As filed with the Securities and Exchange Commission on July 6, 2007
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-07292
NORTH AMERICAN GOVERNMENT BOND FUND, INC.
40 West 57th Street, 18th Floor
New York, New York 10019
(212) 446-5600
R. Alan Medaugh, President
40 West 57th Street, 18th Floor
New York, New York 10019
(212) 446-5600
Date of fiscal year end: October 31
Date of reporting period: April 30, 2007
ITEM 1.REPORT TO STOCKHOLDERS
[LOGO] ISI
INTERNATIONAL STRATEGY & INVESTMENT
SEMI - ANNUAL REPORT
APRIL 30, 2007
[GRAPHIC]
TOTAL RETURN US TREASURY FUND
MANAGED MUNICIPAL FUND
NORTH AMERICAN GOVERNMENT BOND FUND
ISI STRATEGY FUND
ISI FUNDS SEMI-ANNUAL REPORT - TABLE OF CONTENTS
Investment Advisor's Message............ 1
Performance Comparisons................. 2
Shareholder Expense Example............. 7
Portfolio Profiles...................... 9
Schedules of Investments................ 10
Statements of Assets and Liabilities.... 21
Statements of Operations................ 23
Statements of Changes in Net Assets..... 25
Financial Highlights.................... 29
Notes to Financial Statements........... 34
INVESTMENT ADVISOR'S MESSAGE
Dear Shareholder:
I am pleased to present the semi-annual report to shareholders for the ISI
Funds. This report covers the six-month reporting period ended April 30, 2007.
For this period, the Total Return US Treasury Fund, Inc. ('Total Return')
produced a +1.55% return; Managed Municipal Fund, Inc. ('Managed Municipal')
produced a +1.06% return; North American Government Bond Fund, Inc. ('North
American') produced a +1.65% return in its Class A Shares and a +1.32% return
in its Class C Shares; and ISI Strategy Fund ('Strategy') produced a +7.91%
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 designed 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 designed 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 2, 2007
1
TOTAL RETURN US TREASURY FUND - ISI SHARES PERFORMANCE COMPARISON/1/
[CHART]
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, 2007)
Total Return Lehman Brothers
US Treasury Intermediate Lehman Brothers
Fund - Lehman Brothers Treasury Long-Term
ISI Shares Treasury Index Index Treasury Index
------------ --------------- --------------- ---------------
4/30/1997 9,705 10,000 10,000 10,000
5/31/1997 9,799 10,086 10,078 10,112
6/30/1997 9,946 10,199 10,163 10,307
7/31/1997 10,361 10,492 10,354 10,913
8/31/1997 10,167 10,385 10,312 10,609
9/30/1997 10,347 10,543 10,425 10,901
10/31/1997 10,560 10,727 10,547 11,268
11/30/1997 10,636 10,783 10,571 11,418
12/31/1997 10,788 10,896 10,658 11,609
1/31/1998 10,950 11,063 10,801 11,846
2/28/1998 10,900 11,030 10,786 11,761
3/31/1998 10,925 11,060 10,819 11,785
4/30/1998 10,950 11,109 10,870 11,829
5/31/1998 11,105 11,225 10,945 12,055
6/30/1998 11,282 11,354 11,019 12,335
7/31/1998 11,264 11,372 11,062 12,283
8/31/1998 11,708 11,681 11,281 12,838
9/30/1998 12,044 12,006 11,553 13,308
10/31/1998 11,880 11,968 11,576 13,106
11/30/1998 11,962 11,965 11,533 13,207
12/31/1998 11,953 11,989 11,577 13,179
1/31/1999 12,025 12,058 11,627 13,298
2/28/1999 11,611 11,751 11,458 12,644
3/31/1999 11,614 11,796 11,534 12,615
4/30/1999 11,653 11,824 11,566 12,633
5/31/1999 11,515 11,713 11,493 12,434
6/30/1999 11,435 11,689 11,513 12,303
7/31/1999 11,391 11,679 11,524 12,244
8/31/1999 11,347 11,681 11,548 12,196
9/30/1999 11,435 11,770 11,637 12,286
10/31/1999 11,426 11,783 11,652 12,294
11/30/1999 11,369 11,761 11,657 12,210
12/31/1999 11,274 11,682 11,625 12,028
1/31/2000 11,402 11,713 11,593 12,199
2/29/2000 11,641 11,889 11,683 12,567
3/31/2000 11,945 12,125 11,832 12,997
4/30/2000 11,911 12,087 11,824 12,893
5/31/2000 11,877 12,105 11,874 12,846
6/30/2000 12,071 12,309 12,045 13,124
7/31/2000 12,228 12,436 12,126 13,350
8/31/2000 12,450 12,619 12,253 13,655
9/30/2000 12,351 12,629 12,347 13,489
10/31/2000 12,511 12,752 12,428 13,700
11/30/2000 12,789 13,013 12,608 14,133
12/31/2000 13,055 13,262 12,818 14,465
1/31/2001 13,086 13,369 12,969 14,490
2/28/2001 13,276 13,531 13,089 14,738
3/31/2001 13,240 13,574 13,193 14,664
4/30/2001 12,975 13,406 13,140 14,265
5/31/2001 13,006 13,448 13,194 14,283
6/30/2001 13,051 13,520 13,242 14,406
7/31/2001 13,437 13,857 13,482 14,942
8/31/2001 13,660 14,041 13,599 15,261
9/30/2001 13,761 14,263 13,880 15,375
10/31/2001 14,209 14,658 14,091 16,131
11/30/2001 13,739 14,296 13,931 15,364
12/31/2001 13,603 14,156 13,864 15,074
1/31/2002 13,692 14,252 13,902 15,220
2/28/2002 13,781 14,380 14,017 15,447
3/31/2002 13,458 14,034 13,803 14,823
4/30/2002 13,806 14,383 14,049 15,385
5/31/2002 13,867 14,464 14,146 15,434
6/30/2002 14,101 14,668 14,319 15,711
7/31/2002 14,452 15,016 14,604 16,195
8/31/2002 14,878 15,340 14,757 16,902
9/30/2002 15,276 15,754 15,041 17,607
10/31/2002 15,029 15,579 15,013 17,101
11/30/2002 14,885 15,425 14,873 16,912
12/31/2002 15,243 15,826 15,150 17,605
1/31/2003 15,187 15,778 15,107 17,545
2/28/2003 15,459 16,049 15,270 18,076
3/31/2003 15,372 15,982 15,269 17,849
4/30/2003 15,450 16,057 15,300 18,030
5/31/2003 15,938 16,520 15,537 19,044
6/30/2003 15,834 16,419 15,512 18,754
7/31/2003 15,120 15,698 15,173 17,076
8/31/2003 15,200 15,791 15,194 17,349
9/30/2003 15,618 16,267 15,509 18,252
10/31/2003 15,374 16,019 15,357 17,744
11/30/2003 15,408 16,039 15,353 17,830
12/31/2003 15,516 16,181 15,469 18,042
1/31/2004 15,648 16,319 15,546 18,351
2/29/2004 15,838 16,521 15,690 18,717
3/31/2004 15,964 16,676 15,800 19,001
4/30/2004 15,435 16,139 15,443 17,935
5/31/2004 15,398 16,084 15,399 17,847
6/30/2004 15,475 16,149 15,431 18,011
7/31/2004 15,586 16,302 15,536 18,315
8/31/2004 15,913 16,639 15,764 18,995
9/30/2004 15,942 16,682 15,771 19,155
10/31/2004 16,087 16,815 15,858 19,437
11/30/2004 15,864 16,589 15,695 19,004
12/31/2004 16,044 16,753 15,782 19,432
1/31/2005 16,243 16,875 15,799 19,922
2/28/2005 16,105 16,738 15,697 19,665
3/31/2005 16,052 16,683 15,663 19,534
4/30/2005 16,341 16,976 15,854 20,202
5/31/2005 16,580 17,184 15,976 20,726
6/30/2005 16,733 17,289 16,026 21,037
7/31/2005 16,455 17,055 15,878 20,485
8/31/2005 16,765 17,326 16,060 21,082
9/30/2005 16,485 17,096 15,928 20,476
10/31/2005 16,309 16,962 15,858 20,099
11/30/2005 16,377 17,044 15,927 20,225
12/31/2005 16,639 17,221 16,028 20,696
1/31/2006 16,549 17,170 16,012 20,506
2/28/2006 16,600 17,194 16,007 20,652
3/31/2006 16,298 17,009 15,951 19,947
4/30/2006 16,154 16,939 15,959 19,559
5/31/2006 16,134 16,944 15,965 19,560
6/30/2006 16,150 16,998 15,996 19,710
7/31/2006 16,435 17,209 16,165 20,088
8/31/2006 16,775 17,462 16,345 20,640
9/30/2006 16,990 17,624 16,464 20,977
10/31/2006 17,096 17,713 16,537 21,131
11/30/2006 17,294 17,898 16,667 21,546
12/31/2006 17,094 17,751 16,591 21,079
1/31/2007 17,074 17,723 16,591 20,917
2/28/2007 17,347 18,017 16,809 21,538
3/31/2007 17,271 18,008 16,849 21,301
4/30/2007 17,362 18,101 16,924 21,467
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2007 6 Months 1 Year 5 Years 10 Years Inception/2/ 1 Year 3 Years 5 Years 10 Years Inception/2/
Total Return US Treasury
Fund - ISI Shares -1.48% 4.26% 21.94% 73.62% 245.13% 4.26% 2.95% 4.05% 5.67% 6.84%
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Treasury Index/3/ 2.19% 6.86% 25.85% 81.01% 266.70% 6.86% 3.90% 4.71% 6.11% 7.41%
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate
Treasury Index/3/ 2.34% 6.05% 20.46% 69.24% 225.56% 6.05% 3.10% 3.79% 5.40% 6.71%
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Long-Term Treasury
Index/3/ 1.59% 9.76% 39.53% 114.67% 402.81% 9.76% 6.17% 6.89% 7.94% 9.30%
- --------------------------------------------------------------------------------------------------------------------
/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. Distribution 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 9.6 years. Performance
would have been lower during the specified period if certain of the Fund's
fees and expenses had not been waived.
/2/ The Fund's inception date is August 10, 1988. Benchmark returns are for the
periods beginning August 31, 1988.
/3/ The Lehman Brothers Treasury Index is an unmanaged index reflecting the
performance of all public Treasury obligations and does not focus on one
particular segment of the Treasury market. The Lehman Brothers Intermediate
Treasury Index is an unmanaged index reflecting the performance of US
Treasury securities in the intermediate-term Treasury sector. The Lehman
Brothers Long-Term Treasury Index is an unmanaged index reflecting the
performance of US Treasury securities in the long-term Treasury sector.
Benchmark returns do not reflect expenses or sales charges that have been
deducted from the Fund's returns.
