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{LOGO]
ICM SERIES TRUST
------------------
ISABELLE SMALL CAP
VALUE FUND
Semi-Annual Report
June 30, 1998
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ICM/ISABELLE
SMALL CAP VALUE FUND
TABLE OF CONTENTS
Shareholder Letter .................................... 1
Portfolio of Investments .............................. 4
Statement of Assets and Liabilities ................... 6
Statement of Operations ............................... 7
Statement of Changes in Net Assets .................... 8
Financial Highlights .................................. 9
Notes to Financial Statements ......................... 11
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SHAREHOLDER LETTER
Dear Shareholder,
We are delighted to provide to you the first semi-annual report for the
ICM/Isabelle Small Cap Value Fund (the "Fund"). We are pleased with the initial
response to the offering of the Fund and look to continued growth in the
upcoming months.
The Fund commenced operations on March 9, 1998. For the period from commencement
of operations through June 30, 1998, the Fund's net assets grew from an initial
base of $100,000 to over $6,491,000. As we have stated, our goal is to provide
both individual and institutional investors a focused and truly value-oriented
small cap portfolio that will remain an integral part of their long-term equity
allocation. To that end we have begun to build a foundation that will produce
lasting investment results.
In one sense the market has been cooperative, bringing the prices of many small
cap issues down, making already attractive investment candidates even more
appealing. On the other hand, the general lack of interest in small cap issues
has, and continues to penalize investors who choose to hold them. Moreover, our
willingness to accept short-term discomfort in searching out bargains has, early
on, placed us at yet a further disadvantage to the broader markets, which
continue to favor large, industry leaders seemingly without regard to valuation.
For the period from commencement of operations through June 30, 1998, the Fund
returned -9.6%, while the Standard & Poor's 500 Composite Stock Price Index*
(the "S&P 500") posted a return of 7.75% and the Russell 2000 Index*, a widely
used small-cap benchmark, returned -0.81%. While the Fund's early performance
was disappointing, we must again stress that the portfolio is being constructed
for long-term appreciation. With that in mind, we are encouraged that a number
of very attractive investment opportunities remain, so as to allow new monies to
be put to work.
Since inception, we have added thirty-three names to the Fund's holdings,
attempting to buy cautiously. Because of this, and the size of the Fund relative
to new shareholders' daily net contributions, the Fund's cash position has
fluctuated, sometimes significantly. At June 30, 1998, the Fund's cash position
was artificially high, at 31.9% due to larger than expected cash inflows at the
end of the quarter. However, it is not our intent to wield cash as a
market-timing device, and we have worked diligently to invest these dollars,
such that at this writing, cash comprises less than 2% of total portfolio
assets.
Going forward, we will continue to seek out undervalued companies, one by one,
employing an investment philosophy that attempts to define long-term economic
value; a philosophy perhaps better described as determining "business" value in
the context of a competitive environment. To do this effectively, we must
understand the management and underlying operations of each potential
investment, for only then can we accurately assess its economic value and
develop the conviction necessary to take the stock from a candidate to an actual
holding. It takes a great deal of "leg work" to build such a portfolio, and we
have sought to construct it with those ideas that we have thoroughly developed
with a high degree of conviction in the investment thesis.
Accordingly, as of June 30, 1998, the top ten holdings of the Fund represented
39% of the Fund's total assets. By selecting Fund investments in accordance with
the investment approach set forth above, we believe that we offer shareholders
the greatest degree of appreciation potential without sacrificing
diversification. We believe that based on our investment approach and intensity
of our efforts, the risk inherent in the portfolio is actually reduced, as we
are able to distinguish actual risk from perceived risk.
Some of the Fund's new holdings include The Yellow Corporation (6.86% of total
net assets at June 30, 1998), a well-known trucking company that competes
nationwide in both the truckload and less than truckload markets. We believe
that management of the company has done more than a credible job of reducing
costs to match existing levels of business, and is now in the process of
repositioning the company for renewed growth. The company's return on total
invested capital, which languished at less than 1% during the past five years,
has jumped to over 8% and should break into double-digits next year. Crown
Vantage (3.74% of total net assets at June 30, 1998), a 1996 spin-off of the
former James River Corporation, has all but been given up for dead by the
investment community. A seasoned management team is gradually transforming this
debt-laden, capital-starved subsidiary into a value-adding, niche market paper
and packaging company possessing extraordinary operating leverage. The company's
stock has seen its market price fall to around $4 per share, yet it has
demonstrated that it can produce more than $10 per share in earnings before
interest and taxes. Finally, Material Sciences (3.76% of total net assets at
June 30, 1998) is of interest, having a strong national presence in both
industrial coil coating and coated automotive metal and plastic. The company's
operating difficulties have caused earnings to suffer over the past two years,
driving the stock price down to around $10 per share from a high of nearly $23.
