ICM SERIES TRUST
Filing Type: 485BPOS
Description: Post-effective Amendment
Pursuant to Rule 485
Filing Date: May 1, 2000
Period End: N/A
Primary Exchange: NYSE
Ticker: IZZYX (investment class)
IZZIX (institutional class)
<PAGE>
As filed with the Securities and Exchange Commission on May 1, 2000
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. 03 File No. 33-40819 [X]
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 03 File No. 811-8507 [X]
----------------
ICM SERIES TRUST
ICM/ISABELLE SMALL-CAP VALUE FUND
(Exact Name of Registrant as Specified in Charter)
105 Motor Parkway
Suite 109
Hauppauge, New York 11788
(Address of Principal Executive Offices)
800-472-6114
(Registrant's Telephone Number)
JOSEPH F. MAZZELLA, ESQ.
Nutter, McClennen & Fish, LLP
One International Place
Boston, Massachusetts 02110
(Name and Address of Agent for Service)
COPIES TO:
WARREN J. ISABELLE, CFA MICHAEL MIOLA
Ironwood Capital Management, LLC American Data Services, Inc.
21 Custom House Street, #240 105 Motor Parkway, #109
Boston, Massachusetts 02109 Hauppauge, NY 11788
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.
<PAGE>
[COVER PAGE]
Logo
ICM FUNDS
ICM SERIES TRUST
ICM/ISABELLE SMALL CAP VALUE FUND
Investment Shares (Symbol: IZZYZ)
Institutional Shares (Symbol: IZZIX)
PROSPECTUS
MAY 1, 2000
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 1
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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 5
Understanding Expenses 5
The Fund's Management 7
Portfolio Management 7
Portfolio Turnover 7
Information About Your Account 8
Purchasing Shares 8
Opening An Account 8
Share Classes 8
Distribution Arrangements 8
Determining Share Price 9
Selling Shares 10
Distributions and Taxes 12
Tax Considerations 12
Tax Consequences 12
Financial Highlights 14
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 2
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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
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.
Page 3
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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.
Page 4
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PRINCIPAL RISKS
There are two basic risks prevalent in all mutual funds investing in common
stock: "management" and "market" risks.
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 stoc 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.
Page 5
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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.
Year-by-Year Returns (Investment Class)
[BAR CHART]
Calendar Year 1999
49.49%
During the period shown in the above chart, the highest return for a quarter was
25.41% (quarter ended 6/30/99) and the lowest return for a quarter was -3.18%
(quarter ended 3/31/99).
AVERAGE ANNUAL TOTAL RETURN
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.
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 1999, and by showing how the fund's annual return compares with that of a
broad measure of market performance. Returns are based on past performance and
are not an indication of future results.
LIFE OF FUND YEAR ENDED 12/31/99
Investment Shares* 1.81% 49.49%
Institutional Shares** 2.03% 49.71%
Russell 2000 Index 3.30%*** 19.63%
- ---------------------------
* Investment Shares commenced operations on March 9, 1998.
** Institutional Shares commenced operations on March 29, 1998.
*** From March 9, 1998
Page 6
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FEES AND EXPENSES
SHAREHOLDER FEES
(fees paid directly from your investment)
The fund is a 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.
This table describes the fees and expenses that you pay if you buy and hold fund
shares.
INVESTMENT SHARES INSTITUTIONAL
SHARES
Management fee 1.00% 1.00%
Distribution (12b-1) fees 0.25% None
Other expenses 3.54% 3.54%
Total Annual Fund Operating 4.79% 4.54%
Expenses
2.84% 2.84%
Fee Waiver and/or Expense
Reimbursement* 1.95% 1.70%
Net Operating Expenses
* Under a written Investment 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.
Page 7
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[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:
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 ("ICM"), is located at 21
Custom House Street, Suite 240, Boston, MA 02109 and was formed in August 1997.
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, 1999, this fee was reimbursed to the fund in its entirety.
The fund and ICM have adopted a joint code of ethics under Rule 17j-1 of the
1940 Act that sets forth officer, directors and advisory personnel's fiduciary
responsibilities regarding the fund, establishes procedures for personal
investing, and restricts certain transactions. Persons subject to the code of
ethics, including ICM investment personnel, may invest in securities for their
own investment accounts, including securities that may be purchased or held by
the fund.
Page 8
<PAGE>
[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.
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."
INFORMATION ABOUT YOUR ACCOUNT
This fund is a 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.
Page 9
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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 $ 1,000
Institutional $500,000 $50,000 $250,000
Shares
The fund may waive account minimums 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.
Page 10
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<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
<S> <C> <C>
By Mail: Complete the application. Make check payable to "ICM
Series Trust." Be sure to
include your account number
on the check.
Make your check payable to Fill out investment slip and
"ICM Series Trust." indicate the class of shares
you wish to purchase.
Mail application and check to: Mail check with investment
ICM Series Trust slip to the address on the
P.O. Box 5536 left.
Hauppauge, NY 11788-0132
By Wire: Mail your application to the Wire funds to:
above address, then call Fifth Third Bank
1-800-472-6114 to obtain an ABA: 042000314
account number. Include your ICM/Isabelle Small Cap
Taxpayer Identification Number. Value Fund
Wire funds using the DDA: 72980503
instructions at the right. Your name and account number
By Automatic Mail your application with an Shares are purchased once
Investment Plan authorized form to the address and/or twice a month, on the
(AIP) above, along with a check for 1st, 15th, or both days.
your initial investment payable
to "ICM Series Trust." Call 1-
800-472-6114 to obtain a form.
By Electronic Instructions must specify
Funds Transfer your account registration and
(ACH) fund account number preceded
by 001 for Investment Shares
or 101 for Institutional
Shares.
Through a Contact your financial Contact your financial
Financial professional. professional.
Professional
</TABLE>
Page 11
<PAGE>
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.
[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 12
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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, P.O. Box 5536,
Hauppauge, NY 11788-0132.
BY WIRE: Be sure to fill out the appropriate areas of th 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.
[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.
Page 13
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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.
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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 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:
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.
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.
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.
Page 15
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[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 a $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.
Page 16
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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, 1999. 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.
<TABLE>
<CAPTION>
INVESTMENT CLASS INVESTMENT CLASS
FOR THE YEAR ENDED FOR THE PERIOD
DECEMBER 31, 1999 THROUGH
DECEMBER 31, 1998
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.91 $10.00
Income from Investment Operations:
Net investment loss (0.12) (0.04)
Net losses on securities
(both realized and unrealized) 3.54 (3.05)
Total from investment operations 3.42 (3.09)
Less Distributions:
From net investment income (0) (0)
From net realized gains (0) (0)
Total Distributions (0) (0)
NET ASSET VALUE, END OF PERIOD $10.33 $ 6.91
TOTAL RETURN 49.49% (30.90%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $9,993 $1,660
Ratio of expenses to average net assets:
Before expense reimbursement(2) 4.79% 8.81%(1)
After expense reimbursement(2) 1.95% 1.95%(1)
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement(2) (4.24%) (7.99%)(1)
After expense reimbursement(2) (1.39%) (1.13%)(1)
Portfolio turnover rate 84.30% 21.43%
- ---------------------------------------
* Commencement of investment operations
(1) Annualized.
(2) Includes custody earnings credits.
</TABLE>
Page 17
<PAGE>
<TABLE>
<CAPTION>
Institutional Class Institutional Class
For The Period For The Period
Ended March 9, 1998*
December 31, 1999 Through December 31, 1998
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 6.92 $ 10.00
Income from Investment Operations:
Net investment loss (0.10) (0.04)
Net losses on securities
(both realized and unrealized) 3.54 (3.04)
Total from investment operations 3.44 (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 $ 10.36 $ 6.92
TOTAL RETURN 49.71% (30.80%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 7,748 $ 3,734
Ratio of expenses to average net assets:
Before expense reimbursement(2) 4.54% 8.56%(1)
After expense reimbursement(2) 1.70% 1.70%(1)
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement(2) (4.14%) (7.74%)(1)
After expense reimbursement(2) (1.30%) (0.88)(1)
Portfolio turnover rate 84.30% 21.43%
</TABLE>
- --------------------
* Commencement of investment operations
(1) Annualized.
(2) Includes custody earnings credits.
Page 18
<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
150 Motor Parkway, Suite #109
Hauppauge, NY 11788
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, by calling 1-800-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
Page 19
<PAGE>
ICM SERIES TRUST
ICM/ISABELLE SMALL-CAP VALUE FUND
150 Motor Parkway, Suite 109
Hauppauge, New York 11788
INVESTMENT SHARES
INSTITUTIONAL SHARES
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
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 DATED MAY 1, 2000. 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 150 MOTOR PARKWAY, SUITE 109, HAUPPAUGE, NEW
YORK 11788.
Page 1
<PAGE>
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
Page 2
<PAGE>
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 convertible 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,
commonly referred to as "junk-bonds". Investment grade securities are rated BBB
or higher by Standard & Poor's Rating Service ("S&P"), a division of McGraw Hill
Page 3
<PAGE>
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
company's financial condition and operations and from selling the company's
securities promptly and at a profit.
Page 4
<PAGE>
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
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.
Page 5
<PAGE>
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
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.
Page 6
<PAGE>
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. Please refer to the section of the Fund's Prospectus entitled
"Financial Highlights" for the Fund's portfolio turnover rate during the two
most recently completed fiscal years. The difference between the 24.43% turnover
rate in 1998, compared to the 84.30% rate in 1999 is mainly attributable to the
high performance of certain portfolio securities and the manager's having to
sell some of those holdings in order to stay within regulatory guidelines and
the policies of the fund. The fund's manager expects the annual portfolio rate
for 2000 to be between 45% and 65%.
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;
Page 7
<PAGE>
(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) Loan 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
(4) Invest in other investment companies except as permitted under the 1940
Act.
Page 8
<PAGE>
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, Trustee, Portfolio Manager, Pioneer
CFA* President and Capital Growth Fund, July 1990 to
Age 48 Chairman of the January 1997; Senior Vice
21 Custom House Street Board President and Head of Domestic
Boston, MA 02109 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
Age 38 Executive Vice- Marketing, Heartland Advisors,
21 Custom House Street President Inc. (Investment Advisors),
Boston, MA 02109 October 1992 through 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 40 Executive Vice President, Private
1050 Winter Street Healthcare Systems, Inc. (managed
Suite 3200 health care organization), 1990
Waltham, MA 02451 through 1995; President and Chief
Executive Officer, Synergy Health
Care, Inc. (health care
information systems), 1995 to
present.
Donald A. Nelson, Trustee Assistant Professor, Department
CPA(1) of Accounting and Finance,
Age 54 Merrimack College, since 1975;
Merrimack College Certified Public Accountant, 1972
Andover, MA 01810 to present.
</TABLE>
Page 9
<PAGE>
<TABLE>
<CAPTION>
POSITION WITH PRINCIPAL OCCUPATION DURING PAST
NAME, AGE AND ADDRESS THE FUND FIVE YEARS
- --------------------- -------- ----------
<S> <C> <C>
John A. Fiffy(1) Trustee Acquisition Consultant, Digital
Age 49 Equipment Corporation (n/k/a
Compaq Computer Corp. Compaq Computer Corporation),
200 Forest Street 1993 to present.
Marlboro, MA 01752
Gary S. Saks Vice-President, Client Service Representative and
Age 31 Secretary, New Accounts Assistant Manager,
21 Custom House Street Treasurer and Furman Selz Prime Brokerage
Boston, MA 02109 Chief Financial Department (brokerage), December
Officer 1993 to July 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 within 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.
Page 10
<PAGE>
Amount of compensation paid by the Trust
during the fiscal year ending December 31, 1999
-----------------------------------------------
<TABLE>
<CAPTION>
Total
Aggregate Retirement Compensation from
Annual Benefits Accrued Pension Estimated the Trust and
Name of Person Compensation as Part of Fund Annual Benefits Fund Complex Paid
and Position with Fund from the Trust Expenses Upon Retirement to 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 $2,000 None None $2,000
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.
(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 1, 2000 (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 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.
Page 11
<PAGE>
<TABLE>
<CAPTION>
Owner of Shares Percentage of
of the Fund Address Ownership of Shares
- --------------- ------- -------------------
<S> <C> <C>
Carey & Co. P.O. Box 1558 64.83% of Institutional
Columbus, OH 43216 Shares
10.18% of all outstanding
shares
National Investor 55 Water Street, 32nd Floor 35.10% of Institutional
Services Corp. New York, NY 10041 Shares
5.51% of all outstanding
shares
Charles Schwab & Co., 40.51% of Investment
Inc. 101 Montgomery Street Shares
San Francisco, CA 94104 34.19% of all outstanding
shares (*)
National Financial 200 Liberty Street, One 35.75% of Investment
Services Corp. World Financial Shares
New York, NY 10281 30.17% of all outstanding
shares (*)
Donaldson Lufkin P.O. Box 2052 5.75% of Investment
Jenrette Securities Jersey City, NJ 07303 Shares
Corp. 4.85%% of all outstanding
shares
</TABLE>
The Trustees and officers, as a group, own less than 1% of the Fund.
(*) Charles Schwab & Co. and National Financial Services Corp. each 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
Charles Schwab and National Financial'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".
INVESTMENT ADVISER
Ironwood Capital Management, LLC ("ICM")
21 Custom House Street
Boston, Massachusetts 02109
Page 12
<PAGE>
Mr. Warren J. Isabelle, President and Chief Executive Officer of ICM is
the controlling principal of ICM and is also an officer and Trustee of the
Trust. Richard L. Droster, Executive Vice President of ICM is also an officer
and Trustee 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 term of the agreement extends for
one year, and is renewable annually 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).
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 expenses 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;
Page 13
<PAGE>
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. The Fund paid ICM $78,006 in investment
advisory fees and ICM waived its fees and reimbursed the Fund $221,224 for
services rendered during the year ended December 31, 1999.
ADMINISTRATOR
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, New York 11788
American Data Services, Inc. ("ADS"), furnishes the Trust with clerical
help, 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, ADS receives a monthly fee per each
portfolio serviced based of the value of each such portfolio, or a Net Asset
Charge equal to the greater of the minimum fees set forth below or 1/12th of 1%
(12 basis points) of 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.
