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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
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North American Government Bond Fund, Inc.
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(Exact name of registrant as specified in charter)
40 West 57th Street, 18th Floor New York, New York 10019
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(Address of principal executive offices) (Zip code)
R. Alan Medaugh, President
ISI, Inc. 40 West 57th Street, 18th Floor New York, New York 10019
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(Name and address of agent for service)
Registrant's telephone number, including area code: (212) 446-5600
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Date of fiscal year end: October 31, 2008
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Date of reporting period: April 30, 2008
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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. Sec. 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
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ISI International
Strategy &
Investment
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SEMI-ANNUAL REPORT
APRIL 30, 2008
-------------------------------
TOTAL RETURN
US TREASURY
FUND, INC.
MANAGED MUNICIPAL
FUND, INC.
NORTH AMERICAN
GOVERNMENT BOND
FUND, INC.
ISI STRATEGY
FUND, INC.
-------------------------------
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ISI FUNDS SEMI-ANNUAL REPORT -- TABLE OF CONTENTS
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Investment Advisor's Message................................................. 1
Performance Comparisons...................................................... 2
Shareholder Expense Example.................................................. 10
Portfolio Profiles........................................................... 12
Schedules of Investments..................................................... 13
Statements of Assets and Liabilities......................................... 24
Statments of Operations...................................................... 27
Statements of Changes in Net Assets.......................................... 29
Financial Highlights......................................................... 34
Notes to Financial Statements................................................ 39
Notice to Shareholders....................................................... 46
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INVESTMENT ADVISOR'S MESSAGE
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Dear Shareholder:
I am pleased to present the semi-annual report to shareholders of the ISI Funds.
This report covers the six-month reporting period ended April 30, 2008. For this
period, the Total Return US Treasury Fund, Inc. (`Total Return') produced a
+4.26% return; Managed Municipal Fund, Inc. (`Managed Municipal') produced a
+2.39% return; North American Government Bond Fund, Inc. (`North American')
produced a +4.54% return in its Class A Shares and a +4.22% return in its Class
C Shares; and ISI Strategy Fund (`Strategy') produced a -7.71% return. These
figures assume the reinvestment of dividends and capital gain distributions, and
exclude the impact of any sales charges.
PERFORMANCE DATA QUOTED REPRESENTS PAST PERFORMANCE AND IS NO GUARANTEE OF
FUTURE RESULTS. CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE
DATA QUOTED. INVESTMENT RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO THAT AN
INVESTOR'S SHARES, WHEN REDEEMED, MAY BE WORTH MORE OR LESS THAN ORIGINAL COST.
FOR THE MOST RECENT MONTH-END PERFORMANCE OF A FUND, PLEASE CALL (800) 955-7175.
DESCRIPTION OF FUND OBJECTIVES
Total Return, Managed Municipal, North American and Strategy (each a `Fund' and
collectively, the `Funds') are registered under the Investment Company Act of
1940, as amended, as open-end management investment companies. The Funds are
organized as corporations under the laws of the state of Maryland.
International Strategy & Investment, Inc. (`ISI') manages all four Funds. 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 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.
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,
/s/ R. Alan Medaugh
R. Alan Medaugh
President
May 29, 2008
1
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TOTAL RETURN US TREASURY FUND -
PERFORMANCE COMPARISON(1)
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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 April 30, 2008)
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[LINE GRAPH OMITTED]
TOTAL RETURN LEHMAN BROTHERS LEHMAN BROTHERS
US TREASURY LEHMAN BROTHERS INTERMEDIATE LONG-TERM
DATE FUND TREASURY INDEX TREASURY INDEX TREASURY INDEX
- ---- ------ -------------- -------------- --------------
4/30/1998 $ 9,700 $ 10,000 $ 10,000 $ 10,000
4/30/1999 10,325 10,643 10,640 10,680
4/30/2000 10,554 10,880 10,878 10,899
4/30/2001 11,497 12,067 12,088 12,059
4/30/2002 12,233 12,947 12,925 13,007
4/30/2003 13,690 14,453 14,075 15,243
4/30/2004 13,677 14,528 14,207 15,162
4/30/2005 14,479 15,281 14,585 17,078
4/30/2006 14,313 15,247 14,681 16,535
4/30/2007 15,949 16,293 15,570 18,147
4/30/2008 16,530 17,953 17,083 19,911
2
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TOTAL RETURN US TREASURY FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
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Cumulative Total Returns (With Load) Average Annual Total Returns
Periods Ended Since Since
April 30, 2008 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2) 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2)
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Total Return
US Treasury
Fund 1.17% 4.23% 10.79% 17.08% 65.30% 271.42% 1.17% 4.23% 3.47% 3.20% 5.15% 6.88%
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Lehman Brothers
Treasury
Index(3) 6.32% 10.19% 17.49% 24.21% 79.53% 312.91% 6.32% 10.19% 5.52% 4.43% 6.03% 7.42%
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Lehman Brothers
Intermediate
Treasury
Index(3) 5.82% 9.72% 17.12% 21.37% 70.83% 265.57% 5.82% 9.72% 5.41% 3.95% 5.50% 6.77%
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Lehman Brothers
Long-Term
Treasury
Index(3) 6.01% 9.72% 16.59% 30.63% 99.11% 460.44% 6.01% 9.72% 5.25% 5.49% 7.13% 9.09%
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(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
9.0 years.
(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.
3
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MANAGED MUNICIPAL FUND -
PERFORMANCE COMPARISON(1)
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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 April 30, 2008)
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[LINE GRAPH OMITTED]
LEHMAN BROTHERS
LEHMAN BROTHERS PREREFUNDED CONSUMER
MANAGED GENERAL OBLIGATION MUNICIPAL BOND PRICE
DATE MUNICIPAL FUND INDEX INDEX INDEX
- ---- ----------------- ----- ----- -----
4/30/1998 $ 9,702 $ 10,000 $ 10,000 $ 10,000
4/30/1999 10,337 10,716 10,624 10,228
4/30/2000 10,113 10,659 10,744 10,542
4/30/2001 11,097 11,723 11,599 10,886
4/30/2002 11,776 12,535 12,338 11,065
4/30/2003 12,737 13,563 13,218 11,311
4/30/2004 12,789 13,897 13,414 11,569
4/30/2005 13,493 14,761 13,895 11,975
4/30/2006 13,591 15,011 14,058 12,400
4/30/2007 14,591 15,848 14,683 12,720
4/30/2008 14,788 16,512 15,786 13,166
4
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MANAGED MUNICIPAL FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
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Cumulative Total Returns (With Load) Average Annual Total Returns
Periods Ended Since Since
April 30, 2008 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2) 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2)
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Managed
Municipal
Fund -0.70% 0.52% 6.27% 12.65% 47.88% 155.94% -0.70% 0.52% 2.05% 2.41% 3.99% 5.31%
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Lehman Brothers
General
Obligation
Index(3) 2.58% 4.19% 11.87% 21.74% 65.12% 202.38% 2.58% 4.19% 3.81% 4.01% 5.14% 6.27%
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Lehman Brothers
Prerefunded
Municipal
Bond Index(3) 5.04% 7.52% 13.61% 19.43% 57.86% 168.26% 5.04% 7.52% 4.34% 3.62% 4.67% 5.57%
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Consumer Price
Index(4) 2.07% 3.51% 9.95% 16.41% 31.66% 36.78% 2.07% 3.51% 3.21% 3.08% 2.79% 1.74%
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(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.
5
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NORTH AMERICAN GOVERNMENT BOND FUND -
ISI CLASS A PERFORMANCE COMPARISON(1)
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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 April 30, 2008)
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[LINE GRAPH OMITTED]
LEHMAN BROTHERS
EMERGING AMERICAS
INDEX: MEXICO
SECTION / CITIGROUP
NORTH AMERICAN US BROAD
GOVERNMENT BOND LEHMAN BROTHERS INVESTMENT-GRADE CONSUMER
FUND - ISI INTERMEDIATE BOND INDEX PRICE
DATE CLASS A SHARES TREASURY INDEX MEXICO SECTOR INDEX
- ---- -------------- -------------- ---------------- -----
4/30/1998 $ 9,700 $ 10,000 $ 10,000 $ 10,000
4/30/1999 10,317 10,640 10,233 10,228
4/30/2000 10,671 10,878 11,484 10,542
4/30/2001 11,789 12,088 12,835 10,886
4/30/2002 12,573 12,925 14,911 11,065
4/30/2003 13,863 14,075 17,303 11,311
4/30/2004 13,837 14,207 18,057 11,569
4/30/2005 14,730 14,585 19,634 11,975
4/30/2006 15,082 14,681 20,569 12,400
4/30/2007 16,918 15,570 22,860 12,720
4/30/2008 17,797 17,083 23,785 13,166
6
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NORTH AMERICAN GOVERNMENT BOND FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
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Cumulative Total Returns (With Load) Average Annual Total Returns
Periods Ended Since Since
April 30, 2008 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2) 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2)
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North American
Government
Bond Fund -
ISI Class
A Shares 1.44% 6.41% 17.17% 24.48% 77.97% 140.56% 1.44% 6.41% 5.42% 4.48% 5.93% 5.91%
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North American
Government
Bond Fund -
ISI Class
C Shares 3.22% 8.06% 18.54% -- -- 21.01% 3.22% 8.06% 5.83% -- -- 3.92%
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Lehman Brothers
Intermediate
Treasury
Index(4) 5.82% 9.72% 17.12% 21.37% 70.83% 132.96% 5.82% 9.72% 5.41% 3.95% 5.50% 5.70%
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Lehman Brothers
Emerging
Americas
Index: Mexico
Section/
Citigroup
US Broad
Investment-
Grade Bond
Index Mexico
Sector(5) 0.58% 4.04% 21.14% 37.46% 137.85% 327.01% 0.58% 4.04% 6.60% 6.57% 9.05% 9.99%
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Consumer
Price
Index(6) 2.07% 3.51% 9.95% 16.41% 31.66% 53.67% 2.07% 3.51% 3.21% 3.08% 2.79% 2.86%
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(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.