2
MANAGED MUNICIPAL FUND - ISI SHARES PERFORMANCE COMPARISON/1/
[CHART]
Managed Municipal Fund - ISI Shares, 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, 2007)
Managed Lehman Brothers Lehman Brothers
Municipal General Prerefunded Consumer
Fund - Obligation Municipal Price
ISI Shares Index Bond Index Index
---------- -------------- -------------- --------
4/30/1997 $9,702 $10,000 $10,000 $10,000
5/31/1997 9,847 10,149 10,142 9,994
6/30/1997 9,955 10,259 10,210 10,006
7/31/1997 10,251 10,524 10,382 10,019
8/31/1997 10,105 10,431 10,333 10,037
9/30/1997 10,243 10,549 10,421 10,062
10/31/1997 10,295 10,608 10,463 10,087
11/30/1997 10,339 10,657 10,486 10,081
12/31/1997 10,502 10,809 10,576 10,069
1/31/1998 10,609 10,920 10,669 10,087
2/28/1998 10,584 10,929 10,698 10,106
3/31/1998 10,590 10,939 10,695 10,125
4/30/1998 10,526 10,881 10,663 10,144
5/31/1998 10,718 11,060 10,796 10,162
6/30/1998 10,742 11,100 10,834 10,175
7/31/1998 10,757 11,127 10,874 10,187
8/31/1998 10,952 11,302 10,991 10,200
9/30/1998 11,087 11,454 11,082 10,212
10/31/1998 11,072 11,456 11,123 10,237
11/30/1998 11,097 11,494 11,158 10,237
12/31/1998 11,138 11,531 11,177 10,231
1/31/1999 11,270 11,682 11,297 10,256
2/28/1999 11,193 11,622 11,298 10,268
3/31/1999 11,178 11,627 11,296 10,300
4/30/1999 11,214 11,660 11,329 10,375
5/31/1999 11,100 11,594 11,288 10,375
6/30/1999 10,924 11,424 11,189 10,375
7/31/1999 10,966 11,469 11,257 10,406
8/31/1999 10,851 11,402 11,257 10,431
9/30/1999 10,798 11,412 11,293 10,481
10/31/1999 10,672 11,313 11,281 10,499
11/30/1999 10,810 11,428 11,337 10,506
12/31/1999 10,714 11,356 11,306 10,506
1/31/2000 10,639 11,314 11,321 10,537
2/29/2000 10,811 11,427 11,366 10,599
3/31/2000 11,080 11,657 11,463 10,687
4/30/2000 10,972 11,597 11,456 10,693
5/31/2000 10,896 11,536 11,457 10,705
6/30/2000 11,211 11,832 11,622 10,762
7/31/2000 11,375 11,989 11,726 10,787
8/31/2000 11,528 12,160 11,829 10,787
9/30/2000 11,429 12,098 11,819 10,843
10/31/2000 11,573 12,225 11,892 10,861
11/30/2000 11,684 12,311 11,953 10,868
12/31/2000 12,029 12,601 12,120 10,861
1/31/2001 12,085 12,739 12,291 10,930
2/28/2001 12,130 12,777 12,336 10,974
3/31/2001 12,220 12,889 12,425 10,999
4/30/2001 12,039 12,756 12,368 11,042
5/31/2001 12,164 12,885 12,486 11,092
6/30/2001 12,255 12,965 12,552 11,111
7/31/2001 12,426 13,149 12,674 11,080
8/31/2001 12,621 13,362 12,829 11,080
9/30/2001 12,541 13,332 12,877 11,130
10/31/2001 12,702 13,468 12,992 11,092
11/30/2001 12,586 13,350 12,904 11,074
12/31/2001 12,505 13,243 12,848 11,030
1/31/2002 12,669 13,460 13,036 11,055
2/28/2002 12,822 13,624 13,176 11,099
3/31/2002 12,562 13,364 12,909 11,161
4/30/2002 12,776 13,640 13,156 11,223
5/31/2002 12,871 13,714 13,238 11,223
6/30/2002 12,967 13,868 13,372 11,230
7/31/2002 13,123 14,040 13,517 11,242
8/31/2002 13,304 14,200 13,633 11,280
9/30/2002 13,582 14,487 13,829 11,298
10/31/2002 13,351 14,252 13,668 11,317
11/30/2002 13,290 14,182 13,624 11,317
12/31/2002 13,596 14,461 13,905 11,292
1/31/2003 13,522 14,436 13,888 11,342
2/28/2003 13,707 14,635 14,044 11,429
3/31/2003 13,720 14,663 14,022 11,498
4/30/2003 13,819 14,758 14,094 11,473
5/31/2003 14,080 15,083 14,330 11,454
6/30/2003 13,955 15,011 14,289 11,467
7/31/2003 13,429 14,512 13,957 11,479
8/31/2003 13,580 14,647 14,040 11,523
9/30/2003 13,959 15,067 14,349 11,561
10/31/2003 13,870 14,966 14,276 11,548
11/30/2003 14,010 15,089 14,343 11,517
12/31/2003 14,125 15,196 14,424 11,504
1/31/2004 14,125 15,272 14,477 11,561
2/29/2004 14,377 15,511 14,655 11,623
3/31/2004 14,256 15,470 14,571 11,698
4/30/2004 13,875 15,121 14,303 11,735
5/31/2004 13,779 15,101 14,241 11,804
6/30/2004 13,839 15,160 14,280 11,841
7/31/2004 14,043 15,343 14,425 11,823
8/31/2004 14,313 15,637 14,665 11,829
9/30/2004 14,361 15,713 14,685 11,854
10/31/2004 14,461 15,836 14,763 11,916
11/30/2004 14,323 15,699 14,656 11,923
12/31/2004 14,491 15,870 14,773 11,879
1/31/2005 14,606 15,989 14,801 11,904
2/28/2005 14,536 15,926 14,742 11,973
3/31/2005 14,399 15,816 14,637 12,066
4/30/2005 14,639 16,061 14,816 12,147
5/31/2005 14,730 16,171 14,862 12,135
6/30/2005 14,822 16,258 14,943 12,141
7/31/2005 14,725 16,165 14,864 12,197
8/31/2005 14,871 16,326 14,962 12,260
9/30/2005 14,760 16,216 14,917 12,409
10/31/2005 14,634 16,114 14,852 12,434
11/30/2005 14,686 16,189 14,894 12,335
12/31/2005 14,840 16,322 14,965 12,285
1/31/2006 14,879 16,367 15,002 12,378
2/28/2006 14,973 16,462 15,028 12,403
3/31/2006 14,817 16,343 14,962 12,472
4/30/2006 14,745 16,333 14,989 12,578
5/31/2006 14,840 16,407 15,052 12,640
6/30/2006 14,725 16,347 14,992 12,665
7/31/2006 14,919 16,533 15,132 12,703
8/31/2006 15,169 16,779 15,284 12,728
9/30/2006 15,265 16,893 15,374 12,665
10/31/2006 15,319 16,986 15,436 12,597
11/30/2006 15,401 17,120 15,505 12,578
12/31/2006 15,319 17,061 15,479 12,597
1/31/2007 15,302 17,014 15,455 12,635
2/28/2007 15,501 17,227 15,596 12,703
3/31/2007 15,426 17,195 15,621 12,818
4/30/2007 15,481 17,246 15,653 12,902
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2007 6 Months 1 Year 5 Years 10 Years Inception/2/ 1 Year 3 Years 5 Years 10 Years Inception/2/
Managed Municipal Fund -
ISI Shares -1.94% 1.81% 17.56% 54.82% 146.95% 1.81% 2.67% 3.29% 4.47% 5.41%
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers General
Obligation Index/3/ 1.53% 5.59% 26.44% 72.46% 185.69% 5.59% 4.48% 4.80% 5.60% 6.50%
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Prerefunded Municipal
Bond Index/3/ 1.41% 4.43% 18.98% 56.53% 146.02% 4.43% 3.05% 3.54% 4.58% 5.55%
- --------------------------------------------------------------------------------------------------------------------
Consumer Price Index/4/ 2.42% 2.57% 14.95% 29.02% 61.47% 2.57% 3.21% 2.83% 2.58% 2.83%
- --------------------------------------------------------------------------------------------------------------------
/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. For certain investors, a portion of the Fund's income
may be subject to Federal alternative minimum tax. Distribution 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 market performance. The Lehman Brothers
Prerefunded Municipal Bond Index, an unmanaged index, is a subcomponent of
the main Lehman Brothers Municipal Bond Index, and contains only bonds from
the main 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.
3
NORTH AMERICAN GOVERNMENT BOND FUND - ISI CLASS A AND ISI CLASS C SHARES
PERFORMANCE COMPARISON/1/
[CHART]
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, 2007)
Lehman Brothers
Emerging Americas
Index: Mexico
North American Section/Citigroup
Government Bond Fund US Broad Investment Lehman Brothers
- ISI Class A -Grade Bond Index Intermediate Consumer
Date Shares Mexico Sector: Treasury Index Price Index
---- -------------------- ------------------ -------------- ---------
4/30/1997 $9,698 $10,000 $10,000 $10,000
5/31/1997 9,826 10,361 10,078 9,994
6/30/1997 9,967 10,582 10,163 10,006
7/31/1997 10,418 11,056 10,354 10,019
8/31/1997 10,252 10,961 10,312 10,037
9/30/1997 10,468 11,268 10,425 10,062
10/31/1997 10,565 10,752 10,547 10,087
11/30/1997 10,663 11,023 10,571 10,081
12/31/1997 10,847 11,254 10,658 10,069
1/31/1998 10,946 11,492 10,801 10,087
2/28/1998 10,921 11,595 10,786 10,106
3/31/1998 10,972 11,686 10,819 10,125
4/30/1998 11,022 11,719 10,870 10,144
5/31/1998 11,085 11,616 10,945 10,162
6/30/1998 11,213 11,561 11,019 10,175
7/31/1998 11,226 11,672 11,062 10,187
8/31/1998 11,420 9,836 11,281 10,200
9/30/1998 11,696 10,170 11,553 10,212
10/31/1998 11,616 10,517 11,576 10,237
11/30/1998 11,722 11,206 11,533 10,237
12/31/1998 11,762 11,173 11,577 10,231
1/31/1999 11,803 11,053 11,627 10,256
2/28/1999 11,529 11,109 11,458 10,268
3/31/1999 11,626 11,628 11,534 10,300
4/30/1999 11,723 11,992 11,566 10,375
5/31/1999 11,527 11,470 11,493 10,375
6/30/1999 11,542 11,626 11,513 10,375
7/31/1999 11,528 11,502 11,524 10,406
8/31/1999 11,513 11,621 11,548 10,431
9/30/1999 11,600 11,897 11,637 10,481
10/31/1999 11,586 12,117 11,652 10,499
11/30/1999 11,615 12,465 11,657 10,506
12/31/1999 11,571 12,791 11,625 10,506
1/31/2000 11,660 12,696 11,593 10,537
2/29/2000 11,900 13,293 11,683 10,599
3/31/2000 12,186 13,644 11,832 10,687
4/30/2000 12,125 13,458 11,824 10,693
5/31/2000 12,110 13,196 11,874 10,705
6/30/2000 12,248 13,715 12,045 10,762
7/31/2000 12,450 14,047 12,126 10,787
8/31/2000 12,654 14,399 12,253 10,787
9/30/2000 12,606 14,433 12,347 10,843
10/31/2000 12,702 14,290 12,428 10,861
11/30/2000 12,974 14,507 12,608 10,868
12/31/2000 13,200 14,722 12,818 10,861
1/31/2001 13,265 14,997 12,969 10,930
2/28/2001 13,429 14,891 13,089 10,974
3/31/2001 13,495 14,952 13,193 10,999
4/30/2001 13,395 15,041 13,140 11,042
5/31/2001 13,479 15,387 13,194 11,092
6/30/2001 13,563 15,692 13,242 11,111
7/31/2001 13,852 15,726 13,482 11,080
8/31/2001 14,058 16,047 13,599 11,080
9/30/2001 14,076 15,645 13,880 11,130
10/31/2001 14,563 16,265 14,091 11,092
11/30/2001 14,195 16,340 13,931 11,074
12/31/2001 14,106 16,562 13,864 11,030
1/31/2002 14,195 16,826 13,902 11,055
2/28/2002 14,302 17,344 14,017 11,099
3/31/2002 14,086 17,084 13,803 11,161
4/30/2002 14,286 17,474 14,049 11,223
5/31/2002 14,304 17,484 14,146 11,223
6/30/2002 14,411 17,204 14,319 11,230
7/31/2002 14,686 17,012 14,604 11,242
8/31/2002 15,073 17,728 14,757 11,280
9/30/2002 15,332 17,695 15,041 11,298
10/31/2002 15,177 18,058 15,013 11,317
11/30/2002 15,117 18,444 14,873 11,317
12/31/2002 15,358 18,940 15,150 11,292
1/31/2003 15,258 18,851 15,107 11,342
2/28/2003 15,486 19,222 15,270 11,429
3/31/2003 15,482 19,591 15,269 11,498
4/30/2003 15,753 20,277 15,300 11,473
5/31/2003 16,321 20,895 15,537 11,454
6/30/2003 16,257 20,816 15,512 11,467
7/31/2003 15,515 19,935 15,173 11,479
8/31/2003 15,511 20,163 15,194 11,523
9/30/2003 15,971 20,963 15,509 11,561
10/31/2003 15,805 20,729 15,357 11,548
11/30/2003 15,719 20,816 15,353 11,517
12/31/2003 15,881 21,102 15,469 11,504
1/31/2004 16,044 21,322 15,546 11,561
2/29/2004 16,212 21,760 15,690 11,623
3/31/2004 16,339 22,175 15,800 11,698
4/30/2004 15,722 21,161 15,443 11,735
5/31/2004 15,615 21,031 15,399 11,804
6/30/2004 15,637 21,102 15,431 11,841
7/31/2004 15,832 21,528 15,536 11,823
