------------------------
OMB APPROVAL
------------------------
OMB Number: 3235-0570
Expires: April 30, 2008
Estimated average burden
hours per response: 19.4
------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-07292
---------
North American Government Bond Fund, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
40 West 57th Street, 18th Floor New York, New York 10019
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
R. Alan Medaugh, President
ISI, Inc. 40 West 57th Street, 18th Floor New York, New York 10019
- --------------------------------------------------------------------------------
(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 446-5600
---------------------------
Date of fiscal year end: October 31, 2007
---------------------------------------------
Date of reporting period: October 31, 2007
---------------------------------------------
Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW,
Washington, DC 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. ss. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
- --------------------------------------------------------------------------------
ISI INTERNATIONAL
STRATEGY &
INVESTMENT
- --------------------------------------------------------------------------------
ANNUAL REPORT
OCTOBER 31, 2007
-------------------------------------------------------------
TOTAL RETURN
US TREASURY
FUND, INC.
MANAGED MUNICIPAL
FUND, INC.
NORTH AMERICAN
GOVERNMENT BOND
FUND, INC.
ISI STRATEGY
FUND, INC.
-------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ISI FUNDS ANNUAL REPORT -- TABLE OF CONTENTS
- --------------------------------------------------------------------------------
Investment Advisor's Message .............................................. 1
Managment Discussion of Fund Performance .................................. 3
Performance Comparisons ................................................... 7
Shareholder Expense Example ............................................... 15
Portfolio Profiles ........................................................ 17
Schedules of Investments .................................................. 18
Statements of Assets and Liabilities ...................................... 28
Statments of Operations ................................................... 31
Statements of Changes in Net Assets ....................................... 33
Financial Highlights ...................................................... 38
Notes to Financial Statements ............................................. 43
Report of Independent Registered Public Accounting Firm ................... 51
Fund Directors and Officers ............................................... 52
Notice to Shareholders .................................................... 54
Investment Advisory Agreement Approval (Unaudited) ........................ 55
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR'S MESSAGE
- --------------------------------------------------------------------------------
OCTOBER 31, 2007
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders for the ISI Funds.
This report covers the 12-month reporting period through October 31, 2007 and
includes commentary from the Funds' portfolio managers at International Strategy
& Investment, Inc. ("ISI") (see Management Discussion and Analysis that follows
this letter for more details), a complete list of holdings and the financial
statements.
Stocks recorded positive returns for the last year and the last five years. For
example, the Dow Jones Wilshire 5000 Index was +15.28% for the last year and
averaged 15.31% for the past five years. U.S. Treasuries and top quality
municipal indices increased over the last year and were up over the last 5
years. For example, the Lehman Treasury Index was +5.91% for the past year and
averaged +3.79% for the past five years. The Lehman Municipal State GO Index was
+3.09% for the past year and averaged +4.16% for the past five years. The
following is a summary of fund performance during the reporting period. These
performance figures assume the reinvestment of dividend and capital gain
distributions, and exclude the impact of any sales charges.
During the year ended October 31, 2007, Total Return US Treasury Fund, Managed
Municipal Fund, and North American Government Bond Fund continued their policy
of paying dividends at a fixed rate, which resulted in dividends consisting of a
combination of net investment income, short-term capital gains, long-term
capital gains and return of capital.
Total Return US Treasury Fund's investment objective is to achieve a high level
of total return with relative stability of principal, and secondarily, high
current income consistent with an investment in securities issued by the United
States Treasury. For the reporting period, the Fund produced a one-year total
return of +4.66% and a five-year average annual rate of return of +3.55%. From
its inception on August 10, 1988 through October 31, 2007, the Fund has posted a
cumulative total return of +267.31%, which translates into an average annual
rate of return of +7.00%. The Fund's net assets totaled $124.8 million at the
end of the reporting period.
Managed Municipal Fund's investment objective is to provide a high level of
total return with relative stability of principal and, secondarily, high current
income exempt from federal income tax through investment in a portfolio
consisting primarily of tax-free municipal obligations. For the reporting
period, the Fund produced a one-year total return of +2.29% and a five-year
average annual rate of return of +3.25%. From its inception on February 26, 1990
through October 31, 2007, the Fund has posted a cumulative total return of
+157.72%, which translates into an average annual rate of return of +5.50%. The
Fund's net assets totaled $73.0 million at the end of the reporting period.
North American Government Bond Fund's investment objective is to provide a high
level of current income, consistent with prudent investment risk, by investing
primarily in a portfolio consisting of fixed income securities issued or
guaranteed by the governments of the United States, Canada and Mexico. For the
reporting period, the ISI Class A Shares produced a one-
1
year total return of +6.71% and a five-year average annual rate of return of
+4.97%. From its inception on January 15, 1993, through October 31, 2007, the
ISI Class A Shares have posted a cumulative total return of +137.25%, which
translates into an average annual rate of return of +6.01%. For the reporting
period, the ISI Class C Shares produced a one-year total return of +6.03% and
from its inception on May 16, 2003, through October 31, 2007, have posted a
cumulative total return of +16.11%, which translates into an average annual rate
of return of +3.41%. The Fund's net assets totaled $148.6 million at the end of
the reporting period.
ISI Strategy Fund has an investment objective of maximizing total return through
a combination of long-term growth of capital and current income by actively
allocating the Fund's assets between common stocks of US issuers and US Treasury
securities. For the reporting period, the Fund produced a one-year total return
of +13.79% and a five-year average annual rate of return of +12.07%. From its
inception on September 16, 1997, through October 31, 2007, the Fund has posted a
cumulative total return of +91.65%, which translates into an average annual rate
of return of +6.64%. The Fund's net assets totaled $80.5 million at the end of
the reporting period.
We would like to welcome new investors to the ISI Funds and thank those who have
been with us for some time. We appreciate your confidence.
Sincerely,
R. Alan Medaugh
President
November 27, 2007
2
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
Again this fiscal year, the Treasury market based much of its movement on
anticipating Federal Reserve policy actions. The Treasury Market moved 10-year
rates up from roughly 4.60% at the beginning of the year to almost 5.30% by
mid-June 2007, expecting only modest actions by the Federal Reserve. That
changed after June when a more aggressive rate cut regime was expected. As a
result, 10-year rates then moved down to roughly 4.50% which is below the
beginning of the fiscal year level. During the fiscal year, the Federal Reserve
cut its benchmark Federal Funds rate from 5.25% to 4.50%. ISI expected the
economy would slow and rates fall because of high short rates here and around
the world, plus high energy prices. The Fund moved its duration longer as rates
rose with the result that its average duration from April 30, 2007 to the end of
the fiscal year was approximately 6.8 years which was longer than the Treasury
market as a whole, which was approximately 5.3 years. The Fund's duration at the
end of January, 2007, had been a relatively short 4.9 years. The Fund's total
return for the fiscal year is +4.66%.
- --------------------------------------------------------------------------------
10-YEAR US TREASURY YIELD*
- --------------------------------------------------------------------------------
[LINE CHART OMITTED]
10/31/2006 4.602
11/01/2006 4.568
11/02/2006 4.598
11/03/2006 4.719
11/06/2006 4.697
11/07/2006 4.661
11/08/2006 4.639
11/09/2006 4.629
11/10/2006 4.592
11/13/2006 4.613
11/14/2006 4.566
11/15/2006 4.621
11/16/2006 4.668
11/17/2006 4.603
11/20/2006 4.601
11/21/2006 4.574
11/22/2006 4.562
11/23/2006 4.562
11/24/2006 4.552
11/27/2006 4.532
11/28/2006 4.505
11/29/2006 4.524
11/30/2006 4.462
12/01/2006 4.437
12/04/2006 4.427
12/05/2006 4.444
12/06/2006 4.489
12/07/2006 4.485
12/08/2006 4.548
12/11/2006 4.522
12/12/2006 4.489
12/13/2006 4.583
12/14/2006 4.601
12/15/2006 4.597
12/18/2006 4.585
12/19/2006 4.593
12/20/2006 4.599
12/21/2006 4.549
12/22/2006 4.622
12/25/2006 4.622
12/26/2006 4.603
12/27/2006 4.654
12/28/2006 4.684
12/29/2006 4.706
01/01/2007 4.706
01/02/2007 4.684
01/03/2007 4.662
01/04/2007 4.606
01/05/2007 4.648
01/08/2007 4.656
01/09/2007 4.658
01/10/2007 4.688
01/11/2007 4.735
01/12/2007 4.779
01/15/2007 4.779
01/16/2007 4.751
01/17/2007 4.783
01/18/2007 4.747
01/19/2007 4.779
01/22/2007 4.763
01/23/2007 4.812
01/24/2007 4.812
01/25/2007 4.877
01/26/2007 4.877
01/29/2007 4.894
01/30/2007 4.873
01/31/2007 4.812
02/01/2007 4.839
02/02/2007 4.824
02/05/2007 4.806
02/06/2007 4.770
02/07/2007 4.747
02/08/2007 4.734
02/09/2007 4.784
02/12/2007 4.808
02/13/2007 4.812
02/14/2007 4.740
02/15/2007 4.710
02/16/2007 4.692
02/19/2007 4.692
02/20/2007 4.678
02/21/2007 4.694
02/22/2007 4.732
02/23/2007 4.674
02/26/2007 4.629
02/27/2007 4.515
02/28/2007 4.570
03/01/2007 4.554
03/02/2007 4.501
03/05/2007 4.499
03/06/2007 4.532
03/07/2007 4.491
03/08/2007 4.516
03/09/2007 4.591
03/12/2007 4.556
03/13/2007 4.495
03/14/2007 4.538
03/15/2007 4.540
03/16/2007 4.547
03/19/2007 4.567
03/20/2007 4.553
03/21/2007 4.540
03/22/2007 4.587
03/23/2007 4.615
03/26/2007 4.605
03/27/2007 4.601
03/28/2007 4.624
03/29/2007 4.646
03/30/2007 4.648
04/02/2007 4.644
04/03/2007 4.668
04/04/2007 4.652
04/05/2007 4.682
04/06/2007 4.753
04/09/2007 4.747
04/10/2007 4.722
04/11/2007 4.734
04/12/2007 4.739
04/13/2007 4.765
04/16/2007 4.739
04/17/2007 4.684
04/18/2007 4.654
04/19/2007 4.668
04/20/2007 4.674
04/23/2007 4.644
04/24/2007 4.624
04/25/2007 4.654
04/26/2007 4.700
04/27/2007 4.696
04/30/2007 4.626
05/01/2007 4.640
05/02/2007 4.646
05/03/2007 4.676
05/04/2007 4.642
05/07/2007 4.630
05/08/2007 4.638
05/09/2007 4.672
05/10/2007 4.642
05/11/2007 4.676
05/14/2007 4.698
05/15/2007 4.706
05/16/2007 4.714
05/17/2007 4.756
05/18/2007 4.804
05/21/2007 4.786
05/22/2007 4.829
05/23/2007 4.851
05/24/2007 4.843
05/25/2007 4.861
05/28/2007 4.861
05/29/2007 4.886
05/30/2007 4.872
05/31/2007 4.892
06/01/2007 4.956
06/04/2007 4.931
06/05/2007 4.995
06/06/2007 4.968
06/07/2007 5.134
06/08/2007 5.103
06/11/2007 5.156
06/12/2007 5.297
06/13/2007 5.202
06/14/2007 5.225
06/15/2007 5.167
06/18/2007 5.138
06/19/2007 5.086
06/20/2007 5.136
06/21/2007 5.191
06/22/2007 5.134
06/25/2007 5.084
06/26/2007 5.082
06/27/2007 5.084
06/28/2007 5.107
06/29/2007 5.029
07/02/2007 4.993
07/03/2007 5.041
07/04/2007 5.041
07/05/2007 5.144
07/06/2007 5.187
07/09/2007 5.142
07/10/2007 5.025
07/11/2007 5.090
07/12/2007 5.128
07/13/2007 5.097
07/16/2007 5.043
07/17/2007 5.053
07/18/2007 5.032
07/19/2007 5.020
07/20/2007 4.954
07/23/2007 4.952
07/24/2007 4.913
07/25/2007 4.902
07/26/2007 4.790
07/27/2007 4.761
07/30/2007 4.806
07/31/2007 4.743
08/01/2007 4.796
08/02/2007 4.769
08/03/2007 4.688
08/06/2007 4.741
08/07/2007 4.772
08/08/2007 4.881
08/09/2007 4.772
08/10/2007 4.812
08/13/2007 4.764
08/14/2007 4.728
08/15/2007 4.728
08/16/2007 4.661
08/17/2007 4.689
08/20/2007 4.630
08/21/2007 4.594
08/22/2007 4.649
08/23/2007 4.649
08/24/2007 4.620
08/27/2007 4.567
08/28/2007 4.510
08/29/2007 4.563
08/30/2007 4.510
08/31/2007 4.533
09/03/2007 4.533
09/04/2007 4.551
09/05/2007 4.471
09/06/2007 4.511
09/07/2007 4.385
09/10/2007 4.326
09/11/2007 4.372
09/12/2007 4.414
09/13/2007 4.468
09/14/2007 4.458
09/17/2007 4.470
09/18/2007 4.476
09/19/2007 4.550
09/20/2007 4.700
09/21/2007 4.624
09/24/2007 4.632
09/25/2007 4.628
09/26/2007 4.624
09/27/2007 4.567
09/28/2007 4.590
10/01/2007 4.549
10/02/2007 4.526
10/03/2007 4.563
10/04/2007 4.514
10/05/2007 4.640
10/08/2007 4.640
10/09/2007 4.651
10/10/2007 4.653
10/11/2007 4.640
10/12/2007 4.685
10/15/2007 4.681
10/16/2007 4.651
10/17/2007 4.556
10/18/2007 4.493
10/19/2007 4.395
10/22/2007 4.415
10/23/2007 4.407
10/24/2007 4.343
10/25/2007 4.381
10/26/2007 4.405
10/29/2007 4.385
10/30/2007 4.383
10/31/2007 4.475
*Source: Bloomberg
3
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
This fiscal year, the long maturity portion of the municipal market saw yields
rise until late August. Twenty year bond yields rose from roughly 4.15% at the
start of the fiscal year to 4.70% by late August. Rates moved lower in reaction
to rate cuts initiated by the Federal Reserve. At the end of the fiscal year,
rates were 4.30% for long AAA Municipals, which was above the beginning of the
year's level. Of major concern this fiscal year was the worry that insured bonds
would suffer downgrades as bond insurers suffered losses tied to the Sub-Prime
Mortgage crisis. Your Fund was not affected by these concerns because it holds
no insured issues as a matter of investment policy. The Fund's total return this
fiscal year is +2.29%.
- --------------------------------------------------------------------------------
20-YEAR AAA GENERAL OBLIGATION YIELDS*
- --------------------------------------------------------------------------------
[LINE CHART OMITTED]
10/31/2006 4.16
11/01/2006 4.12
11/02/2006 4.09
11/03/2006 4.09
11/06/2006 4.17
11/07/2006 4.17
11/08/2006 4.13
11/09/2006 4.13
11/10/2006 4.13
11/13/2006 4.11
11/14/2006 4.12
11/15/2006 4.12
11/16/2006 4.11
11/17/2006 4.12
11/20/2006 4.10
11/21/2006 4.10
11/22/2006 4.10
11/23/2006 4.10
11/24/2006 4.10
11/27/2006 4.10
11/28/2006 4.10
11/29/2006 4.06
11/30/2006 4.05
12/01/2006 4.02
12/04/2006 3.99
12/05/2006 3.99
12/06/2006 3.99
12/07/2006 3.99
12/08/2006 4.00
12/11/2006 4.03
12/12/2006 4.03
12/13/2006 4.03
12/14/2006 4.07
12/15/2006 4.09
12/18/2006 4.08
12/19/2006 4.09
12/20/2006 4.10
12/21/2006 4.10
12/22/2006 4.09
12/25/2006 4.09
12/26/2006 4.10
12/27/2006 4.10
12/28/2006 4.12
12/29/2006 4.14
01/01/2007 4.14
01/02/2007 4.14
01/03/2007 4.14
01/04/2007 4.13
01/05/2007 4.10
01/08/2007 4.11
01/09/2007 4.11
01/10/2007 4.10
01/11/2007 4.12
01/12/2007 4.14
01/15/2007 4.14
01/16/2007 4.17
01/17/2007 4.19
01/18/2007 4.19
01/19/2007 4.19
01/22/2007 4.20
01/23/2007 4.20
01/24/2007 4.20
01/25/2007 4.20
01/26/2007 4.22
01/29/2007 4.23
01/30/2007 4.24
01/31/2007 4.24
02/01/2007 4.23
02/02/2007 4.23
02/05/2007 4.23
02/06/2007 4.23
02/07/2007 4.21
02/08/2007 4.20
02/09/2007 4.19
02/12/2007 4.19
02/13/2007 4.19
02/14/2007 4.19
02/15/2007 4.15
02/16/2007 4.11
02/19/2007 4.11
02/20/2007 4.10
02/21/2007 4.10
02/22/2007 4.11
02/23/2007 4.11
02/26/2007 4.08
02/27/2007 4.06
02/28/2007 4.02
03/01/2007 4.04
03/02/2007 4.04
03/05/2007 4.03
03/06/2007 4.03
03/07/2007 4.03
03/08/2007 4.03
03/09/2007 4.04
03/12/2007 4.08
03/13/2007 4.07
03/14/2007 4.05
03/15/2007 4.05
03/16/2007 4.05
03/19/2007 4.05
03/20/2007 4.06
03/21/2007 4.05
03/22/2007 4.06
03/23/2007 4.10
03/26/2007 4.11
03/27/2007 4.11
03/28/2007 4.13
03/29/2007 4.14
03/30/2007 4.16
04/02/2007 4.18
04/03/2007 4.18
04/04/2007 4.19
04/05/2007 4.20
04/06/2007 4.20
04/09/2007 4.23
04/10/2007 4.26
04/11/2007 4.25
04/12/2007 4.25
04/13/2007 4.25
04/16/2007 4.27
04/17/2007 4.27
04/18/2007 4.27
04/19/2007 4.23
04/20/2007 4.21
04/23/2007 4.21
04/24/2007 4.21
04/25/2007 4.20
04/26/2007 4.20
04/27/2007 4.21
04/30/2007 4.20
05/01/2007 4.18
05/02/2007 4.18
05/03/2007 4.18
05/04/2007 4.20
05/07/2007 4.18
05/08/2007 4.18
05/09/2007 4.17
05/10/2007 4.17
05/11/2007 4.18
05/14/2007 4.18
05/15/2007 4.20
05/16/2007 4.22
05/17/2007 4.23
05/18/2007 4.26
05/21/2007 4.28
05/22/2007 4.30
05/23/2007 4.32
05/24/2007 4.34
05/25/2007 4.34
05/28/2007 4.34
05/29/2007 4.34
05/30/2007 4.35
05/31/2007 4.35
06/01/2007 4.37
06/04/2007 4.41
06/05/2007 4.41
06/06/2007 4.43
06/07/2007 4.43
06/08/2007 4.50
06/11/2007 4.52
06/12/2007 4.53
06/13/2007 4.59
06/14/2007 4.60
06/15/2007 4.61
06/18/2007 4.58
06/19/2007 4.58
06/20/2007 4.58
06/21/2007 4.59
06/22/2007 4.59
06/25/2007 4.58
06/26/2007 4.56
06/27/2007 4.56
06/28/2007 4.56
06/29/2007 4.56
07/02/2007 4.54
07/03/2007 4.54
07/04/2007 4.54
07/05/2007 4.54
07/06/2007 4.54
07/09/2007 4.59
07/10/2007 4.58
07/11/2007 4.51
07/12/2007 4.50
07/13/2007 4.51
07/16/2007 4.50
07/17/2007 4.49
07/18/2007 4.50
07/19/2007 4.47
07/20/2007 4.46
07/23/2007 4.44
07/24/2007 4.44
07/25/2007 4.44
07/26/2007 4.43
07/27/2007 4.40
07/30/2007 4.39
07/31/2007 4.39
08/01/2007 4.38
08/02/2007 4.38
08/03/2007 4.38
08/06/2007 4.38
08/07/2007 4.41
08/08/2007 4.43
08/09/2007 4.49
08/10/2007 4.49
08/13/2007 4.49
08/14/2007 4.49
08/15/2007 4.51
08/16/2007 4.52
08/17/2007 4.60
08/20/2007 4.65
08/21/2007 4.65
08/22/2007 4.65
08/23/2007 4.67
08/24/2007 4.67
08/27/2007 4.70
08/28/2007 4.70
08/29/2007 4.66
08/30/2007 4.59
08/31/2007 4.59
09/03/2007 4.59
09/04/2007 4.59
09/05/2007 4.59
09/06/2007 4.53
09/07/2007 4.47
09/10/2007 4.35
09/11/2007 4.29
09/12/2007 4.29
09/13/2007 4.29
09/14/2007 4.32
09/17/2007 4.33
09/18/2007 4.34
09/19/2007 4.36
09/20/2007 4.38
09/21/2007 4.45
09/24/2007 4.46
09/25/2007 4.47
09/26/2007 4.46
09/27/2007 4.46
09/28/2007 4.44
10/01/2007 4.42
10/02/2007 4.41
10/03/2007 4.38
10/04/2007 4.38
10/05/2007 4.36
10/08/2007 4.36
10/09/2007 4.40
10/10/2007 4.41
10/11/2007 4.42
10/12/2007 4.43
10/15/2007 4.43
10/16/2007 4.43
10/17/2007 4.42
10/18/2007 4.37
10/19/2007 4.33
10/22/2007 4.29
10/23/2007 4.28
10/24/2007 4.28
10/25/2007 4.26
10/26/2007 4.27
10/29/2007 4.29
10/30/2007 4.30
10/31/2007 4.32
*Source: Bloomberg
4
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND
The Fund's U.S. Treasury section followed the duration management similar to the
Total Return U.S. Treasury Fund where the Fund's duration was longer as rates
rose than it was in January, 2007. The Canadian dollar rose significantly in
value versus the U.S. dollar this fiscal year. The Fund's total return was
helped by this substantial change in relative value. Please see chart below. The
Mexican peso gained modestly versus the U.S. dollar this fiscal year meaning
that the higher rates in Mexico plus the currency change helped the Fund's
performance. The Fund's total return for the fiscal year is +6.71% for ISI Class
A Shares and +6.03% for ISI Class C Shares.