The following minimum fees are per portfolio serviced:
FEE PER PORTFOLIO SERVICED
Under $10 Million........................................... $1,625 00
From $10 Million to $20 Million............................ $2,000.00
From $20 Million on........................................ $2,500.00
Under certain, limited circumstances, ADS may charge the Fund additional
amounts for administrative services outside of the ordinary course of business.
There is currently only one Portfolio serviced. The Fund anticipates that
there will continue to be only one Portfolio serviced.
Page 14
<PAGE>
FUND ACCOUNTING
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, New York 11788
ADS also provides the Fund with the following accounting services:
O calculate and transmit to NASDAQ the Fund's daily net asset value and
communicate such value to the Fund and its transfer agent.
O obtain daily securities quotations for all securities in the Fund's
portfolio from independent pricing services, and a determination
unrealized appreciation/depreciation of portfolio securities;
O maintain and keep current all books and records of the Fund as required by
Rule 31a-1 under the 1940 Act, and any other documents necessary or
advisable for compliance with applicable regulations.
O Prepare and maintain cash receipts journal, cash disbursements journal,
dividend record, purchase and sales "portfolio securities journals",
subscription and redemption journals, securities ledger, broker ledger,
general ledger, daily expense accruals, daily income accruals, securities
and monies borrowed or loaned and collateral given, foreign currency
journal and trial balances.
As compensation for its accounting services ADS receives a monthly fee per
portfolio equal to the prior month's average net assets (there is no prorating
of partial months) as follows:
Fee Per Portfolio Serviced
PORTFOLIO TYPE
Net Assets (in millions) FOREIGN* DOMESTIC MONEY MARKET
Under $1.............................. $2,375 $1,200 $1,050
From $1 to $5......................... $2,775 $1,500 $1,300
From $5 to $10........................ $3,125 $1,700 $1,500
From $10 to $20....................... $3,525 $1,850 $1,650
Over $20.............................. $3,925 $2,000 $1,800
$25 million to $100 million:
The Fee for Assets over
$20 million, plus 1/12 of............ 3.50BP** 2.00BP** 2.00BP
Domestic portfolios excess assets over $100 million: 1/12 of
1.00 BP Fee capped at $50,000 per year.
* Non US Dollar denominated securities
** Basis Points
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MULTI-CLASS PROCESSING CHARGE
$300 per month will be charged for each additional class of stock per
portfolio.
Under certain, limited circumstances, ADS may charge the Fund
additional amounts for accounting services outside of the ordinary course of
business.
There is currently only one Portfolio serviced. The Fund anticipates
that there will continue to be only one Portfolio serviced.
Prior to August 23, 1999, First Data Investor Services Group, Inc.
("Investor Services Group"), a subsidiary of First Data Corporation, served as
the Fund's administrator, fund accountant and transfer agent.
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.
The Fund paid Investor Services Group $43,122 in administrative fees
for services rendered during the period commencing with January 1, 1999 and
ending August 20, 1999.
The Fund paid ADS $8,125 in administrative fees for services rendered
during the period commencing with August 23, 1999 and ending December 31, 1999.
TRANSFER AGENT
American Data Services, Inc.
150 Motor Parkway, Suite 109
Hauppauge, New York 11788
ADS further 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.
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CUSTODIAN
The Fifth Third Bank
38 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
ADS Distributors, Inc.
150 Motor Parkway, Suite 109
Hauppague, New York 11788
Pursuant to a underwriting agreement with the Trust, ADS Distributors, Inc.
("ADSD") acts as the Fund's distributor, by selling on a continuous basis the
Fund's Investment Shares and Institutional Shares. ADSD 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 ADS Distributors ("ADSD")for distribution expenses borne, or paid to others,
by ADSD for 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. ADSD 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, 1999 entitled "Statement of Operations" for the aggregate distribution fees
the Fund accrued for the year ended December 31, 1999.
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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 Nutter, McClennen & Fish, LLP, One
International Place, Boston, Massachusetts, 02110.
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:
0 requirement to purchase more than the minimum investment amount,
0 restriction on issuing redemption checks in the customer's name;
0 limits on purchase of fractional Shares.
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<PAGE>
FEES. There is no sales or service charge to individual investors by
the Fund or by ADSD, 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.
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<PAGE>
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 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 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.
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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.
The Fund paid $45,923.05 in aggregate brokerage commissions for the
period from the Fund's inception through December 31, 1998. The Fund paid
$11,248.02 to Hoenig & Co., Inc. representing "soft-dollars" for investment
research and brokerage services rendered during the period January 1, 1998 until
December 31, 1998.
The Fund paid $94,731.50 in aggregate brokerage commissions for the
period January 1, 1999 until December 31, 1999. The Fund paid an aggregate
$89,994.93 to Hoenig & Co., Inc., GK Baum, Interstate Group, PCS Securities and
Bear Stearns representing "soft-dollars" for investment research and brokerage
services rendered during the same period.
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:
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(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 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; and
(ii) 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).
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<PAGE>
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.
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.
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<PAGE>
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
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
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<PAGE>
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.
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.
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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-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 class 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.
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<PAGE>
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 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
Page 28
<PAGE>
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 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;
Page 29
<PAGE>
(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
(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.
Page 30
<PAGE>
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.
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).
Page 31
<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 Fund's 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. The Fund's total return for the year ended December
31, 1999 was 49.49% for the Investment Shares and 49.71% 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, 1999.
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, 1999. The Trust has included such report in reliance on the authority of
Arthur Andersen LLP as experts in accounting and auditing.
Page 32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE SHAREHOLDERS AND BOARD
OF TRUSTEES OF THE
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, 1999, and the related statement of operations, the statement of
changes in net assets, and the financial highlights for the periods 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 highlights based on our audits.
We conducted our audits 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, 1999, 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 audits provide 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, 1999, the results of its
operations, the changes in its net assets, and the financial highlights for the
periods presented, in conformity with generally accepted accounting principles.
Arthur Andersen, LLP
Boston, Massachusetts
February 24, 2000
Page 33
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----
<S> <C> <C>
COMMON STOCKS - 91.08%
BASIC MATERIALS - 18.51%
25,400 ACX Technologies, Inc.* $ 271,462
17,754 AK Steel Holding Corp. 335,107
3,600 American National Can Group, Inc. 306,800
9,800 Cabot Corp. 199,675
16,000 Castle (A.M.) & Co. 190,000
39,500 CK Witco Corp. 528,312
24,000 Commonwealth Industries, Inc. 312,000
134,600 Crown Vantage Inc.* 277,612
37,400 Hanna (M.A.) Co. 409,063
39,100 Material Sciences Corp.* 398,331
---------------
3,228,362
---------------
CAPITAL GOODS - 19.23%
142,300 Brown & Sharpe Manufacturing Co.* 302,387
9,300 Carlisle Companies Inc. 334,800
11,100 Chicago Bridge & Iron Co. NV 152,625
44,500 DT Industries, Inc.* 350,437
25,600 ESCO Electronics Corp. 297,600
23,200 Kollmorgen Corp. 285,650
46,200 Magna Tek, Inc.* 355,163
70,200 RTI International Metals, Inc.* 526,500
16,800 Sames Corp. 259,350
27,200 TransPro, Inc. 175,100
27,000 Woodhead Industries, Inc. 313,875
---------------
3,353,487
---------------
COMMUNICATION SERVICES - 6.09%
74,375 Arch Communications Group, Inc.* 490,410
78,800 Signal Technology Corp.* 571,300
---------------
1,061,710
---------------
</TABLE>
Page 34
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
------ -----
<S> <C> <C>
CONSUMER CYCLICALS - 10.17%
54,900 Acme Electric Corp.* 315,675
29,400 Louisiana-Pacific Corp. 418,950
2,700 McWhorter technologies, Inc.* 43,200
24,100 Measurement Specialties, Inc.* 503,088
9,800 Russell Corp. 164,150
12,000 Westaff, Inc.* 99,000
42,700 Wickes Inc. 229,513
1,773,576
-------------------
CONSUMER STAPLES - 4.14%
27,100 Homeland Holding Corp.* 98,237
6,200 Michael Foods, Inc. 152,675
45,700 WLR Foods, Inc. 262,775
133,850 Worldtex, Inc.* 209,141
-------------------
722,828
-------------------
</TABLE>
Page 35
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C>
Investments in securities at market value
(identified cost $16,467,254) (Note 1) $17,155,914
Receivable for fund shares sold 691,322
Due from advisor (Note 3) 919
Deferred organization costs (Note 1) 38,416
Other assets 11,326
TOTAL ASSETS 17,897,897
-----------------
LIABILITIES:
Payable for securities purchased 412,411
Accrued expenses 44,550
TOTAL LIBILITIES 456,961
-----------------
NET ASSETS $17,440,936
=================
INVESTMENT CLASS SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 967,017 shares outstanding) $ 9,993,091
=================
Net asset value, offering and redemption price per Investment Class Share $ 10.33
=================
INSTITUTIONAL CLASS SHARES (NOTE 1):
Net assets (Unlimited shares of $0.001 par beneficial
interest authorized; 718,983 shares outstanding) $ 7,447,845
=================
Net asset value, offering and redemption price per Institutional Class Share $ 10.36
=================
NET ASSETS CONSIST OF:
Paid-in capital 15,442,968
Accumulated net investment loss (105,009)
Accumulated net realized gain on investments 1,414,317
Net unrealized appreciation on investments 688,660
NET ASSETS $17,440,936
=================
</TABLE>
Page 36
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF OPERATIONS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
For the Year
Ended
December 31, 1999
-------------------------
<S> <C>
INVESTMENT INCOME:
Dividends $ 13,093
Interest 23,657
TOTAL INCOME 36,750
-------------------------
EXPENSES:
Investment advisory fees (Note 3) 78,006
Transfer agent fees 57,974
Professional fees 57,172
Administration fees 51,247
Accounting fees 43,802
Registration fees 26,043
Custodian fees (Note 3) 12,146
Amortization of organization costs (Note 1) 12,049
Distribution fees - Investment Class (Note 4) 8,582
Printing expenses 6,630
Trustees fees 6,225
Insurance expenses 2,782
Miscellaneous fees 1,763
TOTAL EXPENSES 364,421
Fees waived and expenses reimbursed by advisor (Note 3) (221,224)
Credits allowed by custodian (Note 3) (1,438)
NET EXPENSES 141,759
-------------------------
NET INVESTMENT LOSS (105,009)
-------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments 2,226,890
Net change in unrealized appreciation of investments 1,687,839
Net realized and unrealized gain on investments 3,914,729
-------------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $ 3,809,720
=========================
</TABLE>
Page 37
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
STATEMENT OF CHANGES IN NET ASSETS
DECEMBER 31, 1999
<TABLE>
<CAPTION>
For the Period
For the Year March 9, 1998*
Ended through
December 31, 1999 December 31, 1998
------------------------ ------------------------
<S> <C> <C>
OPERATIONS:
Net investment loss $ (105,009) $ (31,257)
Net realized gain/loss on investments 2,226,890 (812,573)
Net change in unrealized appreciation/
(depreciation) of investments 1,687,839 (999,179)
------------------------ ------------------------
Net increase (decrease) in net
assets resulting from operations 3,809,720 (1,843,009)
------------------------ ------------------------
CAPITAL SHARE TRANSACTIONS:
Shares sold:
Investment Class 6,998,269 2,144,314
Institutional Class 1,782,304 5,500,000
Shares redeemed:
Investment Class (544,317) (206,284)
Institutional Class - (300,061)
------------------------ ------------------------
Increase in net assets derived from
capital share transactions (a) 8,236,256 7,137,969
------------------------ ------------------------
TOTAL INCREASE IN NET ASSETS 12,045,976 5,294,960
------------------------ ------------------------
NET ASSETS:
Beginning of period 5,394,960 100,000
------------------------ ------------------------
End of period (including accumulated net
investment loss of ($105,009) and $0,
respectively) $ 17,440,936 $ 5,394,960
======================== ========================
(a) Transactions in capital stock were:
Shares sold:
Investment Class 789,647 270,372
Institutional Class 179,609 589,374
Shares redeemed:
Investment Class (62,928) (30,074)
Institutional Class - (50,000)
------------------------ ------------------------
Increase in shares outstanding 906,328 779,672
======================== ========================
</TABLE>
* Commencement of investment operations for the Investment Class. Commencement
of operations for the Institutional Class was March 29, 1998.
Page 38
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
DECEMBER 31, 1999
The table below sets forth financial data for one share of capital stock
outstanding throughout each period indicated.
<TABLE>
<CAPTION>
Investment Investment
Class Class
------------------------- ------------------------
For the Period
For the Year March 9, 1998*
Ended through
December 31, 1999 December 31, 1998
----------------------- ---------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF $ 6.91 $ 10.00
PERIOD
----------------------- ---------------------
Income From Investment Operations:
Net investment loss (0.12) (0.04)
Net gains/(losses) on securities
(both realized and unrealized) 3.54 (3.05)
TOTAL FROM INVESTMENT OPERATIONS 3.42 (3.09)
----------------------- ---------------------
NET ASSET VALUE, END OF PERIOD $ 10.33 $ 6.91
======================= =====================
TOTAL RETURN 49.49% (30.90%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 9,993 $ 1,660
Ratio of expenses to average net assets:
Before expense reimbursement(2) 4.79% 8.81%(1)
After expense reimbursement(2) 1.95% 1.95%(1)
Ratio of net investment loss to
average net assets:
Before expense reimbursement(2) (4.24%) (7.99%)(1)
After expense reimbursement(2) (1.39%) (1.13%)(1)
Portfolio turnover rate 84.30% 21.43%
</TABLE>
* Commencement of investment operations.
1 Annualized.
2 Includes custody earnings credits.
Page 39
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
FINANCIAL HIGHLIGHTS
DECEMBER 31, 1999
The table below sets forth financial data for one share of capital stock
outstanding throughout each period indicated.