Management appears to have the situation in hand, but at 1.2x book value and 50%
of depressed sales, the current valuation is so compelling that at least one
competitor, Sequa Corp., has reportedly made an offer to acquire part or all of
the company.
In summary, the die is cast, and while we believe it will take time for it to
`set', the outlook remains very promising. Short-term portfolio declines, while
truly frustrating, have only served to sharpen our sense of contrast. Moreover,
we believe the modest valuation of your Fund's portfolio positions it very well
to respond to a change in market sentiment. The average price to book value is
just 1.7x versus 6.2x for the S&P 500, while the price to earnings ratio is just
14.9x versus 28.5x, respectively. A return to small cap stocks coupled with good
individual stock selection should produce very good returns, indeed. Patience is
rewarded.
We thank you for your continued confidence and support and we look forward to
reporting on our continued progress.
Sincerely,
/s/ Warren J. Isabelle
Warren J. Isabelle
President and Chairman of the Board
July 31, 1998
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* Unmanaged indices, not available for investment
Note: The views expressed in this report reflect those of the portfolio
manager, only through the period of this report as stated on the cover.
The manager's views are subject to change at any time based on market
and other conditions.
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ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
JUNE 30, 1998 (UNAUDITED)
MARKET
SHARES VALUE
------ -----
COMMON STOCKS - 83.65%
BASIC MATERIALS - 10.53%
23,100 Crown Vantage, Inc.* $ 242,550
28,100 Landec Corp.* 196,700
21,000 Material Sciences Corp.* 244,125
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683,375
----------
CAPITAL GOODS - 11.70%
40,900 Acme Electric Corp.* 196,831
13,000 Amtech Corp.* 61,750
9,300 Kollmorgen Corp. 186,581
67,400 Measurement Specialties, Inc.* 202,200
4,800 Nashua Corp.* 75,000
8,100 Nyer Medical Group, Inc.* 37,463
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759,825
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CONSUMER CYCLICALS - 13.74%
14,800 CML Group, Inc.* 28,675
22,100 Delta Woodside Industries, Inc. 114,644
45,000 Morgan Products, Ltd.* 205,313
6,000 Ridgeview, Inc.* 36,000
39,700 Transmedia Network, Inc. 225,794
13,200 ValueVision International, Inc., Class A* 52,800
39,400 Worldtex, Inc.* 229,013
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892,239
----------
CONSUMER STAPLES - 5.02%
55,300 American Banknote Corp.* 169,356
23,600 WLR Foods, Inc.* 156,350
----------
325,706
----------
ENERGY - 2.10%
95,000 Arakis Energy Corp.* 136,563
HEALTH CARE - 13.11%
102,400 Anergen, Inc.* 198,400
35,200 Apria Healthcare Group, Inc.* 235,400
61,000 Medical Resources, Inc.* 186,812
29,000 Neurocrine Biosciences, Inc.* $ 230,188
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850,800
----------
OTHER - 1.57%
14,200 Inco, Ltd. 102,062
----------
TECHNOLOGY - 19.02%
6,800 Anacomp, Inc.* 160,650
10,000 Broadway & Seymour, Inc.* 56,250
108,000 Cayenne Software, Inc.* 162,000
14,000 Integrated Circuit Systems, Inc.* 232,750
47,300 Meridian Data, Inc.* 230,587
173,500 Nexar Technologies, Inc.* 162,656
22,700 Pioneer-Standard Electronics, Inc. 218,487
3,000 Tegal Corp.* 11,250
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1,234,630
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TRANSPORTATION - 6.86%
24,000 Yellow Corp.* 445,500
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TOTAL COMMON STOCKS (COST $5,705,463) 5,430,700
----------
PRINCIPAL SHORT-TERM INVESTMENTS - 31.87%
AMOUNT (COST $2,068,842)
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$2,068,842 First Choice Cash Reserve Fund, 5.21% 2,068,842
----------
TOTAL INVESTMENTS (COST $7,774,305)** - 115.52% 7,499,542
----------
LIABILITIES NET OF CASH AND OTHER ASSETS - (15.52%) (1,007,668)
----------
NET ASSETS - 100.00% $6,491,874
==========
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* Non-income producing security.
** Cost for federal income tax purposes is $7,774,305 and net
unrealized depreciation consists of:
Gross unrealized appreciation .......................... $ 126,227
Gross unrealized depreciation .......................... (400,990)
----------
Net unrealized depreciation ............................ $ (274,763)
==========
See accompanying notes to financial statements.