(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 April 30, 2008 were 19.51% and 3.69%,
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.
7
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ISI STRATEGY FUND -
PERFORMANCE COMPARISON(1)
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[LINE GRAPH OMITTED]
DOW JONES
WILSHIRE 5000
ISI STRATEGY (FULL CAP) CONSUMER
DATE FUND INDEX PRICE INDEX
- ---- ------ ----- -----------
4/30/1998 $ 9,700 $ 10,000 $ 10,000
4/30/1999 10,969 13,648 10,285
4/30/2000 11,643 15,260 10,600
4/30/2001 10,967 13,109 10,947
4/30/2002 10,535 11,813 11,126
4/30/2003 9,748 10,208 11,374
4/30/2004 11,403 12,870 11,634
4/30/2005 12,020 13,771 12,042
4/30/2006 13,953 16,367 12,469
4/30/2007 17,906 18,744 12,720
4/30/2008 15,303 17,854 13,166
8
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ISI STRATEGY FUND -
PERFORMANCE COMPARISON(1) (CONTINUED)
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Cumulative Total Returns (With Load) Average Annual Total Returns
Periods Ended Since Since
April 30, 2008 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2) 6 Month 1 Year 3 Years 5 Years 10 Years Inception(2)
- -----------------------------------------------------------------------------------------------------------------------------------
ISI Strategy
Fund -10.49% -5.62% 23.47% 52.24% 53.03% 71.56% -10.49% -5.62% 7.28% 8.77% 4.35% 5.21%
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Dow Jones
Wilshire 5000
(Full Cap)
Index(3) -9.88% -4.75% 29.65% 74.89% 78.54% 148.71% -9.88% -4.75% 9.04% 11.83% 5.97% 8.99%
- -----------------------------------------------------------------------------------------------------------------------------------
Consumer Price
Index(4) 2.07% 3.51% 9.95% 16.41% 31.66% 178.94% 2.07% 3.51% 3.21% 3.08% 2.79% 10.18%
- -----------------------------------------------------------------------------------------------------------------------------------
Lipper Flexible
Portfolio
Funds
Average(5) -4.92% -0.23% 25.45% 54.58% 63.35% 84.39% -4.92% -0.23% 7.85% 9.10% 5.03% 5.95%
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(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.
9
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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 - "Actual Return" in the following table provides 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 - "Hypothetical Returns" in the
following table provides 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, "Hypothetical Returns" 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.
10
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SHAREHOLDER EXPENSE EXAMPLE (UNAUDITED) (CONTINUED)
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
NOVEMBER 1, 2007 APRIL 30, 2008 DURING PERIOD(1) EXPENSE
- -------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return.................... $1,000.00 $1,042.60 $3.97 0.78%
Based on Hypothetical 5% Return................ $1,000.00 $1,020.98 $3.92 0.78%
- -------------------------------------------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
NOVEMBER 1, 2007 APRIL 30, 2008 DURING PERIOD(1) EXPENSE
- -------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return.................... $1,000.00 $1,023.90 $4.81 0.96%
Based on Hypothetical 5% Return................ $1,000.00 $1,020.11 $4.80 0.96%
- -------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND CLASS A
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
NOVEMBER 1, 2007 APRIL 30, 2008 DURING PERIOD(1) EXPENSE
- -------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return.................... $1,000.00 $1,045.40 $5.82 1.15%
Based on Hypothetical 5% Return................ $1,000.00 $1,019.17 $5.75 1.15%
- -------------------------------------------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND CLASS C
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
NOVEMBER 1, 2007 APRIL 30, 2008 DURING PERIOD(1) EXPENSE
- -------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return.................... $1,000.00 $1,042.20 $8.97 1.77%
Based on Hypothetical 5% Return................ $1,000.00 $1,016.08 $8.85 1.77%
- -------------------------------------------------------------------------------------------------------------------
ISI STRATEGY FUND
BEGINNING ENDING
ACCOUNT VALUE ACCOUNT VALUE EXPENSES PAID ANNUALIZED
NOVEMBER 1, 2007 APRIL 30, 2008 DURING PERIOD(1) EXPENSE
- -------------------------------------------------------------------------------------------------------------------
Based on Actual Fund Return.................... $1,000.00 $ 922.90 $4.72 0.99%
Based on Hypothetical 5% Return................ $1,000.00 $1,019.95 $4.96 0.99%
- -------------------------------------------------------------------------------------------------------------------
(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 366 to reflect the
half-year period.
11
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ISI FUNDS (UNAUDITED)
- --------------------------------------------------------------------------------
PORTFOLIO PROFILES (AS A % OF NET ASSETS) APRIL 30, 2008
TOTAL RETURN US TREASURY FUND
US Treasury Obligations 97.75%
Repurchase Agreements 1.04%
Other Assets and Liabilities 1.21%
-------
100.00%
MANAGED MUNICIPAL FUND
Aaa* 75.38%
Aa* 19.59%
US Treasury Obligations 1.99%
Repurchase Agreements 2.09%
Other Assets and Liabilities 0.95%
-------
100.00%
* Ratings are from Moody's Investors, Inc.
NORTH AMERICAN GOVERNMENT BOND FUND
Canadian Securities 12.75%
Mexican Securities 12.69%
US Treasury Securities 67.92%
Repurchase Agreements 6.48%
Other Assets and Liabilities 0.16%
-------
100.00%
ISI STRATEGY FUND
Consumer Discretionary 5.10%
Consumer Staples 6.79%
Energy 11.58%
Financials 12.33%
Health Care 10.18%
Industrials 10.82%
Information Technology 12.79%
Materials 4.72%
Telecommunications Services 3.26%
Utilities 0.70%
US Treasury Obligations 21.53%
Repurchase Agreements 0.26%
Other Assets and Liabilities -0.06%
-------
100.00%
12
- --------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS APRIL 30, 2008 (UNAUDITED)
INTEREST MATURITY PRINCIPAL MARKET
SECURITY RATE DATE AMOUNT VALUE
- ----------------------------------------------------------------------------------------
US TREASURY OBLIGATIONS - 97.75%
US Treasury Bill 3.350%(1) 05/29/08 $10,500,000 $ 10,490,770
US Treasury Bond 7.625% 02/15/25 11,500,000 15,808,912
US Treasury Bond 6.000% 02/15/26 11,500,000 13,588,872
US Treasury Bond 6.375% 08/15/27 16,000,000 19,860,016
US Treasury Bond 5.000% 05/15/37 5,000,000 5,420,315
US Treasury Note 5.625% 05/15/08 15,000,000 15,023,430
US Treasury Note 4.125% 08/15/08 4,000,000 4,031,252
US Treasury Note 4.875% 10/31/08 8,800,000 8,941,627
US Treasury Note 5.500% 05/15/09 25,000,000 25,919,925
------------
TOTAL US TREASURY OBLIGATIONS
(COST $119,087,588) .................................................. $119,085,119
------------
REPURCHASE AGREEMENT - 1.04%
JPMORGAN CHASE, N.A.
$1,264,000, Dated 04/30/08, 1.750%, principal and interest
in the amount of $1,264,061 due 05/1/08, collaterized by US
Treasury Inflation Bond, par value of $975,000, due 01/15/12,
with a value of $1,290,206 (Cost $1,264,000) ..................... $ 1,264,000
------------
TOTAL INVESTMENTS - 98.79%
(COST $120,351,588)* $120,349,119
OTHER ASSESTS IN EXCESS OF LIABILITIES - 1.21%.......................... 1,476,398
------------
NET ASSETS - 100.00%.................................................... $121,825,517
============
(1) Annualized yield at time of purchase, not a coupon rate.
* Cost for Federal income tax purpose is $120,351,588 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation................ $ 535,180
Gross Unrealized Depreciation................ 537,649
----------
Net Unrealized Depreciation.................. $ (2,469)
==========
See Notes to Financial Statements.