- --------------------------------------------------------------------------------
CANADIAN DOLLAR COMPARED AGAINST US DOLLAR*
- --------------------------------------------------------------------------------
[LINE CHART OMITTED]
10/31/2006 0.8913
11/01/2006 0.8832
11/02/2006 0.8824
11/03/2006 0.8850
11/06/2006 0.8849
11/07/2006 0.8852
11/08/2006 0.8856
11/09/2006 0.8853
11/10/2006 0.8832
11/13/2006 0.8790
11/14/2006 0.8792
11/15/2006 0.8782
11/16/2006 0.8753
11/17/2006 0.8720
11/20/2006 0.8723
11/21/2006 0.8724
11/22/2006 0.8760
11/23/2006 0.8758
11/24/2006 0.8813
11/27/2006 0.8823
11/28/2006 0.8845
11/29/2006 0.8785
11/30/2006 0.8768
12/01/2006 0.8742
12/04/2006 0.8768
12/05/2006 0.8754
12/06/2006 0.8710
12/07/2006 0.8698
12/08/2006 0.8701
12/11/2006 0.8714
12/12/2006 0.8677
12/13/2006 0.8644
12/14/2006 0.8639
12/15/2006 0.8637
12/18/2006 0.8641
12/19/2006 0.8676
12/20/2006 0.8703
12/21/2006 0.8658
12/22/2006 0.8630
12/25/2006 0.8643
12/26/2006 0.8611
12/27/2006 0.8605
12/28/2006 0.8617
12/29/2006 0.8576
01/01/2007 0.8577
01/02/2007 0.8580
01/03/2007 0.8522
01/04/2007 0.8493
01/05/2007 0.8525
01/08/2007 0.8509
01/09/2007 0.8497
01/10/2007 0.8516
01/11/2007 0.8490
01/12/2007 0.8543
01/15/2007 0.8559
01/16/2007 0.8503
01/17/2007 0.8527
01/18/2007 0.8516
01/19/2007 0.8530
01/22/2007 0.8458
01/23/2007 0.8470
01/24/2007 0.8482
01/25/2007 0.8453
01/26/2007 0.8476
01/29/2007 0.8454
01/30/2007 0.8479
01/31/2007 0.8498
02/01/2007 0.8485
02/02/2007 0.8443
02/05/2007 0.8456
02/06/2007 0.8461
02/07/2007 0.8442
02/08/2007 0.8454
02/09/2007 0.8530
02/12/2007 0.8508
02/13/2007 0.8571
02/14/2007 0.8577
02/15/2007 0.8599
02/16/2007 0.8597
02/19/2007 0.8590
02/20/2007 0.8547
02/21/2007 0.8620
02/22/2007 0.8606
02/23/2007 0.8623
02/26/2007 0.8616
02/27/2007 0.8568
02/28/2007 0.8547
03/01/2007 0.8528
03/02/2007 0.8493
03/05/2007 0.8466
03/06/2007 0.8498
03/07/2007 0.8486
03/08/2007 0.8473
03/09/2007 0.8531
03/12/2007 0.8534
03/13/2007 0.8509
03/14/2007 0.8503
03/15/2007 0.8494
03/16/2007 0.8503
03/19/2007 0.8495
03/20/2007 0.8609
03/21/2007 0.8653
03/22/2007 0.8640
03/23/2007 0.8616
03/26/2007 0.8609
03/27/2007 0.8641
03/28/2007 0.8628
03/29/2007 0.8629
03/30/2007 0.8664
04/02/2007 0.8648
04/03/2007 0.8630
04/04/2007 0.8625
04/05/2007 0.8687
04/06/2007 0.8686
04/09/2007 0.8674
04/10/2007 0.8716
04/11/2007 0.8775
04/12/2007 0.8813
04/13/2007 0.8789
04/16/2007 0.8837
04/17/2007 0.8843
04/18/2007 0.8866
04/19/2007 0.8853
04/20/2007 0.8899
04/23/2007 0.8912
04/24/2007 0.8914
04/25/2007 0.8970
04/26/2007 0.8914
04/27/2007 0.8957
04/30/2007 0.9011
05/01/2007 0.9001
05/02/2007 0.9018
05/03/2007 0.9030
05/04/2007 0.9028
05/07/2007 0.9074
05/08/2007 0.9051
05/09/2007 0.9048
05/10/2007 0.9000
05/11/2007 0.9003
05/14/2007 0.9043
05/15/2007 0.9102
05/16/2007 0.9053
05/17/2007 0.9091
05/18/2007 0.9185
05/21/2007 0.9220
05/22/2007 0.9204
05/23/2007 0.9240
05/24/2007 0.9228
05/25/2007 0.9256
05/28/2007 0.9259
05/29/2007 0.9314
05/30/2007 0.9309
05/31/2007 0.9355
06/01/2007 0.9426
06/04/2007 0.9446
06/05/2007 0.9403
06/06/2007 0.9446
06/07/2007 0.9391
06/08/2007 0.9427
06/11/2007 0.9434
06/12/2007 0.9365
06/13/2007 0.9377
06/14/2007 0.9358
06/15/2007 0.9365
06/18/2007 0.9336
06/19/2007 0.9413
06/20/2007 0.9378
06/21/2007 0.9304
06/22/2007 0.9358
06/25/2007 0.9343
06/26/2007 0.9350
06/27/2007 0.9341
06/28/2007 0.9441
06/29/2007 0.9385
07/02/2007 0.9471
07/03/2007 0.9422
07/04/2007 0.9455
07/05/2007 0.9469
07/06/2007 0.9529
07/09/2007 0.9524
07/10/2007 0.9486
07/11/2007 0.9485
07/12/2007 0.9562
07/13/2007 0.9546
07/16/2007 0.9581
07/17/2007 0.9580
07/18/2007 0.9581
07/19/2007 0.9587
07/20/2007 0.9535
07/23/2007 0.9553
07/24/2007 0.9654
07/25/2007 0.9599
07/26/2007 0.9492
07/27/2007 0.9397
07/30/2007 0.9370
07/31/2007 0.9374
08/01/2007 0.9468
08/02/2007 0.9503
08/03/2007 0.9462
08/06/2007 0.9500
08/07/2007 0.9479
08/08/2007 0.9536
08/09/2007 0.9449
08/10/2007 0.9495
08/13/2007 0.9488
08/14/2007 0.9369
08/15/2007 0.9271
08/16/2007 0.9292
08/17/2007 0.9432
08/20/2007 0.9477
08/21/2007 0.9413
08/22/2007 0.9416
08/23/2007 0.9493
08/24/2007 0.9506
08/27/2007 0.9484
08/28/2007 0.9397
08/29/2007 0.9434
08/30/2007 0.9446
08/31/2007 0.9474
09/03/2007 0.9498
09/04/2007 0.9529
09/05/2007 0.9489
09/06/2007 0.9504
09/07/2007 0.9477
09/10/2007 0.9505
09/11/2007 0.9593
09/12/2007 0.9646
09/13/2007 0.9670
09/14/2007 0.9708
09/17/2007 0.9732
09/18/2007 0.9873
09/19/2007 0.9851
09/20/2007 0.9976
09/21/2007 0.9993
09/24/2007 0.9979
09/25/2007 0.9963
09/26/2007 0.9962
09/27/2007 0.9984
09/28/2007 1.0075
10/01/2007 1.0083
10/02/2007 1.0025
10/03/2007 1.0017
10/04/2007 1.0031
10/05/2007 1.0197
10/08/2007 1.0134
10/09/2007 1.0189
10/10/2007 1.0187
10/11/2007 1.0238
10/12/2007 1.0284
10/15/2007 1.0239
10/16/2007 1.0214
10/17/2007 1.0261
10/18/2007 1.0271
10/19/2007 1.0345
10/22/2007 1.0220
10/23/2007 1.0346
10/24/2007 1.0322
10/25/2007 1.0344
10/26/2007 1.0392
10/29/2007 1.0482
10/30/2007 1.0494
10/31/2007 1.0607
*Source: Bloomberg
5
- --------------------------------------------------------------------------------
MANAGEMENT DISCUSSION AND ANALYSIS (CONTINUED)
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
During the fiscal year, the Fund's equity representation moved up from 77% at
the beginning of the year to 83% at year end. The present allocation is neutral,
with 75% in equities. The overweighting in equities helped performance because
the Dow Jones Wilshire 5000 Index was up 15.28% whereas the Lehman Treasury
Index was up only 5.91%. ISI expects that the current slowdown in the U.S.
economy will end with an equity-friendly Mid-cycle slowdown, as was the case in
1995. The equity and bond portions of the Fund's portfolio are actively managed.
The equity portion uses the Sub-advisor's Dynamic Alpha model to select
individual investments. The bond portion follows the duration management of the
Total Return US Treasury Fund. The Fund's total return over the fiscal year is
+13.79%. Please see chart below showing the rise in the equity benchmark over
the fiscal year.
- --------------------------------------------------------------------------------
DOW JONES WILSHIRE 5000 INDEX*
- --------------------------------------------------------------------------------
[LINE CHART OMITTED]
10/31/2006 13829.07
11/01/2006 13709.18
11/02/2006 13698.29
11/03/2006 13683.52
11/06/2006 13843.39
11/07/2006 13871.53
11/08/2006 13914.28
11/09/2006 13837.86
11/10/2006 13876.47
11/13/2006 13913.90
11/14/2006 14017.69
11/15/2006 14067.79
11/16/2006 14090.95
11/17/2006 14098.12
11/20/2006 14103.85
11/21/2006 14136.22
11/22/2006 14174.47
11/24/2006 14136.25
11/27/2006 13918.86
11/28/2006 13961.22
11/29/2006 14094.77
11/30/2006 14116.71
12/01/2006 14077.72
12/04/2006 14217.70
12/05/2006 14272.06
12/06/2006 14257.78
12/07/2006 14199.99
12/08/2006 14221.88
12/11/2006 14247.70
12/12/2006 14222.03
12/13/2006 14234.87
12/14/2006 14347.53
12/15/2006 14356.88
12/18/2006 14289.29
12/19/2006 14311.75
12/20/2006 14300.45
12/21/2006 14244.89
12/22/2006 14177.66
12/26/2006 14240.98
12/27/2006 14346.85
12/28/2006 14324.84
12/29/2006 14257.55
01/02/2007 14257.55
01/03/2007 14246.71
01/04/2007 14269.90
01/05/2007 14164.80
01/08/2007 14197.15
01/09/2007 14204.71
01/10/2007 14242.55
01/11/2007 14350.24
01/12/2007 14426.00
01/16/2007 14432.49
01/17/2007 14417.26
01/18/2007 14350.88
01/19/2007 14405.79
01/22/2007 14329.75
01/23/2007 14391.57
01/24/2007 14517.85
01/25/2007 14358.67
01/26/2007 14354.90
01/29/2007 14359.45
01/30/2007 14438.68
01/31/2007 14531.92
02/01/2007 14615.38
02/02/2007 14642.45
02/05/2007 14626.09
02/06/2007 14646.91
02/07/2007 14681.86
02/08/2007 14667.55
02/09/2007 14556.05
02/12/2007 14502.87
02/13/2007 14611.92
02/14/2007 14712.55
02/15/2007 14731.90
02/16/2007 14733.65
02/20/2007 14796.54
02/21/2007 14786.12
02/22/2007 14778.71
02/23/2007 14729.83
02/26/2007 14703.66
02/27/2007 14203.20
02/28/2007 14271.61
03/01/2007 14236.03
03/02/2007 14060.13
03/05/2007 13896.55
03/06/2007 14125.36
03/07/2007 14093.24
03/08/2007 14194.19
03/09/2007 14213.27
03/12/2007 14257.14
03/13/2007 13966.01
03/14/2007 14046.11
03/15/2007 14111.75
03/16/2007 14054.38
03/19/2007 14209.13
03/20/2007 14302.24
03/21/2007 14536.94
03/22/2007 14540.44
03/23/2007 14556.46
03/26/2007 14563.65
03/27/2007 14474.79
03/28/2007 14369.35
03/29/2007 14413.23
03/30/2007 14409.27
04/02/2007 14448.18
04/03/2007 14581.15
04/04/2007 14595.10
04/05/2007 14640.38
04/09/2007 14648.08
04/10/2007 14685.52
04/11/2007 14593.06
04/12/2007 14682.38
04/13/2007 14736.44
04/16/2007 14891.70
04/17/2007 14910.93
04/18/2007 14909.05
04/19/2007 14875.89
04/20/2007 15009.91
04/23/2007 14983.87
04/24/2007 14972.49
04/25/2007 15110.41
04/26/2007 15108.03
04/27/2007 15092.75
04/30/2007 14952.35
05/01/2007 14983.85
05/02/2007 15102.16
05/03/2007 15158.85
05/04/2007 15194.08
05/07/2007 15222.62
05/08/2007 15203.03
05/09/2007 15259.58
05/10/2007 15046.36
05/11/2007 15194.52
05/14/2007 15150.93
05/15/2007 15108.31
05/16/2007 15223.89
05/17/2007 15206.93
05/18/2007 15304.99
05/21/2007 15355.90
05/22/2007 15372.80
05/23/2007 15348.10
05/24/2007 15181.68
05/25/2007 15269.21
05/29/2007 15315.69
05/30/2007 15441.26
05/31/2007 15462.16
06/01/2007 15532.67
06/04/2007 15569.19
06/05/2007 15484.29
06/06/2007 15343.15
06/07/2007 15070.12
06/08/2007 15233.07
06/11/2007 15246.02
06/12/2007 15085.67
06/13/2007 15297.52
06/14/2007 15373.07
06/15/2007 15481.89
06/18/2007 15464.40
06/19/2007 15490.24
06/20/2007 15291.15
06/21/2007 15376.04
06/22/2007 15203.32
06/25/2007 15139.53
06/26/2007 15089.30
06/27/2007 15232.80
06/28/2007 15235.32
06/29/2007 15210.65
07/02/2007 15378.66
07/03/2007 15430.48
07/05/2007 15449.03
07/06/2007 15507.34
07/09/2007 15523.85
07/10/2007 15303.67
07/11/2007 15382.73
07/12/2007 15652.94
07/13/2007 15700.95
07/16/2007 15655.13
07/17/2007 15655.54
07/18/2007 15621.04
07/19/2007 15695.74
07/20/2007 15506.48
07/23/2007 15558.28
07/24/2007 15244.07
07/25/2007 15291.75
07/26/2007 14938.47
07/27/2007 14710.78
07/30/2007 14852.75
07/31/2007 14682.66
08/01/2007 14755.40
08/02/2007 14829.82
08/03/2007 14432.34
08/06/2007 14723.12
08/07/2007 14823.49
08/08/2007 15046.23
08/09/2007 14640.32
08/10/2007 14641.03
08/13/2007 14633.36
08/14/2007 14360.33
08/15/2007 14146.41
08/16/2007 14190.36
08/17/2007 14531.52
08/20/2007 14544.56
08/21/2007 14570.97
08/22/2007 14750.78
08/23/2007 14720.75
08/24/2007 14896.21
08/27/2007 14769.33
08/28/2007 14425.63
08/29/2007 14734.31
08/30/2007 14677.24
08/31/2007 14847.70
09/04/2007 15007.28
09/05/2007 14846.39
09/06/2007 14905.01
09/07/2007 14655.52
09/10/2007 14613.53
09/11/2007 14809.35
09/12/2007 14802.86
09/13/2007 14909.06
09/14/2007 14927.60
09/17/2007 14839.44
09/18/2007 15271.80
09/19/2007 15371.29
09/20/2007 15271.69
09/21/2007 15338.93
09/24/2007 15262.88
09/25/2007 15254.08
09/26/2007 15338.03
09/27/2007 15411.42
09/28/2007 15362.02
10/01/2007 15575.76
10/02/2007 15595.11
10/03/2007 15517.40
10/04/2007 15551.90
10/05/2007 15723.69
10/08/2007 15680.29
10/09/2007 15806.69
10/10/2007 15798.23
10/11/2007 15706.85
10/12/2007 15789.30
10/15/2007 15648.21
10/16/2007 15544.94
10/17/2007 15577.43
10/18/2007 15567.27
10/19/2007 15174.49
10/22/2007 15247.75
10/23/2007 15386.29
10/24/2007 15337.70
10/25/2007 15310.88
10/26/2007 15518.12
10/29/2007 15581.48
10/30/2007 15482.01
10/31/2007 15673.36
*Source: Bloomberg
6
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND -
PERFORMANCE COMPARISON(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND - ISI SHARES, LEHMAN BROTHERS TREASURY INDEX,
LEHMAN BROTHERS INTERMEDIATE TREASURY INDEX AND
LEHMAN BROTHERS LONG-TERM TREASURY INDEX:
VALUE OF A $10,000 INVESTMENT (FOR 10 YEARS ENDED OCTOBER 31, 2007)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Lehman Brothers
Total Return Intermediate Lehman Brothers
US Treasury Lehman Brothers Treasury Long-Term
Fund Treasury Index Index Treasury Index
---------- -------------- ----- --------------
10/31/1997 $9,700 $10,000 $10,000 $10,000
11/30/1997 9,771 10,052 10,023 10,133
12/31/1997 9,909 10,158 10,105 10,303
1/31/1998 10,059 10,314 10,241 10,512
2/28/1998 10,013 10,283 10,227 10,437
3/31/1998 10,035 10,311 10,258 10,458
4/30/1998 10,058 10,357 10,306 10,498
5/31/1998 10,201 10,464 10,378 10,698
6/30/1998 10,364 10,585 10,448 10,947
7/31/1998 10,347 10,602 10,489 10,901
8/31/1998 10,755 10,890 10,696 11,393
9/30/1998 11,063 11,193 10,954 11,810
10/31/1998 10,913 11,157 10,976 11,631
11/30/1998 10,988 11,155 10,935 11,720
12/31/1998 10,980 11,177 10,976 11,696
1/31/1999 11,046 11,242 11,024 11,801
2/28/1999 10,665 10,955 10,864 11,221
3/31/1999 10,669 10,997 10,936 11,195
4/30/1999 10,704 11,023 10,966 11,211
5/31/1999 10,577 10,920 10,897 11,035
6/30/1999 10,504 10,897 10,916 10,918
7/31/1999 10,464 10,888 10,926 10,865
8/31/1999 10,423 10,889 10,949 10,823
9/30/1999 10,504 10,973 11,034 10,903
10/31/1999 10,496 10,985 11,048 10,910
11/30/1999 10,443 10,964 11,053 10,836
12/31/1999 10,357 10,891 11,022 10,674
1/31/2000 10,473 10,919 10,991 10,826
2/29/2000 10,694 11,084 11,077 11,153
3/31/2000 10,972 11,304 11,219 11,534
4/30/2000 10,941 11,268 11,211 11,442
5/31/2000 10,910 11,285 11,258 11,400
6/30/2000 11,088 11,476 11,420 11,647
7/31/2000 11,233 11,594 11,497 11,848
8/31/2000 11,437 11,764 11,617 12,118
9/30/2000 11,346 11,773 11,707 11,971
10/31/2000 11,492 11,888 11,784 12,158
11/30/2000 11,748 12,132 11,955 12,542
12/31/2000 11,993 12,363 12,153 12,837
1/31/2001 12,021 12,464 12,297 12,859
2/28/2001 12,195 12,614 12,410 13,079
3/31/2001 12,162 12,655 12,508 13,013
4/30/2001 11,919 12,498 12,458 12,659
5/31/2001 11,948 12,537 12,510 12,675
6/30/2001 11,989 12,604 12,555 12,784
7/31/2001 12,343 12,918 12,783 13,260
8/31/2001 12,548 13,089 12,894 13,544
9/30/2001 12,641 13,297 13,160 13,645
10/31/2001 13,052 13,666 13,360 14,315
11/30/2001 12,621 13,327 13,209 13,635
12/31/2001 12,496 13,197 13,145 13,378
1/31/2002 12,578 13,286 13,181 13,507
2/28/2002 12,660 13,406 13,290 13,708
3/31/2002 12,363 13,083 13,087 13,154
4/30/2002 12,682 13,409 13,321 13,654
5/31/2002 12,738 13,484 13,413 13,697
6/30/2002 12,953 13,674 13,576 13,942
7/31/2002 13,276 13,998 13,847 14,373
8/31/2002 13,667 14,301 13,992 15,000
9/30/2002 14,033 14,687 14,261 15,625
10/31/2002 13,806 14,524 14,235 15,176
11/30/2002 13,673 14,380 14,102 15,008
12/31/2002 14,003 14,754 14,365 15,623
1/31/2003 13,951 14,709 14,323 15,570
2/28/2003 14,201 14,962 14,478 16,042
3/31/2003 14,121 14,900 14,477 15,840
4/30/2003 14,193 14,969 14,506 16,001
5/31/2003 14,640 15,401 14,731 16,901
6/30/2003 14,545 15,306 14,708 16,643
7/31/2003 13,889 14,634 14,386 15,154
8/31/2003 13,963 14,721 14,406 15,396
9/30/2003 14,347 15,165 14,704 16,198
10/31/2003 14,123 14,934 14,560 15,747
11/30/2003 14,154 14,952 14,557 15,823
12/31/2003 14,253 15,085 14,667 16,011
1/31/2004 14,374 15,213 14,739 16,286
2/29/2004 14,549 15,402 14,876 16,610
3/31/2004 14,664 15,546 14,981 16,863
4/30/2004 14,179 15,046 14,642 15,917
5/31/2004 14,144 14,994 14,600 15,838
6/30/2004 14,215 15,055 14,631 15,983
7/31/2004 14,317 15,198 14,731 16,254
8/31/2004 14,618 15,512 14,946 16,857
9/30/2004 14,644 15,552 14,953 16,999
10/31/2004 14,778 15,675 15,035 17,249
11/30/2004 14,572 15,465 14,881 16,865
12/31/2004 14,738 15,618 14,964 17,245
1/31/2005 14,920 15,732 14,980 17,680
2/28/2005 14,794 15,604 14,883 17,451
3/31/2005 14,745 15,553 14,851 17,335
4/30/2005 15,011 15,826 15,032 17,928
5/31/2005 15,230 16,020 15,148 18,393
6/30/2005 15,371 16,118 15,195 18,669
7/31/2005 15,115 15,899 15,054 18,179
8/31/2005 15,400 16,152 15,227 18,709
9/30/2005 15,143 15,938 15,102 18,171
10/31/2005 14,982 15,813 15,035 17,837
11/30/2005 15,044 15,890 15,101 17,948
12/31/2005 15,284 16,054 15,197 18,366
1/31/2006 15,202 16,006 15,181 18,198
2/28/2006 15,249 16,030 15,177 18,327
3/31/2006 14,971 15,857 15,124 17,702
4/30/2006 14,839 15,791 15,131 17,357
5/31/2006 14,821 15,797 15,137 17,358
6/30/2006 14,836 15,847 15,167 17,491
7/31/2006 15,097 16,043 15,326 17,827
8/31/2006 15,410 16,279 15,498 18,316
9/30/2006 15,607 16,430 15,610 18,616
10/31/2006 15,705 16,513 15,679 18,753
11/30/2006 15,887 16,685 15,802 19,120
12/31/2006 15,703 16,548 15,729 18,705
1/31/2007 15,685 16,522 15,729 18,561
2/28/2007 15,935 16,796 15,937 19,113
3/31/2007 15,866 16,788 15,975 18,902
4/30/2007 15,949 16,875 16,047 19,050
5/31/2007 15,777 16,723 15,944 18,694
6/30/2007 15,725 16,716 15,970 18,536
7/31/2007 16,031 16,994 16,193 19,033
8/31/2007 16,252 17,261 16,434 19,387
9/30/2007 16,302 17,352 16,533 19,442
10/31/2007 16,438 17,489 16,638 19,717
7
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS (WITH LOAD) AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SINCE SINCE
OCTOBER 31, 2007 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2) 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Total Return
US Treasury
Fund 1.54% 7.85% 15.54% 64.38% 256.26% 1.54% 2.55% 2.93% 5.10% 6.83%
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Treasury Index(3) 5.91% 11.57% 20.41% 74.89% 288.37% 5.91% 3.72% 3.79% 5.75% 7.34%
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate
Treasury Index(3) 6.11% 10.66% 16.88% 66.38% 245.46% 6.11% 3.43% 3.17% 5.22% 6.68%
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Long-Term
Treasury Index(3) 5.14% 14.31% 29.92% 97.17% 428.67% 5.14% 4.56% 5.37% 7.03% 9.08%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The
performance information presented in the graph and table above does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. All performance assumes
the reinvestment of dividends and capital gain distributions and includes
the Fund's maximum 3.00% sales charge. Distributions of the Fund's
capital gains and non-US Treasury income may be subject to state and
local taxes. Management is not aware of any single index that is truly
representative of the Fund since its active maturity management policy
allows the manager to adjust the weighted average maturity throughout
each US Treasury sector. Currently the Fund's weighted average maturity
is approximately 10.3 years. Performance would have been lower during the
period if certain of the Fund's fees and expenses had not been waived.