8/31/2004 16,136 22,263 15,764 11,829
9/30/2004 16,223 22,327 15,771 11,854
10/31/2004 16,377 22,637 15,858 11,916
11/30/2004 16,289 22,482 15,695 11,923
12/31/2004 16,533 22,871 15,782 11,879
1/31/2005 16,667 23,240 15,799 11,904
2/28/2005 16,533 23,224 15,697 11,973
3/31/2005 16,465 22,646 15,663 12,066
4/30/2005 16,737 23,009 15,854 12,147
5/31/2005 17,101 23,717 15,976 12,135
6/30/2005 17,352 23,953 16,026 12,141
7/31/2005 17,145 23,884 15,878 12,197
8/31/2005 17,468 24,293 16,060 12,260
9/30/2005 17,306 24,278 15,928 12,409
10/31/2005 17,097 23,995 15,858 12,434
11/30/2005 17,283 24,442 15,927 12,335
12/31/2005 17,564 24,676 16,028 12,285
1/31/2006 17,564 24,715 16,012 12,378
2/28/2006 17,635 25,024 16,007 12,403
3/31/2006 17,232 24,212 15,951 12,472
4/30/2006 17,137 24,105 15,959 12,578
5/31/2006 17,114 23,740 15,965 12,640
6/30/2006 17,113 23,865 15,996 12,665
7/31/2006 17,475 24,597 16,165 12,703
8/31/2006 17,813 25,243 16,345 12,728
9/30/2006 17,959 25,413 16,464 12,665
10/31/2006 18,129 25,761 16,537 12,597
11/30/2006 18,251 26,035 16,667 12,578
12/31/2006 18,129 26,063 16,591 12,597
1/31/2007 17,981 25,945 16,591 12,635
2/28/2007 18,204 26,411 16,809 12,703
3/31/2007 18,278 27,505 16,849 12,818
4/30/2007 18,428 27,675 16,924 12,902
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2007 6 Months 1 Year 5 Years 10 Years Inception/2/ 1 Year 3 Years 5 Years 10 Years Inception/2/
North American
Government Bond Fund -
ISI Class A Shares -1.41% 4.33% 25.17% 84.28% 119.19% 4.33% 4.36% 4.59% 6.30% 5.65%
- --------------------------------------------------------------------------------------------------------------------
North American
Government Bond Fund -
ISI Class C Shares 0.33% 5.84% - - 10.96%/3/ 5.84% 4.75% - - 2.66%/3/
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers
Intermediate Treasury
Index/4/ 2.34% 6.05% 20.46% 69.24% 225.56% 6.05% 3.10% 3.79% 5.40% 6.71%
- --------------------------------------------------------------------------------------------------------------------
Lehman Brothers Emerging
Americas Index: Mexico
Section/Citigroup US
Broad Investment-Grade
Bond Index Mexico
Sector/Lehman Brothers
Global Aggregate Index:
Mexico/5/ 2.94% 10.02% 51.76% 165.20% 315.94% 10.02% 7.81% 8.70% 10.24% 10.49%
- --------------------------------------------------------------------------------------------------------------------
Consumer Price Index/6/ 2.42% 2.57% 14.95% 29.02% 44.94% 2.57% 3.21% 2.83% 2.58% 2.64%
- --------------------------------------------------------------------------------------------------------------------
4
NORTH AMERICAN GOVERNMENT BOND FUND - ISI CLASS A AND ISI CLASS C SHARES
PERFORMANCE COMPARISON/1/
/1/ PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. Investment return and
principal value will fluctuate so that an investor's shares, when redeemed,
may be worth more or less than their original cost. The performance
information presented in the graph and table above does not reflect the
deduction of taxes that a shareholder would pay on Fund distributions or
the redemption of Fund shares. All performance assumes the reinvestment of
dividends and capital gain distributions and includes sales charges, if
applicable. ISI Class A Shares have a maximum 3.00% sales charge. ISI Class
C Shares have a maximum 1.00% contingent deferred sales charge in the first
year, which is eliminated thereafter. Performance would have been lower
during the specified period if certain of the Fund's fees and expenses had
not been waived.
/2/ ISI Class A Shares inception date is January 15, 1993. Benchmark returns
are for the periods beginning January 31, 1993.
/3/ ISI Class C Shares inception date is May 16, 2003. Cumulative and
annualized returns for the Lehman Brothers Intermediate Treasury Index from
May 31, 2003 through October 31, 2006 were 6.44% and 1.84%, 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 April 30, 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 the Lehman Brothers Global
Aggregate Index which provides a broad-based measure of the global
investment-grade fixed income markets. The Mexican 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.
5
ISI STRATEGY FUND - ISI SHARES PERFORMANCE COMPARISON/1/
[CHART]
ISI Strategy Fund - ISI Shares, Dow Jones Wilshire 5000 (Full Cap) Index,
Consumer Price Index and Lipper Flexible Portfolio Funds Average: Value of
a $10,000 Investment (since inception/2/):
ISI Strategy Dow Jones Lipper Flexible Consumer
Fund - ISI Wilshire 5000 Portfolio Funds Price
Shares (Full Cap)Index Average Index
-------- --------------- --------------- -------
9/16/1997 $ 9,699 $10,000 $10,000 $10,000
9/30/1997 9,719 10,000 10,000 10,000
10/31/1997 9,554 9,667 9,737 10,025
11/30/1997 9,767 9,983 9,887 10,019
12/31/1997 9,933 10,168 10,018 10,006
1/31/1998 10,020 10,223 10,067 10,025
2/28/1998 10,459 10,967 10,531 10,043
3/31/1998 10,810 11,516 10,915 10,062
4/30/1998 10,878 11,653 11,011 10,081
5/31/1998 10,761 11,343 10,865 10,099
6/30/1998 11,044 11,741 11,058 10,112
7/31/1998 10,887 11,483 10,909 10,124
8/31/1998 9,992 9,695 9,790 10,136
9/30/1998 10,483 10,328 10,162 10,149
10/31/1998 10,888 11,097 10,532 10,174
11/30/1998 11,337 11,796 10,928 10,174
12/31/1998 11,776 12,550 11,296 10,167
1/31/1999 12,079 13,012 11,516 10,192
2/28/1999 11,634 12,540 11,164 10,205
3/31/1999 11,937 13,024 11,498 10,236
4/30/1999 12,301 13,648 11,934 10,310
5/31/1999 12,068 13,350 11,724 10,310
6/30/1999 12,443 14,041 12,151 10,310
7/31/1999 12,148 13,590 11,961 10,341
8/31/1999 12,046 13,464 11,922 10,366
9/30/1999 11,863 13,112 11,795 10,416
10/31/1999 12,282 13,946 12,156 10,434
11/30/1999 12,496 14,413 12,515 10,440
12/31/1999 12,953 15,507 13,243 10,440
1/31/2000 12,649 14,864 13,014 10,471
2/29/2000 12,869 15,196 13,464 10,533
3/31/2000 13,498 16,099 13,952 10,620
4/30/2000 13,056 15,260 13,576 10,627
5/31/2000 12,804 14,727 13,409 10,639
6/30/2000 13,183 15,377 13,697 10,695
7/31/2000 13,098 15,063 13,572 10,720
8/31/2000 13,734 16,157 14,213 10,720
9/30/2000 13,289 15,403 13,896 10,775
10/31/2000 13,205 15,076 13,800 10,794
11/30/2000 12,491 13,576 13,251 10,800
12/31/2000 12,735 13,818 13,630 10,794
1/31/2001 13,063 14,347 13,832 10,862
2/28/2001 12,340 12,986 13,190 10,906
3/31/2001 11,865 12,112 12,651 10,931
4/30/2001 12,299 13,109 13,188 10,974
5/31/2001 12,379 13,239 13,323 11,024
6/30/2001 12,254 13,018 13,082 11,042
7/31/2001 12,259 12,803 13,073 11,011
8/31/2001 11,814 12,028 12,702 11,011
9/30/2001 11,107 10,947 12,059 11,061
10/31/2001 11,416 11,226 12,240 11,024
11/30/2001 11,874 12,084 12,657 11,005
12/31/2001 12,006 12,301 12,760 10,962
1/31/2002 11,903 12,149 12,629 10,986
2/28/2002 11,765 11,899 12,514 11,030
3/31/2002 12,087 12,420 12,831 11,092
4/30/2002 11,814 11,813 12,588 11,154
5/31/2002 11,768 11,674 12,535 11,154
6/30/2002 11,193 10,854 11,883 11,160
7/31/2002 10,618 9,978 11,222 11,172
8/31/2002 10,745 10,036 11,312 11,210
9/30/2002 10,041 9,029 10,618 11,228
10/31/2002 10,515 9,720 10,997 11,247
11/30/2002 10,885 10,306 11,425 11,247
12/31/2002 10,500 9,735 11,150 11,222
1/31/2003 10,291 9,490 11,011 11,272
2/28/2003 10,221 9,329 10,893 11,359
3/31/2003 10,326 9,435 10,908 11,427
4/30/2003 10,932 10,208 11,498 11,402
5/31/2003 11,479 10,832 12,110 11,383
6/30/2003 11,569 10,992 12,244 11,396
7/31/2003 11,592 11,257 12,346 11,408
8/31/2003 11,849 11,527 12,630 11,452
9/30/2003 11,779 11,400 12,654 11,489
10/31/2003 12,246 12,096 13,181 11,476
11/30/2003 12,363 12,265 13,401 11,445
12/31/2003 12,722 12,816 13,911 11,433
1/31/2004 12,956 13,101 14,141 11,489
2/29/2004 13,120 13,292 14,376 11,551
3/31/2004 13,046 13,149 14,361 11,625
4/30/2004 12,788 12,870 13,999 11,663
5/31/2004 12,847 13,047 14,087 11,731
6/30/2004 13,045 13,319 14,354 11,768
7/31/2004 12,752 12,811 13,983 11,749
8/31/2004 12,881 12,853 14,072 11,756
9/30/2004 13,084 13,082 14,373 11,780
10/31/2004 13,190 13,305 14,543 11,842
11/30/2004 13,531 13,928 15,157 11,849
12/31/2004 13,862 14,434 15,611 11,805
1/31/2005 13,602 14,049 15,382 11,830
2/28/2005 13,862 14,342 15,751 11,898
3/31/2005 13,705 14,089 15,486 11,991
4/30/2005 13,480 13,771 15,143 12,072
5/31/2005 13,895 14,308 15,563 12,060
6/30/2005 14,057 14,437 15,794 12,066
7/31/2005 14,426 15,041 16,336 12,122
8/31/2005 14,557 14,894 16,371 12,184
9/30/2005 14,694 14,999 16,683 12,333
10/31/2005 14,455 14,738 16,327 12,357
11/30/2005 14,873 15,331 16,732 12,258
12/31/2005 14,961 15,346 16,950 12,208
1/31/2006 15,451 15,895 17,687 12,301
2/28/2006 15,415 15,887 17,599 12,326
3/31/2006 15,648 16,195 17,937 12,395
4/30/2006 15,648 16,367 18,287 12,500
5/31/2006 15,240 15,856 17,814 12,562
6/30/2006 15,307 15,885 17,795 12,587
7/31/2006 15,211 15,827 17,816 12,624
8/31/2006 15,488 16,199 18,035 12,649
9/30/2006 15,829 16,570 18,211 12,587
10/31/2006 16,336 17,185 18,680 12,519
11/30/2006 16,661 17,584 19,149 12,500
12/31/2006 16,740 17,782 19,303 12,519
1/31/2007 17,026 18,143 19,561 12,557
2/28/2007 16,926 17,851 19,439 12,624
3/31/2007 17,054 18,046 19,664 12,739
4/30/2007 17,628 18,743 20,287 12,822
Cumulative Total Returns With Load Average Annual Total Returns With Load
Periods Ending Since Since
April 30, 2007 6 Months 1 Year 5 Years Inception/2/ 1 Year 3 Years 5 Years Inception/2/
ISI Strategy Fund - ISI
Shares 4.67% 9.31% 44.71% 76.28% 9.31% 10.16% 7.67% 6.07%
- ------------------------------------------------------------------------------------------------------
Dow Jones Wilshire 5000
(Full Cap) Index/3/ 9.07% 14.52% 58.66% 71.85% 14.52% 13.35% 9.67% 6.14%
- ------------------------------------------------------------------------------------------------------
Consumer Price Index/4/ 2.42% 2.57% 14.95% 163.10% 2.57% 3.21% 2.83% 3.67%
- ------------------------------------------------------------------------------------------------------
Lipper Flexible
Portfolio Funds
Average/5/ 7.02% 9.56% 56.01% 28.22% 9.56% 11.63% 9.07% 2.63%
- ------------------------------------------------------------------------------------------------------
/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. Performance would have been lower during the specified
period if certain of the Fund's fees and expenses had not been waived.
