As filed with the Securities and Exchange Commission on May 3, 1999
Registration No. 33-40819
811-8507
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. __ [_]
Post-Effective Amendment No. 02 File No. 33-40819 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 02 File No. 811-8507 [X]
----------------
ICM SERIES TRUST
ICM/ISABELLE SMALL-CAP VALUE FUND
(Exact Name of Registrant as Specified in Charter)
4400 Computer Drive
Westboro, Massachusetts 01581
(Address of Principal Executive Offices)
800-472-6114
(Registrant's Telephone Number)
JOSEPH F. MAZZELLA, ESQ.
Lane, Altman & Owens, LLP
101 Federal Street
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
COPIES TO:
WARREN J. ISABELLE, CFA WILLIAM BALTRUS
Ironwood Capital Management, LLC First Data Investor Services Group, Inc.
One International Place 3200 Horizons Drive
Boston, Massachusetts 02110 King of Prussia, Pennsylvania 19405
It is proposed that this filing will become effective (check appropriate box)
[X] immediately upon filing pursuant to paragraph (b) of Rule 485
|_] on (date) pursuant to paragraph (b) of Rule 485
[_] 60 days after filing pursuant to paragraph (a)(1) of Rule 485
[_] on (date) pursuant to paragraph (a)(1) of Rule 485
[_] 75 days after filing pursuant to paragraph (a)(2) of Rule 485
[_] on (date) pursuant to paragraph (a)(2) of Rule 485
If appropriate, check the following box:
[_] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
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[COVER PAGE]
Logo
ICM FUNDS
Prospectus
May 3, 1999
ICM SERIES TRUST
ICM/ISABELLE SMALL CAP VALUE FUND
Institutional Shares
Investment Shares
The fund invests in the common stock of small companies that are believed to
have the potential for substantial appreciation over time.
The fund is designed for long-term investors who are able to tolerate the
volatility that exists with investing in small company stocks.
The Securities and Exchange Commission has not approved or disapproved these
securities or determined if this prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
<PAGE>
TABLE OF CONTENTS
Information About the Fund.................................................... 1
Investment Objective and Philosophy.................................. 1
Principal Investment Strategies...................................... 1
Principal Risks...................................................... 3
Past Performance..................................................... 4
Fees and Expenses.................................................... 4
Understanding Expenses............................................... 5
The Fund's Management......................................................... 6
Portfolio Management................................................. 6
Portfolio Turnover................................................... 6
Year 2000 Readiness.................................................. 6
Information About Your Account................................................ 7
Purchasing Shares.................................................... 7
Opening An Account................................................... 7
Share Classes........................................................ 7
Distribution Arrangements............................................ 7
Determining Share Price.............................................. 8
Selling Shares....................................................... 9
Distributions and Taxes...................................................... 11
Tax Considerations.................................................. 11
Tax Consequences.................................................... 11
Financial Highlights......................................................... 13
WHY YOU SHOULD READ THIS PROSPECTUS
Reading the prospectus will help you to decide whether the ICM/Isabelle Small
Cap Value Fund is the right investment for you. It allows you to compare the
fund's objective, principal investment strategies, principal risks and
performance with other mutual funds. Please keep it for future reference.
<PAGE>
INFORMATION ABOUT THE FUND
INVESTMENT OBJECTIVE AND PHILOSOPHY
The fund seeks capital appreciation by investing its assets primarily in
relatively undervalued common stocks of domestic small companies.
PRINCIPAL INVESTMENT STRATEGIES
Ironwood Capital Management, LLC (ICM), the fund's investment adviser, seeks to
combine the risk-averse nature of value investing with the superior long-term
capital appreciation potential of small company stocks. The fund invests at
least 80% of its assets in companies that have market capitalizations of less
than $1 billion at the time of purchase. Market capitalization is the stock
price multiplied by the total number of shares outstanding.
It is ICM's intention to be fully invested in small cap securities at all times.
To maintain the fund's investment objective it will close to new investors when
assets reach $500 million.
Using a bottom-up approach with fundamental analysis, ICM analyzes a company's
recent valuation, price/earnings ratio and tangible assets, such as cash, real
estate and equipment, to determine whether it presents the best value in terms
of current price, cash flow, and current and forecasted earnings.
[CALLOUT]
Bottom-up Approach To Investing refers to the analysis of individual company
information before considering the impact of industry and economic trends.
[CALLOUT]
Fundamental Analysis is the analysis of company financial statements to forecast
future price movements using past records of assets, earnings, sales, products,
management and markets.
ICM believes that this approach helps to identify companies whose market value
is substantially below true economic value. These companies are often neglected,
overlooked or out-of-favor in the market. As a result, their current stock
prices may not reflect the companies' long-term economic value. Frequently,
these companies exhibit one or more of the following traits:
o a company in transition, or in the process of being turned-around
o emerging, the company has a new product or innovation to offer the
marketplace
<PAGE>
o positioned to benefit from internal changes, such as a shift in management,
or external catalysts, such as a cyclical turn around of a depressed
business or industry.
In selecting these securities, an in-depth research and analysis of each company
is conducted. ICM looks at
o potential cash flow
o quality and commitment of management
o overall financial strength
o existing assets.
ICM often conducts in-person visits or discussions with management as well.
[CALLOUT]
Value Investing is an approach to investing that seeks to identify, through
in-depth research and analysis, companies that are undervalued in the market
place -- companies whose market value is less than their economic value. Such
companies are often out of favor or not closely followed by investors, but offer
the potential for substantial appreciation over time.
Although it is unlikely, the fund may also invest its assets in other securities
or engage in different investment practices. These securities and practices are
not part of the fund's principal investment strategies, but may be used from
time to time to supplement or enhance the fund's principal investment strategies
in an effort to achieve the fund's investment objectives. They include
convertible and debt securities, foreign securities, rights and warrants,
illiquid and restricted securities, below investment-grade debt securities,
commonly referred to as "junk bonds", repurchase agreements, when issued and
delayed delivery securities, hedging transactions, short sales against the box,
lending portfolio securities and borrowing money. Investments in these
securities and engaging in any of these investment practices offer certain
opportunities and carry various risks. Please refer to the statement of
additional information for more information on these securities and investment
practices.
ICM may sell a security when it achieves the clearly defined target price. A
security may also be sold if any of the following occur:
o a disruptive change in management
o the company is unable to operate under its financial burdens
o the cycle fails to materialize
o a company's product or technology cannot be commercialized
o the investment time horizon of 2-to-3 years is exceeded.
PRINCIPAL RISKS
There are two basic risks prevalent in all mutual funds investing in common
stock: "management" and "market" risks.
<PAGE>
o Management risk means that your investment in the fund varies with the
success and failure of ICM's value-oriented investment strategies and ICM's
research, analysis and determination of portfolio securities. If ICM's
investment strategies do not produce the expected results, your investment could
be diminished or even lost.
o Market risk means that the price of common stock may move down in response
to general market and economic conditions, investor perception and anticipated
events, as well as the activities of the individual company. Additionally,
because the fund invests in common stocks, its share price will change daily in
response to stock market movements.
SMALL CAP STOCKS
Because the fund invests in small companies the fund's share price may be more
volatile than the share price of funds investing in larger companies. Small
companies may pose greater risk due to narrow product lines, limited financial
resources, less depth in management or a limited trading market for their
stocks. If small companies fall out-of-favor with the market and investors, the
price of your shares may fall, causing the value of your investment in the fund
to fall.
VALUE INVESTING
Value stocks can react differently to issuer, political, market and economic
developments than the market as a whole and other types of stocks. Value stocks
tend to be inexpensive relative to their earnings or assets compared to other
types of stocks. However, these stocks can continue to be inexpensive for long
periods of time and may not realize their full economic value.
DEFENSIVE INVESTING
For temporary defensive purposes, the fund may hold cash or invest its net
assets in short-term securities including U.S. Treasury securities, high quality
commercial paper and repurchase agreements. Although the fund may do this to
reduce losses, these measures may adversely affect the fund's efforts to achieve
its objective.
THE FUND CANNOT ELIMINATE RISK OR ASSURE ACHIEVEMENT OF ITS OBJECTIVE. IF THE
RISKS ABOVE ARE REALIZED YOU MAY LOSE MONEY ON YOUR INVESTMENT IN THE FUND.
PAST PERFORMANCE
Annual return includes the reinvestment of dividends and distributions and
reflects fund expenses. As with all mutual funds, past performance does not
guarantee future results.
<PAGE>
The fund's average annual return is compared with the Russell 2000 Index, an
unmanaged index consisting of broad-based common stocks. The Russell 2000 Index
does not reflect investment management fees, brokerage commissions and other
expenses associated with investing in equity securities. While the fund does not
seek to match the returns of the Russell 2000 Index, this index is a good
indicator of market performance for small company stocks. You may not invest in
the Russell 2000 Index, and unlike the fund, it does not incur fees or charges.
Although the fund has not operated for an entire calendar year, the following
table provides some indication of the risks of investing in the fund by showing
the fund's performance from inception through the end of fiscal year 1998, and
by showing how the fund's annual return for such period compares with that of a
broad measure of market performance.
AVERAGE ANNUAL TOTAL RETURN FOR LIFE OF THE FUND1
INVESTMENT SHARES -30.90%
INSTITUTIONAL SHARES -30.80%
RUSSELL 2000 INDEX - 7.64%
1. Because the fund has been operating for less than one full fiscal year,
average annual total return is shown for the period commencing with the fund's
inception (March 9, 1998 for Investment Shares and March 29, 1998 for
Institutional Shares) through December 31, 1998. Return shown for the Russell
2000 Index is for the period March 9, 1998 through December 31, 1998.
SHAREHOLDER FEES
(fees paid directly from your investment)
The fund is a 100% no-load fund, so you pay no sales charges (loads) to
purchase, redeem or exchange shares.
ANNUAL FUND OPERATING EXPENSES
(deducted directly from fund assets)
The costs of operating the fund are deducted from fund assets, which means you
pay them indirectly. These costs are deducted before computing the daily share
price or making distributions. As a result, they don't appear on your account
statement, but instead reduce the total return you receive from your fund
investment.
<PAGE>
FEES AND EXPENSES
This table describes the fees and expenses that you pay if you buy and hold fund
shares.
Investment Institutional
Shares Shares
Management fee 1.00% 1.00%
Distribution (12b-1) fees 0.25% None
Other expenses 7.56% 7.56%
Total Annual Fund Operating Expenses 8.81% 8.56%
----- -----
Fee Waiver and/or Expense Reimbursement* 6.86% 6.86%
Net Operating Expenses 1.95% 1.70%
----- -----
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* Under a written Advisory Agreement ("Agreement") between the investment
adviser and the fund, the investment adviser is obligated for as long as the
Agreement remains in effect, to limit total fund expenses, including its
investment advisory fee, to 1.95% of the average daily net assets annually for
Investment Shares and 1.70% of the average daily net assets annually for
Institutional Shares, and to waive such fees and expenses to the extent they
exceed these amounts.
[CALLOUT]
UNDERSTANDING EXPENSES
Operating expenses are paid directly by the fund. As a result, you pay for them
indirectly, as they reduce the fund's return. The higher the fund's expenses
are, the lower its return. Fund expenses include management fees, 12b-1 fees
(with respect to the Investment Shares), and administrative costs such as
shareholder recordkeeping and reports, accounting services and custody fees.
EXAMPLE
This example is intended to help you compare the cost of investing in the fund
with the cost of investing in other mutual funds. It uses the same hypothetical
conditions that other funds use in their prospectuses:
o $10,000 initial investment
o 5% total return on your investment each year
o fund operating expenses remain the same
o redemption at the end of each time period
o reinvestment of all dividends and distributions.
You pay the same amount in expenses whether you hold your shares or sell them at
the end of each period. Your actual costs may be higher or lower because fund
operating expenses change, so use this example for comparison only. Based on
these assumptions at the end of each period your costs would be:
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Example Costs
1 Year 3 Years 5 Years 10 Years
Investment Shares $198 $612 $1,052 $2,275
Institutional Shares $173 $536 $923 $2,009
- -------------------------------------------------------------
THE FUND'S MANAGEMENT
Ironwood Capital Management, LLC, the fund's manager, is located at One
International Place, Boston, MA 02110 and was formed in August 1997, by Warren
J. Isabelle, CFA and Richard L. Droster.
ICM supervises the fund's investment activities and determines which securities
are purchased or sold by the fund. ICM is responsible for all expenses in
managing the fund. ICM receives an annual fee of 1.00% of the fund's average
daily net assets. This fee is computed daily and paid monthly. For the year
ended December 31, 1998, this fee was reimbursed to the fund in its entirety.
[CALLOUT]
PORTFOLIO MANAGEMENT
Mr. Isabelle, President of ICM, is the fund's portfolio manager. Until January
1997, Mr. Isabelle was Senior Vice President and head of Domestic Equity
Management for Pioneer Mutual Funds, and the portfolio manager of Pioneer
Capital Growth Fund (from July 1990 through January 1997) and Pioneer Small
Company Fund (from November 1995 through January 1997). From February 1997
through May 1997, Mr. Isabelle was Senior Vice President and Chief Investment
Officer of Equities at Keystone Investment Management Company.
PORTFOLIO TURNOVER
Although the fund does not intend to engage in trading for short-term profits it
may sell a portfolio security regardless of how long the security has been held.
The annual portfolio turnover rate is not expected to exceed 50%. A turnover
rate of 50% means that one half of the securities owned by the fund were
replaced during the year. Significant portfolio turnover could increase expenses
the fund incurs for securities trading, as well as increase the likelihood that
the fund will have more short-term capital gain from investment income, which is
not taxed at a preferred rate. Increased expenses and taxes could adversely
affect the fund's overall performance, as they reduce the fund's return. See
"Fees and Expenses".