13
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS APRIL 30, 2008 (UNAUDITED)
RATINGS
INTEREST MATURITY (MOODY'S/ PRINCIPAL MARKET
SECURITY RATE DATE S&P)1 AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 94.97%
GENERAL OBLIGATIONS - 60.94%
Alexandria, VA, Capital Improvements ............ 4.250% 06/15/21 Aaa/AAA $3,300,000 $ 3,330,888
Arlington County, VA,
State Aid Withholding ......................... 5.000% 10/01/14 Aaa/AAA 1,080,000 1,101,524
Arlington County, VA,
State Aid Withholding ......................... 4.500% 01/15/28 Aaa/AAA 2,000,000 2,004,080
Cary, NC ........................................ 5.000% 03/01/18 Aaa/AAA 2,000,000 2,108,960
Dallas, TX ...................................... 4.000% 02/15/16 Aa1/AA+ 2,450,000 2,490,695
Delaware State, Series A ........................ 4.200% 01/01/20 Aaa/AAA 1,675,000 1,688,182
Du Page County, IL, Jail Project ................ 5.600% 01/01/21 Aaa/AAA 1,600,000 1,757,232
Florida State, Board of Education,
Public Education, Series I .................... 4.125% 06/01/21 Aa1/AAA 3,000,000 2,979,210
Georgia State, Series G ......................... 4.125% 10/01/23 Aaa/AAA 2,000,000 1,971,880
Henrico County, VA,
Public Improvement ............................ 4.250% 07/15/24 Aaa/AAA 2,830,000 2,813,445
Maryland State, Capital
Improvements, Series A ........................ 4.000% 02/15/20 Aaa/AAA 4,000,000 4,020,880
Mecklenburg County, NC, Public
Improvements, Series A ........................ 4.000% 02/01/20 Aaa/AAA 3,000,000 3,011,940
Minnesota State ................................. 5.500% 06/01/18 Aa1/AAA 2,000,000 2,090,620
Missouri State, Fourth State
Building, Series A ............................ 4.125% 10/01/19 Aaa/AAA 2,000,000 2,020,880
Montgomery County, MD, Public
Improvements, Series A ........................ 4.000% 05/01/21 Aaa/AAA 2,450,000 2,446,791
Salt Lake City, UT, School District,
School Board Guaranty, Series A ............... 4.500% 03/01/20 Aaa/AAA 2,240,000 2,294,432
South Carolina State, Highway, Series B ......... 5.000% 04/01/19 Aaa/AA+ 1,000,000 1,046,460
Virginia State, Series B ........................ 4.250% 06/01/26 Aaa/AAA 2,500,000 2,453,475
Washington, MD, Suburban Sanitation
District, Water Supply ........................ 4.250% 06/01/26 Aaa/AAA 2,500,000 2,450,425
Washington State, Series F ...................... 4.500% 07/01/27 Aa1/AA+ 2,500,000 2,483,975
------------
$ 46,565,974
------------
OTHER REVENUE - 7.22%
Fairfax County, VA, Water
Authority Water Revenue ....................... 4.500% 04/01/27 Aaa/AAA 2,500,000 2,505,375
Texas, Water Development Board
Revenue, State Revolving Fund -
Senior Lien, Series A ......................... 4.750% 07/15/20 Aaa/AAA 3,000,000 3,007,110
------------
$ 5,512,485
------------
See Notes to Financial Statements.
14
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) APRIL 30, 2008 (UNAUDITED)
RATINGS
INTEREST MATURITY (MOODY'S/ PRINCIPAL MARKET
SECURITY RATE DATE S&P)1 AMOUNT VALUE
- ---------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 94.97% (CONTINUED)
PREREFUNDED ISSUES - 26.81%
Arlington County, VA, 10/01/08 @ 101,
State Aid Withholding ......................... 5.000% 10/01/14 Aaa/AAA $ 920,000 $ 940,433
Charlotte, NC, Water & Sewer
System Revenue, 06/01/09 @ 101 ................ 5.250% 06/01/24 Aa1/AAA 1,600,000 1,669,184
Chesterfield County, VA,
01/15/10 @ 100 ................................ 5.625% 01/15/14 Aaa/AAA 1,350,000 1,424,020
Chesterfield County, VA,
01/15/11 @ 100 ................................ 5.000% 01/15/20 Aaa/AAA 1,000,000 1,062,250
Florida State, Board of Education,
Public Education Capital Outlay,
Series A, 06/01/10 @ 101 ...................... 5.125% 06/01/21 Aaa/AAA 1,000,000 1,064,720
Georgia State, Series D, Refundable
Balance, 10/01/10 @ 100 ....................... 5.000% 10/01/17 Aaa/AAA 390,000 413,548
Guilford County, NC, Series B,
10/01/10 @ 102 ................................ 5.250% 10/01/16 Aa1/AAA 3,000,000 3,253,050
Gwinnett County, GA, Water &
Sewer Authority, 08/01/12 @ 100 ............... 5.250% 08/01/24 Aaa/AAA 1,500,000 1,638,435
Missouri State, Fourth State
Building, Series A, 06/01/08 @ 100 ............ 5.000% 06/01/23 Aaa/AAA 2,000,000 2,005,060
North Carolina State, Public
School Building, 04/01/09 @ 102 ............... 4.600% 04/01/17 Aaa/AAA 5,000,000 5,211,500
South Carolina State, State
Institutional, Series A, 03/01/10 @ 101 ....... 5.300% 03/01/17 Aaa/AA+ 1,700,000 1,805,672
------------
$ 20,487,872
------------
TOTAL MUNICIPAL BONDS
(COST $70,311,039) ......................................................................................... $ 72,566,331
------------
US TREASURY NOTES - 1.99%
US Treasury Note
(Cost $1,518,346).............................. 4.625% 09/30/08 $1,500,000 $ 1,518,867
------------
REPURCHASE AGREEMENT - 2.09%
JPMORGAN CHASE, N.A.
$1,598,000, Dated 04/30/08, 1.750%, principal and interest in the amount of $1,598,078
due 05/01/08, collaterized by US Treasury Inflation Bond, par value of $1,235,000,
due 01/15/12, with a value of $1,634,261 (Cost $1,598,000) ............................................... $ 1,598,000
------------
TOTAL INVESTMENTS - 99.05%
(COST $73,427,385)*........................................................................................... $ 75,683,198
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.95%................................................................... 723,546
------------
NET ASSETS - 100.00%............................................................................................ $ 76,406,744
============
See Notes to Financial Statements.
15
- --------------------------------------------------------------------------------
MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) APRIL 30, 2008 (UNAUDITED)
- --------------------------------------------------------------------------------
(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.
Prerefunded: Bonds which are prerefunded are collateralized 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 $73,427,385 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation................ $ 2,352,932
Gross Unrealized Depreciation................ (97,119)
------------
Net Unrealized Appreciation.................. $ 2,255,813
============
16
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS APRIL 30, 2008 (UNAUDITED)
INTEREST MATURITY PRINCIPAL MARKET
SECURITY RATE DATE AMOUNT(1) VALUE
- -------------------------------------------------------------------------------------------------------
CANADIAN SECURITIES - 12.75%
Canadian Government Bond 3.750% 06/01/12 CAD 7,500,000 $ 7,637,027
Canadian Government Bond 4.000% 06/01/17 12,500,000 12,750,720
------------
TOTAL CANADIAN SECURITIES
(COST $19,991,512) ................................................................ $ 20,387,747
------------
MEXICAN SECURITIES - 12.69%
Mexican Bono(2) 8.000% 12/24/08 MXP 47,062,400 4,497,688
Mexican Bono(2) 9.000% 12/22/11 80,322,900 7,950,886
Mexican Bono(2) 9.000% 12/20/12 31,782,400 3,160,120
Mexican Bono(2) 8.000% 12/17/15 49,017,000 4,689,860
------------
TOTAL MEXICAN SECURITIES
(COST $19,376,964)................................................................. $ 20,298,554
------------
US TREASURY OBLIGATIONS - 67.92%
US Treasury Bond 7.625% 02/15/25 $10,100,000 13,884,349
US Treasury Bond 6.000% 02/15/26 2,000,000 2,363,282
US Treasury Bond 6.375% 08/15/27 9,600,000 11,916,010
US Treasury Bond 5.000% 05/15/37 8,000,000 8,672,504
US Treasury Note 5.625% 05/15/08 15,650,000 15,674,445
US Treasury Note 3.250% 08/15/08 5,500,000 5,530,509
US Treasury Note 4.125% 08/15/08 10,000,000 10,078,130
US Treasury Note 3.125% 09/15/08 2,000,000 2,012,344
US Treasury Note 4.625% 09/30/08 1,400,000 1,418,047
US Treasury Note 4.875% 10/31/08 12,500,000 12,701,175
US Treasury Note 5.000% 02/15/11 12,500,000 13,384,775
US Treasury Note 4.125% 05/15/15 10,500,000 10,981,530
------------
TOTAL US TREASURY OBLIGATIONS
(COST $107,941,167)................................................................ $108,617,100
------------
See Notes to Financial Statements.
17
- --------------------------------------------------------------------------------
NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) APRIL 30, 2008 (UNAUDITED)
MARKET
SECURITY VALUE
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.48%
JPMORGAN CHASE, N.A.
$10,365,000, Dated 04/30/08, 1.750%, principal and
interest in the amount of $10,365,504 due 05/01/08,
collaterized by US Treasury Inflation Bond, par value
of $7,990,000, due 01/15/28, with a value of
$10,573,074 (Cost $10,365,000).......................... $ 10,365,000
------------
TOTAL INVESTMENTS - 99.84%
(COST $157,674,643)* ....................................... $159,668,401
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.16%................. 253,595
------------
NET ASSETS - 100.00% ......................................... $159,921,996
============
- --------------------------------------------------------------------------------
CAD Canadian dollar
MXP Mexican peso
(1) Principal Amount is shown in US dollar unless otherwise noted.
(2) Bonos are fixed rate, local currency-denominated coupon bonds issued by
the Mexican government.
* Cost for Federal income tax purpose is $157,668,329 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation................ $ 2,225,574
Gross Unrealized Depreciation................ (225,502)
-----------
Net Unrealized Appreciation.................. $ 2,000,072
===========
See Notes to Financial Statements.