<TABLE>
<CAPTION>
Institutional Institutional
Class Class
------------------------- ------------------------
For the Period
For the Year March 29, 1998*
Ended through
December 31, 1999 December 31, 1998
------------------------- ------------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF $ 6.92 $ 10.00
PERIOD
------------------------- ------------------------
Income From Investment Operations:
Net investment loss (0.10) (0.04)
Net gains/(losses) on securities
(both realized and unrealized) 3.54 (3.04)
TOTAL FROM INVESTMENT OPERATIONS 3.44 (3.08)
------------------------- ------------------------
NET ASSET VALUE, END OF PERIOD $ 10.36 $ 6.92
========================= ========================
TOTAL RETURN 49.71% (30.80%)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in 000s) $ 7,448 $ 3,734
Ratio of expenses to average net assets:
Before expense reimbursement(2) 4.54% 8.56%(1)
After expense reimbursement(2) 1.70% 1.70%(1)
Ratio of net investment loss to
average net assets:
Before expense reimbursement(2) (4.14%) (7.74%)(1)
After expense reimbursement(2) (1.30%) (0.88%)(1)
Portfolio turnover 84.30% 21.43%
rate
</TABLE>
* Commencement of investment operations.
1 Annualized.
2 Includes custody earnings credits.
Page 40
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
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 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 (March 29, 1998 for the Institutional
Class). 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.
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.
Page 41
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
D. ORGANIZATION COSTS. Organization costs are 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 prorata share of the unamortized organizational costs as of the
date of redemption. The prorata 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 continue 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 substantially all of its earnings to its
shareholders. Therefore, no federal income tax provision is required.
F. INCOME AND EXPENSES. Expenses directly attributable to a particular
class are charged directly to such class. In calculating net asset
value per share of each class, investment income, realized and
unrealized gains and losses and expenses, other than class specific
expenses, are allocated daily to each class of shares based on the
proportion of net assets of each class at the beginning of that day.
G. DISTRIBUTIONS TO SHAREHOLDERS. The Fund will distribute
substantially all 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 income tax regulations, which may differ from
generally accepted accounting principals.
Page 42
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
H. USE OF ESTIMATES. In preparing financial statements in conformity
with generally accepted accounting principles, management makes
estimates and assumptions that affect the reported amounts of assets
and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
NOTE 2 - PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities, other than short-term investments, aggregated
$20,774,320 and $6,915,565 respectively, for the year ended December 31, 1999.
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.
Pursuant of the terms of the Agreement, ICM 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
the Investment Class and 1.70% of the average daily net assets annually for the
Institutional Class, and to waive such fees and expenses to the extent that they
exceed these amounts. For the year ended December 31, 1999, advisory fees of
$78,007 were waived by ICM and ICM as agreed to reimburse the Fund $143,244.
Unreimbursed balance due from Advisor as of December 31, 1999 was $919. Certain
officers and Trustees of the Trust are affiliated persons of ICM.
Effective August 23, 1999, American Data Services, Inc. ("ADS") serves as the
administrator, fund accounting agent and transfer agent to the Fund, and ADS
Distributors, an affiliate of ADS, serves as the Fund's distributor.
Page 43
<PAGE>
ICM/ISABELLE SMALL CAP VALUE FUND
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 (CONTINUED)
For providing administrative services, the Fund pays ADS a fee at the annualized
rate of 0.10% of the Fund's average daily net assets up to $100 million and at
reduced percentages thereafter; a minimum fee applies. For providing fund
accounting services, the Fund pays ADS a fixed monthly fee for average net
assets less than $25 million plus out-of-pocket expenses. For providing transfer
agent services, the Fund pays ADS a minimum monthly or per account fee plus
certain transaction fees. Prior to August 23, 1999, First Data Investor Services
Group, Inc., a subsidiary of First Data Corporation, served as the Fund's
administrator.
Fifth Third Bank serves as the Fund's custodian.
Fifth Third Bank has agreed to compensate the Fund and decrease custody fees for
any cash balances left uninvested by it. For the year ended December 31, 1999,
the Fund's custodian expenses were reduced by $1,438.
No officer, trustee or employee of ICM, or ADS, 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 year ended December 31, 1999, the Fund incurred $8,582
in the distribution costs for Investment Class shares.
Page 44
<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.
Page 45
<PAGE>
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.
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 tha are not rated
as a matter of policy.
3. There is a lack of essential data pertaining to the issu 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.
Page 46
<PAGE>
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.
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.
Page 47
<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
Investment Advisory Agreement
with Ironwood Capital Management, LLC*
(e) Underwriting Contracts
(e)(1) Distribution Agreement with First
Data Distributors, Inc.*
(e)2) Underwriting Agreement with ADS
Distributors, Inc. dated as of
August 10, 1999 (replaces
Exhibit (e)(1))**
(f) Bonus or Profit Sharing Contracts
Not Applicable
(g) Custodian Agreements
Custody Agreement with The Fifth
Third Bank*
(h) Other Material Contracts
(h)(1) Transfer Agency and Service Agreement
with First Data Investor Services
Group, Inc.*
(h)(2) Transfer Agency and Service Agreement
with American Data Services, Inc.
dated as of August 10, 1999 (replaces
Exhibit (h)(1))**
Page 48
<PAGE>
(h)(3) Administration Agreement with First
Data Investor Services Group, Inc.*
(h)(4) Administrative Services Agreement with
American Data Services, Inc. dated as
of August 10, 1999 (replaces Exhibit
(h)(3))**
(h)(5) Fund Accounting Service Agreement with
American Data Services, Inc. dated as
of August 10, 1999**
(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
Form of Initial Capital Purchase Agreement*
(m) Rule 12b-1 Plan
Distribution Plan for Investment Class
Shares*
(n) Rule 18f-3 Plan
Multi-Class Plan*
(o)(1) Financial Data Schedule - Investment Class**
(o)(2) Financial Data Schedule - Institutional Class**
(p)(1) Code of Ethics, adopted February 10,
1998 by the Fund, and Ironwood Capital
Management, LLC, the Fund's investment
adviser, pursuant to Rule 17j-1.**
Page 49
<PAGE>
(p)(2) Code of Ethics, adopted as of May 1,
1998 by American Data Services Inc.,
the Fund's principal underwriter,
pursuant to Rule 17j-1.**
- ---------------------------------------------
* Previously filed
** Filed herewith
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.
Page 50
<PAGE>
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. Reidy 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) ADS Distributors, Inc. ("ADSD") serves as distributor of shares of
the Registrant. ADSD also serves as principal underwriter to the following
investment companies other than the Registrant:
The Canandaigua Funds
ADSD is registered with the Securities and Exchange Commission ("SEC") as a
broker-dealer and is a member of the National Association of Securities Dealers.
ADSD is located at 150 Motor Parkway, Hauppauge, NY 11788-0132.
(b) The information required by this item with respect to each
director, officer and partner of ADSD is incorporated by reference to Schedule A
of Form BD filed by ADSD under the Securities Exchange Act of 1934 (SEC File
Number 8-49995). No director, officer or partner of ADSD 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, 21 Custom House Street, #240,
Boston, Massachusetts 02109 (records relating to its function as investment
adviser).
Page 51
<PAGE>
(2) American Data Services, Inc., 150 Motor Parkway, Hauppauge, NY
11788-0132 (records relating to its functions as Administrator, Fund Accountant
and Transfer Agent).
(3) ADS Distributors, Inc., 150 Motor Parkway, Hauppauge, NY
11788-0132 (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 52
<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 28th day of April, 2000.
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:
SIGNATURES TITLE DATE
- ---------- ----- ----
s/ Warren J. Isabelle President, Trustee April 28, 2000
- ---------------------- and Chairman of the
Warren J. Isabelle Board
/s/ Richard L. Droster Vice President and April 28, 2000
- ---------------------- Trustee
Richard L. Droster
/s/ Gary S. Saks Vice President, April 28, 2000
- ---------------------- Treasurer and
Gary S. Saks Secretary
[Signatures continued on next page]
Page 53
<PAGE>
/s/ John A. Fiffy
- ----------------------
John A. Fiffy Trustee April 28, 2000
/s/ N. Stephen Ober
- ----------------------
N. Stephen Ober Trustee April 25, 2000
/s/ Donald Nelson
- ----------------------
Donald Nelson Trustee April 26, 2000
Page 54
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
(1) Declaration of Trust*
(2) By-Laws*
(3) Instruments Defining Rights of Security Holders-None
(4) Investment Advisory Agreement with Ironwood Capital
Management, LLC*
(5) (a) Distribution Agreement with First Data Distributors, Inc.*
(5) (b) Underwriting Agreement with ADS Distributors, Inc. dated
as of August 10, 1999 (replaces Exhibit 5(a))**
(6) Bonus or Profit Sharing Contracts - None
(7) Custody Agreement with The Fifth Third Bank*
(8) Other Material Contracts
(a) Transfer Agency and Service Agreement with First Data
Investor Services Group, Inc.*
(b) Transfer Agency and Service Agreement with American Data
Services, Inc. dated as of August 10, 1999 (replaces
Exhibit (8)(a))**
(c) Administration Agreement with First Data Investor Services
Group, Inc.*
(d) Administrative Services Agreement with American Data
Services, Inc. dated as of August 10, 1999 (replaces
Exhibit (8)(c))**
(e) Fund Accounting Service Agreement with American Data
Services, Inc. dated as of August 10, 1999**
(9) Opinion and Consent of Counsel*
Page 55
<PAGE>
(10) Consent of Independent Public Accountants*
(11) Omitted Financial Statements - None
(12) Form of Initial Capital Purchase Agreement*
(13) 12b-1 Distribution Plan for Investment Class Shares*
(15) 18f-3 of Multi-Class Plan*
(27.1) Financial Data Schedule - Investment Class**
(27.2) Financial Data Schedule - Institutional Class**
(99) Additional Exhibits
(a) Code of Ethics, adopted February 10, 1998 by the Fund, and
Ironwood Capital Management, LLC, the Fund's investment
adviser, pursuant to Rule 17j-1.**
(b) Code of Ethics, adopted as of May 1, 1998 by American Data
Services Inc., the Fund's principal underwriter, pursuant
to Rule 17j-1.**
- ---------------------------------------------
* Previously filed
** Filed herewith
Page 56
UNDERWRITING AGREEMENT
AGREEMENT made as of this 10th day of August, 1999 by and between ICM Series
Trust, a Massachusetts Business Trust (the "Fund"), and ADS Distributors, Inc.,
a Florida Corporation (the "Distributor").
BACKGROUND
WHEREAS, the Fund is a diversified, open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS Distributors, Inc. ("Distributor") is a registered broker dealer
under the Securities Exchange Act of 1934 and a member in good standing of the
National Association of Securities Dealers;
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
A: DISTRIBUTION ACTIVITIES:
1. The Distributor will receive orders from purchasers for and the Fund will
sell, issue and deliver from time to time to such purchasers, such part of
the authorized shares of capital stock of the Fund remaining un-issued as
from time to time shall be effectively registered under the Securities Act
of 1933, as amended (the "33 Act"), at prices determined as hereinafter
provided and on the terms hereinafter set forth, all subject to applicable
Federal and State laws and regulations and to the charter of the Fund.
1.1 The Distributor agrees that it will use such efforts as it may deem
appropriate to solicit orders for the sale of shares of capital stock of the
Fund. Such activities shall include, without limitation, such advertising
and promotion as the Distributor, in conjunction with Fund management and by
mutual agreement by both parties, may believe reasonable in connection with
such solicitation; entering into arrangements with securities dealers,
financial institutions and other industry professionals, including so-called
"mutual fund supermarkets" and monitoring such agreements and relationships
as may be necessary and appropriate to assure compliance with applicable
state and Federal securities regulations relating to such agreements. Such
activities shall also include the review of all advertising and promotional
literature and the preparation and coordination of all filings of any such
literature that the Fund may be required to make with the Securities and
Exchange Commission or the NASD.
1
<PAGE>
2. The Distributor shall present all orders received by it for shares of
capital stock of the Fund to the Fund by telegraphic or written purchase
orders and each such order shall be subject to the acceptance or rejection
by the Fund in its sole discretion.
2.1 Notwithstanding any other provision hereof, whenever in the judgment of
the Fund such action is warranted by market, economic or political
conditions or by abnormal circumstances of any kind, the Fund may suspend
the offer of shares in effect and may, without liability under the provision
of this Agreement, decline to accept or confirm any orders or make any sales
of shares or capital stock under this Agreement until such time as the Fund
shall deem it advisable to resume the offering of such shares, provided that
as soon as practicable after the taking of any such action a special meeting
of the Board of Directors shall be called to be held as soon as practicable
thereafter to determine whether or not such action shall then continue to be
effective, and the period during, or the circumstance under, which such
action shall continue or cease to be effective. During any period during
which the offer of shares shall be suspended or the Fund shall decline to
accept or confirm any such orders or make any such sales, the Distributor
shall be under no obligation to confirm or accept any such orders or make
any such sale at any price.
2.2 The Fund will use its best efforts to keep effectively registered under
the 33 Act for sale as herein contemplated such shares of its capital stock
as the Distributor shall reasonably request and as the Securities and
Exchange Commission (the "SEC") shall permit to be so registered.
3. Sales by the Distributor shall be made as agent for the Fund and all such
sales be made to or though qualified dealers or others in such manner, not
inconsistent with the provisions hereof and the then effective registration
statement of the Fund under the 33 Act, (and related prospectus), as the
Distributor may determine from time to time.
4. All shares of capital stock offered for sale or sold by the Distributor
shall be so offered or sold at a price per share (the "Offering Price")
equal to the net asset value per share (determined as authorized from time
to time by the Board of Directors of the Fund pursuant to its charter).
4.1 For the purpose of determining the offering price, the net asset value
of any such shares shall be so determined in accordance with the then
current offering prospectus. The Fund, or its authorized agent, will
promptly furnish to the Distributor a statement of the Offering Price as
often as such net asset value is determined and such statement shall at the
request of the Distributor show the basis of computation of the Offering
Price.
4.2 Orders presented by the Distributor for shares, if accepted by the Fund,
shall be accepted and confirmed by it or its duly authorized agent at the
Offering Price in effect at the time of its receipt of such order at its
principal office.
4.3 The Distributor will not in any event (a) offer for sale or sell shares
of capital stock in excess of the number then effectively registered under
the 33 Act, and available for sale, or (b) offer for sale or sell any shares
in violation of any applicable Federal or State law, rule or regulation.