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (UNAUDITED)
ASSETS:
Investments in securities at market value
(identified cost $7,774,305) (Note 1) $ 7,499,542
Cash 228
Interest receivable 16,128
Deferred organization costs (Note 1) 56,538
Other assets 30,373
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TOTAL ASSETS 7,602,809
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LIABILITIES:
Payable for securities purchased 1,067,581
Accrued expenses 39,387
Accrued distribution expense (Note 4) 579
Due to Adviser (Note 3) 3,388
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TOTAL LIABILITIES 1,110,935
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NET ASSETS $ 6,491,874
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INVESTMENT CLASS SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 128,428 shares outstanding) $ 1,161,073
===========
Net asset value, offering and redemption price per
Investment Class Share ($1,161,073 / 128,428 shares) $ 9.04
===========
INSTITUTIONAL CLASS SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 589,374 shares outstanding) $ 5,330,801
===========
Net asset value, offering and redemption
price per Institutional Class Share
($5,330,801 / 589,374 shares) $ 9.04
===========
NET ASSETS CONSIST OF:
At June 30, 1998, net assets consisted of:
Paid-in capital 6,762,885
Accumulated undistributed net investment income 6,844
Accumulated net realized loss on investments (3,092)
Net unrealized depreciation on investments (274,763)
-----------
NET ASSETS $ 6,491,874
===========
See accompanying notes to financial statements.
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
JUNE 30, 1998 (UNAUDITED)
FOR THE PERIOD
MARCH 9, 1998*
THROUGH
JUNE 30, 1998
-------------
INVESTMENT INCOME:
Dividends $ 314
Interest 19,321
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TOTAL INCOME 19,635
-----------
EXPENSES:
Investment advisory fees (Note 3) 7,184
Professional fees 27,504
Transfer agent fees 20,337
Administration fees 17,098
Registration fees 16,182
Custodian fees 5,201
Miscellaneous fees 4,292
Printing fees 4,048
Amortization of organization costs (Note 1) 3,730
Insurance fees 3,333
Trustees fees 2,283
Distribution fees - Investment Class (Note 4) 579
-----------
TOTAL EXPENSES 111,771
Expenses waived and reimbursed by Adviser (Note 3) (98,980)
-----------
NET EXPENSES 12,791
-----------
NET INVESTMENT INCOME 6,844
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REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (3,092)
Net change in unrealized depreciation of investments (274,763)
-----------
Net realized and unrealized loss on investments (277,855)
-----------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ (271,011)
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*Commencement of investment operations.
See accompanying notes to financial statements.
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
JUNE 30, 1998 (UNAUDITED)
FOR THE PERIOD
MARCH 9, 1998*
THROUGH
JUNE 30, 1998
-------------
OPERATIONS:
Net Investment Income $ 6,844
Net realized loss on investments (3,092)
Net change in unrealized depreciation of investments (274,763)
-----------
Net decrease in net assets resulting from operations (271,011)
-----------
CAPITAL SHARE TRANSACTIONS
Shares sold:
Investment Class 1,168,885
Institutional Class 5,500,000
Shares redeemed:
Investment Class (6,000)
Institutional Class 0
-----------
Increase in net assets derived from capital
share transactions (a). 6,662,885
-----------
TOTAL INCREASE IN NET ASSETS. 6,391,874
-----------
NET ASSETS:
Beginning of period 100,000
-----------
End of period (including undistributed net
investment income of $6,844) $ 6,491,874
===========
(a) Transactions in capital stock were:
Shares sold:
Investment Class 119,027
Institutional Class. 589,374
Shares redeemed:
Investment Class (599)
Institutional Class 0
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Increase in shares outstanding. 707,802
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*Commencement of investment operations.
See accompanying notes to financial statements.
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
JUNE 30, 1998 (UNAUDITED)
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
INVESTMENT
CLASS
-----
FOR THE PERIOD
MARCH 9, 1998*
THROUGH
JUNE 30, 1998
-------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
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Income From Investment Operations:
Net investment income 0.01
Net losses on securities
(both realized and unrealized) (0.97)
--------
TOTAL FROM INVESTMENT OPERATIONS (0.96)
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Net Asset Value, End of Period $ 9.04
========
TOTAL RETURN (NOT ANNUALIZED) (9.60%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 1,161
Ratio of expenses to average net assets:
Before expense reimbursement 15.70%(1)
After expense reimbursement 1.95%(1)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement (12.72%)(1)
After expense reimbursement 0.78%(1)
Portfolio turnover rate 4.39%
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* Investment Class Shares commenced investment operations on March 9, 1998.