18
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS APRIL 30, 2008 (UNAUDITED)
MARKET
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 78.27%
CONSUMER DISCRETIONARY - 5.10%
Amazon.com, Inc.* 1,000 $ 78,630
Bed Bath & Beyond, Inc.* 200 6,500
Best Buy Co., Inc. 456 19,617
Burger King Holdings, Inc. 5,000 139,500
Charter Communications, Inc.* 19,000 20,330
DIRECTV Group, Inc. (The)* 10,000 246,400
DreamWorks Animation SKG, Inc.* 3,439 96,154
drugstore.com, Inc.* 5,000 11,850
Eastman Kodak Co. 5,000 89,450
Expedia, Inc.* 2,543 64,236
Gemstar-TV Guide International, Inc.* 15,000 60,450
Genuine Parts Co. 1,450 61,567
Getty Images, Inc.* 10,000 326,500
Harman International Industries, Inc. 600 24,522
IAC/InterActiveCorp* 9,600 199,776
Interpublic Group of Cos., Inc.* 1,900 17,195
Johnson Controls, Inc. 7,560 266,566
Liberty Media Corp. - Entertainment - Series A* 1,516 39,340
Marvel Entertainment, Inc.* 5,000 143,450
McDonald's Corp. 10,000 595,800
McGraw-Hill Cos., Inc. 600 24,594
New York Times Co. - Class A 10,000 195,000
Newell Rubbermaid, Inc. 5,000 102,650
News Corp. - Class A 604 10,812
NexCen Brands, Inc.* 5,000 15,300
Office Depot, Inc.* 100 1,268
Sally Beauty Holdings, Inc.* 15,000 90,900
Sears Holdings Corp.* 6,200 611,382
Stamps.com, Inc.* 5,000 68,550
Syntax-Brillian Corp.* 5,000 6,100
Target Corp. 1,198 63,650
Walt Disney Co. (The) 5,000 162,150
Whirlpool Corp. 600 43,668
------------
3,903,857
------------
MARKET
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
CONSUMER STAPLES - 6.79%
Altria Group, Inc. 12,171 $ 243,420
Avon Products, Inc. 5,000 195,100
Bunge Ltd. 4,276 487,849
Coca-Cola Co. 5,000 294,350
Costco Wholesale Corp. 2,860 203,775
General Mills, Inc. 5,000 302,000
Hansen Natural Corp.* 5,000 176,950
Hershey Co. (The) 5,000 186,900
Hormel Foods Corp. 10,000 394,100
McCormick & Co. - Non-Voting Shares 5,000 188,950
Pepsico, Inc. 1,284 87,993
Philip Morris International, Inc.* 12,171 621,086
Procter & Gamble Co. 10,644 713,680
Reynolds America (The), Inc. 5,000 269,250
Sara Lee Corp. 300 4,353
Wal-Mart Stores, Inc. 14,266 827,143
------------
5,196,899
------------
ENERGY - 11.58%
Chevron Corp. 9,328 896,887
ConocoPhillips 8,650 745,198
Exterran Holdings, Inc.* 1,000 66,790
Exxon Mobil Corp. 26,424 2,459,282
Halliburton Co. 5,000 229,550
Hess Corp. 3,439 365,222
Kinder Morgan Management, LLC* 5,177 282,136
Marathon Oil Corp. 9,000 410,130
Mariner Energy, Inc.* 94 2,591
National Oilwell Varco, Inc.* 5,000 342,250
Newfield Exploration Co.* 5,000 303,800
Plains Exploration & Production Co.* 10,000 622,800
Superior Energy Services, Inc.* 10,000 443,800
Transocean, Inc.* 4,757 701,467
Williams Cos., Inc. 28,100 997,550
------------
8,869,453
------------
See Notes to Financial Statements.
19
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) APRIL 30, 2008 (UNAUDITED)
MARKET
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 78.27% (CONTINUED)
FINANCIALS - 12.33%
Aon Corp. 17,000 $ 771,630
Bank of New York Mellon Corp. (The) 842 36,652
BGC Partners, Inc.* 1,544 14,884
Blackrock, Inc. - Class A 2,240 452,010
Boston Properties, Inc. 5,100 512,499
Charles Schwab Corp. 14,100 304,560
Citigroup, Inc. 12,702 320,980
CME Group, Inc. 800 365,960
Cullen/Frost Bankers, Inc. 5,000 279,100
Discover Financial Services, LLC 6,240 113,630
E*TRADE Financial Corp.* 5,600 22,288
First Niagara Financial Group, Inc. 5,000 72,150
Goldman Sachs Group, Inc. 5,000 956,850
Knight Capital Group, Inc.* 5,000 93,550
Lehman Brothers Holdings, Inc. 10,800 477,792
Liberty Media Corp. - Capital - Series A* 379 5,825
Loews Corp. 13,000 547,430
Marsh & McLennan Cos., Inc. 26,363 727,355
Merrill Lynch & Co. 6,120 304,960
MetLife, Inc. 10,000 608,500
Moody's Corp. 6,974 257,759
PMI Group, Inc. 1,200 6,756
ProLogis 5,000 313,050
Prudential Financial, Inc. 5,000 378,550
Public Storage, Inc. 5,186 470,370
Radian Group, Inc. 200 1,080
Regions Financial Corp. 546 11,968
SEI Investments Co. 6,400 148,928
State Street Corp. 5,300 382,342
SWS Group, Inc. 5,000 65,600
Torchmark Corp. 200 12,948
Toronto-Dominion Bank 1,880 123,572
Travelers Cos., Inc. (The) 100 5,040
MARKET
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
FINANCIALS - 12.33% (CONTINUED)
U.S. Bancorp 2,473 $ 83,810
UnionBanCal Corp. 3,582 188,091
Zions Bancorp. 100 4,635
------------
9,443,104
------------
HEALTH CARE - 10.18%
Abbott Laboratories 4,335 228,671
Aetna, Inc. 5,400 235,440
Allergan, Inc. 420 23,675
AmerisourceBergen Corp. 10,000 405,500
Amgen, Inc.* 7,300 305,651
Baxter International, Inc. 500 31,160
Beckman Coulter, Inc. 100 6,830
Bristol-Myers Squibb Co. 2,247 49,367
CIGNA Corp. 8,046 343,645
Covance, Inc.* 5,000 418,950
Eli Lilly & Co. 2,396 115,343
Express Scripts, Inc.* 5,000 350,100
Forest Laboratories, Inc.* 10,000 347,100
Genentech, Inc.* 6,324 431,297
Genzyme Corp.* 5,000 351,750
Health Net, Inc.* 10,000 292,900
Invitrogen Corp.* 5,000 467,850
Javelin Pharmaceuticals, Inc.* 5,000 13,200
Johnson & Johnson 12,606 845,737
Landauer, Inc. 700 37,275
McKesson Corp. 4,700 244,964
Medtronic, Inc. 2,670 129,976
PerkinElmer, Inc. 1,000 26,560
Pfizer, Inc. 56,763 1,141,504
Schering-Plough Corp. 4,500 82,845
Sepracor, Inc.* 5,000 107,750
Sirona Dental Systems, Inc.* 5,000 133,850
UnitedHealth Group, Inc. 6,548 213,661
WellPoint, Inc.* 5,000 248,750
Wyeth 3,630 161,426
------------
7,792,727
------------
See Notes to Financial Statements.
20
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) APRIL 30, 2008 (UNAUDITED)
MARKET
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 78.27% (CONTINUED)
INDUSTRIALS - 10.82%
3M Co. 2,400 $ 184,560
AGCO Corp.* 5,800 348,754
Burlington Northern Santa Fe Corp. 5,000 512,750
Copart, Inc.* 5,000 204,350
CSX Corp. 5,000 314,750
FedEx Corp. 5,000 479,350
Flow International Corp.* 5,000 50,150
General Electric Co. 25,234 825,152
Goodrich Corp. 1,100 74,965
Herman Miller, Inc. 5,000 116,650
Honeywell International, Inc. 3,500 207,900
Illinois Tool Works, Inc. 1,138 59,506
Joy Global, Inc. 5,000 371,250
Kansas City Southern* 5,000 225,400
Layne Christensen Co.* 5,000 213,350
Manitowoc Co., Inc. 14,000 529,480
Northrop Grumman Corp. 10,000 735,700
Rockwell Automation, Inc. 3,439 186,497
Ryder Systems, Inc. 5,000 342,350
Spirit AeroSystems Holdings, Inc.* 15,000 437,550
Textron, Inc. 9,600 585,696
Timken Co. 9,300 336,195
Union Pacific Corp. 5,000 725,950
United Technologies Corp. 3,000 217,410
------------
8,285,665
------------
INFORMATION TECHNOLOGY - 12.79%
Agilent Technologies, Inc.* 5,105 154,222
Akamai Technologies, Inc.* 5,000 178,850
Apple, Inc.* 5,848 1,017,259
Broadcom Corp. - Class A* 6,950 180,422
Cisco Systems, Inc.* 40,857 1,047,573
Computer Sciences Corp.* 10,000 435,900
eBay, Inc.* 2,840 88,864
Electronic Arts, Inc.* 10,000 514,700
Entegris, Inc.* 1,444 10,888
Fidelity National Information Services, Inc. 279 10,061
MARKET
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
INFORMATION TECHNOLOGY - 12.79% (CONTINUED)
Google, Inc.* 2,200 $ 1,263,438
Heartland Payment Systems, Inc. 3,000 65,700
Hewitt Associates, Inc. - Class A* 2,940 120,540
Hewlett-Packard Co. 10,000 463,500
Integrated Device Technology, Inc.* 10,000 106,900
Intel Corp. 3,674 81,783
International Business Machines Corp. 13,422 1,620,035
International Rectifier Corp.* 1,000 22,760
Juniper Networks, Inc.* 1,795 49,578
LSI Logic Corp.* 15,000 93,000
MEMC Electronic Materials, Inc.* 5,000 314,850
Microsoft Corp. 30,146 859,764
MIPS Technologies, Inc.* 3,000 13,620
Move, Inc.* 20,000 63,000
NCR Corp.* 10,000 246,300
Skyworks Solutions, Inc.* 7,900 68,651
Sun Microsystems, Inc.* 2,190 34,295
Symyx Technologies, Inc.* 5,000 37,550
Synopsys, Inc.* 630 14,559
Teradata Corp.* 10,000 212,900
Teradyne, Inc.* 5,000 66,450
Texas Instruments, Inc. 10,000 291,600
Volterra Semiconductor Corp.* 3,000 45,180
------------
9,794,692
------------
MATERIALS - 4.72%
AK Steel Holding Corp. 30,448 1,911,525
Ashland, Inc. 5,000 265,100
FMC Corp. 2,700 169,506
International Flavors & Fragrance, Inc. 11,500 524,515
Newmont Mining Corp. 5,000 221,050
Owens-Illinois, Inc.* 9,500 523,925
------------
3,615,621
------------
See Notes to Financial Statements.