(2) The Fund's inception date is August 10, 1988. Benchmark returns are for
the periods beginning August 31, 1988.
(3) The Lehman Brothers Treasury Index is an unmanaged index reflecting the
performance of all public Treasury obligations and does not focus on one
particular segment of the Treasury market. The Lehman Brothers
Intermediate Treasury Index is an unmanaged index reflecting the
performance of US Treasury securities in the intermediate-term Treasury
sector. The Lehman Brothers Long-Term Treasury Index is an unmanaged
index reflecting the performance of US Treasury securities in the
long-term Treasury sector. Benchmark returns do not reflect expenses or
sales charges that have been deducted from the Fund's returns.
8
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND -
PERFORMANCE COMPARISON(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND, LEHMAN BROTHERS GENERAL OBLIGATION INDEX,
LEHMAN BROTHERS PREREFUNDED MUNICIPAL BOND INDEX AND CONSUMER PRICE INDEX:
VALUE OF A $10,000 INVESTMENT (FOR 10 YEARS ENDED OCTOBER 31, 2007)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Lehman Brothers
Lehman Brothers Prerefunded
Managed General Municipal Bond Consumer Price
Municipal Fund Obligation Index Index Index
-------------- ---------------- ----- -----
10/31/1997 $ 9,700 $ 10,000 $ 10,000 $ 10,000
11/30/1997 9,741 10,047 10,022 9,994
12/31/1997 9,895 10,190 10,109 9,981
1/31/1998 9,995 10,295 10,197 10,000
2/28/1998 9,973 10,303 10,225 10,019
3/31/1998 9,977 10,312 10,223 10,037
4/30/1998 9,917 10,257 10,191 10,056
5/31/1998 10,098 10,427 10,318 10,074
6/30/1998 10,121 10,464 10,355 10,087
7/31/1998 10,135 10,489 10,394 10,099
8/31/1998 10,319 10,655 10,505 10,111
9/30/1998 10,446 10,798 10,592 10,124
10/31/1998 10,432 10,800 10,631 10,149
11/30/1998 10,456 10,836 10,665 10,149
12/31/1998 10,494 10,870 10,682 10,142
1/31/1999 10,618 11,013 10,798 10,167
2/28/1999 10,546 10,957 10,798 10,179
3/31/1999 10,532 10,961 10,796 10,210
4/30/1999 10,566 10,992 10,828 10,285
5/31/1999 10,459 10,930 10,789 10,285
6/30/1999 10,293 10,769 10,695 10,285
7/31/1999 10,332 10,812 10,759 10,316
8/31/1999 10,223 10,749 10,759 10,340
9/30/1999 10,174 10,758 10,793 10,390
10/31/1999 10,055 10,665 10,782 10,408
11/30/1999 10,185 10,773 10,836 10,415
12/31/1999 10,095 10,706 10,806 10,415
1/31/2000 10,024 10,666 10,820 10,446
2/29/2000 10,186 10,773 10,863 10,507
3/31/2000 10,439 10,989 10,956 10,594
4/30/2000 10,337 10,933 10,950 10,600
5/31/2000 10,266 10,875 10,950 10,613
6/30/2000 10,563 11,155 11,108 10,668
7/31/2000 10,717 11,302 11,207 10,693
8/31/2000 10,862 11,464 11,306 10,693
9/30/2000 10,768 11,405 11,296 10,749
10/31/2000 10,904 11,525 11,366 10,767
11/30/2000 11,008 11,606 11,424 10,774
12/31/2000 11,334 11,880 11,584 10,767
1/31/2001 11,386 12,009 11,748 10,835
2/28/2001 11,428 12,045 11,791 10,879
3/31/2001 11,513 12,151 11,875 10,903
4/30/2001 11,343 12,025 11,821 10,947
5/31/2001 11,460 12,147 11,934 10,996
6/30/2001 11,546 12,222 11,997 11,015
7/31/2001 11,708 12,396 12,114 10,984
8/31/2001 11,891 12,596 12,261 10,984
9/30/2001 11,816 12,569 12,308 11,033
10/31/2001 11,968 12,697 12,418 10,996
11/30/2001 11,859 12,585 12,333 10,978
12/31/2001 11,782 12,484 12,280 10,934
1/31/2002 11,937 12,689 12,459 10,959
2/28/2002 12,081 12,844 12,594 11,002
3/31/2002 11,836 12,599 12,338 11,064
4/30/2002 12,037 12,858 12,574 11,126
5/31/2002 12,127 12,929 12,653 11,126
6/30/2002 12,217 13,074 12,781 11,132
7/31/2002 12,364 13,235 12,919 11,145
8/31/2002 12,535 13,386 13,030 11,182
9/30/2002 12,796 13,657 13,218 11,200
10/31/2002 12,579 13,436 13,064 11,219
11/30/2002 12,522 13,370 13,021 11,219
12/31/2002 12,810 13,632 13,290 11,194
1/31/2003 12,741 13,609 13,274 11,244
2/28/2003 12,915 13,797 13,423 11,330
3/31/2003 12,926 13,823 13,402 11,399
4/30/2003 13,020 13,913 13,470 11,374
5/31/2003 13,266 14,219 13,696 11,355
6/30/2003 13,148 14,151 13,658 11,368
7/31/2003 12,652 13,681 13,340 11,380
8/31/2003 12,795 13,808 13,419 11,423
9/30/2003 13,152 14,204 13,714 11,460
10/31/2003 13,068 14,109 13,645 11,448
11/30/2003 13,200 14,225 13,709 11,417
12/31/2003 13,308 14,326 13,787 11,405
1/31/2004 13,308 14,397 13,837 11,460
2/29/2004 13,546 14,623 14,007 11,522
3/31/2004 13,431 14,584 13,927 11,597
4/30/2004 13,073 14,255 13,670 11,634
5/31/2004 12,982 14,236 13,611 11,702
6/30/2004 13,039 14,292 13,649 11,739
7/31/2004 13,231 14,465 13,788 11,720
8/31/2004 13,486 14,741 14,017 11,726
9/30/2004 13,530 14,813 14,036 11,751
10/31/2004 13,625 14,929 14,110 11,813
11/30/2004 13,495 14,799 14,008 11,819
12/31/2004 13,653 14,961 14,120 11,776
1/31/2005 13,761 15,073 14,147 11,801
2/28/2005 13,695 15,014 14,091 11,869
3/31/2005 13,566 14,910 13,990 11,962
4/30/2005 13,792 15,141 14,161 12,042
5/31/2005 13,879 15,245 14,205 12,030
6/30/2005 13,965 15,327 14,282 12,036
7/31/2005 13,873 15,239 14,207 12,092
8/31/2005 14,012 15,391 14,301 12,153
9/30/2005 13,906 15,287 14,257 12,302
10/31/2005 13,788 15,191 14,195 12,327
11/30/2005 13,837 15,262 14,235 12,228
12/31/2005 13,982 15,387 14,304 12,178
1/31/2006 14,018 15,430 14,339 12,271
2/28/2006 14,107 15,519 14,364 12,296
3/31/2006 13,961 15,407 14,301 12,364
4/30/2006 13,892 15,397 14,326 12,469
5/31/2006 13,982 15,467 14,386 12,531
6/30/2006 13,874 15,410 14,329 12,556
7/31/2006 14,056 15,586 14,462 12,593
8/31/2006 14,292 15,818 14,609 12,618
9/30/2006 14,383 15,925 14,694 12,556
10/31/2006 14,433 16,013 14,753 12,488
11/30/2006 14,516 16,140 14,820 12,469
12/31/2006 14,439 16,083 14,796 12,488
1/31/2007 14,422 16,038 14,774 12,526
2/28/2007 14,610 16,239 14,908 12,594
3/31/2007 14,539 16,208 14,932 12,709
4/30/2007 14,591 16,256 14,964 12,791
5/31/2007 14,520 16,187 14,926 12,877
6/30/2007 14,421 16,107 14,905 12,902
7/31/2007 14,542 16,249 15,020 12,917
8/31/2007 14,512 16,246 15,109 12,899
9/30/2007 14,730 16,468 15,246 12,934
10/31/2007 14,769 16,511 15,316 12,971
9
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS (WITH LOAD) AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SINCE SINCE
OCTOBER 31, 2007 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2) 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2)
- ------------------------------------------------------------------------------------------------------------------------------------
Managed Municipal
Fund -0.74% 5.09% 13.85% 47.69% 149.97% -0.74% 1.67% 2.63% 3.98% 5.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
General Obligation
Index(3) 3.09% 10.60% 22.89% 65.11% 194.77% 3.09% 3.41% 4.21% 5.14% 6.26%
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Prerefunded
Municipal
Bond Index(3) 3.81% 8.55% 17.24% 53.16% 155.39% 3.81% 2.77% 3.23% 4.36% 5.41%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Price
Index(4) 3.87% 9.81% 15.62% 29.71% 34.01% 3.87% 3.17% 2.95% 2.64% 1.67%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The
performance information presented in the graph and table above does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. All performance assumes
the reinvestment of dividends and capital gain distributions and includes
the Fund's maximum 3.00% sales charge. Distributions of the Fund's income
and capital gains may be subject to state and local taxes.
(2) The Fund's inception date is February 26, 1990. Benchmark returns are for
the periods beginning February 28, 1990.
(3) The Lehman Brothers General Obligation Index is an unmanaged index
reflecting general municipal bond market performance. The Lehman Brothers
Prerefunded Municipal Bond Index, an unmanaged index, is a subcomponent
of the general Lehman Brothers Municipal Bond Index, and contains only
bonds from that index that have been prerefunded or escrowed to maturity.
Benchmark returns do not reflect expenses or sales charges that have been
deducted from the Fund's returns.
(4) The Consumer Price Index is a widely used measure of inflation.
10
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND -
ISI CLASS A PERFORMANCE COMPARISON(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND - ISI CLASS A SHARES, LEHMAN BROTHERS
INTERMEDIATE TREASURY INDEX, LEHMAN BROTHERS EMERGING AMERICAS INDEX: MEXICO
SECTION / CITIGROUP US BROAD INVESTMENT-GRADE BOND INDEX MEXICO SECTOR AND
CONSUMER PRICE INDEX:
VALUE OF A $10,000 INVESTMENT (FOR 10 YEARS ENDED OCTOBER 31, 2007)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Lehman Brothers Emerging
Americas Index: Mexico
North American Section/Citigroup
Government Lehman Brothers US Broad Investment- Consumer
Bond Fund - ISI Intermediate Grade Bond Index Price
Class A Shares Treasury Index Mexico Sector Index
-------------- -------------- ----------------- -----
10/31/1997 $ 9,700 $ 10,000 $ 10,000 $ 10,000
11/30/1997 9,790 10,023 10,253 9,994
12/31/1997 9,959 10,105 10,467 9,981
1/31/1998 10,050 10,241 10,688 10,000
2/28/1998 10,027 10,227 10,784 10,019
3/31/1998 10,074 10,258 10,869 10,037
4/30/1998 10,120 10,306 10,900 10,056
5/31/1998 10,178 10,378 10,804 10,074
6/30/1998 10,295 10,448 10,753 10,087
7/31/1998 10,307 10,489 10,856 10,099
8/31/1998 10,486 10,696 9,148 10,111
9/30/1998 10,738 10,954 9,459 10,124
10/31/1998 10,665 10,976 9,782 10,149
11/30/1998 10,763 10,935 10,422 10,149
12/31/1998 10,799 10,976 10,392 10,142
1/31/1999 10,837 11,024 10,280 10,167
2/28/1999 10,586 10,864 10,333 10,179
3/31/1999 10,674 10,936 10,815 10,210
4/30/1999 10,763 10,966 11,153 10,285
5/31/1999 10,584 10,897 10,668 10,285
6/30/1999 10,597 10,916 10,813 10,285
7/31/1999 10,584 10,926 10,698 10,316
8/31/1999 10,571 10,949 10,809 10,340
9/30/1999 10,651 11,034 11,065 10,390
10/31/1999 10,638 11,048 11,270 10,408
11/30/1999 10,664 11,053 11,593 10,415
12/31/1999 10,624 11,022 11,896 10,415
1/31/2000 10,706 10,991 11,808 10,446
2/29/2000 10,926 11,077 12,364 10,507
3/31/2000 11,189 11,219 12,691 10,594
4/30/2000 11,133 11,211 12,517 10,600
5/31/2000 11,119 11,258 12,273 10,613
6/30/2000 11,246 11,420 12,756 10,668
7/31/2000 11,431 11,497 13,065 10,693
8/31/2000 11,618 11,617 13,393 10,693
9/30/2000 11,574 11,707 13,424 10,749
10/31/2000 11,662 11,784 13,291 10,767
11/30/2000 11,912 11,955 13,493 10,774
12/31/2000 12,120 12,153 13,693 10,767
1/31/2001 12,180 12,297 13,948 10,835
2/28/2001 12,330 12,410 13,850 10,879
3/31/2001 12,391 12,508 13,907 10,903
4/30/2001 12,299 12,458 13,989 10,947
5/31/2001 12,375 12,510 14,311 10,996
6/30/2001 12,453 12,555 14,595 11,015
7/31/2001 12,718 12,783 14,627 10,984
8/31/2001 12,907 12,894 14,925 10,984
9/30/2001 12,924 13,160 14,551 11,033
10/31/2001 13,371 13,360 15,128 10,996
11/30/2001 13,033 13,209 15,198 10,978
12/31/2001 12,952 13,145 15,404 10,934
1/31/2002 13,033 13,181 15,650 10,959
2/28/2002 13,132 13,290 16,132 11,002
3/31/2002 12,933 13,087 15,889 11,064
4/30/2002 13,117 13,321 16,253 11,126
5/31/2002 13,133 13,413 16,262 11,126
6/30/2002 13,232 13,576 16,001 11,132
7/31/2002 13,484 13,847 15,822 11,145
8/31/2002 13,840 13,992 16,489 11,182
9/30/2002 14,077 14,261 16,458 11,200
10/31/2002 13,935 14,235 16,795 11,219
11/30/2002 13,879 14,102 17,155 11,219
12/31/2002 14,101 14,365 17,616 11,194
1/31/2003 14,009 14,323 17,533 11,244
2/28/2003 14,219 14,478 17,878 11,330
3/31/2003 14,215 14,477 18,222 11,399
4/30/2003 14,463 14,506 18,859 11,374
5/31/2003 14,985 14,731 19,434 11,355
6/30/2003 14,926 14,708 19,361 11,368
7/31/2003 14,245 14,386 18,541 11,380
8/31/2003 14,241 14,406 18,753 11,423
9/30/2003 14,664 14,704 19,497 11,460
10/31/2003 14,511 14,560 19,279 11,448
11/30/2003 14,432 14,557 19,361 11,417
12/31/2003 14,581 14,667 19,626 11,405
1/31/2004 14,731 14,739 19,831 11,460
2/29/2004 14,885 14,876 20,238 11,522
3/31/2004 15,002 14,981 20,624 11,597
4/30/2004 14,435 14,642 19,682 11,634
5/31/2004 14,337 14,600 19,561 11,702
6/30/2004 14,357 14,631 19,627 11,739
7/31/2004 14,536 14,731 20,023 11,720
8/31/2004 14,815 14,946 20,706 11,726
9/30/2004 14,895 14,953 20,766 11,751
10/31/2004 15,037 15,035 21,054 11,813
11/30/2004 14,956 14,881 20,910 11,819
12/31/2004 15,180 14,964 21,272 11,776
1/31/2005 15,303 14,980 21,615 11,801
2/28/2005 15,179 14,883 21,600 11,869
3/31/2005 15,117 14,851 21,063 11,962
4/30/2005 15,367 15,032 21,400 12,042
5/31/2005 15,701 15,148 22,059 12,030
6/30/2005 15,931 15,195 22,278 2,036
7/31/2005 15,742 15,054 22,215 12,092
8/31/2005 16,038 15,227 22,594 12,153
9/30/2005 15,889 15,102 22,580 12,302
10/31/2005 15,698 15,035 22,317 12,327
11/30/2005 15,869 15,101 22,734 12,228
12/31/2005 16,126 15,197 22,951 12,178
1/31/2006 16,126 15,181 22,987 12,271
2/28/2006 16,191 15,177 23,275 12,296
3/31/2006 15,822 15,124 22,519 12,364
4/30/2006 15,735 15,131 22,419 12,469
5/31/2006 15,713 15,137 22,080 12,531
6/30/2006 15,713 15,167 22,196 12,556
7/31/2006 16,044 15,326 22,878 12,593
8/31/2006 16,355 15,498 23,478 12,618
9/30/2006 16,489 15,610 23,636 12,556
10/31/2006 16,645 15,679 23,960 12,488
11/30/2006 16,756 15,802 24,204 12,469
12/31/2006 16,644 15,729 24,478 12,488
1/31/2007 16,508 15,729 24,343 12,526
2/28/2007 16,712 15,937 24,444 12,594
3/31/2007 16,781 15,975 24,888 12,709
4/30/2007 16,918 16,047 24,917 12,791
5/31/2007 16,849 15,944 25,190 12,877
6/30/2007 16,803 15,970 25,257 12,902
7/31/2007 17,035 16,193 25,408 12,917
8/31/2007 17,268 16,434 25,510 12,899
9/30/2007 17,455 16,533 25,624 12,934
10/31/2007 17,761 16,638 25,776 12,971
11
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS (WITH LOAD) AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SINCE SINCE
OCTOBER 31, 2007 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2) 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2)
- ------------------------------------------------------------------------------------------------------------------------------------
North American
Government Bond
Fund - ISI Class A
Shares 3.50% 14.57% 23.62% 77.61% 130.12% 3.50% 4.64% 4.33% 5.91% 5.80%
- ------------------------------------------------------------------------------------------------------------------------------------
North American
Government Bond
Fund - ISI Class C
Shares 5.03% 15.87% -- -- 16.11%(3) 5.03% 5.03% -- -- 3.41%(3)
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate
Treasury Index(4) 6.11% 10.66% 16.88% 66.38% 120.15% 6.11% 3.43% 3.17% 5.22% 5.50%
- ------------------------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Emerging Americas
Index: Mexico
Section / Citigroup
US Broad
Investment-Grade
Bond Index
Mexico Sector(5) 7.58% 22.42% 53.47% 157.76% 324.55% 7.58% 6.98% 8.94% 9.93% 48.03%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer
Price Index(6) 3.87% 9.81% 15.62% 29.71% 50.55% 3.87% 3.17% 2.95% 2.64% 2.81%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The
performance information presented in the graph and table above does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. All performance assumes
the reinvestment of dividends and capital gain distributions and includes
sales charges, if applicable. ISI Class A shares have a maximum 3.00%
sales charge. ISI Class C Shares have a maximum 1.00% contingent deferred
sales charge in the first year, which is eliminated thereafter.