/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 the mutual funds
designated by Lipper, Inc. as falling into the category indicated. The
Lipper Flexible Portfolio Funds category includes funds that allocate their
investments 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.
6
SHAREHOLDER EXPENSE EXAMPLE
As a shareholder of a Fund, you incur two types of costs: (1) transaction
costs for certain share classes, including sales charges (loads) on purchase
payments or other distributions; and (2) ongoing costs, including management
fees, Rule 12b-1 distribution/shareholder service fees for certain share
classes and other Fund expenses. This example is intended to help you
understand your ongoing costs (in dollars) of investing in a Fund and to
compare these costs with the ongoing costs of investing in other mutual funds.
The following example is based on $1,000 invested on November 1, 2006 and
held for the six months through April 30, 2007.
ACTUAL EXPENSES - The "Actual Return" rows in the following table provide
information about actual account values and actual expenses. You may use the
information, together with the amount you invested, to estimate the expenses
that you paid over the period. Simply divide your account value by $1,000 (for
example, an $8,600 account value divided by $1,000 = 8.6), then multiply the
result by the number in the "Expenses Paid During Period" column to estimate
the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES - The "Hypothetical Return"
rows in the following table provide information about hypothetical account
values and hypothetical expenses based on each Fund's actual expense ratio and
an assumed rate of return of 5% per year before expenses, which is not the
actual return of each Fund. The hypothetical account values and expenses may
not be used to estimate the actual ending account balance or expenses you paid
for the period. You may use this information to compare the ongoing cost of
investing in a Fund and other funds. To do so, compare this 5% hypothetical
example with the 5% hypothetical examples that appear in the shareholder
reports of other funds.
Expenses shown in the table are meant to highlight your ongoing costs only
and do not reflect any transactional costs, such as sales charges (loads).
Therefore, the "Hypothetical Return" rows in the table are useful in comparing
ongoing costs only, and will not help you determine the relative total costs of
owning different funds. If these transactional costs were included, your costs
would have been higher.
7
SHAREHOLDER EXPENSE EXAMPLE
BEGINNING ENDING EXPENSES PAID ANNUALIZED
ACCOUNT VALUE ACCOUNT VALUE DURING EXPENSE
NOVEMBER 1, 2006 APRIL 30, 2007 PERIOD/(1)/ RATIO
- --------------------------------------------------------------------------------------------
TOTAL RETURN US TREASURY FUND
Actual Return $1,000.00 $1,015.50 $3.80 0.76%
Hypothetical Return $1,000.00 $1,021.03 $3.81 0.76%
MANAGED MUNICIPAL FUND
Actual Return $1,000.00 $1,010.58 $4.59 0.92%
Hypothetical Return $1,000.00 $1,020.23 $4.61 0.92%
NORTH AMERICAN GOVERNMENT BOND FUND
ISI CLASS A SHARES
Actual Return $1,000.00 $1,016.48 $5.40 1.08%
Hypothetical Return $1,000.00 $1,019.44 $5.41 1.08%
NORTH AMERICAN GOVERNMENT BOND FUND
ISI CLASS C SHARES
Actual Return $1,000.00 $1,013.20 $8.59 1.72%
Hypothetical Return $1,000.00 $1,016.27 $8.60 1.72%
ISI STRATEGY FUND
Actual Return $1,000.00 $1,079.12 $5.36 1.04%
Hypothetical Return $1,000.00 $1,019.64 $5.21 1.04%
- --------------------------------------------------------------------------------
(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
most recent fiscal half-year, divided by 365 to reflect the half-year period.
8
ISI FUNDS
PORTFOLIO PROFILES (AS A % OF TOTAL NET ASSETS) (UNAUDITED) APRIL 30, 2007
TOTAL RETURN US TREASURY FUND
US Treasury Obligations 96.66%
Repurchase Agreements 1.90%
Other Assets and Liabilities 1.44%
-------
100.00%
MANAGED MUNICIPAL FUND
Aaa* 75.10%
Aa* 22.15%
Repurchase Agreements 1.18%
Other Assets and Liabilities 1.57%
-------
100.00%
* Ratings are based on Moody's Investor Services, Inc.
NORTH AMERICAN GOVERNMENT BOND FUND
Canadian Securities 9.16%
Mexican Securities 13.82%
US Treasury Securities 74.12%
Repurchase Agreements 1.61%
Other Assets and Liabilities 1.29%
-------
100.00%
ISI STRATEGY FUND
Basic Materials 6.07%
Biotechnology 1.92%
Business Services 2.31%
Capital Goods 9.46%
Consumer Cyclicals 1.02%
Consumer Staples 8.46%
Energy 5.87%
Finance 14.93%
Health Care 4.59%
Information Services 4.38%
Internet 4.40%
Retail 3.09%
Technology 6.97%
Transportation 1.96%
Utilities 3.69%
US Treasury Securities 19.96%
Repurchase Agreements 2.64%
Other Assets and Liabilities (1.72)%
-------
100.00%
9
TOTAL RETURN US TREASURY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
INTEREST MATURITY PAR MARKET
SECURITY RATE DATE VALUE VALUE
-------------------------------------------------------------------------------------------------
US TREASURY OBLIGATIONS - 96.66%
US Treasury Bond..................... 10.375% 11/15/12 $14,250,000 $ 14,666,367
US Treasury Bond..................... 7.625% 2/15/25 11,500,000 15,194,375
US Treasury Bond..................... 6.000% 2/15/26 11,500,000 13,039,922
US Treasury Bond..................... 6.750% 8/15/26 14,000,000 17,200,314
US Treasury Bond..................... 6.375% 8/15/27 21,000,000 24,950,625
US Treasury Note..................... 5.500% 5/15/09 25,000,000 25,433,594
US Treasury Note..................... 3.250% 8/15/07 8,000,000 7,960,000
US Treasury Note..................... 4.125% 5/15/15 1,000,000 967,656
US Treasury Note..................... 4.125% 8/15/10 6,000,000 5,930,625
------------
TOTAL US TREASURY OBLIGATIONS
(COST $129,382,873)..................................................... 125,343,478
------------
REPURCHASE AGREEMENT - 1.90%
JPMORGAN CHASE BANK, N.A.
Dated 04/30/07, 4.750%, principal and interest in the amount of $2,459,324
due 05/01/07, collaterized by US Treasury Strips, par value of $2,459,000
due 04/15/11 with a value of $2,509,197
(Cost $2,459,000)....................................................... 2,459,000
------------
TOTAL INVESTMENTS - 98.56%
(COST $131,841,873)*......................................................... 127,802,478
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.44%....................................... 1,872,842
------------
NET ASSETS - 100.00%................................................................ $129,675,320
============
- --------------------------------------------------------------------------------
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and the net unrealized appreciation
(depreciation) on a tax basis consists of:
Gross Unrealized Appreciation............................... $ 84,047
Gross Unrealized Depreciation............................... (4,123,442)
-----------
Net Unrealized Depreciation................................. $(4,039,395)
===========
See Notes to Financial Statements.
10
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
RATING/1/
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P) VALUE VALUE
- -------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 97.25%
GENERAL OBLIGATIONS - 65.83%
Alexandria, VA, Capital Improvement................. 4.250% 6/15/21 Aaa/AAA $3,300,000 $ 3,337,290
Arlington County, VA, State Aid Withholding......... 4.500% 1/15/28 Aaa/AAA 4,500,000 4,550,535
Arlington County, VA, State Aid Withholding......... 5.000% 10/1/14 Aaa/AAA 1,080,000 1,109,765
Cary, NC............................................ 5.000% 3/1/18 Aaa/AAA 2,000,000 2,125,000
Dallas, TX.......................................... 4.000% 2/15/16 Aa1/AA+ 2,450,000 2,461,882
Dallas, TX.......................................... 4.500% 2/15/23 Aa1/AA+ 3,500,000 3,530,590
Delaware State, Series A............................ 4.200% 1/1/20 Aaa/AAA 1,675,000 1,687,713
Du Page County, IL, Jail Project.................... 5.600% 1/1/21 Aaa/AAA 1,600,000 1,805,232
Florida State, Board of Education, Public Education,
Series I.......................................... 4.125% 6/1/21 Aa1/AAA 3,000,000 2,971,440
Georgia State, Series G............................. 4.125% 10/1/23 Aaa/AAA 2,000,000 1,983,440
Henrico County, VA, Public Improvement.............. 4.250% 7/15/24 Aaa/AAA 2,830,000 2,844,461
Maryland State, Capital Improvement, Series A....... 4.000% 2/15/20 Aaa/AAA 4,000,000 4,001,120
Mecklenburg County, NC, Public Improvement,
Series A.......................................... 4.000% 2/1/20 Aaa/AAA 3,000,000 3,000,720
Mecklenburg County, NC, Public Improvement,
Series A.......................................... 4.250% 2/1/19 Aaa/AAA 2,000,000 2,029,880
Minnesota State..................................... 5.500% 6/1/18 Aa1/AAA 2,000,000 2,106,700
Missouri State, Fourth State Building, Series A..... 4.125% 10/1/19 Aaa/AAA 2,000,000 2,015,700
Montgomery County, MD, Public Improvement,
Series A.......................................... 4.000% 5/1/21 Aaa/AAA 2,450,000 2,438,289
Salt Lake City, UT, School District, School Board
Guaranty, Series A................................ 4.500% 3/1/20 Aaa/NR 2,240,000 2,284,218
South Carolina State, Highway, Series B............. 5.000% 4/1/19 Aaa/AA+ 1,000,000 1,053,970
Virginia State, Series B............................ 4.250% 6/1/26 Aaa/AAA 1,500,000 1,502,760
Washington State, Series E.......................... 5.000% 7/1/22 Aa1/AA 2,000,000 2,003,140
Washington, MD, Suburban Sanitation District, Water
Supply............................................ 4.250% 6/1/26 Aaa/AAA 2,500,000 2,502,725
-----------
53,346,570
-----------
See Notes to Financial Statements.
