156,850 52,150 Quanex Corp. 3,453,373 66,900 Reliance Steel & Aluminum Co. 3,541,017 163,600 Richmont Mines, Inc.(a) 734,564 23,200 Rio Tinto Plc - ADR 3,811,760 81,900 Ryerson Tull, Inc. 1,744,470 7,600 Sociedad Quimica y Minera de Chile SA - ADR 959,424 62,700 Steel Dynamics, Inc. 2,129,292 92,700 Steel Technologies, Inc. 2,403,711 29,400 The Manitowoc Co., Inc. 1,477,350 41,100 The Scotts Miracle-Gro Co. 3,613,923 47,700 Worthington Industries, Inc. 1,003,131 ------------ TOTAL COMMON STOCKS (COST $82,642,546) 99,692,995 SHORT-TERM INVESTMENTS (0.7%) $718,844 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05# 718,844 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $718,844) 718,844 ------------ TOTAL INVESTMENTS 100.8% (COST $83,361,390) 100,411,839 LIABILITIES LESS OTHER ASSETS (0.8)% (842,485) ------------ TOTAL NET ASSETS 100.0% $ 99,569,354 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt 58 Schedule of Investments Management Overview ICON Telecommunication & Utilities Fund - -------------------------------------------------------------------------------- PORTFOLIO PROFILE September 30, 2005 Equities 99.7% Top 10 Equity Holdings 33.4% Number of Stocks 56 Short-Term Investments 0.9% Percentages are based upon net assets. TOP 10 EQUITY HOLDINGS September 30, 2005 California Water Service Group 4.1% America Movil S.A. De C.V. - ADR 3.6% American States Water Co. 3.6% CenterPoint Energy, Inc. 3.3% BellSouth Corp. 3.3% El Paso Electric Co. 3.3% Equitable Resources, Inc. 3.1% Pepco Holdings, Inc. 3.1% Southern Co. 3.0% TECO Energy, Inc. 3.0% Percentages are based upon net assets. - -------------------------------------------------------------------------------- Q. HOW DID THE FUND PERFORM RELATIVE TO ITS BENCHMARKS? A. The ICON Telecommunication & Utilities Fund appreciated 26.70% for the fiscal year ended September 30, 2005, outperforming the 2.27% return for S&P 1500 Telecommunication Services Index while underperforming the 36.70% return for the S&P 1500 Utilities Index. Although neither sector-specific benchmark 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 13.45% over the same period. Total returns for other periods as of September 30, 2005 appear on page 64. Q. WHAT PRIMARY FACTORS WERE BEHIND THE FUND'S RELATIVE PERFORMANCE? A. Consistent with the returns of the sector-specific benchmarks during the period, the Fund's valuation-related tilt toward Utilities issues accounted for its positive overall performance. Over the course of the fiscal year, the average exposure to Utilities-oriented industries was more than two-thirds of the Fund, while the average exposure to Telecommunication issues was less than one-third. Although commonly considered defensive in nature, Utilities industries assumed roles as market leaders based on a powerful combination of value and relative strength. ICON's investment discipline guided the Fund to maintain an overweight position in medium-capitalization stocks relative to the narrow benchmarks. While the emphasis on mid-cap securities was a residual of the Fund's investment process rather than a primary consideration, the larger relative weighting proved advantageous to fiscal-year returns. Q. HOW WOULD YOU DESCRIBE THE FUND'S INVESTMENT APPROACH? A. The Fund employs an all-cap investment strategy, identifying securities we believe are underpriced regardless of their location on the conventional style grid. Our system is not limited by restrictions on market capitalization or investment style, and searches for potential industry leadership wherever and whenever it may emerge. Furthermore, the Fund does not utilize static valuation metrics such as price-to-earnings (P/E), as we believe these measures do not adequately represent intrinsic value, which can vary over time. Instead, we calculate proprietary value-to-price (V/P) ratios that consider the effects of historical and projected earnings, projected growth, risk, and interest rates (opportunity cost). By combining our determination of value with relative strength (RS), we aim to capture leading industry themes that we believe are poised to outperform the sector benchmarks. Management Overview 59 Management Overview (continued) ICON Telecommunication & Utilities Fund Q. WHAT INVESTMENT ENVIRONMENT DID THE FUND FACE DURING THE FISCAL YEAR? A. With rising oil prices, inflation fears, monetary tightening, and economic concerns pressuring the broader market, investors increasingly sought out safe havens in defensive-oriented sectors such as Utilities. Further bolstering the sector's appeal was its history of dividend payouts, which proved highly attractive given last year's lowering of maximum tax rates on dividend income. All told, the overall economic environment provided a positive setting, as long-term bond yields, which compete with dividend yields paid by utility stocks, remained relatively low. Deregulation of utility markets and strong global demand for power were also key growth factors. Each contributed to improved utility earnings, particularly among those power companies whose excess capacity could be resold into regions experiencing higher demand and cost dynamics. At the same time, conditions within the Telecommunication space were not nearly as favorable. Large-cap integrated telecommunication issues continued to come under heavy selling pressure, as intense pricing competition and rising costs chilled investor sentiment toward this primary constituent industry. Nevertheless, major telecom players in developed world markets benefited from increased sales and consolidation activity, while those in emerging markets gained from rapid infrastructure and wireless growth. Q. HOW DID THE PORTFOLIO'S COMPOSITION AFFECT FUND PERFORMANCE? A. A highly weighted tilt toward the Utilities sector worked in the Fund's favor, as evidenced by fiscal-year returns of 36.70% for the S&P 1500 Utilities Index and 2.27% for the S&P 1500 Telecommunications Services Index. Leading industry contributors by performance attribution included the entire field of Utilities industries, namely independent power producers & energy traders, gas utilities, water utilities, electric utilities, and multi-utilities. Our analysis of valuation and relative strength played a key role in their respective weightings, as did liquidity considerations. Among the Fund's primary contributors to performance, wireless communications provider America Movil, S.A. de C.V. has experienced phenomenal growth, expanding into 13 countries and acquiring more than 66 million subscribers in just over five years of operations. NII Holdings Inc., a provider of digital wireless services aimed at businesses, also gained, having reported record subscribers, revenues and income. Independent power producer Constellation Energy Group Inc. reflected solid market share gains in the competitive power supply arena, while diversified electric utility Allegheny Energy Inc. advanced on significantly improved outlooks for current year and forward earnings. 60 Management Overview [ROBERT STRAUS, CMT PHOTO] Robert Straus, CMT Portfolio Manager Conversely, communications equipment was the largest industry detractor to fiscal-year performance, although it comprised a relatively small portion of the Fund thereby limiting its impact. While the industry continues to trade at a discount to our estimate of fair value, investors avoided the group on concerns that a lack of service provider demand would curb its growth prospects. Likewise, the Fund maintained relatively narrow exposure to the integrated telecommunication services industry, which helped offset some of the losses associated with the group. Individual companies that detracted from Fund returns included networking equipment supplier UTStarcom Inc., which fell sharply after announcing an unexpected fourth-quarter loss on declining revenue and was removed from the Fund. Meanwhile, wireless services provider Vimpel Communications tumbled on news that the company faced substantial back tax claims. Elsewhere, shares of Boston Communication Group Inc. plummeted when the provider of subscriber management solutions received an unfavorable ruling in a patent infringement suit, and the company was ultimately sold due to our estimates of declining relative strength. Q. WHAT IS YOUR INVESTMENT OUTLOOK FOR THE TELECOMMUNICATION & UTILITIES SECTOR? A. Although utility stocks recorded above-average returns throughout the fiscal year, they also experienced above-average losses during a late-period broad market sell-off. Moreover, rising long-term bond yields have begun to regain some luster versus utility dividend yields. Nevertheless, we continue to detect significant value across the Utilities sector, particularly in conjunction with the recent sell-off. The same holds true for the Telecommunication sector, especially the integrated telecommunication services industry, which is demonstrating nascent leadership based on our estimates of value and relative strength. Management Overview 61 Management Overview (continued) ICON Telecommunication & Utilities Fund PERFORMANCE HIGHLIGHTS September 30, 2005 - - The Fund's valuation-related tilt toward the Utilities sector, which assumed the role of market leader, benefited overall performance. - - Defensive-oriented investor preferences, dividend payouts, deregulation, and strong global demand provided a positive setting for Utilities industries. - - Leading industry contributors to Fund performance included the entire Utilities group, while communications equipment detracted from relative returns. - - America Movil, S.A. de C.V., NII Holdings Inc., Constellation Energy Group Inc., and Allegheny Energy Inc. were among the Fund's leading individual contributors to Fund returns. - - Companies that detracted from Fund performance during the period included UTStarcom Inc., Vimpel Communications and Boston Communication Group Inc. 62 Management Overview INDUSTRY COMPOSITION September 30, 2005 Multi-Utilities 26.1% Electric Utilities 25.8% Integrated Telecommunication Services 13.2% Wireless Telecommunication Services 9.9% Gas Utilities 8.7% Water Utilities 8.3% Communications Equipment 4.4% Independent Power Producers & Energy Traders 3.3%
Percentages are based upon net assets. Management Overview 63 Management Overview (continued) ICON Telecommunication & Utilities Fund AVERAGE ANNUAL TOTAL RETURN as of September 30, 2005
SINCE INCEPTION 1 YEAR 5 YEARS 7/9/97 - ----------------------------------------------------------------------------------------- ICON Telecommunication & Utilities Fund 26.70% 2.58% 9.70% - ----------------------------------------------------------------------------------------- S&P 1500 Telecommunications Services Index 2.27% -10.79% -0.07% - ----------------------------------------------------------------------------------------- S&P 1500 Utilities Index 36.70% 1.41% 8.85% - ----------------------------------------------------------------------------------------- S&P 1500 Index 13.45% -0.46% 6.01% - -----------------------------------------------------------------------------------------
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, 2005 [LINE GRAPH]
ICON S&P 1500 TELECOMMUNICATION & TELECOMMUNICATIONS S&P 1500 UTILITIES UTILITIES FUND SERVICES INDEX INDEX S&P 1500 INDEX ------------------- ------------------ ------------------ -------------- 7/9/97 10000 10000 10000 10000 10630 10622 10417 10597 12253 12707 12118 10852 13800 14982 12775 12321 13528 14391 12766 12620 9/30/98 14231 15105 13226 11262 15927 19374 13625 13709 15110 20000 12192 14207 16924 22672 13518 15312 9/30/99 16401 21048 12967 14339 17026 23189 12330 16485 15958 22888 13585 16994 16306 19688 14281 16554 9/30/00 18858 17603 18732 16548 19039 14272 19530 15338 15995 14014 18172 13550 16564 13868 17309 14440 9/30/01 15327 13802 14540 12290 15596 12458 14271 13705 15322 10537 14813 13837 14173 8052 12587 12059 9/30/02 11948 5960 10056 9976 12737 8181 10542 10786 11625 7010 10216 10425 14077 8534 12283 12064 9/30/03 14380 7750 12292 12439 15985 8776 13319 13976 17289 9219 13956 14275 16215 9133 13832 14523 9/30/04 16906 9723 14699 14251 18497 10515 16403 15624 18497 9715 17175 15313 20075 10055 18792 15576 9/30/05 21420 9944 20094 16168
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. 64 Management Overview Schedule of Investments ICON Telecommunication & Utilities Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- COMMON STOCKS (99.7%) 31,700 Allegheny Energy, Inc.(a) $ 973,824 164,900 America Movil S.A. De C.V. - ADR 4,340,168 72,100 American Electric Power Co., Inc. 2,862,370 129,700 American States Water Co. 4,339,762 30,900 Avista Corp. 599,460 152,300 BellSouth Corp. 4,005,490 121,400 California Water Service Group 5,001,680 270,600 CenterPoint Energy, Inc. 4,023,822 42,700 China Telecom Corp., Ltd. - ADR 1,609,363 74,300 China Unicom, Ltd. - ADR 615,204 92,400 Cleco Corp. 2,178,792 72,200 Consolidated Edison Company of New York, Inc. 3,505,310 42,300 Constellation Energy Group, Inc. 2,605,680 19,100 Dominion Resources, Inc. of Virginia 1,645,274 44,600 DTE Energy Co. 2,045,356 188,300 El Paso Electric Co.(a) 3,926,055 22,700 Endesa, S.A. - ADR 607,679 39,500 Energen Corp. 1,708,770 53,600 Enersis S.A. - ADR 613,184 94,800 Equitable Resources, Inc. 3,702,888 67,400 FirstEnergy Corp. 3,512,888 25,700 FPL Group, Inc. 1,223,320 61,600 Golden Telecom, Inc. - ADR 1,944,712 40,500 IDACORP, Inc. 1,220,265 34,900 Korea Electric Power Corp. - ADR 618,079 54,700 KT Corp. - ADR 1,230,750 29,700 Mobile Telesystems - ADR 1,208,196 66,300 National Fuel Gas Co. 2,267,460
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- 72,700 NETGEAR, Inc.(a) $ 1,749,162 34,100 NICE Systems, Ltd. - ADR(a) 1,540,638 95,100 NiSource, Inc. 2,306,175 73,200 Nokia Corp. - ADR 1,237,812 63,400 Oneok, Inc. 2,156,868 28,900 Otter Tail Corp. 894,166 158,600 Pepco Holdings, Inc. 3,690,622 87,200 PG&E Corp. 3,422,600 63,900 Philippine Long Distance Telephone Co.- ADR 1,945,755 36,000 Pinnacle West Capital Corp. 1,586,880 83,200 PNM Resources, Inc. 2,385,344 108,700 PPL Corp. 3,514,271 33,800 Public Service Enterprise Group, Inc. 2,175,368 25,300 Puget Energy, Inc. 594,044 104,200 Semco Energy, Inc.(a) 686,678 58,500 Sempra Energy 2,753,010 25,000 SK Telecom Co., Ltd. - ADR 546,000 102,100 Southern Co. 3,651,096 49,800 Southwest Water Co. 722,100 61,900 SpectraLink Corp. 789,225 133,000 Sprint Nextel Corp. 3,162,740 202,100 TECO Energy, Inc. 3,641,842 89,000 Telecomunicacoes de Sao Paulo S.A. - ADR 1,769,320 159,500 Telefonos de Mexico S.A. De C.V. - ADR 3,392,565 38,000 Turkcell Iletisim Hizmetleri - ADR 518,700 12,100 TXU Corp. 1,365,848 83,000 Vectren Corp. 2,353,050 35,500 Vimpel Communications - ADR(a) 1,577,620 ------------ TOTAL COMMON STOCKS (COST $98,775,949) 120,265,300
Schedule of Investments 65 Schedule of Investments (continued) ICON Telecommunication & Utilities Fund September 30, 2005
SHARES OR PRINCIPAL AMOUNT VALUE - --------------------------------------------- x SHORT-TERM INVESTMENTS (0.9%) $1,080,301 Brown Brothers Harriman Time Deposit, 3.24%, 10/01/05 # $ 1,080,301 ------------ TOTAL SHORT-TERM INVESTMENTS (COST $1,080,301) 1,080,301 ------------ TOTAL INVESTMENTS 100.6% (COST $99,856,250) 121,345,601 LIABILITIES LESS OTHER ASSETS (0.6)% (695,056) ------------ TOTAL NET ASSETS 100.0% $120,650,545 ============
The accompanying notes are an integral part of the financial statements. (a) Non-income producing security. # BBH Time Deposits are considered short-term obligations and are payable on demand. Interest rates change periodically on specified dates. The rates listed are as of September 30, 2005. ADR American Depositary Receipt 66 Schedule of Investments Six Month Hypothetical Expense Example September 30, 2005 (unaudited) EXAMPLE As a shareholder of a Fund you may pay two types of fees: transaction fees and fund-related fees. Certain funds charge transactions fees, including sales charges (loads) on purchase payments, reinvested dividends, or other distributions; redemption fees; and exchange fees. 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 various ICON Funds and to compare these costs with the ongoing costs of investing in other mutual funds. This Example is based on an investment of $1,000 invested at the beginning of the period and held for the six-month period (4/1/05 - 9/30/05). ACTUAL EXPENSES The first line in the table for each Fund provides information about actual account values and actual expenses. The Example includes, but is not limited to, management fees, fund accounting, custody and transfer agent fees. However, the Example does not include client specific fees, such as the $10.00 fee charged to IRA accounts, or the $15.00 fee charged for wire redemptions. You may use this information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for each Fund under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line in the table for each Fund provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), redemption fees, or exchange fees that may be charged by other funds. Therefore, this information is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. Expense Example 67 Six Month Hypothetical Expense Example (continued) September 30, 2005 (unaudited)
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/05 9/30/05 4/1/05-9/30/05* 4/1/05-9/30/05 - ------------------------------------------------------------------------------------------------- ICON CONSUMER DISCRETIONARY FUND - ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $ 980.50 $5.91 1.19% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.03 6.02 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON ENERGY FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,297.00 $6.68 1.16% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.18 5.87 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON FINANCIAL FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,048.40 $6.32 1.23% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.83 6.22 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON HEALTHCARE FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,091.20 $6.13 1.17% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.13 5.92 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON INDUSTRIALS FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,070.80 $6.13 1.18% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,019.08 5.97 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON INFORMATION TECHNOLOGY FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,072.80 $6.44 1.24% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.78 6.28 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON LEISURE AND CONSUMER STAPLES FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 922.10 $5.97 1.24% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.78 6.28 (5% return before expenses) - -------------------------------------------------------------------------------------------------
68 Expense Example
BEGINNING ENDING EXPENSES PAID ANNUALIZED ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD EXPENSE RATIO 4/1/05 9/30/05 4/1/05-9/30/05* 4/1/05-9/30/05 - ------------------------------------------------------------------------------------------------- ICON MATERIALS FUND - ------------------------------------------------------------------------------------------------- Actual Expenses $1,000.00 $1,101.40 $6.64 1.26% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.68 6.38 (5% return before expenses) - ------------------------------------------------------------------------------------------------- ICON TELECOMMUNICATION & UTILITIES FUND - ------------------------------------------------------------------------------------------------- Actual Expenses 1,000.00 1,158.00 $6.60 1.22% - ------------------------------------------------------------------------------------------------- Hypothetical Example 1,000.00 1,018.88 6.17 (5% return before expenses) - ------------------------------------------------------------------------------------------------- - -------------------------------------------------------------------------------------------------
* Expenses are equal to the Fund's six month expense ratio annualized, multiplied by the average account value over the period, multiplied by 183/365 to reflect the one-half year period. Expense Example 69 Statements of Assets and Liabilities September 30, 2005
ICON CONSUMER ICON ICON ICON DISCRETIONARY FUND ENERGY FUND FINANCIAL FUND HEALTHCARE FUND ------------------ -------------- -------------- --------------- ASSETS Investments, at cost $157,856,022 $ 675,827,812 $188,383,403 $555,895,839 ------------ -------------- ------------ ------------ Investments, at value 170,046,854 995,387,279 211,202,874 685,721,897 Cash - - - 865 Receivables: Fund shares sold 104,854 19,482,215 106,524 3,879,342 Investments sold 7,442,331 - 10,555,722 - Interest - 2,430 54 2,114 Dividends 123,927 1,008,486 363,923 53,071 Other assets 26,953 72,396 27,918 58,551 ------------ -------------- ------------ ------------ Total Assets 177,744,919 1,015,952,806 222,257,015 689,715,840 ------------ -------------- ------------ ------------ LIABILITIES Payables: Due to custodian bank 2,521,888 - 528 - Fund shares redeemed 121,967 861,431 136,208 1,426,189 Investments bought 5,472,993 5,174,634 10,997,586 4,826,787 Advisory fees 142,144 764,687 172,690 547,728 Fund accounting fees 3,483 18,736 4,231 13,420 Transfer agent fees 7,622 26,731 9,717 23,947 Administration fees 6,740 36,258 8,189 25,971 Trustee fees 4,363 14,574 4,865 11,062 Accrued expenses 41,957 97,914 39,725 81,397 ------------ -------------- ------------ ------------ Total Liabilities 8,323,157 6,994,965 11,373,739 6,956,501 ------------ -------------- ------------ ------------ NET ASSETS $169,421,762 $1,008,957,841 $210,883,276 $682,759,339 ============ ============== ============ ============ NET ASSETS CONSIST OF Paid-in Capital $142,175,007 $ 671,848,557 $173,175,967 $542,364,349 Accumulated undistributed net investment income/(loss) - 2,256,526 1,744,312 - Accumulated undistributed net realized gain/(loss) from investments 15,055,923 15,293,291 13,143,526 10,568,932 Unrealized appreciation/(depreciation) on investments 12,190,832 319,559,467 22,819,471 129,826,058 ------------ -------------- ------------ ------------ NET ASSETS $169,421,762 $1,008,957,841 $210,883,276 $682,759,339 ============ ============== ============ ============ Shares outstanding (unlimited shares authorized, no par value) 12,445,868 29,887,461 15,707,906 38,062,144 Net Asset Value (offering price and redemption price per share) $ 13.61 $ 33.76 $ 13.43 $ 17.94