Performance would have been lower during the period if certain of the
Fund's fees and expenses had not been waived.
(2) ISI Class A Shares inception date is January 15, 1993. Benchmark returns
are for the periods beginning January 31, 1993.
(3) ISI Class C Shares inception date is May 16, 2003. Cumulative and
annualized returns for the Lehman Brothers Intermediate Treasury Index
from May 31, 2003 through October 31, 2007 were 12.94% and 2.79%,
respectively.
(4) The Lehman Brothers Intermediate Treasury Index is an unmanaged index
reflecting the performance of US Treasury securities in the
intermediate-term Treasury sector. Benchmark returns do not reflect
expenses or sales charges that have been deducted from the Fund's
returns.
(5) Reflects the performance of the Lehman Brothers Emerging Americas Index:
Mexico Section through October 31, 2004 and the Citigroup US Broad
Investment-Grade Bond Index Mexico Sector from that date through October
31, 2006 and the Lehman Brothers Global Aggregate Index: Mexico from
October 31, 2006 through October 31, 2007. The Lehman Brothers Emerging
Americas Index: Mexico Section has been discontinued. Lehman Brothers
Emerging Americas Index: Mexico Section was an unmanaged sub-index of the
Lehman Brothers Emerging Americas Index reflecting the performance of
selected Mexican debt instruments with maturities of one year or more.
The Citigroup US Broad Investment-Grade Bond Index Mexico Sector is an
unmanaged sub-index of the Citigroup US Broad Investment-Grade Bond Index
reflecting the performance of selected Mexican debt instruments with
maturities of one year or more. The Lehman Brothers Global Aggregate
Index: Mexico Section is an unmanaged sub-index of Lehman Brothers Global
Aggregate Index which provides broad-based measure of global
investment-grade fixed income markets. The Mexico Section reflects the US
dollar performance of selected Mexican government peso-denominated debt
instruments with maturities of one year or more. Benchmark returns do not
reflect expenses or sales charges that have been deducted from the Fund's
returns.
(6) The Consumer Price Index is a widely used measure of inflation.
12
- --------------------------------------------------------------------------------
ISI STRATEGY FUND -
PERFORMANCE COMPARISON(1)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ISI STRATEGY FUND - DOW JONES WILSHIRE 5000 (FULL CAP)
INDEX AND CONSUMER PRICE INDEX:
VALUE OF A $10,000 INVESTMENT (FOR 10 YEARS ENDED OCTOBER 31, 2007)
- --------------------------------------------------------------------------------
[GRAPHIC OMITTED]
Dow Jones
Wilshire 5000
ISI Strategy (Full Cap) Consumer Price
Fund Index Index
---- ----- -----
10/31/1997 $ 9,700 $ 10,000 $ 10,000
11/30/1997 9,917 10,518 9,994
12/31/1997 10,085 10,575 9,981
1/31/1998 10,174 11,345 10,000
2/28/1998 10,619 11,912 10,019
3/31/1998 10,975 12,054 10,037
4/30/1998 11,044 11,733 10,056
5/31/1998 10,925 12,145 10,074
6/30/1998 11,213 11,879 10,087
7/31/1998 11,053 10,029 10,099
8/31/1998 10,145 10,684 10,111
9/30/1998 10,644 11,479 10,124
10/31/1998 11,055 12,202 10,149
11/30/1998 11,511 12,983 10,149
12/31/1998 11,956 13,461 10,142
1/31/1999 12,263 12,974 10,167
2/28/1999 11,812 13,475 10,179
3/31/1999 12,120 14,120 10,210
4/30/1999 12,490 13,811 10,285
5/31/1999 12,253 14,526 10,285
6/30/1999 12,634 14,060 10,285
7/31/1999 12,334 13,929 10,316
8/31/1999 12,230 13,566 10,340
9/30/1999 12,044 14,428 10,390
10/31/1999 12,470 14,912 10,408
11/30/1999 12,688 16,044 10,415
12/31/1999 13,151 15,378 10,415
1/31/2000 12,842 15,722 10,446
2/29/2000 13,066 16,656 10,507
3/31/2000 13,705 15,788 10,594
4/30/2000 13,256 15,237 10,600
5/31/2000 12,999 15,909 10,613
6/30/2000 13,385 15,585 10,668
7/31/2000 13,299 16,716 10,693
8/31/2000 13,944 15,936 10,693
9/30/2000 13,492 15,598 10,749
10/31/2000 13,407 14,046 10,767
11/30/2000 12,682 14,296 10,774
12/31/2000 12,930 14,843 10,767
1/31/2001 13,263 13,436 10,835
2/28/2001 12,529 12,532 10,879
3/31/2001 12,047 13,563 10,903
4/30/2001 12,487 13,699 10,947
5/31/2001 12,568 13,469 10,996
6/30/2001 12,441 13,247 11,015
7/31/2001 12,447 12,445 10,984
8/31/2001 11,995 11,328 10,984
9/30/2001 11,277 11,615 11,033
10/31/2001 11,591 12,504 10,996
11/30/2001 12,056 12,729 10,978
12/31/2001 12,190 12,571 10,934
1/31/2002 12,085 12,312 10,959
2/28/2002 11,945 12,851 11,002
3/31/2002 12,272 12,224 11,064
4/30/2002 11,995 12,080 11,126
5/31/2002 11,948 11,231 11,126
6/30/2002 11,364 10,324 11,132
7/31/2002 10,780 10,385 11,145
8/31/2002 10,909 9,344 11,182
9/30/2002 10,194 10,058 11,200
10/31/2002 10,676 10,665 11,219
11/30/2002 11,052 10,074 11,219
12/31/2002 10,660 9,820 11,194
1/31/2003 10,448 9,654 11,244
2/28/2003 10,377 9,763 11,330
3/31/2003 10,484 10,564 11,399
4/30/2003 11,099 11,209 11,374
5/31/2003 11,654 11,375 11,355
6/30/2003 11,746 11,650 11,368
7/31/2003 11,770 11,929 11,380
8/31/2003 12,030 11,797 11,423
9/30/2003 11,960 12,517 11,460
10/31/2003 12,434 12,693 11,448
11/30/2003 12,552 13,263 11,417
12/31/2003 12,917 13,558 11,405
1/31/2004 13,154 13,756 11,460
2/29/2004 13,321 13,609 11,522
3/31/2004 13,245 13,319 11,597
4/30/2004 12,984 13,503 11,634
5/31/2004 13,043 13,784 11,702
6/30/2004 13,245 13,257 11,739
7/31/2004 12,947 13,301 11,720
8/31/2004 13,078 13,538 11,726
9/30/2004 13,284 13,769 11,751
10/31/2004 13,392 14,414 11,813
11/30/2004 13,738 14,937 11,819
12/31/2004 14,074 14,540 11,776
1/31/2005 13,810 14,842 11,801
2/28/2005 14,074 14,579 11,869
3/31/2005 13,915 14,250 11,962
4/30/2005 13,686 14,806 12,042
5/31/2005 14,107 14,939 12,030
6/30/2005 14,272 15,565 12,036
7/31/2005 14,646 15,412 12,092
8/31/2005 14,779 15,520 12,153
9/30/2005 14,918 15,250 12,302
10/31/2005 14,676 15,865 12,327
11/30/2005 15,100 15,881 12,228
12/31/2005 15,190 16,448 12,178
1/31/2006 15,687 16,439 12,271
2/28/2006 15,651 16,758 12,296
3/31/2006 15,887 16,936 12,364
4/30/2006 15,887 16,407 12,469
5/31/2006 15,473 16,437 12,531
6/30/2006 15,542 16,378 12,556
7/31/2006 15,444 16,763 12,593
8/31/2006 15,725 17,147 12,618
9/30/2006 16,071 17,783 12,556
10/31/2006 16,586 18,195 12,488
11/30/2006 16,924 18,401 12,469
12/31/2006 17,004 18,774 12,488
1/31/2007 17,294 18,472 12,526
2/28/2007 17,194 18,674 12,594
3/31/2007 17,323 19,396 12,709
4/30/2007 17,906 20,096 12,791
5/31/2007 18,502 19,791 12,877
6/30/2007 18,234 19,122 12,902
7/31/2007 17,687 19,374 12,917
8/31/2007 17,814 20,074 12,899
9/30/2007 18,398 20,501 12,934
10/31/2007 18,822 20,495 12,971
13
- --------------------------------------------------------------------------------
ISI STRATEGY FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
- --------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
CUMULATIVE TOTAL RETURNS (WITH LOAD) AVERAGE ANNUAL TOTAL RETURNS
PERIODS ENDED SINCE SINCE
OCTOBER 31, 2007 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2) 1 YEAR 3 YEARS 5 YEARS 10 YEARS INCEPTION(2)
- ------------------------------------------------------------------------------------------------------------------------------------
ISI Strategy Fund 10.37% 36.66% 71.50% 88.82% 85.89% 10.37% 10.97% 11.39% 6.56% 6.32%
- ------------------------------------------------------------------------------------------------------------------------------------
Dow Jones Wilshire
5000 (Full Cap)
Index(3) 15.28% 48.91% 103.83% 104.95% 98.13% 15.28% 14.19% 15.31% 7.44% 57.75%
- ------------------------------------------------------------------------------------------------------------------------------------
Consumer Price
Index(4) 3.87% 9.81% 15.62% 29.71% 173.28% 3.87% 3.17% 2.95% 2.64% 10.48%
- ------------------------------------------------------------------------------------------------------------------------------------
Lipper Flexible
Portfolio Funds
Average(5) 16.40% 43.70% 83.27% 89.14% 93.46% 16.40% 12.85% 12.88% 6.58% 6.76%
- ------------------------------------------------------------------------------------------------------------------------------------
(1) PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return
and principal value will fluctuate so that an investor's shares, when
redeemed, may be worth more or less than their original cost. The
performance information presented in the graph and table above does not
reflect the deduction of taxes that a shareholder would pay on Fund
distributions or the redemption of Fund shares. All performance assumes
the reinvestment of dividends and capital gain distributions and includes
the Fund's maximum 3.00% sales charge.
(2) The Fund's inception date is September 16, 1997. Benchmark returns are for
the periods beginning September 30, 1997.
(3) The Dow Jones Wilshire 5000 (Full Cap) Index is an unmanaged index that
represents the broadest measure of the US equity market. Benchmark returns
do not reflect expenses or sales charges that have been deducted from the
Fund's returns.
(4) The Consumer Price Index is a widely used measure of inflation.
(5) Lipper figures represent the average total returns by all mutual funds
designated by Lipper as falling into the category indicated. The Lipper
Flexible Portfolio Funds category includes funds that allocate their
investment across various asset classes, including domestic common stocks,
bonds and money market instruments with a focus on total return. Benchmark
returns do not reflect expenses or sales charges that have been deducted
from the Fund's returns.
14
- --------------------------------------------------------------------------------
SHAREHOLDER EXPENSE EXAMPLES (UNAUDITED)
- --------------------------------------------------------------------------------
As a shareholder of the Fund, you incur two types of cost: (1) transaction costs
for certain share classes, including sales charges (loads); and (2) ongoing
costs, including management fees, Rule 12b-1 distribution/shareholder service
fees and other Fund expenses. This example is intended to help you understand
your ongoing costs (in dollars) of investing in each Fund and to compare these
costs with the ongoing costs of investing in other mutual funds.
A mutual fund's ongoing costs are expressed as a percentage of its average net
assets. This figure is known as the expense ratio. The expenses in the tables
below are based on an investment of $1,000 made at the beginning of the period
shown and held for the entire period.
ACTUAL EXPENSES - The "Actual Return" rows in the following table provide
information about actual account values and actual expenses. You may use the
information here, together with the amount you invested, to estimate the
expenses that you paid over the period. Simply divide your account value by
$1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then
multiply the result by the number in the "Expenses Paid During Period" column to
estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The "Hypothetical Return" rows in
the following table provide information about hypothetical account values and
hypothetical expenses based on each Fund's actual expense ratio and an assumed
rate of return of 5% per year before expenses, which is not the actual return of
each Fund. The hypothetical account values and expenses may not be used to
estimate the actual ending account balance or expenses you paid for the period.
You may use this information to compare the ongoing cost of investing in a Fund
and other funds. To do so, compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the shareholder reports of other funds.
Expenses shown in the tables are meant to highlight your ongoing costs only and
do not reflect any transactional costs, such as sales charges (loads).
Therefore, the "Hypothetical Return" rows in the table are useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. If these transactional costs were included, your costs
would have been higher.
15
- --------------------------------------------------------------------------------
SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
MAY 1, 2007 OCTOBER 31, 2007 DURING PERIOD(1) EXPENSE
- -----------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return ............ $1,000.00 $1,030.70 $4.23 0.83%
Based on Hypothetical 5% Return ........ $1,000.00 $1,021.04 $4.21 0.83%
- -----------------------------------------------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
MAY 1, 2007 OCTOBER 31, 2007 DURING PERIOD(1) EXPENSE
- -----------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return ............ $1,000.00 $1,012.20 $4.87 0.96%
Based on Hypothetical 5% Return ........ $1,000.00 $1,020.37 $4.89 0.96%
- -----------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND CLASS A
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
MAY 1, 2007 OCTOBER 31, 2007 DURING PERIOD(1) EXPENSE
- -----------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return ............ $1,000.00 $1,049.80 $5.77 1.12%
Based on Hypothetical 5% Return ........ $1,000.00 $1,019.58 $5.68 1.12%
- -----------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND CLASS C
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
MAY 1, 2007 OCTOBER 31, 2007 DURING PERIOD(1) EXPENSE
- -----------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return ............ $1,000.00 $1,046.50 $9.16 1.78%
Based on Hypothetical 5% Return ........ $1,000.00 $1,016.25 $9.03 1.78%
- -----------------------------------------------------------------------------------------------------------------------
ISI STRATEGY FUND
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
MAY 1, 2007 OCTOBER 31, 2007 DURING PERIOD(1) EXPENSE
- -----------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return ............ $1,000.00 $1,054.50 $5.05 0.98%
Based on Hypothetical 5% Return ........ $1,000.00 $1,020.29 $4.97 0.98%
- -----------------------------------------------------------------------------------------------------------------------
(1) Equals the Fund's annualized expense ratio for the period, multiplied by
the average account value over the period, multiplied by the number of
days in the most recent fiscal half-year, divided by 365 to reflect the
half-year period.
16
- --------------------------------------------------------------------------------
ISI FUNDS (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO PROFILES (AS A % OF NET ASSETS) OCTOBER 31, 2007
TOTAL RETURN US TREASURY FUND
US Treasury Obligations 97.35%
Repurchase Agreements 1.07%
Other Assets in Excess
of Liabilities 1.58%
--------
100.00%
MANAGED MUNICIPAL FUND
Aaa* 76.49%
Aa* 20.28%
Repurchase Agreements 2.56%
Other Assets in Excess
of Liabilities 0.67%
--------
100.00%
* Ratings are based on Moody's Investors, Inc.
NORTH AMERICAN GOVERNMENT BOND FUND
Canadian Securities 8.68%
Mexican Securities 14.87%
US Treasury Securities 75.32%
Repurchase Agreements 0.68%
Other Assets in Excess
of Liabilities 0.45%
--------
100.00%
ISI STRATEGY FUND
Consumer Discretionary 5.14%
Consumer Staples 4.40%
Energy 9.65%
Financials 14.14%
Health Care 11.41%
Industrials 10.55%
Information Technology 16.22%
Materials 3.62%
Telecommunications Services 7.16%
Utilities 3.15%
US Treasury Obligations 12.37%
Repurchase Agreements 5.21%
Liabilities in excess of
other Assets -3.02%
--------
100.00%
17
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2007
INTEREST MATURITY PAR MARKET
SECURITY RATE DATE VALUE VALUE
- --------------------------------------------------------------------------------------------
US TREASURY OBLIGATIONS - 97.35%
US Treasury Bill 4.070%(1) 3/20/08 $ 8,800,000 $ 8,668,757
US Treasury Bond(2) 10.375% 11/15/12 14,250,000 14,283,402
US Treasury Bond 7.625% 2/15/25 11,500,000 15,299,496
US Treasury Bond 6.000% 2/15/26 11,500,000 13,171,100
US Treasury Bond 6.750% 8/15/26 8,250,000 10,226,782
US Treasury Bond 6.375% 8/15/27 21,000,000 25,204,935
US Treasury Note 4.625% 2/29/08 5,000,000 5,010,550
US Treasury Note 5.500% 5/15/09 25,000,000 25,585,950
US Treasury Note 4.125% 8/15/10 3,000,000 3,015,471
US Treasury Note 4.125% 5/15/15 1,000,000 986,172
------------
TOTAL US TREASURY OBLIGATIONS
(COST $ 124,037,635) .................................................. 121,452,615
------------
REPURCHASE AGREEMENT - 1.07%
JPMORGAN CHASE, N.A.
$1,338,000, Dated 10/31/07, 4.100%, principal and interest in the amount
of $1,338,152 due 11/1/07, collaterized by US Treasury Bond,
par value of $995,000 due 5/15/17 with a value of $1,367,143
(Cost $1,338,000) ....................................................... 1,338,000
------------
TOTAL INVESTMENTS - 98.42%
(COST $ 125,375,635)*.................................................. 122,790,615
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.58%.................................. 1,977,462
------------
NET ASSETS - 100.00%........................................................... $124,768,077
============
- --------------------------------------------------------------------------------
(1) Annualized yield at time of purchase, not a coupon rate.
(2) Bond callable at par on 11/15/2007.
* Cost for Federal income tax purpose is $125,375,635 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation...................... $ 257,195
Gross Unrealized Depreciation...................... (2,842,215)
-----------
Net Unrealized Depreciation........................ $(2,585,020)
===========
See Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2007
RATINGS
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P)(1) VALUE VALUE
- -------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 96.77%
GENERAL OBLIGATIONS - 64.82%
Alexandria, VA, Capital Improvements ............. 4.250% 6/15/21 Aaa/AAA $ 3,300,000 $ 3,314,058
Arlington County, VA,
State Aid Withholding .......................... 4.500% 1/15/28 Aaa/AAA 2,000,000 2,007,720
Arlington County, VA,
State Aid Withholding .......................... 5.000% 10/1/14 Aaa/AAA 1,080,000 1,104,818
Cary, NC ......................................... 5.000% 3/1/18 Aaa/AAA 2,000,000 2,111,920
Dallas, TX ....................................... 4.000% 2/15/16 Aa1/AA+ 2,450,000 2,461,687
Delaware State, Series A ......................... 4.200% 1/1/20 Aaa/AAA 1,675,000 1,680,326
Du Page County, Il, Jail Project ................. 5.600% 1/1/21 Aaa/AAA 1,600,000 1,794,496
Florida State, Board of Education,
Public Education, Series I ..................... 4.125% 6/1/21 Aa1/AAA 3,000,000 2,919,510
Georgia State, Series G .......................... 4.125% 10/1/23 Aaa/AAA 2,000,000 1,958,320
Henrico County, VA,
Public Improvement ............................. 4.250% 7/15/24 Aaa/AAA 2,830,000 2,806,766
Maryland State, Capital Improvements,
Series A ....................................... 4.000% 2/15/20 Aaa/AAA 4,000,000 3,959,600
Mecklenburg County, NC,
Public Improvements, Series A .................. 4.000% 2/1/20 Aaa/AAA 3,000,000 2,966,910
Mecklenburg County, NC,
Public Improvements, Series A .................. 4.250% 2/1/19 Aaa/AAA 2,000,000 2,019,120
Minnesota State .................................. 5.500% 6/1/18 Aa1/AAA 2,000,000 2,092,620
Missouri State, Fourth State Building,
Series A ....................................... 4.125% 10/1/19 Aaa/AAA 2,000,000 2,007,900
Montgomery County, MD,
Public Improvements, Series A .................. 4.000% 5/1/21 Aaa/AAA 2,450,000 2,408,571
Salt Lake City, UT, School District,
School Board Guaranty, Series A ................ 4.500% 3/1/20 Aaa/NR 2,240,000 2,276,512
South Carolina State, Highway,
Series B ....................................... 5.000% 4/1/19 Aaa/AA+ 1,000,000 1,047,920
Virginia State, Series B ......................... 4.250% 6/1/26 Aaa/AAA 1,500,000 1,472,520
Washington State, Series F ....................... 4.500% 7/1/27 Aa1/AA+ 2,500,000 2,472,525
Washington, MD, Suburban Sanitation
District, Water Supply ......................... 4.250% 6/1/26 Aaa/AAA 2,500,000 2,457,325
-----------
47,341,144
-----------
OTHER REVENUE - 4.13%
Texas, Water Development Board
Revenue, State Revolving Fund - Senior
Lien, Series A ................................. 4.750% 7/15/20 Aaa/AAA 3,000,000 3,017,940
-----------
See Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2007
RATINGS
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P)(1) VALUE VALUE
- -------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 96.77% (CONTINUED)
PREREFUNDED ISSUES - 27.82%
Arlington County, VA, 10/1/08 @ 101,
State Aid Withholding ............................. 5.000% 10/1/14 Aaa/AAA $ 920,000 $ 942,190
Charlotte, NC, Water & Sewer
System Revenue, 6/1/09 @ 101 ...................... 5.250% 6/1/24 Aa1/AAA 1,600,000 1,660,240
Chesterfield County, VA,
1/15/10 @ 100 ..................................... 5.625% 1/15/14 Aaa/AAA 1,350,000 1,413,085
Chesterfield County, VA,
1/15/11 @ 100 ..................................... 5.000% 1/15/20 Aaa/AAA 1,000,000 1,045,830
Florida State, Board of Education,
Public Education Capital Outlay,
Series A, 6/1/10 @ 101 ............................ 5.125% 6/1/21 Aaa/AAA 1,000,000 1,050,820
Georgia State, Series D, Refundable
Balance, 10/01/10 @ 100 ........................... 5.000% 10/1/17 Aaa/AAA 390,000 407,012
Guilford County, NC, Series B,
10/1/10 @ 102 ..................................... 5.250% 10/1/16 Aa1/AAA 3,000,000 3,206,730
Gwinnett County, GA, Water &
Sewer Authority, 8/1/12 @ 100...................... 5.250% 8/1/24 Aaa/AAA 1,500,000 1,612,170
Missouri State, Fourth State Building,
Series A, 6/1/08 @ 100 ............................ 5.000% 6/1/23 Aaa/AAA 2,000,000 2,018,220
North Carolina State, Public School
Building, 4/1/09 @ 102 ............................ 4.600% 4/1/17 Aaa/AAA 5,000,000 5,177,150
South Carolina State, State Institutional,
Series A, 3/1/10 @ 101 ............................ 5.300% 3/1/17 Aaa/AA+ 1,700,000 1,787,295
-----------
20,320,742
-----------
TOTAL MUNICIPAL BONDS
COST ($68,768,230) .................................................................................. $70,679,826
-----------
REPURCHASE AGREEMENT - 2.56%
JPMORGAN CHASE, N.A.