21
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) APRIL 30, 2008 (UNAUDITED)
MARKET
SECURITY SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS - 78.27% (CONTINUED)
TELECOMMUNICATIONS SERVICES - 3.26%
Alaska Communications Systems Group, Inc. 2,449 $ 27,380
AT&T, Inc. 21,439 829,904
Fairpoint Communications, Inc. 771 7,102
FiberTower Corp.* 5,000 7,600
Qwest Communications International, Inc. 9,900 51,084
Verizon Communications, Inc. 40,888 1,573,370
------------
2,496,440
------------
UTILITIES - 0.70%
Allegheny Energy, Inc. 7,200 387,360
Energen Corp. 2,100 143,304
------------
530,664
------------
TOTAL COMMON STOCKS
(COST $50,861,586) $ 59,929,122
------------
See Notes to Financial Statements.
22
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
SCHEDULE OF INVESTMENTS (CONTINUED) APRIL 30, 2008 (UNAUDITED)
INTEREST MATURITY PRINCIPAL MARKET
SECURITY RATE DATE AMOUNT VALUE
- ---------------------------------------------------------------------------------------------
US TREASURY OBLIGATIONS - 21.53%
US Treasury Bill 4.030%(1) 05/01/08 $ 2,500,000 $ 2,500,000
US Treasury Bond 6.000% 02/15/26 1,000,000 1,181,641
US Treasury Bond 6.750% 08/15/26 3,050,000 3,904,717
US Treasury Bond 6.375% 08/15/27 200,000 248,250
US Treasury Bond 5.000% 05/15/37 500,000 542,032
US Treasury Note 4.125% 08/15/08 4,500,000 4,535,158
US Treasury Note 4.625% 09/30/08 1,100,000 1,114,180
US Treasury Note 4.875% 10/31/08 1,400,000 1,422,532
US Treasury Note 3.875% 10/31/12 1,000,000 1,037,501
------------
TOTAL US TREASURY OBLIGATIONS
(COST $16,055,570)......................................................... $ 16,486,011
------------
REPURCHASE AGREEMENT - 0.26%
JPMORGAN CHASE, N.A.
$197,000, Dated 04/30/08, 1.750%, principal and interest in the
amount of $197,010 due 05/01/08, collaterized by US Treasury
Inflation Bond, par value of $155,000, due 01/15/12, with a
value of $205,110 (Cost $197,000) .................................. $ 197,000
------------
TOTAL INVESTMENTS - 100.06%
(COST $67,114,156)**....................................................... $ 76,612,133
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.06%).............................. (44,026)
------------
NET ASSETS - 100.00%......................................................... $ 76,568,107
============
(1) Annualized yield at time of purchase, not a coupon rate.
* Non-income producing
** Cost for Federal income tax purpose is $67,210,342 and net unrealized
appreciation (depreciation) on a tax basis consists of:
Gross Unrealized Appreciation................ $ 13,463,537
Gross Unrealized Depreciation................ (4,061,746)
------------
Net Unrealized Appreciation.................. $ 9,401,791
============
See Notes to Financial Statements.
23
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED)
TOTAL RETURN MANAGED
US TREASURY MUNICIPAL
FUND FUND
- ---------------------------------------------------------------------------------------
ASSETS
Investments in securities:
At acquisition cost ...................... $ 120,351,588 $ 73,427,385
============== ==============
At value (Note 1) ........................ $ 120,349,119 $ 75,683,198
Cash ......................................... 814 108
Dividends and interest receivable ............ 1,715,224 841,784
Receivable for capital shares sold ........... 1,162 35,153
Other assets ................................. 24,786 26,460
-------------- --------------
TOTAL ASSETS ............................. 122,091,105 76,586,703
-------------- --------------
LIABILITIES
Distributions payable ........................ 120,492 105,416
Payable for capital shares redeemed .......... 62,685 9,500
Accrued investment advisory fees (Note 3) .... 28,275 24,871
Accrued distribution expenses (Note 3) ....... 26,764 15,544
Accrued administration fees (Note 3) ......... 11,700 7,200
Accrued transfer agent fees (Note 3) ......... 3,000 1,000
Other accrued expenses ....................... 12,672 16,428
-------------- --------------
TOTAL LIABILITIES ........................ 265,588 179,959
-------------- --------------
NET ASSETS ....................................... $ 121,825,517 $ 76,406,744
============== ==============
NET ASSETS CONSIST OF:
Paid-in capital .............................. $ 122,154,623 $ 73,897,840
Undistributed (distributions in excess of) net
investment income ........................ (547,443) 151,318
Accumulated net realized gains
from security transactions ............... 220,806 101,773
Net unrealized appreciation (depreciation)
on investments ........................... (2,469) 2,255,813
-------------- --------------
Net assets ....................................... $ 121,825,517 $ 76,406,744
============== ==============
Shares of capital stock outstanding of $0.001 par
value ISI Shares (115,000,000 and 55,000,000
shares authorized, respectively) ............. 12,517,510 7,244,423
============== ==============
Net asset value per share ........................ $ 9.73 $ 10.55
============== ==============
Maximum offering price value per share
(100/97) x Net asset value per share ......... $ 10.03 $ 10.88
============== ==============
See Notes to Financial Statements.
24
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES APRIL 30, 2008 (UNAUDITED)
NORTH AMERICAN ISI
GOVERNMENT BOND STRATEGY
FUND FUND
- --------------------------------------------------------------------------------------------
ASSETS
Investments in securities:
At acquisition cost ........................... $ 157,674,643 $ 67,114,156
============== ==============
At value (Note 1) ............................. $ 159,668,401 $ 76,612,133
Cash .............................................. 706 473
Dividends and interest receivable ................. 2,222,328 160,827
Receivable for capital shares sold ................ 132,000 76,945
Other assets ...................................... 45,700 22,664
-------------- --------------
TOTAL ASSETS .................................. 162,069,135 76,873,042
-------------- --------------
LIABILITIES
Distributions payable ............................. 283,754 --
Payable for securities purchased .................. 1,464,277 --
Payable for capital shares redeemed ............... 196,697 240,392
Accrued investment advisory fees (Note 3) ......... 51,330 26,826
Accrued distribution expenses (Note 3) ............ 57,035 15,634
Accrued shareholder servicing fees (Note 3) ....... 4,075 --
Accrued administration fees (Note 3) .............. 14,900 7,300
Accrued transfer agent fees (Note 3) .............. 5,200 2,300
Other accrued expenses ............................ 69,871 12,483
-------------- --------------
TOTAL LIABILITIES ............................. 2,147,139 304,935
-------------- --------------
NET ASSETS ............................................ $ 159,921,996 $ 76,568,107
============== ==============
NET ASSETS CONSIST OF:
Paid-in capital ................................... $ 158,475,266 $ 67,389,038
Undistributed (distributions in excess of) net
investment income ............................. (1,665,225) 27,592
Accumulated net realized gains (losses)
from security and foreign currency transactions 1,111,883 (346,500)
Net unrealized appreciation
on investments and foreign currencies ......... 2,000,072 9,497,977
-------------- --------------
Net assets ............................................ $ 159,921,996 $ 76,568,107
============== ==============
See Notes to Financial Statements.
25
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF ASSETS AND LIABILITIES (CONTINUED) APRIL 30, 2008 (UNAUDITED)
NORTH AMERICAN ISI
GOVERNMENT BOND STRATEGY
FUND FUND
- ------------------------------------------------------------------------------------------------
SHARES OF CAPITAL STOCK
OUTSTANDING OF $0.001 PAR VALUE
ISI Class A Shares (50,000,000 shares authorized) ...... 18,286,511 --
============== ==============
ISI Class C Shares (5,000,000 shares authorized) ....... 2,513,401 --
============== ==============
ISI Shares (25,000,000 shares authorized) .............. -- 5,960,549
============== ==============
NET ASSET VALUE PER SHARE
ISI Class A Shares (based on net assets of $140,621,536) $ 7.69 $ --
============== ==============
ISI Class C Shares (based on net assets of $19,300,460) $ 7.68 $ --
============== ==============
ISI Shares ............................................. $ -- $ 12.85
============== ==============
MAXIMUM OFFERING PRICE
VALUE PER SHARE
(100/97) x Net asset value per share
ISI Class A Shares ..................................... $ 7.93 $ --
============== ==============
ISI Shares ............................................. $ -- $ 13.25
============== ==============
See Notes to Financial Statements.