The accompanying notes are an integral part of the financial statements. 70 Financial Statements
ICON ICON LEISURE AND ICON ICON INFORMATION CONSUMER ICON TELECOMMUNICATION INDUSTRIALS FUND TECHNOLOGY FUND STAPLES FUND MATERIALS FUND & UTILITIES FUND ---------------- --------------- ------------ -------------- ----------------- $173,005,778 $187,818,238 $43,805,774 $ 83,361,390 $ 99,856,250 ------------ ------------ ----------- ------------ ------------ 216,705,960 220,291,913 47,898,293 100,411,839 121,345,601 2,769 - - - - 115,212 271,594 19,339 108,905 131,130 - 10,001,177 1,360,785 369,148 - 266 95 - 65 97 114,741 77,001 12,636 49,066 225,175 36,537 40,397 29,086 28,126 24,746 ------------ ------------ ----------- ------------ ------------ 216,975,485 230,682,177 49,320,139 100,967,149 121,726,749 ------------ ------------ ----------- ------------ ------------ - 1,082 104,135 - - 98,622 221,085 186,893 53,583 71,662 - 10,132,355 1,538,505 1,225,564 847,240 174,605 180,347 40,164 75,603 96,392 4,278 4,419 984 1,852 2,362 7,116 12,273 9,481 8,557 7,509 8,279 8,552 1,905 3,584 4,571 4,890 4,992 2,667 3,250 3,593 42,087 43,642 25,152 25,802 42,875 ------------ ------------ ----------- ------------ ------------ 339,877 10,608,747 1,909,886 1,397,795 1,076,204 ------------ ------------ ----------- ------------ ------------ $216,635,608 $220,073,430 $47,410,253 $ 99,569,354 $120,650,545 ============ ============ =========== ============ ============ $168,637,190 $242,185,530 $33,924,279 $ 73,995,331 $ 91,426,775 16,028 - - 236,509 1,719,241 4,282,208 (54,585,775) 9,393,455 8,287,065 6,015,178 43,700,182 32,473,675 4,092,519 17,050,449 21,489,351 ------------ ------------ ----------- ------------ ------------ $216,635,608 $220,073,430 $47,410,253 $ 99,569,354 $120,650,545 ============ ============ =========== ============ ============ 17,064,530 25,306,600 3,963,291 8,811,606 14,574,830 $ 12.70 $ 8.70 $ 11.96 $ 11.30 $ 8.28
Financial Statements 71 Statements of Operations For the year ended September 30, 2005
ICON CONSUMER ICON ICON ICON DISCRETIONARY FUND ENERGY FUND FINANCIAL FUND HEALTHCARE FUND ------------------ ------------ -------------- --------------- INVESTMENT INCOME Interest $ 8,151 $ 1,019,847 $ 48,337 $ 345,909 Dividends 1,135,197 8,552,720 4,234,107 1,520,589 Foreign taxes withheld - (37,833) - (7,019) ----------- ------------ ----------- ------------ Total Investment Income 1,143,348 9,534,734 4,282,444 1,859,479 ----------- ------------ ----------- ------------ EXPENSES Advisory fees 1,676,070 6,010,428 1,886,008 4,631,466 Fund accounting fees 88,416 292,571 104,328 212,610 Transfer agent fees 103,922 308,048 130,166 250,077 Administration fees 80,902 290,502 90,964 223,505 Registration fees 20,593 35,165 23,744 28,644 Insurance expense 8,642 13,411 10,749 16,515 Trustee fees and expenses 17,400 45,216 21,570 40,095 Interest expense 14,721 - 48,707 18,079 Other expenses 79,994 282,867 71,502 223,566 ----------- ------------ ----------- ------------ Total expenses 2,090,660 7,278,208 2,387,738 5,644,557 ----------- ------------ ----------- ------------ NET INVESTMENT INCOME (LOSS) (947,312) 2,256,526 1,894,706 (3,785,078) ----------- ------------ ----------- ------------ NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS Net realized gain/(loss) from investment transactions 21,149,069 22,940,745 15,015,457 10,569,614 Change in unrealized appreciation/(depreciation) on investments (9,621,489) 259,958,925 (4,980,248) 96,973,294 ----------- ------------ ----------- ------------ Net realized and unrealized gain/(loss) on investments 11,527,580 282,899,670 10,035,209 107,542,908 ----------- ------------ ----------- ------------ NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS $10,580,268 $285,156,196 $11,929,915 $103,757,830 =========== ============ =========== ============
The accompanying notes are an integral part of the financial statements. 72 Financial Statements
ICON ICON LEISURE AND ICON ICON INFORMATION CONSUMER ICON TELECOMMUNICATION INDUSTRIALS FUND TECHNOLOGY FUND STAPLES FUND MATERIALS FUND & UTILITIES FUND ---------------- --------------- ------------ -------------- ----------------- $ 36,949 $ 34,007 $ 4,406 $ 20,975 $ 12,503 1,754,074 968,628 844,465 1,665,484 3,166,445 (20,546) - (2,636) (17,645) (1,907) ----------- ----------- ---------- ----------- ----------- 1,770,477 1,002,635 846,235 1,668,814 3,177,041 ----------- ----------- ---------- ----------- ----------- 1,961,273 2,640,693 1,004,088 1,020,441 1,011,015 97,842 153,118 45,208 59,889 47,415 113,109 202,692 81,010 85,040 68,507 94,739 127,452 48,566 49,249 48,808 23,897 28,002 19,724 22,640 18,582 11,081 11,122 7,113 6,989 3,579 20,477 29,312 10,158 10,347 10,008 27,210 100,248 70,665 37,033 22,295 85,463 103,334 11,291 43,767 41,417 ----------- ----------- ---------- ----------- ----------- 2,435,091 3,395,973 1,297,823 1,335,395 1,271,626 ----------- ----------- ---------- ----------- ----------- (664,614) (2,393,338) (451,588) 333,419 1,905,415 ----------- ----------- ---------- ----------- ----------- 28,540,115 9,986,052 12,701,511 28,105,684 10,867,997 6,079,683 12,306,795 (9,663,969) (7,049,729) 12,025,488 ----------- ----------- ---------- ----------- ----------- 34,619,798 22,292,847 3,037,542 21,055,955 22,893,485 ----------- ----------- ---------- ----------- ----------- $33,955,184 $19,899,509 $2,585,954 $21,389,374 $24,798,900 =========== =========== ========== =========== ===========
Financial Statements 73 Statements of Changes in Net Assets
ICON CONSUMER DISCRETIONARY FUND ICON ENERGY FUND -------------------------------- --------------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2005 2004 2005 2004 ------------- ------------- -------------- ------------- OPERATIONS Net investment income/(loss) $ (947,312) $ (671,699) $ 2,256,526 $ (261,112) Net realized gain/(loss) from investment transactions 21,149,069 17,989,808 22,940,745 6,377,507 Change in unrealized appreciation/depreciation on investments (9,621,489) (6,390,181) 259,958,925 51,219,049 ------------ ------------ -------------- ------------ Net increase/(decrease) in net assets resulting from operations 10,580,268 10,927,928 285,156,196 57,335,444 ------------ ------------ -------------- ------------ Dividends and Distributions to Shareholders Net investment income - - - - Net realized gains - - - - ------------ ------------ -------------- ------------ Net decrease from dividends and distributions - - - - ------------ ------------ -------------- ------------ FUND SHARE TRANSACTIONS Shares sold 50,107,439 62,754,370 711,655,180 246,044,827 Reinvested dividends and distributions - - - - Shares repurchased (43,187,689) (71,825,277) (275,467,439) (71,395,398) ------------ ------------ -------------- ------------ Net increase/(decrease) from fund share transactions 6,919,750 (9,070,907) 436,187,741 174,649,429 ------------ ------------ -------------- ------------ Total net increase/(decrease) in net assets 17,500,018 1,857,021 721,343,937 231,984,873 NET ASSETS Beginning of period 151,921,744 150,064,723 287,613,904 55,629,031 ------------ ------------ -------------- ------------ End of period $169,421,762 $151,921,744 $1,008,957,841 $287,613,904 ============ ============ ============== ============ TRANSACTIONS IN FUND SHARES Shares sold 3,605,400 4,709,437 27,585,644 13,031,426 Reinvested dividends and distributions - - - - Shares repurchased (3,120,303) (5,477,472) (10,886,604) (3,903,835) ------------ ------------ -------------- ------------ Net increase/(decrease) 485,097 (768,035) 16,699,040 9,127,591 Shares outstanding beginning of period 11,960,771 12,728,806 13,188,421 4,060,830 ------------ ------------ -------------- ------------ Shares outstanding end of period 12,445,868 11,960,771 29,887,461 13,188,421 ============ ============ ============== ============ PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-term Securities) Purchase of Securities $270,228,278 $213,763,244 $ 565,978,887 $184,627,946 Proceeds from sales of securities 263,033,052 220,582,308 155,874,919 15,787,580 Accumulated undistributed net investment income/(loss) $ - $ - $ 2,256,526 $ - ============ ============ ============== ============
* The tax character of distributions to shareholders from net investment income for the year ended September 30, 2004 is ordinary income. The accompanying notes are an integral part of the financial statements. 74 Financial Statements
ICON FINANCIAL FUND ICON HEALTHCARE FUND ICON INDUSTRIALS FUND ----------------------------- ----------------------------- ----------------------------- YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2005 2004 2005 2004 2005 2004 ------------- ------------- ------------- ------------- ------------- ------------- $ 1,894,706 $ 548,732 $ (3,785,078) $ (2,540,659) $ (664,614) $ (849,293) 15,015,457 17,877,672 10,569,614 10,762,480 28,540,115 5,713,298 (4,980,248) 13,429,005 96,973,294 6,619,577 6,079,683 22,171,644 ------------ ------------ ------------ ------------ ------------ ------------- 11,929,915 31,855,409 103,757,830 14,841,398 33,955,184 27,035,649 ------------ ------------ ------------ ------------ ------------ ------------- (400,204) (576,093)* - - - - (14,368,848) - (877,529) - - - ------------ ------------ ------------ ------------ ------------ ------------- (14,769,052) (576,093) (877,529) - - - ------------ ------------ ------------ ------------ ------------ ------------- 160,151,652 99,493,912 513,075,619 196,893,511 116,314,931 119,436,391 14,495,645 570,282 842,844 - - - (149,318,334) (82,211,184) (219,709,399) (67,323,826) (143,327,765) (69,333,095) ------------ ------------ ------------ ------------ ------------ ------------- 25,328,963 17,853,010 294,209,064 129,569,685 (27,012,834) 50,103,296 ------------ ------------ ------------ ------------ ------------ ------------- 22,489,826 49,132,326 397,089,365 144,411,083 6,942,350 77,138,945 188,393,450 139,261,124 285,669,974 141,258,891 209,693,258 132,554,313 ------------ ------------ ------------ ------------ ------------ ------------- $210,883,276 $188,393,450 $682,759,339 $285,669,974 $216,635,608 $ 209,693,258 ============ ============ ============ ============ ============ ============= 12,078,196 7,735,769 30,887,090 14,262,864 9,680,063 11,909,801 1,066,641 47,802 53,243 - - - (11,535,456) (6,605,919) (13,735,740) (4,910,162) (12,555,300) (7,036,857) ------------ ------------ ------------ ------------ ------------ ------------- 1,609,381 1,177,652 17,204,593 9,352,702 (2,875,237) 4,872,944 14,098,525 12,920,873 20,857,551 11,504,849 19,939,767 15,066,823 ------------ ------------ ------------ ------------ ------------ ------------- 15,707,906 14,098,525 38,062,144 20,857,551 17,064,530 19,939,767 ============ ============ ============ ============ ============ ============= $334,005,678 $204,755,026 $493,069,662 $249,051,968 $131,854,781 $ 132,934,226 321,445,227 186,785,022 216,184,507 123,293,752 161,003,971 80,111,027 $ 1,744,312 $ 249,818 $ - $ - $ 16,028 $ - ============ ============ ============ ============ ============ =============
Financial Statements 75 Statements of Changes in Net Assets (continued)
ICON INFORMATION TECHNOLOGY FUND ------------------------------ YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, 2005 2004 ------------- ------------- OPERATIONS: Net investment income/(loss) $ (2,393,338) $ (2,576,634) Net realized gain/(loss) from investments transactions 9,986,052 30,876,230 Change in net unrealized appreciation/depreciation on investments 12,306,795 (41,133,606) ------------ ------------- Net increase/(decrease) in net assets resulting from operations 19,899,509 (12,834,010) ------------ ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS Net investment income - - Net realized gains - - ------------ ------------- Net decrease from dividends and distributions - - ------------ ------------- FUND SHARE TRANSACTIONS Shares sold 183,518,365 178,801,650 Reinvested dividends and distributions - - Shares repurchased (227,596,847) (229,687,727) ------------ ------------- Net increase/(decrease) from fund share transactions (44,078,482) (50,886,077) ------------ ------------- Total net increase/(decrease) in net assets (24,178,973) (63,720,087) NET ASSETS: Beginning of period 244,252,403 307,972,490 ------------ ------------- End of period $220,073,430 $ 244,252,403 ============ ============= TRANSACTIONS IN FUND SHARES Shares sold 22,003,840 21,330,842 Reinvested dividends and distributions - - Shares repurchased (27,607,984) (27,658,934) ------------ ------------- Net increase/(decrease) (5,604,144) (6,328,092) Shares outstanding beginning of period 30,910,744 37,238,836 ------------ ------------- Shares outstanding end of period 25,306,600 30,910,744 ============ ============= PURCHASE AND SALES OF INVESTMENT SECURITIES (excluding Short-term Securities) Purchase of Securities $395,041,638 $ 537,991,382 Proceeds from sales of securities 442,915,109 591,381,665 ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME/(LOSS) $ - $ - ============ =============
* The tax character of distributions to shareholders from net investment income for the year ended September 30, 2004 is ordinary income. The accompanying notes are an integral part of the financial statements. 76 Financial Statements
ICON LEISURE AND ICON TELECOMMUNICATION & CONSUMER STAPLES FUND ICON MATERIALS FUND UTILITIES FUND ------------------------------ ------------------------------ ------------------------------ YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, 2005 2004 2005 2004 2005 2004 ------------- ------------- ------------- ------------- ------------- ------------- $ (451,588) $ (326,799) $ 333,419 $ 87,329 $ 1,905,415 $ 580,886 12,701,511 11,738,085 28,105,684 1,298,590 10,867,997 3,885,662 (9,663,969) 2,299,602 (7,049,729) 22,065,303 12,025,488 3,437,864 ------------ ------------ ------------ ------------ ------------ ------------ 2,585,954 13,710,888 21,389,374 23,451,222 24,798,900 7,904,412 ------------ ------------ ------------ ------------ ------------ ------------ - - (163,349) (198,911)* (767,065) (559,797)* (13,572,229) - - - - - ------------ ------------ ------------ ------------ ------------ ------------ (13,572,229) - (163,349) (198,911) (767,065) (559,797) ------------ ------------ ------------ ------------ ------------ ------------ 156,682,191 52,673,531 89,687,347 111,162,483 93,654,010 26,477,305 13,378,405 - 160,788 198,136 762,535 557,773 (194,686,497) (65,709,303) (151,343,125) (25,150,862) (59,123,198) (15,563,524) ------------ ------------ ------------ ------------ ------------ ------------ (24,625,901) (13,035,772) (61,494,990) 86,209,757 35,293,347 11,471,554 ------------ ------------ ------------ ------------ ------------ ------------ (35,612,176) 675,116 (40,268,965) 109,462,068 59,325,182 18,816,169 83,022,429 82,347,313 139,838,319 30,376,251 61,325,363 42,509,194 ------------ ------------ ------------ ------------ ------------ ------------ $ 47,410,253 $ 83,022,429 $ 99,569,354 $139,838,319 $120,650,545 $ 61,325,363 ============ ============ ============ ============ ============ ============ 12,172,021 3,663,087 8,775,257 13,704,883 12,890,779 4,192,093 1,067,710 - 15,794 26,174 106,947 94,538 (14,999,963) (4,572,081) (15,426,293) (3,179,704) (7,698,688) (2,487,287) ------------ ------------ ------------ ------------ ------------ ------------ (1,760,232) (908,994) (6,635,242) 10,551,353 5,299,038 1,799,344 5,723,523 6,632,517 15,446,848 4,895,495 9,275,792 7,476,448 ------------ ------------ ------------ ------------ ------------ ------------ 3,963,291 5,723,523 8,811,606 15,446,848 14,574,830 9,275,792 ============ ============ ============ ============ ============ ============ $261,063,086 $151,387,685 $132,449,934 $123,284,118 $149,329,103 $ 69,915,069 299,173,481 163,795,587 191,074,580 41,285,979 113,156,179 58,301,505 $ - $ - $ 236,509 $ 66,439 $ 1,719,241 $ 580,891 ============ ============ ============ ============ ============ ============
Financial Statements 77 Financial Highlights
INCOME FROM INVESTMENT OPERATIONS ---------------------------------------- NET ASSET NET NET REALIZED VALUE, INVESTMENT AND UNREALIZED TOTAL FROM BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS --------- ---------- -------------- ---------- ICON CONSUMER DISCRETIONARY FUND Year Ended September 30, 2005 $12.70 $(0.08) $ 0.99 $ 0.91 Year Ended September 30, 2004 11.79 (0.05) 0.96 0.91 Year Ended September 30, 2003 10.12 (0.08) 1.75 1.67 Year Ended September 30, 2002 8.96 (0.06) 1.22 1.16 Year Ended September 30, 2001 9.23 (0.01) (0.26) (0.27) ICON ENERGY FUND Year Ended September 30, 2005 21.81 0.10 11.85 11.95 Year Ended September 30, 2004 13.70 (0.04) 8.15 8.11 Year Ended September 30, 2003 11.84 (0.04) 1.90 1.86 Year Ended September 30, 2002 11.29 (0.08) 0.65 0.57 Year Ended September 30, 2001 13.19 0.07 (0.76) (0.69) ICON FINANCIAL FUND Year Ended September 30, 2005 13.36 0.13 0.99 1.12 Year Ended September 30, 2004 10.78 0.04 2.60 2.64 Year Ended September 30, 2003 8.84 0.05 1.92 1.97 Year Ended September 30, 2002 12.04 (0.01) (1.08) (1.09) Year Ended September 30, 2001 12.26 0.06 1.13 1.19 ICON HEALTHCARE FUND Year Ended September 30, 2005 13.70 (0.14) 4.42 4.28 Year Ended September 30, 2004 12.28 (0.14) 1.56 1.42 Year Ended September 30, 2003 10.35 (0.09) 2.02 1.93 Year Ended September 30, 2002 11.57 (0.12) (0.49) (0.61) Year Ended September 30, 2001 11.93 (0.10) 0.51 0.41 ICON INDUSTRIALS FUND Year Ended September 30, 2005 10.52 (0.04) 2.22 2.18 Year Ended September 30, 2004 8.80 (0.05) 1.77 1.72 Year Ended September 30, 2003 7.96 (0.05) 0.89 0.84 Year Ended September 30, 2002 8.55 (0.02) (0.57) (0.59) Year Ended September 30, 2001 9.07 (0.02) (0.48) (0.50) LESS DIVIDENDS AND DISTRIBUTIONS ------------------------------------------------------- DIVIDENDS DISTRIBUTIONS TOTAL FROM NET FROM NET DIVIDENDS INVESTMENT REALIZED RETURN AND INCOME GAINS OF CAPITAL DISTRIBUTIONS ---------- ------------- ---------- ------------- ICON CONSUMER DISCRETIONARY FUND Year Ended September 30, 2005 $ - $ - $ - $ - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - - - - Year Ended September 30, 2001 - - - - ICON ENERGY FUND Year Ended September 30, 2005 - - - - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 (0.02) - - (0.02) Year Ended September 30, 2001 (0.09) (1.12) - (1.21) ICON FINANCIAL FUND Year Ended September 30, 2005 (0.03) (1.02) - (1.05) Year Ended September 30, 2004 (0.06) - - (0.06) Year Ended September 30, 2003 (0.03) - - (0.03) Year Ended September 30, 2002 - (2.11) - (2.11) Year Ended September 30, 2001 (1.41) - - (1.41) ICON HEALTHCARE FUND Year Ended September 30, 2005 - (0.04) - (0.04) Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - (0.56) (0.05) (0.61) Year Ended September 30, 2001 - (0.77) - (0.77) ICON INDUSTRIALS FUND Year Ended September 30, 2005 - - - - Year Ended September 30, 2004 - - - - Year Ended September 30, 2003 - - - - Year Ended September 30, 2002 - - - - Year Ended September 30, 2001 (0.02) - - (0.02)
(x) Calculated using the average share method. The accompanying notes are an integral part of the financial statements. 78 Financial Highlights
RATIO OF NET NET ASSET AVERAGE RATIO OF INVESTMENT VALUE, NET ASSETS, NET ASSETS EXPENSES INCOME/(LOSS) PORTFOLIO END OF TOTAL END OF PERIOD FOR THE PERIOD TO AVERAGE TO AVERAGE TURNOVER PERIOD RETURN (IN THOUSANDS) (IN THOUSANDS) NET ASSETS NET ASSETS RATE --------- ------ -------------- -------------- ---------- ------------- --------- $13.61 7.17% $ 169,422 $167,635 1.25% (0.57)% 157.94% 12.70 7.72% 151,922 178,011 1.31% (0.38)% 120.63% 11.79 16.50% 150,065 118,834 1.40% (0.79)% 174.51% 10.12 12.95% 121,640 184,174 1.29% (0.49)% 128.06% 8.96 (2.93)% 107,075 78,281 1.37% (0.10)% 88.20% 33.76 54.79% 1,008,958 602,922 1.21% 0.37% 27.51% 21.81 59.20% 287,614 127,920 1.35% (0.20)% 13.42% 13.70 15.71% 55,629 74,883 1.40% (0.29)% 42.53% 11.84 5.03% 104,220 71,434 1.35% (0.61)% 26.30% 11.29 (6.53)% 36,945 49,195 1.39% 0.54% 134.77% 13.43 8.29% 210,883 188,864 1.26% 1.00% 170.75% 13.36 24.53% 188,393 162,121 1.32% 0.34% 114.50% 10.78 22.35% 139,261 131,042 1.34% 0.54% 142.77% 8.84 (11.88)% 110,116 60,904 1.36% (0.06)% 69.58% 12.04 9.57% 54,318 59,425 1.41% 0.51% 174.41% 17.94 31.39% 682,759 463,813 1.22% (0.82)% 47.88% 13.70 11.56% 285,670 244,742 1.29% (1.04)% 52.72% 12.28 18.65% 141,259 120,068 1.34% (0.84)% 85.52% 10.35 (5.63)% 93,031 44,042 1.39% (1.05)% 104.90% 11.57 3.39% 33,646 35,981 1.45% (0.98)% 145.08% 12.70 20.72% 216,636 196,295 1.24% (0.34)% 67.25% 10.52 19.55% 209,693 179,657 1.29% (0.47)% 45.77% 8.80 10.55% 132,554 70,382 1.43% (0.64)% 90.49% 7.96 (6.90)% 63,919 107,335 1.30% (0.24)% 99.22% 8.55 (5.55)% 76,325 55,928 1.38% (0.16)% 72.65%