$1,868,000, Dated 10/31/07, 4.100%, principal and interest in the amount of $ 1,868,213
due 11/1/07, collaterized by US Treasury Bond, par value of $1,390,000
due 5/15/17 with a value of $1,909,879 (Cost $ 1,868,000) ............................................ $ 1,868,000
-----------
TOTAL INVESTMENTS - 99.33%
(COST $ 70,636,230)* ................................................................................. $72,547,826
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.67% .............................................................. 490,117
-----------
NET ASSETS - 100.00% ....................................................................................... $73,037,943
===========
See Notes to Financial Statements.
20
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2007
- --------------------------------------------------------------------------------
(1) Moody's Municipal Bond Ratings:
Aaa Judged to be of the best quality
Aa Judged to be of high quality by all standards. Issues are
sometimes denoted with a 1, 2 or 3, which denote a high,
medium or low ranking within the rating.
S&P Municipal Bond Ratings:
AAA Of the highest quality.
AA The second strongest capacity for payment of debt services.
Those issues determined to possess very strong safety
characteristics are denoted with a plus (+) sign.
NR Not rated
Prerefunded: Bonds which are prerefunded are collateralized usually by US
Treasury securities which are held in escrow and are used to pay principal
and interest on tax-exempt issues and to retire the bonds in full at the
earliest refunding date.
* Cost for Federal income tax purpose is $70,636,230 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation..................... $ 2,089,238
Gross Unrealized Depreciation..................... (177,642)
-----------
Net Unrealized Appreciation ...................... $ 1,911,596
===========
21
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2007
INTEREST MATURITY PAR/NOMINAL MARKET
SECURITY RATE DATE VALUE(1) VALUE
- -----------------------------------------------------------------------------------------------
CANADIAN SECURITIES - 8.68%
Canadian Government Bond 4.000% 6/1/17 C 12,500,000 $ 12,899,555
------------
TOTAL CANADIAN SECURITIES
(COST $12,599,747) ..................................................... $ 12,899,555
------------
MEXICAN SECURITIES - 14.87%
Mexican Bono(2) 9.000% 12/22/11 P 80,322,900 $ 7,884,255
Mexican Bono(2) 9.000% 12/20/12 31,782,400 3,129,949
Mexican Bono(2) 8.000% 12/24/08 47,062,400 4,429,480
Mexican Bono(2) 8.000% 12/17/15 48,717,000 4,602,345
Mexican Bono(2) 7.250% 12/15/16 22,700,000 2,043,468
------------
TOTAL MEXICAN SECURITIES
(COST $21,296,293) ..................................................... $ 22,089,497
------------
US TREASURY SECURITIES - 75.32%
US Treasury Bill 4.070%(3) 3/20/08 $ 14,500,000 $ 14,283,747
US Treasury Bond 3.250% 8/15/08 5,500,000 5,463,480
US Treasury Bond 3.125% 9/15/08 2,000,000 1,984,376
US Treasury Bond 7.625% 2/15/25 10,100,000 13,436,949
US Treasury Bond 6.000% 2/15/26 2,000,000 2,290,626
US Treasury Bond 6.750% 8/15/26 10,250,000 12,706,003
US Treasury Bond 6.375% 8/15/27 15,600,000 18,723,666
US Treasury Note 3.000% 2/15/08 9,100,000 9,075,121
US Treasury Note 4.625% 2/29/08 500,000 501,055
US Treasury Note 5.000% 2/15/11 19,500,000 20,139,854
US Treasury Note 4.125% 5/15/15 10,500,000 10,354,806
US Treasury Note 4.750% 8/15/17 2,900,000 2,964,798
------------
TOTAL US TREASURY SECURITIES
(COST $114,088,813) .................................................... $111,924,481
------------
See Notes to Financial Statements.
22
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2007
MARKET
SECURITY VALUE
- --------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 0.68%
JPMORGAN CHASE, N.A.
$1,011,000, Dated 10/31/07, 4.100%, principal and interest in the amount
of $1,011,115 due 11/1/07, collaterized by US Treasury Bond,
par value of $755,000 due 5/15/17 with a value of $1,037,380
(Cost $1,011,000) ......................................................... $ 1,011,000
------------
TOTAL INVESTMENTS -99.55%
(COST $ 148,995,853)* ..................................................... $147,924,533
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.45% ..................................... 671,952
------------
NET ASSETS - 100.00% .............................................................. $148,596,485
============
- --------------------------------------------------------------------------------
(1) Par Value is shown in local currency: Canadian dollars (C), Mexican pesos
(P) and US dollars ($).
(2) Bonos are fixed rate, local currency-denominated coupon bonds issued by
the Mexican government.
(3) Annualized yield at time of purchase, not a coupon rate.
* Cost for Federal income tax purpose is $148,995,853 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation.................... $ 1,453,416
Gross Unrealized Depreciation.................... (2,524,736)
-----------
Net Unrealized Depreciation...................... $(1,071,320)
===========
See Notes to Financial Statements.
23
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS OCTOBER 31, 2007
MARKET
SECURITY SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS - 85.44%
CONSUMER DISCRETIONARY - 5.14%
Acco Brands Corp.* 2,908 $ 62,348
Amazon.com, Inc.* 6,000 534,900
Bed Bath & Beyond, Inc.* 200 6,788
Best Buy Co., Inc. 456 22,125
Copart, Inc.* 5,000 191,900
DreamWorks Animation SKG* 3,439 111,974
Expedia, Inc.* 2,543 83,054
Genuine Parts Co. 1,450 71,151
Johnson Controls, Inc. 9,360 409,219
Liz Claiborne, Inc. 1,600 45,552
McDonald's Corp. 10,000 597,000
Nexcen Brands, Inc.* 5,000 30,700
Office Depot, Inc.* 100 1,876
Regis Corp. 4,211 141,490
Rent-A-Center, Inc.* 4,460 71,360
Revlon, Inc. - Class A* 30,000 34,500
Sears Holdings Corp.* 11,200 1,509,648
Target Corp. 1,198 73,509
WABCO Holdings, Inc. 649 32,982
WESCO International, Inc.* 1,093 50,988
Weight Watchers
International, Inc. 160 8,198
Whirlpool Corp. 600 47,508
-----------
4,138,770
-----------
CONSUMER STAPLES - 4.40%
Altria Group, Inc. 2,171 158,331
Bunge, Ltd. 4,276 492,552
Burger King Holdings, Inc. 5,000 132,200
Coca-Cola Co. 5,000 308,800
Costco Wholesale Corp. 2,860 192,364
Hansen Natural Corp.* 5,000 340,000
Pepsico, Inc. 1,284 94,656
Pilgrim's Pride Corp. 9,119 270,834
Procter & Gamble Co. 10,644 739,971
Sally Beauty Holdings, Inc.* 10,000 92,500
Sara Lee Corp. 300 4,962
Smithfield Foods, Inc.* 2,373 68,034
Wal-Mart Stores, Inc. 14,266 644,966
Williams Scotsman International* 39 1,101
-----------
3,541,271
-----------
ENERGY - 9.65%
Chevron Corp. 9,328 853,605
ConocoPhillips 8,650 734,904
Exterran Holdings, Inc.* 1,000 84,200
Exxon Mobil Corp. 26,424 2,430,744
GlobalSantaFe Corp. 10,000 810,300
Halliburton Co. 5,000 197,100
Hess Corp. 3,439 246,267
Marathon Oil Corp. 9,000 532,170
Mariner Energy, Inc.* 94 2,350
National Oilwell Varco, Inc.* 10,000 732,400
Reliant Resources, Inc.* 4,417 121,556
Williams Cos., Inc. 28,100 1,025,369
-----------
7,770,965
-----------
FINANCIALS - 14.14%
American International
Group, Inc. 10,500 662,760
Aon Corp. 17,000 770,440
Bank of America Corp. 4,722 227,978
Bank of New York
Mellon Corp. (The) 842 41,132
Bear Stearns Cos. 220 24,992
Blackrock, Inc.- Class A 2,240 463,568
Boston Properties, Inc. 5,100 552,534
Charles Schwab Corp. 14,100 327,684
Citigroup, Inc. 12,702 532,214
CME Group, Inc. 800 533,000
Commerce Bancorp, Inc. 4,540 185,005
Discover Financial
Services, LLC 6,240 120,432
E*TRADE Financial Corp.* 600 6,684
Fidelity National Financial, Inc. 635 9,773
Goldman Sachs Group, Inc. 5,000 1,239,600
Heartland Payment Systems, Inc. 8,000 240,000
Host Hotels & Resorts, Inc. 5,200 115,232
Lehman Brothers Holdings, Inc. 10,800 684,072
Liberty Media Corp - Series A* 379 47,367
Loews Corp. 13,000 638,170
Marsh & McLennan Cos., Inc. 26,363 682,538
Merrill Lynch & Co. 6,120 404,042
MetLife, Inc. 10,000 688,500
Moody's Corp. 6,974 304,903
Old Republic International Corp. 187 2,867
See Notes to Financial Statements.
24
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2007
MARKET
SECURITY SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS - 85.44% (CONTINUED)
FINANCIALS - 14.14% (CONTINUED)
PMI Group, Inc. 1,200 $ 19,236
Prudential Financial, Inc. 5,000 483,600
Public Storage, Inc. 5,186 419,910
Radian Group, Inc. 200 2,518
Regions Financial Corp. 546 14,808
SEI Investments Co. 6,400 202,368
State Street Corp. 300 23,931
Torchmark Corp. 200 13,032
Travelers Cos., Inc. (The) 100 5,221
US Bancorp 2,473 82,005
UnionBanCal Corp. 3,582 193,464
UnumProvident Corp. 18,038 421,007
Zions Bancorp. 100 5,911
-----------
11,392,498
-----------
HEALTH CARE - 11.41%
Abbott Laboratories 4,335 236,778
Aetna, Inc. 5,400 303,318
Allergan, Inc. 420 28,384
Amerisourcebergen Corp. 10,000 471,100
Amgen, Inc.* 7,300 424,203
Baxter International, Inc. 500 30,005
Beckman Coulter, Inc. 100 7,082
Biogen Idec, Inc.* 1,000 74,440
Bristol-Myers Squibb Co. 2,247 67,388
CIGNA Corp. 8,046 422,335
Covance, Inc.* 5,000 412,500
CV Therapeutics, Inc.* 5,000 51,200
Eli Lilly & Co. 2,396 129,743
Express Scripts, Inc.* 5,000 315,500
Forest Laboratories, Inc.* 10,000 390,700
Genentech, Inc.* 6,324 468,798
Genzyme Corp.* 5,000 379,850
Indevus Pharmaceuticals, Inc.* 5,000 38,500
Johnson & Johnson 12,606 821,533
Landauer, Inc. 700 34,489
McKesson Corp. 4,700 310,670
Medtronic, Inc. 2,670 126,665
OSI Pharmaceuticals, Inc.* 5,000 207,850
Owens & Minor, Inc. 10,000 405,400
PerkinElmer, Inc. 1,000 27,520
Pfizer, Inc. 56,763 1,396,937
PharMerica Corp.* 833 13,286
Schering-Plough Corp. 4,500 137,340
Sirona Dental Systems, Inc.* 5,000 168,200
Unitedhealth Group, Inc. 6,548 321,834
WellPoint, Inc.* 10,000 792,300
Wyeth 3,630 176,527
-----------
9,192,375
-----------
INDUSTRIALS - 10.55%
3M Co. 2,400 207,264
AGCO Corp.* 5,800 346,144
Boeing Corp. 7,730 762,101
Briggs & Stratton Corp. 2,925 65,842
Caterpillar, Inc. 3,220 240,244
EDO Corp. 17,000 986,000
Entegris, Inc.* 1,444 13,184
FTI Consulting, Inc.* 1,000 54,300
General Electric Co. 25,234 1,038,631
Goodrich Corp. 1,100 76,626
Hewitt Associates. Inc. Class - A* 2,940 103,723
Honeywell International, Inc. 3,500 211,435
Illinois Tool Works, Inc. 4,438 254,120
International Rectifier Corp.* 1,000 33,380
Manitowoc Co., Inc. 14,000 689,640
Northrop Grumman Corp. 10,000 836,200
Owens-Illinois, Inc.* 9,500 421,990
ProLogis 5,000 358,700
Rockwell Automation, Inc. 3,439 236,878
Textron, Inc. 9,600 664,416
Timken Co. 12,900 429,054
TRW Automotive
Holdings Corp.* 8,000 237,520
United Technologies Corp. 3,000 229,770
-----------
8,497,162
-----------
INFORMATION TECHNOLOGY - 16.22%
Agilent Technologies, Inc.* 5,105 188,119
Akamai Technologies, Inc.* 5,000 195,950
Apple, Inc.* 5,848 1,110,828
Broadcom Corp. - Class A* 6,950 226,223
Checkfree Corp.* 1,800 85,554
Cisco Systems, Inc.* 40,857 1,350,732
See Notes to Financial Statements.
25
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2007
MARKET
SECURITY SHARES VALUE
- -------------------------------------------------------------------------------
COMMON STOCKS - 85.44% (CONTINUED)
INFORMATION TECHNOLOGY - 16.22% (CONTINUED)
Computer Sciences Corp.* 15,000 $ 875,850
Diebold, Inc. 10,000 418,400
eBay, Inc.* 2,840 102,524
Electronic Arts, Inc* 10,000 611,200
Electronic Data Systems Corp. 33,000 712,470
Electronics for Imaging, Inc.* 5,000 114,000
eSpeed, Inc.* 1,544 15,687
Fidelity National Information
Services, Inc. 279 12,868
Google, Inc.* 2,200 1,555,400
Hewlett-Packard Co. 10,000 516,800
Integrated Device
Technology, Inc.* 10,000 134,300
Intel Corp. 3,674 98,831
International Business
Machines Corp. 13,422 1,558,563
Juniper Networks, Inc.* 1,795 64,620
LSI Logic Corp.* 20,000 132,000
Microsoft Corp. 30,146 1,109,674
MIPS Technologies, Inc.* 3,000 23,700
Move, Inc.* 20,000 50,800
NCR Corp.* 10,000 275,900
Seagate Technology 2,700 75,168
Skyworks Solutions, Inc.* 7,900 72,838
Sun Microsystems, Inc.* 43,560 248,728
Synopsys, Inc.* 630 17,804
Teradata Corp.* 10,000 285,300
Texas Instruments, Inc. 10,000 326,000
VeriSign, Inc.* 1,400 47,726
Volterra Semiconductor Corp.* 3,000 36,870
Yahoo!, Inc.* 9,481 294,859
Zoran Corp.* 4,600 117,300
-----------
13,063,586
-----------
MATERIALS - 3.62%
AK Steel Holding Corp.* 30,448 1,526,358
Ashland, Inc. 10,000 587,200
FMC Corp. 2,700 155,250
International Flavors
& Fragrance, Inc. 11,500 600,415
Symyx Technologies, Inc.* 5,000 46,050
-----------
2,915,273
-----------
TELECOMMUNICATIONS SERVICES - 7.16%
Alaska Communications
Systems Group, Inc. 2,449 39,845
Alltel Corp. 5,377 382,574
AT&T, Inc. 31,439 1,313,836
Cablevision System, Inc.- NY* 7,000 205,310
Centennial Communications
Corp.* 5,000 51,200
Charter Communications, Inc.* 19,000 39,330
DirecTV Group, Inc.* 5,000 132,400
Dobson Communications Corp.* 3,000 38,820
FiberTower Corp.* 5,000 15,800
Getty Images, Inc.* 10,000 282,500
IAC/InterActive Corp.* 9,600 282,816
Interpublic Group of Cos., Inc.* 1,900 19,665
McGraw-Hill Companies 600 30,024
New York Times Co.(The) 10,000 195,600
News Corp. - Class A 604 13,089
Qwest Communications
International, Inc.* 19,900 142,882
R.H. Donnelly Corp.* 1,400 76,790
Time Warner, Inc. 23,844 435,391
Verizon Communications, Inc. 40,888 1,883,711
Vonage Holdings Corp.* 15,000 30,600
XM Satellite Radio
Holdings, Inc.* 11,323 150,369
-----------
5,762,552
-----------
UTILITIES - 3.15%
AES Corp.* 5,000 107,050
Alleghany Energy, Inc. 7,200 436,752
American Electric
Power Co., Inc. 5,345 257,682
CMS Energy Corp. 4,060 68,898
Consolidated Edison, Inc. 4,200 197,778
Dominion Resources, Inc. VA 3,400 311,542
Exelon Corp. 6,711 555,537
Integrys Energy Group, Inc. 10,987 591,210
PPL Corp. 186 9,616
-----------
2,536,065
-----------
TOTAL COMMON STOCKS
(COST $53,131,587) $68,810,517
-----------
See Notes to Financial Statements.
26
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) OCTOBER 31, 2007
INTEREST MATURITY PAR MARKET
SECURITY RATE DATE VALUE VALUE
- --------------------------------------------------------------------------------------------------
US TREASURY OBLIGATIONS - 12.37%
US Treasury Bill 4.070%(1) 3/20/08 $ 700,000 $ 689,560
US Treasury Bill 4.030%(1) 5/1/08 2,500,000 2,450,165
US Treasury Bond 9.250% 2/15/16 500,000 666,915
US Treasury Bond 6.000% 2/15/26 1,000,000 1,145,313
US Treasury Bond 6.750% 8/15/26 3,050,000 3,780,810
US Treasury Bond 6.375% 8/15/27 200,000 240,047
US Treasury Note 3.875% 10/31/12 1,000,000 987,188
-----------
TOTAL US TREASURY OBLIGATIONS
(COST $9,700,422) $ 9,959,998
-----------
REPURCHASE AGREEMENT - 5.21%
JPMORGAN CHASE, N.A.
$4,197,000, Dated 10/31/07, 4.100%, principal and interest in the amount of
$4,197,478 due 11/1/07, collaterized by US Treasury Bond, par value
of $3,120,000 due 5/15/17 with a value of $4,286,922
(Cost $4,197,000) ............................................................ $ 4,197,000
-----------
TOTAL INVESTMENTS - 103.02%
(COST $ 67,029,009)** ........................................................ $82,967,515
LIABILITIES IN EXCESS OF OTHER ASSETS - (3.02%) .................................... (2,432,269)
-----------
NET ASSETS - 100.00% ............................................................... $80,535,246
===========
- -------------------------------------------------------------------------------
(1) Annualized yield at time of purchase, not a coupon rate.
* Non-income producing.
** Cost for Federal income tax purpose is $67,126,717 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation.................... $18,294,717
Gross Unrealized Depreciation.................... (2,453,919)
-----------
Net Unrealized Appreciation...................... $15,840,798
===========
See Notes to Financial Statements.
27
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES OCTOBER 31, 2007
TOTAL RETURN MANAGED
US TREASURY MUNICIPAL
FUND FUND
- ----------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
At cost ............................................ $ 125,375,635 $ 70,636,230
============= =============
At value (Note 1) .................................. $ 122,790,615 $ 72,547,826
Cash ................................................. 792 715
Interest receivable .................................. 2,136,890 847,713
Receivable for capital shares sold ................... 157,263 833
Other assets ......................................... 10,592 7,492
------------- -------------
TOTAL ASSETS ....................................... 125,096,152 73,404,579
------------- -------------
LIABILITIES
Distributions payable ................................ 117,726 101,318
Payable for capital shares redeemed .................. 90,877 179,180
Accrued investment advisory fees (Note 3) ............ 27,718 24,970
Accrued distribution expenses (Note 3) ............... 25,566 15,606
Accrued administration fees (Note 3) ................. 12,500 7,300
Accrued transfer agent fees (Note 3) ................. 3,200 1,000
Accrued compliance fees (Note 3) ..................... 600 900
Other accrued expenses ............................... 49,888 36,362
------------- -------------
TOTAL LIABILITIES .................................. 328,075 366,636
------------- -------------
NET ASSETS .............................................. $ 124,768,077 $ 73,037,943
============= =============
NET ASSETS CONSIST OF:
Paid-in capital ...................................... $ 128,004,292 $ 70,098,330
Undistributed (distributions in excess of)
net investment income .............................. (117,726) 726,011
Accumulated net realized gains (losses)
from security transactions ......................... (533,469) 302,006
Net unrealized appreciation (depreciation)
on investments ..................................... (2,585,020) 1,911,596
------------- -------------
Net assets .............................................. $ 124,768,077 $ 73,037,943
============= =============
Shares of capital stock outstanding $0.001 par value
ISI Shares (115,000,000 and 55,000,000 shares
authorized, respectively) ............................ 13,127,757 6,885,254
============= =============
Net asset value per share ............................... $ 9.50 $ 10.61
============= =============
Maximum offering price per share
(100/97) x Net asset value per share .................... $ 9.79 $ 10.94
============= =============
See Notes to Financial Statements.