26
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED)
TOTAL RETURN MANAGED
US TREASURY MUNICIPAL
FUND FUND
- --------------------------------------------------------------------------------
INVESTMENT INCOME
Interest .................................... $ 2,310,867 $ 1,644,730
------------ ------------
EXPENSES
Investment advisory fees (Note 3) ........... 162,007 147,973
Distribution fees (Note 3) .................. 158,689 92,483
Administration fees (Note 3) ................ 72,949 42,973
Professional fees ........................... 36,619 12,305
Transfer agent fees (Note 3) ................ 18,238 6,035
Registration fees ........................... 10,234 10,011
Custodian fees .............................. 9,949 1,664
Compliance consulting fees (Note 3) ......... 8,376 4,325
Directors' fees and expenses ................ 7,823 6,193
Other expenses .............................. 5,118 29,456
------------ ------------
TOTAL EXPENSES .......................... 490,002 353,418
------------ ------------
NET INVESTMENT INCOME ........................... 1,820,865 1,291,312
------------ ------------
REALIZED AND UNREALIZED
GAINS ON INVESTMENTS
Net realized gains from security transactions 754,275 102,019
Net change in unrealized appreciation/
depreciation on investments ............. 2,582,551 344,217
------------ ------------
NET REALIZED AND UNREALIZED
GAINS ON INVESTMENTS ........................ 3,336,826 446,236
------------ ------------
NET INCREASE IN NET ASSETS
FROM OPERATIONS ............................. $ 5,157,691 $ 1,737,548
============ ============
See Notes to Financial Statements.
27
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
STATEMENTS OF OPERATIONS SIX MONTHS ENDED APRIL 30, 2008 (UNAUDITED)
NORTH AMERICAN ISI
GOVERNMENT BOND STRATEGY
FUND FUND
- -------------------------------------------------------------------------------------------
INVESTMENT INCOME
Dividends ............................................ $ -- $ 482,646
Interest ............................................. 3,101,626 278,214
------------ ------------
TOTAL INVESTMENT INCOME .......................... 3,101,626 760,860
------------ ------------
EXPENSES
Investment advisory fees (Note 3) .................... 306,331 150,496
Distribution fees (Note 3):
ISI Class A Shares ............................... 269,417 --
ISI Class C Shares ............................... 69,214 --
ISI Shares ....................................... -- 94,060
Administration fees (Note 3) ......................... 88,973 43,706
Transfer agent fees (Note 3):
ISI Class A Shares ............................... 27,357 --
ISI Class C Shares ............................... 3,863 --
ISI Shares ....................................... -- 13,761
Professional fees .................................... 31,360 20,185
Shareholder servicing fees (Note 3):
ISI Class C Shares ............................... 23,071 --
Registration fees .................................... 20,085 16,599
Custodian fees ....................................... 8,558 7,009
Directors' fees and expenses ......................... 8,808 6,292
Compliance consulting fees (Note 3) .................. 9,553 2,206
Other expenses ....................................... 67,239 16,617
------------ ------------
TOTAL EXPENSES ................................... 933,829 370,931
------------ ------------
NET INVESTMENT INCOME .................................... 2,167,797 389,929
------------ ------------
REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCIES (NOTE 5)
Net realized gains (losses) from:
Security transactions ............................ 1,292,457 (235,817)
Foreign currency transactions .................... 99,569 --
Net change in unrealized appreciation/depreciation on:
Investments ...................................... 3,500,491 (6,440,529)
Foreign currency translation ..................... (451,001) --
------------ ------------
NET REALIZED AND UNREALIZED
GAINS (LOSSES) ON INVESTMENTS
AND FOREIGN CURRENCIES ............................... 4,441,516 (6,676,346)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS ...................................... $ 6,609,313 $ (6,286,417)
============ ============
See Notes to Financial Statements.
28
- --------------------------------------------------------------------------------
ISI TOTAL RETURN US TREASURY FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
APRIL 30, ENDED
2008 OCTOBER 31,
(UNAUDITED) 2007
- ----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................... $ 1,820,865 $ 4,947,388
Net realized gains (losses) on
security transactions ........................... 754,275 (533,469)
Net change in unrealized appreciation/
depreciation on investments ..................... 2,582,551 1,546,328
-------------- --------------
Net increase in net assets from operations .............. 5,157,691 5,960,247
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .......................... (2,250,582) (4,897,087)
From net realized gains from security transactions .. -- (12,992)
From return of capital .............................. -- (104,188)
-------------- --------------
Decrease in net assets from distributions to shareholders (2,250,582) (5,014,267)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................... 3,998,880 6,319,187
Net asset value of shares issued in reinvestment
of distributions to shareholders ................ 1,531,134 3,348,275
Payments for shares redeemed ........................ (11,379,683) (39,629,589)
-------------- --------------
Net decrease in net assets from
capital share transactions .......................... (5,849,669) (29,962,127)
-------------- --------------
TOTAL DECREASE IN NET ASSETS ............................ (2,942,560) (29,016,147)
NET ASSETS
Beginning of period ................................. 124,768,077 153,784,224
-------------- --------------
End of period ....................................... $ 121,825,517 $ 124,768,077
============== ==============
DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME ............................... $ (547,443) $ (117,726)
============== ==============
CAPITAL SHARE ACTIVITY
Sold ................................................ 399,018 675,464
Reinvested .......................................... 156,599 356,856
Redeemed ............................................ (1,165,864) (4,234,096)
-------------- --------------
Net decrease in shares outstanding .................. (610,247) (3,201,776)
Shares outstanding, beginning of period ............. 13,127,757 16,329,533
-------------- --------------
Shares outstanding, end of period ................... 12,517,510 13,127,757
============== ==============
See Notes to Financial Statements.
29
- --------------------------------------------------------------------------------
ISI MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
APRIL 30, ENDED
2008 OCTOBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................... $ 1,291,312 $ 2,768,327
Net realized gains on security transactions ......... 102,019 302,012
Net change in unrealized appreciation/
depreciation on investments ..................... 344,217 (1,359,099)
------------ ------------
Net increase in net assets from operations .............. 1,737,548 1,711,240
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .......................... (1,866,005) (2,444,322)
From net realized gains from security transactions .. (302,252) (720,919)
------------ ------------
Decrease in net assets from distributions to shareholders (2,168,257) (3,165,241)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................... 6,718,791 3,715,876
Net asset value of shares issued in reinvestment
of distributions to shareholders ................ 1,178,473 1,836,701
Payments for shares redeemed ........................ (4,097,754) (13,940,935)
------------ ------------
Net increase (decrease) in net assets from
capital share transactions .......................... 3,799,510 (8,388,358)
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................. 3,368,801 (9,842,359)
NET ASSETS
Beginning of period ................................. 73,037,943 82,880,302
------------ ------------
End of period ....................................... $ 76,406,744 $ 73,037,943
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ..................... $ 151,318 $ 726,011
============ ============
CAPITAL SHARE ACTIVITY
Sold ................................................ 633,097 350,339
Reinvested .......................................... 111,481 172,566
Redeemed ............................................ (385,409) (1,310,969)
------------ ------------
Net increase (decrease) in shares outstanding ....... 359,169 (788,064)
Shares outstanding, beginning of period ............. 6,885,254 7,673,318
------------ ------------
Shares outstanding, end of period ................... 7,244,423 6,885,254
============ ============
See Notes to Financial Statements.
30
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
APRIL 30, ENDED
2008 OCTOBER 31,
(UNAUDITED) 2007
- -----------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ................................ $ 2,167,797 $ 5,210,288
Net realized gains on security and
foreign currency transactions .................... 1,392,026 1,593,508
Net change in unrealized appreciation/
depreciation on investments and foreign currencies 3,049,490 2,654,081
-------------- --------------
Net increase in net assets from operations ............... 6,609,313 9,457,877
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income
ISI Class A Shares ............................... (3,180,011) (6,373,815)
ISI Class C Shares ............................... (380,020) (652,731)
From return of capital
ISI Class A Shares ............................... -- (156,882)
ISI Class C Shares ............................... -- (16,066)
-------------- --------------
Decrease in net assets from distributions to shareholders (3,560,031) (7,199,494)
-------------- --------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold
ISI Class A Shares ............................... 17,777,385 17,184,282
ISI Class C Shares ............................... 5,634,494 3,349,326
Net asset value of shares issued in reinvestment
of distributions to shareholders
ISI Class A Shares ............................... 1,691,674 3,218,998
ISI Class C Shares ............................... 250,466 397,242
Payments for shares redeemed
ISI Class A Shares ............................... (13,276,001) (37,507,806)
ISI Class C Shares ............................... (3,801,789) (2,737,227)
-------------- --------------
Net increase (decrease) in net assets
from capital share transactions ...................... 8,276,229 (16,095,185)
-------------- --------------
TOTAL INCREASE (DECREASE) IN NET ASSETS .................. 11,325,511 (13,836,802)
NET ASSETS
Beginning of period .................................. 148,596,485 162,433,287
-------------- --------------
End of period ........................................ $ 159,921,996 $ 148,596,485
============== ==============
DISTRIBUTIONS IN EXCESS OF
NET INVESTMENT INCOME ................................ $ (1,665,225) $ (272,991)
============== ==============
See Notes to Financial Statements.
31
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS (CONTINUED)
SIX MONTHS
ENDED YEAR
APRIL 30, ENDED
2008 OCTOBER 31,
(UNAUDITED) 2007
- -----------------------------------------------------------------------------------------------
CAPITAL SHARE ACTIVITY
Sold
ISI Class A Shares ............................... 2,286,655 2,336,309
ISI Class C Shares ............................... 731,758 454,890
Reinvested
ISI Class A Shares ............................... 219,742 437,899
ISI Class C Shares ............................... 32,566 54,106
Redeemed
ISI Class A Shares ............................... (1,724,181) (5,097,813)
ISI Class C Shares ............................... (492,458) (374,116)
Net increase (decrease) in shares outstanding
ISI Class A Shares ............................... 782,216 (2,323,605)
ISI Class C Shares ............................... 271,866 134,880
Shares outstanding, beginning of period
ISI Class A Shares ............................... 17,504,295 19,827,900
ISI Class C Shares ............................... 2,241,535 2,106,655
Shares outstanding, end of period
ISI Class A Shares ............................... 18,286,511 17,504,295
ISI Class C Shares ............................... 2,513,401 2,241,535
See Notes to Financial Statements.