YEAR 2000 READINESS
Mutual funds and businesses around the world could be adversely affected if
computers do not properly process date-related information after the year 2000.
ICM is addressing this issue and is getting reasonable assurances from the
fund's other major service providers that they are
<PAGE>
addressing these issues to preserve the smooth functioning of the fund's
trading, pricing, shareholder, custodial and other operations. Also, ICM is
investigating the vulnerability to year 2000 problems of companies selected for
investment.
Improperly functioning computers may disrupt securities markets or result in
overall economic uncertainty. Individual companies may also be adversely
affected by the cost of fixing their computers, which could be substantial.
There is no guarantee that all problems will be avoided.
INFORMATION ABOUT YOUR ACCOUNT
This fund is a 100% no-load fund, which means that you may purchase, redeem or
exchange shares directly at their net asset value without paying a sales charge.
However, you may be charged a fee or have higher investment minimums if you buy,
sell or exchange shares through a securities dealer, bank or financial
institution.
PURCHASING SHARES
OPENING AN ACCOUNT
You may purchase fund shares by check or wire. All checks must be made payable
in U.S. dollars and drawn on US banks. Third party checks will not be accepted.
The fund reserves the right to wait until it receives acknowledgment to its
satisfaction that a check has cleared and payment has been posted before issuing
fund shares. A $20 charge will be imposed on any returned checks.
SHARE CLASSES
The fund offers two classes of shares: Investment Shares and Institutional
Shares. Institutional Shares are offered to investors that meet the $500,000
minimum investment.
SHARE TO OPEN MINIMUM MINIMUM
CLASS AN ACCOUNT ADDITION BALANCE
Investment Shares $ 1,000 $ 100 $ 1,000
IRAs $ 1,000 $ 100 $ 1,000
AIP $ 1,000 $ 100 $ 1,200
Institutional Shares $ 500,000 $ 50,000 $ 250,000
The fund may waive account minimums for Institutional Shares if it is
economically feasible and in the best interests of the fund's shareholders. The
fund has the right to reject any purchase order, or limit or suspend the
offering of its shares.
DISTRIBUTION ARRANGEMENTS
The fund has adopted a plan under rule 12b-1 allowing it to compensate the
fund's distributor for the sale and distribution of its Investment Shares. The
distributor receives up to 0.25% of the average daily net assets of Investment
Shares. Because this fee is paid on an ongoing basis, it may cost you more than
other types of sales charges.
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<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C> <C>
BY MAIL: o Complete the application. o Make check payable to
"ICM Series Trust." Be
sure to include your
account number on the
check.
o Make your check payable to o Fill out investment slip and
"ICM Series Trust." indicate the class of shares
you wish to purchase.
o Mail application and check o Mail check with
to: investment slip to the
ICM Series Trust address on the left.
3200 Horizon Drive
King of Prussia, PA 19406
BY WIRE: Mail your application to the above Wire funds to:
address, then call 1-800-472-6114 Boston Safe Deposit and Trust
to obtain an account number. Company
Include your Taxpayer ABA: 011001234
Identification Number. Wire funds Fund's name and class of shares
using the instructions at the right. Fund's DDA: 145718
Your name and account number
BY AUTOMATIC Mail your application with an Shares are purchased once and/or
INVESTMENT PLAN authorized form to the address twice a month, on the 1st, 15th, or
(AIP) above, along with a check for your both days.
initial investment payable to "ICM
Series Trust." Call 1-800-472-6114
to obtain a form.
BY ELECTRONIC Instructions must specify your
FUNDS TRANSFER account registration and fund
(ACH) account number preceded by 001
for Investment Shares or 101 for
Institutional Shares.
THROUGH A Contact your financial professional. Contact your financial
FINANCIAL professional.
PROFESSIONAL
</TABLE>
DETERMINING SHARE PRICE
The price at which you buy or sell fund shares is the net asset per share price
or NAV. The NAV is calculated for each class at the close of regular trading of
the New York Stock Exchange "NYSE" (normally 4:00 p.m. Eastern standard time)
each day the NYSE is open. It is not calculated on days the NYSE is closed for
trading. The price for a purchase or redemption of fund shares is the NAV next
calculated after receipt of your request. The NAV for each class can differ
because each class may not have the same portfolio investments or number of
shares outstanding.
<PAGE>
[CALLOUT]
CALCULATING NAV
The price for each share class is determined by adding the value of that class's
investments, cash and other assets, deducting liabilities, and then dividing
that amount by the total number of shares outstanding for that class.
When the fund calculates NAV, it values portfolio securities at the last current
sales price on the market where the security is normally traded, unless ICM
deems that price is not representative of market values. This could happen if,
after the close of the market, an event took place that had a major impact on
the price of the fund's securities. Securities, which cannot be valued at
closing prices, will be valued by ICM at fair value in accordance with
procedures adopted by the trustees. If no sales occurred on a particular day,
the security is valued at the mean between the most recently quoted bid and
asked price.
SELLING SHARES
WHAT YOU NEED TO KNOW WHEN SELLING SHARES
You may sell your shares on any day the fund is open for business. No redemption
request will be processed until your shares have been paid for in full. This
means if you purchased your shares by check, the redemption payment will be
delayed until the fund has received acknowledgment to its satisfaction that the
check has cleared and the funds have been posted. In times of drastic economic
or market conditions, you may have difficulty selling shares by telephone.
Once your request has been "actually received" by the fund in "proper form" the
fund will redeem shares at the next determined share price. "Proper form" means
that the fund has actually received and processed your account application, all
shares are paid for in full and all documentation including any required
signature guarantees are included. "Actual receipt" by the fund, when by mail,
means physical receipt at the fund's address listed below, or if by telephone,
receipt by an authorized fund representative at the telephone number listed
below. Generally, the fund pays redemption proceeds by check within seven days
after the request is actually received by the fund. Payment is sent to the
address of record.
<PAGE>
SELLING YOUR SHARES:
BY PHONE: Be sure to fill out the appropriate areas of the account
application. You may redeem up to $50,000 per day by
calling 1-800-472-6114. Shares held by retirement plans
may not be redeemed by telephone.
BY MAIL: Send a letter of instruction including the account
number, the dollar value or number of shares and any
necessary signature guarantees (see next page) to: ICM
Series Trust, 3200 Horizon Drive, King of Prussia, PA
19406.
BY WIRE: Be sure to fill out the appropriate areas of the account
application. Proceeds of $1,000 or more may be wired to
your pre-designated bank account. There is a $20 charge
for each wire redemption.
BY SYSTEMATIC For further information on a systematic withdrawal plan,
WITHDRAWAL please call 1-800-472-6114.
PLAN:
THROUGH A Contact your financial professional.
FINANCIAL
PROFESSIONAL:
SIGNATURE GUARANTEES
A signature guarantee must be provided if:
o you are redeeming shares worth more than $50,000
o you want the proceeds sent to someone other than the owner of the account
o you want the proceeds to be mailed to an address other than the address of
record
o the account registration has changed within the last 30 days
o you want the proceeds wired to a bank not designated on your application.
Signature guarantees are accepted from most domestic banks and securities
dealers. A notary public cannot provide a signature guarantee.
<PAGE>
[CALLOUT]
SECURITY CONSIDERATIONS
You may give up some level of security by choosing to buy or sell shares by
telephone rather than by mail. The fund uses procedures designed to give
reasonable assurance that telephone instructions are genuine, including
recording the transactions, testing the identity of the shareholder placing the
order and sending prompt written confirmation of transactions to the shareholder
of record. If these procedures are followed, the fund and its service providers
are not liable for acting upon instructions communicated by telephone that they
believe to be genuine.
INVOLUNTARY REDEMPTION
If your account falls below the stated investment minimums, the fund may redeem
your shares. Your account will not be redeemed if the balance falls below the
minimum due to investment losses. You will receive notice 45 days prior to an
involuntary redemption. If your account is redeemed the proceeds will be sent to
the address of record.
IN-KIND REDEMPTIONS
Although the fund expects to make redemptions in cash, it reserves the right to
make the redemption a distribution in-kind. This is done to protect the
interests of the fund's remaining shareholders. An in-kind payment means you
receive portfolio securities rather than cash. If this occurs, you will incur
transaction costs when you sell the securities.
DISTRIBUTIONS AND TAXES
DISTRIBUTIONS
The fund makes distributions to shareholders at least annually from two sources:
net long-term capital gain and income dividends, if any. Dividends from income
and/or capital gains may
<PAGE>
also be paid at such other times as may be necessary for the fund to avoid
federal income or excise taxes. Most of the fund's distributions are expected to
be from net long-term capital gains.
Unless you tell us that you want to receive your distributions in cash, all
distributions will be automatically reinvested in additional full and fractional
shares of the fund. Your other options are to receive checks for these payments
or have them deposited into your bank account.
[Call Out]
TAX CONSIDERATIONS
Unless your investment is in a tax-deferred account you may want to avoid:
o Investing a large amount in the fund near the end of the calendar year;
if the fund makes a capital gains distribution you will receive some of
your investment back as a taxable distribution.
o Selling shares at a loss for tax purposes and then making an identical
investment within 30 days. The result is a wash sale and you will not
be allowed to claim a tax loss.
TAX CONSEQUENCES
The buying, selling and holding of mutual fund shares may result in a gain or a
loss and is a taxable event. Distributions from the fund, whether received in
cash or additional shares of the fund, may be subject to federal income tax. Any
net investment income and net short-term capital gain distributions you receive
from the fund are taxable as ordinary dividend income at your income tax rate.
Distributions of net capital gains are generally taxable as long-term capital
gains. This is generally true no matter how long you have owned your shares and
whether you reinvest your distributions or take them in cash. You may also have
to pay taxes when you exchange or sell shares if your shares have increased in
value since you bought them.
<PAGE>
TRANSACTION TAX STATUS
Income dividends Ordinary income
Short-term capital gains Ordinary income
Long-term capital gains Capital gains
If the fund's (1) income distributions exceed its net investment income and net
short-term capital gains or (2) capital gain distributions exceed its net
capital gains in any one year, all or a portion of those distributions may be
treated as a return of capital to you. Although a return of capital is not
taxed, it will reduce the cost basis of your shares.
[CALLOUT]
COST BASIS is the amount you paid for your shares. When you sell shares, you
subtract the cost basis from the sale proceeds to determine whether you realized
an investment gain or loss. For example, if you bought $1000 worth of shares of
the fund and sold them two years later at $1200, your cost basis on the shares
is $1000 and your gain is $200.
[CALLOUT]
Tax-Deferral
Generally, if your investment is in a traditional IRA or other tax-deferred
account, your dividends and distributions will not be taxed at the time they are
paid, but instead at the time you withdraw them from your account.
The fund may be subject to foreign withholding taxes or other foreign taxes on
some of its foreign investments. This will reduce the yield or total return on
those investments. In addition, we must withhold 31% of your distributions and
proceeds if (1) you are subject to backup withholding or (2) you have not
provided us with complete and correct taxpayer information such as your Social
Security Number (SSN) or Tax Identification Number (TIN).
Your investment in the fund could have additional tax consequences. Please
consult your tax advisor on state, local or other applicable tax laws.
FINANCIAL HIGHLIGHTS
The financial highlights are intended to help you understand the fund's
financial performance since it commenced operations through its fiscal year
ended December 31, 1998. This information has been audited by Arthur Andersen
LLP, whose report along with the fund's financial statements, are included in
the annual report which is available upon request.
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<TABLE>
<CAPTION>
Investment Class Institutional Class
For The Period For The Period
March 9, 1998* March 29, 1998*
Through Through
December 31, 1998 December 31, 1998
<S> <C> <C>
Net Asset Value, Beginning Of Period $ 10.00 $ 10.00
Income from Investment Operations:
Net investment loss (0.04) (0.04)
Net losses on securities
(both realized and unrealized) (3.05) (3.04)
Total from investment operations (3.09) (3.08)
Less Distributions:
From net investment income (0) (0)
From net realized gains (0) (0)
Total Distributions (0) (0)
Net Asset Value, End Of Period $ 6.91 $ 6.92
Total Return (not annualized) (30.90%) (30.80%)
Ratios/supplemental Data
Net assets, end of period (in 000s) $ 1,660 3,734
Ratio of expenses to average net assets:
Before expense reimbursement2 8.81%1 8.56%1
After expense reimbursement2 1.95%1 1.70%1
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement2 (7.99%)1 (7.74%)1
After expense reimbursement2 (1.13%)1 (0.88%)1
Portfolio turnover rate 26.04% 26.04%
* Commencement of investment operations
</TABLE>
(1) Annualized.
(2) Includes custody earnings credit.
<PAGE>
[BACK COVER]
LOGO
ICM FUNDS
FOR MORE INFORMATION
Additional information about the fund's investments is available in the fund's
semi-annual and annual reports to shareholders. The fund's annual report
contains a discussion of the market conditions and investment strategies that
affected the fund's performance over the past year.
You may want to read the statement of additional information (SAI) for more
information on the fund and the securities it invests in. The SAI is
incorporated into this prospectus by reference, which means that it is legally
considered to be part of this prospectus.
To request free copies of the semi-annual and annual reports and the SAI, and to
request other information or get answers to your questions about the fund, write
or call:
BY TELEPHONE:
(800) 472-6114
BY MAIL OR OVERNIGHT DELIVERY:
ICM/Isabelle Small Cap Value Fund
3200 Horizon Drive
King of Prussia, PA 19406
VIA THE INTERNET
VIEW ONLINE OR DOWNLOAD TEXT-ONLY DOCUMENTS:
ICM Series Trust: www.icmfunds.com
Securities and Exchange Commission: www.sec.gov*
*You can also obtain copies by visiting the SEC's Public Reference Room in
Washington, DC, calling (800) SEC-0330, or by sending your request and the
appropriate fee to the SEC's public reference section, Washington DC 20549-6009.