28
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES OCTOBER 31, 2007
NORTH AMERICAN ISI
GOVERNMENT BOND STRATEGY
FUND FUND
- ----------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
At cost ............................................ $ 148,995,853 $ 67,029,009
============= =============
At value (Note 1) .................................. $ 147,924,533 $ 82,967,515
Cash ................................................. 126 1,481
Dividends and interest receivable .................... 1,917,316 123,370
Receivable for capital shares sold ................... 287,855 28,151
Other assets ......................................... 11,065 13,239
------------- -------------
TOTAL ASSETS ....................................... 150,140,895 83,133,756
------------- -------------
LIABILITIES
Distributions payable ................................ 272,991 --
Payable for securities purchased ..................... -- 2,450,898
Payable for capital shares redeemed .................. 1,078,393 56,184
Accrued investment advisory fees (Note 3) ............ 50,474 26,939
Accrued distribution expenses (Note 3) ............... 55,399 16,837
Accrued shareholder servicing fees (Note 3) .......... 3,518 --
Accrued administration fees (Note 3) ................. 14,800 7,900
Accrued transfer agent fees (Note 3) ................. 5,200 2,400
Accrued compliance fees (Note 3) ..................... 1,100 600
Other accrued expenses ............................... 62,535 36,752
------------- -------------
TOTAL LIABILITIES .................................. 1,544,410 2,598,510
------------- -------------
NET ASSETS .............................................. $ 148,596,485 $ 80,535,246
============= =============
NET ASSETS CONSIST OF:
Paid-in capital ...................................... $ 150,199,037 $ 60,378,808
Undistributed (distributions in excess of)
net investment income .............................. (272,991) 36,257
Accumulated net realized gains (losses)
from security and foreign currency transactions .... (280,143) 4,181,675
Net unrealized appreciation (depreciation)
on investments and foreign currencies .............. (1,049,418) 15,938,506
------------- -------------
Net assets .............................................. $ 148,596,485 $ 80,535,246
============= =============
See Notes to Financial Statements.
29
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) OCTOBER 31, 2007
NORTH AMERICAN ISI
GOVERNMENT BOND STRATEGY
FUND FUND
- ----------------------------------------------------------------------------------------------------
SHARES OF CAPITAL STOCK
OUTSTANDING $0.001 PAR VALUE
ISI Class A Shares (50,000,000 shares authorized) ........... 17,504,295 --
============= =============
ISI Class C Shares (5,000,000 shares authorized) ............ 2,241,535 --
============= =============
ISI Shares (25,000,000 shares authorized) ................... -- 5,432,929
============= =============
NET ASSET VALUE PER SHARE
ISI Class A Shares (based on net assets of $131,748,269) .... $ 7.53 $ --
============= =============
ISI Class C Shares (based on net assets of $16,848,216) ..... $ 7.52 $ --
============= =============
ISI Shares .................................................. $ -- $ 14.82
============= =============
MAXIMUM OFFERING PRICE VALUE PER SHARE
(100/97) X NET ASSET VALUE PER SHARE
ISI Class A Shares .......................................... $ 7.76 $ --
============= =============
ISI Shares .................................................. $ -- $ 15.28
============= =============
See Notes to Financial Statements.
30
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS YEAR ENDED OCTOBER 31, 2007
TOTAL RETURN MANAGED
US TREASURY MUNICIPAL
FUND FUND
- -------------------------------------------------------------------------------
INVESTMENT INCOME
Interest .................................. $ 6,011,257 $ 3,495,975
------------- -------------
EXPENSES
Investment advisory fees (Note 3) ......... 353,437 310,424
Distribution fees (Note 3) ................ 335,922 194,015
Administration fees (Note 3) .............. 152,223 88,190
Professional fees ......................... 89,573 71,113
Transfer agent fees (Note 3) .............. 35,005 10,749
Registration fees ......................... 24,304 23,756
Directors' fees and expenses .............. 17,077 9,686
Custodian fees ............................ 15,115 12,898
Compliance consulting fees (Note 3) ....... 8,892 6,039
Other expenses ............................ 32,321 778
------------- -------------
TOTAL EXPENSES .......................... 1,063,869 727,648
------------- -------------
NET INVESTMENT INCOME ........................ 4,947,388 2,768,327
------------- -------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
Net realized gains (losses) from
security transactions ................... (533,469) 302,012
Net change in unrealized appreciation/
depreciation on investments ............. 1,546,328 (1,359,099)
------------- -------------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS ............. 1,012,859 (1,057,087)
------------- -------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS .......................... $ 5,960,247 $ 1,711,240
============= =============
See Notes to Financial Statements.
31
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS YEAR ENDED OCTOBER 31, 2007
NORTH AMERICAN ISI
GOVERNMENT BOND STRATEGY
FUND FUND
- --------------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends ................................................. $ -- $ 942,817
Interest .................................................. 6,970,232 696,896
------------- -------------
TOTAL INVESTMENT INCOME ............................... 6,970,232 1,639,713
------------- -------------
EXPENSES
Investment advisory fees (Note 3) ......................... 599,920 301,428
Distribution fees:
ISI Class A Shares ...................................... 537,109 --
ISI Class C Shares ...................................... 117,770 --
ISI Shares .............................................. -- 188,392
Administration fees (Note 3) .............................. 170,217 85,700
Transfer agent fees:
ISI Class A Shares ...................................... 48,323 --
ISI Class C Shares ...................................... 5,933 --
ISI Shares .............................................. -- 23,423
Professional fees ......................................... 106,400 65,369
Shareholder servicing fees:
ISI Class C Shares ...................................... 39,257 --
Registration fees ......................................... -- 21,567
ISI Class A Shares ...................................... 21,961 --
ISI Class C Shares ...................................... 9,616 --
Custodian fees ............................................ 20,213 9,313
Directors' fees and expenses .............................. 18,740 9,392
Compliance consulting fees (Note 3) ....................... 10,961 5,350
Other expenses ............................................ 53,524 15,973
------------- -------------
TOTAL EXPENSES ........................................ 1,759,944 725,907
------------- -------------
NET INVESTMENT INCOME ........................................ 5,210,288 913,806
------------- -------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTE 5)
Net realized gains from:
Security transactions ................................. 1,459,162 4,355,339
Foreign currency transactions ......................... 134,346 --
Net change in unrealized appreciation/depreciation on:
Investments ........................................... 2,639,640 4,419,629
Foreign currency translation .......................... 14,441 --
------------- -------------
NET REALIZED AND UNREALIZED GAINS ON
INVESTMENTS AND FOREIGN CURRENCIES ...................... 4,247,589 8,774,968
------------- -------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ........................................... $ 9,457,877 $ 9,688,774
============= =============
See Notes to Financial Statements.
32
- --------------------------------------------------------------------------------
ISI TOTAL RETURN US TREASURY FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
- ----------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ...................................... $ 4,947,388 $ 5,290,628
Net realized gains (losses) on
security transactions .................................... (533,469) 520,514
Net change in unrealized appreciation/
depreciation on investments .............................. 1,546,328 1,328,795
------------- -------------
Net increase in net assets from operations .................... 5,960,247 7,139,937
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................................. (4,897,087) (5,796,709)
From net realized gains from security transactions ......... (12,992) --
From return of capital ..................................... (104,188) --
------------- -------------
Net decrease in net assets from
distributions to shareholders .............................. (5,014,267) (5,796,709)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................................. 6,319,187 21,219,446
Net asset value of shares issued in reinvestment.
of distributions to shareholders ......................... 3,348,275 3,868,677
Payments for shares redeemed ............................... (39,629,589) (38,620,829)
------------- -------------
Net decrease in net assets from capital share transactions .... (29,962,127) (13,532,706)
------------- -------------
TOTAL DECREASE IN NET ASSETS .................................. (29,016,147) (12,189,478)
NET ASSETS
Beginning of year .......................................... 153,784,224 165,973,702
------------- -------------
End of year ................................................ $ 124,768,077 $ 153,784,224
============= =============
DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME ...................................... $ (117,726) $ (168,027)
============= =============
CAPITAL SHARE ACTIVITY
Shares sold ................................................ 675,464 2,295,735
Shares reinvested .......................................... 356,856 417,867
Shares redeemed ............................................ (4,234,096) (4,176,347)
------------- -------------
Net decrease in shares outstanding ......................... (3,201,776) (1,462,745)
Shares outstanding, beginning of year ...................... 16,329,533 17,792,278
------------- -------------
Shares outstanding, end of year ............................ 13,127,757 16,329,533
============= =============
See Notes to Financial Statements.
33
- --------------------------------------------------------------------------------
ISI MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
- --------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ...................................... $ 2,768,327 $ 3,148,701
Net realized gains on security transactions ................ 302,012 720,970
Net change in unrealized appreciation/
depreciation on investments .............................. (1,359,099) 57,308
------------ ------------
Net increase in net assets from operations .................... 1,711,240 3,926,979
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................................. (2,444,322) (2,715,401)
From net realized gains from security transactions ......... (720,919) (289,342)
------------ ------------
Net decrease in net assets from
distributions to shareholders .............................. (3,165,241) (3,004,743)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................................. 3,715,876 3,859,303
Net asset value of shares issued in reinvestment
of distributions to shareholders ......................... 1,836,701 1,631,474
Payments for shares redeemed ............................... (13,940,935) (17,559,432)
------------ ------------
Net decrease in net assets from capital share transactions .... (8,388,358) (12,068,655)
------------ ------------
TOTAL DECREASE IN NET ASSETS .................................. (9,842,359) (11,146,419)
NET ASSETS
Beginning of year .......................................... 82,880,302 94,026,721
------------ ------------
End of year ................................................ $ 73,037,943 $ 82,880,302
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ........................... $ 726,011 $ 402,006
============ ============
CAPITAL SHARE ACTIVITY
Shares sold ................................................ 350,339 361,229
Shares reinvested .......................................... 172,566 152,711
Shares redeemed ............................................ (1,310,969) (1,645,396)
------------ ------------
Net decrease in shares outstanding ......................... (788,064) (1,131,456)
Shares outstanding, beginning of year ...................... 7,673,318 8,804,774
------------ ------------
Shares outstanding, end of year ............................ 6,885,254 7,673,318
============ ============
See Notes to Financial Statements.
34
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
- -------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................... $ 5,210,288 $ 6,117,369
Net realized gains on security and
foreign currency transactions ........................ 1,593,508 1,386,451
Net change in unrealized appreciation/
depreciation on investments and foreign currencies .... 2,654,081 2,411,650
------------- -------------
Net increase in net assets from operations ................. 9,457,877 9,915,470
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income
ISI Class A Shares .................................... (6,373,815) (6,717,243)
ISI Class C Shares .................................... (652,731) (523,270)
From net realized gains from security transactions
ISI Class A Shares .................................... -- (203,699)
ISI Class C Shares .................................... -- (21,643)
From return of capital
ISI Class A Shares .................................... (156,882) (1,071,732)
ISI Class C Shares .................................... (16,066) (113,868)
------------- -------------
Net decrease in net assets from
distributions to shareholders ........................... (7,199,494) (8,651,455)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold
ISI Class A Shares .................................... 17,184,282 23,115,736
ISI Class C Shares .................................... 3,349,326 3,159,574
Net asset value of shares issued in reinvestment
of distributions to shareholders
ISI Class A Shares .................................... 3,218,998 4,001,123
ISI Class C Shares .................................... 397,242 345,590
Payments for shares redeemed
ISI Class A Shares .................................... (37,507,806) (58,492,446)
ISI Class C Shares .................................... (2,737,227) (4,005,443)
------------- -------------
NET DECREASE IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS .............................. (16,095,185) (31,875,866)
------------- -------------
TOTAL DECREASE IN NET ASSETS ............................... (13,836,802) (30,611,851)
NET ASSETS
Beginning of year ....................................... 162,433,287 193,045,138
------------- -------------
End of year ............................................. $ 148,596,485 $ 162,433,287
============= =============
DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME ................................... $ (272,991) $ (330,384)
============= =============
See Notes to Financial Statements.
35
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
- -------------------------------------------------------------------------------------------
CAPITAL SHARE ACTIVITY
Shares sold
ISI Class A Shares ............................. 2,336,309 3,159,317
ISI Class C Shares ............................. 454,890 431,786
Shares reinvested
ISI Class A Shares ............................. 437,899 546,407
ISI Class C Shares ............................. 54,106 47,323
Shares redeemed
ISI Class A Shares ............................. (5,097,813) (8,017,963)
ISI Class C Shares ............................. (374,116) (549,102)
Net increase (decrease) in shares outstanding
ISI Class A Shares ............................. (2,323,605) (4,312,239)
ISI Class C Shares ............................. 134,880 (69,993)
Shares outstanding, beginning of year
ISI Class A Shares ............................. 19,827,900 24,140,139
ISI Class C Shares ............................. 2,106,655 2,176,648
Shares outstanding, end of year
ISI Class A Shares ............................. 17,504,295 19,827,900
ISI Class C Shares ............................. 2,241,535 2,106,655
See Notes to Financial Statements.
36
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
YEAR YEAR
ENDED ENDED
OCTOBER 31, OCTOBER 31,
2007 2006
- ----------------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ...................................... $ 913,806 $ 773,684
Net realized gains on security transactions ................ 4,355,339 3,910,226
Net change in unrealized appreciation/
depreciation on investments .............................. 4,419,629 3,289,965
------------- -------------
Net increase in net assets from operations .................... 9,688,774 7,973,875
------------- -------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income ................................. (913,710) (765,946)
From net realized gains from security transactions ......... (1,880,666) --
------------- -------------
Net decrease in net assets from
distributions to shareholders .............................. (2,794,376) (765,946)
------------- -------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold .................................. 11,950,032 13,419,552
Net asset value of shares issued in reinvestment
of distributions to shareholders ......................... 2,410,919 651,658
Payments for shares redeemed ............................... (10,158,032) (12,046,141)
------------- -------------
Net increase in net assets from capital share transactions .... 4,202,919 2,025,069
------------- -------------
TOTAL INCREASE IN NET ASSETS .................................. 11,097,317 9,232,998
NET ASSETS
Beginning of year .......................................... 69,437,929 60,204,931
------------- -------------
End of year ................................................ $ 80,535,246 $ 69,437,929
============= =============
UNDISTRIBUTED NET INVESTMENT INCOME ........................... $ 36,257 $ 36,161
============= =============
CAPITAL SHARE ACTIVITY
Shares sold ................................................ 850,502 1,052,202
Shares reinvested .......................................... 175,991 50,673
Shares redeemed ............................................ (723,124) (941,380)
------------- -------------
Net increase in shares outstanding ......................... 303,369 161,495
Shares outstanding, beginning of year ...................... 5,129,560 4,968,065
------------- -------------
Shares outstanding, end of year ............................ 5,432,929 5,129,560
============= =============
See Notes to Financial Statements.
37
- --------------------------------------------------------------------------------
ISI TOTAL RETURN US TREASURY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEARS ENDED OCTOBER 31,
---------------------------------------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year .................. $ 9.42 $ 9.33 $ 9.57 $ 9.92 $ 10.18
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income .............. 0.35(a) 0.32(a) 0.29(a) 0.24(a) 0.23
Net realized and unrealized gains
(losses) on investments .......... 0.08 0.12 (0.16) 0.19 0.01
----------- ----------- ----------- ----------- -----------
Total from investment operations ..... 0.43 0.44 0.13 0.43 0.24
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.34) (0.35) (0.25) (0.23) (0.25)
Distributions from net
realized gains ................... (0.00)* -- (0.03) (0.33) (0.25)
Distributions from
return of capital ................ (0.01) -- (0.09) (0.22) --
----------- ----------- ----------- ----------- -----------
Total distributions .................. (0.35) (0.35) (0.37) (0.78) (0.50)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ....... $ 9.50 $ 9.42 $ 9.33 $ 9.57 $ 9.92
=========== =========== =========== =========== ===========
TOTAL RETURN (b) ..................... 4.66% 4.83% 1.38% 4.64% 2.30%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) .... $ 124,768 $ 153,784 $ 165,974 $ 194,790 $ 229,027
=========== =========== =========== =========== ===========
Ratio of expenses to
average net assets ................. 0.79% 0.76%(c) 0.70% 0.69% 0.67%
Ratio of net investment income to
average net assets ................. 3.68% 3.44%(c) 3.01% 2.56% 2.50%
Portfolio turnover rate .............. 29% 51% 16% 31% 125%
- --------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the year.
(b) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. Returns do not reflect
the deduction of taxes a shareholder would pay on Fund distributions or
the redemption of Fund shares.
(c) The ratios of expenses and net investment income to average net assets
were unaffected by the waiver of distribution fees during the fiscal year
ended October 31, 2006.
* Amount less than $0.005 per share.
See Notes to Financial Statements.
38
- --------------------------------------------------------------------------------
ISI MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEARS ENDED OCTOBER 31,
-------------------------------------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year .................... $ 10.80 $ 10.68 $ 10.91 $ 10.89 $ 11.00
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income ................ 0.38(a) 0.39(a) 0.40(a) 0.38(a) 0.40
Net realized and unrealized gains
(losses) on investments. ........... (0.14) 0.10 (0.27) 0.08 0.01
----------- ----------- ----------- ----------- -----------
Total from investment operations ....... 0.24 0.49 0.13 0.46 0.41
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net
investment income .................. (0.34) (0.34) (0.36) (0.44) (0.47)
Distributions from net
realized gains ..................... (0.09) (0.03) -- -- (0.05)
----------- ----------- ----------- ----------- -----------
Total distributions .................... (0.43) (0.37) (0.36) (0.44) (0.52)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ......... $ 10.61 $ 10.80 $ 10.68 $ 10.91 $ 10.89
=========== =========== =========== =========== ===========
TOTAL RETURN(b) ........................ 2.29% 4.68% 1.19% 4.26% 3.89%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ...... $ 73,038 $ 82,880 $ 94,027 $ 113,844 $ 107,078
=========== =========== =========== =========== ===========
Ratio of expenses to
average net assets ................... 0.94% 0.91% 0.86% 0.88% 0.89%
Ratio of net investment income
to average net assets ............... 3.57% 3.63% 3.64% 3.53% 3.66%
Portfolio turnover rate ................ 5% 7% 7% 17% 11%
- --------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the year.
(b) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund.
Returns do not reflect the deduction of taxes a shareholder would pay on
Fund distributions or the redemption of Fund shares.
See Notes to Financial Statements.
39
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND - CLASS A
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEARS ENDED OCTOBER 31,
-------------------------------------------------------------------------------------
2007 2006 2005 2004 2003
- --------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year ................... $ 7.41 $ 7.34 $ 7.41 $ 7.73 $ 8.03
----------- ----------- ----------- ----------- -----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income ............... 0.26(a) 0.25(a) 0.26(a) 0.24(a) 0.25
Net realized and unrealized
gains on investments
and foreign currencies.. .......... 0.22 0.18 0.06 0.03 0.07
----------- ----------- ----------- ----------- -----------
Total from investment operations ...... 0.48 0.43 0.32 0.27 0.32
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................. (0.35) (0.30) (0.31) (0.16) (0.29)
Distributions from net
realized gains .................... -- (0.01) (0.03) (0.08) (0.33)
Distributions from
return of capital ................. (0.01) (0.05) (0.05) (0.35) --
----------- ----------- ----------- ----------- -----------
Total distributions ................... (0.36) (0.36) (0.39) (0.59) (0.62)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ........ $ 7.53 $ 7.41 $ 7.34 $ 7.41 $ 7.73
=========== =========== =========== =========== ===========
Total return(b) ....................... 6.71% 6.04% 4.39% 3.62% 4.14%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) ..... $ 131,748 $ 146,854 $ 177,101 $ 204,266 $ 267,756
=========== =========== =========== =========== ===========
Ratio of expenses to
average net assets .................. 1.11% 1.06%(c) 1.04% 1.05% 1.09%
Ratio of net investment income
to average net assets .............. 3.54% 3.47%(c) 3.55% 3.22% 3.03%
Portfolio turnover rate ............... 49% 53% 66% 47% 152%
- --------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the year.
(b) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. Returns do not reflect
the deduction of taxes a shareholder would pay on Fund distributions or
the redemption of Fund shares.
(c) The ratios of expense and net investment income to average net assets were
unaffected by the waiver of distribution fees during the fiscal year ended
October 31, 2006.
See Notes to Financial Statements.