11
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
RATING/1/
INTEREST MATURITY (MOODY'S/ PAR MARKET
SECURITY RATE DATE S&P) VALUE VALUE
- -------------------------------------------------------------------------------------------------------
OTHER REVENUE - 6.30%
Gwinnett County, GA, Water & Sewer Authority,
Series B.......................................... 4.750% 8/1/21 Aaa/AAA $2,000,000 $ 2,075,980
Texas, Water Development Board Revenue, State
Revolving Fund - SR Lien, Series A................ 4.750% 7/15/20 Aaa/AAA 3,000,000 3,030,540
-----------
5,106,520
-----------
PREREFUNDED ISSUES - 25.12%
Arlington County, VA, 10/1/08 @ 101, State Aid
Withholding....................................... 5.000% 10/1/14 Aaa/AAA 920,000 946,708
Charlotte, NC, Water & Sewer System Revenue,
6/1/09 @ 101...................................... 5.250% 6/1/24 Aa1/AAA 1,600,000 1,666,256
Chesterfield Country, VA, 1/15/10 @ 100............. 5.625% 1/15/14 Aaa/AAA 1,350,000 1,417,905
Chesterfield Country, VA, 1/15/11 @ 100............. 5.000% 1/15/20 Aaa/NR 1,000,000 1,045,770
Florida State, Board of Education, Public Education
Capital Outlay, Series A, 6/1/10 @ 101............ 5.125% 6/1/21 #Aaa/AAA 1,000,000 1,050,550
Georgia State, Series D, Refunded Balance,
10/1/10 @ 100..................................... 5.000% 10/1/17 #Aaa/AAA 390,000 406,832
Guilford County, NC, Series B, 10/1/10 @ 102........ 5.250% 10/1/16 Aa1/AAA 3,000,000 3,206,430
Gwinnett County, GA, Water & Sewer Authority,
8/1/12 @ 100...................................... 5.250% 8/1/24 Aaa/AAA 1,500,000 1,611,090
Missouri State, Fourth State Building, Series A,
6/1/08 @ 100...................................... 5.000% 6/1/23 Aaa/AAA 2,000,000 2,029,600
North Carolina State, Public School Building,
4/1/09 @ 102...................................... 4.600% 4/1/17 Aaa/AAA 5,000,000 5,183,750
South Carolina State, State Institutional, Series A,
3/1/10 @ 101...................................... 5.300% 3/1/17 Aaa/AA+ 1,700,000 1,789,471
-----------
20,354,362
-----------
TOTAL MUNICIPAL BONDS
(COST $76,231,261)............................................................. 78,807,452
-----------
See Notes to Financial Statements.
12
MANAGED MUNICIPAL FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
MARKET
SECURITY VALUE
----------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.18%
JPMORGAN CHASE BANK, N.A.
Dated 04/30/07, 4.750%, principal and interest in the amount of $955,126
due 05/01/07, collaterized by US Treasury Strips, par value of $955,000
due 04/15/11 with a value of $974,647
(Cost $955,000)....................................................... $ 955,000
-----------
TOTAL INVESTMENTS - 98.43%
(COST $77,186,261)*........................................................ 79,762,452
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.57%..................................... 1,275,086
-----------
NET ASSETS - 100.00%.............................................................. $81,037,538
===========
- --------------------------------------------------------------------------------
/1/Moody's Municipal Bond Ratings:
Aaa Judged to be of the best quality. Issues that are identified by a
hatchmark symbol (#) are issues that are secured by escrowed funds held
in trust, reinvested in direct, non-callable obligations unconditionally
guaranteed by the U.S. Government or Resolution Funding Corporation.
Aa Judged to be of high quality by all standards. Issues are sometimes
denoted with a 1, 2 or 3, which denote a high, medium or low ranking
within the rating.
S&P Municipal Bond Ratings:
AAA Of the highest quality.
AA The second strongest capacity for payment of debt services. Those issues
determined to possess very strong safety characteristics are denoted with
a plus (+) sign.
NR Not rated.
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and the net unrealized appreciation
(depreciation) on a tax basis consists of:
Gross Unrealized Appreciation............................... $2,594,699
Gross Unrealized Depreciation............................... (18,508)
----------
Net Unrealized Appreciation................................. $2,576,191
==========
See Notes to Financial Statements.
13
NORTH AMERICAN GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
INTEREST MATURITY PAR/NOMINAL MARKET
SECURITY RATE DATE VALUE/1/ VALUE
------------------------------------------------------------------------
CANADIAN SECURITIES - 9.16%
Canadian Government Bond.. 4.000% 6/1/16 C15,383,000 $ 13,696,954
-------------
TOTAL CANADIAN SECURITIES
(COST $13,825,181)............................ 13,696,954
-------------
MEXICAN SECURITIES - 13.82%
Mexican Bono/2/........... 8.000% 12/24/08 P 47,062 4,328,740
Mexican Bono/2/........... 9.000% 12/22/11 80,323 7,752,597
Mexican Bono/2/........... 9.000% 12/20/12 31,782 3,093,871
Mexican Bono/2/........... 8.000% 12/17/15 58,717 5,500,616
-------------
TOTAL MEXICAN SECURITIES
(COST $20,287,244)............................ 20,675,824
-------------
US SECURITIES - 74.12%
US Treasury Bond.......... 7.625% 2/15/25 $ 10,100,000 13,344,626
US Treasury Bond.......... 6.000% 2/15/26 2,000,000 2,267,812
US Treasury Bond.......... 6.750% 8/15/26 14,750,000 18,121,758
US Treasury Bond.......... 6.375% 8/15/27 15,600,000 18,534,750
US Treasury Note.......... 3.000% 2/15/08 9,100,000 8,959,234
US Treasury Note.......... 3.250% 8/15/07 4,700,000 4,676,500
US Treasury Note.......... 3.250% 8/15/08 5,500,000 5,393,438
US Treasury Note.......... 3.125% 9/15/08 2,000,000 1,955,937
US Treasury Note.......... 5.000% 2/15/11 19,500,000 19,847,344
US Treasury Note.......... 5.000% 8/15/11 6,500,000 6,625,937
US Treasury Note.......... 4.125% 5/15/15 11,500,000 11,128,047
-------------
TOTAL US SECURITIES
(COST $114,745,118)........................... 110,855,383
-------------
See Notes to Financial Statements.
14
NORTH AMERICAN GOVERNMENT BOND FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
INTEREST MATURITY PAR/NOMINAL MARKET
SECURITY RATE DATE VALUE/1/ VALUE
--------------------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.61%
JPMORGAN CHASE BANK, N.A.
Dated 04/30/07, 4.750%, principal and interest in the amount of $2,417,319
due 05/01/07, collaterized by US Treasury Strips, par value of $2,417,000
due 04/15/11 with a value of $2,467,722
(Cost $2,417,000)....................................................... $ 2,417,000
-------------
TOTAL INVESTMENTS - 98.71%
(COST $151,274,543)*......................................................... 147,645,161
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.29%....................................... 1,925,058
-------------
NET ASSETS - 100.00%................................................................ $ 149,570,219
=============
- --------------------------------------------------------------------------------
/1/Par Value is shown in local currency: Canadian dollars (C), Mexican pesos
(P) and US dollars ($).
/2/Bonos are fixed rate, local currency-denominated coupon bonds issued by the
Mexican government.
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and the net unrealized appreciation
(depreciation) on a tax basis consists of:
Gross Unrealized Appreciation................ $ 485,607
Gross Unrealized Depreciation................ (4,114,989)
-----------
Net Unrealized Depreciation.................. $(3,629,382)
===========
See Notes to Financial Statements.
15
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
MARKET
SECURITY SHARES VALUE
------------------------------------------------------------
COMMON STOCK - 79.12%
BASIC MATERIALS - 6.07%
AK Steel Holding Corp.+ 30,448 $ 929,273
Arch Chemicals, Inc. 8,000 241,760
Corn Products International, Inc. 4,200 167,244
Crown Holdings, Inc.+ 3,000 72,510
Del Monte Foods Co. 7,000 81,200
Dow Chemical Co.+ 10,200 455,022
FMC Corp.+ 2,100 161,553
Hercules, Inc.+ 5,000 94,200
Huntsman Corp. 8,000 156,800
International Flavors & Fragrances, Inc. 11,500 559,705
OfficeMax, Inc. 7,600 374,072
Owens-Illinois, Inc.+ 9,500 285,855
Temple-Inland, Inc. 200 11,848
Timken Co. 16,000 527,680
Tronox, Inc. - Class A 2,800 39,564
UAP Holding Corp. 12,000 332,040
Wausau Paper Corp. 12,100 162,866
Weyerhaeuser Co. 350 27,727
------------
4,680,919
------------
BIOTECHNOLOGY - 1.92%
Abraxis BioScience, Inc.+ 4,954 136,284
Amgen, Inc.+ 7,300 468,222
Biogen Idec, Inc.+ 1,000 47,210
Genentech, Inc.+ 6,324 505,857
Genzyme Corp.+ 5,000 326,550
------------
1,484,123
------------
BUSINESS SERVICES - 2.31%
Checkfree Corp.+ 1,800 60,588
Computer Sciences Corp.+ 5,000 277,700
Expedia, Inc.+ 2,543 60,066
Fidelity National Information
Services, Inc. 279 14,098
First Data Corp. 5,000 162,000
Heartland Payment Systems, Inc. 8,000 199,440
IMS Health, Inc. 5,000 146,650
Interpublic Group of Cos., Inc.+ 1,900 24,092
Jackson Hewitt Tax Service, Inc. 6,000 165,480
Laidlaw International, Inc. 5,000 171,250
Landauer, Inc. 700 32,830
Regis Corp. 4,211 160,987
Rent-A-Center, Inc.+ 6,000 167,040
MARKET
SECURITY SHARES VALUE
RH Donnelley Corp.+ 1,400 $ 109,326
ServiceMaster Co. 1,100 16,929
United Rentals, Inc.+ 123 4,121
Weight Watchers International, Inc. 160 7,678
------------
1,780,275
------------
CAPITAL GOODS - 9.46%
3M Co. 2,400 198,648
AGCO Corp.+ 5,800 242,034
Alcoa, Inc. 1,242 44,078
American Standard Cos., Inc. 2,900 159,674
Boeing Co. 7,730 718,890
Briggs & Stratton Corp. 27,000 801,090
Caterpillar, Inc. 3,220 233,836
Clarcor, Inc. 200 6,308
Cree, Inc.+ 105 2,142
CTS Corp. 6,700 87,636
Deere & Co. 200 21,880
Dycom Industries, Inc.+ 1,500 38,865
EDO Corp. 17,000 467,500
General Electric Co. 25,234 930,125
Goodrich Corp. 1,100 62,524
Griffon Corp.+ 1,500 35,985
Harsco Corp. 194 9,894
Honeywell International, Inc. 3,500 189,630
IKON Office Solutions, Inc. 3,000 44,880
Illinois Tool Works, Inc. 4,438 227,714
Ingersoll-Rand Co., Ltd. - Class A 2,900 129,485
Johnson Controls, Inc. 3,120 319,270
Littelfuse, Inc.+ 2,400 96,264
Manitowoc Co., Inc. 7,000 477,610
Navistar International Corp.+ 900 49,964
Pall Corp. 400 16,780
PerkinElmer, Inc. 1,000 24,200
Pitney Bowes, Inc. 4,329 207,792
Raytheon Co. 200 10,708
Spectrum Brands, Inc.+ 2,400 16,704
TRW Automotive Holdings Corp.+ 8,000 296,480
Tenneco, Inc.+ 3,000 89,850
Textron, Inc. 4,800 488,016
Thermo Fisher Scientific, Inc.+ 400 20,824
Titanium Metals Corp.+ 2,700 93,231
United Stationers, Inc.+ 600 35,712
United Technologies Corp. 3,000 201,390
URS Corp.+ 1,430 62,491
See Notes to Financial Statements.