2
<PAGE>
5. The Fund will execute any and all documents and furnish any and all
information which may be reasonably necessary in connection with the
qualification of its shares of capital stock in such states as the
Distributor may reasonably request (it being understood that the Fund shall
not be required without its consent to qualify to do business in any
jurisdiction or to comply with any requirement which in its opinion is
unduly burdensome). The Distributor, at its own expense, will effect all
necessary qualifications as dealer or broker.
5.1 The Distributor agrees to indemnify and hold harmless the Fund and each
person, if any, who controls the Fund against any and all claims, costs,
expenses (including reasonable attorneys' fee) (collectively "Losses") that
may arise (i) out of the acquisition of any shares of capital stock of the
Fund by any person which may be based upon any untrue statement, or alleged
untrue statement of material fact contained in the Fund registration
statement, or any omission or alleged omission, to state a material fact
required to be stated therein to make the statements therein not misleading,
if such statement or omission was made in reliance upon information
furnished or confirmed in writing to the Fund by the Distributor or any
affiliated person of the Distributor; or (ii) as a result of the
Distributor's willful misfeasance, bade faith or negligence in the
performance of its duties or obligations hereunder, or the reckless
disregard of such duties or obligations.
6. The Fund will furnish to the Distributor from time to time such information
with respect to its shares as the Distributor may reasonably request for
use in connection with the sale of shares. The Distributor will not use or
distribute or authorize the use, distribution or dissemination by its
dealers or others in connection with such sale of any literature,
advertising or selling aids in any form or through any medium, written or
oral, without prior written specific approval thereof by the Fund.
7. Nothing herein contained shall limit the right of the Fund, in its absolute
discretion, to issue or sell shares of its capital stock for such other
considerations (whether in connection with the acquisition of assets or
shares or securities of another corporation or entity or with the merger or
consolidation of any other corporation into or with the Fund, or otherwise)
as and to the extent permitted by its charter and any applicable laws, or
to issue or sell any such shares directly to the shareholders of the Fund,
upon such terms and conditions and for such consideration, if any, as may
be determined by the Board of Directors, whether pursuant to the
distribution of subscription or purchase rights to such holders or by way
of dividends or otherwise.
8. At the request of the Fund, the Distributor agrees to act as agent for the
Fund for the repurchase or redemption of shares of the Fund at such prices
as the Fund from time to time shall prescribe.
9. In selling or reacquiring shares, the Distributor agrees to conform to the
requirements of all state and Federal laws relating to such sale or
reacquisition, as the case may be, and will indemnify and hold the Fund
harmless from any damage or expense on account of any wrongful act by the
Distributor or any employee, representative or agent of the Distributor.
The Distributor will observe and be bound by all the provisions of the
charter of the Fund and any fundamental policies adopted by the Fund
pursuant to the Investment Company Act of 1940, as amended (the "40 Act"),
notice of which has been given to the Distributor.
3
<PAGE>
10. Neither the Distributor, any dealer nor any other person is authorized by
the Fund to give any information or to make any representation other than
those contained (a) in the latest effective registration statement (and
related prospectus) filed with the SEC under the 33 Act as such
registration statement (and prospectus) may be amended from time to time,
or (b) in any statement expressly authorized by the Fund for use in
connection with any sale or reacquisition of capital stock for the account
of the Fund.
D. COMPENSATION AND OTHER:
1. In consideration of the agreements on the part of the Distributor herein
contained, the Distributor shall receive payment in the amount of $10,000
or 1 basis point, whichever is greater, per annum billed monthly, plus
reimbursement of all reasonable out-of-pocket expenses incurred at the
request of the Fund in fulfillment of its responsibilities in this
Agreement.
2. This Agreement shall continue in effect until such time as there remain no
unsold balance of shares of capital stock effectively registered under the
33 Act; provided, however, that (a) this Agreement shall continue in effect
for a period more than two years from the date hereof only so long as such
continuance is specifically approved at least annually by the Board of
Directors or a majority of the outstanding voting securities of the Fund,
and (b) either party hereto may terminate this Agreement on any date by
giving the other party at least ninety (90) days prior written notice of
such termination specifying the date fixed therefor.
2.1 This Agreement shall automatically terminate in the event of its
assignment by the Distributor, the term "assignment" having the meaning
defined in Section 2(a)(4) of the 40 Act.
3. The parties understand and agree that the Fund is a Massachusetts business
trust and, as such, the obligations of the Fund under this agreement shall
not be binding upon any of the Trustees, or shareholders of the Fund, but
only on the assets and property of the Fund, as provided in the Declaration
of Trust.
4. Any notice under this Agreement shall be in writing addressed and delivered
by mail, postage prepaid, to the party to whom addressed at the address
given below, or at such other address as such party shall theretofore have
designated (by notice given to the other party as herein provided) in
writing for the receipt of such notice:
To the Fund: To the Administrator:
Mr. Gary Saks Michael Rogan
Chief Operating Officer President
Ironwood Capital Management LLC ADS Distributors, Inc.
1 International Place, Suite2401 c/o American Data Services, Inc.
Boston, MA 02110 150 Motor Parkway
Hauppauge, NY 11788
4
<PAGE>
IN WITNESS WHEREOF, The Fund and the Distributor have each
caused this Agreement to be executed on its behalf by an officer thereunto duly
authorized on the day and year first above written.
ICM Series Trust ADS Distributors, Inc.
By: /s/ By: /s/
------------------------------- ------------------------------
Warren J. Isabelle, President Michael Miola, Chairman of the
Board and Treasurer
5
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made the 10th day of August 1999, by and between ICM Series Trust, a
Massachusetts Business Trust, having its principal office and place of business
at 1 International Place, Suite 2401, Boston, MA 02110 (the "Fund"), and
American Data Services, Inc., a New York corporation having its principal office
and place of business at the Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788 ("ADS")
WHEREAS, the Fund desires to appoint ADS as its transfer agent,
dividend disbursing agent and agent in connection with certain other activities,
and ADS desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
1. TERMS OF APPOINTMENT; DUTIES OF ADS
1.01 Subject to the terms and conditions set forth in this agreement,
the Fund hereby employs and appoints ADS to act as, and ADS agrees to act as its
transfer agent for the Fund's authorized and issued shares of its common stock,
("Shares"), dividend disbursing agent and agent in connection with any
accumulation, open-account or similar plans provided to the shareholders of the
fund ("Shareholders") set out in the currently effective prospectus and
statement of additional information ("prospectus") of the Fund.
1.02 ADS agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Fund and ADS, ADS shall:
I. Receive for acceptance, orders for the purchase of Shares, and
promptly deliver payment and appropriate documentation therefore to
the Custodian of the Fund authorized by the Board of Directors of
the Fund (the "Custodian");
II. Pursuant to purchase orders, issue the appropriate number of Shares
and hold such Shares in the appropriate Shareholder account;
III.Receive for acceptance redemption requests and redemption
directions and deliver the appropriate documentation therefore to
the Custodian;
IV. At the appropriate time as and when it receives monies paid to it
by the Custodian with respect to any redemption, pay over or cause
to be paid over in the appropriate manner such monies as instructed
by the redeeming Shareholders;
V. Effect transfers of Shares by the registered owners thereof upon
receipt of appropriate instructions;
VI. Prepare and transmit payments for dividends and distributions
declared by the Fund;
VII. Maintain records of account for and advise the Fund and its
Shareholders as to the foregoing; and
VIII. Record the issuance of shares of the Fund and maintain pursuant
to SEC Rule 17Ad-10(e) a record of the total number of shares of
the Fund which are authorized, based upon data provided to it by
the Fund, and issued and outstanding. ADS shall also provide the
1
<PAGE>
Fund on a regular basis with the total number of shares which are
authorized and issued and outstanding and shall have no obligation,
when recording the issuance of shares, to monitor the issuance of
such shares or to take cognizance of any laws relating to the issue
or sale of such shares, which functions shall be the sole
responsibility of the Fund.
(b) In addition to and not in lieu of the services set forth in the
above paragraph (a), ADS shall:
I. Perform all of the customary services of a transfer agent, dividend
disbursing agent, including but not limited to: maintaining all
Shareholder accounts, preparing Shareholder meeting lists, mailing
proxies, receiving and tabulating proxies, mailing Shareholder reports
and prospectuses to current Shareholders, withholding taxes on U.S.
resident and non-resident alien accounts, preparing and filing U.S.
Treasury Department Forms 1099 and other appropriate forms required
with respect to dividends and distributions by federal authorities for
all Shareholders, preparing and mailing confirmation forms and
statements of account to Shareholders for all purchases redemption's of
Shares and other confirmable transactions in Shareholder accounts,
preparing and mailing activity statements for Shareholders, and
providing Shareholder account information and (ii) provide a system and
reports which will enable the Fund to monitor the total number of
Shares sold in each State and ADS will notify the Fund when current
registrations are either within 30 days of expiration or when sales
exceed 75% of the amount registered for sale.
(c) In addition, the Fund shall (i) identify to ADS in writing those
transactions and shares to be treated as exempt from blue sky
reporting for each State and (ii) verify the establishment of such
transactions for each state on the system prior to activation and
thereafter monitor the daily activity for each State as provided by
ADS.
Procedures applicable to certain of these services may be established
from time to time by agreement between the Fund and ADS.
2. FEES AND EXPENSES
2.01 For performance by ADS pursuant to this Agreement, the Fund agrees
to pay ADS an annual maintenance fee for each Shareholder account and
transaction fees for each portfolio or class of shares serviced under this
Agreement (See Schedule A) as set out in the fee schedule attached hereto. Such
fees and out-of pocket expenses and advances identified under Section 2.02 below
may be changed from time to time subject to mutual written agreement between the
Fund and ADS.
2.02 In addition to the fee paid under Section 2.01 above, the Fund
agrees to reimburse ADS for out-of-pocket expenses or advances incurred by ADS
for the items set out in the fee schedule attached hereto. In addition, any
other expenses incurred by ADS at the request or with the consent of the Fund,
will be reimbursed by the Fund.
2.03 The Fund agrees to pay all fees and reimbursable expenses within
five days following the receipt of the respective billing notice. Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to ADS by the Fund at least seven (7)
days prior to the mailing date of such materials.
3. REPRESENTATIONS AND WARRANTIES OF ADS
ADS represents and warrants to the Fund that:
3.01 It is empowered under applicable laws and by its charter and
by-laws to enter into and perform this Agreement.
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3.02 All requisite corporate proceedings have been taken to authorize
it to enter into and perform this Agreement.
3.03 It has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and obligations under
this Agreement.
3.04 ADS is duly registered as a transfer agent under the Securities
Act of 1934 and shall continue to be registered throughout the remainder of this
Agreement.
4. REPRESENTATIONS AND WARRANTIES OF THE FUND
The Fund represents and warrants to ADS that;
4.01 It is empowered under applicable laws and by its Articles of
Incorporation and By-Laws / Declaration of Trust to enter into and perform this
Agreement.
4.02 All proceedings required by said Articles of Incorporation and
By-Laws / Declaration of Trust have been taken to authorize it to enter into and
perform this Agreement.
4.03 It is an open-end management investment company registered under
the Investment Company Act of 1940.
4.04 A registration statement under the Securities Act of 1933 is
currently or will become effective and will remain effective, and appropriate
state securities law filings as required, have been or will be made and will
continue to be made, with respect to all Shares of the Fund being offered for
sale.
5. INDEMNIFICATION
5.01 ADS shall not be responsible for, and the Fund shall indemnify and
hold ADS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of ADS whether taken directly or through agents or
subcontractors required to be taken pursuant to this
Agreement, provided that such actions are taken in good faith
and without negligence or willful misconduct.
(b) The reliance on or use by ADS whether directly or through
agents or subcontractors of information, records and documents
which (i) are received by ADS or its agents or subcontractors
and furnished to it by or on behalf of the Fund, and (ii) have
been prepared and/or maintained by the Fund or any other
person or firm on behalf of the Fund provided, in each case,
that ADS in good faith believes such information to be
accurate (or such records and documents to be genuine) and
provided further that such information, records or documents
are not received from or prepared by an employee, officer or
agent of ADS or of any company affiliated with ADS.
(c) The reliance on, or the carrying out by ADS or its agents or
subcontractors of any instructions or requests of the Fund or
its agents, other than ADS or its affiliates.
5.02 ADS shall indemnify and hold the Fund harmless from and against
any and all losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributable to any action or failure or
omission to act by ADS as a result of ADS's lack of good faith, negligence or
willful misconduct.
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<PAGE>
5.03 At any time ADS may apply to any officer of the Fund for
instructions, and may consult with legal counsel with respect to any matter
arising in connection with the services to be performed by ADS under this
Agreement, and ADS shall not be liable and shall be indemnified by the Fund for
any action taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel. ADS, its agents and subcontractors shall be protected
and indemnified in acting upon any paper or document furnished by or on behalf
of the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided ADS or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. ADS, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
5.04 In the event either party is unable to perform its obligations
under the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party of seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
6. COVENANTS OF THE FUND AND ADS
6.01 The Fund shall promptly furnish to ADS a certified copy of the
resolution of the Board of Directors of the Fund authorizing the appointment of
ADS and the execution and delivery of this Agreement.
6.02 ADS hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Fund for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 ADS shall keep records relating to the services to be performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the Investment Company Act of 1940, as amended, and
the Rules thereunder, ADS agrees that all such records prepared or maintained by
ADS relating to the services to be performed by ADS hereunder are the property
of the Fund and will be preserved, maintained and made available in accordance
with such Section and Rules, and will be surrendered promptly to the Fund on and
in accordance with its request.
6.04 ADS and the Fund agree that all books, records, information and
data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
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<PAGE>
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Fund, ADS will endeavor to notify the Fund and to
secure instructions from an authorized officer of the Fund as to such
inspection. ADS reserves the right, however, to exhibit the Shareholder records
to any person whenever it is advised by its counsel that it may be held liable
for the failure to exhibit the Shareholder records to such person, and shall
promptly notify the Fund of any unusual request to inspect or copy the
shareholder records of the Fund or the receipt of any other unusual request to
inspect, copy or produce the records of the Fund.
7. TERMINATION OF AGREEMENT.
7.01 This Agreement shall become effective on the date first above
written.