(1) Annualized.
See accompanying notes to financial statements.
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
JUNE 30, 1998 (UNAUDITED)
The table below sets forth financial data for one share of capital stock
outstanding throughout the period presented.
INSTITUTIONAL
CLASS
-----
FOR THE PERIOD
MARCH 29, 1998*
THROUGH
JUNE 30, 1998
-------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
--------
Income From Investment Operations:
Net investment income 0.01
Net losses on securities
(both realized and unrealized) (0.97)
--------
TOTAL FROM INVESTMENT OPERATIONS (0.96)
--------
NET ASSET VALUE, END OF PERIOD $ 9.04
========
TOTAL RETURN (NOT ANNUALIZED) (9.60%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 5,331
Ratio of expenses to average net assets:
Before expense reimbursement 15.45%(1)
After expense reimbursement 1.70%(1)
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement (12.72%)(1)
After expense reimbursement 1.03%(1)
Portfolio turnover rate 4.39%
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* Institutional Class Shares commenced investment operations on
March 29, 1998
(1) Annualized
See accompanying notes to financial statements.
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998 (UNAUDITED)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
ICM/Isabelle Small Cap Value Fund (the "Fund"), a series of ICM Series Trust
(the "Trust") was organized as a Massachusetts business trust pursuant to a
trust agreement dated November 18, 1997. The Trust is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Fund offers two
classes of shares (Investment Class shares and Institutional Class shares) each
of which has equal rights as to class and voting privileges. The Investment
Class has exclusive voting rights with respect to its distribution plan pursuant
to Rule 12b-1 ("12b-1 Plan") and is subject to 12b-1 Plan expenses. The Fund
commenced operations on March 9, 1998. The investment objective of the Fund is
to seek capital appreciation by investing is a diversified portfolio of
securities consisting primarily of common stocks. The following is a summary of
significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The policies are in conformity with
generally accepted accounting principles for investment companies.
A. SECURITY VALUATION. Investments in securities are valued at the last
reported sales price on the national securities exchange or national
securities market on which such securities are primarily traded on the last
business day of the period. Unlisted securities, or listed securities in
which there were no sales, are valued at the mean of the closing bid and ask
prices. Short-term obligations with remaining maturities of 60 days or less
are valued at amortized cost plus accrued interest, which approximates market
value. Any securities or other assets for which recent market quotations are
not readily available are valued at fair value as determined in good faith
under the direction of the Board of Trustees.
B. INVESTMENT INCOME AND SECURITIES TRANSACTIONS. Security transactions are
accounted for on the date the securities are purchased or sold (trade date).
Cost is determined and gains and losses are based on the identified cost
basis for both financial statement and federal income tax purposes. Dividend
income is reported on the ex-dividend date. Interest income and expenses are
accrued daily.
C. NET ASSET VALUE PER SHARE. Net asset value per share of each class of
shares of the Fund is determined daily as of the close of trading on the New
York Stock Exchange by dividing the value of its net assets, less liabilities
attributable to that class, by the number of outstanding shares of that class.
The net asset value of the classes may differ because of different fees and
expenses charged to each class.
D. ORGANIZATION COSTS. Organization costs are being amortized on a straight
line basis over five years from commencement of operations. If any of the
original shares are redeemed by any holder thereof prior to the end of the
amortization period, the redemption proceeds will be decreased by the pro rata
share of the unamortized organizational costs as of the date of redemption.
The pro rata shares will be derived by dividing the number of original shares
redeemed by the total number of original shares outstanding at the time of
redemption.
E. FEDERAL INCOME TAXES. The Trust intends to qualify each year as a regulated
investment company by complying with all requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies by,
among other things, distributing substantially all of its earnings to its
shareholders. Therefore, no federal income tax provision is required.
F. INCOME AND EXPENSES. Expenses directly attributable to a particular class
are charged directly to such class. In calculating 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 on the proportion of net assets of each class at the
beginning of that day.
G. DISTRIBUTIONS TO SHAREHOLDERS. The Fund will distribute substantially all
if its net investment income and capital gains, if any, annually.
Distributions to shareholders are recorded on the ex-dividend date. Income and
capital gain distributions are determined in accordance with income tax
regulations, which may differ from generally accepted accounting principals.
H. USE OF ESTIMATES. In preparing financial statements in conformity with
generally accepted accounting principles, management makes estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements, as well as the reported amounts of revenues
and expenses during the reporting period. Actual results could differ from
those estimates.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments, aggregated
$5,797,455 and $88,901 respectively, for the period from March 9, 1998
(commencement of operations) through June 30, 1998.