Investment Company Act File Number: 811-08507
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ICM SERIES TRUST
ICM/ISABELLE SMALL-CAP VALUE FUND
3200 Horizons Drive
King of Prussia, Pennsylvania 19406
Investment Shares
Institutional Shares
STATEMENT OF ADDITIONAL INFORMATION
May 3, 1999
ICM Series Trust (the "Trust") is a diversified open-end management investment
company. Currently, the Trust offers one investment portfolio, ICM/Isabelle
Small-Cap Value Fund (the "Fund"). The Fund currently offers two classes of
Shares, Investment Shares ("Investment Shares") and Institutional Shares
("Institutional Shares", together with Investment Shares, the "Shares").
This Statement of Additional Information ("SAI") is not a prospectus, and should
be read together with the Fund's current Prospectus ("Prospectus") dated May 1,
1999. A copy of the Prospectus may be obtained free of charge by calling 1-800-
472-6114 or by written request to the Trust at 3200 Horizon Drive, King of
Prussia, Pennsylvania 19406.
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TABLE OF CONTENTS
Page
The Fund ........................................................ 1
Investment Policies and Practices................................ 1
Investment Restrictions.......................................... 5
Management of the Fund........................................... 7
Principal Holders of Securities.................................. 9
Investment Adviser............................................... 10
Administrator.................................................... 12
Transfer Agent................................................... 12
Custodian........................................................ 13
Distributor...................................................... 13
Distribution Plan................................................ 13
Independent Public Accountants................................... 14
Legal Counsel.................................................... 14
Purchase of Fund Shares.......................................... 15
Redemption of Fund Shares........................................ 15
Investment of Portfolio Securities............................... 17
Taxes............................................................ 18
Description of Shares............................................ 23
Shareholder and Trustee Liability................................ 24
Determination of Net Asset Value................................. 25
Investment Results............................................... 26
Registration Statement........................................... 28
Experts ......................................................... 28
Report of Independent Public Accountants......................... 29
Financial Statements............................................. 30
Appendix A....................................................... 41
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THE FUND
The Fund, a diversified open-end mutual fund, is currently the only
portfolio offered by the ICM Series Trust, a registered investment company that
sells redeemable shares representing an ownership interest in the Trust. The
Trust was organized as a Massachusetts business trust in the Commonwealth of
Massachusetts on November 18, 1997.
INVESTMENT POLICIES AND PRACTICES
This SAI supplements the Fund's Prospectus. The purpose of this SAI is to
set forth additional investment policies not described in the Fund's Prospectus,
and to provide an expanded description of the Fund's investment strategies,
management and other Fund policies which are already contained in the Fund's
Prospectus.
CONVERTIBLE SECURITIES AND DEBT SECURITIES
The Fund may invest up to 5% of its assets in convertible securities.
Convertible securities are bonds, notes, debentures, preferred stocks and other
securities which may be converted or exchanged at a stated or determinable
exchange ratio into shares of common stock. Convertible securities rank senior
to common stock in an issuer's capital structure and are consequently of higher
quality and entail less risk than the issuer's common stock. The market value of
convertible securities tends to increase when interest rates decline, and
conversely, tends to decline when interest rates increase. In addition, the
price of convertible securities often reflects changes in the value of the
underlying common stock.
The Fund will receive interest payments, if the convertible security is
a debt security, or a dividend preference, if the convertable security is
preferred stock, until the security matures or the Fund chooses to convert or
redeem the security. The Fund benefits from convertible securities by earning
current income from the security in an amount greater than the Fund would earn
by purchasing the underlying stock outright. The Fund may convert the security
if the underlying stock appreciates in value. In determining whether to purchase
a convertible security, the Fund will consider the same criteria as if it were
purchasing the underlying stock.
The value of the convertible security may be determined both by the value
of its current yield (its "investment value") and the market value of the
underlying stock (the "conversion value"). The investment value typically
fluctuates inversely with changes in prevailing interest rates and the
conversion value fluctuates directly with changes in the price of the underlying
stock.
LOWER-RATED SECURITIES
The Fund may invest up to 5% of its assets in convertible and
non-convertible debt securities which are below investment grade or carry no
rating.
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Investment grade securities are rated BBB or higher by Standard & Poor's Rating
Service ("S&P"), a division of McGraw Hill Companies, Inc. or Baa or higher by
Moody's Investors Service, Inc. ("Moody's"), two of the top rating services. The
Fund will maintain a minimum grade for its lower-rated debt securities of CCC by
S&P or Caa by Moody's. If unrated, such debt securities shall be of comparable
quality, as determined by the Fund. Lower-rated securities generally offer a
higher rate of return than investment grade issues, but also involve greater
risks, in that they are sensitive to changes in interest rates, and adverse
economic changes in the issuing company's industry. Furthermore, there is less
of a market in which to dispose lower-rated debt securities than there is for
higher quality securities. These factors may limit the Fund's ability to sell
such securities at fair value.
RIGHTS AND WARRANTS
The Fund may invest up to 5% of its total assets in rights or warrants.
These securities entitle the Fund to purchase a set amount of shares of a
corporation's stock in exchange for a fixed price per share, during a specified
period of time. The warrant may become worthless if the right to purchase the
shares is not exercised before the warrant expires. Furthermore, the amount the
Fund paid for the warrant together with the amount the Fund is entitled to pay
for the underlying security may ultimately exceed the actual market value of the
underlying security, during circumstances of poor market performance.
LENDING OF PORTFOLIO SECURITIES
The Fund may lend up to 25% of its portfolio securities to creditworthy
registered brokers, dealers and other financial institutions, in exchange for
cash or equivalent collateral equal to the value of the securities. The Fund
benefits from such loans by continuing to receive the income on the loaned
securities while also earning interest on the cash collateral. The Fund could
lose money if the borrower fails to return the loaned securities and the
collateral is insufficient to cover the loss. The Fund will monitor on an
ongoing basis the creditworthiness of firms to which the Fund lends its
portfolio securities. In addition, the Fund will seek to have the loaned
securities returned when the Fund wishes to exercise voting or other rights
associated with the securities.
FOREIGN SECURITIES
The Fund may invest up to 5% of its total assets in foreign securities.
Such investments may be in the form of American Depository Receipts- stock
certificates of a foreign company which are held in trust by a bank or similar
financial institution. Foreign securities are associated with significant risks
such as fluctuating currency rates, less trading volume and liquidity than U.S.
markets, and less stringent accounting and disclosure standards. In addition,
foreign investments may be subject to foreign government intervention, or
economic or social instability in the foreign issuer's country. These factors
may prevent the Fund from obtaining reliable information about the foreign
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company's financial condition and operations and from selling the company's
securities promptly and at a profit.
BORROWING
The Fund may borrow money in amounts up to 5% of the value of its total
assets (but may exceed such 5% limit in order to meet redemption requests). The
Fund may not purchase securities while its borrowings exceed the 5% limit. The
Fund will not borrow money for the purpose of increasing the Fund's net income.
In order to maintain assets in a ratio of 300% of the amount of the Fund's
borrowings (required by most banks), the Fund may be required to quickly divest
some of its securities and apply the proceeds toward reducing the Fund's debt,
even though it may be disadvantageous from an investment standpoint to sell
securities at the time.
ILLIQUID AND RESTRICTED SECURITIES
The Fund may invest in securities which are subject to restrictions on
resale because they have not been registered under the Securities Act of 1933,
as amended, or are otherwise not readily marketable. Limitations on the resale
of such securities may have an adverse effect on their marketability, and may
prevent the Fund from disposing of them promptly and at reasonable prices. The
Fund may have to bear the expense of registering such securities for resale and
the risk of substantial delays in effecting such registration.
The Fund may invest up to 15% of its net assets in illiquid securities, or
securities which may not be easily sold due to restrictions on resale,
conditions or terms that are attached to the security, or the general lack of an
available market. The Fund may lose money due to its inability to promptly
divest such securities.
RULE 144A SECURITIES
The Fund may purchase Rule 144A securities which are otherwise illiquid
but are still eligible for purchase and sale without limitation by qualified
institutional buyers. If the Fund determines such securities to be readily
disposable (based upon factors such as the available market and ease of trading)
such securities will be excluded from the limit on illiquid securities.
SHORT SALES "AGAINST THE BOX"
"Short sales" are sales of securities the Fund does not actually own,
made with the anticipation that the value of the securities will decrease and
the Fund will be able to make a profit by purchasing securities to cover the
sale at the lower price. The Fund may make short sales "against the box", in
which the Fund actually owns or has the right to acquire securities equal to the
securities sold. As collateral for its short sales against the box, the Fund
will deposit amounts in escrow equal to the value of securities it has sold
short. In order to protect the Fund's investment in its current portfolio of
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securities, the Fund may fulfill its obligation to deliver securities sold short
by using the escrow funds to purchase comparable securities in the marketplace,
rather than by delivering securities already in the Fund's portfolio.
HEDGING TRANSACTIONS
The Fund may use certain hedging techniques to manage risks associated
with exposure to the effects of possible changes in security prices, or other
factors that affect the value of its portfolio. These techniques, such as buying
and selling derivative securities (including options, forward foreign currency
exchange contracts, futures contracts or options on futures contracts) involve
significant risks and may increase the volatility of the Fund. The Fund may use
such hedging transactions solely for risk management purposes and not for
speculation. No more than 5% of the Fund's net assets will be placed at risk in
hedging transactions.
REPURCHASE AGREEMENTS
From time to time, the Fund may invest up to 15% of its assets in
repurchase agreements, in which the Fund purchases securities from a financial
institution such as bank, which agrees to repurchase those securities back from
the Fund at a fixed price and at a fixed time (not more than one week from the
Fund's original purchase). In the meantime, the securities are held as
collateral in a separate account and the Fund receives the interest income on
that account. The Fund will enter into repurchase transactions only with
reputable financial institutions, whose creditworthiness the Fund has
investigated. The Fund will also require the financial institution to maintain
collateral at all times with a value equal to the amount the Fund paid for the
securities. If the bank or other financial institution cannot honor its
commitment to repurchase the securities, the Fund could lose money.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES
From time to time the Fund may purchase securities for delivery at a later
date, or sell securities for payment at a later date. The value of these
securities may fluctuate prior to settlement, and could result in a gain or loss
for the Fund. Should any security purchased for delayed delivery decline in
value, the Fund may sell the security before settlement to mitigate the loss.
The Fund will maintain cash or equivalent collateral in a separate account to
cover the value of any securities purchased for later delivery. The Fund will
use the daily market value of such securities when calculating the Fund's net
assets, rather than the purchase or sale price.
"WHEN", "AS" AND "IF" ISSUED SECURITIES
The Fund may purchase a company's securities even though actual delivery
depends on the occurrence of a particular event, such as the company's merger,
corporate reorganization or debt restructuring. The Fund will only include such
securities in its portfolio when there is a real possibility of delivery. Until
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delivery, the Fund will maintain cash or equivalent collateral in a separate
account to cover the value of the conditional securities. In addition, the Fund
will use the daily market value of such securities when calculating the Fund's
net assets.
TEMPORARY DEFENSIVE INVESTMENTS
There may be periods when the Fund believes that market conditions are
unusual. During these periods, the Fund may temporarily assume a defensive
position, and place a higher amount of its total assets in short-term liquid
assets, cash or cash equivalents.
PORTFOLIO TURNOVER
Although the Fund does not intend to engage in trading for short-term
profits it may sell a portfolio security regardless of how long the security has
been held. The Fund's annual portfolio turnover rate is not expected to exceed
50%, which means that the Fund expects no more than one half of its portfolio
securities to be replaced during the year. Please refer to the section of the
Fund's Prospectus entitled "Financial Highlights" for the Fund's portfolio
turnover rate during the most recently completed fiscal year.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS. In addition to the investment policies contained in
the Prospectus, the Fund has adopted the investment restrictions listed below.
Approval by a majority of the outstanding shares of the Fund is required to
change these restrictions. Majority approval means approval by the lesser of (i)
the holders of more than 50% of all the Fund's outstanding shares; or (ii) the
holders of 67% of shares represented at any meeting at which at least 50% of the
Fund's outstanding shares are present. The Fund may exceed the percentage limits
set forth in these investment restrictions if such excess is due to a
fluctuation in the value of the Fund's net assets (except in the case of excess
borrowings).
The Fund may not:
(1) Invest 25% or more of its total assets in any one industry
(securities issued or guaranteed by the United States
Government, its agencies or instrumentalities are not
considered to represent industries);
(2) With respect to 75% of the Fund's total assets, invest more
than 5% of the Fund's total assets (taken at market value at
the time of purchase) in securities of any single issuer or
own more than 10% of the outstanding voting securities of any
one issuer, in each case other than securities issued or
guaranteed by the United States Government, its agencies or
instrumentalities;
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(3) Borrow amounts greater than 5% of its total assets for
temporary purposes and greater than 33 1/3% of its total
assets for meeting redemption requests (when aggregated with
temporary borrowings);
(4) Pledge, mortgage or hypothecate its assets other than to
secure borrowings permitted by restriction 3 above (collateral
arrangements with respect to margin requirements for options
and futures transactions are not deemed to be pledges or
hypothecations for this purpose);
(5) loans its securities to other persons in excess of 25% of the
Fund's total assets, provided that, the Fund may invest
without limitation in short-term debt obligations (including
repurchase agreements) and publicly distributed debt
obligations;
(6) Act as an underwriter for other issuers (except as the Fund
may be deemed an underwriter when selling its portfolio
securities);
(7) Purchase or sell real property or any real estate interests;
including interests in real estate limited partnerships,
except securities issued by companies (including real estate
investment trusts) that invest in real property or real estate
interests;
(8) Purchase securities on margin, except as short-term credit
necessary for clearing any purchase and sale of portfolio
securities, but the Fund may deposit margins in connection
with transactions in options, futures and options on futures;
(9) Invest in commodities or commodity futures contracts, except
for: (i) forward foreign currency contracts; (ii) financial
futures contracts; and (iii) options on financial futures
contracts, securities, foreign currencies and securities
indices; and
(10) Issue any senior securities, except as permitted by the 1940
Act.
NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following restrictions have also
been adopted by the Fund. These restrictions may be amended by a vote of the
Trust's Board of Trustees without the approval of shareholders.
The Fund may not:
(1) Sell securities short, except transactions involving selling
securities short "against the box";
(2) Make investments for the purpose of exercising control or
management;
(3) Invest or maintain more than 15% of its net assets in
securities which cannot be readily resold because of legal or
contractual restrictions; or
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(4) Invest in other investment companies except as permitted under
the 1940 Act.
MANAGEMENT OF THE FUND
The Trust is directed by a Board of Trustees, which has broad supervision
over the affairs of the Fund and the Trust. The officers of the Trust are
responsible for the Fund's operations. Listed below are the Trustees and
officers of the Trust who are primarily responsible for managing the Fund, and
their principal occupations during the past five years.
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION DURING PAST
NAME, AGE AND ADDRESS THE FUND FIVE YEARS
- --------------------- ------------- -------------------------------
<S> <C> <C>
WARREN J. ISABELLE, CFA* Trustee, President Portfolio Manager, Pioneer Capital
Age 47 and Chairman of Growth Fund, July 1990 to January
One International Place the Board 1997; Senior Vice President and Head
Boston, MA 02110 of Domestic Equity Management,
Pioneer Mutual Funds, June 1994 to
January 1997; Portfolio Manager,
Pioneer Small Company Fund; Senior
Vice President and Chief Investment
Officer of Equities at Keystone
Investment Management Company,
February 1997 through May 1997.
RICHARD L. DROSTER* Trustee and Director of Institutional Marketing,
Age 37 Executive Vice- Heartland Advisors, Inc. (Investment
One International Place President Advisors), October 1992 through
Boston, MA 02110 October 1996; Vice President,
Prospect Street Investment Management
Co., Inc., June 1997 through August
1997.
N. STEPHEN OBER(1) Trustee Corporate Medical Director and
Age 39 Executive Vice President, Private
36 Washington Street Healthcare Systems, Inc. (managed
Suite 70 health care organization), 1990
Wellesley Hills, MA 02181 through 1995; President and Chief
Executive Officer, Synergy Health
Care, Inc. (health care information
systems), 1995 to present.
DONALD A. NELSON, CPA(1) Trustee Assistant Professor, Department of
Age 53 Accounting and Finance, Merrimack
Merrimack College College, since 1975; Certified Public
Andover, MA 01810 Accountant, 1972 to present.
</TABLE>
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<TABLE>
<CAPTION>
POSITION WITH THE PRINCIPAL OCCUPATION DURING PAST FIVE
NAME, AGE AND ADDRESS FUND YEARS
- --------------------- ----------------- -------------------------------------
<S> <C> <C>
JOHN A. FIFFY(1) Trustee Acquisition Consultant, Digital Equipment
Age 48 Corporation (n/k/a Compaq Computer
Compaq Computer Corporation Corporation), 1993 to present.
200 Forest Street
Marlboro, MA 01752
GARY S. SAKS Vice-President, Client Service Representative and New
Age 30 Secretary, Accounts Assistant Manager, Furman
One International Place Treasurer and Selz Prime Brokerage Department
Boston, MA 02110 Chief Financial (brokerage), December 1993 to July
Officer 1995; Consultant Air Travelers
Service Corporation, January 1997
to September 1997; Consultant,
Dorchester Tire Service, January 1996
to December 1996.
</TABLE>
* These Trustees are considered Interested Persons withing the meaning of
the 1940 Act. Mr. Isabelle is President and Chief Investment Officer
and Mr. Droster is Executive Vice-President of Ironwood Capital
Management, LLC, the Fund's Investment Adviser.
(1) Messers. Ober, Nelson and Fiffy serve on the Fund's Audit Committee and
Nominating Committee. The Fund has no Management or Executive
Committees.
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Amount of compensation paid by the Trust
during the fiscal year ending December 31, 1998
<TABLE>
<CAPTION>
Total
Aggregate Retirement Compensation
Annual Benefits Pension from the Trust
Name of Person Compensat Accrued as Part Estimated and Fund
and Position with ion from of Fund Annual Benefits Complex Paid to
Fund the Trust Expenses Upon Retirement Trustee
------------------ --------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
Warren J. Isabelle(1) $0 None None $0
Chairman of the
Board, President and
Trustee
Richard L. Droster(1) $0 None None $0
Vice-President and
Trustee
N. Stephen Ober $0 None None $0
Trustee
Donald A. Nelson $2,000 None None $2,000
Trustee
John A. Fiffy $2,000 None None $2,000
Trustee
Gary S. Saks(2) $0 None None $0
Vice-President,
Secretary and
Treasurer
</TABLE>
(1) The Fund does not pay any annual trustee's fee to any Trustee who is
affiliated with ICM or FDDI.
(2) The Trust pays no salaries or compensation to any of its officers.
PRINCIPAL HOLDERS OF SECURITIES
The following table sets forth, as of April 28, 1999 (A) the name,
address and holdings of each person known by the Fund to be a record or
beneficial owner of (i) more than 5% of the outstanding Investment shares or
Institutional Shares of the Fund; (ii) more than 25% of the total outstanding
voting Shares of the Fund; and (B) the percentage of the Fund's Shares owned by
all officers and Trustees of the Fund as a group.
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<TABLE>
<CAPTION>
Owner of Shares Percentage of
of the Fund Address Ownership of Shares
- ----------- ------- -------------------
<S> <C> <C>
The Huntington National 23000 Euclid Avenue 100% of Institutional Shares
Bank, TTEE FBO Cleveland, OH 44117 63.49% of all outstanding
Park Ohio Industries, Inc. Shares(1)
Charles Schwab & Co., Inc. 101 Montgomery Street 18.23% of Investment Shares
San Francisco, CA 94104
National Financial Services 200 Liberty Street, One 13.88% of Investment Shares
Corp. World Financial
New York, NY 10281
All Officers and Trustees N/A 6.51% of Investment Shares(2)
as a Group (6 Persons)
</TABLE>
(1) Park Ohio Industries, Inc. ("Park Ohio") owns in excess of 25% of the
total outstanding Shares of the Fund and may be considered a Control
Person within the meaning of the 1940 Act. Should the Fund hold annual
meetings of shareholders, the effect of other shareholders' voting
rights could be diminished by the influence of Park Ohio's substantial
voting power. The Fund does not intend to hold annual meetings of
shareholders, as set forth in the section of this SAI entitled
"Description of Shares".
(2) Includes 2.66% owned of record by immediate family members of Richard
L. Droster, an officer and Trustee of the Trust.
INVESTMENT ADVISER
Ironwood Capital Management, LLC ("ICM")
One International Place
Boston, Massachusetts 02110
Mr. Warren J. Isabelle, President and Chief Executive Officer of ICM
and Mr. Richard L. Droster, Executive Vice-President of ICM are the controlling
principals of ICM and are also officers and Trustees of the Trust.
As the Fund's investment adviser, ICM determines in its discretion
which securities the Fund will purchase, sell or otherwise dispose of, pursuant
to an agreement between ICM and the Trust. The agreement extends for two years,
and is renewable annually thereafter by vote of a majority of the Trustees
(including a majority of the Trustees who are not parties to the contract or
interested persons of any such parties). The agreement may not be assigned and
may be terminated without penalty by either party upon sixty days' written
notice (in the case of the Fund by vote of a majority of the Board of Trustees
or outstanding voting securities).
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Pursuant to the agreement, ICM will not be held liable for any error of
judgment or mistake of law, or for any investment losses resulting from ICM's
recommendations. ICM is responsible for its own willful bad acts, bad faith or
gross negligence while performing its duties and its own reckless disregard of
its obligations.
ICM also privately manages investment portfolios for individuals,
partnerships, corporations, and other institutional investors.
ICM is responsible for all expenses related to its services for the
Fund. ICM has undertaken to waive its fees and reimburse the Fund to the extent
total annualized expences exceed 1.95% of the average daily net assets for
Investment Shares and 1.70% of the average daily net assets for Institutional
Shares. All other expenses will be paid by the Fund, Expenses incurred by the
Fund are:
o distribution expenses for Investment Shares;
o charges by any administrator, registrar, custodian, stock
transfer and dividend disbursing agent;
o brokerage commissions;
o taxes;
o costs of registering the Fund and its shares under federal and
state securities laws;
o cost of printing, typesetting, and distributing Fund offering
materials to shareholders;
o expenses associated with shareholders' and Trustees' meetings
and preparing and distributing proxy statements to
shareholders;
o fees and travel expenses of Trustees or members of any advisory
board or committee who are not employees or affiliates of ICM;
o expenses incident to any dividend, withdrawal or redemption
options;
o charges and expenses of any outside share valuation service;
o legal and accounting fees (excluding compensation of attorneys
who are employees of the Adviser);
o membership dues of industry associations;
o interest payable on Fund borrowings;
o postage;
o insurance premiums on property and employees;
o other extraordinary expenses;
o expenses of any outside pricing service for Fund Shares; and
o all other costs of the Fund's operations.
As compensation for its management services and expenses incurred, ICM
is entitled to a monthly management fee from the Fund at the rate of 1.00% of
the Fund's average daily net assets, which fee is computed daily. The Fund paid
ICM $32,430 in investment advisory fees and ICM waived its fees and reimbursed
the Fund $224,508 for services rendered during the period commencing with
operations and ending December 31, 1998.
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ADMINISTRATOR
First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19405
First Data Investor Services Group, Inc. ("Investor Services Group"), a
subsidiary of First Data Corporation, furnishes the Trust with clerical help and
accounting, data processing, internal auditing and legal services and certain
other services required by the Trust. It also prepares reports for the Fund's
shareholders, tax returns, filings with SEC and state securities authorities,
and generally assists in all aspects of the Trust's operations, other than
providing investment advice.
As compensation for its services, Investor Services Group receives a
monthly fee based on the value of the aggregate average daily net assets of the
Fund (and any other Fund of the Trust for which the administrator provides
services), computed daily at the following rates:
o 0.12% of the first $150 million of net assets;
o 0.15% of net assets between $150 million and $500 million of
net assets;
o 0.12% of the next $500 million to $750 million in net assets;
o 0.09% of the next $750 million to $1.5 billion in net assets;
o 0.075% of the next $1.5 billion to $2.5 billion in net assets;
o 0.05% of the next $2.5 billion to $5 billion in net assets; and
o 0.025% of net assets in excess of $5 billion, subject to a
minimum annual charge of $55,000 per fund.
There is a separate fee for accounting services at the following rates:
o $35,000 per annum per fund; and
o $5,000 per annum for each additional class of shares above the
initial class.
The Fund paid Investor Services Group $45,017 in administrative fees for
services rendered during the period commencing with operations and ending
December 31, 1998.
TRANSFER AGENT
First Data Investor Services Group, Inc.
3200 Horizon Drive
King of Prussia, Pennsylvania 19405
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First Data Investor Services Group, Inc. also acts as the Fund's transfer
and dividend disbursing agent, pursuant to an agreement with the Trust, and
provides the following services:
o issues and redeems Shares of the Fund;
o addresses and mails all communications by the Fund to its
record owners, including reports to shareholders, dividend and
distribution notices and proxy materials for shareholders'
meetings;
o maintains shareholder accounts;
o responds to shareholder correspondence; and
o makes periodic reports to the Board of Trustees concerning the
operations of the Trust.
CUSTODIAN
The Fifth Third Bank
37 Fountain Square Plaza
Cincinnati, Ohio 45263
As Custodian of the Fund's assets, the bank is responsible for handling
the receipt and delivery of securities, collecting interest and dividends on the
Fund's investments and safekeeping and controlling the Fund's cash and
securities (which may be deposited into the Federal Reserve Treasury Department
Book Entry System or the Depository Trust Company). While the Custodian does not
determine the Fund's investment policies or make investment recommendations, the
Fund may invest in securities and repurchase agreements issued by the Custodian
or deal with the Custodian as a principal in securities transactions.
DISTRIBUTOR
First Data Distributors, Inc.
4400 Computer Drive
Westborough, Massachusetts 01581
Pursuant to a distribution agreement with the Trust (renewable
annually), First Data Distributors, Inc. ("FDDI"), a subsidiary of Investor
Services Group, acts as the Fund's distributor, by selling on a continuous basis
the Fund's Investment Shares and Institutional Shares. FDDI is not obligated to
sell any particular amount of shares.
DISTRIBUTION PLAN
(Investment Shares Only)
The Trust has entered into a Distribution Plan (under Rule 12b-1) with
respect to the Fund's Investment Shares (the "Plan"), which permits the Fund to
pay FDDI for distribution expenses borne, or paid to others, by FDDI for
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the purposes of financing or assisting in the financing of any activity which is
primarily intended to result in the sale of the Investment Shares of the Fund.
The Trustees believe that the Plan will benefit the Fund by providing greater
access to investors than could be achieved without the Plan. The type of
distribution expenses covered under the Plan include, but are not limited to,
the costs and expenses of direct marketing activities, the design, preparation,
printing and distribution of promotional materials, advertising, offering
materials, and shareholder materials and the compensation of securities dealers
and other financial intermediaries for sales activities. These expenses accrue
annually each fiscal year, and may not exceed 0.25% of the Fund's average annual
net assets attributable to Investment Shares. FDDI provides the Trust with a
quarterly written report of the amounts expended under the distribution plan and
the purpose for which such expenditures were made.