16
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
MARKET
SECURITY SHARES VALUE
------------------------------------------------------
COMMON STOCK
CAPITAL GOODS (CONTINUED)
USG Corp.+ 1,000 46,150
Vishay Intertechnology, Inc.+ 5,000 83,250
-----------
7,289,504
-----------
CONSUMER CYCLICALS - 1.02%
Centex Corp. 400 17,908
Ford Motor Co. 1,800 14,472
General Motors Corp. 2,545 79,480
Genuine Parts Co. 1,450 71,644
Harley-Davidson, Inc. 300 18,996
Liz Claiborne, Inc. 1,600 71,552
McGraw-Hill Cos., Inc. 600 39,318
News Corp. - Class A 604 13,524
Retail Ventures, Inc.+ 2,000 40,760
Viacom, Inc. - Class B+ 933 38,486
WESCO International, Inc.+ 5,000 315,850
Whirlpool Corp. 600 63,618
-----------
785,608
-----------
CONSUMER STAPLES - 8.46%
Altria Group, Inc. 2,171 149,625
American Tower Corp. - Class A+ 3,321 126,198
AmerisourceBergen Corp. 10,000 499,900
Anheuser-Busch Cos., Inc. 983 48,354
Avis Budget Group, Inc. 519 14,599
Avon Products, Inc. 9,106 362,419
Blyth, Inc. 1,000 26,100
Bunge, Ltd. 4,276 323,950
Cablevision Systems Corp.+ 7,000 229,460
Cardinal Health, Inc. 5,815 406,759
CBS Corp. - Class B 933 29,641
Eastman Kodak Co. 5,570 138,749
EchoStar Communications
Corp. - Class A+ 5,000 232,650
FTI Consulting, Inc.+ 1,000 36,770
Hanesbrands, Inc.+ 37 984
Hewitt Associates, Inc. - Class A+ 2,940 87,465
Idearc, Inc. 294 10,216
Jarden Corp.+ 3,100 130,634
Kraft Foods, Inc. 1,502 50,272
Kroger Co. 7,000 206,570
Liberty Global, Inc. - Class A+ 6,533 234,469
Liberty Media Corp. - Interactive -
Class A+ 1,895 47,432
MARKET
SECURITY SHARES VALUE
Liberty Media Holding Corp. -
Capital - Class A+ 379 $ 42,816
McDonald's Corp. 10,000 482,800
McKesson Corp. 4,700 276,501
PepsiCo, Inc. 4,128 272,820
Procter & Gamble Co. 10,644 684,516
Sara Lee Corp. 300 4,923
Sirius Satellite Radio, Inc.+ 1,900 5,624
Smithfield Foods, Inc.+ 6,000 183,420
Time Warner, Inc. 38,844 801,352
Universal Corp./Richmond VA 5,000 313,400
Williams Scotsman International, Inc.+ 2,889 63,645
------------
6,525,033
------------
ENERGY - 5.87%
Arch Coal, Inc. 6,000 216,420
Chevron Corp. 9,328 725,625
ConocoPhillips 8,650 599,877
El Paso Corp. 16,000 240,000
Exxon Mobil Corp. 21,424 1,700,637
Marathon Oil Corp. 4,500 456,975
Mariner Energy, Inc.+ 94 2,120
Reliant Energy, Inc.+ 4,417 98,367
Universal Compression Holdings, Inc.+ 1,000 66,570
Williams Cos., Inc. 14,100 415,950
------------
4,522,541
------------
FINANCE - 14.93%
American Express Co. 1,825 110,723
American International Group, Inc. 10,500 734,055
Bank of America Corp. 4,722 240,350
Bank of New York Co., Inc. 670 27,122
BB&T Corp. 6,391 265,993
Bear Stearns Cos., Inc. 220 34,254
BlackRock, Inc./New York 2,240 335,328
Boston Properties, Inc. 5,100 599,556
Charles Schwab Corp. 14,100 269,592
Chicago Mercantile Exchange Holdings,
Inc. - Class A 800 413,400
Citigroup, Inc. 12,702 681,081
Comerica, Inc. 250 15,477
Commerce Bancorp, Inc./NJ 4,540 151,818
Compass Bancshares, Inc. 5,000 340,900
Eaton Vance Corp. 3,700 141,414
Equity Residential 200 9,286
eSpeed, Inc. - Class A+ 3,400 31,484
See Notes to Financial Statements.
17
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
MARKET
SECURITY SHARES VALUE
---------------------------------------------------------------
COMMON STOCK
FINANCE (CONTINUED)
Fannie Mae 2,652 $ 156,256
Fidelity National Financial, Inc. - Class A 635 16,186
First American Corp. 2,500 128,750
Goldman Sachs Group, Inc. 5,000 1,093,050
Health Care Property Investors, Inc. 200 7,078
Host Hotels & Resorts, Inc. 5,200 133,328
iStar Financial, Inc. 100 4,792
JPMorgan Chase & Co. 3,580 186,518
Kimco Realty Corp. 2,900 139,403
Lehman Brothers Holdings, Inc. 10,800 813,024
Loews Corp. - Carolina Group 3,500 267,855
Marsh & McLennan Cos., Inc. 15,363 487,929
Mellon Financial Corp. 210 9,015
Merrill Lynch & Co., Inc. 6,120 552,208
Moody's Corp. 6,974 461,121
Morgan Stanley 2,481 208,429
National City Corp. 2,700 98,685
Northern Trust Corp. 300 18,885
Old Republic International Corp. 187 3,977
PMI Group, Inc. 1,200 58,164
PNC Financial Services Group, Inc. 522 38,680
Prologis 5,000 324,000
Public Storage, Inc. 186 17,358
Radian Group, Inc. 200 11,622
Regions Financial Corp. 546 19,159
SEI Investments Co. 3,200 195,296
Simon Property Group, Inc. 100 11,528
State Street Corp. 300 20,661
SunTrust Banks, Inc. 2,602 219,661
T. Rowe Price Group, Inc. 200 9,936
TD Ameritrade Holding Corp.+ 7,000 119,350
Torchmark Corp. 200 13,660
Travelers Cos., Inc. 100 5,410
UnionBanCal Corp. 200 12,296
Unum Group 23,038 573,185
US Bancorp 2,473 84,948
Wachovia Corp. 4,599 255,428
Washington Mutual, Inc. 3,284 137,862
Western Union Co. 5,000 105,250
WSFS Financial Corp. 1,200 77,412
Zions Bancorp. 100 8,180
------------
11,507,368
------------
MARKET
SECURITY SHARES VALUE
HEALTH CARE - 4.59%
Abbott Laboratories 4,335 $ 245,448
Aetna, Inc. 5,400 253,152
Allergan, Inc. 210 25,452
Baxter International, Inc. 500 28,315
Beckman Coulter, Inc. 100 6,281
Bristol-Myers Squibb Co. 2,247 64,848
Cigna Corp. 2,682 417,292
Eli Lilly & Co. 2,396 141,675
Johnson & Johnson 12,606 809,557
Medtronic, Inc. 2,670 141,323
Pfizer, Inc. 20,763 549,389
Schering-Plough Corp. 4,500 142,785
Stryker Corp. 2,600 168,844
UnitedHealth Group, Inc. 6,548 347,437
Wyeth 3,630 201,465
------------
3,543,263
------------
INFORMATION SERVICES - 4.38%
Alaska Communications Systems Group,
Inc. 5,000 79,500
Alltel Corp. 5,377 337,084
AT&T, Inc. 17,439 675,238
Centennial Communications Corp.+ 5,000 41,650
Citizens Communications Co. 3,000 46,710
Dobson Communications Corp.+ 33,000 300,630
Sprint Nextel Corp. 16,827 337,045
Verizon Communications, Inc. 40,888 1,561,104
------------
3,378,961
------------
INTERNET - 4.40%
Akamai Technologies, Inc.+ 5,000 220,400
Amazon.Com, Inc.+ 6,000 367,980
Cisco Systems, Inc.+ 28,857 771,636
E*Trade Financial Corp.+ 10,600 234,048
eBay, Inc.+ 2,840 96,390
Google, Inc. - Class A+ 2,200 1,037,036
Juniper Networks, Inc.+ 1,795 40,136
Qwest Communications International,
Inc.+ 24,900 221,112
VeriSign, Inc.+ 1,400 38,290
Yahoo!, Inc.+ 12,920 362,277
------------
3,389,305
------------
RETAIL - 3.09%
AutoNation, Inc.+ 234 4,783
Bed Bath & Beyond, Inc.+ 200 8,148
See Notes to Financial Statements.
18
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
MARKET
SECURITY SHARES VALUE
---------------------------------------------------------
COMMON STOCK
RETAIL (CONTINUED)
Best Buy Co., Inc. 456 $ 21,272
Borders Group, Inc. 2,500 52,775
Circuit City Stores, Inc. 4,100 71,545
Costco Wholesale Corp. 2,860 153,210
CVS/Caremark Corp. 3,267 118,396
Dillard's, Inc. - Class A 4,671 161,757
Home Depot, Inc. 1,520 57,562
Lowe's Cos., Inc. 2,268 69,310
Office Depot, Inc.+ 100 3,362
Owens & Minor, Inc. 5,000 176,750
Sears Holdings Corp.+ 1,200 229,092
Target Corp. 1,198 71,125
Tech Data Corp.+ 1,700 60,418
Walgreen Co. 1,525 66,948
Wal-Mart Stores, Inc. 14,266 683,627
World Fuel Services Corp. 8,000 369,680
------------
2,379,760
------------
TECHNOLOGY - 6.97%
ACCO Brands Corp.+ 15,408 366,710
Advanced Analogic Technologies, Inc.+ 3,000 24,330
Agilent Technologies, Inc.+ 5,105 175,459
Agilysys, Inc. 1,300 27,339
Amkor Technology, Inc.+ 4,900 68,551
Apple, Inc.+ 1,300 129,740
Autodesk, Inc.+ 2,900 119,683
Broadcom Corp. - Class A+ 1,950 63,473
Compuware Corp.+ 3,100 30,597
Dell, Inc.+ 2,770 69,832
Discovery Holding Co. - Class A+ 758 16,486
Electronic Data Systems Corp. 34,000 994,160
Electronics for Imaging+ 5,000 133,350
Embarq Corp. 841 50,494
Entegris, Inc.+ 2,200 25,784
Gateway, Inc.+ 49,700 108,843
IBM 3,422 349,763
Ikanos Communications, Inc.+ 19,893 153,773
Integrated Device Technology, Inc.+ 10,000 149,800
Intel Corp. 19,474 418,691
International Rectifier Corp.+ 1,000 35,280
Komag, Inc.+ 300 8,253
Mattson Technology, Inc.+ 3,000 30,330
Microsoft Corp. 30,146 902,571
MARKET
SECURITY SHARES VALUE
MIPS Technologies, Inc.+ 3,000 $ 25,740
Oracle Corp.+ 181 3,403
Photronics, Inc.+ 100 1,505
Qualcomm, Inc. 4,688 205,334
Seagate Technology 2,700 59,805
Skyworks Solutions, Inc.+ 7,900 54,431
Sun Microsystems, Inc.+ 54,200 282,924
Synopsys, Inc.+ 630 17,426
Unisys Corp.+ 4,000 31,360
Valuevision Media, Inc. - Class A+ 3,400 38,454
Veeco Instruments, Inc.+ 3,580 65,442
Volterra Semiconductor Corp.+ 3,000 47,430
Zoran Corp.+ 4,600 91,356
------------
5,377,902
------------
TRANSPORTATION - 1.96%
AMR Corp.+ 300 7,827
Burlington Northern Santa Fe Corp. 2,900 253,866
CSX Corp. 10,000 431,700
FedEx Corp. 3,400 358,496
Royal Caribbean Cruises, Ltd. 1,900 78,983
Union Pacific Corp. 400 45,700
United Parcel Service, Inc. - Class B 4,600 323,978
World Air Holdings, Inc.+ 769 9,109
------------
1,509,659
------------
UTILITIES - 3.69%
AES Corp.+ 5,000 109,950
Allegheny Energy, Inc.+ 7,200 384,912
American Electric Power Co., Inc. 5,345 268,426
CMS Energy Corp. 4,060 75,191
Consolidated Edison, Inc. 8,000 410,080
Dominion Resources, Inc./VA 3,400 310,080
Duquesne Light Holdings, Inc. 5,000 99,700
Exelon Corp. 2,000 150,820
Integrys Energy Group, Inc. 10,987 616,371
PPL Corp. 186 8,111
TXU Corp. 6,274 411,449
------------
2,845,090
------------
TOTAL COMMON STOCK
(COST $46,441,363) 60,999,311
------------
See Notes to Financial Statements.