7.02 This Agreement shall remain in effect for a period of three (3)
years from the date of its effectiveness (the "Initial Term") and shall continue
in effect for successive twelve-month periods; provided that such continuance is
specifically approved at least annually by the Board and by a majority of the
Trustees who are not parties to this Agreement or interested persons of any such
party.
7.03 After the Initial Term, this Agreement may be terminated at
anytime (i) by the Board on 90 days' written notice to ADS or (ii) by ADS on 90
days' written notice to the Fund. The obligations of Sections 2 and 5 shall
survive any termination of this Agreement
7.04 Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, ADS reserves the right to charge for any other
reasonable costs expenses associated with such termination.
8. ASSIGNMENT.
8.01 Neither this Agreement nor any rights or obligations hereunder may
be assigned by either party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
9. AMENDMENT.
9.01 This Agreement may be amended by the parties hereto only if
such amendment is in writing and signed by both parties.
10. NEW YORK LAWS TO APPLY
10.01 The provisions of this Agreement shall be construed and
interpreted in accordance with the laws of the State of New
York as at the time in effect and the applicable provisions of
the 1940 Act. To the extent that the applicable law of the
State of New York, or any of the provisions herein, conflict
with the applicable provisions of the 1940 Act, the latter
shall control.
11. MERGER OF AGREEMENT.
11.01 This Agreement constitutes the entire agreement between the
parties hereto and supersedes any prior agreement with respect to the subject
matter hereof whether oral or written.
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<PAGE>
12. MASSACHUSETTS BUSINESS TRUST .
The parties understand and agree that the Fund is a Massachusetts
business trust and, as such, the obligations of the Fund under this agreement
shall not be binding upon any of the Trustees, or shareholders of the Fund, but
only on the assets and property of the Fund, as provided in the Declaration of
Trust.
13. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To the Administrator:
Mr. Gary Saks Michael Miola
Chief Operating Officer President
Ironwood Capital Management LLC American Data Services, Inc.
1 International Place, Suite2401 150 Motor Parkway, Suite 109
Boston, MA 02110 Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ICM SERIES TRUST AMERICAN DATA SERVICES, INC.
By: /s/ By: /s/
----------------------------- -------------------------
Warren J. Isabelle, President Michael Miola, President
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<PAGE>
FEE SCHEDULE
For the services rendered by ADS in its capacity as transfer agent, the
Fund shall pay ADS, within twenty (20) days after receipt of an invoice from ADS
at the beginning of each month, a fee, calculated as a combination of account
maintenance charges plus transaction charges as follows:
(a) ACCOUNT MAINTENANCE CHARGE:
The Greater of (No prorating for partial months):
(1) Minimum maintenance charge per portfolio/class:
First Class - $900.00/ month
Second Class - $450.00/month *
* ADS reserves the right to renegotiate the minimum fee for the second class
when the second class becomes actively traded.
OR,
(2) Based upon the total of all open/closed accounts (1) per
portfolio/class upon the following annual rates (billed monthly):
FUND TYPE:
Dividend calculated and
paid annually, semi-annually, quarterly................. $ 9.00 per account
Dividend calculated and paid monthly..................... $10.50 per account
Dividend accrued daily and paid monthly.................. $14.00 per account
Closed accounts.......................................... $ 2.00 per account (2)
(1) All accounts closed during a month will be considered as open accounts
for billing purposes in the month the account is closed.
(2) Closed accounts remain on the shareholder files until all 1099's and
5498's have been distributed to the shareholders and send via mag-media
to the IRS.
PLUS,
(b) TRANSACTION FEES:
Trade Entry (purchase/liquidation) and
maintenance transactions ....................................... $ 1.50 each
New account set-up ............................................ $ 3.00 each
Customer service calls ......................................... $ 1.25 each
Correspondence/ information requests ........................... $ 1.75 each (2)
Check preparation .............................................. $ .50 each
Liquidation's paid by wire transfer ............................ $ 3.00 each
ACH charge ..................................................... $ .45 each
SWP ............................................................ $ 1.00 each
<PAGE>
(c) 24 HOUR AUTOMATED VOICE RESPONSE:
Initial set-up (one-time) charge per portfolio - $750.00
Monthly maintenance charge per portfolio - $50.00
All calls processed through automated voice response will be billed as a
customer service call listed above.
(d) FUND/SERV:
All portfolios processed through Fund/SERV will be subject to an additional
monthly charge of $250.00
All transactions processed through Fund/SERV will be billed at the transaction
fee rates listed in (b) above.
FEE INCREASES
On each annual anniversary date of this Agreement, the minimum account
maintenance charges enumerated above will be increased by the change in the
Consumer Price Index for the Northeast Region (CPI) for the twelve month period
ending with the month preceding such annual anniversary date. All other fees
will be reviewed on an annual basis and will be subject to reasonable
adjustments as ADS experiences increases in its processing costs.
(e) IRA PLAN FEES:
The following fees will be charged directly to the shareholder account:
Annual maintenance fee ................................ $15.00 /account *
Incoming transfer from prior custodian ................ $12.00
Distribution to a participant ......................... $15.00
Refund of excess contribution ......................... $15.00
Transfer to successor custodian ....................... $15.00
Automatic periodic distributions ..................... $15.00/year per account
* Includes $8.00 Bank Custody Fee.
<PAGE>
(f) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses, exclusive
of salaries, advanced by ADS in connection with but not limited to the costs for
printing fund documents, (i.e. printing of confirmation forms, shareholder
statements, redemption/dividend checks, envelopes, financial statements, proxy
statement, fund prospectus, etc.) proxy solicitation and mailing expenses,
travel requested by the Fund, telephone toll charges, 800-line costs and fees,
facsimile and data transmission costs, stationery and supplies (related to Fund
records), record storage, postage (plus a $0.085 service charge for all
mailings), pro-rata portion of annual SAS-70 audit letter, telex and courier
charges incurred in connection with the performance of its duties hereunder. ADS
shall provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse ADS within fifteen (15) days after receipt thereof.
(g) SPECIAL REPORTS:
All reports and/or analyses requested by the Fund that are not included
in the fee schedule, shall be subject to an additional charge, agreed upon in
advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr.
Junior staff - $ 75.00/hr.
Computer time - $45.00/hr.
(h) CONVERSION CHARGE: (existing funds only, new funds please ignore)
There will be a charge to convert the Fund's shareholder accounting
records on to the ADS stock transfer system. In addition, ADS will be reimbursed
for all out-of-pocket expenses, enumerated in paragraph (b) above and data media
conversion costs, incurred during the conversion process.
The conversion charge is estimated to be $1,000. However, if the
quality of the records received, and the level of cooperation from the previous
service provider requires that ADS spend additional time to complete the
conversion, the Fund will be notified and all missing information that can be
provided by the Fund will be determined. In the absence of a cost effective
solution by the Fund and ADS, any incremental charges required by ADS to
complete the conversion will be agreed upon in advance by the Fund and ADS.
<PAGE>
SCHEDULE A
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
ICM/ISABELLE SMALL CAP VALUE FUND
ADMINISTRATIVE SERVICES AGREEMENT
AGREEMENT made the 10th day of August 1999, by and between ICM Series Trust a
Massachusetts Business Trust, having its principal office and place of business
at 1 International Place, Suite 2401, Boston, MA 02110 (the "Fund"), and
American Data Services, Inc., a New York corporation having its principal office
and place of business at the Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788 ("ADS").
BACKGROUND
WHEREAS, the Fund is a diversified open-end management investment
company registered with the United States Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing administrative
services to mutual funds and possesses facilities sufficient to provide such
services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance
and facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree to the following:
1. DUTIES OF ADS.
ADS will provide the Fund with the necessary office space (the Fund's
principal office will be located at the New York offices of ADS), communication
facilities and personnel to perform the following services for the Fund:
(a) Monitor all regulatory (1940 Act and IRS) and prospectus
restrictions for compliance;
(b) Prepare and coordinate the printing of semi-annual and annual
financial statements, other communications to shareholders
including notices, proxy statements and forms of proxy;
(c) Prepare selected management reports for performance and
compliance analyses as agreed upon by the Fund and Administrator
from time to time including; without limitation, reports
referred to in Section 4 and reports necessary and appropriate
in connection with regular and special meetings of the Fund's
Board of Trustees.
(d) Prepare selected financial data required for directors' meetings
as agreed upon by the Fund and ADS from time to time,
preparation of meeting minutes, compliance calendar and
compliance reports, and coordinate directors meeting agendas
with outside legal counsel to the Fund;
(e) Determine income and capital gains available for distribution
and calculate distributions required to meet regulatory, income,
and excise tax requirements, to be reviewed by the Fund's
independent public accountants;
(f) Prepare the Fund's federal, state, and local tax returns to be
reviewed by the Fund's independent public accountants;
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<PAGE>
(g) Prepare and maintain the Fund's operating expense budget to
determine proper expense accruals to be charged to the Fund in
order to calculate its daily net asset value, to include
calculations of contractual expense limitations, expense waivers
and all Fund disbursements;
(h) 1940 ACT filings - In conjunction with the Fund's outside legal
counsel (ADS will prepare, outside counsel will review) ADS
will:
O Prepare and file with the SEC via EDGAR, the Fund's Form
N-SAR reports;
O Update all financial sections of the Fund's Statement of
Additional Information and coordinate its completion and
filing with the SEC via EDGAR;
O Update all financial sections of the Fund's prospectus and
coordinate its completion and filing with the SEC via EDGAR;
O Update all financial sections of the Fund's proxy statement
and coordinate its completion and filing with the SEC via
EDGAR;
O Prepareand file with the SEC via EDGAR, an annual update to
Fund's 24f-2 filing (if applicable);
(i) Monitor services provided by the Fund's custodian bank as well
as any other service providers to the Fund;
(j) Provide appropriate financial schedules (as requested by the
Fund's independent public accountants or SEC examiners),
coordinate the Fund's annual or SEC audit, and provide office
facilities as may be required;
(k) Prepare (with the assistance of outside counsel and Fund
management) and distribute all material necessary and
appropriate for Board meetings, coordinate and attend management
and board of directors meetings as requested;
(l) The preparation and filing (filing fee to be paid by the Fund)
of applications and reports as necessary to register or maintain
the Funds registration under the securities or "Blue Sky" laws
of the various states selected by the Fund or its Distributor.
(m) Monitor Code of Ethics filings by Directors and Officers of the
Fund as required under SEC Rule 17j of the 40 Act.
(n) Review adequacy of Fidelity Bond Insurance and make appropriate
filings with the SEC under Section 17(g) of the 40 Act.
ADS shall, for all purposes herein, be deemed to be an independent contractor
and shall, unless otherwise expressly provided or authorized, have no authority
to act for or represent the Fund in any way or otherwise be deemed an agent of
the Fund.
2. COMPENSATION OF ADS.
In consideration of the services to be performed by ADS as set forth
herein for each portfolio listed in Schedule B, ADS shall be entitled to receive
compensation and reimbursement for all reasonable out-of-pocket expenses. The
Fund agrees to pay ADS the fees and reimbursement of out-of-pocket expenses as
set forth in the fee schedule attached hereto as Schedule A.
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<PAGE>
3. RESPONSIBILITY AND INDEMNIFICATION.
ADS shall not be responsible for, and the Fund shall indemnify and hold
ADS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of ADS whether taken directly or through agents or
subcontractors required to be taken pursuant to this Agreement,
provided that such actions are taken in good faith and without
negligence or willful misconduct.
(b) The reliance on or use by ADS whether directly or through agents
or subcontractors of information, records and documents which (i)
are received by ADS or its agents or subcontractors and furnished
to it by or on behalf of the Fund, and (ii) have been prepared
and/or maintained by the Fund or any other person or firm on
behalf of the Fund provided, in each case, that ADS in good faith
believes such information to be accurate (or such records and
documents to be genuine) and provided further that such
information, records or documents are not received from or
prepared by an employee, officer or agent of ADS or of any
company affiliated with ADS.
(c) The reliance on, or the carrying out by ADS or its agents or
subcontractors of any instructions or requests of the Fund or its
agents, other than ADS or its affiliates.
ADS shall indemnify and hold the Fund harmless from and against any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by ADS as a result of ADS's lack of good faith, negligence or willful
misconduct.
At any time ADS may apply to any officer of the Fund for instructions,
and may consult with legal counsel with respect to any matter arising in
connection with the services to be performed by ADS under this Agreement, and
ADS shall not be liable and shall be indemnified by the Fund for any action
taken or omitted by it in reliance upon such instructions or upon the opinion of
such counsel. ADS, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided ADS or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. ADS, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party of seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
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4. REPORTS.
(a) ADS shall provide to the Board of Directors of the Fund, on a
quarterly basis, a report, in such a form as ADS and the Fund shall from time to
time agree, representing that, to its knowledge, the Fund was in compliance with
all requirements of applicable federal and state law, including without
limitation, the rules and regulations of the Securities and Exchange Commission
and the Internal Revenue Service, or specifying any instances in which the Fund
was not so in compliance. Whenever, in the course of performing its duties under
this Agreement, ADS determines, on the basis of information supplied to ADS by
the Fund, that a violation of applicable law has occurred, or that, to its
knowledge, a possible violation of applicable law may have occurred or, with the
passage of time, could occur, ADS shall promptly notify the Fund and its counsel
of such violation.
5. ACTIVITIES OF ADS.
ADS shall be free to render similar services to others so long as its
services hereinunder are not impaired thereby.
6. RECORDS.
The records maintained by ADS shall be the property of the Fund, and
shall be surrendered to the Fund, at the expense of the Fund, promptly upon
request by the Fund. ADS agrees to maintain a back-up set of accounts and
records of the Fund (which back-up set shall be updated on at least a weekly
basis) at a location other than that where the original accounts and records are
stored. ADS shall assist the Fund's independent auditors, or, upon approval of
the Fund, any regulatory body, in any requested review of the Fund's accounts
and records. ADS shall preserve the accounts and records as they are required to
be maintained and preserved by Rule 31a-1.
7. CONFIDENTIALITY.
ADS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all other
information germane thereto, as confidential and such information shall not be
disclosed to any person except as may be authorized by the Fund.
8. DURATION AND TERMINATION OF THE AGREEMENT.
This Agreement shall become effective on the date first above written.