Financial Highlights 79 Financial Highlights (continued)
INCOME FROM INVESTMENT OPERATIONS LESS DIVIDENDS AND DISTRIBUTIONS ---------------------------------------- ------------------------------------------ NET ASSET NET NET REALIZED DIVIDENDS DISTRIBUTIONS TOTAL VALUE, INVESTMENT AND UNREALIZED TOTAL FROM FROM NET FROM NET DIVIDENDS BEGINNING INCOME/ GAINS/(LOSSES) INVESTMENT INVESTMENT REALIZED AND OF PERIOD (LOSS)(X) ON INVESTMENTS OPERATIONS INCOME GAINS DISTRIBUTIONS --------- ---------- -------------- ---------- ---------- ------------- ------------- ICON INFORMATION TECHNOLOGY FUND Year Ended September 30, 2005 $ 7.90 $(0.08) $ 0.88 $ 0.80 $ - $ - $ - Year Ended September 30, 2004 8.27 (0.08) (0.29) (0.37) - - - Year Ended September 30, 2003 5.98 (0.08) 2.37 2.29 - - - Year Ended September 30, 2002 7.80 (0.10) (1.72) (1.82) - - - Year Ended September 30, 2001 22.13 (0.10) (4.03) (4.13) - (10.20) (10.20) ICON LEISURE AND CONSUMER STAPLES FUND Year Ended September 30, 2005 14.51 (0.06) 0.94 0.88 - (3.43) (3.43) Year Ended September 30, 2004 12.42 (0.04) 2.13 2.09 - - - Year Ended September 30, 2003 11.20 (0.06) 1.28 1.22 - - - Year Ended September 30, 2002 9.42 (0.07) 1.85 1.78 - - Year Ended September 30, 2001 9.24 (0.05) 0.26 0.21 (0.01) (0.02) (0.03) ICON MATERIALS FUND Year Ended September 30, 2005 9.05 0.03 2.23 2.26 (0.01) - (0.01) Year Ended September 30, 2004 6.20 0.01 2.87 2.88 (0.03) - (0.03) Year Ended September 30, 2003 5.68 0.03 0.50 0.53 (0.01) - (0.01) Year Ended September 30, 2002 5.70 0.02 (0.01) 0.01 (0.03) - (0.03) Year Ended September 30, 2001 6.49 0.02 (0.74) (0.72) (0.07) - (0.07) ICON TELECOMMUNICATION & UTILITIES FUND Year Ended September 30, 2005 6.61 0.14 1.61 1.75 (0.08) - (0.08) Year Ended September 30, 2004 5.69 0.07 0.92 0.99 (0.07) - (0.07) Year Ended September 30, 2003 4.78 0.10 0.87 0.97 (0.06) - (0.06) Year Ended September 30, 2002 6.19 0.10 (1.45) (1.35) (0.06) - (0.06) Year Ended September 30, 2001 8.13 0.09 (1.52) (1.43) (0.11) (0.40) (0.51)
(x) Calculated using the average share method. The accompanying notes are an integral part of the financial statements. 80 Financial Highlights
RATIO OF NET NET ASSET AVERAGE NET RATIO OF INVESTMENT VALUE, NET ASSETS, ASSETS EXPENSES INCOME/(LOSS) PORTFOLIO END OF TOTAL END OF PERIOD FOR THE PERIOD TO AVERAGE TO AVERAGE TURNOVER PERIOD RETURN (IN THOUSANDS) (IN THOUSANDS) NET ASSETS NET ASSETS RATE --------- ------ -------------- -------------- ---------- ------------- --------- $ 8.70 10.13% $220,073 $264,222 1.29% (0.91)% 152.16% 7.90 (4.47)% 244,252 282,062 1.31% (0.91)% 189.67% 8.27 38.29% 307,972 190,287 1.35% (1.16)% 155.39% 5.98 (23.33)% 75,623 189,972 1.31% (1.09)% 190.09% 7.80 (32.90)% 118,851 99,875 1.37% (0.90)% 70.32% 11.96 5.01% 47,410 99,988 1.30% (0.45)% 271.72% 14.51 16.83% 83,022 104,515 1.33% (0.31)% 148.43% 12.42 10.89% 82,347 80,928 1.38% (0.51)% 139.54% 11.20 18.90% 88,341 86,202 1.34% (0.55)% 90.43% 9.42 2.26% 41,162 41,086 1.40% (0.50)% 148.23% 11.30 25.04% 99,569 101,971 1.31% 0.33% 128.01% 9.05 46.61% 139,838 68,497 1.37% 0.13% 59.48% 6.20 9.36% 30,376 40,156 1.47% 0.59% 130.01% 5.68 0.06% 59,020 45,917 1.36% 0.23% 74.55% 5.70 (11.07)% 29,200 24,544 1.47% 0.40% 91.28% 8.28 26.70% 120,651 101,129 1.26% 1.88% 112.91% 6.61 17.57% 61,325 54,232 1.37% 1.07% 108.81% 5.69 20.36% 42,509 53,219 1.41% 2.05% 158.24% 4.78 (22.05)% 66,366 20,196 1.50% 1.78% 137.81% 6.19 (18.74)% 16,537 13,554 1.54% 1.22% 46.10%
Financial Highlights 81 Notes to Financial Statements September 30, 2005 1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES The ICON Consumer Discretionary Fund ("Consumer Discretionary Fund"), ICON Energy Fund ("Energy Fund"), ICON Financial Fund ("Financial Fund"), ICON Healthcare Fund ("Healthcare Fund"), ICON Industrials Fund ("Industrials Fund"), ICON Information Technology Fund ("Information Technology Fund"), ICON Leisure and Consumer Staples Fund ("Leisure and Consumer Staples Fund"), ICON Materials Fund ("Materials Fund"), and ICON Telecommunication & Utilities Fund ("Telecommunication & Utilities Fund") are series funds (individually a "Fund" and collectively, the "Funds"). The Funds are part of the ICON Funds (the "Trust"), a Massachusetts business trust registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end investment management company. There are eight other active funds within the Trust. Those funds are covered by separate prospectuses and shareholder reports. The Funds invest primarily in securities of companies whose principal business activities fall within specific industries and sectors. Each Fund is authorized to issue an unlimited number of no par shares. The investment objective of each of Fund is to provide long-term capital appreciation. The Funds may have elements of risk, including the loss of principal. There is no assurance that the investment process will consistently lead to successful results. An investment in a non-diversified sector fund may involve greater risk and volatility than a diversified fund. Investments in foreign securities and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar-denominated transactions as a result of, among other factors, the possibility of lower government supervision and regulation of foreign securities markets and the possibility of political or economic instability. There are also risks associated with small- and mid-cap investing, including limited product lines, less liquidity and small market share. In addition, in the normal course of business the Funds may enter into various agreements that provide for general indemnifications. Each Fund's maximum exposure under these arrangements is unknown as any potential exposure involves future claims that may be made against each Fund. However, based on experience, the Funds expect the risk of loss to be remote. 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. 82 Notes to Financial Statements INVESTMENT VALUATION The Funds' securities and other assets are valued at the closing price at the close of the regular trading session of the New York Stock Exchange (the "NYSE") (normally 4 p.m. Eastern time) each day the NYSE is open, except that securities traded primarily on the NASDAQ Stock Market ("NASDAQ") are normally valued by a Fund at the NASDAQ Official Closing Price provided by NASDAQ each business day. The Funds use pricing services to report the market value of securities in their portfolios; if a pricing service is not able to provide a price, or the pricing service quote of valuation is considered inaccurate or does not reflect the market value of the security, prices may be obtained through market quotations from independent broker/dealers. If market quotations from these sources are not readily available, the Funds' securities or other assets are valued at fair value as determined in good faith by the Funds' Board of Trustees ("Board") or pursuant to procedures approved by the Board. Lacking any sales that day, the security is valued at the current closing bid price (or yield equivalent thereof) or based on quotes from dealers making a market for the security. Options are valued at their closing mid-price on the principal market where the option is traded. Mid-price is the average of the closing bid and closing ask prices. Debt securities with a remaining maturity of greater than sixty days are valued in accordance with the evaluated bid price supplied by the pricing service. The evaluated bid price supplied by the pricing service is a matrix system which considers such factors as security prices, yields, maturities and ratings. Short-term securities with remaining maturities of sixty days or less are generally valued at amortized cost or original cost plus accrued interest, which approximates market value. Prior to February 22, 2005, London closing exchange rates were used to convert foreign security values into U.S. dollars. After that date, currency rates as of the close of the New York Stock Exchange were used to convert foreign security values into U.S. dollars. 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 net asset value ("NAV") may differ from the security's most recent closing market price and from the prices used by other mutual funds to calculate their NAVs. Notes to Financial Statements 83 Notes to Financial Statements (continued) REPURCHASE AGREEMENTS Repurchase agreements, if held by the Funds, are fully collateralized by U.S. Government securities and such collateral is in the possession of the Funds' custodian. The collateral is evaluated daily to ensure its market value exceeds the current market value of the repurchase agreements including accrued interest. In the event of default on the obligation to repurchase, the Funds have the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the other party to the agreement, realization and/or retention of the collateral or proceeds may be subject to legal proceedings. No repurchase agreements were purchased or sold by the Funds during the year ended September 30, 2005. 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 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. 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, resulting from changes in the exchange rates and changes in market prices of securities held. The Funds did not enter into any forward foreign currency contracts during the year ended September 30, 2005. 84 Notes to Financial Statements FUTURES CONTRACTS The Funds may invest in financial futures contracts for the purpose of hedging their existing securities or securities it intends to purchase against fluctuations in fair value caused by changes in prevailing markets. Upon entering into a financial futures contract, the Fund is required to pledge to the broker an amount of cash and/or other assets equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as "variation margin," are made or received by the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, the Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts and the underlying hedged assets. The Funds held no financial futures contracts during the year ended September 30, 2005. OPTIONS TRANSACTIONS Each Fund may write put and call options only if it owns an offsetting position in the underlying security. When a Fund writes a put or call option, an amount equal to the premium received is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. 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. The Funds did not enter into any option transactions during the year ended September 30, 2005. Notes to Financial Statements 85 Notes to Financial Statements (continued) INCOME TAXES The Funds intend to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code and, accordingly, the Funds will generally not be subject to federal and state income taxes, or federal excise taxes to the extent that they intend to make sufficient distributions of net investment income and net realized capital gains. Dividends received by shareholders of the Funds which are derived from foreign source income and foreign taxes paid by the Funds are to be treated, to the extent allowable under the Code, as if received and paid by the shareholders of the Funds. Dividends paid by the Funds from net investment income and distributions of net realized short-term gains are, for federal income tax purposes, taxable as ordinary income to shareholders. Dividends and distributions to shareholders are recorded by the Funds on the ex-dividend/distribution date. The Funds distribute net realized capital gains, if any, to shareholders at least annually, if not offset by capital loss carryovers. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from accounting principles generally accepted in the United States of America. 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 no later than one business day after trade date. However, for financial reporting purposes security transactions are accounted for on 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 in the Trust based upon relative net assets. 86 Notes to Financial Statements 2. FEES AND OTHER TRANSACTIONS WITH AFFILIATES INVESTMENT ADVISORY FEES ICON Advisers, Inc. ("ICON") serves as the investment adviser to the Funds and is responsible for managing the Funds' portfolios of securities. ICON receives a monthly management fee that is computed daily at an annual rate of 1.00% of the Funds' average daily net assets. TRANSFER AGENT, CUSTODY AND ACCOUNTING FEES U.S. Bank N.A. ("U.S. Bank") and U.S. Bancorp Fund Services, LLC ("U.S. Bancorp") provided domestic custodial services, transfer agent services and fund accounting for the Funds for various portions of the year ended September 30, 2005. U.S. Bank served as the custodian until April 17, 2005 and the transfer agent until April 24, 2005. For these services, the Trust paid 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. U.S. Bancorp served as the fund accountant until March 31, 2005, for which they were paid 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 paid for various out-of-pocket costs incurred by U.S. Bank and U.S. Bancorp. Effective April 1, 2005, the Trust retained BISYS Fund Services Ohio, Inc. ("BISYS") as Fund Accounting Agent for the Funds. For its services, the Trust pays BISYS 0.03% on the first $1.75 billion of Trust Assets, 0.0175% on the average daily net assets over $1.75 billion and up to $5 billion, and 0.01% on assets in excess of $5 billion. Effective April 18, 2005, the Trust retained Brown Brothers Harriman ("BBH") as custodian of the Trust's investments. For domestic custody services, the Trust pays BBH 0.0065% on the first $50 million of average net assets and 0.0050% on domestic assets above $50 million, plus certain transaction charges. For foreign custody services, the Trust pays BBH 0.03% on foreign assets plus certain transaction charges. Effective April 25, 2005, the Trust retained Boston Financial Data Services, Inc. as the Trust's transfer agent. For these services, the Trust pays an account fee of $13.25 per open account, $7.00 per networked account, $1.80 per closed account, plus certain other transaction and cusip charges. Notes to Financial Statements 87 Notes to Financial Statements (continued) ADMINISTRATIVE SERVICES The Trust has entered into an administrative services agreement with ICON pursuant to which ICON oversees the administration of the Trust's business and affairs, including regulatory reporting and all necessary office space, equipment, personnel and facilities. This agreement provides for an annual fee to ICON of 0.05% on the Funds' first $1.5 billion of average daily net assets and 0.045% on average daily net assets in excess of $1.5 billion. The administrative services agreement provides that ICON will not be liable for any error of judgment, mistake of law, or any loss suffered by the Trust in connection with matters to which the administrative services agreement relates, except for a loss resulting from willful misfeasance, bad faith or negligence by ICON in the performance of its duties. For the period October 1, 2004 thru March 31, 2005, U.S. Bancorp provided sub-administration services to ICON for a sub-administration fee of 0.02% on the Trust's first $1.5 billion of average daily net assets and 0.015% on assets above $1.5 billion, subject to a minimum annual fee of $140,000. Effective April 1, 2005, ICON entered into a sub-administration agreement with BISYS pursuant to which BISYS assists ICON with the administration and business affairs of the Trust. For its services, ICON pays BISYS at an annual rate of 0.025% on the first $1.75 billion of Trust assets and 0.015% on assets above $1.75 billion. RELATED PARTIES Certain Officers and Directors of ICON are also Officers and Trustees of the Funds; however, such Officers and Trustees (with the exception of the Chief Compliance Officer, "CCO") receive no compensation from the Funds. The CCO's salary is paid 90% by the Funds and 10% by the Adviser. For the year ended September 30, 2005, the total related amounts paid by the Trust under this arrangement are included in Other Expenses on the Statements of Operations. 3. LINE OF CREDIT The Funds had entered into Lines of Credit agreements with U.S. Bank that allowed the Funds to borrow funds, subject to certain conditions, for temporary 88 Notes to Financial Statements purposes. The maximum borrowing was limited to 25% of eligible securities held by the portfolio subject to the following maximums:
AVERAGE U.S. AVERAGE BBH MAXIMUM BANK BORROWING BORROWING - ------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund** $30,000,000 $1,677,700 $ 728,674 ICON Energy Fund 30,000,000 - - ICON Financial Fund 35,250,000 592,929 8,056,338 ICON Healthcare Fund 50,000,000 5,806,565 - ICON Industrials Fund 17,250,000 829,227 11,532,886 ICON Information Technology Fund 56,500,000 2,446,992 5,507,829 ICON Leisure and Consumer Staples Fund** 19,250,000 1,159,667 5,024,527 ICON Materials Fund 15,000,000 2,989,104 1,348,882 ICON Telecommunication & Utilities Fund 8,750,000 209,762 3,421,081
**Fund had outstanding borrowings as of September 30, 2005. This agreement was terminated when the custody was transferred to BBH. Effective April 18, 2005, the Funds entered into Lines of Credit agreements with BBH; the maximum borrowing is limited to 25% of eligible securities held by the portfolio subject to a maximum borrowing limit by the Trust of $115 million. Interest is charged at LIBOR plus 2.00% which was 5.86% at September 30, 2005. 4. FEDERAL INCOME TAX Income and capital gain distributions are determined in accordance with income tax regulations that may differ from accounting principles that are generally accepted in the United States of America. These differences are due to differing treatments for items such as net short-term gains, deferrals of wash losses, foreign currency transactions, net investment losses, and capital loss carryovers. The tax components of capital shown in the following tables represent losses or deductions the Funds may be able to offset against income and gains recognized in future years and post October loss deferrals. The accumulated losses noted in the following tables represent net capital loss carryforwards as of September 30, 2005 that may be available to offset future realized capital gains and thereby reduce future taxable income distributions. The ICON Information Technology Fund has a capital loss carryforward of $54,485,753, which expires in 2011. Notes to Financial Statements 89 Notes to Financial Statements (continued) The tax characteristics of dividends and distributions paid to shareholders during the fiscal year ended September 30, 2005, were as follows:
TOTAL ORDINARY NET LONG- TOTAL TAXABLE DISTRIBUTIONS FUND INCOME TERM GAINS DISTRIBUTIONS PAID - ---------------------------------------------------------------------------------------------------------------- ICON Financial Fund $4,850,731 $ 9,918,321 $14,769,052 $14,769,052 ICON Healthcare Fund - 877,529 877,529 877,529 ICON Leisure and Consumer Staples Fund 698,297 12,873,932 13,572,229 13,572,229 ICON Materials Fund 163,349 - 163,349 163,349 ICON Telecommunication & Utilities Fund 767,065 - 767,065 767,065
During the year ended September 30, 2005, the following capital loss carryforwards were used: ICON Consumer Discretionary Fund $ 6,093,146 ICON Energy Fund 7,535,248 ICON Industrials Fund 24,281,548 ICON Information Technology Fund 9,949,705 ICON Materials Fund 19,740,720 ICON Telecommunication & Utilities Fund 4,843,948
As of September 30, 2005, the components of accumulated earnings (deficit) on a tax basis was as follows:
TOTAL UNDISTRIBUTED UNDISTRIBUTED ACCUMULATED UNREALIZED ACCUMULATED ORDINARY NET LONG- ACCUMULATED CAPITAL AND APPRECIATION EARNINGS FUND INCOME TERM GAINS EARNINGS OTHER LOSSES (DEPRECIATION) (DEFICITS) - ---------------------------------------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund $ - $15,075,599 $15,075,599 $ - $ 12,171,156 $ 27,246,755 ICON Energy Fund 2,256,526 15,317,738 17,574,264 - 319,535,020 337,109,284 ICON Financial Fund 1,744,312 13,206,728 14,951,040 - 22,756,269 37,707,309 ICON Healthcare Fund - 10,591,515 10,591,515 - 129,803,475 140,394,990 ICON Industrials Fund - 4,282,208 4,282,208 - 43,716,211 47,998,419 ICON Information Technology Fund - - - (54,485,753) 32,373,653 (22,112,100) ICON Leisure and Consumer Staples Fund 34,856 9,538,955 9,573,811 - 3,912,163 13,485,974 ICON Materials Fund 236,509 8,471,489 8,707,998 - 16,866,025 25,574,023 ICON Telecommunication & Utilities Fund 1,719,240 6,033,092 7,752,332 - 21,471,438 29,223,770
90 Notes to Financial Statements As of September 30, 2005, book cost for financial reporting purposes is substantially the same for federal income tax purposes and differs from market value by net unrealized appreciation/(depreciation) of securities as follows:
UNREALIZED UNREALIZED NET APPRECIATION FUND COST APPRECIATION (DEPRECIATION) (DEPRECIATION) - ----------------------------------------------------------------------------------------- ICON Consumer Discretionary Fund $157,875,698 $15,296,598 ($3,125,442) $12,171,156 ICON Energy Fund 675,852,259 320,310,350 (775,330) 319,535,020 ICON Financial Fund 188,446,605 24,168,907 (1,412,638) 22,756,269 ICON Healthcare Fund 555,918,422 138,674,998 (8,871,523) 129,803,475 ICON Industrials Fund 172,989,749 45,027,631 (1,311,420) 43,716,211 ICON Information Technology Fund 187,918,260 34,932,479 (2,558,826) 32,373,653 ICON Leisure and Consumer Staples Fund 43,986,130 5,097,937 (1,185,774) 3,912,163 ICON Materials Fund 83,545,814 17,044,670 (178,645) 16,866,025 ICON Telecommunication & Utilities Fund 99,874,163 21,816,656 (345,218) 21,471,438