19
ISI STRATEGY FUND
SCHEDULE OF INVESTMENTS (UNAUDITED) APRIL 30, 2007
INTEREST MATURITY MARKET
RATE DATE PAR VALUE VALUE
--------------------------------------------------------------------------------------------------
US TREASURY SECURITIES - 19.96%
US Treasury Bond.................... 9.250% 2/15/16 $1,000,000 $ 1,330,000
US Treasury Bond.................... 6.000% 2/15/26 1,000,000 1,133,907
US Treasury Bond.................... 6.750% 8/15/26 3,600,000 4,422,938
US Treasury Bond.................... 6.375% 8/15/27 1,700,000 2,019,813
US Treasury Note.................... 3.250% 8/15/07 500,000 497,500
US Treasury Note.................... 4.250% 8/15/13 1,000,000 984,844
US Treasury Note.................... 4.750% 5/15/14 1,000,000 1,010,156
US Treasury Note.................... 4.250% 10/31/07 4,000,000 3,986,875
------------
TOTAL US TREASURY SECURITIES
(COST $15,181,929)...................................................... 15,386,033
------------
REPURCHASE AGREEMENT - 2.64%
JPMORGAN CHASE BANK, N.A.
Dated 04/30/07, 4.750%, principal and interest in the amount of $2,032,268
due 05/01/07, collaterized by US Treasury Strips, par value of $2,032,000
due 04/15/11 with a value of $2,073,716
(Cost $2,032,000)....................................................... 2,032,000
------------
TOTAL INVESTMENTS IN SECURITIES - 101.72%
(COST $63,655,292)*.......................................................... 78,417,344
OTHER LIABILITIES IN EXCESS OF ASSETS - (1.72)%..................................... (1,322,461)
------------
NET ASSETS - 100.00%................................................................ $ 77,094,883
============
- --------------------------------------------------------------------------------
+Non-income producing security.
*Cost for Federal income tax purposes is substantially the same as for
financial statement purposes and net unrealized appreciation (depreciation)
consists of:
Gross Unrealized Appreciation $15,357,143
Gross Unrealized Depreciation (595,091)
-----------
Net Unrealized Appreciation.. $14,762,052
===========
See Notes to Financial Statements.
20
ISI FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2007
TOTAL RETURN US MANAGED
TREASURY FUND MUNICIPAL FUND
- ---------------------------------------------------------------------------------
ASSETS:
Investments:
In securities, at market value (cost
$129,382,873 and $76,231,261, respectively).. $125,343,478 $78,807,452
Repurchase agreement (cost $2,459,000 and
$955,000, respectively)...................... 2,459,000 955,000
Cash............................................ 419 448
Receivables:
Capital shares sold............................ 1,665 493,505
Securities sold................................ 5,508,675 -
Interest....................................... 2,238,644 915,717
Prepaid expenses................................ 13,043 14,943
------------ -----------
Total assets.................................... 135,564,924 81,187,065
------------ -----------
LIABILITIES:
Payables:
Capital shares redeemed........................ 116,862 5,000
Securities purchased........................... 5,581,057 -
Dividends...................................... 125,493 85,998
Accrued Liabilities:
Investment advisory fees....................... 25,123 26,518
Directors' fees and expenses................... 1,376 937
Distribution fees.............................. 26,635 16,574
Accrued expenses and other..................... 13,058 14,500
------------ -----------
Total liabilities............................... 5,889,604 149,527
------------ -----------
Net assets........................................ $129,675,320 $81,037,538
============ ===========
COMPONENTS OF NET ASSETS:
Paid in capital................................. $134,438,000 $77,777,022
Undistributed (distributions in excess of) net
investment income.............................. (178,977) 564,685
Accumulated net realized gain (loss) from
investment transactions........................ (544,308) 119,640
Net unrealized appreciation (depreciation) on
investments.................................... (4,039,395) 2,576,191
------------ -----------
Net assets........................................ $129,675,320 $81,037,538
============ ===========
SHARES OF CAPITAL STOCK OUTSTANDING OF $0.001 PAR
VALUE:
ISI Shares (115,000,000 and 55,000,000 shares
authorized, respectively)...................... 13,806,555 7,607,350
------------ -----------
NET ASSET VALUE PER SHARE:
ISI Shares (net assets / shares of capital
stock outstanding)............................. $ 9.39 $ 10.65
------------ -----------
MAXIMUM OFFERING PRICE PER SHARE:
ISI Shares ($9.42 / 0.97 and $10.80 / 0.97,
respectively).................................. $ 9.71 $ 11.13
------------ -----------
See Notes to Financial Statements.
21
ISI FUNDS
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED) APRIL 30, 2007
NORTH AMERICAN
GOVERNMENT
BOND FUND ISI STRATEGY FUND
- ------------------------------------------------------------------------------------------------------------------------------
ASSETS:
Investments:
In securities, at market value (cost $148,857,543 and $61,623,292, respectively)......... $145,228,161 $76,385,344
Repurchase agreement (cost $2,417,000 and $2,032,000, respectively)...................... 2,417,000 2,032,000
Cash....................................................................................... 883 571
Receivables:
Capital shares sold...................................................................... 577,681 163,502
Securities sold.......................................................................... 4,306,782 -
Interest and dividends................................................................... 1,979,724 183,840
Prepaid expenses........................................................................... 22,506 8,135
------------ -----------
Total assets............................................................................... 154,532,737 78,773,392
------------ -----------
LIABILITIES:
Payables:
Capital shares redeemed.................................................................. 198,133 136,974
Securities purchased..................................................................... 4,340,822 1,488,282
Dividends................................................................................ 303,964 -
Accrued Liabilities:
Investment advisory fees................................................................. 48,920 24,877
Directors' fees and expenses............................................................. 1,784 788
Distribution fees........................................................................ 53,389 15,548
Shareholder servicing fees............................................................... 3,192 -
Accrued expenses and other............................................................... 12,314 12,040
------------ -----------
Total liabilities.......................................................................... 4,962,518 1,678,509
------------ -----------
Net assets................................................................................... $149,570,219 $77,094,883
============ ===========
COMPONENTS OF NET ASSETS:
Paid in capital.......................................................................... $154,809,939 $60,666,822
Undistributed (distributions in excess of) net investment income......................... (1,363,096) 50,473
Accumulated net realized gain (loss) from investment and foreign currency transactions... (259,102) 1,615,536
Net unrealized appreciation (depreciation) on investments and foreign currencies......... (3,617,522) 14,762,052
------------ -----------
Net assets................................................................................... $149,570,219 $77,094,883
============ ===========
SHARES OF CAPITAL STOCK OUTSTANDING OF $0.001 PAR VALUE:
ISI Class A Shares (50,000,000 shares authorized)........................................ 18,192,959 -
------------ -----------
ISI Class C Shares (5,000,000 shares authorized)......................................... 2,161,132 -
------------ -----------
ISI Shares (25,000,000 shares authorized)................................................ - 5,456,687
------------ -----------
NET ASSET VALUE PER SHARE:
(net assets / shares of capital stock outstanding)
ISI Class A Shares (based on net assets of $133,709,704)................................. $ 7.35 $ -
------------ -----------
ISI Class C Shares (based on net assets of $15,860,515).................................. $ 7.34 $ -
------------ -----------
ISI Shares............................................................................... $ - $ 14.13
------------ -----------
MAXIMUM OFFERING PRICE PER SHARE:
ISI Class A Shares ($7.41 / 0.97)........................................................ $ 7.64 $ -
------------ -----------
ISI Shares ($13.54 / 0.97)............................................................... $ - $ 13.96
------------ -----------
See Notes to Financial Statements.
22
ISI FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2007
TOTAL RETURN US MANAGED
TREASURY FUND MUNICIPAL FUND
- ------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest....................................................... $3,185,355 $1,810,923
---------- ----------
EXPENSES:
Investment advisory fees....................................... 183,074 161,586
Distribution fees.............................................. 177,420 100,991
Compliance services fees....................................... 5,246 3,057
Administration fees............................................ 76,686 43,684
Transfer agent fees............................................ 19,188 6,341
Custody fees................................................... 9,828 5,913
Professional fees.............................................. 42,232 28,639
Registration fees.............................................. 12,186 12,806
Directors' fees................................................ 9,503 5,385
Miscellaneous.................................................. 4,908 2,385
---------- ----------
Total expenses................................................ 540,271 370,787
---------- ----------
Net investment income.......................................... 2,645,084 1,440,136
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from investment transactions.......... (544,166) 119,646
Net change in unrealized appreciation/depreciation on
investments................................................... 91,953 (694,504)
---------- ----------
Net realized and unrealized loss on investments................ (452,213) (574,858)
---------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS........................... $2,192,871 $ 865,278
========== ==========
See Notes to Financial Statements.
23
ISI FUNDS
STATEMENTS OF OPERATIONS (UNAUDITED) FOR THE SIX MONTHS ENDED APRIL 30, 2007
NORTH AMERICAN
GOVERNMENT
BOND FUND ISI STRATEGY FUND
- -----------------------------------------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest...................................................................... $3,521,140 $ 393,916
Dividends..................................................................... - 452,520
---------- ----------
Total income................................................................ 3,521,140 846,436
---------- ----------
EXPENSES:
Investment advisory fees...................................................... 304,961 143,790
Distribution fees:
ISI Class A Shares.......................................................... 274,311 -
ISI Class C Shares.......................................................... 57,470 -
ISI Shares.................................................................. - 89,868
Compliance services fees...................................................... 5,791 2,698
Administration fees........................................................... 82,474 38,914
Transfer agent fees:
ISI Class A Shares.......................................................... 26,483 -
ISI Class C Shares.......................................................... 3,116 -
ISI Shares.................................................................. - 12,077
Custody fees.................................................................. 10,474 4,891
Professional fees............................................................. 44,844 27,571
Shareholder servicing fees:
ISI Class C Shares.......................................................... 19,157 -
Registration fees............................................................. 17,282 13,308
Directors' fees............................................................... 10,194 4,751
Miscellaneous................................................................. 15,539 3,536
---------- ----------
Total expenses.............................................................. 872,096 341,404
---------- ----------
Net investment income......................................................... 2,649,044 505,032
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment transactions..................................................... (262,168) 1,789,200
Foreign currency transactions............................................... 3,066 -
---------- ----------
Net realized gain (loss) on investments and foreign currency transactions..... (259,102) 1,789,200
Net change in unrealized appreciation/depreciation on:
Investment transactions..................................................... 81,562 3,243,175
Foreign currency translations............................................... 4,415 -
---------- ----------
Net change in unrealized appreciation/depreciation on investments and foreign
currency translations........................................................ 85,977 3,243,175
---------- ----------
Net realized and unrealized gain (loss) on investments and foreign currencies. (173,125) 5,032,375
---------- ----------
INCREASE IN NET ASSETS FROM OPERATIONS.......................................... $2,475,919 $5,537,407
========== ==========
See Notes to Financial Statements.