This Agreement shall remain in effect for a period of three (3) years
from the date of its effectiveness (the "Initial Term") and shall continue in
effect for successive twelve-month periods; provided that such continuance is
specifically approved at least annually by the Board and by a majority of the
Trustees who are not parties to this Agreement or interested persons of any such
party.
After the Initial Term, this Agreement may be terminated at anytime (i)
by the Board on 90 days' written notice to ADS or (ii) by ADS on 90 days'
written notice to the Fund. The obligations of Sections 2 and 3 shall survive
any termination of this Agreement
Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, ADS reserves the right to charge for any other
reasonable costs expenses associated with such termination.
4
<PAGE>
9. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the prior written consent
of ADS, or by ADS without the prior written consent of the Fund.
10. NEW YORK LAWS TO APPLY.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
11. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
12. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
13. MASSACHUSETTS BUSINESS TRUST.
The parties understand and agree that the Fund is a Massachusetts
business trust and, as such, the obligations of the Fund under this agreement
shall not be binding upon any of the Trustees, or shareholders of the Fund, but
only on the assets and property of the Fund, as provided in the Declaration of
Trust.
14. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when delivered in person or by certified
mail, return receipt requested, and shall be given to the following addresses
(or such other addresses as to which notice is given):
5
<PAGE>
To the Fund: To ADS:
Mr. Gary Saks Michael Miola
Chief Operating Officer President
Ironwood Capital Management LLC American Data Services, Inc.
1 International Place, Suite 2401 150 Motor Parkway, Suite 109
Boston, MA 02110 Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ICM/ISABELLE SMALL CAP VALUE FUND AMERICAN DATA SERVICES, INC.
By:/s/ By:/s/
----------------------------- -------------------------
Warren J. Isabelle, President Michael Miola, President
6
<PAGE>
SCHEDULE A
(a) ADMINISTRATIVE SERVICE FEE:
For the services rendered by ADS in its capacity as administrator, as
specified in Paragraph 1. DUTIES OF ADS., the Fund shall pay ADS within Twenty
(20) days after receipt of an invoice from ADS at the beginning of each month, a
fee equal to the greater of:
NOTE: The following fees are per portfolio serviced.
MINIMUM FEE:
CALCULATED FEE WILL BE BASED UPON PRIOR MONTH AVERAGE NET ASSETS:
(No prorating partial months)
Each Portfolio
Under $10 million.............................. $1,625
From $10 million to $20 million................ 2,000
From $20 million on............................ 2,500
OR,
NET ASSET CHARGE:
1/12th of 0.1% (12 basis points) of average net assets of portfolio for month.
FEE INCREASES
On each anniversary date of this Agreement, the minimum service fees
enumerated above will be increased by the change in the Consumer Price Index for
the Northeast Region (CPI) for the twelve month period ending with the month
preceding such annual anniversary date.
(b) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses , exclusive
of salaries, advanced by ADS in connection with but not limited to the printing
or filing of documents for the Fund, travel, telephone, quotation services,
facsimile transmissions, stationery and supplies, record storage, postage,
telex, and courier charges, incurred in connection with the performance of its
duties hereunder. ADS shall provide the Fund with a monthly invoice of such
expenses and the Fund shall reimburse ADS within fifteen (15) days after receipt
thereof.
(c) STATE REGISTRATION (BLUE SKY) SURCHARGE:
The fees enumerated in paragraph (a) above include the initial state
registration, renewal and maintenance of registrations (as detailed in Paragraph
1(l) DUTIES OF ADS) for three (3) states. Each additional state registration
requested will be subject to the following fees:
<PAGE>
Initial registration ............... $295.00
Registration renewal ............... $150.00
Sales reports (if required) ....... $ 25.00
The state registration fees enumerated above will be discounted by 33.333% until
the Fund's net assets exceed $20 million.
(d) SPECIAL REPORTS:
All reports and /or analyses requested by the Fund, its auditors, legal
counsel, portfolio manager, or any regulatory agency having jurisdiction over
the Fund, that are not in the normal course of fund administrative activities as
specified in Section 1 of this Agreement shall be subject to an additional
charge, agreed upon in advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr.
Junior staff - $ 75.00/hr.
Computer time - $ 45.00/hr.
<PAGE>
SCHEDULE B
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
ICM/ISABELLE SMALL CAP VALUE FUND
FUND ACCOUNTING SERVICE AGREEMENT
AGREEMENT made the 10th day of August 1999, by and between ICM Series Trust, a
Massachusetts Business Trust, having its principal office and place of business
at 1 International Place, Suite 2401, Boston, MA 02110 (the "Fund"), and
American Data Services, Inc., a New York corporation having its principal office
and place of business at the Hauppauge Corporate Center, 150 Motor Parkway,
Suite 109, Hauppauge, New York 11788 ("ADS")
BACKGROUND
WHEREAS, the Fund is a diversified, open-end management investment company
registered with the United States Securities and Exchange Commission under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, ADS is a corporation experienced in providing accounting services to
mutual funds and possesses facilities sufficient to provide such services; and
WHEREAS, the Fund desires to avail itself of the experience, assistance and
facilities of ADS and to have ADS perform for the Fund certain services
appropriate to the operations of the Fund, and ADS is willing to furnish such
services in accordance with the terms hereinafter set forth.
TERMS
NOW, THEREFORE, in consideration of the promises and mutual covenants
hereinafter contained, the Fund and ADS hereby agree as follows:
1. DUTIES OF ADS.
ADS will provide the Fund with the necessary office space,
communication facilities and personnel to perform the following services for the
Fund:
(a) Timely calculate and transmit to NASDAQ the Fund's daily net
asset value and communicate such value to the Fund and its
transfer agent. To obtain daily securities quotations for all
securities in the Fund's portfolio from independent pricing
services, and determination of unrealized
appreciation/depreciation of portfolio securities;
(b) Maintain and keep current all books and records of the Fund as
required by Rule 31a-1 under the 1940 Act, as such rule or any
successor rule may be amended from time to time ("Rule
31a-1"), that are applicable to the fulfillment of ADS's
duties hereunder, as well as any other documents necessary or
advisable for compliance with applicable regulations as may be
mutually agreed to between the Fund and ADS. Without limiting
the generality of the foregoing, ADS will prepare and maintain
the following records upon receipt of information in proper
form from the Fund or its authorized agents:
o Cash receipts journal
o Cash disbursements journal
o Dividend record
o Purchase and sales - portfolio securities journals
o Subscription and redemption journals
<PAGE>
o Security ledgers
o Broker ledger
o General ledger
o Daily expense accruals
o Daily income accruals
o Securities and monies borrowed or loaned and
collateral therefore
o Foreign currency journals
o Trial balances
(c) Provide the Fund and its investment adviser with daily
portfolio valuation, net asset value calculation and other
standard operational reports as requested from time to time.
(d) Provide all raw data available from our fund accounting system
(PAIRS) for management's or the administrators preparation of
the following:
1. Semi-annual financial statements;
2. Semi-annual form N-SAR;
3. Annual tax returns;
4. Financial data necessary to update form N-1a;
5. Annual proxy statement.
(e) Provide facilities to accommodate annual audit and any audits
or examinations conducted by the Securities and Exchange
Commission or any other governmental or quasi-governmental
entities with jurisdiction.
(f) Verify and reconcile with the Fund's custodian bank all daily
trade activity.
ADS shall for all purposes herein be deemed to be an independent contractor and
shall, unless otherwise expressly provided or authorized, have no authority to
act for or represent the Fund in any way or otherwise be deemed an agent of the
Fund.
2. COMPENSATION OF ADS.
In consideration of the services to be performed by ADS as set forth
herein for each portfolio listed in Schedule B, ADS shall be entitled to receive
compensation and reimbursement for all reasonable out-of-pocket expenses. The
Fund agrees to pay ADS the fees and reimbursement of out-of-pocket expenses as
set forth in the fee schedule attached hereto as Schedule A.
3. LIMITATION OF LIABILITY OF ADS.
ADS shall not be responsible for, and the Fund shall indemnify and hold
ADS harmless from and against, any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or attributable
to:
(a) All actions of ADS whether taken directly or through agents or
subcontractors required to be taken pursuant to this Agreement,
provided that such actions are taken in good faith and without
negligence or willful misconduct.
(b) The reliance on or use by ADS whether directly or through agents
or subcontractors of information, records and documents which
(i) are received by ADS or its agents or subcontractors and
furnished to it by or on behalf of the Fund, and (ii) have been
prepared and/or maintained by the Fund or any other person or
firm on behalf of the Fund provided, in each case, that ADS in
good faith believes such information to be accurate (or such
records and documents to be genuine) and provided further that
such information, records or documents are not received from or
prepared by an employee, officer or agent of ADS or of any
company affiliated with ADS.
2
<PAGE>
(c) The reliance on, or the carrying out by ADS or its agents or
subcontractors of any instructions or requests of the Fund or
its agents, other than ADS or its affiliates.
ADS shall indemnify and hold the Fund harmless from and against any and
all losses, damages, costs, charges, counsel fees, payments, expenses and
liability arising out of or attributable to any action or failure or omission to
act by ADS as a result of ADS's lack of good faith, negligence or willful
misconduct.
At any time ADS may apply to any officer of the Fund for instructions,
and may consult with legal counsel with respect to any matter arising in
connection with the services to be performed by ADS under this Agreement, and
ADS shall not be liable and shall be indemnified by the Fund for any action
taken or omitted by it in reliance upon such instructions or upon the opinion of
such counsel. ADS, its agents and subcontractors shall be protected and
indemnified in acting upon any paper or document furnished by or on behalf of
the Fund, reasonably believed to be genuine and to have been signed by the
proper person or persons, or upon any instruction, information, data, records or
documents provided ADS or its agents or subcontractors by machine readable
input, telex, CRT data entry or other similar means authorized by the Fund, and
shall not be held to have notice of any change of authority of any person, until
receipt of written notice thereof from the Fund. ADS, its agents and
subcontractors shall also be protected and indemnified in recognizing stock
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Fund, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
In the event either party is unable to perform its obligations under
the terms of this Agreement because of acts of God, strikes, equipment or
transmission failure or damage reasonably beyond its control, or other causes
reasonably beyond its control, such party shall not be liable for damages to the
other for any damages resulting from such failure to perform or otherwise from
such causes.
Neither party to this Agreement shall be liable to the other party for
consequential damages under any provision of this Agreement or for any act or
failure to act hereunder.
In order that the indemnification provisions contained in this Article
5 shall apply, upon the assertion of a claim for which either party may be
required to indemnify the other, the party of seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
4. ACTIVITIES OF ADS.
The services of ADS under this Agreement are not to be deemed
exclusive, and ADS shall be free to render similar services to others so long as
its services hereunder are not impaired thereby.
5. ACCOUNTS AND RECORDS.
The accounts and records maintained by ADS shall be the property of the
Fund, and shall be surrendered to the Fund, at the expense of the Fund, promptly
upon request by the Fund, provided that all service fees and expenses charged by
ADS in the performance of its duties hereunder have been fully paid (the final
amount to be mutually agreed upon by both parties to this agreement), in the
form in which such accounts and records have been maintained or preserved. ADS
agrees to maintain a back-up set of accounts and records of the Fund (which
back-up set shall be updated on at least a weekly basis) at a location other
than that where the original accounts and records are stored. ADS shall assist
the Fund's independent auditors, or, upon approval of the Fund, any regulatory
3
<PAGE>
body, in any requested review of the Fund's accounts and records. ADS shall
preserve the accounts and records as they are required to be maintained and
preserved by Rule 31a-1.
6. CONFIDENTIALITY.
ADS agrees that it will, on behalf of itself and its officers and
employees, treat all transactions contemplated by this Agreement, and all other
information germane thereto, as confidential and not to be disclosed to any
person except as may be authorized by the Fund.
7. DURATION AND TERMINATION OF THIS AGREEMENT.
This Agreement shall become effective on the date first above written.
This Agreement shall remain in effect for a period of three (3) years
from the date of its effectiveness (the "Initial Term") and shall continue in
effect for successive twelve-month periods; provided that such continuance is
specifically approved at least annually by the Board and by a majority of the
Trustees who are not parties to this Agreement or interested persons of any such
party.
After the Initial Term, this Agreement may be terminated at anytime (i)
by the Board on 90 days' written notice to ADS or (ii) by ADS on 90 days'
written notice to the Fund. The obligations of Sections 2 and 3 shall survive
any termination of this Agreement
Should the Fund exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Fund. Additionally, ADS reserves the right to charge for any other
reasonable costs expenses associated with such termination.
8. ASSIGNMENT.
This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided, however, that this
Agreement shall not be assignable by the Fund without the prior written consent
of ADS, or by ADS without the prior written consent of the Fund.
9. NEW YORK LAWS TO APPLY.
The provisions of this Agreement shall be construed and interpreted in
accordance with the laws of the State of New York as at the time in effect and
the applicable provisions of the 1940 Act. To the extent that the applicable law
of the State of New York, or any of the provisions herein, conflict with the
applicable provisions of the 1940 Act, the latter shall control.
10. AMENDMENTS TO THIS AGREEMENT.
This Agreement may be amended by the parties hereto only if such
amendment is in writing and signed by both parties.
11. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject matter
hereof whether oral or written.
4
<PAGE>
12. MASSACHUSETTS BUSINESS TRUST.
The parties understand and agree that the Fund is a Massachusetts
business trust and, as such, the obligations of the Fund under this agreement
shall not be binding upon any of the Trustees, or shareholders of the Fund, but
only on the assets and property of the Fund, as provided in the Declaration of
Trust.
13. NOTICES.
All notices and other communications hereunder shall be in writing,
shall be deemed to have been given when received or when sent by telex or
facsimile, and shall be given to the following addresses (or such other
addresses as to which notice is given):
To the Fund: To the Administrator:
Mr. Gary Saks Michael Miola
Chief Operating Officer President
Ironwood Capital Management LLC American Data Services, Inc.
1 International Place, Suite 2401 150 Motor Parkway, Suite 109
Boston, MA 02110 Hauppauge, NY 11788
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
ICM/ISABELLE SMALL CAP VALUE FUND AMERICAN DATA SERVICES, INC.