Notes to Financial Statements 91 Report of Independent Registered Public Accounting Firm To the Board of Trustees and Shareholders of the ICON Sector Funds: In our opinion, the accompanying statements of assets and liabilities, including the schedules of investments, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of ICON Consumer Discretionary Fund, ICON Energy Fund, ICON Financial Fund, ICON Healthcare Fund, ICON Industrials Fund, ICON Information Technology Fund, ICON Leisure and Consumer Staples Fund, ICON Materials Fund, and ICON Telecommunication & Utilities Fund (nine of the portfolios constituting ICON Funds, hereafter referred to as the "Funds") at September 30, 2005, 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 audits 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, 2005 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion. /s/ PricewaterhouseCoopers LLP Denver, Colorado November 22, 2005 92 Report of Accounting Firm Board of Trustees and Fund Officers (unaudited) The ICON Funds Board of Trustees ("Board") consists of six Trustees who oversee the 17 ICON Funds (the "Funds"). The Board is responsible for general oversight of the Funds' business and for ensuring 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, 54, Chairman of the Board. Dr. Callahan has been a Trustee of the Funds since their inception. Dr. Callahan also serves as President (1998 to present) and served as the Chief Investment Officer (1991 to 2004) of ICON Advisers, Inc. ("ICON Advisers"), the Funds' Investment Adviser. Dr. Callahan is also President (1998 to present); Director (1991 to present); and was previously Vice President (1991 to 1998) of ICON Distributors, Inc. ("IDI"), the Funds' Distributor, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan also serves as the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of ICON Management & Research Corporation ("IM&R"), the parent company of ICON Advisers and IDI. INDEPENDENT TRUSTEES GLEN F. BERGERT, 55. Mr. Bergert has been a Trustee of the Funds since 1999. Mr. Bergert is President of Venture Capital Management LLC (1997 to present); General Partner of SOGNO Partners LP, a venture capital company (2001 to present); and was previously a General Partner with KPMG Peat Marwick, LLP (1979 to 1997). Mr. Bergert is also a Director of Herre Bros, Inc., a contracting company (1998 to present); Delta Dental of Pennsylvania, an insurance company (1998 to present); DDP Inc., an insurance company (1998 to present); and Delta Reinsurance Corporation (2000 to present). JOHN C. POMEROY, JR., 56. Mr. Pomeroy has been a Trustee of the Funds since November 2002. Mr. Pomeroy is Chief Investment Officer and Director of Investments, Pennsylvania State University (2001 to present) and was Portfolio Manager and Product Manager of Trinity Investment Management Corporation (1989 to 2001). GREGORY KELLAM SCOTT, 57. Mr. Scott has been a Trustee of the Funds since November 2002. Mr. Scott was Senior Vice President -- Law, General Counsel and Secretary of GenCorp, Inc., a multinational technology-based manufacturing company (2002 to 2004); Vice President and General Counsel of Kaiser-Hill Company LLC, a nuclear clean-up and environmental remediation company (2000 to 2002) and a Colorado Supreme Court Justice (1993 to 2000). Mr. Scott is also a member of the National Board of Directors of the Constituency for Africa (1997 to present) and serves as Executive Director of Indiana Civil Rights Commission (2005-present). Trustees and Officers 93 Board of Trustees and Fund Officers (continued) (unaudited) R. MICHAEL SENTEL, 57. 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, 52. 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, 54. Dr. Callahan has been President of the Funds since their inception in 1996. Dr. Callahan also serves as ICON Advisers' President (1998 to present) and served as the Chief Investment Officer (1991 to 2004). Dr. Callahan is also President (1998 to present), Director (1991 to present) and was previously Vice President (1991 to 1998) of IDI, and is President of ICON Insurance Agency, Inc. (2004 to present). Dr. Callahan is also the Director (1994 to present), and was previously Secretary/Treasurer (1994 to 1998) of IM&R. ERIK L. JONSON, 56. Mr. Jonson has been a Vice President and Chief Financial Officer of the Funds since their inception and from May 20, 2005 to November 15, 2005 acting Secretary. 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). 94 Trustees and Officers Other Information (unaudited) ALL FUNDS RENEWAL OF INVESTMENT ADVISORY AGREEMENT. In determining to renew the investment advisory agreements between ICON Funds (the "Trust") and ICON Advisers, Inc. ("ICON" or the "Adviser") the Board requested, was provided with and reviewed data with respect to ICON, its personnel, and the services to be provided to each Fund by ICON under the Trust's Investment Advisory Agreement dated October 9, 1996, as amended (related to the Sector, Foreign and Core Equity Funds) and under the Trust's Investment Advisory Agreement dated July 9, 2002 and effective October 1, 2002, as amended (related to the Specialty Funds -- Bond, Covered Call, Equity Income and Long/Short Funds) (collectively, the "Advisory Agreements"). The data included information concerning advisory, distribution and administrative services provided to the Funds by ICON and its related companies; information concerning other businesses of those companies; comparative data related to exchange traded funds versus the Sector Funds; and comparative data obtained from Lipper Analytical Services related to Fund performance and Fund expenses. On August 8, 2005, the Board of Trustees, including all of the Trustees that are not "interested persons" of the Trust (the "Independent Trustees"), approved continuation of the Advisory Agreements with the Adviser for each Fund for an additional one-year term commencing October 1, 2005. The Independent Trustees were represented by independent legal counsel throughout the process. Prior to acting on the matter, the Independent Trustees met separately as a group in private sessions with their independent legal counsel to review and discuss the foregoing information and also met with management to discuss responses to questions raised during the process. In addition, the Independent Trustees received materials from their independent legal counsel discussing the legal standards applicable to their consideration of the agreement. In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed information relating to the Adviser's operations and personnel. Among other things, the Adviser provided biographical information on its professional staff and descriptions of its organizational and management structure. In the course of their deliberations the Board evaluated, among other things, information relating to the investment philosophy, strategies and techniques used in managing each Fund, the qualifications and experience of the Adviser's investment personnel, the Adviser's compliance programs, the Adviser's brokerage practices, including the extent to which the Adviser obtains research through "soft dollar" arrangements with the Funds' brokerage, and the financial and non-financial resources available to provide services required under the Advisory Agreement. Other Information 95 Other Information (continued) (unaudited) In considering the reasonableness of the fee payable to the Adviser for managing each Fund, the Board reviewed, among other things, financial statements of the Adviser and an analysis of the profitability to the Adviser and its affiliates of their relationship with each Fund over various time periods, which analysis identified all revenues and other benefits received by the Adviser and its affiliates from managing each Fund, the costs associated with providing such services and the resulting profitability to the Adviser and its affiliates. The Board considered the current and anticipated asset levels of each Fund and the willingness of the Adviser to waive fees and pay expenses of the Funds from time to time to limit the total expenses of the Funds. The Board concluded that the profitability to the Adviser and its affiliates from their relationship with the Funds is not excessive and that the Adviser is not realizing material benefits from economies of scale that would warrant adjustments to the fees for any Fund at this time. The Board of Trustees concluded that, in light of the nature, extent and quality of the services provided by the Adviser and the levels of profitability associated with providing these services, the fees charged by the Adviser under the Advisory Agreements to each Fund are reasonable. The Board of Trustees' considered: 1. In connection with reviewing data bearing upon the nature, quality, and extent of services furnished by ICON to each Fund, the Board assessed data concerning ICON's staffing, systems and facilities. The Board also assessed ICON's non-Trust business to see if there are any initiatives that would dilute service to the Trust. It was noted: A. That the breadth and the quality of investment advisory and other services being provided to each Fund is satisfactory, as evidenced in part by the performance record of each Fund compared with the performance records of a peer group of comparable funds; B. That ICON has made significant expenditures in the past year and in prior years to ensure that it has the sophisticated systems and the highly trained personnel necessary for it to be able to continue to provide quality service to the Funds' shareholders, including the dedication of substantial resources to ICON's investment and trading departments; and C. That the Board is satisfied with the research, portfolio management, and trading services, among others, being provided by ICON to the Funds, and is charging fair, reasonable, and competitive fees. 2. In connection with reviewing data bearing upon the costs of services to be provided and profits to be realized by ICON and its related companies from the relationship with the Trust, the Board considered the Lipper comparative data, data concerning ICON's soft-dollar arrangements, data from independent reviews of compliance procedures, costs borne by ICON in providing advisory services to each Fund and the profitability of ICON in light of the estimated 96 Other Information profitability analyses which had been provided by ICON, other benefits to ICON from serving as the Funds' adviser, and ICON's financial statements. A. With respect to the soft-dollar arrangements the Board assessed all facets of the arrangements -- including the quality of trade execution. It was noted that ICON receives research assistance from the use of soft dollars generated from Fund portfolio transactions and that such research assists ICON in providing quality investment advisory services to the Funds and other accounts to which it provides advisory services. The Board concluded that the arrangements are consistent with Fund brokerage practices and benefit the Funds and their shareholders. B. The Board noted that ICON benefits from serving directly as investment adviser and administrative agent, and through its affiliate, as the principal underwriter for the Funds. With respect to the distribution services, the Board noted that proceeds of the Trust's distribution plans pursuant to Rule 12b-1 under the 1940 Act for the International Equity and Specialty Funds are paid to ICON's affiliate and that the distributor has not profited from plan proceeds as all of the proceeds have been or will be used to cover distribution and marketing expenses. In this regard, the Trustees noted that marketing efforts have been successful as evidenced by Fund asset levels. With respect to the administrative fee paid to ICON, the Board reviewed the comparative data related to those services. The Board also considered the compliance experience in these service areas and concluded that the services provided by ICON and its affiliates to the Funds are satisfactory and that the profits derived from providing the services are competitive and reasonable. C. The Board also noted the risks assumed by ICON in providing investment advisory, distribution and administrative services (including compliance) to each Fund, including the capital commitments which have been made in the past and which continue to be made by ICON to ensure the continuation of the highest quality of service to the Funds is made with the recognition that the Funds' advisory relationship with ICON can be terminated at any time and must be renewed on an annual basis. 3. In connection with assessing data bearing upon the fairness of fee arrangements, the Board used data from Lipper, Inc. concerning funds of similar size and funds of larger size, as well as data concerning ICON's other clients: A. In this regard the Board noted that the Trust had recently changed fund accounting, transfer agent and custodial service providers; and that the expense numbers in the comparative data did not reflect the lower fees to be charged by the current service providers. Other Information 97 Other Information (continued) (unaudited) B. The advisory fee structures of the Funds were considered in comparison with advisory fees and expense ratios of other similarly-managed funds as set forth in the comparative data. It was noted that contractual advisory fees for the Sector Funds were higher than fees for similar funds; but that the Sector Funds' expense ratios were competitive and in most instances lower than those of similarly-managed Funds. It was noted that contractual advisory fees for the International Funds were above the average fees for similar funds; and that the Funds' expense ratios were competitive in light of their size. It was noted that contractual advisory fees for the Specialty Funds were in line with fees for similar funds; and that, with the exception of the Bond Fund, the Specialty Funds' expense ratios were lower than those of similarly-managed Funds. It was noted that contractual advisory fee for the Core Equity Fund was below the average fee for similar funds; and that its expense ratio was lower than those of similarly-managed Funds. C. In connection with assessing advisory fees and expense ratios it was noted ICON has contractually agreed to impose expense limitations on the International Equity and the Specialty Funds at a cost to ICON. D. It was noted that generally the fees paid to ICON for managing other institutional accounts (such as pension plans) are not lower than the fees paid by similarly-managed Funds; however, to the extent such fees are lower, it is due to the fact that such accounts are less costly for ICON to manage. E. It was noted that the advisory and other fees payable by the Funds to ICON are essentially fees which would be similar to those which would have resulted solely from "arm's-length" bargaining, and may well be lower than fees arrived solely from such arm's-length negotiation. 4. The Board considered the extent to which economies of scale could be realized as a Fund grows in assets and whether the Fund's fees reflect these economies of scale for the benefit of Fund shareholders. In the regard the Board noted the Adviser's commitment to establish breakpoints in its investment advisory fees at elevated asset levels commencing during the next fiscal year. Based on these considerations, among others, the Board, including all of the Independent Trustees, concluded that the continuation of the advisory agreement was in the best interests of each Fund and its shareholders, the services to be performed under the agreement were services required for the operation of the Funds, ICON had provided satisfactory advisory services to the Funds in the past, and the fees for the advisory services which ICON would 98 Other Information perform and other benefits from the relationship with the Trust and consistent with fees paid by similar funds, are reasonable in light of the comparative data, and would be within the range of what would have been negotiated at arm's length in light of the circumstances. SUPPLEMENTAL TAX INFORMATION For corporate shareholders, the following percentage of the total ordinary income dividends paid during the fiscal year ended September 30, 2005, qualify for the corporate dividends received deduction for the following Funds:
DIVIDENDS RECEIVED FUND DEDUCTION - ----------------------------------------------------------------------- ICON Financial Fund 10.19% ICON Leisure and Consumer Staples Fund 100.00 ICON Materials Fund 59.33 ICON Telecommunication & Utilities Fund 24.27
For the fiscal year ended September 30, 2005, the following Funds paid qualified dividend income of:
FUND AMOUNT - ------------------------------------------------------------------------ ICON Financial Fund $2,805,053 ICON Leisure and Consumer Staples Fund 698,297 ICON Materials Fund 163,349 ICON Telecommunication & Utilities Fund 767,065
The Funds designate the following amounts as long term capital gain distributions qualifying for the maximum 15% income tax rate for individuals:
FUND AMOUNT - ------------------------------------------------------------------------- ICON Financial Fund $ 9,918,321 ICON Healthcare Fund 877,529 ICON Leisure and Consumer Staples Fund 12,873,932
Other Information 99 PORTFOLIO HOLDINGS A list of each ICON Fund's Top 10 holdings is available at www.iconadvisers.com on or about 15 days following each month end. Each ICON Fund also files a complete schedule of portfolio holdings for the first and third quarters of its fiscal year with the SEC on Form N-Q. The ICON Funds' Forms N-Q are available at www.sec.gov or may be reviewed and copied at the Commission's Public Reference Room in Washington, DC. Information about the Public Reference Room may be obtained by calling 1-800-SEC-0330. PROXY VOTING A 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 is available at www.iconadvisers.com or on the SEC's website at www.sec.gov. FOR MORE INFORMATION This report is for the general information of the Funds' shareholders and is not authorized for distribution to prospective investors unless preceded or accompanied by a current prospectus. You may obtain a copy of the prospectus, which contains information about the investment objectives, risks, charges, expenses, and share classes of each ICON Fund, by visiting www.iconadvisers.com or by calling 1-800-764-0442. Please read the prospectus carefully before investing. ICON Distributors, Inc., Distributor 100 THIS PAGE INTENTIONALLY LEFT BLANK [ICON FUNDS LOGO] For more information about the ICON Funds, contact us: By Telephone 1-800-764-0442 By Mail ICON Funds P.O. Box 55452 Boston, MA 02205-8165 In Person ICON Funds 5299 DTC Boulevard, 12(th) Floor Greenwood Village, CO 80111 On the Internet www.iconadvisers.com By E-Mail info@iconadvisers.com
[ICON FUNDS LOGO] 1-800-764-0442 www.iconadvisers.com I-147-SEC ITEM 2. CODE OF ETHICS. During the period covered by the report, with respect to the registrant's code of ethics that applies to its principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions; there have been no amendments to, nor any waivers granted from, a provision that relates to any element of the code of ethics definition enumerated in paragraph (b) of this Item 2. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. 3(a)(1) The registrant's board of directors has determined that the registrant has at least one audit committee financial expert serving on its audit committee. 3(a)(2) The audit committee financial expert is Jonathan F. Zeschin, who is "independent" for purposes of this Item 3 of Form N-CSR. ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES. Fiscal year ended 9/30/05
Registrant (g) Covered Entities 1 ---------- ---------------- (a) Audit Fees 2 $298,250 N/A (b) Non-Audit Fees (c) Tax Fees 3 $64,300 $34,650 All Other Fees 4 - $28,400 (d) Total Non-Audit Fees $64,300 $63,050
Fiscal year ended 9/30/04
Registrant (g) Covered Entities 1 ---------- ---------------- (a) Audit Fees 2 $261,500 N/A (b) Non-Audit Fees (c) Tax Fees 3 $ 91,300 $30,870 All Other Fees 4 $ 6,300 $85,700 5 (d) Total Non-Audit Fees $ 97,600 $116,570