Please refer to the section of the Fund's Annual Report dated December
31, 1998 entitled "Statement of Operations" for the aggregate distribution fees
the Fund accrued for the period commencing with operations and ending December
31, 1998.
THE PLAN. The Distribution Plan was adopted by a majority vote of the
Board of Trustees (including all non-interested Trustees), for the benefit of
the Fund and its shareholders. None of the Trustees has any direct or indirect
financial interest in the Distribution Plan. The Plan remains in effect from
year to year provided the Trustees annually approve its continuance. The
Trustees (as well as holders of the Investment shares) must approve any material
changes to the Plan, including changes to increase distribution expenses. The
Plan may be terminated at any time, without penalty, by vote of the majority of
the Trustees who are not interested persons of the Trust and who have no
financial interest in the operations of the Plan, or by a vote of a majority of
the outstanding voting Investment Shares. The Plan will automatically terminate
in the event of its assignment (as defined in the 1940 Act).
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP
225 Franklin Street
Boston, Massachusetts 02110-2812
As the Trust's independent public accountant, Arthur Andersen provides
audit services, tax return review and assistance and consultation on financial
information contained in the Fund's SEC filings.
LEGAL COUNSEL
The Trust's legal counsel is Lane Altman & Owens LLP, 101 Federal Street,
Boston, Massachusetts, 02110.
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<PAGE>
PURCHASE OF FUND SHARES
The following information about how to purchase the Fund's shares
supplements the information in the Prospectus under the heading "Information
About Your Account - Purchasing Shares."
TRANSACTIONS THROUGH SECURITIES DEALERS. Fund shares may be purchased and
redeemed through securities dealers. Some dealers may place the Fund's Shares in
an account with their firm. Dealers may place conditions on the purchase of Fund
shares, including:
o requirement to purchase more than the minimum investment
amount,
o restriction on issuing redemption checks in the customer's
name;
o limits on purchase of fractional Shares.
FEES. There is no sales or service charge to individual investors by the
Fund or by FDDI, although investment dealers, banks and other institutions may
make reasonable charges to investors for their services. These fees are usually
deducted monthly from the investor's account and on smaller accounts could
constitute a substantial portion of the distribution. In some states, banks or
other financial institutions may be required by law to register as securities
dealers. Securities dealers may charge fees in connection with:
o same-day investment of client funds;
o same-day access to client funds;
o advice about the status of accounts, yield currently being
paid or income earned to date;
o providing periodic account statements of security and money
market positions;
o other assistance with inquiries related to a client's
investment.
RETIREMENT PLANS. Tax-deferred retirement plans such as individual
retirement accounts ("IRAs"), Roth IRAs, Educational IRAs and other qualified
plans are permitted to purchase shares of the Fund. Anyone considering
establishing a retirement plan should consult with an attorney and/or accountant
about the terms and tax consequences of the plan.
REDEMPTION OF FUND SHARES
The following information about how to redeem the Fund's shares
supplements the information in the Prospectus under the heading "Information
About Your Account - Selling Shares."
WIRE REDEMPTION PRIVILEGE. The Fund's Transfer Agent is authorized by
the investor using this privilege to act on wire or telephone redemption
instructions from any person who the Transfer Agent reasonably believes to be
the genuine owner of the account. Ordinarily, if the Transfer Agent receives the
redemption request in proper form, the Fund will usually initiate payment
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<PAGE>
for the redeemed shares (less a $20 wire redemption fee) on the next business
day after receipt.
Redemption proceeds ($1,000 minimum) are be transferred by Federal
Reserve wire to the commercial bank account specified on the Account Application
or Shareholder Services Form (or to a correspondent bank if the investor's bank
is not a member of the Federal Reserve System). The correspondent bank must
immediately notify the investor's bank to avoid a delay in crediting the funds
to the investor's bank account.
SIGNATURES. Each shareholder (and each joint account holder) must
personally sign a written redemption request. You must provide a signature
guarantee if:
o you are redeeming shares worth more than $50,000;
o you are requesting that the proceeds check be made out to
someone other than the registered owners or be sent to an
address other than the record address;
o the account registration has changed within the last 30 days;
or
o you are instructing us to wire the proceeds to a bank account
not designated on the Account Application.
The Transfer Agent will generally accept signature guarantees in proper
form from domestic banks, brokers, dealers, credit unions, national securities
exchanges, registered securities associations, clearing agencies and savings
associations, as well as from participants in the NYSE Medallion Signature
Program, the Securities Transfer Agents Medallion Program and the Stock
Exchanges Medallion Program. Signature Guarantees must be signed by an
authorized signatory of the guarantor and "Signature Guaranteed" must appear
with the signature. The Transfer Agent may request additional documentation from
corporations, executors, administrators, trustees or guardians, and may accept
other suitable verification arrangements from foreign investors, such as
consular verification. For more information with respect to signature
guarantees, please call the telephone number listed on the cover.
REDEMPTION COMMITMENT. The Fund will pay in cash all redemption
requests by any shareholder of record, limited in amount during any 90-day
period to the lesser of $250,000 or 1% of the value of the Fund's net assets at
the beginning of such period. This commitment is irrevocable without the prior
approval of the SEC. For requests in excess of such amount, the Board of
Trustees may make payments in whole or in part in securities or other assets
(usually during a time of emergency or when a cash distribution would adversely
impact the Fund's liquidity). Any securities distributed would be readily
marketable, to the extent available, and would be valued in the same manner as
the Fund's investment securities are valued. Brokerage charges may be incurred
upon the sale of such securities.
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<PAGE>
SUSPENSION OF REDEMPTIONS. Redemption rights may be suspended and payment
for redeemed Shares may be postponed under the following circumstances:
o during any period when the NYSE is closed (excluding normal
weekend and holiday closings);
o when trading is restricted in the Fund's normal markets;
o during an emergency (as determined by the SEC) in which the
Fund cannot reasonably dispose of its investments or determine
its net asset value; or
o during such other periods as the SEC may permit to protect the
Fund's shareholders.
INVESTMENT OF PORTFOLIO SECURITIES
BROKER-DEALERS. When selecting a broker or dealer to effect a
transaction in the Fund's portfolio securities, ICM will consider various
factors such as:
o the size and type of the transaction;
o the nature and character of the markets for the security to be
purchased or sold;
o the dealer's execution efficiency, settlement capability, and
financial condition;
o the dealer's execution services rendered on a continuing
basis; and
o the reasonableness of any dealer spreads.
When more than one broker-dealer is suitable, ICM will choose a
broker-dealer capable of providing supplemental research services to the Fund,
and may choose to pay a higher commission to account for the supplemental
services. (It is impossible to estimate the frequency with which ICM uses such
broker-dealers). Such research is intended to supplement ICM's normal
independent research activities in an effort to avoid additional expense, rather
than replace them. Supplemental research services may include:
o providing advice about the value of securities;
o providing advice about the availability of securities for
purchase, or about specific purchasers or sellers of
securities;
o furnishing analyses and reports concerning issuers,
industries, securities, economic factors and trends, portfolio
strategies and performance of accounts; and
o effecting securities transactions and performing incidental
functions such as clearance and settlement.
From time to time, ICM may execute portfolio transactions with
broker-dealers who also sell shares of the Fund, subject to rules adopted by the
National Association of Securities Dealers. ICM has made no commitment to
execute any or all portfolio transactions through such broker-dealers.
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<PAGE>
The Fund paid $45,923.05 in aggregate commissions for brokerage
services rendered during the period January 1, 1998 until December 31, 1998. The
Fund paid $11,248.02 in Hoenig & Co., Inc. representing "soft-dollars" for
investment research and brokerage services rendered during the period January 1,
1998 until December 31, 1998.
IDENTICAL SECURITIES. From time to time, it is possible that identical
securities may be held by more than one of ICM's clients. If ICM purchases or
sells identical securities for more than one account at the same time, ICM may
not be able to execute orders as large as it may desire, or buy and sell the
securities at an advantageous price. Conversely, ICM may be able to obtain more
desirable prices by buying or selling in a volume transaction identical
securities held by more than one of its client accounts. When ICM purchases or
sells identical securities for more than one of its accounts, ICM will allocate
the transaction in such security between the Fund and all such client accounts
in a manner ICM deems equitable, taking into account the size of each account
and the amount being purchased or sold.
TAXES
QUALIFICATION. The Fund intends to meet the requirements of Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"), for
qualification as a regulated investment company. The Fund will not be required
to pay federal income tax if the Fund meets these requirements:
(1) SOURCE OF INCOME. The Fund must derive at least 90% of its annual
gross income from dividends, interest, payments on loans of securities, gains
from the sale or other disposition of stock, securities or foreign currencies,
or other income (including gains from options, futures and forward contracts)
derived with respect to its business of investing in such stock, securities or
currencies (the "90% income test").
(2) DIVERSIFICATION. The Fund must also satisfy certain quarterly
diversification requirements, including:
(i) limiting the Fund's investment composition so that at
least 50% of the Fund's total assets consist of cash
and cash items, U.S. Government securities,
securities of other regulated investment companies,
and other securities.
(ii) limiting other securities in (i) above, with respect
to any one issuer, to an amount that does not exceed
5% of the value of the Fund's total assets and 10% of
the issuer's outstanding voting securities; and
(iii) limiting the value of the Fund's total assets that
can be invested in a single issuer to 25% (other than
U.S. Government
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<PAGE>
securities or securities of other regulated investment
companies).
Changes to the Federal tax law repealed the 30% limit on gains from
securities held for less than three months (the "30% test") for tax years
beginning after August 5, 1997. However, the Fund may continue to observe the
restriction until certain state taxing authorities adopt the new federal
provisions.
(3) DISTRIBUTION. The Fund must also make a "required distribution",
consisting of:
(i) 98% of the Fund's ordinary income earned during the
calendar year;
(ii) and 98% of capital gain net income for the one year
period ending October 31 (or December 31 if an
election is made).
The required distribution also includes 100% of any undistributed
amount from prior years. A 4% excise tax will be imposed on the excess, if any,
of the Fund's "required distribution" over the amount distributed within the
calendar year. Any dividend declared by the Fund in October, November or
December as of a record date in such a month and paid during the following
January will be treated for federal income tax purposes as received by
shareholders on December 31 of the calendar year in which it is declared.
DIVIDENDS. Dividends from investment company taxable income may be
taxed to the shareholders as ordinary income or long-term capital gain:
(i) ORDINARY INCOME: dividends from net investment
income, net short-term capital gain in excess of net
long-term capital loss, and certain net foreign
exchange gains, whether received in cash or
reinvested in additional Shares.
(ii) LONG-TERM CAPITAL GAIN: dividends from net long-term
capital gain in excess of net short-term capital
loss, if any, whether received in cash or reinvested
in additional Shares (without regard to the length of
time Shares of the Fund have been held).
Recently enacted federal legislation provides for additional categories
of net capital gain to be reported to shareholders each year beginning in 1997.
Shareholders who receive annual 1099-DIV information from the Fund will also be
provided with information with respect to the amount of 28% and 20% capital gain
that is included in the capital gain dividend paid to shareholders during the
year. The federal income tax status of all distributions will be reported to
shareholders annually.
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<PAGE>
FOREIGN INVESTMENTS. Foreign exchange gains and losses realized by the
Fund in connection with certain transactions involving foreign
currency-denominated debt securities, certain options and futures contracts
relating to foreign currency, foreign currency forward contracts, foreign
currencies, or payables or receivables denominated in a foreign currency are
subject to Section 988 of the Code, which generally causes such gains and losses
to be treated as ordinary income and losses and may affect the amount, timing
and character of distributions to shareholders. Any such transactions that are
not directly related to the Fund's investments in stocks or securities may need
to be limited in order to enable the Fund to satisfy certain tax qualification
requirements. If the net foreign exchange loss for a year were to exceed the
Fund's investment company taxable income (computed without regard to such loss),
the resulting ordinary loss for such year would not be deductible by the Fund or
its shareholders in future years.
If the Fund acquires any equity interest (under proposed regulations,
generally including not only stock but also an option to acquire stock) in
certain foreign corporations that receive at least 75% of their annual gross
income from passive sources (such as interest, dividends, rents, royalties or
capital gain) or hold at least 50% of their assets in investments producing such
passive income ("passive foreign investment companies"), the Fund could be
subject to federal income tax and additional interest charges on "excess
distributions" received from such companies or gain from the sale of stock in
such companies, even if all income or gain actually received by the Fund is
timely distributed to its shareholders. The Fund would not be able to pass
through to its shareholders any credit or deduction for such a tax. Certain
elections may, if available, ameliorate these adverse tax consequences, but any
such election would require the electing fund to recognize taxable income or
gain without the concurrent receipt of cash. The Fund may limit and/or manage
its holdings in passive foreign investment companies to minimize its tax
liability or maximize its return from these investments.
The Fund may be subject to withholding and other taxes imposed by
foreign countries, including taxes on interest, dividends and capital gains,
with respect to its investments, if any, in those countries. Tax conventions
between certain countries and the U.S. may reduce or eliminate such taxes in
some cases. The Fund does not expect to satisfy the requirements for passing
through to its shareholders their pro rata share of qualified foreign taxes paid
by the Fund, with the result that shareholders will not include such taxes in
their gross incomes and will not be entitled to a tax deduction or credit for
such taxes on their own tax returns.
ORIGINAL ISSUE DISCOUNT. If the Fund invests in certain pay-in-kind
securities ("PIKs"), zero coupon securities, deferred interest securities or, in
general, any other securities with original issue discount (or with market
discount if the Fund elects to include market discount in income currently), the
Fund must accrue income on such investments for each taxable year, which
generally will be prior to the receipt of the corresponding cash payments.