40
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND - CLASS C
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH
PERIOD
MAY 16,
2003(a)
YEARS ENDED OCTOBER 31, THROUGH
----------------------------------------------------------------- OCTOBER 31,
2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period .................. $ 7.40 $ 7.33 $ 7.40 $ 7.72 $ 8.20
----------- ----------- ----------- ----------- -----------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income ................ 0.21(b) 0.21(b) 0.21(b) 0.19(b) 0.17
Net realized and unrealized
gains (losses) on investments
and foreign currencies.. ........... 0.22 0.17 0.06 0.02 (0.38)
----------- ----------- ----------- ----------- -----------
Total from investment operations ....... 0.43 0.38 0.27 0.21 (0.21)
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net
investment income .................. (0.30) (0.25) (0.26) (0.14) (0.21)
Distributions from net
realized gains ..................... -- (0.01) (0.03) (0.08) (0.06)
Distributions from
return of capital .................. (0.01) (0.05) (0.05) (0.31) --
----------- ----------- ----------- ----------- -----------
Total distributions .................... (0.31) (0.31) (0.34) (0.53) (0.27)
----------- ----------- ----------- ----------- -----------
Net asset value at end of period ....... $ 7.52 $ 7.40 $ 7.33 $ 7.40 $ 7.72
=========== =========== =========== =========== ===========
TOTAL RETURN(c) ........................ 6.03% 5.35% 3.73% 2.91% (2.62)%(d)
=========== =========== =========== =========== ===========
Net assets at end of period (000's) .... $ 16,848 $ 15,579 $ 15,944 $ 18,616 $ 13,565
=========== =========== =========== =========== ===========
Ratio of net expenses
to average net assets ................ 1.74% 1.72% 1.69% 1.77% 1.85%(e)(f)
Ratio of net investment income
to average net assets ............... 2.93% 2.81% 2.89% 2.50% 3.32%(e)
Portfolio turnover rate ................ 49% 53% 66% 47% 152%(d)
- ------------------------------------------------------------------------------------------------------------------------------------
(a) Commencement of operations.
(b) Calculated using the average shares outstanding for the year.
(c) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. Returns do not reflect
the deduction of taxes a shareholder would pay on Fund distributions or
the redemption of Fund shares.
(d) Not annualized.
(e) Annualized.
(f) Absent fee waivers by the investment advisor, the annualized ratio of
expenses to average net assets would have been 2.12% for the year ended
October 31, 2003.
See Notes to Financial Statements.
41
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR
YEARS ENDED OCTOBER 31,
--------------------------------------------------------------------------------------
2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of year .................. $ 13.54 $ 12.12 $ 11.21 $ 10.50 $ 9.08
----------- ----------- ----------- ----------- -----------
INCOME FROM
INVESTMENT OPERATIONS:
Net investment income .............. 0.17(a) 0.15(a) 0.16(a) 0.10(a) 0.08
Net realized and unrealized
gains on investments
and foreign currencies.. ......... 1.65 1.42 0.91 0.70 1.42
----------- ----------- ----------- ----------- -----------
Total from investment operations ..... 1.82 1.57 1.07 0.80 1.50
----------- ----------- ----------- ----------- -----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.17) (0.15) (0.16) (0.09) (0.08)
Distributions from
net realized gains ............... (0.37) -- -- -- --
----------- ----------- ----------- ----------- -----------
Total distributions .................. (0.54) (0.15) (0.16) (0.09) (0.08)
----------- ----------- ----------- ----------- -----------
Net asset value at end of year ....... $ 14.82 $ 13.54 $ 12.12 $ 11.21 $ 10.50
=========== =========== =========== =========== ===========
TOTAL RETURN(b) ...................... 13.79% 13.01% 9.59% 7.71% 16.47%
=========== =========== =========== =========== ===========
Net assets at end of year (000's) .... $ 80,535 $ 69,438 $ 60,205 $ 44,920 $ 30,262
=========== =========== =========== =========== ===========
Ratio of net expenses
to average net assets .............. 0.96% 0.95% 0.94% 1.12% 1.30%(c)
Ratio of net investment income
to average net assets ............. 1.21% 1.17% 1.33% 0.92% 0.77%
Portfolio turnover rate .............. 62% 41% 30% 66% 60%
- -------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the year.
(b) Total return is a measure of the change in value of an investment in the
Fund over the period covered, which assumes any dividends or capital gains
distributions are reinvested in shares of the Fund. Returns do not reflect
the deduction of taxes a shareholder would pay on Fund distributions or
the redemption of Fund shares.
(c) Absent fee waivers by the investment advisor, the ratio of expenses to
average net assets would have been 1.79% for the year ended October 31,
2003.
See Notes to Financial Statements.
42
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2007
NOTE 1 - ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
A. ORGANIZATION
Total Return US Treasury Fund, Inc. ("Total Return"), Managed Municipal
Fund, Inc. ("Managed Municipal"), North American Government Bond Fund, Inc.
("North American") and ISI Strategy Fund, Inc. ("Strategy") (each a "Fund" and
collectively, the "Funds") are registered under the Investment Company Act of
1940 as open-end management investment companies. The Funds are organized as
corporations under the laws of the State of Maryland.
Total Return's investment objective is to achieve a high level of total
return with relative stability of principal and, secondarily, high current
income consistent with an investment in securities issued by the United States
Treasury. Managed Municipal's investment objective is to provide a high level of
total return with relative stability of principal and, secondarily, high current
income exempt from Federal income tax through investment in a portfolio
consisting primarily of tax-free municipal obligations. North American's
investment objective is designed to provide a high level of current income,
consistent with prudent investment risk. Strategy's investment objective is to
maximize total return through a combination of long-term growth of capital and
current income.
Total Return, Managed Municipal and Strategy currently offer a single
class of shares (ISI Shares) to investors. North American offers ISI Class A
Shares and ISI Class C Shares. ISI Shares and ISI Class A Shares are subject to
a maximum front-end sales charge equal to 3.00%. A contingent deferred sales
charge of 1.00% is imposed on the sale of ISI Class C Shares if redeemed within
the first year after purchase.
Total Return, Managed Municipal and Strategy are authorized to issue
115,000,000, 55,000,000 and 25,000,000 shares, respectively, of ISI Shares at
$0.001 par value. North American is authorized to issue 50,000,000 ISI Class A
Shares and 5,000,000 ISI Class C Shares at $0.001 par value.
B. VALUATION OF SECURITIES
Exchange traded securities and over-the-counter securities listed on the
NASDAQ National Market System for which market quotations are readily available
are valued each Fund business day using the last reported sales price or the
NASDAQ Official Closing Price ("NOCP") provided by independent pricing services
as of the close of trading on the New York Stock Exchange (normally 4:00 p.m.
Eastern time). In the absence of a sale price or NOCP, such securities are
valued at the mean of the last bid and the last asked prices. Non-exchange
traded securities for which quotations are readily available are generally
valued at the mean between the last bid and the last asked prices. Money market
instruments that mature in 60 days or less may be valued at amortized cost
unless the Fund's investment advisor believes another valuation is more
appropriate.
43
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
When valuing securities for which market quotations are not readily
available or for which the market quotations that are readily available are
considered unreliable, the Funds determine a fair value in good faith under
procedures established by and under the general supervision of the Funds' Boards
of Directors (the "Board"). The Funds may use these procedures to establish the
fair value of securities when, for example, a significant event occurs between
the time the market closes, and the event is likely to affect the Fund's net
asset value per share. Fair valuation may also be used for securities that are
subject to legal or contractual restrictions on resale, securities for which no
or limited trading activity has occurred for a period of time, or securities
that are otherwise deemed to be illiquid (i.e., securities that cannot be
disposed of within seven days at approximately the price at which the security
is currently priced by the Funds).
If a fair value is required, the investment advisor, or the sub-advisor in
the case of Strategy, determines the value of the security until the Board meets
to establish the fair value of the security.
As of October 31, 2007, there were no fair valued securities.
C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on trade date. Realized gains and
losses are determined by comparing the proceeds of a sale or the cost of a
purchase with a specific offsetting transaction. Dividend income is recorded on
the ex-dividend date. Interest income, including amortization of premiums and
accretion of discounts, is accrued daily. Estimated expenses are also accrued
daily. With respect to North American, income, gains (losses) and common
expenses are allocated to each class based on its respective net assets. Class
specific expenses are charged directly to each class.
D. DISTRIBUTIONS
Total Return declares dividends daily, and Managed Municipal and North
American declare monthly dividends at fixed rates approved by the Board. These
dividends are paid monthly. To the extent that a Fund's net investment income is
less than an approved fixed rate, some of its dividends may be designated as a
return of shareholder capital. Strategy declares and pays dividends quarterly
from its net investment income. Net realized capital gains, if any, are
distributed at least annually. The Funds record dividends and distributions on
the ex-dividend date.
E. FEDERAL INCOME TAXES
Each Fund has a policy to qualify as a regulated investment company under
subchapter M of the Internal Revenue Code and to distribute all of its taxable
income. In addition, by distributing in each calendar year substantially all of
its net investment income and net realized capital gains, a Fund will not be
subject to Federal excise taxes. Accordingly, no Federal income taxes have been
accrued.
44
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
F. FOREIGN CURRENCY TRANSLATION
The Funds maintain their accounting records in U.S. dollars. North
American determines the U.S. dollar value of foreign currency-denominated
assets, liabilities and transactions by using prevailing exchange rates. In
valuing security transactions, the receipt of income and the payment of
expenses, North American uses the prevailing exchange rate on the transaction
date.
Net realized gains and losses on foreign currency transactions shown on
North American's financial statements result from the sale of foreign
currencies, currency gains or losses realized between the trade and settlement
dates on securities transactions, and from the difference between the amounts of
interest recorded on North American's books and the U.S. dollar equivalent of
the amounts actually received or paid. That portion of realized gains (losses)
from security transactions that results from fluctuation in foreign currency
exchange rates relating to the sale of foreign securities is not separately
disclosed but is included with net realized gains (losses) from security
transactions. That portion of unrealized gains and losses on investments that
results from fluctuations in foreign currency exchange rates is not separately
disclosed but is included with net change in unrealized
appreciation/depreciation on investments.
G. FORWARD FOREIGN CURRENCY CONTRACTS
North American may use forward foreign currency contracts to manage
foreign exchange rate risk. The Fund may use these contracts to fix the U.S.
dollar value of securities transactions for the period between the date of the
transaction and the date the security is received or delivered or to hedge the
U.S. dollar value of securities that it already owns. The use of forward foreign
currency contracts does not eliminate fluctuations in the prices of the
underlying securities, but does establish a rate of exchange that can be
achieved in the future.
North American determines the net U.S. dollar value of the forward foreign
currency contracts using prevailing exchange rates. As of October 31, 2007,
there were no open forward currency contracts.
H. REPURCHASE AGREEMENTS
Each Fund may make short-term investments in repurchase agreements that
are fully collateralized by U.S. government securities. Under the terms of a
repurchase agreement, a financial institution sells fixed-income securities to a
Fund and agrees to buy them back on a specified day in return for the principal
amount of the original sale plus accrued interest. The custodial bank holds the
collateral in a separate account until the agreement matures. If the value of
the securities falls below the principal amount of the repurchase agreement plus
accrued interest, the financial institution deposits additional collateral by
the following business day. If the financial institution either fails to deposit
the required additional collateral or fails to repurchase the securities as
agreed, a Fund has the right to sell the securities and recover any resulting
loss from the financial institution. If the financial institution enters into
bankruptcy, a Fund's claim on the collateral may be subject to legal
proceedings.
45
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
I. ESTIMATES
In preparing its financial statements in conformity with U.S. generally
accepted accounting principles, management makes estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the period. Actual results
may be different.
NOTE 2 - NEW ACCOUNTING PRONOUNCEMENTS
On July 13, 2006, the Financial Accounting Standards Board (FASB) released
FASB Interpretation No. 48 (FIN 48) "Accounting for Uncertainty in Income
Taxes." FIN 48 provides guidance for how uncertain tax positions should be
recognized, measured, presented and disclosed in the financial statements. FIN
48 requires the evaluation of tax positions taken in the course of preparing the
Funds' tax returns to determine whether the tax positions are
"more-likely-than-not" of being sustained by the applicable tax authority. Tax
positions not deemed to meet the more-likely-than-not threshold would be
recorded as a tax benefit or expense in the current year. Adoption of FIN 48 is
required for fiscal years beginning after December 15, 2006 and is to be applied
to all open tax years as of the effective date. Recent SEC guidance allows
implementing FIN 48 in fund NAV calculations as late as a fund's last NAV
calculation in the first required financial statement reporting period. As a
result, the Funds will incorporate FIN 48 in their Semi-Annual Report on April
30, 2008. Management is in the process of determining the impact of the adoption
of FIN 48.
In September 2006, the Financial Accounting Standards Board issued
Statement on Financial Accounting Standards (SFAS) No. 157, "Fair Value
Measurements." This standard establishes a single authoritative definition of
fair value, sets out a framework for measuring fair value and requires
additional disclosures about fair value measurements. SFAS No. 157 applies to
fair value measurements already required or permitted by existing standards.
SFAS No. 157 is effective for financial statements issued for fiscal years
beginning after November 15, 2007 and interim periods within those fiscal years.
The changes to current generally accepted accounting principles from the
application of SFAS No. 157 relate to the definition of fair value, the methods
used to measure fair value, and the expanded disclosures about fair value
measurements. As of October 31, 2007, the Funds do not believe the adoption of
SFAS No. 157 will impact the amounts reported in the financial statements.
However, additional disclosures may be required about the inputs used to develop
the measurements and the effect of certain of the measurements reported on the
statement of changes in net assets for a fiscal period.
46
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - FEES AND TRANSACTIONS WITH AFFILIATES
International Strategy & Investment, Inc. ("ISI") is the Funds' investment
advisor. As compensation for its advisory services, Total Return pays ISI an
annual fee based on the Fund's average daily net assets, which is calculated
daily and paid monthly at the following annual rates: 0.20% of the first $100
million, 0.18% of the next $100 million, 0.16% of the next $100 million, 0.14%
of the next $200 million and 0.12% of the amount over $500 million. In addition,
Total Return pays ISI 0.50% of the Fund's gross interest income. Managed
Municipal, North American and Strategy each pay ISI a fee, which is calculated
daily and paid monthly, at the annual rate of 0.40% of such Fund's average daily
net assets.
ISI has contractually agreed to waive its advisory fees and/or reimburse
expenses of North American through February 28, 2008 to the extent necessary to
limit the expenses of ISI Class C Shares to 1.85% of the average daily net
assets attributable to such shares. During the year ended October 31, 2007, ISI
did not waive any advisory fees.
Los Angeles Capital Management and Equity Research, Inc. is Strategy's
Sub-Advisor and is responsible for managing the common stocks in Strategy's
portfolio. The Sub-Advisor is paid by ISI, not Strategy.
ISI Group, Inc. ("ISI Group"), an affiliate of ISI, is the distributor for
the Funds. Total Return, Managed Municipal and Strategy each pay ISI Group a
distribution/shareholder service fee, pursuant to Rule 12b-1, that is calculated
daily and paid monthly at the annual rate up to 0.25% of their average daily net
assets. North American's ISI Class A Shares and ISI Class C Shares pay ISI Group
a distribution/shareholder service fee, pursuant to Rule 12b-1, that is
calculated daily and paid monthly at the annual rate up to 0.40% and 1.00%
(which may include up to 0.25% for shareholder servicing fees for each class) of
their average daily net assets, respectively. During the year ended October 31,
2007, North American Class A shares did not pay any shareholder servicing fees.
During the year ended October 31, 2007, ISI Group earned commissions on
sales of ISI Shares of Total Return, Managed Municipal, and Strategy of $5,157,
$4,633 and $16,500, respectively, and $13,118 on sales of ISI Class A Shares of
North American. ISI Group retained $623 of contingent deferred sales charges on
the sale of ISI Class C Shares of North American.
EJV Financial Services, LLC provides certain compliance support services
to the Funds' Chief Compliance Officer. Edward J. Veilleux, Vice President of
the Funds, is also a principal of EJV Financial Services, LLC.
Until September 24, 2007, Citigroup Fund Services, LLC ("Citigroup")
served as the Funds' administrator, fund accountant, and transfer agent. For its
services, Citigroup received an asset-based fee, calculated daily and paid
monthly, based on the aggregate average net assets of the Funds (subject to a
minimum monthly fee) and monthly fees per open shareholder account. Effective
September 24, 2007, Ultimus Fund Solutions,
47
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
LLC ("Ultimus") replaced Citigroup as the Funds' administrator, fund accountant
and transfer agent. For its services, Ultimus receives an asset-based fee,
calculated daily and paid monthly, based on the aggregate net assets of the
Funds (subject to a minimum monthly fee) and monthly fees per open shareholder
account.
NOTE 4 - FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS
The Funds may periodically make reclassifications among certain capital
accounts as a result of differences in the characterization and allocation of
certain income and capital gain distributions determined annually in accordance
with Federal tax regulations, which may differ from U.S. generally accepted
accounting principles. These book/tax differences may be either temporary or
permanent in nature. To the extent they are permanent, they are charged or
credited to paid-in-capital, undistributed net investment income or accumulated
net realized gains, as appropriate, in the period that the differences arose.
The reclassifications have no impact on the net assets or net asset value per
share of the Funds. As of October 31, 2007, the following reclassifications were
made to the statements of assets and liabilities:
UNDISTRIBUTED
NET INVESTMENT PAID-IN
INCOME CAPITAL
- --------------------------------------------------------------------------------
North American $ 1,873,651 $ (1,873,651)
The Funds determine their net investment income and capital gain
distributions in accordance with income tax regulations, which may differ from
U.S. generally accepted accounting principles.
As of October 31, 2007, the components of distributions on a tax basis
were as follows:
ORDINARY TAX-EXEMPT LONG-TERM RETURN OF
INCOME INCOME CAPITAL GAINS CAPITAL
------------------------- ------------------------- ------------------------- ------------------------
OCTOBER 31, OCTOBER 31, OCTOBER 31, OCTOBER 31,
2007 2006 2007 2006 2007 2006 2007 2006
- --------------------------------------------------------------------------------------------------------------------------------
Total Return $ 4,910,079 $ 5,796,709 $ -- $ -- $ -- $ -- $ 104,188 $ --
Managed Municipal 72,962 45,169 2,371,360 2,670,232 720,919 286,342 -- --
North American 7,026,546 7,465,855 -- -- -- -- 172,948 1,185,600
Strategy 913,710 765,946 -- -- 1,880,666 -- -- --
48
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of October 31, 2007, the components of distributable earnings
(accumulated losses) on a tax basis were as follows:
CAPITAL
UNDISTRIBUTED UNDISTRIBUTED UNDISTRIBUTED LOSS UNREALIZED
TAX-EXEMPT ORDINARY LONG-TERM CARRY- APPRECIATION
INCOME INCOME CAPITAL GAINS FORWARD (DEPRECIATION) TOTAL
- --------------------------------------------------------------------------------------------------------------------
Total Return $ -- $ -- $ -- $ (533,469) $ (2,585,020) $ (3,118,489)
Managed Municipal 817,824 24,744 286,767 -- 1,911,596 3,040,931
North American -- -- -- (280,143) (1,049,418) (1,329,561)
Strategy -- 97,962 4,217,678 ~~ 15,840,798 20,156,438
As of October 31, 2007, Total Return and North American had capital loss
carryforwards available to offset future realized gains. These losses expire in
2015.
The difference between book and tax basis unrealized appreciation
(depreciation) for strategy was primarily due to wash sales.
The aggregate cost of purchases and proceeds from sales of investments,
other than short-term obligations, for the year ended October 31, 2007, were as
follows:
NON-US GOVERNMENT OBLIGATIONS US GOVERNMENT OBLIGATIONS
-------------------------------------------------------------
PURCHASES SALES PURCHASES SALES
- --------------------------------------------------------------------------------
Total Return $ -- $ -- $33,671,094 $68,418,852
Managed Municipal 3,923,020 13,026,814 -- --
North American 24,273,787 25,249,520 39,028,024 66,690,766
Strategy 39,006,391 32,253,976 6,242,176 15,110,742
NOTE 5 - MARKET AND CREDIT RISK
North American invests in Canadian and Mexican government securities.
Investing in Canadian and Mexican government securities may have different risks
than investing in U.S. government securities. An investment in Canada or Mexico
may be affected by developments unique to those countries. These developments
may not affect the U.S. economy or the prices of U.S. government securities in
the same manner. In addition, the value of bonds issued by non-U.S. governments
may be affected by adverse international political and economic developments
that may not impact the value of U.S. government securities.
NOTE 6 - CONTRACTUAL OBLIGATIONS
In the ordinary course of business, the Funds enter into contracts that
contain a variety of indemnifications. Each Fund's maximum exposure under these
arrangements is unknown. However, the Funds have not had prior claims or losses
pursuant to these indemnification provisions and believe the risk of loss
thereunder to be remote.
49
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 - OTHER INFORMATION
On October 31, 2007, 1 shareholder(s) held approximately 10% of North
American. This shareholder is an omnibus account, which is held on behalf of
several individual shareholders.
NOTE 8 - CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Effective December 14, 2005, the Funds replaced Ernst & Young, LLP ("E&Y")
with Briggs, Bunting & Dougherty, LLP as the Funds' independent registered
public accounting firm by action of the Board, and upon the recommendation of
the Audit and Compliance Committee of the Board. E&Y's reports on each Fund's
financial statements for the years ended October 31, 2003, October 31, 2004, and
October 31, 2005 contained no adverse opinion or disclaimer of opinion nor were
they qualified or modified as to the uncertainty, audit scope, or accounting
principles.
During the Funds' fiscal years ended October 31, 2003, October 31, 2004
and October 31, 2005, (i) there were no disagreements with E&Y on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure, which disagreements, if not resolved to the satisfaction of
E&Y, would have caused it to make reference to the subject matter of
disagreements in connection with its report on each Fund's financial statements
for such year, and (ii) there were no "reportable events" of the kind described
in Item 304 (a) (1) (v) of Regulation S-K under the Securities Exchange Act of
1934.
50
- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF
TOTAL RETURN U.S. TREASURY FUND, INC., MANAGED MUNICIPAL FUND, INC.,
NORTH AMERICAN GOVERNMENT BOND FUND, INC., AND ISI STRATEGY FUND, INC.