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. 4. "All Other Fees" paid by the Registrant in fiscal year 2004 reflect agreed-upon procedures related to trade allocation review. For fiscal year 2005, the fees were related to multi-class issues. 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. (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. Not applicable. ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. Not applicable. ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. ITEM 11. CONTROLS AND PROCEDURES. (a)The registrant's principal executive officer and principal financial officer have concluded, based on their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures are adequately designed and are operating effectively to ensure that information required to be disclosed by the registrant on Form N-CSR is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b)There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR 270.30a-3(d)) that occurred during the second fiscal quarter of the period covered by this report that have materially affected or are reasonably likely to materially affect, the registrant's internal control over financial reporting. ITEM 12. EXHIBITS. (a)(1) THE CODE OF ETHICS THAT IS THE SUBJECT OF THE DISCLOSURE REQUIRED BY ITEM 2 IS FURNISHED HEREWITH. (a)(2) CERTIFICATIONS PURSUANT TO RULE 30A-2 ARE FURNISHED HEREWITH. (a)(3) Not Applicable. (b) CERTIFICATIONS PURSUANT TO RULE 30A-2(b) ARE FURNISHED HEREWITH. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) ICON FUNDS -------------------------------------------------------------- By (Signature and Title)* /s/ Craig T. Callahan ------------------------------------------------- Craig T. Callahan, President and Chief Executive Officer (Principal Executive Officer) Date December 8, 2005 ---------------------------------------- Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title)* /s/ Craig T. Callahan ------------------------------------------------------- Craig T. Callahan, President and Chief Executive Officer (Principal Executive Officer) Date December 8, 2005 ---------------------------------------- By (Signature and Title)* /s/ Erik L. Jonson ------------------------------------------------------- Erik L. Jonson, Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) Date December 8, 2005 ---------------------------------------- EX-99.CODE OF COND 2 d30941exv99wcodeofcond.txt CODE OF CONDUCT EXHIBIT 99.CODE ICON MANAGEMENT & RESEARCH CORPORATION ICON ADVISERS, INC. ICON DISTRIBUTORS, INC. ICON FUNDS ---------- CODE OF CONDUCT INSIDER TRADING POLICY GIFT POLICY OUTSIDE EMPLOYMENT POLICY ---------- LAST REVISED November, 12, 2004 ---------- DEFINITIONS .................................................... 3 INTRODUCTION, STATEMENT OF PURPOSE AND APPLICATION ............. 4 CAUTION REGARDING PERSONAL TRADING ACTIVITIES ............... 5 COMMUNICATION WITH OUTSIDE TRUSTEES ......................... 5 CODE OF CONDUCT ................................................ 5 OVERVIEW .................................................... 5 EXCLUSIONS APPLICABLE TO OUTSIDE TRUSTEES ................... 5 GENERAL PROHIBITIONS ........................................ 6 TRADING RESTRICTIONS ........................................ 7 PRECLEARANCE ................................................... 7 SHORT SALES .................................................... 7 HEDGE FUNDS, INVESTMENT CLUBS, AND OTHER GROUP ................. 8 EXCLUDED TRANSACTIONS .......................................... 8 BLACKOUT PERIODS ............................................ 8 PENDING ORDERS .............................................. 9 SEVEN DAY RULE .............................................. 9 FIFTEEN DAY WINDOW .......................................... 9 60 DAY RULE ................................................. 9 PRE-CLEARANCE PROCEDURES .................................... 9 GENERAL PRE-CLEARANCE .................................... 9 PRE-CLEARANCE REQUIREMENTS FOR INVESTMENT PERSONNEL ...... 10 PRE-CLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS .. 10 FIVE BUSINESS DAY EFFECTIVE PERIOD ....................... 10
REPORTING TRANSACTIONS AND ACCOUNTS ......................... 10 QUARTERLY TRANSACTIONS REPORTS ........................... 11 ANNUAL HOLDINGS REPORTS .................................. 11 PASSIVE ACCOUNTS ......................................... 11 OTHER REQUIRED FORMS ........................................ 12 ACKNOWLEDGEMENT FORM ..................................... 12 REPORT OF SECURITIES OWNERSHIP ........................... 12 INVESTMENT PERSONNEL REPRESENTATION FORM ................. 12 OUTSIDE TRUSTEE REPRESENTATION FORM ...................... 12 INSIDER TRADING POLICY ......................................... 12 BACKGROUND INFORMATION ...................................... 12 WHO IS AN INSIDER? ....................................... 13 WHEN IS INFORMATION NONPUBLIC? ........................... 13 WHAT IS MATERIAL INFORMATION? ............................ 13 WHEN IS INFORMATION MISAPPROPRIATED? ..................... 13 PENALTIES FOR INSIDER TRADING ............................ 14 WHO IS A CONTROLLING PERSON? ............................. 14 PROCEDURES TO IMPLEMENT POLICY .............................. 14 IDENTIFYING MATERIAL INSIDE INFORMATION .................. 14 REPORTING INSIDE INFORMATION ............................. 15 WATCH AND RESTRICTED LISTS ............................... 15 PROTECTING INFORMATION ................................... 15 RESPONSIBILITY TO MONITOR TRANSACTIONS ................... 16 TENDER OFFERS ............................................ 17 GIFT POLICY .................................................... 17 GIFT GIVING ................................................. 17 GIFT RECEIVING .............................................. 17 CUSTOMARY BUSINESS AMENITIES ................................ 17 OUTSIDE EMPLOYMENT POLICY ...................................... 18 SUPERVISORY AND COMPLIANCE PROCEDURES .......................... 18 SUPERVISORY PROCEDURES ...................................... 18 PREVENTION OF VIOLATIONS ................................. 18 DETECTION OF VIOLATIONS .................................. 18 COMPLIANCE PROCEDURES ....................................... 19 REPORTS OF POTENTIAL DEVIATIONS OR VIOLATIONS ............ 19 ANNUAL REPORTS ........................................... 19 RECORDS ........................................................ 19 INSPECTION ..................................................... 19 CONFIDENTIALITY ................................................ 19 THE ETHICS COMMITTEE ........................................ 20 MEMBERSHIP OF THE COMMITTEE .............................. 20 COMMITTEE MEETINGS ....................................... 20 SPECIAL DISCRETION ....................................... 20 GENERAL INFORMATION ABOUT THE CODE OF CONDUCT .................. 21 ENFORCEMENT .................................................... 21 INTERNAL USE ................................................... 21 FORMS .......................................................... 21
DEFINITIONS The following definitions are used throughout this document. Unless otherwise defined, all capitalized terms used in this document shall have the same meaning as set forth in this section. 1) "Access Persons" are Investment Personnel, Directors/Trustees and officers of ICON Management & Research Corporation ("IM&R"), ICON Advisers, Inc. "ICON Advisers")ICON Distributors,Inc. ("ICON DISTRIBUTORS")(collectively "ICON Companies"), and ICON Funds ("ICON"); and any employee who, with respect to any client account of ICON Companies or ICON, makes any recommendation, participates in the determination of which recommendation will be made, or whose duties relate to the determination of which recommendation will be made, or who obtains or has access to any information concerning recommendations or trading activity on Covered Securities. 2) "Beneficial Ownership" shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder. For example, in addition to a person's own accounts, the term "Beneficial Ownership" encompasses securities held in the name of a spouse or equivalent domestic partner, minor children, a relative sharing your home, or certain trusts under which you or a related party is a beneficiary, or held under other arrangements indicating a sharing of financial interest. 3) "Covered Securities" generally includes all securities, whether publicly or privately traded; any option, future, forward contract or other obligation involving a security or index of securities, including an instrument whose value is derived or based on any of the above (a "derivative"); and any transactions in affiliated mutual funds. The following are not Covered Securities: - - Shares of open-end investment companies other than shares in the ICON Funds (i.e., mutual funds); - - Shares of broad index-based exchange traded funds ("ETFs") (does not include sector-based ETFs); - - Investments in qualified state tuition programs under Section 529 ofthe Internal Revenue Code of 1986, as amended ("529 Plans"); - - Direct obligations of the U.S. government or any derivative thereof; - - Obligations of agencies and instrumentalities of the U.S. government with a remaining term to maturity of one year or less, or any derivative thereof; - - Securities representing a limited partnership interest in a real estate limited partnership; - - Money market instruments, such as certificates of deposit, bankers' acceptances, repurchase agreements, and commercial paper; - - Insurance contracts, including life insurance or annuity contracts; - - Direct investments in real estate, business franchises or similar ventures; and - - Physical commodities (including foreign currencies), or any derivatives thereof. 4) "Designated Compliance Representatives" are ICON Companies' Chief Compliance Officer and ICON Companies' General Counsel and/or such persons' designee(s). 5) "Designated Legal Representative" is ICON Companies' General Counsel or such person's designee(s). 6) "Directors/Trustees" are directors and/or trustees of ICON Companies and/or ICON. 7) "Equity Review Committee" is comprised of ICON Advisers' President and members of its Investment Committee. page 3 8) "Ethics Committee" is comprised of ICON Advisers' General Counsel, Chief Compliance Officer, Chief Financial Officer and President. 9) "Inside Trustees" are Trustees who are interested persons, as defined in the Investment Company Act of 1940, of ICON. 10) "Investment Personnel" refers to portfolio managers, research analysts, trading department personnel and any other persons who provide information and advice directly or indirectly to any advisory client of ICON Companies, or who assist in executing the portfolio managers' decisions. 11) "NASD" is the National Association of Securities Dealers, Inc. 12) "Outside Trustees" are Trustees who are not interested persons, as defined in the Investment Company Act of 1940, of ICON. INTRODUCTION, STATEMENT OF PURPOSE AND APPLICATION ICON Companies provides investment advisory services to various clients and accounts (collectively the "Managed Accounts"), some of which are investment companies registered under the Investment Company Act of 1940 (the "Company Act"). Persons designated as Access Persons of ICON Companies, who have access to information about the investment activities of the Managed Accounts, owe an undivided duty of loyalty to such Managed Accounts, and must therefore adhere to the highest ethical and professional standards of conduct. It is the objective of all persons subject to this Code of Conduct ("Code") to maintain the highest standards of integrity and conduct in order to meet their respective duties and obligations to ICON Companies and the Managed Accounts. These standards, as contained in this Code, are based on the requirements of the Company Act, the Investment Advisers Act of 1940 (the "Advisers Act"), the Insider Trading and Securities Fraud Enforcement Act ("ITSFEA"), and the laws governing the management of investment accounts. The Code is intended to ensure that you at all times place first the interests of the Managed Accounts, (ii) conduct all personal trading consistent with the Code and in such a manner as to avoid any actual or potential conflict of interest or any abuse of your position of trust and responsibility, and (iii) not use any material nonpublic information in securities trading. The Code also establishes policies regarding other matters, such as outside employment and the giving or receiving of gifts. The Code is intended to comply with Rule 17j-1 under the Company Act, as amended, which requires ICON Companies to adopt a code of ethics containing provisions reasonably necessary to prevent specified individuals from engaging in certain conduct. Under Rule 17j-1(a), certain conduct by "access persons" (as defined in the Rule) of investment companies managed by ICON Companies, of ICON Companies itself as adviser to these companies, and of the principal underwriter of the investment companies, with respect to purchases or sales of securities held or to be acquired by the investment companies is prohibited. The Code is also intended to comply with the provisions of Rule 204-2 under the Advisers Act, which requires ICON Companies to maintain records of securities transactions in which certain of its personnel have any Beneficial Ownership. The Code applies to all Investment Personnel, Directors/Trustees and officers of ICON Companies, and to all other individuals who are Access Persons. The Code applies to transactions for your personal accounts and any other accounts over which you have Beneficial Ownership. You may be deemed the Beneficial Owner of any account in which you have a direct or indirect financial interest. Such accounts include, among others, accounts held in the name of your spouse or equivalent domestic partner, your minor children, a relative sharing your home, or certain trusts under which you or such persons are a beneficiary. You are required to read and retain this Code and to sign and return the attached Acknowledgment Form to the Compliance Department ("Compliance") upon page 4 commencement of employment or other services, and on an annual basis thereafter. The Acknowledgment Form confirms that (i) you have received, read and asked any questions necessary to understand the Code, (ii) you agree to conduct yourself in accordance with the Code, and (iii) you have complied with the Code during such time as you have been associated with ICON Companies. Depending on your status, you may be required to submit additional reports and/or obtain clearances as discussed more fully below. Adherence to this Code is a fundamental condition of service with ICON Companies, and Directors/Trustees, officers and other Access Persons of ICON Companies bear full responsibility for ensuring that they and members of their immediate families and personal households comply with the provisions and intent of this Code. Only by careful adherence to the requirements outlined in the Code can we protect our reputation and avoid legal or regulatory actions. CAUTION REGARDING PERSONAL TRADING ACTIVITIES Certain personal trading activities may be risky not only because of the nature of the transactions, but also because action necessary to close out a position may, for some Access Persons, become prohibited while the position remains open (e.g., closing out short sales and transactions in derivatives). Furthermore, if ICON Companies becomes aware of material nonpublic information, or if a Managed Account is active in a given security, some Access Persons may find themselves "frozen" in a position. ICON Companies will not bear any losses in personal accounts resulting from the application of this Code. COMMUNICATION WITH OUTSIDE TRUSTEES As a regular business practice, ICON Companies attempts to keep the Trustees informed with respect to its investment activities through reports and other information provided to them in connection with board meetings and other events. In addition, ICON Companies personnel are encouraged to respond to inquiries from Trustees, particularly as they relate to general strategy considerations or economic or market conditions affecting ICON Companies. However, it is ICON Companies' policy not to communicate specific trading information and/or advice on specific issues to the Outside Trustees (i.e., no information should be given on securities for which current activity is being considered for Managed Accounts). Any pattern of repeated requests by such Trustees should be reported to the Chief Compliance Officer. CODE OF CONDUCT OVERVIEW In general, it is unlawful for persons affiliated with investment companies, their principal underwriters or their investment advisers to engage in personal transactions in securities which are held or are to be acquired by a registered investment company, if such personal transactions are made in contravention of rules which the Securities and Exchange Commission (the "SEC") has adopted to prevent fraudulent, deceptive and manipulative practices. Such rules require each registered investment company, investment adviser and principal underwriter to adopt its own written code of ethics containing provisions reasonably necessary to prevent its access persons from engaging in such conduct, and to maintain records, use reasonable diligence, and institute such procedures as are reasonably necessary to prevent violations of such code. This Code and information reported hereunder will enable ICON Companies to fulfill these requirements. EXCLUSIONS APPLICABLE TO OUTSIDE TRUSTEES Because they have limited access to information regarding trading activity for the Managed Accounts, certain of the prohibitions discussed in this section are not applicable to the Outside Trustees. Specifically, Outside Trustees are excluded from the following: 1. The pre-clearance requirements prior to engaging in any personal transaction in Covered Securities. See PRE-CLEARANCE on page 7. page 5 2. The prohibition against participation in hedge funds, investment clubs, or similar investment groups except as a passive investor. See HEDGE FUNDS, INVESTMENT CLUBS AND OTHER GROUPS on page 8. 3. The requirement to disgorge any price advantage realized if a personal securities transaction in a Covered Security coincides with a transaction in the same security executed by ICON Companies on behalf of any Managed Account within fifteen days after the personal trade. See FIFTEEN DAY WINDOW on page 9. 4. The requirement to disgorge any profits realized in the purchase and sale, or sale and purchase, of the same or equivalent Covered Securities within 60 calendar days if a Managed Account held or traded the security during the 60 day period. See 60 DAY RULE on page 9. 5. The requirement to pre-clear participation in a tender offer or stock purchase plan prior to submitting notice to participate in such tender offer or notice of participation in such stock purchase plan to the applicable company. See PRE-CLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS on page 10. 6. The requirement to arrange for provision of duplicate account statements and confirmations showing all transactions in brokerage or commodities accounts in which the Outside Trustee has a beneficial interest. See REPORTING TRANSACTIONS AND ACCOUNTS on page 10. Note, however, that Outside Trustees must report a transaction in a Covered Security if such person, at the time of that transaction, knew, or in the ordinary course of fulfilling his or her official duties as a trustee should have known, that, during the fifteen business-day period immediately before or after the date of his or her personal transaction, such security was purchased or sold by, or was being considered for purchase or sale on behalf of, any registered investment company for which such person acts as trustee. GENERAL PROHIBITIONS The following activities are prohibited for Access Persons. Persons who violate any of the following prohibitions shall disgorge any profits realized in connection with such violation. 1. Purchasing, in an initial public offering, Covered Securities (see Definitions section) for which no public market in the same or similar securities of that issuer has previously existed. No securities may be purchased in an offering that constitutes a "hot issue" as defined in NASD rules. Such securities may be purchased, however, where the individual has an existing right to purchase the security based on his or her status as an investor, policyholder or depositor of the issuer. In addition, securities issued in reorganizations are also outside the scope of this prohibition if the transaction involves no investment decision on the part of the employee except in connection with a shareholder vote. 2. Causing a Managed Account to take action, or to fail to take action, for personal benefit, rather than to benefit such Managed Account. For example, an Access Person would violate this Code by causing a Managed Account to purchase a security owned by the Access Person for the purpose of supporting or increasing the price of that security, or by causing a Managed Account to refrain from selling a security in an attempt to protect a personal investment, such as an option on that security. 3. Using, for personal profit, knowledge of portfolio transactions made or contemplated for the Managed Accounts, or causing others to profit by the market effect of such transactions. 4. Disclosing current portfolio transactions made or contemplated for the Managed Accounts, as well as any other nonpublic information, to anyone outside of ICON Companies. 5. Engaging in fraudulent conduct in connection with the purchase or sale of a security held or to be acquired by a Managed Account, including without limitation: a) Employing any device, scheme or artifice to defraud any Managed Account; page 6 b) Making to any Managed Account any untrue statement of material fact or omitting to state to such Managed Account a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading; c) Engaging in any act, practice or course of business which operates or would operate as a fraud or deceit upon any Managed Account; or d) Engaging in any manipulative practice with respect to any Managed Account. 6. Investing in derivatives to evade the restrictions of this Code. Accordingly, individuals may not use derivatives to take positions in securities which the Code would prohibit if the positions were taken directly. 7. No Investment Personnel may serve on the board of directors of a publicly traded company without prior written authorization by the President of ICON Advisers. No such service shall be approved without a finding that the board service would not be inconsistent with the interests of the Managed Accounts. If board service is authorized, the Investment Personnel serving as director normally should be isolated from those making investment decisions with respect to the company involved through "Chinese Walls" or other procedures. 