By: /s/ By: /s/
----------------------------- ---------------------------------
Warren J. Isabelle, President Michael Miola, President
5
<PAGE>
SCHEDULE A
(a) FUND ACCOUNTING SERVICE FEE:
For the services rendered by ADS in its capacity as fund accounting
agent, as specified in Paragraph 1. DUTIES OF ADS, the Fund shall pay ADS,
within twenty (20) days after receipt of an invoice from ADS at the beginning of
each month, a fee equal to:
Calculated Fee Will Be Based Upon Prior Month Average Net Assets:
(No prorating partial months)
MONTHLY FEE PER PORTFOLIO
Portfolio Type
Net Assets (in millions) Foreign* Domestic Money Mkt
- ------------------------ -------- -------- ---------
Under $1 ....................... $2,375 $1,200 $1,050
From $1 to $ 5 ................ 2,775 1,500 1,300
From $5 to $10 ................ 3,125 1,700 1,500
From $10 to $20................ 3,525 1,850 1,650
Over $20........................ 3,925 2,000 1,800
$25 million to $100 million:
The fee for assets over $20 million,
plus 1/12 of ............. 3.50BP** 2.00BP 2.00BP
Domestic portfolios excess assets over $100 million 1/12 of 1.00 BP. Fee capped
at $50,000 per year.
* Non US Dollar denominated securities
** Basis Points
MULTI-CLASS PROCESSING CHARGE
$300 per month will be charged for each additional class of stock per portfolio.
FEE INCREASES
On each anniversary date of this Agreement, the minimum service fees
enumerated above will be increased by the change in the Consumer Price Index for
the Northeast Region (CPI) for the twelve month period ending with the month
preceding such annual anniversary date.
(b) EXPENSES:
The Fund shall reimburse ADS for any out-of-pocket expenses , exclusive
of salaries, advanced by ADS in connection with but not limited to the printing
or filing of documents for the Fund, travel, telephone, quotation services
(currently (1) $0.12 per equity valuation, $0.60 per bond valuation, and 1.50
for each foreign quotation or manual quote insertion), facsimile transmissions,
stationery and supplies, record storage, NASDAQ insertion fee ($22 (1) per
month), prorata portion of annual SAS 70 review, postage, telex, and courier
<PAGE>
charges, incurred in connection with the performance of its duties hereunder.
ADS shall provide the Fund with a monthly invoice of such expenses and the Fund
shall reimburse ADS within fifteen (15) days after receipt thereof.
(1) Rate subject to change on 30 days notice.
(c) SPECIAL REPORTS:
All reports and /or analyses requested by the Fund, its auditors, legal
counsel, portfolio manager, or any regulatory agency having jurisdiction over
the Fund, that are not in the normal course of fund accounting activities as
specified in Section 1 of this Agreement shall be subject to an additional
charge, agreed upon in advance, based upon the following rates:
Labor:
Senior staff - $150.00/hr. Junior staff - $ 75.00/hr.
Computer time - $45.00/hr.
(d) CONVERSION CHARGE:
NOTE: FOR EXISTING FUNDS ONLY (new funds please ignore):
There will be a charge to convert the Fund's portfolio accounting
records on to the ADS fund accounting system (PAIRS). In addition, ADS will be
reimbursed for all out-of-pocket expenses, enumerated in paragraph (b) above,
incurred during the conversion process.
The conversion charge is estimated to be $1,000. However, if the
quality of the records received, and the level of cooperation from the previous
service provider requires that ADS spend additional time to complete the
conversion, the Fund will be notified and all missing information that can be
provided by the Fund will be determined. In the absence of a cost effective
solution by the Fund and ADS, any incremental charges required by ADS to
complete the conversion will be agreed upon in advance by the Fund and ADS.
<PAGE>
SCHEDULE B:
PORTFOLIOS TO BE SERVICED UNDER THIS AGREEMENT:
ICM/ISABELLE SMALL CAP VALUE FUND
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements and supporting schedules for the fiscal period commencinng Jannuary
1, 1999 and ending December 31, 1999, 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-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Dec-31-1999
<INVESTMENTS-AT-COST> 16,467,254
<INVESTMENTS-AT-VALUE> 17,155,914
<RECEIVABLES> 691,322
<ASSETS-OTHER> 11,326
<OTHER-ITEMS-ASSETS> 919
<TOTAL-ASSETS> 17,897,897
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 456,961
<TOTAL-LIABILITIES> 456,961
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,447,845
<SHARES-COMMON-STOCK> 967,017
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,414,317
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 688,660
<NET-ASSETS> 17,440,936
<DIVIDEND-INCOME> 13,093
<INTEREST-INCOME> 23,651
<OTHER-INCOME> 0
<EXPENSES-NET> 141,759
<NET-INVESTMENT-INCOME> (105,009)
<REALIZED-GAINS-CURRENT> 2,226,890
<APPREC-INCREASE-CURRENT> 1,687,837
<NET-CHANGE-FROM-OPS> 3,809,720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 789,647
<NUMBER-OF-SHARES-REDEEMED> (62,928)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,045,976
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 78,006
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 364,421
<AVERAGE-NET-ASSETS> 9,993,000
<PER-SHARE-NAV-BEGIN> 6.91
<PER-SHARE-NII> (0.12)
<PER-SHARE-GAIN-APPREC> 3.54
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.33
<EXPENSE-RATIO> 1.95
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
The schedule contains summary financial information extracted from the financial
statements and supporting schedules for the fiscal period commencing January 1,
1999 and ending December 31, 1999, 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-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Dec-31-1999
<INVESTMENTS-AT-COST> 16,467,254
<INVESTMENTS-AT-VALUE> 17,155,914
<RECEIVABLES> 691,322
<ASSETS-OTHER> 11,326
<OTHER-ITEMS-ASSETS> 919
<TOTAL-ASSETS> 17,897,897
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 456,961
<TOTAL-LIABILITIES> 456,961
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 7,447,845
<SHARES-COMMON-STOCK> 718,983
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1,414,317
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 688,660
<NET-ASSETS> 17,440,936
<DIVIDEND-INCOME> 13,093
<INTEREST-INCOME> 23,651
<OTHER-INCOME> 0
<EXPENSES-NET> 141,759
<NET-INVESTMENT-INCOME> (105,009)
<REALIZED-GAINS-CURRENT> 2,226,890
<APPREC-INCREASE-CURRENT> 1,687,837
<NET-CHANGE-FROM-OPS> 3,809,720
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 179,609
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 12,045,976
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 78,006
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 364,421
<AVERAGE-NET-ASSETS> 7,448,000
<PER-SHARE-NAV-BEGIN> 6.92
<PER-SHARE-NII> (0.10)
<PER-SHARE-GAIN-APPREC> 3.54
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.36
<EXPENSE-RATIO> 1.70
</TABLE>
ICM SERIES TRUST
ICM/Isabelle Small-Cap Value Fund
CODE OF ETHICS
Adopted February 10, 1998
I. Legal Requirement.
Rule 17j-l under the Investment Company Act of 1940, as amended, ("1940
Act") makes it unlawful for any officer or director of a Fund (as well as other
persons), in connection with the purchase or sale by such person of a security
held or to be acquired by a Fund:
(1) To employ any device, scheme, or artifice to defraud the Fund;
(2) To make to the Fund any untrue statement of a material fact or omit
to state to the Fund a material fact necessary in order to make the statements
made, in light of the circumstances under which they are made, nor misleading;
(3) To engage in any act, practice, or course of business which
operates or would operate as a fraud or deceit upon the Fund; or
(4) To engage in any manipulative practice with respect to the Fund.
A security is "held or to be acquired" if within the most recent 15
days it has (i) been held by a Fund, or (ii) is being or has been considered by
the Fund or its investment adviser for purchase by a Fund. A purchase or sale
includes the writing of an option to purchase or sell.
II. DEFINITIONS.
(a) "Trust" means ICM Series Trust.
(b) "Fund" means each of the funds, series or portfolios that comprise
ICM Series Trust, including, but not limited to, ICM/Isabelle Small-cap Value
Fund.
(c) "Access person" means any officer, trustee, or advisory person of
the Fund or the Trust.
1
<PAGE>
(d) "Advisory person" means (i) any employee or agent of the Fund or
the Trust or of any company in a control relationship thereto, who, in
connection with their regular functions or duties, makes, participates in, or
obtains information regarding the purchase or sale of a security by the Fund, or
whose functions relate to the making of any recommendations with respect to such
purchases or sales; and (ii) any natural person in a control relationship to the
Fund or the Trust who obtains information concerning recommendations made to the
Fund with regard to the purchase or sale of a security.
(e) A security is "being considered for purchase or sale" when a
recommendation to purchase or sell a security has been made and communicated,
and with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
(f) "Beneficial ownership" shall be interpreted in the same manner as
it would be in determining whether a person is subject to the provisions of
Section 16 of the Securities Exchange Act of 1934 and the rules and regulations
thereunder, except that the determination of direct or indirect beneficial
ownership shall apply to all securities which an access person has or acquires.
(g) "Control" shall have the same meaning as that set forth in Section
2(a)(9) of the 1940 Act.
(h) "Compliance Officer" shall mean any individual designated and
appointed as such by the appropriate officers of the Fund.
(i) "Disinterested trustee" means a trustee of the Trust who is not an
"interested person" of the Trust or its investment adviser or principal
underwriter within the meaning of Section 2(a)(19) of the 1940 Act.
(j) "Purchase or sale of a security" includes, inter alia, the writing
of an option to purchase and sell a security.
(k) "Security" shall have the meaning set forth in Section 2(a)(36) of
the 1940 Act, except that it shall not include securities issued by the
Government of the United States, bankers' acceptances, bank certificates of
deposit, commercial paper and shares of registered open-end investment
companies.
III. EXEMPTED TRANSACTIONS.
The prohibitions of Section IV of this Code shall not apply to:
(a) Purchases or sales effected in any account over which the access
person has no direct or indirect influence or control.
(b) Purchases or sales of securities which are not eligible for
purchase or sale by a Fund.
(c) Purchases or sales which are non-volitional on the part of either
the access person or the Fund.
(d) Purchases which are part of an automatic dividend reinvestment
plan.
(e) Purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired.
2
<PAGE>
IV. PROHIBITED PURCHASES AND SALES.
(a) No access person shall knowingly purchase or sell, directly or
indirectly, any security in which by reason of such transactions acquires, any
direct or indirect beneficial ownership, from the time the investment adviser or
investment committee, if there is one, of the applicable Fund decides to buy or
sell said security until the third business day after such Fund completes all of
its intended trades in said security.
(b) No access person shall knowingly purchase or sell any security
which said person intends to recommend for purchase or sale by the applicable
Fund, until the third business day after Fund has completed all its intended
trades in said security.
(c) No access person shall engage in any act, practice or course of
conduct that would violate the provisions of Rule 17j-l as set forth in Section
I above.
V. REPORTING.
(a) All trades of advisory persons shall be approved in advance, in
writing, by a Compliance Officer. In addition, all advisory persons must have
copies of trade confirmations and monthly statements sent directly to the
Compliance Officer.
(b) Every access person, including advisory persons, shall report to
the applicable Fund the information described in this Section V(d) with respect
to transactions in any security in which such access person has, or by reason of
such transaction acquires, any direct or indirect beneficial ownership in the
security; provided, however, that an access person shall not be required to make
a report with respect to transactions effected for any account over which such
person does not have any direct or indirect influence.
(c) A disinterested trustee of a Trust need only report a transaction
in a security if such trustee, at the time of that transaction, knew, or in the
ordinary course of fulfilling his or her official duties as a trustee of the
Trust, should have known that, during the 15 day period immediately preceding
the date of the transaction by the trustee, such security was purchased or sold
by the Fund or was being considered for purchase by its investment adviser.
(d) Every report shall be made not later than 10 days after the end of
the calendar quarter in which the transaction to which the report relates was
effected, and shall contain the following information:
(i) The date of the transaction, the title and the number of
shares, and the principal amount of each security involved;
(ii) The nature of the transaction (i.e., purchase, sale, or
any other type of acquisition or disposition);
(iii) The price at which the transaction was effected; and
(iv) The name of the broker, dealer, or bank with or through
whom the transaction was effected.
3
<PAGE>
(e) Any such report may contain a statement that the report shall not
be construed as an admission by the person making such report that he has any
direct or indirect beneficial ownership in the security to which the report
relates.
VI. Sanctions.
Upon discovering a violation of this Code, the Board of Trustees of the
Trust may impose such sanctions as it deems appropriate, including, inter alia,
a letter of censure, suspension, or termination of the employment of the
violator, and/or a disgorging of any profits made by the violator.
VII. Certification.
Each individual covered by this Code of Ethics shall: (i) receive a
copy of this Code of Ethics at the time of his/her appointment, employment or
other engagement, (ii) certify in writing that he/she has read and understood
the Code of Ethics; and (iii) retain a copy at all times. On an annual basis,
each individual covered by this Code of Ethics shall certify that he/she has
complied in all respects with the Code of Ethics during the previous year. Any
questions regarding this Code of Ethics should be referred to the Compliance
Officer.
4
CODE OF ETHICS FOR
AMERICAN DATA SERVICES, INC.
ADS DISTRIBUTORS, INC.
American Data Services, Inc. ("ADS") and ADS Distributors, Inc.
("ADSD") have determined to adopt this Code of Ethics (the "Code") as of May 1,
1998, to specify and prohibit certain types of personal securities transactions
deemed to create a conflict of interest and to establish reporting requirements
and preventive procedures pursuant to the provisions of Rule 17j-1(b)(1) under
the Investment Company Act of 1940 (the "1940 Act").
I. DEFINITIONS
A. An "Access Person" means (i) any Director, officer or employee (as
defined below) of ADS. who, in the ordinary course of his or her business,
makes, participates in or obtains information regarding the purchase or sale of
securities for a fund for which ADS provides administrative or fund accounting
services or for which ADSD provides distribution services (the "Client").
B. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-l(a) (exclusive of Section (a)(1) of such Rule) of the
Securities Exchange Act of 1934.
C. "Control" shall have the same meaning as set forth in Section 2(a)9
of the 1940 Act.
D. The "Review Officer" is the person designated by the Board of
Directors of ADS or ADSD (the "Boards") to monitor the overall compliance with
this Code. In the absence of any such designation the Review Officer shall be
the Chief Executive Officer of ADS.
