Despite a tight budget Steve Paterson steered the team to an excellent 4th place in Division One.
Mark McCulloch and Barry Wilson left for Livingston in the close season but David Bagan arrived from Kilmarnock and Roy McBain from Ross County. Davide Xausa also left for Livingston in March.

Off the field Catriona Bisset was appointed in June to the newly created post of Chief Executive – the first female Chief Executive in Scottish football. The AGM of the PLC on Friday 25 August saw the unveiling of the Board’s revival plan “The Road To Premier League Football”. This envisaged the setting up of a Charitable Trust to take ownership of the Stadium and shoulder the debt of £1.9m. The Football Club would lease the Stadium back, raise cash for football purposes and move on free of debt. Arrangements were put in place and the plan eventually voted through by shareholders on 1 March. December saw an internal re-organisation of the administration staff. It was announced that Catriona Bisset would revert to a part-time consultancy role from 1 April and General Manager John Sutherland left to be replaced by Gary Thompson.

The opening competitive fixture was a home league match against a Spanish-dominated Airdrie team battling extinction. Caley Thistle won 2-0 but Airdrie gained revenge a few weeks later when they reversed the score in the second round of the CIS Cup. The second round was reached with a 3-2 away win against Scottish League newcomers Peterhead. Form slumped in the League and reached four defeats until Alloa were thumped 4-1 on 23rd September. A last minute draw at Ayr, a convincing 4-0 win over Morton and a win at Airdrie improved things greatly and by 14 October the team stood a respectable sixth. Injuries caused problems in late October/early November and Steve Paterson was struggling to put out 16 fit players. Despite this they climbed to 5th place by mid November and won a classic derby match at Dingwall 3-0. October saw the departure of Iain Stewart to Peterhead – leaving behind a goal record which will be hard to beat. On 2 December an astounding game at Caledonian Stadium saw promotion-chasing Ayr defeated 7-3.

The 18th December saw the granting of “Millennium City” status to Inverness and the immediate re-opening of the debate regarding the Club’s name with “Inverness City” mooted – a poll among supporters ended with 72% voting for the status quo. A unbeaten December run earned Steve Paterson the Bell’s First Division Manager of the Month award with Dennis Wyness taking the Player of the Month award. They turned the year in 4th place. Snow and ice threatened the New Year derby match with Ross County but an army of volunteers worked over three days (including New Year’s Day) to ensure the match went ahead. It ended 3-3 with Dennis Wyness rescuing a point by scoring twice in the last two minutes. The big January freeze throughout Scotland caused the first postponement of a senior match at Caledonian Stadium – 20 January against Morton. January also saw SPL2 discussions involving a number of Clubs including ICT and Ross County. Scottish Football was rocked when Airdrie’s financial problems came to a head in February – they were thrown out of the Scottish Cup and their fourth round tie awarded to Peterhead. Caley Thistle stood to lose 9 points if a new consortium had not stepped in and ensured survival at least to the end of the season.

On 17 February, in a thrilling home tie, Kilmarnock were held to a 1-1 draw in the 4th round of the Tennents Scottish Cup. Both goals came in injury time with ICT scoring first and thinking this was enough. An immediate equaliser took the tie to a replay on 28 February. This match was amazingly abandoned after 27 minutes due to a frozen pitch despite undersoil heating. This caused a tremendous row in view of the travel implications for the fans. Tennents paid for all supporters’ buses for the revised match on Tuesday 6 March – Kilmarnock narrowly won 2-1 despite ICT taking the lead through David Xausa.

A 14 league game undefeated run ended at Livingston on 3 April but it left ICT a firm 4th. The last home game of the season on 28 April saw Livingston – with three ex-Caley Thistle players – needing a point to secure promotion to the Premier League. In the event they won 3-2 in a hard fought match then celebrated in style – including a pitch invasion. With Ayr definitely second it left a straight fight with Falkirk for 3rd place in the last match of the season at Brockville. A jaded performance led to a 2-1 defeat but a very respectable 4th place. Dennis Wyness ended the season as the First Division’s top goalscorer with 26 goals.