However, the Fund must distribute, at least annually, all or substantially all
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<PAGE>
of its net income, including such accrued income, to shareholders to qualify as
a regulated investment company under the Code and to avoid federal income and
excise taxes. Therefore, the Fund may have to dispose of its portfolio
securities under disadvantageous circumstances to generate cash, or may have to
leverage itself by borrowing the cash, to satisfy distribution requirements.
CARRY-FORWARD. For federal income tax purposes, the Fund is permitted
to carry forward a net capital loss for any year to offset its own capital
gains, if any, during the eight years following the year of the loss. To the
extent subsequent capital gains are offset by such losses, they would not result
in federal income tax liability to the Fund and therefore are not expected to be
distributed as such to shareholders.
APPRECIATION. At the time of an investor's purchase of Fund shares, a
portion of the purchase price may be attributable to realized or unrealized
appreciation in the Fund's portfolio or undistributed taxable income of the
Fund. Consequently, subsequent distributions on these shares from such
appreciation or income may be taxable to such investor even if the net asset
value of the investor's shares is, as a result of the distributions, reduced
below the investor's cost for such Shares and the distributions economically
represent a return of a portion of the investment.
REDEMPTIONS. Redemptions and exchanges are taxable events. Any loss
realized by a shareholder upon the redemption, exchange or other disposition of
Shares with a tax holding period of six months or less will be treated as a
long-term capital loss to the extent of any amounts treated as distributions of
long-term capital gain with respect to such Shares.
DERIVATIVES. Options written or purchased and futures contracts entered
into by the Fund on certain securities, indices and foreign currencies, as well
as certain foreign currency forward contracts, may cause the Fund to recognize
gains or losses from marking-to-market at the end of its taxable year even
though such options may not have lapsed, been closed out, or exercised or such
futures or forward contracts may not have been performed or closed out. The tax
rules applicable to these contracts may affect the characterization as long-term
or short-term of capital gains and losses realized by the Fund. Certain options,
futures and forward contracts relating to foreign currency may be subject to
Section 988, as described above, and may accordingly produce ordinary income or
loss. Losses on certain options, futures or forward contracts and/or offsetting
positions (portfolio securities or other positions with respect to which the
Fund's risk of loss is substantially diminished by one or more options, futures
or forward contracts) may also be deferred under the tax straddle rules of the
Code, which may also affect the characterization of capital gains or losses from
straddle positions and certain successor positions as long-term or short-term.
Certain tax elections may be available that would enable the Fund to ameliorate
some adverse effects of the tax rules described in this paragraph. The tax rules
applicable to options, futures or forward contracts and straddles may affect the
amount, timing and character of the Fund's income and losses and its
distributions to shareholders.
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<PAGE>
DIVIDENDS-RECEIVED DEDUCTION. For purposes of the 70% dividends-received
deduction generally available to corporations under the Code, dividends received
by the Fund from U.S. domestic corporations in respect of any share of stock
with a tax holding period of at least 46 days (91 days in the case of certain
preferred stock) held in an unleveraged position and distributed and designated
by the Fund may be treated as qualifying dividends. Any corporate shareholder
should consult its tax adviser regarding the possibility that its tax basis in
its shares may be reduced, for federal income tax purposes, by reason of
"extraordinary dividends" received with respect to the shares. In order to
qualify for the deduction, corporate shareholders must meet the minimum holding
period requirement stated above with respect to their Fund Shares, taking into
account any holding period reductions from certain hedging or other transactions
or positions that diminish their risk of loss with respect to their Fund Shares,
and, if they borrow to acquire Fund Shares, they may be denied a portion of the
dividends-received deduction. The entire qualifying dividend, including the
otherwise deductible amount, will be included in determining the excess (if any)
of a corporation's adjusted current earnings over its alternative minimum
taxable income, which may increase a corporation's alternative minimum tax
liability.
QUALIFIED PLANS. Different tax treatment, including penalties on
certain excess contributions and deferrals, certain pre-retirement and
post-retirement distributions, and certain prohibited transactions, is accorded
to accounts maintained as qualified retirement plans. Shareholders should
consult their tax advisers for more information.
BACKUP WITHHOLDING. Federal law requires that the Fund withhold (as
"backup withholding") 31% of reportable payments, including dividends, capital
gain dividends and the proceeds of redemptions (including exchanges) and
repurchases to shareholders who have not complied with IRS regulations. In order
to avoid this withholding requirement, shareholders must certify on their
Account Applications, or on separate IRS Forms W-9, that the Social Security
Number or other Taxpayer Identification Number they provide is their correct
number and that they are not currently subject to backup withholding, or that
they are exempt from backup withholding. A Fund may nevertheless be required to
withhold if it receives notice from the IRS or a broker that the number provided
is incorrect or backup withholding is applicable as a result of previous under
reporting of interest or dividend income.
STATE TAX. If, as anticipated, the Fund qualifies as a regulated
investment company under the Code, it will not be required to pay any
Massachusetts income, corporate excise or franchise taxes.
The description of certain federal tax provisions above relates only to
U.S. federal income tax consequences for shareholders who are U.S. persons (U.S.
citizens, residents or U.S. corporations, partnerships, trusts or estates) and
who are subject to U.S. federal income tax. This description does not address
the special tax rules that may be applicable to particular types of investors,
such as financial institutions, insurance companies, securities dealers, or
tax-
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<PAGE>
exempt or tax-deferred plans, accounts or entities. Investors other than
U.S. persons may be subject to different U.S. tax treatment, including a
possible 30% non-resident alien U.S. withholding tax (or non-resident alien
withholding tax at a lower treaty rate) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8 or authorized substitute for
Form W-8 is on file, to 31% backup withholding on certain other payments from
the Fund. Shareholders should consult their own tax advisers on these matters
and on state, local and other applicable tax laws.
DESCRIPTION OF SHARES
SERIES OF SHARES. The Board of Trustees may authorize the issuance of
an unlimited number of full and fractional Shares of beneficial interest which
may be divided into such separate series as the Trustees may establish.
Currently, the Trust consists of only one series. However, the Trustees may
establish additional series of shares, and may divide or combine the shares into
a greater or lesser number of shares (without changing the proportionate
beneficial interests in the Trust).
CLASSES OF SHARES. The Trustees may classify or reclassify any series
of the shares into one or more classes. The Trustees have authorized the
issuance of two classes of Shares of the Fund designated as Investment Shares
and Institutional Shares. Each Share of a class of the Fund represents an equal
proportionate interest in the assets of the Fund allocable to that class. Upon
liquidation of the Trust, shareholders of each class of a series are entitled to
share pro rata in the net assets allocable to such available for distribution to
shareholders. The Trust may create and issue additional classes of shares.
VOTING OF SHARES. Any matter required by federal or applicable state
law, or otherwise, to be submitted to the holders of the outstanding voting
securities of the Trust must be approved by the holders of a majority of the
outstanding shares of each class or series affected by such matter. A class or
series will be deemed to be affected by a matter unless the interests of each
class or series in the matter are substantially identical or the matter does not
affect any interest of such class or series. The selection of independent public
accountants, the approval of principal distribution contracts and the election
of trustees are exempted.
ANNUAL SHAREHOLDER MEETINGS. The Trust is not required and does not
intend to hold annual meetings of shareholders. If the Trust holds a meeting,
each share of the Trust will be entitled, as determined by the Trustees, to
either one vote for each share or to one vote for each dollar of net asset value
represented by such shares on all matters presented to shareholders including
the elections of Trustees ("dollar based voting"). However, to the extent
required by law or otherwise determined by the Trustees, series and classes of
the Trust will vote separately from each other. Shareholders of the Trust do not
have cumulative voting rights in the election of Trustees. Shareholder
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<PAGE>
meetings may be called by the Trustees, certain officers of the Trust or upon
the written request of holders of 10% or more of the Shares entitled to vote at
such meetings. Shareholders have the right to vote only on those matters
specified in the Declaration of Trust and such other matters as the Trustees may
determine or as may be required by law.
TERMINATION OF TRUST. The Declaration of Trust permits the termination
of the Trust or of any series or class of the Trust:
(i) by a majority of the affected shareholders at a meeting of
shareholders of the Trust, series or class; or
(ii) by a majority of the Trustees without shareholder
approval if the Trustees determine that such action is in the
best interest of the Trust or its shareholders.
MERGER OR CONSOLIDATION. The Declaration of Trust authorizes the
Trustees, with shareholder approval to cause the Trust, or any series thereof,
to merge or consolidate with any corporation, association, trust or other
organization or sell or exchange all or substantially all of the property
belonging to the Trust or any series thereof. In addition, the Trustees, without
shareholder approval, may adopt a master-feeder structure by investing all or a
portion of the assets of a series of the Trust in the securities of another
open-end investment company.
AMENDMENT OF TRUST. The Trustees may amend the Declaration of Trust
without a shareholder vote. However, shareholders of the Trust have the right
to vote on any amendment:
(i) that would affect the voting rights of shareholders;
(ii) that is required by law to be approved by shareholders;
(iii) that would amend the voting provisions of the Declaration
of Trust; or
(iv) that the Trustees determine to submit to shareholders.
SHAREHOLDER AND TRUSTEE LIABILITY
LIABILITY AND INDEMNIFICATION OF SHAREHOLDERS. The Trust will indemnify
each Shareholder out of Trust property and hold each Shareholder harmless from
and against all claims and liabilities, to which a Shareholder may become
subject by reason of his being or having been a Shareholder. The Trust will
reimburse such Shareholder for all legal and other expenses reasonably incurred
by him in connection with any such claim or liability. If the Trust consists of
more than one Series, recovery of losses and related expenses by Shareholders
who are faced with claims or liabilities solely by reason of their status as
Shareholders of that Series may not exceed the assets of that Series. The Trust
will, upon request, assume the defense of any claim made against any shareholder
for any act or obligation of the Trust and satisfy any resulting judgment. While
a shareholder may be held liable to the extent the Trust is unable to meet
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<PAGE>
its indemnification obligations, the Trust believes this possibility is remote
in light of the nature of the Trust's business and the nature and amount of its
assets.
LIABILITY AND INDEMNIFICATION OF TRUSTEES. The declaration of Trust
authorized the Trust to indemnify each of its Trustees, officers, agents and
employees against liabilities and expenses reasonably incurred by them, in
connection with, or arising out of, any action, suit or proceeding, threatened
against or otherwise involving such Trustee, officer, agent or employee,
directly or indirectly, by reason of being or having been a Trustee, officer,
agent or employee of the Trust. The Declaration of Trust does not authorize the
Trust to indemnify any Trustee, officer, agent or employee against any liability
to which he or she would otherwise be subject by reason of or for willful
misfeasance, bad faith, gross negligence, unlawful conduct or reckless disregard
of such person's duties or of the best interests of the Trust.
DETERMINATION OF NET ASSET VALUE
Shares of the Fund are sold on a continuous basis at the net asset
value per share next determined upon receipt by the Transfer Agent of an order
in proper form. Net asset value per share of each class of shares of the Fund is
determined by dividing the value of its assets, less liabilities attributable to
that Class, by the number of Shares of that class outstanding. The net asset
value is computed once daily, on each day the NYSE is open, as of the close of
regular trading on the NYSE.
Calculation of the Fund's net asset value is governed by certain
policies and limitations:
(1) an equity portfolio security listed or traded on the New
York or American Stock Exchange or other stock exchange or
quoted by NASDAQ is valued at its latest sale price on that
exchange (or on the primary exchange therefor, if such
securities are listed on more than one exchange) or quotation
service prior to the time assets are valued. If there were no
sales that day and for securities traded on the other
over-the-counter markets, the security is valued at the mean
between the most recently quoted bid and asked prices;
(2) when market quotations are not readily available,
including circumstances under which it is determined by the
Adviser that sale or bid prices are not reflective of a
security's market value, portfolio securities are valued at
their fair value as determined in good faith under procedures
established by and under the general supervision of the Fund's
Trustees;
(3) the value of short-term debt securities which mature at a
date less than sixty days subsequent to the valuation date
will be determined on an amortized cost basis; and
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<PAGE>
(4) the value of other assets will be determined in good faith
at fair value under procedures established by and under the
general supervision of the Fund's Trustees. Dividends
receivable are accrued as of the ex-dividend date. Interest
income is accrued daily.
The Fund does not accept purchase and redemption orders on days the
NYSE is closed. The NYSE is currently scheduled to be closed on the following
holidays: New Year's Day, Martin Luther King Day, Presidents' Day, Good Friday,
Memorial Day (observed), Independence Day, Labor Day, Thanksgiving and Christmas
Day, and on the preceding Friday or subsequent Monday when one of these holidays
falls on a Saturday or Sunday, respectively.
INVESTMENT RESULTS
QUOTATIONS, COMPARISONS AND GENERAL INFORMATION. From time to time, the
Fund may cite certain performance rankings in its advertisements or reports to
shareholders for the purpose of illustrating or comparing its past performance
with that of other mutual funds. For example, total return of the Fund's classes
may be compared to rankings prepared by Lipper Analytical Services, Inc., a
widely recognized independent service which monitors mutual fund performance;
the Standard & Poor's 500 Stock Index ("S&P 500"), an index of unmanaged groups
of common stock; the Dow Jones Industrial Average, a recognized unmanaged index
of common stocks of 30 industrial companies listed on the NYSE; or The Frank
Russell Indexes ("Russell 1000," "2000," "2500," and "3000,") or the Wilshire
Total Market Value Index ("Wilshire 5000"), two recognized unmanaged indexes of
broad based common stocks.