8. If an Investment Person is planning to invest or make a recommendation to invest in a security for a Managed Account, and such person has a material interest in the security, such person must first disclose such interest to the Chief Investment Officer and obtain his consent. The Chief Investment Officer may only grant consent if he has no material interest in the security, and must immediately inform the Ethics Committee in writing of the granting of such consent. A material interest is Beneficial Ownership of any securities (including derivatives, options, warrants or rights), offices, directorships, significant contracts, or interests or relationships that are likely to affect such person's judgment. 9. No Investment Person may do or cause to be done on behalf of any Managed Account, any business with a broker-dealer in which that Investment Person holds any material financial interest, unless such material financial interest is first disclosed to the Chief Compliance Officer, and trading with the subject broker-dealer is approved by the Chief Investment Officer in consultation with the Ethics Committee. 10. Any Investment Person who acquires Beneficial Ownership of securities in a private placement must disclose that investment when such Investment Person plays a part in the decision of ICON Companies to purchase securities of that issuer for a Managed Account. Such investment decision will be subject to an independent review by Investment Personnel with no personal interest in the subject issuer. TRADING RESTRICTIONS PRE-CLEARANCE Access Persons (except Outside Trustees who do not require pre-clearance and portfolio managers who require pre-clearance on all trades) must obtain pre-clearance, for any trade in a Covered Security that is greater than $5,000, prior to engaging in any personal transaction in Covered Securities. Pre-clearance procedures, as well as special procedures for pre-clearing transactions in tender offers and stock purchase plans, are set forth below. Trading activity, although pre-cleared and otherwise permitted under this Code, must not be excessive in terms of time spent during your normal working hours. The trading restrictions of the Code apply to all direct or indirect acquisitions or dispositions of Covered Securities, whether by purchase, sale, tender, stock purchase plan, gift, inheritance, or otherwise. Unless otherwise noted, the following trading restrictions are applicable to any transaction in a Covered Security Beneficially Owned by an Access Person. Outside Trustees are exempt from certain trading restrictions, as noted, because of their limited access to current information regarding Managed Account investments. page 7 SHORT SALES Any Access Person (except Outside Trustees) who sells short a Covered Security that such person knows is held long by any Managed Account shall disgorge any profit realized on such transaction. This prohibition shall not apply, however, to securities indices or derivatives thereof (such as futures contracts on the S&P 500 Index). Managed Account ownership of Covered Securities will be checked as part of the pre-clearance process referenced above. HEDGE FUNDS, INVESTMENT CLUBS, AND OTHER GROUPS No Access Person (except Outside Trustees) may participate in hedge funds, investment clubs, or similar investment groups except as a passive investor. Such passive investments are not subject to these trading restrictions, but must be reported to Compliance as noted under Reporting Transactions and Accounts, below. EXCLUDED TRANSACTIONS Some or all of the trading restrictions listed below do not apply to the following transactions. However, these transactions must still be reported to Compliance (see Reporting Transactions and Accounts): 1. Tender offer transactions are exempt from all trading restrictions except pre-clearance. 2. Stock purchase plans are exempt from all trading restrictions except pre-clearance and the seven-day rule. 3. The acquisition of securities through stock dividends, dividend reinvestments, stock splits, reverse stock splits, mergers, consolidations, spin-offs, or other similar corporate reorganizations or distributions generally applicable to all holders of the same class of such securities are exempt from all trading restrictions. 4. The acquisition of securities through the exercise of rights issued by an issuer pro rata to all holders of a class of the issuer's securities, to the extent such rights were acquired from the issuer, and sales of such rights so acquired, are exempt from all trading restrictions. 5. The acquisition or disposition of securities of the same issuer in the amount of $5,000.00 or less in any 24-hour period is exempt from the pre-clearance requirement. 6. The acquisition of securities by gift or inheritance is exempt from all trading restrictions. Future transactions involving such securities, however, are subject to the provisions of this Code. BLACKOUT PERIODS FOR ALL TRANSACTIONS THAT REQUIRE PRE-CLEARANCE If any Access Person engages in a transaction in a Covered Security which violates any of the restrictions detailed below (the "Blackout Periods"), or is determined to be in conflict with transactions made on behalf of the Managed Accounts, such transaction must, upon notice from the Chief Compliance Officer, be immediately cancelled or reversed, or profits must be disgorged.(1) This applies to all securities transactions, even those which were made in good faith, were pre-cleared and the violation is one that was either inadvertent or was determined after the fact by a review of trading data. - ---------- (1) Unless otherwise noted, restrictions on personal transactions apply to transactions involving Covered Securities, including any derivatives thereof. When determining the amount of disgorgement required with respect to a derivative, consideration will be given to price differences in both the derivative and the underlying securities, with the lesser amount being used for purposes of computing disgorgement. For example, in determining whether a reimbursement is required when the applicable personal trade is in a derivative and the Managed Account transaction is in the underlying security, the amount shall be calculated using the lesser of (a) the difference between the price paid or received for the derivative and the closing bid or ask price (as appropriate) for the derivative on the date of the Managed Account transaction, or (b) the difference between the last sale price, or the last bid or ask price (as appropriate) of the underlying security on the date of the derivative transaction, and the price received or paid by the Managed Account for the underlying security. Neither pre-clearance nor disgorgement shall be required if such person's transaction is to close, sell or exercise a derivative within five days of its expiration. page 8 Any disgorgement of profits required under any of the following provisions shall be donated to a charitable organization, unless otherwise prescribed by law. The specific charitable organization shall be selected by the Ethics Committee. However, if disgorgement is required as a result of trades by a portfolio manager that conflicted with that manager's own Managed Accounts, disgorgement proceeds shall be paid directly to such Managed Accounts. If disgorgement is required under more than one provision, the Ethics Committee shall determine in its sole discretion the provision that shall control. PENDING ORDERS No Access Person may engage in a transaction in a Covered Security when there is a buy or sell order pending, on behalf of any Managed Account, in that same security. The existence of pending orders will be checked as part of the pre-clearance process referenced above. Pre-clearance may be given only consistent with the Blackout Periods detailed in this section, or after any pending Managed Account order is withdrawn. SEVEN DAY RULE Any Portfolio Manager who buys or sells a Covered Security within seven calendar days before or after he or she trades in that security on behalf of a Managed Account shall disgorge any profits realized on such transaction. FIFTEEN DAY WINDOW No personal securities transaction will be pre-cleared if a transaction was made by ICON Companies on behalf of any Managed Account during the fifteen days immediately preceding the request for pre-clearance. If a personal securities transaction in a Covered Security is properly pre-cleared, and within fifteen days after the personal trade, a transaction in the same security is executed by ICON Companies on behalf of any Managed Account, the Access Person (except Outside Trustees) must disgorge any price advantage realized.(2) The price advantage shall be the favorable spread, if any, between the price paid or received by such person and the least favorable price paid or received by a Managed Account during such period. 60 DAY RULE Access Persons (except Outside Trustees) shall disgorge any profits realized in the purchase and sale, or sale and purchase, of the same or equivalent Covered Securities within 60 calendar days if a Managed Account held or traded the security during the 60 day period. PRE-CLEARANCE PROCEDURES Pre-clearance must be obtained by Access Persons (except Outside Trustees who do not require pre-clearance and portfolio managers who require pre-clearance on all trades) for any applicable transaction greater than $5,000 in a Covered Security. Access Persons requiring pre-clearance shall obtain clearance for themselves and members of their immediate families and households before purchasing, selling or pledging either the debt or equity securities of any publicly-traded company. If the transaction is approved, the Access Person has five business days from the date of pre-clearance to execute the trade. GENERAL PRE-CLEARANCE (EXCLUDING INVESTMENT PERSONNEL) All requests for pre-clearance shall be made using the Pre-Clearance Form appended to this Code. Access Persons are responsible for presenting the - ---------- (2) Note that, for the purposes of this restriction, personal purchases are matched only against subsequent Managed Account purchases, and personal sales are matched only against subsequent Managed Account sales. page 9 personal investment request to ICON Companies' Chief Investment Officer or, in his absence, any member of ICON Companies' Investment Committee, who will be given an opportunity to object. The Chief Investment Officer, or member of the Investment Committee, shall object to pre-clearance if any such person knows of a conflict with a pending Managed Account transaction or a transaction known by such person to be under consideration for a Managed Account. Consideration of pre-clearance should also take into account, among other factors, whether the investment opportunity should be reserved for a Managed Account. If no objections are raised, the Investment Committee representative shall indicate clearance of the trade by signing the Pre-Clearance Form. All approved requests for pre-clearance must be submitted to the Designated Compliance Representative for final approval. PRE-CLEARANCE REQUIREMENTS FOR INVESTMENT PERSONNEL Trades by Investment Personnel are subject to the following special requirements: - Any purchase of an equity security for a personal account, which equity security is not owned by any Managed Account, must first be submitted as a potential investment to the Chief Investment Officer of ICON Companies. The Chief Investment Officer must make a determination that the security in question is not an appropriate investment for any Managed Account before pre-clearance for such security may be requested. - Upon approval by the Chief Investment Officer, the Pre-clearance Form shall be presented to a Designated Compliance Representative for signature. - A request for pre-clearance regarding a private placement which is an investment asset in which the Managed Accounts might invest, or managed or sponsored by broker-dealers with whom the Managed Accounts presently do business or may in the future do business, or is being offered in any way because of an Investment Person's position with ICON Companies, will normally be declined. PRE-CLEARANCE OF TENDER OFFERS AND STOCK PURCHASE PLANS Access Persons (other than Outside Trustees) who wish to participate in a tender offer or stock purchase plan must pre-clear such trades only with the Chief Compliance Officer prior to submitting notice to participate in such tender offer or notice of participation in such stock purchase plan to the applicable company. To pre-clear the trade, the Chief Compliance Officer shall consider all material factors relevant to a potential conflict of interest between the Access Person and Managed Accounts. In addition, any increase of $100 or more to a pre-existing stock purchase plan must be pre-cleared. FIVE BUSINESS DAY EFFECTIVE PERIOD Clearance to trade will be effective for five business days from the date of the last signature on the Pre-clearance Form. Open orders, including stop loss orders, will generally not be allowed due to the five day effective period. It will be necessary to repeat the pre-clearance process for transactions not executed within the five day effective period. REPORTING TRANSACTIONS AND ACCOUNTS Access Persons (other than Outside Trustees) must provide to ICON Companies an initial Report of Securities Ownership no later than 10 days after becoming an Access Person. The report must contain the following information: - The title, number of shares and principal amount of each Covered Security in which the Access Person had any direct or indirect beneficial ownership when the person became an Access Person; - The name of any broker, dealer or bank with whom the Access Person maintained an account in which any securities were held. Copies of account statements may be submitted in lieu of the initial Report of Securities Ownership, provided that such account statements include all of the information listed above. page 10 All ICON employees (other than Outside Trustees) ("ICON Employees") must consent for their brokers or financial institutions to provide to Compliance, on a timely basis, duplicate account statements and confirmations showing all transactions in every brokerage or commodities account in which they have a beneficial interest. Please note that, even if such person does not trade Covered Securities in a particular brokerage or commodities account (e.g., trading mutual funds in a Schwab account), the provision of duplicate account statements and confirmations is still required. This requirement does not apply to brokerage accounts maintained solely for investment in 529 Plans. Reporting of accounts that do not allow any trading in Covered Securities (e.g., a mutual fund account held directly with the fund sponsor) is not required. ICON Employees must notify Compliance of each reportable account at the time it is opened, and annually thereafter, including the name of the firm and the name under which the account is carried. An Account Information Form should be completed for this purpose. Certain transactions, such as private placements, inheritances or gifts, might not be reported through a securities account. In these instances, ICON Employees must report these transactions using a Quarterly Transactions Report as noted below. Outside Trustees need only report a transaction in a Covered Security if such person, at the time of the transaction, knew, or in the ordinary course of fulfilling his or her official duties as a trustee should have known, that, during the fifteen day period immediately preceding the date of his or her personal transaction, such security was purchased or sold by, or was being considered for purchase or sale on behalf of, any registered investment company for which such person acts as trustee. QUARTERLY TRANSACTIONS REPORTS ICON employees (other than Outside Trustees) must provide a Quarterly Transactions Report within 30 days after the end of each calendar quarter, showing all transactions in Covered Securities, including all such transactions that are not effected in securities or commodities accounts; non-brokered private placements; gifts; inheritances; and other transactions in Covered Securities. ICON Employees are not required to list transactions for which duplicate confirmations have been provided. ICON Employees shall affirm that their brokers have been instructed to provide duplicate confirmations for all accounts. ICON Employees shall also affirm that they have not opened any new brokerage accounts during the quarter. ANNUAL HOLDINGS REPORTS ICON Employees (other than Outside Trustees) must provide to ICON Companies a Report of Securities Ownership at least annually. The report must contain the same type information as the initial Report of Securities Ownership filed upon becoming an Access Person. Copies of account statements may be submitted in lieu of the annual Report of Securities Ownership, provided that such account statements include all of the information listed above. PASSIVE ACCOUNTS The Code shall not apply to purchases or sales affected in any account over which the ICON Employee has no direct or indirect influence or control. ICON Employees relying upon this provision will be required to file a Certification of Non-Influence and Non-Control Form with the Chief Compliance Officer regarding any such accounts. Any account beneficially owned by an Access Person that is managed by ICON Companies in a discretionary capacity is not covered by this Code so long as such person has no direct or indirect influence or control over the account. The employment relationship between the account-holder and the individual managing the account, in the absence of other facts indicating control, will not be deemed to give such account-holder influence or control over the account. page 11 OTHER REQUIRED FORMS In addition to the Account Information Form, Quarterly and Annual Transaction Reports, and Certification of Non-Influence and Non-Control Form discussed above, the following forms must be completed if applicable to you: ACKNOWLEDGEMENT FORMS Each ICON Employee must, upon commencement of services and annually thereafter, provide Compliance with an Acknowledgment Form stating that he or she has reviewed and complied with the Code and has disclosed or reported all applicable securities transactions. REPORT OF SECURITIES OWNERSHIP ICON Employees must, upon commencement of services, and annually thereafter, provide Compliance with a Report of Securities Ownership Form which lists all Covered Securities beneficially held. INVESTMENT PERSONNEL REPRESENTATION FORM Investment Personnel must, upon commencement of services, provide Compliance with an Investment Personnel Representation Form which lists all Covered Securities beneficially held. In addition, such persons must provide a brief description of any positions held (e.g., director, officer, other) with for-profit entities other than ICON Companies. OUTSIDE TRUSTEE REPRESENTATION FORM All Outside Trustees must, upon commencement of services, provide Compliance with an Outside Trustee Representation Form. The Form declares that such persons agree to refrain from trading in any securities when they are in possession of any information regarding trading recommendations made or proposed to be made to any Managed Account by ICON Companies or its officers or employees. Annually thereafter, the security transaction confirmation and adherence to the Code of Conduct affirmation will be done included in the Trustee Questionnaire. INSIDER TRADING POLICY BACKGROUND INFORMATION ICON Companies seeks to foster a reputation for integrity and professionalism, and that reputation is a vital business asset. This Insider Trading Policy ("Policy") includes procedures to deter the misuse of material nonpublic information. By adopting this Policy, ICON Companies seeks to exceed the stringent requirements of the federal securities laws. The Policy reinforces ICON Companies' commitment to avoiding even the appearance of impropriety. The term "insider trading" is not defined in the federal securities statutes, but generally is used to refer to the use of material nonpublic information to trade in securities (whether or not one is an "insider"), or to communication of material nonpublic information to others. The law concerning insider trading can be complex and unclear, and an individual legitimately may be uncertain about the application of this Policy. Often, a simple question may forestall disciplinary action or complex legal difficulties. If you have any questions regarding the application of this Policy or you have any reason to believe that a violation of this Policy has occurred or is about to occur, you should contact the Chief Compliance Officer. You may assume that the law regarding insider trading operates to prohibit: - Trading by an insider, while in possession of material nonpublic information; - Trading by a non-insider, while in possession of material nonpublic information, where the information was disclosed to the non-insider (directly or through one or more intermediaries) in violation of an insider's duty to keep such information confidential; page 12 - Communicating material nonpublic information to others in breach of a duty not to disclose such information; and - Misappropriating confidential information for securities trading purposes, in breach of a duty owed to the source of the information to keep the information confidential. WHO IS AN INSIDER? The concept of "insider" is broad. It includes officers, directors