We have audited the accompanying statements of assets and liabilities of the
Total Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., North
American Government Bond Fund, Inc., and ISI Strategy Fund, Inc., including the
schedules of investments, as of October 31, 2007, and the related statements of
operations for the year then ended, and the statements of changes in net assets
and the financial highlights for each of the years in the two year period then
ended. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits. The financial highlights for each of the three years ended October 31,
2005 were audited by other auditors whose report dated December 23, 2005
expressed an unqualified opinion on such financial highlights.
We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements 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. Our procedures included
confirmation of securities owned as of October 31, 2007 by correspondence with
the custodian and brokers or by other appropriate auditing procedures where
replies from brokers were not received. 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
Total Return U.S. Treasury Fund, Inc., Managed Municipal Fund, Inc., North
American Government Bond Fund, Inc., and ISI Strategy Fund, Inc. as of October
31, 2007, the results of their operations for the year then ended, and the
changes in their net assets, and their financial highlights for each of the
years in the two year period then ended, in conformity with accounting
principles generally accepted in the United States of America.
/s/ BRIGGS, BUNTING & DOUGHERTY, LLP
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
December 27 , 2007
51
- --------------------------------------------------------------------------------
FUND DIRECTORS AND OFFICERS (UNAUDITED)
- --------------------------------------------------------------------------------
OTHER
LENGTH BUSINESS DIRECTORSHIPS
OF TIME EXPERIENCE DURING HELD BY
NAME AND AGE SERVED THE PAST FIVE YEARS DIRECTOR
- ---------------------------------------------------------------------------------------------------------------------
INDEPENDENT DIRECTORS
- ---------------------------------------------------------------------------------------------------------------------
W. Murray Jacques since 2002 President, WMJ Consulting, None
(age 71) LLC (real estate investment management
company) (1999 to present).
- ---------------------------------------------------------------------------------------------------------------------
Louis E. Levy since 1994 Retired Partner, KPMG Peat Marwick, None
(age 75) (retired 1990); Formerly a Director of
Kimberly-Clark Corp., (personal consumer
products) (retired 2001), Household
International, Inc. (consumer finance)
(retired 2004), and Scudder Group of
Mutual Funds (retired 2005).
- ---------------------------------------------------------------------------------------------------------------------
Edward A. Kuczmarski since 2007 Certified Public Accountant and Partner of Director or Trustee
(age 58) Hays & Company LLP (accounting firm). of 12 funds in the
Reich & Tang Fund
Complex; Trustee
of Empire Builder
Tax Free Bond
Fund.
- ---------------------------------------------------------------------------------------------------------------------
FUND DIRECTORS AND EXECUTIVE OFFICERS
- ---------------------------------------------------------------------------------------------------------------------
R. Alan Medaugh since 1991 President, International Strategy & None
(age 64) Investment, Inc. (registered investment
President and advisor) (1991 to present). Director,
Director since 2007 International Strategy & Investment
Group, Inc. (registered broker-dealer)
(1991 to present).
- ---------------------------------------------------------------------------------------------------------------------
Nancy Lazar since 1997 Executive Vice President, Assistant None
(age 50) Treasurer, and Secretary of International
Vice President Strategy & Investment, Inc. (registered
investment advisor) (1991 to present);
Executive Vice President, Assistant
Treasurer and Secretary of International
Strategy & Investment Group, Inc.
(registered broker-dealer) (1991 to present).
- ---------------------------------------------------------------------------------------------------------------------
52
- --------------------------------------------------------------------------------
FUND DIRECTORS AND OFFICERS (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
LENGTH OF BUSINESS EXPERIENCE DURING
NAME AND AGE TIME SERVED THE PAST FIVE YEARS
- ---------------------------------------------------------------------------------------------------------------------
FUND DIRECTORS AND EXECUTIVE OFFICERS
- ---------------------------------------------------------------------------------------------------------------------
Thomas D. Stevens since 1997 Chairman and President, Los Angeles Capital Management and
(age 58) Equity Research, Inc. (registered investment advisor) (March
Vice President 2002 to present).
- ---------------------------------------------------------------------------------------------------------------------
Carrie L. Butler since 1991 Managing Director, International Strategy & Investment, Inc.
(age 40) (registered investment advisor) (2000 to present).
Vice President
- ---------------------------------------------------------------------------------------------------------------------
Edward J. Veilleux since 1992 President, EJV Financial Services, LLC (2002 to present);
(age 64) Officer of various investment companies for which EJV
Vice President Financial Services provides consulting and compliance services.
- ---------------------------------------------------------------------------------------------------------------------
Stephen V. Killorin since 2002 (Chief Executive Managing Director and Chief Financial Officer,
(age 54) Compliance Officer International Strategy & Investment, Inc. (registered
Vice President since September, 2004 investment advisor) (December 2000 to present); Executive
and Chief Financial Managing Director and Chief Financial Officer, International
Officer since Strategy & Investment Group, Inc. (registered broker-dealer)
December, 2004) (December 2000 to present).
- ---------------------------------------------------------------------------------------------------------------------
Margaret M. Beeler since 2005 Managing Director, International Strategy & Investment, Inc.
(age 40) (Secretary since (registered investment advisor) (July 2004 to present).
Vice President 2004) Formerly, Associate Managing Director (2000 - July 2004) of
International Strategy & Investment, Inc. (registered
investment advisor). Assistant Vice President (1996 to 2000)
- ---------------------------------------------------------------------------------------------------------------------
Heena Dhruv since 2005 Managing Director, International Strategy & Investment, Inc.
(age 31) (registered investment advisor) (July 2005 to present),
Assistant Vice President Associate Managing Director, International Strategy &
Investment, Inc. (January 2003 to July 2005).
- ---------------------------------------------------------------------------------------------------------------------
53
- --------------------------------------------------------------------------------
NOTICE TO SHAREHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that Strategy uses to determine how
to vote proxies relating to securities held in Strategy's Portfolio is
available, without charge and upon request, by calling (800) 955-7175.
Information regarding how the Fund voted proxies relating to portfolio
securities during the most recent twelve-month period ended June 30 is
available, without charge, upon request, by calling (800) 955-7175 or on the
SEC's website at http://www.sec.gov.
AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Funds file their completed schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. Each Funds' Form
N-Q is available on the SEC's website at http://www.sec.gov or may be reviewed
and copied at the SEC's Public Reference Room in Washington, DC. Information on
the operation of t he Public Reference Room may be obtained by calling
800-SEC-0330.
TAX INFORMATION FOR THE TAX YEAR ENDED OCTOBER 31, 2007:
The amounts may differ from those elsewhere in this report because of
differences between tax and financial reporting requirements.
ORDINARY % OF % OF
INCOME % OF ORDINARY SHORT-TERM
DISTRIBUTIONS ORDINARY INCOME CAPITAL GAIN
THAT QUALIFY INCOME DISTRIBUTIONS DISTRIBUTIONS
FOR THE DISTRIBUTIONS THAT ARE THAT ARE
LONG-TERM % OF CORPORATE THAT QUALIFY EXEMPT FROM EXEMPT FROM
CAPITAL TAX-EXEMPT DIVIDENDS AS QUALIFIED US TAX FOR US TAX FOR
GAIN INCOME RECEIVED DIVIDEND FOREIGN FOREIGN
DISTRIBUTIONS DISTRIBUTIONS DEDUCTION INCOME SHAREHOLDERS SHAREHOLDERS
- ---------------------------------------------------------------------------------------------------------------------------------
Total Return $ -- -- -- -- 100% 100%
Managed Municipal 720,919 97.10% -- -- 1.88% --
North American -- -- -- 67.70% --
Strategy 1,880,666 -- 53.94% 53.91% 42.51% --
54
- --------------------------------------------------------------------------------
INVESTMENT ADVISORY AGREEMENT APPROVAL (UNAUDITED)
- --------------------------------------------------------------------------------
At the Board meeting held on September 20, 2007, the Board, including the
Independent Directors, approved the continuance of the Investment Advisory
Agreements between ISI and each of the Funds (the "Advisory Agreements") as well
as the Sub-Advisory Agreement between ISI and the Sub-Advisor with respect to
Strategy. In evaluating the Advisory Agreements and the Sub-Advisory Agreement,
the Board reviewed materials furnished by ISI and the Sub-Advisor. Specifically,
the Board considered: (1) the nature, extent and quality of the services
provided to the Funds by ISI and the Sub-Advisor, including information on the
investment performance of the Funds; (2) the total expense ratio of each Fund
compared to its relevant peer group; (3) the investment advisory fee schedule
for each Fund; (4) the cost of the services provided and profitability to ISI
with respect to its relationship with the Funds; (5) the extent to which
economies of scale would be realized as each Fund grows and whether the advisory
fees reflect these economies of scale for the benefit of shareholders of each
Fund; and (6) other benefits received by ISI and the Sub-Advisor from their
relationship with the Funds. In their deliberations, the Board did not identify
any particular information that was all-important or controlling, and the Board
attributed different weights to the various factors. In particular, the Board
focused on the factors discussed below.
NATURE, EXTENT AND QUALITY OF SERVICES. The Directors reviewed information
provided by ISI which included statistics on each Fund's performance as compared
to other funds in its peer group, comparative expense ratios and profitability.
The Board noted that it receives detailed reports at each quarterly Board
meeting from senior management of ISI that provides information about ISI's
management approach with respect to each Fund as well as ISI's general economic
outlook. With respect to Strategy, the Board noted that, under the Sub-Advisory
Agreement, the Sub-Advisor manages the Fund's equity portfolio and that the
Sub-Advisor had presented to the Board detailed information about its operations
and investment process. The Board also considered the background and quality of
the investment management team of ISI and the Sub-Advisor.
o TOTAL RETURN. The Board reviewed information comparing the Fund's
performance to the performance of its benchmark and peers for
selected periods ended July 31, 2007, which indicated that the Fund
placed within the top quartile of its Morningstar average for all
periods.
o MANAGED MUNICIPAL. The Board reviewed the Fund's performance for
selected periods ended July 31, 2007 against the performance of the
Lehman High Quality Index and noted that the Fund performed below
the Lehman Index for all stated periods. The Board was advised by
ISI that the Fund's relative underperformance against its benchmark
index was due to the fact that a large proportion of the index is in
short maturity, pre-refunded issues, while the Fund has a longer
duration. The Board compared the Fund's performance against its
Lipper, Morningstar and CDA/Thomson peers which indicates that the
Fund was generally in the top half of its peers for both the quarter
and the one-year period ended July 31, 2007. The Board was advised
by ISI that the peer groups do not provide an exact comparison since
they include bonds of all credit qualities, while the Fund invests
primarily in AA or higher rated municipals on their own merit; none
of the Fund's securities have been assigned a higher ratio by virtue
of being insured by a third party.
55
- --------------------------------------------------------------------------------
INVESTMENT ADIVSORY AGREEMENT APPROVAL (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
o NORTH AMERICAN. The Board reviewed the Fund's performance for
selected periods ended July 31, 2007, which indicated that the Fund
outperformed the North American benchmark during all review periods,
due to its underweighting of Canadian bonds and the successful
trading of its 10-year Mexican bonds. The Board was advised by ISI
that the Fund's peer group comparisons remain favorable and the
Board reviewed the Fund's Lipper, Morningstar and CDA/Thompson
rankings.
o STRATEGY FUND. The Board reviewed the Fund's performance for
selected periods ended July 31, 2007. The Board was advised that the
Fund had an 85% weighting in equities, versus a 75% weighting by its
benchmark (the Wilshire 5000/Lehman Treasury), which caused the Fund
to underperform against its benchmark during the July 31, 2007
quarter. The Board was further advised that the overweighting in
equities resulted in the Fund outperforming its benchmark during the
one-year and three-year periods ended July 31, 2007. The Board
reviewed separately the performance of both the equity section and
the bond section of the Fund's portfolio and was advised that during
all review periods, the equity section had outperformed and the bond
section had underperformed their respective indices. The Board then
reviewed information comparing the Fund's performance to its peers
and was advised that the Fund is below the Lipper Flexible Portfolio
Funds average and the CDA/Thomson average for the July 31, 2007
quarter, but above the Lipper average for the one-year period ended
July 31, 2007.
Based on the above information, the Board concluded that the quality and range
of services provided by ISI and the Sub-Advisor have benefited, and should
continue to benefit, each Fund and its shareholders.
INVESTMENT ADVISORY FEE SCHEDULES FOR EACH FUND. The Board considered the
investment advisory fees paid by each Fund to ISI. The Board noted that the
sub-advisory fee for Strategy is paid by ISI and not the Fund. The Board
concluded that the fee schedules under the Investment Advisory Agreements
provide fair compensation to ISI in light of the nature, extent and quality of
the services being provided to the Funds and the performance of the Funds.
COSTS OF SERVICES PROVIDED AND PROFITABILITY. The Board reviewed the costs
associated with ISI's portfolio management, research and corporate governance
and considered the profitability of ISI from the advisory and other services
provided to the Funds. The Board was advised by ISI of the methodology it used
to assign its costs associated with the portfolio management, research and
corporate governance services provided to the Funds. The Board was also provided
with a report from the Sub-Advisor showing its profitability with respect to its
management of Strategy and the methodology used by the Sub-Advisor to prepare
its profitability analysis.
The Board also was advised that ISI's overall profitability on advisory services
rendered to the Funds had declined over the past year due to a decrease in
assets of the Funds. The Board also considered whether the Funds would benefit
from any economies of scale, noting that the investment advisory fees for
Managed Municipal, North American
56
- --------------------------------------------------------------------------------
INVESTMENT ADIVSORY AGREEMENT APPROVAL (UNAUDITED)
(CONTINUED)
- --------------------------------------------------------------------------------
and Strategy did not contain breakpoints. The Board considered whether the Funds
would benefit from any economies of scale and concluded that due to the
declining asset levels in all Funds except Strategy, economy of scale
considerations were not relevant at this time.
o TOTAL RETURN. The Board was provided information that compares the
Fund's expense ratio as of July 31, 2007 with the average of its
peers and noted that its 0.81% expense ratio was below the 0.90%
average of its peers.
o MANAGED MUNICIPAL. The Board reviewed an expense ratio comparison
chart and noted that the Fund's expenses were 2 basis points below
the average for municipal bond funds of similar size.
o NORTH AMERICAN. The Board reviewed a list of expense ratios for
North American, which indicated that the Fund's 1.11% expense ratio
is slightly below the 1.14% average for its peer group. The Board
was advised by ISI that there are no other mutual funds that invest
exclusively in North American bonds that can be used for comparative
purposes, as two others that did have closed during the year.
o STRATEGY. The Board was advised by ISI that the Fund's expense ratio
as of July 31, 2007 was 0.97%, which is below the 1.18% average for
comparably managed funds.
OTHER BENEFITS REVIEWED. The Board considered the fact that ISI Group, an
affiliate of ISI, serves as the distributor of the Funds. The Board reviewed the
costs and profitability of ISI Group in rendering distribution services to each
of the Funds and noted that ISI Group operates at a loss with respect to
distribution services provided to the Funds. The Board also considered other
benefits received by ISI from its relationship with the Funds. It noted that ISI
benefits from the shared costs of its two primary lines of business, but that
ISI's profit margins are higher for its institutional line of business than from
its mutual fund business.
57
- --------------------------------------------------------------------------------
ISI INTERNATIONAL
STRATEGY &
INVESTMENT
- --------------------------------------------------------------------------------
LOUIS E. LEVY EDWARD J. VEILLEUX
CHAIRMAN VICE PRESIDENT
W. MURRAY JACQUES THOMAS P. STEVENS*
DIRECTOR VICE PRESIDENT
EDWARD A. KUCZMARSKI STEPHEN V. KILLORIN
DIRECTOR VICE PRESIDENT
TREASURER
R. ALAN MEDAUGH CHIEF COMPLIANCE OFFICER
PRESIDENT CHIEF FINANCIAL OFFICER
DIRECTOR
MARGARET M. BEELER
NANCY LAZAR VICE PRESIDENT
VICE PRESIDENT SECRETARY
CARRIE L. BUTLER EDWARD S. HYMAN
VICE PRESIDENT SENIOR ECONOMIC ADVISOR
* Thomas D. Stevens is an officer for only the ISI Strategy Fund.
- --------------------------------------------------------------------------------
INVESTMENT ADVISOR
- --------------------------------------------------------------------------------
ISI, INC.
40 WEST 57TH STREET, 18TH FLOOR
NEW YORK, NY 10019
(800) 955-7175
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENT
- --------------------------------------------------------------------------------
ULTIMUS FUND SOLUTIONS, LLC
P.O. BOX 460707
CINCINNATI, OH 45246-0707
- --------------------------------------------------------------------------------
DISTRIBUTOR
- --------------------------------------------------------------------------------
ISI GROUP, INC.
40 WEST 57TH STREET, 18TH FLOOR
NEW YORK, NY 10019
(800) 955-7175
- --------------------------------------------------------------------------------
ITEM 2. CODE OF ETHICS.
As of the end of the period covered by this report, the registrant has adopted a
code of ethics that applies to the registrant's principal executive officer,
principal financial officer, principal accounting officer or controller, or
persons performing similar functions, regardless of whether these individuals
are employed by the registrant or a third party. Pursuant to Item 12(a)(1), a
copy of registrant's code of ethics is filed as an exhibit to this Form N-CSR.
During the period covered by this report, the code of ethics has not been
amended, and the registrant has not granted any waivers, including implicit
waivers, from the provisions of the code of ethics.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The registrant's board of directors has determined that the registrant has at
least one audit committee financial expert serving on its audit committee. The
name of the audit committee financial expert is Louis E. Levy. Mr. Levy is
"independent" for purposes of this Item.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) AUDIT FEES. The aggregate fees billed for professional services
rendered by the principal accountant for the audit of the
registrant's annual financial statements or for services that are
normally provided by the accountant in connection with statutory
and regulatory filings or engagements were $19,500 and $18,000
with respect to the registrant's fiscal years ended October 31,
2007 and 2006, respectively.
(b) AUDIT-RELATED FEES. No fees were billed in either of the last two
fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the
audit of the registrant's financial statements and are not
reported under paragraph (a) of this Item.
(c) TAX FEES. The aggregate fees billed for professional services
rendered by the principal accountant for tax compliance, tax
advice, and tax planning were $2,000 and $1,500 with respect to
the registrant's fiscal years ended October 31, 2007 and 2006,
respectively. The services comprising these fees are the
preparation of the registrant's federal income and excise tax
returns.
(d) ALL OTHER FEES. No fees were billed in either of the last two
fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a)
through (c) of this Item.
(e)(1) The audit committee has not adopted pre-approval policies and
procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X.
(e)(2) None of the services described in paragraph (b) through (d) of
this Item were approved by the audit committee pursuant to
paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Less than 50% of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the
most recent fiscal year were attributed to work performed by
persons other than the principal accountant's full-time, permanent
employees.
(g) During the fiscal years ended October 31, 2007 and 2006, aggregate
non-audit fees of $2,000 and $1,500, respectively, were billed by
the registrant's accountant for services rendered to the
registrant. No non-audit fees were billed in either of the last
two fiscal years by the registrant's accountant for services
rendered to the registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and
any entity controlling, controlled by, or under common control
with the adviser that provides ongoing services to the registrant.
(h) The principal accountant has not provided any non-audit services
that were not previously approved to the registrant's investment
adviser (not including any sub-adviser whose role is primarily
portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling,
controlled by, or under common control with the investment adviser
that provides ongoing services to the registrant.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. SCHEDULE OF INVESTMENTS.
Not applicable [schedule filed with Item 1]
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The registrant has not adopted procedures by which shareholders may recommend
nominees to the registrant's board of directors.
ITEM 11. CONTROLS AND PROCEDURES.
(a) Based on their evaluation of the registrant's disclosure controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company Act of
1940) as of a date within 90 days of the filing date of this report, the
registrant's principal executive officer and principal financial officer have
concluded that such disclosure controls and procedures are reasonably designed
and are operating effectively to ensure that material information relating to
the registrant, including its consolidated subsidiaries, is made known to them
by others within those entities, particularly during the period in which this
report is being prepared, and that the information required in filings on Form
N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940)
that occurred during the second fiscal quarter of the period covered by this
report that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 12. EXHIBITS.
File the exhibits listed below as part of this Form. Letter or number the
exhibits in the sequence indicated.
(a)(1) Any code of ethics, or amendment thereto, that is the subject of the
disclosure required by Item 2, to the extent that the registrant intends to
satisfy the Item 2 requirements through filing of an exhibit: Attached hereto
(a)(2) A separate certification for each principal executive officer and
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Act (17 CFR 270.30a-2(a)): Attached hereto
(a)(3) Any written solicitation to purchase securities under Rule 23c-1 under
the Act (17 CFR 270.23c-1) sent or given during the period covered by the report
by or on behalf of the registrant to 10 or more persons: Not applicable
(b) Certifications required by Rule 30a-2(b) under the Act (17 CFR
270.30a-2(b)): Attached hereto
Exhibit 99.CODE ETH Code of Ethics
Exhibit 99.CERT Certifications required by Rule 30a-2(a) under the Act
Exhibit 99.906CERT Certifications required by Rule 30a-2(b) under the Act
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) North American Government Bond Fund, Inc.
By (Signature and Title)* /s/ R. Alan Medaugh
------------------------------
R. Alan Medaugh, President
Date January 3, 2008
---------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ R. Alan Medaugh
------------------------------
R. Alan Medaugh, President
Date January 3, 2008
---------------
By (Signature and Title)* /s/ Stephen V. Killorin
------------------------------
Stephen V. Killorin, Treasurer
Date January 3, 2008
---------------
* Print the name and title of each signing officer under his or her signature.