32
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR
APRIL 30, ENDED
2008 OCTOBER 31,
(UNAUDITED) 2007
- ------------------------------------------------------------------------------------------
FROM OPERATIONS
Net investment income ............................... $ 389,929 $ 913,806
Net realized gains (losses) on security transactions (235,817) 4,355,339
Net change in unrealized appreciation/
depreciation on investments ..................... (6,440,529) 4,419,629
------------ ------------
Net increase (decrease) in net assets from operations ... (6,286,417) 9,688,774
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS
From net investment income .......................... (398,594) (913,710)
From net realized gains from security transactions .. (4,292,358) (1,880,666)
------------ ------------
Decrease in net assets from distributions to shareholders (4,690,952) (2,794,376)
------------ ------------
FROM CAPITAL SHARE TRANSACTIONS
Proceeds from shares sold ........................... 9,370,849 11,950,032
Net asset value of shares issued in reinvestment
of distributions to shareholders ................ 4,166,193 2,410,919
Payments for shares redeemed ........................ (6,526,812) (10,158,032)
------------ ------------
Net increase in net assets from
capital share transactions .......................... 7,010,230 4,202,919
------------ ------------
TOTAL INCREASE (DECREASE) IN NET ASSETS ................. (3,967,139) 11,097,317
NET ASSETS
Beginning of period ................................. 80,535,246 69,437,929
------------ ------------
End of period ....................................... $ 76,568,107 $ 80,535,246
============ ============
UNDISTRIBUTED NET INVESTMENT INCOME ..................... $ 27,592 $ 36,257
============ ============
CAPITAL SHARE ACTIVITY
Sold ................................................ 716,269 850,502
Reinvested .......................................... 309,288 175,991
Redeemed ............................................ (497,937) (723,124)
------------ ------------
Net increase in shares outstanding .................. 527,620 303,369
Shares outstanding, beginning of period ............. 5,432,929 5,129,560
------------ ------------
Shares outstanding, end of period ................... 5,960,549 5,432,929
============ ============
See Notes to Financial Statements.
33
- --------------------------------------------------------------------------------
ISI TOTAL RETURN US TREASURY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
2008 ----------------------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period ................ $ 9.50 $ 9.42 $ 9.33 $ 9.57 $ 9.92 $ 10.18
---------- ---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income .............. 0.14(a) 0.35(a) 0.32(a) 0.29(a) 0.24(a) 0.23
Net realized and unrealized gains
(losses) on investments .......... 0.26 0.08 0.12 (0.16) 0.19 0.01
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ..... 0.40 0.43 0.44 0.13 0.43 0.24
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.17) (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 .................. (0.17) (0.35) (0.35) (0.37) (0.78) (0.50)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ..... $ 9.73 $ 9.50 $ 9.42 $ 9.33 $ 9.57 $ 9.92
========== ========== ========== ========== ========== ==========
TOTAL RETURN (b) ..................... 4.26%(c) 4.66% 4.83% 1.38% 4.64% 2.30%
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) .. $ 121,826 $ 124,768 $ 153,784 $ 165,974 $ 194,790 $ 229,027
========== ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets ................. 0.78%(d) 0.79% 0.76%(e) 0.70% 0.69% 0.67%
Ratio of net investment income
to average net assets .............. 2.90%(d) 3.68% 3.44%(e) 3.01% 2.56% 2.50%
Portfolio turnover rate .............. 12%(c) 29% 51% 16% 31% 125%
- -------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the period.
(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) Not annualized.
(d) Annualized.
(e) The October 31, 2006 ratios of expense and net investment income to
average net assets were unaffected by the waiver of distribution fees
during the year.
* Amount less than $0.005 per share
See Notes to Financial Statements.
34
- --------------------------------------------------------------------------------
ISI MANAGED MUNICIPAL FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
2008 ----------------------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period ................ $ 10.61 $ 10.80 $ 10.68 $ 10.91 $ 10.89 $ 11.00
---------- ---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income .............. 0.19(a) 0.38(a) 0.39(a) 0.40(a) 0.38(a) 0.40
Net realized and unrealized gains
(losses) on investments .......... 0.06 (0.14) 0.10 (0.27) 0.08 0.01
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ..... 0.25 0.24 0.49 0.13 0.46 0.41
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.27) (0.34) (0.34) (0.36) (0.44) (0.47)
Distributions from
net realized gains ............... (0.04) (0.09) (0.03) -- -- (0.05)
---------- ---------- ---------- ---------- ---------- ----------
Total distributions .................. (0.31) (0.43) (0.37) (0.36) (0.44) (0.52)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ..... $ 10.55 $ 10.61 $ 10.80 $ 10.68 $ 10.91 $ 10.89
========== ========== ========== ========== ========== ==========
TOTAL RETURN(b) ...................... 2.39%(c) 2.29% 4.68% 1.19% 4.26% 3.89%
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) .. $ 76,407 $ 73,038 $ 82,880 $ 94,027 $ 113,844 $ 107,078
========== ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets ................. 0.96%(d) 0.94% 0.91% 0.86% 0.88% 0.89%
Ratio of net investment income
to average net assets .............. 3.49%(d) 3.57% 3.63% 3.64% 3.53% 3.66%
Portfolio turnover rate .............. 3%(c) 5% 7% 7% 17% 11%
- -------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the period.
(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) Not annualized.
(d) Annualized.
See Notes to Financial Statements.
35
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND - CLASS A
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
2008 ----------------------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period ................ $ 7.53 $ 7.41 $ 7.34 $ 7.41 $ 7.73 $ 8.03
---------- ---------- ---------- ---------- ---------- ----------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income .............. 0.10(a) 0.26(a) 0.25(a) 0.26(a) 0.24(a) 0.25
Net realized and unrealized gains
on investments and foreign
currencies ....................... 0.24 0.22 0.18 0.06 0.03 0.07
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ..... 0.34 0.48 0.43 0.32 0.27 0.32
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.18) (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 .................. (0.18) (0.36) (0.36) (0.39) (0.59) (0.62)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ..... $ 7.69 $ 7.53 $ 7.41 $ 7.34 $ 7.41 $ 7.73
========== ========== ========== ========== ========== ==========
TOTAL RETURN(b) ...................... 4.54%(c) 6.71% 6.04% 4.39% 3.62% 4.14%
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) .. $ 140,622 $ 131,748 $ 146,854 $ 177,101 $ 204,266 $ 267,756
========== ========== ========== ========== ========== ==========
Ratio of expenses to
average net assets ................. 1.15%(d) 1.11% 1.06%(e) 1.04% 1.05% 1.09%
Ratio of net investment income
to average net assets .............. 2.90%(d) 3.54% 3.47%(e) 3.55% 3.22% 3.03%
Portfolio turnover rate .............. 28%(c) 49% 53% 66% 47% 152%
- -------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the period.
(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) Not annualized.
(d) Annualized.
(e) The October 31, 2006 ratios of expense and net investment income to
average net assets were unaffected by the waiver of distribution fees
during the year.
See Notes to Financial Statements.
36
- --------------------------------------------------------------------------------
ISI NORTH AMERICAN GOVERNMENT BOND FUND - CLASS C
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED MAY 16, 2003(a)
APRIL 30, YEARS ENDED OCTOBER 31, THROUGH
2008 -------------------------------------------------------- OCTOBER 31,
(UNAUDITED) 2007 2006 2005 2004 2003
- ------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period ................ $ 7.52 $ 7.40 $ 7.33 $ 7.40 $ 7.72 $ 8.20
---------- ---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income .............. 0.08(b) 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 ............. 0.24 0.22 0.17 0.06 0.02 (0.38)
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ..... 0.32 0.43 0.38 0.27 0.21 (0.21)
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.16) (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 .................. (0.16) (0.31) (0.31) (0.34) (0.53) (0.27)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ..... $ 7.68 $ 7.52 $ 7.40 $ 7.33 $ 7.40 $ 7.72
========== ========== ========== ========== ========== ==========
TOTAL RETURN(c) ...................... 4.22%(d) 6.03% 5.35% 3.73% 2.91% (2.62)%(d)
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) .. $ 19,300 $ 16,848 $ 15,579 $ 15,944 $ 18,616 $ 13,565
========== ========== ========== ========== ========== ==========
Ratio of net expenses to
average net assets ................. 1.77%(e) 1.74% 1.72% 1.69% 1.77% 1.85%(e)(f)
Ratio of net investment income
to average net assets .............. 2.31%(e) 2.93% 2.81% 2.89% 2.50% 3.32%(e)
Portfolio turnover rate .............. 28%(d) 49% 53% 66% 47% 152%(d)
(a) Commencement of operations.
(b) Calculated using the average shares outstanding for the period.
(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 period ended
October 31, 2003.
See Notes to Financial Statements.