Performance rankings and listings reported in newspapers or national
business and financial publications, such as Barron's, Business Week, Consumers
Digest, Consumer Reports, Financial World, Forbes, Fortune, Investors Business
Daily, Kiplinger's Personal Finance Magazine, Money Magazine, New York Times,
Smart Money, USA Today, U.S. News and World Report, The Wall Street Journal, and
Worth may also be cited (if the Fund is listed in any such publication) or used
for comparison, as well as performance listings and rankings from various other
sources including Bloomberg Financial Markets, CDA/Wiesenberger, Donoghue's
Mutual Fund Almanac, Investment Company Data, Inc., Johnson's Charts, Kanon
Bloch Carre and Co., Lipper Analytical Services, Inc., Micropal, Inc.,
Morningstar, Inc., Schabacker Investment Management and Towers Data Systems,
Inc.
In addition, from time to time quotations from articles from financial
publications such as those listed above may be used in advertisements in sales
literature, or in reports to shareholders of the Fund.
The Fund may also present, from time to time, historical information
depicting the value of a hypothetical account in one or more classes of the Fund
since the Fund's inception.
- 26 -
<PAGE>
In presenting investment results, the Fund may also include references to
certain financial planning concepts, including (a) the need to evaluate
financial assets and obligations to determine how much to invest; (b) the need
to analyze the objectives of various investments to determine where to invest;
and (c) the need to analyze the time frame for future capital needs to determine
how long to invest. The investor controls these three factors, all of which
affect the use of investments in building assets.
One of the primary methods used to measure the performance of a class of
the Fund is "total return." "Total return" will normally represent the
percentage change in value of an account, or of a hypothetical investment in a
class of the Fund, over any period up to the lifetime of that class of the Fund.
Total return calculations will usually assume the reinvestment of all dividends
and capital gains distributions and will be expressed as a percentage increase
or decrease from an initial value, for the entire period or for one or more
specified periods within the entire period. Total return percentages for periods
of less than one year will usually be annualized; total return percentages for
periods longer than one year will usually be accompanied by total return
percentages for each year within the period and/or by the average annual
compounded total return for the period. The income and capital components of a
given return may be separated and portrayed in a variety of ways in order to
illustrate their relative significance. Performance may also be portrayed in
terms of cash or investment values, without percentages. Past performance cannot
guarantee any particular future result.
STANDARDIZED AVERAGE ANNUAL TOTAL RETURN QUOTATIONS. The Fund's average
annual total return quotations for each of its classes are calculated by
standard methods prescribed by the SEC. They are computed by finding the average
annual compounded rates of return that would cause a hypothetical investment in
that class made on the first day of a designated period (assuming all dividends
and distributions are reinvested) to equal the ending redeemable value of such
hypothetical investment on the last day of the designated period in accordance
with the following formula:
P(1+T)n = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of the hypothetical $1000 initial
payment made at the beginning of the designated period (or
fractional portion thereof).
- 27 -
<PAGE>
For purposes of the above computation, it is assumed that all dividends and
distributions made by the Fund are reinvested at net asset value during the
designated period. The average annual total return quotation is determined to
the nearest 1/100 of 1%.
In determining the average annual total return (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts of
a particular class are taken into consideration. For any account fees that vary
with the size of the account, the account fee used for purposes of the above
computation is assumed to be the fee that would be charged to a class's mean
account size.
The Funds total return for the period commencing with operations and ending
December 31, 1998 was -30.90% for the Investment Shares and -30.80% for the
Institutional Shares. Please refer to the section of the Fund's Prospectus
entitled "Past Performance" for a more detailed description of the Fund's total
return for the period commencing with operations and ending December 31, 1998.
REGISTRATION STATEMENT
This SAI and the Prospectus do not contain all the information included in
the Trust's Registration Statement filed with the SEC which covers the Shares
offered hereby. The Registration Statement, including exhibits filed therewith,
may be examined at the offices of the SEC in Washington, D.C.
Statements made within this SAI or the Prospectus with respect to any
contract or other document are not necessarily complete. You should refer to the
complete copy of such contract or other documents attached as an exhibit to the
Trust's Registration Statement.
EXPERTS
Arthur Andersen LLP, independent public accountants, have audited the
Financial Statements attached hereto as of and for the period ending December
31, 1998. The Trust has included such report in reliance on the authority of
Arthur Andersen LLP as experts in accounting and auditing.
- 28 -
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees
of ICM/Isabelle Small Cap Value Fund
We have audited the accompanying statement of assets and liabilities of the
ICM/Isabelle Small Cap Value Fund, including the schedule of investments, as of
December 31, 1998, and the related statements of operations, changes in net
assets and financial highlights for the period presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements and
financial highlights. Our procedures included confirmation of securities owned
as of December 31, 1998, by correspondence with the custodian and brokers. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
ICM/Isabelle Small Cap Value Fund as of December 31, 1998, the results of its
operations, changes in its net assets and the financial highlights for the
period presented, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
February 16, 1999
29
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998
MARKET
SHARES VALUE
- ------ -----
Common Stocks - 97.80%
BASIC MATERIALS - 7.69%
30,000 Crown Vantage, Inc.* $ 67,500
28,100 Landec Corp.* 168,600
21,000 Material Sciences Corp.* 178,500
------------
414,600
------------
CAPITAL GOODS - 16.85%
47,700 Acme Electric Corp.* 226,575
9,300 Kollmorgen Corp. 141,825
75,400 Measurement Specialties, Inc.* 329,875
8,800 Nashua Corp. 117,150
7,000 Sparton Corp. * 41,563
4,000 Woodhead Industries, Inc. 52,000
------------
908,988
------------
CONSUMER CYCLICALS - 8.96%
60,000 Morgan Products, Ltd.* 210,000
42,700 Transmedia Network, Inc. 90,737
50,400 Worldtex, Inc.* 182,700
------------
483,437
------------
CONSUMER STAPLES - 4.34%
26,000 WLR Foods, Inc. 234,000
------------
234,000
ENERGY - 1.64%
7,000 Power-One, Inc. * 49,000
5,000 Triton Energy Limited * 39,688
------------
88,688
HEALTH CARE - 19.88%
112,400 Anergen, Inc.* 45,662
50,200 Apria Healthcare Group, Inc.* 448,663
5,000 EPIX Medical, Inc. * 46,562
97,500 Medical Resources, Inc.* 219,375
29,000 Neurocrine Biosciences, Inc.* 199,375
25,000 Vencor, Inc. * 112,500
------------
1,072,137
The accompanying notes are an integral part of the Financial Statements.
30
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
December 31, 1998 (CONTINUED)
Market
Shares Value
- ----- ------
Common Stocks - continued
TECHNOLOGY - 22.85%
11,800 Anacomp, Inc.* 219,775
47,000 Broadway & Seymour, Inc.* 105,750
23,650 CSP, Inc. * 187,722
2,000 DT Industries, Inc. 31,500
5,000 General Scanning, Inc. * 30,312
17,000 Integrated Circuit Systems, Inc.* 299,625
50,000 OpenROUTE Networks, Inc. * 85,937
22,700 Pioneer-Standard Electronics, Inc. 212,813
10,000 Signal Technology, Corp. * 26,250
3,000 VLSI Technology, Inc. * 32,813
------------
1,232,497
TRANSPORTATION - 8.51%
24,000 Yellow Corp. 459,000
------------
459,000
OTHER - 7.08%
5,000 Harnischfeger Industries, Inc. $ 50,938
19,000 Maverick Tube Corp. * 105,687
2,000 Roy F. Weston, Inc. * 5,500
11,000 Vallen Corporation * 220,000
------------
382,125
Total Common Stocks (Cost $6,274,651) 5,275,472
Total Investments (Cost $6,274,651)** - 97.80% 5,275,472
Liabilities Net of Cash and Other Assets - 2.20% 119,488
------------
NET ASSETS - 100.00% $ 5,394,960
* Non-income producing security.
** Cost for federal income tax purposes is $6,274,651 and net unrealized
depreciation consists of:
Gross unrealized appreciation..................................... $ 399,331
Gross unrealized depreciation..................................... 1,398,510
Net unrealized depreciation..................................... ($999,179)
The accompanying notes are an integral part of the Financial Statements.
31
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
ASSETS:
Investments in securities at market value
(identified cost $6,274,651) (Note 1) $ 5,275,472
Receivable for investments sold 104,574
Receivable for fund shares sold 42,073
Due from adviser (Note 3) 26,018
Deferred organization costs (Note 1) 50,464
Other assets 4,294
------------
TOTAL ASSETS 5,502,895
------------
LIABILITIES:
Accrued expenses 46,924
Accrued distribution expense 1,204
Due to Bank 59,807
-----------
TOTAL LIABILITIES 107,935
-----------
NET ASSETS $ 5,394,960
------------
INVESTMENT CLASS SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 240,298 shares outstanding) $ 1,660,463
------------
Net asset value, offering and redemption price per Investment
Class Share ($1,660,463 / 240,298 shares) $ 6.91
------------
INSTITUTIONAL CLASS SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 539,374 shares outstanding) $ 3,734,497
------------
Net asset value, offering and redemption price per Institutional
Class Share ($3,734,497 / 539,374 shares) $ 6.92
------------
NET ASSETS CONSIST OF:
Paid-in capital 7,206,712
Accumulated net investment loss 0
Accumulated net realized loss on investments (812,573)
Net unrealized depreciation on investments (999,179)
------------
NET ASSETS $5,394,960
------------
The accompanying notes are an integral part of the Financial Statements.
32
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
December 31, 1998
For the Period
March 9, 1998*
through
December 31, 1998
-----------------
INVESTMENT INCOME:
Dividends $ 4,307
Interest 22,576
------------
TOTAL INCOME 26,883
------------
EXPENSES:
Investment advisory fees (Note 3) 32,936
Professional fees 40,426
Accounting fees 32,591
Administration fees 45,017
Registration fees 36,291
Transfer agent fees 57,942
Custodian fees (Note 3) 10,062
Printing fees 3,589
Amortization of organization costs (Note 1) 9,804
Insurance fees 8,759
Trustees fees 4,000
Distribution fees - Investment Class (Note 4) 2,153
------------
TOTAL EXPENSES 283,570
Fees waived and expenses reimbursed by Adviser (Note 3) (224,508)
Credits allowed by custodian (Note 3) (922)
------------
NET EXPENSES 58,140
------------
NET INVESTMENT LOSS (31,257)
------------
REALIZED AND UNREALIZED LOSS ON INVESTMENTS:
Net realized loss on investments (812,573)
Net change in unrealized depreciation of investments (999,179)
------------
Net realized and unrealized loss on investments (1,811,752)
------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS $(1,843,009)
- --------------- ------------
*Commencement of investment operations.
The accompanying notes are an integral part of the Financial Statements.
33
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
December 31, 1998
For the Period
March 9, 1998*
through
December 31, 1998
-----------------
OPERATIONS:
Net investment loss $ (31,257)
Net realized loss on investments (812,573)
Net change in unrealized depreciation of investments. (999,179)
Net decrease in net assets resulting from operations. (1,843,009)
------------
CAPITAL SHARE TRANSACTIONS
Shares sold:
Investment Class 2,144,314
Institutional Class 5,500,000
Shares redeemed:
Investment Class (206,284)
Institutional Class (300,061)
------------
Increase in net assets derived from capital share transactions (a) 7,137,969
TOTAL INCREASE IN NET ASSETS 5,294,960
NET ASSETS:
Beginning of period 100,000
------------
End of period (including accumulated net
investment loss of ($31,257) $ 5,394,960
------------
(a) Transactions in capital stock were: Shares sold:
Investment Class 270,372
Institutional Class. 589,374
Shares redeemed:
Investment Class (30,074)
Institutional Class (50,000)
------------
Increase in shares outstanding. 779,672
------------
- ------------
*Commencement of investment operations.
The accompanying notes are an integral part of the Financial Statements.
34
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
December 31, 1998
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
December 31, 1998
-----------------
Net Asset Value, Beginning of Period $ 10.00
Income From Investment Operations:
Net investment loss (0.04)
Net losses on securities
(both realized and unrealized) (3.05)
Total from investment operations (3.09)
Net Asset Value, End of Period $ 6.91
------------
Total Return (not annualized) (30.90%)
Ratios/Supplemental Data
Net assets, end of period (in 000s) $ 1,660
Ratio of expenses to average net assets:
Before expense reimbursement 2 8.81%1
After expense reimbursement 2 1.95%1
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement 2 (7.99%)1
After expense reimbursement 2 (1.13%)1
Portfolio turnover rate 26.04%
- ----------
* Commencement of investment operations.
1 Annualized.
2 Includes custody earnings credits.
The accompanying notes are an integral part of the Financial Statements.
35
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
December 31, 1998
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
December 31, 1998
-----------------
Net Asset Value, Beginning of Period $ 10.00
-----------
Income From Investment Operations:
Net investment loss (0.04)
Net losses on securities
(both realized and unrealized) (3.04)
-----------
Total from investment operations (3.08)
-----------
Net Asset Value, End of Period $ 6.92
-----------
Total Return (not annualized) (30.80%)
Ratios/Supplemental Data
Net assets, end of period (in 000s) $ 3,734
Ratio of expenses to average net assets:
Before expense reimbursement 2 8.56%1
After expense reimbursement 2 1.70%1
Ratio of net investment income (loss) to average net assets:
Before expense reimbursement 2 (7.74%)1
After expense reimbursement 2 (0.88%)
Portfolio turnover rate 26.04%
- ----------
* Commencement of investment operations.
1 Annualized.
2 Includes custody earnings credits.
The accompanying notes are an integral part of the Financial Statements.
36
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998
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 in 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.
37
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (CONTINUED)
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
including, among other things, distributing substan-tially all of its earnings
to its shareholders. Therefore, no federal income tax provision is required. At
December 31, 1998, the Fund has a capital loss carryforward of $296,646, which
will expire December 31, 2006.