E. The "Preclearance Officer" is the person designated by the Boards to
provide preclearance of any personal security transaction as required by this
Code of Ethics.
F. "Purchase or sale of a security" includes, among other things, the
writing of an option to purchase or sell a security or the purchase or sale of a
future or index on a security or option thereon.
G. "Security" shall have the meaning as set forth in Section 2(a)(36)
of the 1940 Act (in effect, all securities), except that it shall not include
securities issued by the U.S. Government (or any other "government security" as
that term is defined in the 1940 Act), bankers' acceptances, bank certificates
of deposit, commercial paper and such other money market instruments as may be
designated by the Boards and shares of registered open-end investment companies.
H. A security is "being considered for purchase or sale" when a
recommendation to purchase or sell the security has been made and communicated
and, with respect to the person making the recommendation, when such person
seriously considers making such a recommendation.
<PAGE>
II. STATEMENT OF GENERAL PRINCIPLES
The following general fiduciary principles shall govern the personal
investment activities of all Access Persons.
Each Access Person shall adhere to the highest ethical standards and
shall:
A. at all times, place the interests of the Clients of ADS and ADSD
before his personal interests;
B. conduct all personal securities transactions in a manner consistent
with this Code, so as to avoid any actual or potential conflicts of interest, or
an abuse of position of trust and responsibility; and
C. not take any inappropriate advantage of his position with or on
behalf of the Client.
III. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES.
A. BLACKOUT PERIODS
1. No Access Person shall purchase or sell, directly or
indirectly, any security in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership on a day
during which he or she knows or should have known a Client has a pending "buy"
and "sell" order in that same security until that order is executed or
withdrawn.
2. No Access shall purchase or sell, directly or indirectly,
any security in which he or she has, or by reason of such transaction acquires,
any direct or indirect beneficial ownership within at least seven calendar days
before and after the Client trades (or has traded) in that security.
C. GIFTS
No Access Person shall receive any gift or other things of
value from any person or entity that does business with or on behalf of the
Client, ADS, or ADSD that poses a potential conflict of interest.
D. SERVICE AS A DIRECTOR
1. No Access Person shall serve on a board of directors of a
publicly traded company without prior authorization from the appropriate Board
of Directors or the Client, based upon a determination that such board service
would be consistent with the interests of ADS, ADSD or the Client and its
investors.
2
<PAGE>
E. EXEMPTED TRANSACTIONS
The prohibition of Section III shall not apply to:
1. purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control;
2. purchases or sales that are non-volitional on the part of
the Access Person or the Fund, including mergers, recapitalizations or similar
transactions;
3. purchases which are part of an automatic dividend
reinvestment plan;
4. purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities, to the extent such
rights were acquired from such issuer, and sales of such rights so acquired; and
5. purchases and sales that receive prior approval in writing
by the Preclearance Officer as (a) only remotely potentially harmful to the
Client because they would be very unlikely to affect a highly institutional
market, (b) clearly not economically related to the securities to be purchased
or sold or held by the Client or (c) not representing any danger of the abuses
prescribed by Rule 17j-l, but only if in each case the prospective purchaser has
identified to the Review Officer all factors of which he or she is aware which
are potentially relevant to a conflict of interest analysis, including the
existence of any substantial economic relationship between his or her
transaction and securities held or to be held by the Client.
IV. COMPLIANCE PROCEDURES
A. PRECLEARANCE
An Access Person may not, directly or indirectly, acquire or
dispose of beneficial ownership of a security except as provided below unless:
1. such purchase or sale has been approved by the Preclearance
Officer;
2. the approved transaction is completed on the same day
approval is received; and
3. the Preclearance Officer has not rescinded such approval
prior to execution of the transaction.
Each Access Person may effect total purchases and sales of up
to $25,000 of securities listed on a national securities exchange within any six
month period without preclearance from the Board of Directors or the
Preclearance Officer.
1) The six month period is a "rolling" period, i.e.,
the limit is applicable between any two dates which are six months apart.
3
<PAGE>
2) Transactions in options and futures, other than
options or futures on commodities, will be included for purposes of calculating
whether the $25,000 limit has been exceeded. Such transactions will be measured
by the value of the securities underlying the options and futures.
3) Although preclearance is not required for personal
transactions in securities which fall into this "de minimis" exception, these
trades must still be reported on a quarterly basis pursuant to Section IV.B, if
such transactions are reportable.
B. REPORTING
1. Coverage: Each Access Person shall file with the Review
Officer confidential quarterly reports containing the information required in
this Code with respect to all transactions during the preceding quarter in any
securities in which such person has, or by reason of such transaction acquires,
any direct or indirect beneficial ownership, provided that no Access Person
shall be required to report transactions effected for any account over which
such Access Person has no direct or indirect influence or control (except that
such an Access Person must file a written certification stating that he or she
has no direct or indirect influence or control over the account in question).
All such Access Persons shall file reports, only when transactions are
determined by the Access Person to be reportable.
2. Filings: Every report required to be filed shall be made no
later than 10 days after the end of the calendar quarter in which the
transaction to which the report relates was effected, and shall contain the
following information:
a. the date of the transaction, the title and the
number of shares and the principal amount of each security involved;
b. the nature of the transaction (i.e., purchase,
sale or any other type of acquisition or disposition);
c. the price at which the transaction was effected;
and
d. the name of the broker, dealer or bank with or
through whom the transaction was effected.
3. Any report may contain a statement that it shall not be
construed as an admission by the person making the report that he or she has any
direct or indirect beneficial ownership in the security to which the report
relates.
C. REVIEW
In reviewing reportable transactions, the Review Officer shall
take into account the exemptions allowed under Section II.G. Before making a
determination that a violation has been committed by an Access Person, the
Review Officer shall give such person an opportunity to supply additional
information regarding the transaction in question.
4
<PAGE>
D. CERTIFICATION OF COMPLIANCE
Each Access Person is required to certify annually that he or
she has read and understood this Code and recognizes that he or she is subject
to such Code. Further, each Access Person is required to certify annually that
he or she has complied with all the requirements of this Code and that he or she
has disclosed or reported all personal securities transactions pursuant to the
requirements of this Code.
V. REVIEW BY THE BOARD OF DIRECTORS
At least annually, the Review Officer shall report to the Board of
Directors regarding:
A. All existing procedures concerning Access Persons' personal
trading activities and any procedural changes made during the past year;
B. Any recommended changes to this Code or procedures; and
C. A summary of any violations which occurred during the past
year with respect to which significant remedial action was taken.
VI. SANCTIONS
A. SANCTIONS FOR VIOLATIONS BY ACCESS PERSONS
If the Review Officer determines that a violation of this Code
has occurred, he or she shall so advise the Board of Directors and the Board may
impose such sanctions as it deems appropriate, including, inter alia,
disgorgement of profits, censure, suspension or termination of the employment of
the violator. All material violations of this Code and any sanctions imposed as
a result thereto shall be reported periodically to the Board of Directors.
VII. MISCELLANEOUS
A. ACCESS PERSONS
The Review Officer will identify all Access Persons who are
under a duty to make reports and will inform such persons of such duty. Any
failure by the Review Officer to notify any person of his or her duties under
this Code shall not relieve such person of his or her obligations hereunder.
B. RECORDS
The Review Officer shall maintain records in the manner and to
the extent set forth below, which records may be maintained on microfilm under
the conditions described in Rule 31a-2(f) under the 1940 Act, and shall be
available for examination by representatives of the Securities and Exchange
Commission ("SEC"):
1. copy of this Code and any other code which is, or at any
time within the past five years has been, in effect shall be preserved in an
easily accessible place;
5
<PAGE>
2. a record of any violation of this Code and of any action
taken as a result of such violation shall be preserved in an easily accessible
place for a period of not less than five years following the end of the fiscal
year in which the violation occurs;
3. a copy of each report made pursuant to this Code shall be
preserved for a period of not less than five years from the end of the fiscal
year in which it is made, the first two years in an easily accessible place; and
C. CONFIDENTIALITY
All reports of securities transactions and any other
information filed pursuant to this Code shall be treated as confidential, except
to the extent required by law.
D. INTERPRETATION OF PROVISIONS
The Board of Directors may from time to time adopt such
interpretations of this Code as it deems appropriate.
6
<PAGE>
AMERICAN DATA SERVICES, INC.
TRANSACTIONS REPORT
To: _________________________, Review Officer
From: ________________________________________
(Your Name)
This Transaction Report (the "Report") is submitted pursuant to Section
IV of the Code of Ethics of ADS, and supplies (below) information with respect
to transactions in any security in which I may be deemed to have, or by reason
of such transaction acquire, any direct or indirect beneficial ownership
interest (whether or not such security is a security held or to be acquired by
the Fund) for the calendar quarter ended ____________________________.
Unless the context otherwise requires, all terms used in the Report
shall have the same meaning as set forth in the Code of Ethics.
For purposes of the Report beneficial ownership shall be interpreted
subject to the provisions of the Code of Ethics and Rule 16a-l(a) (exclusive of
Section (a)(1) of such Rule) of the Securities Exchange Act of 1934.
Client affected: ________________________________
<TABLE>
<CAPTION>
Nature of Name of the
Transaction Principal Broker,
(whether Amount of Price At Which Dealer Or Nature Of
Title of Date of Purchase, Sale Securities the Bank With Ownership of
Securities Transaction or Other Type Acquired or Transaction Whom The Securities*
of Disposition Disposed Of Was Effected Transaction
Or Acquisition Was Effected
<S> <C> <C> <C> <C> <C> <C>
</TABLE>
- ---------------
* If appropriate, you may disclaim beneficial ownership of any security listed
in this report.
<PAGE>
I HEREBY CERTIFY THAT I (1) HAVE READ AND UNDERSTAND THE CODE OF ETHICS
OF ADS, DATED ____________, 1998, (2) RECOGNIZE THAT I AM SUBJECT TO THE CODE OF
ETHICS, (3) HAVE COMPLIED WITH THE REQUIREMENTS OF THE CODE OF ETHICS OVER THE
PAST YEAR, TO THE EXTENT APPLICABLE, (4) HAVE DISCLOSED ALL PERSONAL SECURITIES
TRANSACTIONS, OVER THE PAST YEAR, TO THE EXTENT APPLICABLE, REQUIRED TO BE
DISCLOSED BY THE CODE OF ETHICS, (5) HAVE SOUGHT AND OBTAINED PRECLEARANCE
WHENEVER REQUIRED BY THE CODE OF ETHICS AND (6) CERTIFY THAT TO THE BEST OF MY
KNOWLEDGE THE INFORMATION FURNISHED IN THIS REPORT IS TRUE AND CORRECT.
Name (Print) _____________________________________________
Signature _____________________________________________
Date _____________________________________________
<PAGE>
AMERICAN DATA SERVICES, INC.
PERSONAL TRADING REQUEST AND AUTHORIZATION
Personal Trading Request (to be completed by access person prior to any personal
trade):
Name:___________________________________________________________________________
Date For Which You Seek Approval:_______________________________________________
Name of the issuer and dollar amount or number of securities of the issuer to be
purchased or sold:
________________________________________________________________________________
________________________________________________________________________________
Nature of the transaction (i.e., purchase, sale):(1)____________________________
________________________________________________________________________________
________________________________________________________________________________
Are you or is a member of your immediate family an officer or director of the
issuer of the securities or any affiliate 2 of the issuer? Yes __ No __
If yes, please describe:________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
___________________________
(1) If other than market order, please describe any proposed limits.
(2) For purposes of this question, "affiliate" includes (i) any entity
that directly or indirectly owns, controls or holds with power to vote 5% or
more of the outstanding voting securities of the issuer and (ii) any entity
under common control with the issuer.
<PAGE>
Describe the nature of any direct or indirect professional or business
relationship that you may have with the issuer of the securities.(3)
________________________________________________________________________________
________________________________________________________________________________
______________________________
(1) A "professional relationship" includes, for example, the provision
of legal counsel or accounting services. A "business relationship" includes, for
example, the provision of consulting services or insurance coverage.
<PAGE>
Do you have any material nonpublic information concerning the issuer?
Yes___ No___
Do you beneficially own more than1/2of 1% of the outstanding equity securities
of the issuer? Yes___ No___
If yes, please report the name of the issuer and the total number of shares
"beneficially owned":___________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Are you aware of any facts regarding the proposed transaction, including the
existence of any substantial economic relationship, between the proposed
transaction and any securities held or to be acquired by the Fund that may be
relevant to a determination as to the existence of a potential conflict of
interest? (4)
Yes___ No___
If yes, please describe:______________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(4) Facts that would be responsive to this question include, for
example, the receipt of "special favors" from a stock promoter, such as
participation in a private placement or initial public offering, as an
inducement to purchase other securities of the Fund. Another example would be
investment in securities of a limited partnership that in turn owned warrants of
a company formed for the purpose of effecting a leveraged buy-out in
circumstances where the Fund might invest in securities related to the leveraged
buy-out. The foregoing are only examples of pertinent facts and in no way limit
the types of facts that may be responsive to this question.
<PAGE>
To the best of your knowledge and belief, the answers that you have
provided above are true and correct.
-----------------------------
Signature
<PAGE>
Approval or Disapproval of Personal Trading Request (to be completed by
Preclearance Officer):
I confirm that the above-described proposed transaction
appears to be consistent with the policies described in the
Code and that the conditions necessary 5 for approval of the
proposed transaction have been satisfied.
I do not believe the above-described proposed transaction is
consistent with the policies described in the Code or that the
conditions necessary for approval of the proposed transaction
have been satisfied.
Dated:____________________ Signed:______________________
Title:___________________
_____________________
(5) In the case of a personal securities transaction by an Access
Person of a Portfolio (other than Disinterested Directors of the Company), the
Code of Ethics requires that the Preclearance Officer determine that the
proposed personal securities transaction (i) is not potentially harmful to the
Fund, (ii) would be unlikely to affect the market in which the Fund's portfolio
securities are traded, or (iii) is not related economically to securities to be
purchased, sold, or held by the Fund. In addition, the Code requires that the
Preclearance Officer determine that the decision to purchase or sell the
security at issue is not the result of information obtained in the course of the
access person's relationship with the Fund.