37
- --------------------------------------------------------------------------------
ISI STRATEGY FUND
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
SELECTED PER SHARE DATA AND RATIOS FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED
APRIL 30, YEARS ENDED OCTOBER 31,
2008 ----------------------------------------------------------------------
(UNAUDITED) 2007 2006 2005 2004 2003
- -------------------------------------------------------------------------------------------------------------------------------
Net asset value at
beginning of period ................ $ 14.82 $ 13.54 $ 12.12 $ 11.21 $ 10.50 $ 9.08
---------- ---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM
INVESTMENT OPERATIONS:
Net investment income .............. 0.07(a) 0.17(a) 0.15(a) 0.16(a) 0.10(a) 0.08
Net realized and unrealized gains
(losses) on investments
and foreign currencies ........... (1.17) 1.65 1.42 0.91 0.70 1.42
---------- ---------- ---------- ---------- ---------- ----------
Total from investment operations ..... (1.10) 1.82 1.57 1.07 0.80 1.50
---------- ---------- ---------- ---------- ---------- ----------
LESS DISTRIBUTIONS:
Dividends from net
investment income ................ (0.07) (0.17) (0.15) (0.16) (0.09) (0.08)
Distributions from
net realized gains ............... (0.80) (0.37) -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Total distributions .................. (0.87) (0.54) (0.15) (0.16) (0.09) (0.08)
---------- ---------- ---------- ---------- ---------- ----------
Net asset value at end of period ..... $ 12.85 $ 14.82 $ 13.54 $ 12.12 $ 11.21 $ 10.50
========== ========== ========== ========== ========== ==========
TOTAL RETURN(b) ...................... (7.71%)(c) 13.79% 13.01% 9.59% 7.71% 16.47%
========== ========== ========== ========== ========== ==========
Net assets at end of period (000's) .. $ 76,568 $ 80,535 $ 69,438 $ 60,205 $ 44,920 $ 30,262
========== ========== ========== ========== ========== ==========
Ratio of net expenses to
average net assets ................. 0.99%(d) 0.96% 0.95% 0.94% 1.12% 1.30%(e)
Ratio of net investment income
to average net assets .............. 1.04%(d) 1.21% 1.17% 1.33% 0.92% 0.77%
Portfolio turnover rate .............. 17%(c) 62% 41% 30% 66% 60%
- -------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using the average shares outstanding for the period.
(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) Not annualized.
(d) Annualized.
(e) Absent fee waivers by the investment advisor, the annualized ratio of
expenses to average net assets would have been 1.79% for the period ended
October 31, 2003.
See Notes to Financial Statements.
38
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 2008 (UNAUDITED)
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.
39
- --------------------------------------------------------------------------------
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 calculation of the net asset value per share,
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 April 30, 2008, 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 North American declares 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. Managed Municipal declares and pays dividends monthly from
its net investment income. 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.
40
- --------------------------------------------------------------------------------
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 April 30, 2008, 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.
41
- --------------------------------------------------------------------------------
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
In September 2006, the Financial Accounting Standards Board issued
Statement of 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 April 30, 2008, 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.
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 1.50% 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 contractually agreed to waive its advisory fees and/or reimburse
expenses of North American through February 28, 2009 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 six months ended April 30, 2008,
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.
42
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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 six months ended April
30, 2008, North American Class A shares did not pay any shareholder servicing
fees.
During the six months ended April 30, 2008, ISI Group earned commissions
on sales of ISI Shares of Total Return, Managed Municipal, and Strategy of
$2,723, $5,348 and $5,773, respectively, and $11,750 on sales of ISI Class A
Shares of North American. ISI Group retained $11,821 of contingent deferred
sales charges on the sale of ISI Class C Shares of North American.
Ultimus Fund Solutions, LLC ("Ultimus") is the administrator and fund
accountant for the Funds pursuant to the terms of a Mutual Fund Services
Agreement. Ultimus supplies non-investment related statistical and research
data, internal regulatory compliance services and executive and administrative
services. Ultimus supervises the preparation of tax returns, reports to
shareholders of the Funds, reports to and filings with the SEC and state
securities commissions, and materials for meetings of the Board of Directors.
Ultimus also calculates the net asset value per share of each Fund and provides
information necessary to prepare the Funds' financial statements and tax
returns. For the performance of these services, the Funds pay Ultimus a fee at
the annual rate of 0.10% of the combined average value of the daily net assets
up to $500 million, 0.075% of such assets from $500 million to $1 billion, and
0.06% of such assets in excess of $1 billion, subject to an annual minimum of
$500,000.
Under the terms of a Transfer Agent and Shareholder Services Agreement,
Ultimus maintains the records of each shareholder's account, answers
shareholders' inquiries concerning their accounts, processes purchases and
redemptions of each Fund's shares, acts as dividend and distribution disbursing
agent and performs other shareholder service functions. For these services,
Ultimus receives a monthly fee from each Fund at an annual rate of $20 for each
direct account and $15 for certain accounts established through financial
intermediaries; provided, however, that the minimum monthly fee is $1,000. In
addition, the Funds reimburse Ultimus for its out-of-pocket expenses including,
but not limited to, postage and supplies.
EJV Financial Services, LLC provides certain compliance services to the
Funds. Edward J. Veilleux, Vice President and Chief Compliance Officer of the
Funds, is also a principal of EJV Financial Services, LLC.
43
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
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.
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.
During the periods ended April 30, 2008 and 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
------------------------ ------------------------ ------------------------ ------------------------
APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31, APRIL 30, OCTOBER 31,
2008 2007 2008 2007 2008 2007 2008 2007
Total Return $2,250,582 $4,910,079 $ -- $ -- $ -- $ -- $ -- $ 104,188
Managed Municipal 25,203 72,962 1,856,286 2,371,360 286,768 720,919 -- --
North American 3,560,031 7,026,546 -- -- -- -- -- 172,948
Strategy 470,277 913,710 -- -- 4,220,675 1,880,666 -- --
FASB's Interpretation No. 48 ("FIN 48") "Accounting for Uncertainty in
Income Taxes" 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
each Fund's 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 booked
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 net asset value calculations as late as the Fund's last such
calculation in the first required financial statement reporting period. As a
result, the Funds have adopted FIN 48 with this semi-annual report. Based on
management's analysis, the adoption of FIN 48 does not have a material impact on
the financial statements. The statue of limitations on the Funds' tax returns
remains open for the years ended October 31, 2006 and October 31, 2007.
44
- --------------------------------------------------------------------------------
ISI FUNDS
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
As of April 30, 2008, 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 $ -- $ -- $ 220,806 $ -- $ (2,469) $ 218,337
Managed Municipal 148,523 2,795 101,773 -- 2,255,813 2,508,904
North American -- -- 1,111,883 -- 2,000,072 3,111,955
Strategy -- 27,592 -- (250,314) 9,401,791 9,179,069
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 six months ended April 30, 2008, were
as follows:
NON-US GOVERNMENT OBLIGATIONS US GOVERNMENT OBLIGATIONS
----------------------------- ----------------------------
PURCHASES SALES PURCHASES SALES
- --------------------------------------------------------------------------------
Total Return $ -- $ -- $ 10,641,250 $ 40,633,085
Managed Municipal 3,458,630 2,040,000 -- --
North American 10,394,227 22,588,662 18,079,063 30,551,211
Strategy 11,377,457 13,321,765 526,294 673,906
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.
NOTE 7 - OTHER INFORMATION
On April 30, 2008, 1 shareholder account held approximately 10% of North
American. This shareholder is an omnibus account, which is held on behalf of
several individual shareholders.
45
- --------------------------------------------------------------------------------
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
Security and Exchange Commission's ("SEC") 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 Fund's 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 the Public Reference Room may be obtained by calling
800-SEC-0330.
ISI INTERNATIONAL STRATEGY AND INVESTMENT
PRIVACY NOTICE FOR ISI MUTUAL FUNDS
PRIVACY POLICY
The mutual funds in the ISI Fund Complex ("the Funds") believe that your privacy
is extremely important. We are firmly committed to protecting any personal or
financial information you provide to us as well as information about your
transactions with us, such as transaction amounts, account balance and account
holdings ("Personal Information"). We use Personal Information only to develop
and deliver products and services that you request and to fulfill any applicable
legal and regulatory requirements. We do not disclose Personal Information about
you or our former customers except to our affiliates and service providers. We
require our employees, affiliates and service providers to maintain appropriate
safeguards to ensure the security of your non-public information.
LIMITS OF USE OF PERSONAL INFORMATION
We limit the use, collection and retention of customer information to what is
necessary to provide personal financial services and related products. We have
security practices and procedures in place to ensure the confidentiality and
security of your Personal Information.
ACCURACY OF PERSONAL INFORMATION
We strive to keep your personal and financial information accurate. If our
records are incorrect or out-of-date, please notify us immediately by contacting
the Service Center listed on your account statement.
CHANGE TO OUR POLICIES
If you have any privacy or security questions, please contact us at
800-882-8585. We may, at our discretion, change this Privacy Policy at any time.
If we make material changes to the policy, we will provide you with notice of
these changes.
46
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- --------------------------------------------------------------------------------
ISI International
Strategy &
Investment
- --------------------------------------------------------------------------------
LOUIS E. LEVY EDWARD J. VEILLEUX
CHAIRMAN VICE PRESIDENT
CHIEF COMPLIANCE OFFICER
W. MURRAY JACQUES
DIRECTOR THOMAS P. STEVENS*
VICE PRESIDENT
EDWARD A. KUCZMARSKI
DIRECTOR STEPHEN V. KILLORIN
VICE PRESIDENT
R. ALAN MEDAUGH TREASURER
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.
Not required
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not required
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not required
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: Not required
(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.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 June 30, 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 June 30, 2008
------------------------------
By (Signature and Title)* /s/ Mark J. Seger
----------------------------------------------------
Mark J. Seger, Treasurer
Date June 30, 2008
------------------------------
* Print the name and title of each signing officer under his or her signature.