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 of
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
38
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (CONTINUED)
income tax regulations, which may differ from generally accepted accounting
principals.
F. 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 $8,069,443 and $982,219
respectively, for the period from March 9, 1998 (commencement of operations)
through December 31, 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 December 31, 1998, advisory fees of $32,936
were waived by ICM and ICM has agreed to reimburse the Fund $191,572.
Unreimbursed balance due for the Advisor as of December 31, 1998 was $26,018.
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
39
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
December 31, 1998 (CONTINUED)
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 and
0.15% of net assets between $150 million and $500 million of net assets, 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.
Fifth Third Bank serves as the Fund's custodian. Investor Services
Group serves as the Fund's transfer agent.
Fifth Third Bank has agreed to compensate the Fund and decrease custody fees for
uninvested fund cash balances left uninvested by it. For the period ended
December 31, 1998, the Fund's expenses were reduced by $922.
No officer, trustee or employee of ICM, Investor Services Group or First Data
Distributors (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 December
31, 1998, the Fund incurred $2,153 in distribution costs for Investment Class
Shares.
40
<PAGE>
APPENDIX A
MOODY'S INVESTORS SERVICE, INC.
Aaa: Bonds which are rated Aaa are judged to be the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa: Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuations of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A: Bonds which are rated A possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Baa: Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba: Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B: Bonds which are rated B generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa: Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca: Bonds which are rated Ca represent obligations which are speculative in
a high degree. Such issues are often in default or have other market
shortcomings.
41
<PAGE>
C: Bonds which are rated C are the lowest rated class of bonds, and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Unrated: Where no rating has been assigned or where a rating has been
suspended or withdrawn, it may be for reasons unrelated to the quality of the
issue.
Should no rating be assigned, the reason may be one of the following:
1. An application for rating was not received or accepted.
2. The issue or issuer belongs to a group of securities that are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issue or issuer.
4. The issue was privately placed, in which case the rating is not
published in Moody's Investors Service, Inc.'s ("Moody's")
publications.
Suspension or withdrawal may occur if new and material circumstances
arise, the effects of which preclude satisfactory analysis; if there is no
longer available reasonable up-to-date data to permit a judgment to be formed;
if a bond is called for redemption; or for other reasons.
Note: Those bonds in the Aa, A, Baa, Ba and B groups which Moody's believe
possess the strongest investment attributes are designated by the symbols Aa-1,
A-1, Baa-1, and B-1.
STANDARD & POOR'S RATINGS SERVICE
AAA: Bonds rated AAA have the highest rating assigned by Standard & Poor's
Ratings Service ("S&P"). Capacity to pay interest and repay principal is
extremely strong.
AA: Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A: Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in the highest rated
categories.
BBB: Bonds rated BBB are regarded as having an adequate capacity to pay
interest and repay principal. While they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than in higher rated categories.
42
<PAGE>
BB, B, CCC, CC, C: Bonds rated BB, B, CCC, CC and C are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and repay principal in accordance with the terms of this obligation. BB
indicates the lowest degree of speculation and C the highest degree of
speculation. While such bonds will likely have some quality and protective
characteristics, they are outweighed by large uncertainties of major risk
exposures to adverse conditions.
C1: The rating C1 is reserved for income bonds on which no interest is
being paid.
D: Bonds rated D are in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or Minus (-): The ratings from "AA" to "CCC" may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating, or that S&P does not rate a particular
type of obligation as a matter of policy.
43
<PAGE>
PART C
OTHER INFORMATION
ITEM 23. EXHIBITS.
(a) Declaration of Trust*
(b) By-Laws*
(c) Instruments Defining Rights of Security Holders
Not Applicable
(d) Investment Advisory Contracts
Form of Investment Advisory Agreement*
(e) Underwriting Contracts
Not Applicable
(f) Bonus or Profit Sharing Contracts
Not Applicable
(g) Custodian Agreements
Form of Custody Agreement*
(h) Other Material Contracts
Form of Transfer Agency and Service Agreement*
Form of Administration Agreement*
(i) Legal Opinion
Opinion and Consent of Counsel*
(j) Other Opinions
Consent of Independent Public Accountants*
(k) Omitted Financial Statements
Not Applicable
(l) Initial Capital Agreements
<PAGE>
Form of Initial Capital Purchase Agreement*
(m) Rule 12b-1 Plan
Form of Distribution Plan for Investment Class
Shares*
(n) Financial Data Schedule
(o) Rule 18f-3 Plan
Form of Multi-Class Plan*
- ---------------------------------------------
* Previously filed
<PAGE>
ITEM 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT.
None.
ITEM 25. INDEMNIFICATION.
Reference is made to Article V of Registrant's Declaration of Trust
filed as an exhibit to this Registration Statement.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended (the "Act"), may be permitted to Trustees, Officers and
controlling persons of the Registrant by the Registrant pursuant to the Trust's
Declaration of Trust, its By-Laws or otherwise, the Registrant is aware that in
the opinion of the Securities and Exchange Commission, such indemnification is
against public policy as expressed in the Act and, therefore, is unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by Trustees,
officers of controlling persons of the Registrant in connection with the
successful defense of any act, suit or proceeding) is asserted by such Trustees,
officers or controlling persons in connection with shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
ITEM 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISOR.
IRONWOOD CAPITAL MANAGEMENT, LLC
Name Position With Adviser
- ---- ---------------------
Warren J. Isabelle, CFA President and Chief Executive Officer
Richard L. Droster Executive Vice-President
Donald Collins Senior Portfolio Manager
Gary S. Saks Vice President of Compliance
Shantelle J. Evans Senior Financial and Operations Analyst
For more information relating to the Investment Advisor's personnel,
reference is made to Form ADV filed under the Investment Advisers Act of 1940 by
Ironwood Capital Management, LLC, SEC File No. 801-55081.
ITEM 27. PRINCIPAL UNDERWRITERS.
(a) First Data Distributors, Inc. ("FDDI") serves as Distributor
of shares of the Registrant. FDDI also serves as principal underwriter to the
following investment companies other than the Registrant:
<PAGE>
<TABLE>
<S> <C> <C>
- --- The Galaxy Fund --- Galaxy Fund II
- --- The Galaxy VIP Fund --- Alleghany Funds(f/n/a CT & T Funds)
- --- Wilshire Target Funds, Inc. --- The Potomac Funds
- --- Panorama Trust --- First Choice Funds Trust
- --- Undiscovered Managers Funds --- LKCM Funds
- --- BT Insurance Funds Trust --- ABN AMRO Funds(f/n/a Rembrant Funds)
- --- IBJ Funds Trust --- ICM Series Trust
- --- Forward Funds, Inc. --- Light Index Funds, Inc.
- --- Worldwide Index Funds --- Trainer, Wortham First Mutual Funds
- --- Weiss, Peck & Greer International Fund --- Weiss, Peck & Greer Funds Trust
- --- Weiss, Peck & Greer Growth Fund --- Weiss, Peck & Greer Growth and Income Fund
- --- Weiss, Peck & Greer Tudor Fund --- RWB/WPG U.S. Large Stock Fund
- --- Tomorrow Funds Retirement Trust --- The Govett Funds, Inc.
- --- IAA Trust Growth Fund, Inc. --- IAA Trust Asset Allocation Fund, Inc.
- --- IAA Trust Tax Exempt Bond Fund, Inc. --- IAA Trust Taxable Fixed Income Series Fund, Inc.
- --- Matthews International Funds --- MCM Funds
- --- Metropolitan West Funds --- Smith Breeden Series Fund
- --- Smith Breeden Trust --- The Sports Funds Trust
- --- Stratton Growth Fund, Inc. --- Stratton Monthly Dividend REIT Shares, Inc.
- --- The Stratton Funds, Inc.
</TABLE>
FDDI is registered with the Securities and Exchange Commission ("SEC")
as a broker-dealer and is a member of the National Association of Securities
Dealers. FDDI, a wholly owned subsidiary of First Data Investor Services Group,
Inc. is located at 4400 Computer Drive, Westborough, Massachusetts 01581.
(b) The information required by this Item 27(b) with respect to each
director, officer or partner of FDDI is incorporated by reference to Schedule A
of Form BD filed by FDDI with the SEC pursuant to the Securities Act of 1934
(File No. 8-45467). No director, officer or partner of FDDI holds a position or
office with the Registrant.
(c) Not Applicable
ITEM 28. LOCATION OF ACCOUNTS AND RECORDS.
The Account books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940 and
the Rules thereunder will be maintained at the offices of:
(1) Ironwood Capital Management, LLC, One International Place,
Boston, Massachusetts, 02110 (records relating to its function
as investment adviser)
(2) First Data Investor Services Group, Inc., 3200 Horizon Drive
King of Prussia, Pennsylvania 19405 (records relating to its
functions as Administrator and Transfer Agent)
(3) First Data Distributors, Inc., 4400 Computer Drive,
Westborough, Massachusetts 01581 (records relating to its
function as distributor)
(4) The Fifth Third Bank, 38 Fountain Square Plaza, Cincinnati,
Ohio 45262 (records relating to its function as custodian)
ITEM 29. MANAGEMENT SERVICES.
Not Applicable
ITEM 30. UNDERTAKINGS.
Not Applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Registrant has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and the Commonwealth of
Massachusetts on this 30th day of April, 1999.
ICM SERIES TRUST
By:/s/ Warren J. Isabelle
-----------------------------
Warren J. Isabelle, President
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement on Form N-1A has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ Warren J. Isabelle President, Trustee April 30, 1999
---------------------- and Chairman of the
Warren J. Isabelle Board
/s/ Richard L. Droster Vice President and April 30, 1999
---------------------- Trustee
Richard L. Droster
/s/ Gary S. Saks Vice President, April 30, 1999
---------------------- Treasurer and Secretary
Gary S. Saks
/s/ John A. Fiffy
----------------------
John A. Fiffy Trustee April 30, 1999
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit Description
(1) Declaration of Trust*
(2) By-Laws*
(3) Instruments Defining Rights of Security Holders - None
(4) Form of Investment Advisory Agreement*
(5) Underwriting Contracts - None
(6) Bonus or Profit Sharing Contracts - None
(7) Form of Custody Agreement*
(8) Other Material Contracts
(a) Form of Transfer Agency and Service Agreement*
(b) Form of Administration Agreement*
(9) Opinion and Consent of Counsel*
(10) Consent of Independent Public Accountants*
(11) Omitted Financial Statements - None
(12) Form of Initial Capital Purchase Agreement*
(13) Form of Distribution Plan for Investment Class Shares*
(14) Financial Data Schedule
(15) Form of Multi-Class Plan*
- ---------------------------------------------
* Previously filed
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
financial statements and supporting schedules for the period commencing with
operations on March 9, 1998 until December 31, 1998, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001049629
<NAME> ICM/ISABELLE SMALL CAP VALUE FUND
<SERIES>
<NUMBER> 1
<NAME> INVESTMENT CLASS
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Dec-31-1998
<PERIOD-START> Mar-9-1998
<PERIOD-END> Dec-31-1998
<INVESTMENTS-AT-COST> 6,274,651
<INVESTMENTS-AT-VALUE> 5,275,472
<RECEIVABLES> 172,665
<ASSETS-OTHER> 4294
<OTHER-ITEMS-ASSETS> 50,464
<TOTAL-ASSETS> 5,502,895
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107,935
<TOTAL-LIABILITIES> 107,935
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,206,712
<SHARES-COMMON-STOCK> 240,298
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (812,573)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (999,179)
<NET-ASSETS> 5,394,960
<DIVIDEND-INCOME> 4,307
<INTEREST-INCOME> 22,576
<OTHER-INCOME> 0
<EXPENSES-NET> 58,140
<NET-INVESTMENT-INCOME> (31,257)
<REALIZED-GAINS-CURRENT> (812,573)
<APPREC-INCREASE-CURRENT> (999,179)
<NET-CHANGE-FROM-OPS> (1,843,009)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 270,372
<NUMBER-OF-SHARES-REDEEMED> (30,074)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,294,960
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 32,936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 283,570
<AVERAGE-NET-ASSETS> 1,063,413
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> (3.05)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.91
<EXPENSE-RATIO> 1.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the
financial statements and supporting schedules for the period commencing with
operations on March 29, 1998 until December 31, 1998, and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<CIK> 0001049629
<NAME> ICM/ISABELLE SMALL CAP VALUE FUND
<SERIES>
<NUMBER> 2
<NAME> INSTITUTIONAL CLASS
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> MAR-29-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 6,274,651
<INVESTMENTS-AT-VALUE> 5,275,472
<RECEIVABLES> 172,665
<ASSETS-OTHER> 4,294
<OTHER-ITEMS-ASSETS> 50,464
<TOTAL-ASSETS> 5,502,895
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 107,935
<TOTAL-LIABILITIES> 107,935
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,206,712
<SHARES-COMMON-STOCK> 539,374
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (812,573)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (999,179)
<NET-ASSETS> 5,394,960
<DIVIDEND-INCOME> 4,307
<INTEREST-INCOME> 22,576
<OTHER-INCOME> 0
<EXPENSES-NET> 58,140
<NET-INVESTMENT-INCOME> (31,257)
<REALIZED-GAINS-CURRENT> (812,573)
<APPREC-INCREASE-CURRENT> (999,179)
<NET-CHANGE-FROM-OPS> (1,843,009)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 589,374
<NUMBER-OF-SHARES-REDEEMED> (50,000)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 5,294,960
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 32,936
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 281,417
<AVERAGE-NET-ASSETS> 3,218,887
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> (.04)
<PER-SHARE-GAIN-APPREC> (3.04)
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 6.92
<EXPENSE-RATIO> 1.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