and employees of a company. In addition, a person can be a "temporary insider" if he or she enters into a special confidential relationship in the conduct of a company's affairs and as a result is given access to information solely for the company's purposes. A temporary insider can include, among others, a company's attorneys, accountants, consultants, bank lending officers, and the employees of such organizations. In addition, ICON Companies may become a temporary insider of a company it advises or for which it performs other services. To be considered an insider, the company must expect the outsider to keep the disclosed nonpublic information confidential and/or the relationship must at least imply such a duty. WHEN IS INFORMATION NONPUBLIC? Information should be treated as being nonpublic unless a reasonable period of time has passed since it has been distributed by means likely to result in a general public awareness of the information. Such awareness would result, for example, from publication of the information in a daily newspaper. As a general rule, information may be considered to be public on the third business day after it has been broadly distributed to the general public. WHAT IS MATERIAL INFORMATION? In general, "material information" is information for which there is a substantial likelihood that a reasonable investor would consider it important in making his or her investment decisions, or information that is reasonably certain to have a substantial effect on the price of a company's securities. Information that should be considered material includes, but is not limited to, dividend changes, earnings estimates, changes in previously released earnings estimates, significant merger or acquisition proposals or agreements, major litigation, liquidation problems, and extraordinary management developments. Material information may also relate to the market for a company's securities. Information about a significant order to purchase or sell securities may, in some contexts, be deemed material. Similarly, prepublication information regarding reports in the financial press also may be deemed material. For example, the U.S. Supreme Court upheld the criminal convictions of insider trading defendants who capitalized on prepublication information about The Wall Street Journal's "Heard on the Street" column. WHEN IS INFORMATION MISAPPROPRIATED? The misappropriation theory prohibits trading on the basis of non-public information by a corporate "outsider" in breach of a duty owed not to a trading party, but to the source of confidential information. Misappropriation of information occurs when a person obtains the non-public information through deception or in breach of a duty of trust and loyalty to the source of the information. page 13 PENALTIES FOR INSIDER TRADING Insider trading is a serious legal concern for ICON Companies and its personnel. The trading of securities of publicly-traded companies while in possession of material, nonpublic information relating to those companies may subject ICON Companies and its personnel to penalties under federal law. Penalties for trading on or communicating material nonpublic information are severe, both for individuals involved in such unlawful conduct and their employers or other controlling persons. A person can be subject to some or all of the penalties below even if he or she does not personally benefit from the violation. Penalties may include: - Civil injunctions; - Treble damages; - Disgorgement of profits; - Jail sentences of up to 10 years; - Fines up to $1,000,000 (or $2,500,000 for corporations and other entities); - Civil penalties for the person who committed the violation of up to three times the profit gained or loss avoided, whether or not the person actually benefited; and - Civil penalties for the employer or other controlling person of up to the greater of $1,000,000 or three times the amount of the profit gained or loss avoided. With separate tiers of penalties for employers and personnel, there may be situations in which the concerns of these groups diverge. This contrasts with routine litigation in which an employer typically reinforces the actions of its senior personnel. Consequently, personnel who trade on material, nonpublic information should be aware that ICON Companies may not be able to protect their interests. In addition, any violation of the law may result in serious sanctions by ICON Companies, including termination of employment. WHO IS A CONTROLLING PERSON? Included as controlling persons are ICON Companies and its Trustees and officers. If you are a Trustee or officer, you have a duty to act to prevent insider trading. Failure to fulfill such a duty may result in penalties as described above. PROCEDURES TO IMPLEMENT POLICY The following procedures have been implemented to aid the Directors/Trustees, officers and other Access Persons of ICON Companies in avoiding insider trading, and to aid ICON Companies in preventing, detecting and imposing sanctions against insider trading. IDENTIFYING MATERIAL INSIDE INFORMATION Before trading for yourself or others, including Managed Accounts, in the securities of a company about which you may have potential inside information, ask yourself the following questions: - To whom has this information been provided? Has the information been effectively communicated to the marketplace? - Has this information been obtained from either the issuer or from another source in breach of a duty to that source to keep the information confidential? - Is the information material? Is this information that an investor would consider important in making his or her investment decisions? Is this information that would affect the market price of the securities if generally disclosed? page 14 REPORTING INSIDE INFORMATION If, after consideration of the above, you believe that the information you possess is material and nonpublic, or if you have questions as to whether the information is material and nonpublic, you should take the following steps: - Do not purchase or sell the securities on behalf of yourself or others, including Managed Accounts. - Do not communicate the information inside or outside of ICON Companies, other than to the Chief Compliance Officer. - Immediately advise the Chief Compliance Officer of the nature and source of such information. The Chief Compliance Officer will review the information with the Ethics Committee. - Depending upon the determination made by the Ethics Committee, or by the Chief Compliance Officer until the Committee can be convened, you may be instructed to continue the prohibition against trading and communication and the Chief Compliance Officer will place the security on a restricted list or watch list, as described below. Alternatively, if it is determined that the information obtained is not material nonpublic information, you may be allowed to trade and communicate the information. WATCH AND RESTRICTED LISTS Whenever the Ethics Committee or the Chief Compliance Officer determines that a Director/Trustee, officer or other Access Person of ICON Companies is in possession of material nonpublic information with respect to a company (regardless of whether it is currently owned by any Managed Account), such company will either be placed on a watch list or on a restricted list. Watch List. If the security is placed on a watch list, the flow of the information to other ICON Companies personnel will be restricted in order to allow such persons to continue their ordinary investment activities. This procedure is commonly referred to as a "Chinese Wall." Restricted List. If the Ethics Committee or the Chief Compliance Officer determines that material nonpublic information is in the possession of a Director/Trustee, officer, or other Access Person of ICON Companies and cannot be adequately isolated through the use of a Chinese Wall, the company will be placed on a restricted list. While a company is on the restricted list, no Investment Person shall initiate or recommend any transaction in any Managed Account, and no Access Person will be pre-cleared to transact in any account in which he or she has a beneficial interest, with respect to the securities of such company. The Ethics Committee or the Chief Compliance Officer will also have the discretion of placing a company on a restricted list even though no "break in the Chinese Wall" has or is expected to occur with respect to the material nonpublic information about the company. Such action may be taken by such persons for the purpose of avoiding any appearance of the misuse of material nonpublic information. The Ethics Committee or the Chief Compliance Officer will be responsible for determining whether to remove a particular company from the watch list or restricted list. The only persons who will have access to the watch list or restricted list are members of the Ethics Committee, Designated Legal or Compliance Representatives and such persons who are affected by the information. The watch list and restricted list are highly confidential and should under no circumstances be discussed with or disseminated to anyone other than the persons noted above. PROTECTING INFORMATION Directors/Trustees, officers and other Access Persons of ICON Companies shall not disclose any nonpublic information (whether or not it is material) relating to ICON Companies, its securities transactions or securities positions of any Managed Account to any person outside ICON Companies (unless such disclosure has been authorized by ICON Companies). Material nonpublic information may not be communicated to anyone, including any Director/Trustee, officer or other Access Person of ICON Companies, except as provided in this Policy. Access to such information must be restricted. For example, access to page 15 files containing material nonpublic information and computer files containing such information should be restricted, and conversations containing such information, if appropriate at all, should be conducted in private. Directors/Trustees, officers and other Access Persons of ICON Companies must refrain from communicating any information not publicly published about any Managed Account's investment transactions or financial situation to anyone unless absolutely necessary and authorized by ICON Companies as a part of the regular course of business. Performance information, use of the Managed Accounts as a reference, and release of other information about the Managed Accounts is permitted only when a properly authorized representative of the applicable Managed Account expressly agrees. Equal care and discretion must be used in discussing or distributing information regarding investment strategies, reports or recommendations. To insure the integrity of the Chinese Wall and to avoid unintended disclosures, it is important that all Access Persons take the following steps with respect to confidential or nonpublic information: - Do not discuss confidential information in public places such as elevators, hallways or social gatherings. - To the extent practical, limit access to the areas of the firm where confidential information could be observed or overheard to persons with a business need for being in the area. - Avoid use of speaker phones in areas where unauthorized persons may overhear conversations. - Avoid use of wireless and cellular phones, or other means of communication which may be intercepted. - Where appropriate, maintain the confidentiality of Managed Account identities by using code names or numbers for confidential projects. - Exercise care to avoid placing documents containing confidential information in areas where they may be read by unauthorized persons and to store such documents in secure locations when they are not in use. - Destroy copies of confidential documents no longer needed for a project unless required to be saved pursuant to applicable record keeping policies or requirements. - Refer to the Chief Compliance Officer without comment all inquiries involving nonpublic information possessed by ICON Companies from persons outside of ICON Companies, including the news media, arbitrageurs, financial analysts and the general public. ICON Companies personnel who become aware of a leak, whether deliberate or otherwise, of nonpublic information relating to ICON Companies, or to any company about which ICON Companies or its personnel have acquired such nonpublic information, shall report the leak immediately to the Chief Compliance Officer. For purposes of this section, a "leak" is defined to include any unauthorized disclosure of nonpublic information about ICON Companies or any company about which ICON Companies or its personnel have acquired information. A leak exists when such disclosure has been made to a person or entity outside of ICON Companies, or to an unauthorized person within ICON Companies. RESPONSIBILITY TO MONITOR TRANSACTIONS Compliance will monitor transactions of Managed Accounts and Access Persons for which reports are received to detect the existence of any unusual trading activities with respect to companies on the watch and restricted lists. Compliance will immediately report any unusual trading activity directly to the Ethics Committee, who will be responsible for determining what, if any, action should be taken. page 16 TENDER OFFERS Tender offers represent a particular concern in the law of insider trading for two reasons. First, tender offer activity often produces extraordinary fluctuations in the price of the target company's securities. Trading during this time period is more likely to attract regulatory attention (and produces a disproportionate percentage of insider trading cases). Second, the SEC has adopted a rule which expressly forbids trading and "tipping" while in possession of material nonpublic information regarding a tender offer received from the tender offeror, the target company or anyone acting on behalf of either. Persons subject to this Policy should exercise particular caution any time they become aware of nonpublic information relating to a tender offer. GIFT POLICY All goods and services purchased by ICON Companies shall be obtained from suppliers who offer the best price consistent with required standards of service, quality, timeliness and reliability. To avoid any actual or perceived conflict with this policy, the acceptance from any supplier of gifts or other consideration of significant value by any Director/Trustee, officer or other Access Person of ICON Companies is prohibited. This prohibition includes donations of cash, goods or services for meetings, picnics or other similar gatherings, costly entertainment or any other gift which could reasonably cause the donor to expect to be favored as a supplier or influence ICON Companies to so favor the donor. The following outlines ICON Companies' policy on giving and receiving gifts to help us maintain these standards. GIFT GIVING Neither you nor members of your immediate family may give any gift, series of gifts, or other thing of value, including cash, loans, personal services, or special discounts ("Gifts") in excess of $100 per year to any Managed Account, or any one person that does or seeks to do business with or on behalf of ICON Companies or any Managed Account (collectively referred to herein as "Business Relationships"). Gifts of substantial value between employees are also discouraged. Such gifts are prohibited in those instances in which they might be interpreted as attempts to influence personnel decisions. GIFT RECEIVING The solicitation of a Gift is prohibited (i.e., you may not request that a gift, such as tickets to a sporting event, be given to you by a Business Relationship). Neither you nor members of your immediate family may receive any Gift of material value from any single Business Relationship. A Gift will be considered material in value if it influences or gives the appearance of influencing the recipient. In the event the aggregate fair market value of all Gifts received by you from any single Business Relationship is estimated to exceed $250 in any 12-month period, you must immediately notify your manager. Managers who receive such notification must report this information to the Chief Compliance Officer if it appears that such Gifts may have improperly influenced the recipient. CUSTOMARY BUSINESS AMENITIES Customary business amenities are not considered Gifts so long as such amenities are business related, reasonable in cost, appropriate as to time and place, and neither so frequent nor so costly as to raise any question of impropriety. Customary business amenities will typically not be considered Gifts if the above-described guidelines are followed and the offeror accompanies you to the event, or if you accompany the recipient. Customary business amenities which you and, if appropriate, your guests, may accept (or give) include an page 17 occasional meal, a ticket to a sporting event or the theater, green fees, an invitation to a reception or cocktail party, or comparable entertainment. This policy must be read in conjunction with applicable NASD rules regarding non-cash compensation. OUTSIDE EMPLOYMENT POLICY No Inside Director/Trustee, officer or other Access Person of ICON Companies shall accept employment or compensation as a result of any business activity (other than a passive investment), outside the scope of his or her relationship with ICON Companies unless such person has provided prompt written notice of such employment or compensation to the Chief Compliance Officer, and, in the case of securities-related employment or compensation, has received the prior written approval of the Ethics Committee. SUPERVISORY AND COMPLIANCE PROCEDURES Supervisory procedures can be divided into two classifications; (i) prevention of violations and (ii) detection of violations. Compliance review procedures include preparation of special and annual reports, record maintenance and review, and confidentiality preservation. SUPERVISORY PROCEDURES PREVENTION OF VIOLATIONS To prevent violations of the Code, the Chief Compliance Officer should, in addition to enforcing the procedures outlined in the Code: 1. Review and update the Code as necessary, at least once annually, including but not limited to a review of the Code by the Ethics Committee and/or counsel; 2. Answer questions regarding the Code; 3. Request from all persons upon commencement of services, and annually thereafter, any applicable forms and reports as required by the Code; and 4. Maintain a continuing education program consisting of the following: a) Orienting Directors/Trustees, officers, and other Access Persons who are new to ICON Companies to the Code, and b) Further educating Directors/Trustees, officers, and employees by distributing memos or other materials that may be issued by outside organizations such as the Investment Company Institute discussing the issue of insider trading and other issues raised by the Code. DETECTION OF VIOLATIONS To detect violations of the Code, the Chief Compliance Officer should, in addition to enforcing the procedures outlined in the Code: - Review reports, confirmations, and statements relative to applicable restrictions, as provided under the Code; page 18 - Review the restricted and watch lists relative to applicable personal and Managed Account trading activity, as provided under the Code; - Conduct spot checks of certain information as noted under the Code. COMPLIANCE PROCEDURES REPORTS OF POTENTIAL DEVIATIONS OR VIOLATIONS Upon learning of a potential deviation from, or violation of, the Code, the Chief Compliance Officer shall prepare a written report to the Ethics Committee providing full details and recommendations for further action. The Ethics Committee shall thereafter take such action as it deems appropriate. ANNUAL REPORTS The Chief Compliance Officer shall prepare, at least annually, a written report for the Ethics Committee. This report shall contain the following information, and shall be confidential. - Copies of the Code, as revised, including a summary of any changes made during the past year; - A summary of any violations requiring significant remedial action during the past year; and - Recommendations, if any, regarding changes in existing restrictions or procedures based upon ICON Companies' experience under the Code, evolving industry practices, or developments in applicable laws or regulations. The Chief Compliance Officer will report to the ICON Advisers and ICON boards with respect to any of the above items to the extent that any Managed Account is materially affected thereby. RECORDS Compliance shall maintain the following records: - Files for personal securities transaction confirmations and account statements, all reports and other forms submitted by Access Persons pursuant to the Code and any other pertinent information. Such files shall be stored in a secure location; - A copy of each pre-clearance; - A list of all persons who are, or have been, required to make reports pursuant to the Code. INSPECTION The records and reports maintained by Compliance pursuant to the Code shall at all times be available for inspection, without prior notice, by any member of the Ethics Committee. CONFIDENTIALITY All procedures, reports and records monitored, prepared or maintained pursuant to the Code shall be considered confidential and proprietary to ICON Companies and shall be maintained and protected accordingly. Except as otherwise required by law or the Code, such matters shall not be disclosed to anyone other than to members of the Ethics Committee, as requested. page 19 THE ETHICS COMMITTEE The Ethics Committee ("Committee") was formed to provide an