NOTE 3 - INVESTMENT MANAGEMENT FEE, ADMINISTRATION FEE AND OTHER TRANSACTIONS
Ironwood Capital Management, LLC ("ICM") serves as the investment advisor for
the Fund pursuant to an investment advisory agreement (the "Agreement") dated
March 2, 1998. Under the terms of the Agreement, ICM receives a fee from the
Fund, accrued daily and paid monthly, at an annual rate of 1.00% of the average
daily net assets of the Fund.
ICM has voluntarily agreed to waive its fees and reimburse the Fund to the
extent total annualized expenses, inclusive of distribution expenses, exceed
1.95%, with respect to the Investment Class, and 1.70%, with respect to the
Institutional Class, of the average daily net assets. For the period from
commencement of operations through June 30, 1998, advisory fees of $7,184 were
waived by ICM and ICM reimbursed the Fund $91,796. Certain officers and Trustees
of the Trust are affiliated persons of ICM.
First Data Investor Services Group, Inc. ("Investor Services Group"), a
subsidiary of First Data Corporation, serves as the Fund's Administrator
pursuant to an Administration Agreement with the Trust on behalf of the Fund.
Under the terms of the agreement, Investor Services Group is entitled to receive
fees based on the aggregate average daily net assets of the Fund, computed daily
and payable monthly at a rate of 0.12% of the first $150 million of net assets;
0.15% of net assets between $150 million and $500 million of net assets; 0.12%
of next $500 million to $750 million in net assets; 0.09% of next $750 million
to $1.5 billion in net assets; 0.075% of next $1.5 billion to $2.5 billion in
net assets; 0.05% of next $2.5 billion to $5 billion in net assets and 0.025% of
net assets in excess of $5 billion, subject to a minimum annual charge of
$55,000. A separate fee of $35,000 per annum and $5,000 for any additional class
per annum, will be charged for fund accounting services.
No officer, trustee or employee of ICM, Investor Services Group or First Data
Distributors, Inc. (the "Distributor") or any affiliate thereof, receives any
compensation from the Trust for serving as a Trustee or officer of the Trust.
The Trust pays each unaffiliated Trustee an annual fee of $2,000 for their
services, including their attendance at board and committee meetings. The Trust
also reimburses each unaffiliated Trustee for travel and out-of-pocket expenses
related to the attendance at such meetings.
NOTE 4 - DISTRIBUTION PLAN
The Trustees of the Fund have adopted a 12b-1 Plan with respect to the
Investment Class shares pursuant to Section 12(b) of the 1940 Act and Rule 12b-1
thereunder, which permits the Fund to pay certain expenses associated with the
distribution of its Investment Class shares. Under the 12b-1 Plan, the Fund
compensates the Distributor at a fee calculated at an annual rate of up to 0.25%
of the value of the average daily net assets attributable to the Investment
Class shares for distribution expenses borne, or paid to others, by the
Distributor. For the period from commencement of operations through June 30,
1998, the Fund accrued $579 in distribution costs for Investment Class Shares.
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
Notes
<PAGE>
IRONWOOD CAPITAL MANAGEMENT, LLC
AND ICM FUNDS
THE IRONWOOD TREE
is a small, hardy tree, which yields
a very useful and solid wood. Patiently, these
trees remain under the forest canopy until taller
neighbors fall.
Once given the opportunity, the Ironwood grows quickly
to reach its full potential. We believe this imagery is appropriate
for our firm as well as our investment style.
IRONWOOD CAPITAL MANAGEMENT, LLC,
the investment manager of the ICM/Isabelle Small Cap Value Fund,
is an independent investment management firm specializing
in investing in small company stocks.
ICM Funds
4400 Computer Drive, P.O. Box 5182
Westborough, MA 01581
1-800-472-6114
- --------------------------------------------------------------------------------
There are risks associated with investing in funds of this type that invest in
stocks of small-sized companies, which tend to be more volatile and less liquid
than stocks of larger companies. Past Fund performance is not indicative of
future results.
This information is not authorized for distribution unless accompanied or
preceded by a current prospectus.
DISTRIBUTOR: FIRST DATA DISTRIBUTORS, INC.
FOR ACCOUNT INFORMATION AND PRICES, CALL 1-800-472-6114 BETWEEN THE HOURS OF
9:00 A.M. AND 5:00 P.M. (EASTERN TIME), MONDAY THROUGH FRIDAY.
DFU 8/98