effective mechanism for monitoring compliance with the standards and procedures contained in the Code and to take appropriate action at such times as violations or potential violations are discovered. MEMBERSHIP OF THE COMMITTEE The Ethics Committee currently consists of senior compliance, administration and investment staff. The composition of the Committee may be changed from time to time. COMMITTEE MEETINGS The Committee shall generally meet quarterly or as often as necessary to review operation of the compliance program and to consider technical deviations from operational procedures, inadvertent oversights, or any other potential violation of the Code. At such time as the Chief Compliance Officer learns of a potential violation, he shall either present the information at the next regular meeting of the Committee, or convene a special meeting. Committee meetings are primarily intended for consideration of the general operation of the compliance program and substantive or serious departures from standards and procedures in the Code. A Committee meeting may be attended, at the discretion of the Committee, by such other persons as the Committee shall deem appropriate. Any individual whose conduct has given rise to the meeting may also be called upon, but shall not have the right to appear before the Committee. It is not required that minutes of Committee meetings be maintained; in lieu of minutes the Committee may issue a report describing issues reviewed and any action taken. Any such report shall be included in the confidential file maintained by the Chief Compliance Officer with respect to the particular person or persons whose conduct has been the subject of the meeting. SPECIAL DISCRETION The Committee shall have the authority by unanimous action to exempt any person or class of persons from all or a portion of the Code, provided that: - The Committee determines, on advice of counsel, that the particular application of all or a portion of the Code is not legally required; - The Committee determines that the likelihood of any abuse of the Code by such exempted person(s) is remote; - The terms or conditions upon which any such exemption is granted is evidenced in a written instrument; and - The exempted person(s) agrees to execute and deliver to the Chief Compliance Officer, at least annually, a signed Acknowledgment Form, which shall, by operation of this provision, include a discussion of such exemption and the terms and conditions upon which it was granted. The Committee shall also have the authority by unanimous action to impose such additional requirements or restrictions as it, in its sole discretion, determines appropriate or necessary. GENERAL INFORMATION ABOUT THE CODE OF CONDUCT ENFORCEMENT In addition to the penalties described elsewhere in the Code, upon discovering a violation of the Code, ICON Companies may impose such sanctions as page 20 it deems appropriate, including without limitation, a letter of censure or suspension or termination of employment or personal trading privileges of the violator. All material violations of the Code and any sanctions imposed with respect thereto shall be reported periodically to the Directors/Trustees. INTERNAL USE The Code is intended solely for internal use by ICON Companies and does not constitute an admission by or on behalf of such companies, their controlling persons or persons they control, as to any fact, circumstance or legal conclusion. The Code is not intended to evidence, describe or define any relationship of control between or among any persons. Further, the Code is not intended to form the basis for describing or defining any conduct by a person that should result in such person being liable to any other person, except insofar as the conduct of such person in violation of the Code may constitute sufficient cause for ICON Companies to terminate or otherwise adversely affect such person's relationship with ICON Companies. FORMS Attached are blank forms for use in complying with the Code. These forms may be revised from time to time, as the Ethics Committee shall determine. Please contact Compliance if you need additional forms or if you have any questions. page 21 ICON COMPANIES CODE OF CONDUCT ACKNOWLEDGEMENT FORM This form must be completed by all ICON Employees upon commencement of services and annually thereafter. ACKNOWLEDGEMENT I hereby acknowledge that I have received and reviewed the ICON Companies Code of Conduct and that I understand its provisions and its applicability to me. Furthermore, I acknowledge that, since the commencement of my employment or other services with ICON Companies or the date of my last certification, I have complied with the Code of Conduct and have disclosed or reported all applicable securities transactions required thereunder. INVESTMENT PERSONNEL: All Investment Personnel must attach a completed Investment Personnel Representation Form as of the date this acknowledgment is signed. Generally, Investment Personnel include portfolio managers, research analysts, trading department personnel, and other employees whose duties are to manage any client account. See the Code of Conduct for a more complete definition of Investment Personnel. OUTSIDE TRUSTEES: All Outside Trustees must attach a completed Outside Trustee Representation Form as of the date this acknowledgment is signed. Signature - ------------------------------------- Name (Please print) - ------------------------------------- -------------------------- Signature Date page 22 ICON COMPANIES CODE OF CONDUCT REPORT OF SECURITIES OWNERSHIP FOR PERIOD ENDED __________________ This form must be completed by all ICON Employees upon commencement of services and annually thereafter. It should be attached to the Acknowledgment Form. PLEASE PROVIDE THE FOLLOWING INFORMATION: List all Covered Securities Beneficially Owned (see the Code of Conduct for explanations of the terms Covered Security and Beneficial Ownership). Note that Covered Securities do not include mutual funds, U.S. government securities, money market instruments (e.g., CDs, commercial paper), Exempt Investments (e.g., life insurance or annuity contracts) and physical commodities:
SHARES/ SECURITY NAME AND TYPE PRINCIPAL - ------------------------------------- --------- 1) _________________________________ _________ 2) _________________________________ _________ 3) _________________________________ _________ 4) _________________________________ _________ 5) _________________________________ _________ 6) _________________________________ _________ 7) _________________________________ _________ 8) _________________________________ _________ 9) _________________________________ _________ 10) _________________________________ _________
Signature Name (Please print): --------------------------------------------- Signature: Date: -------------------------- -------------------- page 23 ICON COMPANIES CODE OF CONDUCT INVESTMENT PERSONNEL REPRESENTATION FORM This form must be completed by all Investment Personnel upon commencement of services. It should be attached to the Acknowledgment Form. Generally, Investment Personnel include portfolio managers, research analysts, trading department personnel, and other employees whose duties are to manage any client account. If this is your initial submission, complete parts one and two; otherwise, complete part one only. PLEASE PROVIDE THE FOLLOWING INFORMATION: 1. List all positions held (director, officer, other) with for-profit entities other than ICON Companies:
ENTITY NAME POSITION - ------------------------------------- ---------------------------------------- _____________________________________ ________________________________________ _____________________________________ ________________________________________
2. List all Covered Securities Beneficially Owned (see the Code of Conduct for explanations of the terms Covered Security and Beneficial Ownership). Note that Covered Securities do not include mutual funds, U.S. government securities, money market instruments (e.g., CDs, commercial paper), Exempt Investments (e.g., life insurance or annuity contracts) and physical commodities:
SHARES/ SECURITY NAME AND TYPE PRINCIPAL - ------------------------------------- --------- 1) _________________________________ _________ 2) _________________________________ _________ 3) _________________________________ _________ 4) _________________________________ _________ 5) _________________________________ _________ 6) _________________________________ _________ 7) _________________________________ _________ 8) _________________________________ _________ 9) _________________________________ _________ 10) _________________________________ _________
I have complied with the Investment Personnel information disclosure provision of the Code of Conduct by including all of the information requested above, if applicable. Signature Name (Please print): --------------------------------------------- Signature: Date: -------------------------- -------------------- page 24 ICON COMPANIES CODE OF CONDUCT OUTSIDE TRUSTEE REPRESENTATION FORM This form must be completed by all Outside Trustees upon commencement of service and annually thereafter. It should be attached to the Acknowledgment Form. Representation The undersigned serves as an Outside Trustee of ICON Funds. In addition to complying with all applicable provisions of the Code of Conduct, I agree that I will refrain from trading in any securities when I am in possession of information regarding trading recommendations made or proposed to be made to any client by ICON Companies or its officers or employees with respect to such securities. Signature Name (Please print): --------------------------------------------- Signature: Date: -------------------------- -------------------- page 25 ICON COMPANIES CODE OF CONDUCT ACCOUNT INFORMATION FORM The following account information must be completed at least annually by all ICON Employees, and updated whenever a new account is opened or an existing account is closed. For further explanation of the terms Covered Security and Exempt Investment, or for additional information on existing account notification procedures, see the applicable section(s) in the Code of Conduct. Note that Covered Securities do not include non-affiliated mutual funds, U.S. government securities, money market instruments (e.g., CDs, commercial paper), Exempt Investments (e.g., life insurance or annuity contracts) and physical commodities. PLEASE CHECK ONE OF THE FOLLOWING BOXES REGARDING YOUR BROKERAGE ACCOUNTS: [ ] No, I do not have any open brokerage or commodity accounts. [ ] Yes, I do have open brokerage or commodity accounts. With regard to securities firms holding accounts for which I may be deemed a Beneficial Owner, I agree to authorize ICON Companies to request and receive directly, duplicate trade confirmations and duplicate account statements. I also agree to notify Compliance in the event that a new account is opened or an existing account is closed. All such Beneficially Owned accounts are listed below.
ACCOUNT REGISTRATION AND Firm Account Number Address - ------------------------------------- ------------------------ ------------------------------ 1) _________________________________ ________________________ ______________________________ 2) _________________________________ ________________________ ______________________________ 3) _________________________________ ________________________ ______________________________ 4) _________________________________ ________________________ ______________________________ 5) _________________________________ ________________________ ______________________________
If you do not exercise any direct or indirect influence or control over the trading in any of the above account(s), you may exempt such account(s) from the provisions of the Code of Conduct by completing the Certification Of Non-Influence and Non-Control Form. Signature Name (Please print): --------------------------------------------- Signature: Date: -------------------------- -------------------- page 26 ICON COMPANIES CODE OF CONDUCT CERTIFICATION OF NON-INFLUENCE AND NON-CONTROL FORM The provisions of the ICON Companies Code of Conduct shall not apply to purchases or sales affected in any account(s) over which you have no direct or indirect influence or control. Listed below are my Beneficially Owned accounts which I certify are not subject to the Code of Conduct because I do not have any direct or indirect influence or control over the trading in such account(s). I further certify that I have had no communications with the person(s) responsible for management of the account(s) that may have influenced an investment to be made or not to be made for the account(s).
Account Type (e.g., trust, Account Registration Account Number(S) hedge fund, etc.) Securities Firm Address - -------------------- ----------------- -------------------------- ----------------------- ____________________ _________________ __________________________ _______________________ ____________________ _________________ __________________________ _______________________ ____________________ _________________ __________________________ _______________________
Briefly describe below the reason you do not have direct or indirect influence or control (e.g., independently managed trust, etc.): ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ Signature Name (Please print): -------------------------- Signature: Date: ------------------------------------ ------------------------ page 27 ICON COMPANIES CODE OF CONDUCT OUTSIDE EMPLOYMENT FORM All Inside Directors/Trustees, officers and other ICON Employees of any ICON Companies must provide prompt written notice of outside employment or compensation from any other person as a result of any business activity, other than a passive investment. In the case of securities-related employment or compensation, prior written approval must be received from the Ethics Committee. COMPANY OR BUSINESS INFORMATION Name: __________________________________________________________________________ Address: _______________________________________________________________________ Nature of Business: ____________________________________________________________ POSITION INFORMATION Title, position or role: _______________________________________________________ Describe your responsibilities or role: ________________________________________ ________________________________________________________________________________ Beginning date: ______________________________, to present. TIME COMMITMENT Amount of time devoted monthly: ___________________________________ Signature Name (Please print): -------------------------- Signature: Date: ------------------------------------ ------------------------ page 28 ICON COMPANIES CODE OF CONDUCT PRE-CLEARANCE FORM Employee Information Employee Name: _____________________ Phone Extension: _____________________ Account Information Account Name: _______________________________________________________________ Account Number: _____________________________________________________________ Name of Broker/Bank: ________________________________________________________ Transaction Detail Transaction type (Buy/Sell/Short) $ Amount or # of Shares: ________________ Name of Security: ___________________________________________________________ If sale, date acquired: ____________________ Ticker Symbol: _________________ Investment Department Personnel Complete the next section if you are an Investment Person (not required if selling a security that is not held by Managed Accounts) Indicate the primary reason(s) why the above transaction is not appropriate for Managed Accounts at this time: Investment is too risky for clients (provide reason) __________________________________________ ___________________________________ Clients/funds are already exposed to industry. __________________________________________ ___________________________________ Security is not included in the current ICON Companies database. __________________________________________ ___________________________________ Insufficient information about the issuer or available information is not favorable. __________________________________________ ___________________________________ Investment is outside of clients'/funds' permitted policies (e.g. short selling) __________________________________________ ___________________________________ Due to the nature of my responsibilities, I am not in a position to recommend this security to clients. __________________________________________ ___________________________________ Other: __________________________________________ ___________________________________
Signature Section By submitting this completed form to the Compliance department, I certify that the information provided is true, and that the appropriate representations below are true: Analyst's Representation: I have discussed this transaction with my supervisor and I am not recommending this investment for purchase or sale by any Managed Accounts, or my prior recommendation was rejected. Access Person's Representation (including Analysts): My trading in this security is not based on any material nonpublic information. I understand that pre-clearance will be in effect for five business days from the date of approval. Employee Signature: Date: ------------------------------------ ---------------- Investment Committee Representative: Date: ------------------- --------------- Ethics Committee Representative: Date: (if required) ----------------------- --------------- Designated Compliance Representative: Date: ------------------ ---------------- page 29 ICON COMPANIES CODE OF CONDUCT QUARTERLY TRANSACTIONS REPORT FOR CALENDAR QUARTER ENDED
SECURITY DESCRIPTION (INCLUDE ISSUER, TYPE, MATURITY & RATE, SHARES/ TRANSACTION DATE AS APPLICABLE) PRINCIPAL TYPE (BUY/SELL) PRICE BROKER - ---------- --------------------------------------- --------- --------------- ----- ------ __________ _______________________________________ _________ _______________ _____ ______ __________ _______________________________________ _________ _______________ _____ ______ __________ _______________________________________ _________ _______________ _____ ______ __________ _______________________________________ _________ _______________ _____ ______ __________ _______________________________________ _________ _______________ _____ ______ __________ _______________________________________ _________ _______________ _____ ______
[ ] I have authorized ICON Companies to receive duplicate confirms and account statements from all of my broker-dealer accounts. [ ] I have not opened any new broker-dealer accounts during the quarter ended as of the above date, or have completed an Account Information Form for all such accounts. - ------------------------------------ -------------------------- Signature Date - ----------------------------------------------- Print Name EX-99.CERT 3 d30941exv99wcert.txt CERTIFICATIONS CERTIFICATIONS - -------------- I, Craig T. Callahan, certify that: 1. I have reviewed this report on Form N-CSR of ICON Funds (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. December 8, 2005 /s/ Craig T. Callahan - ----------------------- --------------------- Date Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) CERTIFICATIONS - -------------- I, Erik L. Jonson, certify that: 1. I have reviewed this report on Form N-CSR of ICON Funds (the "registrant"); 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. December 8, 2005 /s/ Erik L. Jonson - ------------------- ------------------------------- Date Erik L. Jonson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) EX-99.906CERT 4 d30941exv99w906cert.txt CERTIFICATIONS This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, and accompanies the report on Form N-CSR for the fiscal period end of September 30, 2005 of ICON Funds (the "Registrant"). I, Craig T. Callahan, the Principal Executive Officer of the Registrant, certify that, to the best of my knowledge,: 1. the Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d)); and 2. the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. December 8, 2005 - -------------------------------------------- Date /s/ Craig T. Callahan - ----------------------------------------------------------- Craig T. Callahan President and Chief Executive Officer (Principal Executive Officer) This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request This certification is provided pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350, and accompanies the report on Form N-CSR for the fiscal period end of September 30, 2005 of ICON Funds (the "Registrant"). I, Erik L. Jonson, the Principal Financial Officer of the Registrant, certify that, to the best of my knowledge,: 1. the Form N-CSR fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 ( 15 U.S.C. 78m(a) or 78o(d)); and 2. the information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant. December 8, 2005 - -------------------------------------------- Date /s/ Erik L. Jonson - ------------------------------------------------------------- Erik L. Jonson Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Principal Accounting Officer) This certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and is not being filed as part of Form N-CSR or as a separate disclosure document. A signed original of this written statement required by Section 906 has been provided to the Registrant and will be retained by the Registrant and furnished to the Securities and Exchange Commission or its staff upon request -----END PRIVACY-ENHANCED MESSAGE-----