24
TOTAL RETURN US TREASURY FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2007 OCTOBER 31, 2006
- ----------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.................................................. $ 2,645,084 $ 5,290,628
Net realized gain (loss) on investment transactions.................... (544,166) 520,514
Net change in unrealized appreciation/depreciation on investments...... 91,953 1,328,795
------------ ------------
Increase in net assets from operations................................. 2,192,871 7,139,937
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.................................................. (2,656,034) (5,796,709)
Net realized gain on investments....................................... (13,134) -
Return of capital...................................................... - -
------------ ------------
Total distributions.................................................... (2,669,168) (5,796,709)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares........................................... 3,096,272 21,219,446
Distribution reinvestments............................................. 1,753,982 3,868,677
Cost of shares redeemed................................................ (28,482,861) (38,620,829)
------------ ------------
Decrease in net assets from capital share transactions................. (23,632,607) (13,532,706)
------------ ------------
Total decrease in net assets........................................... (24,108,904) (12,189,478)
NET ASSETS:
Beginning of period.................................................... 153,784,224 165,973,702
------------ ------------
End of period (including undistributed (distributions in excess of) net
investment income of $(178,977) and $168,027, respectively).......... $129,675,320 $153,784,224
============ ============
SHARE TRANSACTIONS:
Shares sold............................................................ 329,551 2,295,735
Shares issued to shareholders on reinvestment of distributions......... 186,648 417,867
Shares redeemed........................................................ (3,039,177) (4,176,347)
------------ ------------
Decrease in shares from capital share transactions..................... (2,522,978) (1,462,745)
============ ============
See Notes to Financial Statements.
25
MANAGED MUNICIPAL FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2007 OCTOBER 31, 2006
- ------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income........................... $ 1,440,136 $ 3,148,701
Net realized gain on investment transactions.... 119,646 720,970
Net change in unrealized
appreciation/depreciation on investments....... (694,504) 57,308
----------- ------------
Increase in net assets from operations.......... 865,278 3,926,979
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................... (1,277,457) (2,715,401)
Net realized gain on investments................ (720,919) (289,342)
----------- ------------
Total distributions............................. (1,998,376) (3,004,743)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares.................... 2,034,590 3,859,303
Distribution reinvestments...................... 1,268,542 1,631,474
Cost of shares redeemed......................... (4,012,798) (17,559,432)
----------- ------------
Decrease in net assets from capital share
transactions................................... (709,666) (12,068,655)
----------- ------------
Decrease in net assets.......................... (1,842,764) (11,146,419)
NET ASSETS:
Beginning of period............................. 82,880,302 94,026,721
----------- ------------
End of period (including undistributed net
investment income of $564,685 and $402,006,
respectively).................................. $81,037,538 $ 82,880,302
=========== ============
SHARE TRANSACTIONS:
Shares sold..................................... 190,452 361,229
Shares issued to shareholders on reinvestment
of distributions............................... 118,684 152,711
Shares redeemed................................. (375,104) (1,645,396)
----------- ------------
Decrease in shares from capital share
transactions................................... (65,968) (1,131,456)
=========== ============
See Notes to Financial Statements.
26
NORTH AMERICAN GOVERNMENT BOND FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED
APRIL 30, 2007
- -------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.......................................................................... $ 2,649,044
Net realized gain (loss) on investment
and foreign currency transactions.............................................................. (259,102)
Net change in unrealized appreciation/depreciation
on investments and foreign currencies.......................................................... 85,977
------------
Increase in net assets from operations......................................................... 2,475,919
------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
ISI Class A Shares............................................................................ (3,353,504)
ISI Class C Shares............................................................................ (328,252)
Net realized gain on investments:
ISI Class A Shares............................................................................ -
ISI Class C Shares............................................................................ -
Return of capital:
ISI Class A Shares............................................................................ -
ISI Class C Shares............................................................................ -
------------
Total distributions............................................................................ (3,681,756)
------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares:
ISI Class A Shares............................................................................ 6,555,297
ISI Class C Shares............................................................................ 1,522,820
Distribution reinvestments:
ISI Class A Shares............................................................................ 1,614,297
ISI Class C Shares............................................................................ 189,024
Cost of shares redeemed:
ISI Class A Shares............................................................................ (20,224,964)
ISI Class C Shares............................................................................ (1,313,705)
------------
Decrease in net assets from capital share transactions......................................... (11,657,231)
------------
Decrease in net assets......................................................................... (12,863,068)
NET ASSETS:
Beginning of period........................................................................... 162,433,287
------------
End of period (including undistributed (distributions in excess of) net investment income of
$(1,363,096) and $330,384, respectively)..................................................... $149,570,219
============
SHARE TRANSACTIONS:
Shares sold:
ISI Class A Shares............................................................................ 889,955
ISI Class C Shares............................................................................ 207,225
Shares issued to shareholders on reinvestment of distributions:
ISI Class A Shares............................................................................ 219,965
ISI Class C Shares............................................................................ 25,795
Shares redeemed:
ISI Class A Shares............................................................................ (2,744,861)
ISI Class C Shares............................................................................ (178,543)
------------
Increase (decrease) in shares from capital share transactions:
ISI Class A Shares............................................................................ (1,634,941)
============
ISI Class C Shares............................................................................ 54,477
============
YEAR ENDED
OCTOBER 31, 2006
- ------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income.......................................................................... $ 6,117,369
Net realized gain (loss) on investment
and foreign currency transactions.............................................................. 1,386,451
Net change in unrealized appreciation/depreciation
on investments and foreign currencies.......................................................... 2,411,650
------------
Increase in net assets from operations......................................................... 9,915,470
------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income:
ISI Class A Shares............................................................................ (6,717,243)
ISI Class C Shares............................................................................ (523,270)
Net realized gain on investments:
ISI Class A Shares............................................................................ (203,699)
ISI Class C Shares............................................................................ (21,643)
Return of capital:
ISI Class A Shares............................................................................ (1,071,732)
ISI Class C Shares............................................................................ (113,868)
------------
Total distributions............................................................................ (8,651,455)
------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares:
ISI Class A Shares............................................................................ 23,115,736
ISI Class C Shares............................................................................ 3,159,574
Distribution reinvestments:
ISI Class A Shares............................................................................ 4,001,123
ISI Class C Shares............................................................................ 345,590
Cost of shares redeemed:
ISI Class A Shares............................................................................ (58,492,446)
ISI Class C Shares............................................................................ (4,005,443)
------------
Decrease in net assets from capital share transactions......................................... (31,875,866)
------------
Decrease in net assets......................................................................... (30,611,851)
NET ASSETS:
Beginning of period........................................................................... 193,045,138
------------
End of period (including undistributed (distributions in excess of) net investment income of
$(1,363,096) and $330,384, respectively)..................................................... $162,433,287
============
SHARE TRANSACTIONS:
Shares sold:
ISI Class A Shares............................................................................ 3,159,317
ISI Class C Shares............................................................................ 431,786
Shares issued to shareholders on reinvestment of distributions:
ISI Class A Shares............................................................................ 546,407
ISI Class C Shares............................................................................ 47,323
Shares redeemed:
ISI Class A Shares............................................................................ (8,017,963)
ISI Class C Shares............................................................................ (549,102)
------------
Increase (decrease) in shares from capital share transactions:
ISI Class A Shares............................................................................ (4,312,239)
============
ISI Class C Shares............................................................................ (69,993)
============
See Notes to Financial Statements.
27
ISI STRATEGY FUND
STATEMENTS OF CHANGES IN NET ASSETS (UNAUDITED)
SIX MONTHS ENDED YEAR ENDED
APRIL 30, 2007 OCTOBER 31, 2006
- ----------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income............................................ $ 505,032 $ 773,684
Net realized gain on investment transactions..................... 1,789,200 3,910,226
Net change in unrealized appreciation/depreciation on investments 3,243,175 3,289,965
----------- ------------
Increase in net assets from operations........................... 5,537,407 7,973,875
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................ (490,720) (765,946)
Net realized capital gains....................................... (1,880,666) -
----------- ------------
Total distributions.............................................. (2,371,386) (765,946)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Proceeds from sale of shares..................................... 7,144,344 13,419,552
Dividend reinvestments........................................... 2,049,799 651,658
Cost of shares redeemed.......................................... (4,703,210) (12,046,141)
----------- ------------
Increase in net assets from capital share transactions........... 4,490,933 2,025,069
----------- ------------
Total increase in net assets..................................... 7,656,954 9,232,998
NET ASSETS:
Beginning of period.............................................. 69,437,929 60,204,931
----------- ------------
End of period (including undistributed net investment income of
$50,473 and $36,161, respectively)............................. $77,094,883 $ 69,437,929
=========== ============
SHARE TRANSACTIONS:
Shares sold...................................................... 501,888 1,052,202
Shares issued to shareholders on reinvestment of dividends....... 150,905 50,673
Shares redeemed.................................................. (325,666) (941,380)
----------- ------------
Increase in shares from capital share transactions............... 327,127 161,495
=========== ============
See Notes to Financial Statements.
28
TOTAL RETURN US TREASURY FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI SHARES
SIX MONTHS
ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, -------------------------------------------------------
2007 2006 2005 2004 2003 2002
- ---------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year........ $ 9.42 $ 9.33 $ 9.57 $ 9.92 $ 10.18 $ 10.20
-------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.17/1/ 0.32/1/ 0.29/1/ 0.24/1/ 0.23 0.35
Net realized and unrealized gain (loss) on
investments............................. (0.03) 0.12 (0.16) 0.19 0.01 0.20
-------- -------- -------- -------- -------- --------
Total from investment operations.......... 0.14 0.44 0.13 0.43 0.24 0.55
-------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income..................... (0.17) (0.35) (0.25) (0.23) (0.25) (0.40)
Net realized gain on investments.......... - - (0.03) (0.33) (0.25) (0.17)
Tax return of capital..................... - - (0.09) (0.22) - -
-------- -------- -------- -------- -------- --------
Total distributions....................... (0.17) (0.35) (0.37) (0.78) (0.50) (0.57)
-------- -------- -------- -------- -------- --------
Net asset value, end of year.............. $ 9.39 $ 9.42 $ 9.33 $ 9.57 $ 9.92 $ 10.18
======== ======== ======== ======== ======== ========
TOTAL RETURN/2,3/.......................... 1.55% 4.83% 1.38% 4.64% 2.30% 5.78%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s).......... $129,675 $153,784 $165,974 $194,790 $229,027 $262,928
Ratios to average daily net assets/4/:
Net investment income................... 3.73% 3.44%/5/ 3.01% 2.56% 2.50% 3.64%
Expenses................................ 0.76% 0.76%/5/ 0.70% 0.69% 0.67% 0.74%
Portfolio turnover rate/3/................ 27% 51% 16% 31% 125% 129%
- --------------------------------------------------------------------------------
/1/Calculated using the average shares outstanding for the period.
/2/Total return excludes the effect of sales charges.
/3/Not annualized for periods less than one year.
/4/Annualized for periods less than one year.
/5/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.
29
MANAGED MUNICIPAL FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI SHARES
SIX MONTHS
ENDED FOR THE YEARS ENDED OCTOBER 31,
APRIL 30, ----------------------------------------------------
2007 2006 2005 2004 2003 2002
- ------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of year........ $ 10.80 $ 10.68 $ 10.91 $ 10.89 $ 11.00 $ 10.99
------- ------- ------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income..................... 0.19/1/ 0.39/1/ 0.40/1/ 0.38/1/ 0.40 0.45
Net realized and unrealized gain (loss) on
investments............................. (0.08)/2/ 0.10 (0.27) 0.08 0.01 0.09
------- ------- ------- -------- -------- --------
Total from investment operations.......... 0.11 0.49 0.13 0.46 0.41 0.54
------- ------- ------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income..................... (0.17) (0.34) (0.36) (0.44) (0.47) (0.45)
Net realized gain on investments.......... (0.09) (0.03) - - (0.05) (0.08)
------- ------- ------- -------- -------- --------
Total distributions....................... (0.26) (0.37) (0.36) (0.44) (0.52) (0.53)
------- ------- ------- -------- -------- --------
Net asset value, end of year.............. $ 10.65 $ 10.80 $ 10.68 $ 10.91 $ 10.89 $ 11.00
======= ======= ======= ======== ======== ========
TOTAL RETURN/3,4/.......................... 1.06% 4.68% 1.19% 4.26% 3.89% 5.11%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s).......... $81,038 $82,880 $94,027 $113,844 $107,078 $103,198
Ratios to average daily net assets/5/:
Net investment income................... 3.56% 3.63% 3.64% 3.53% 3.66% 3.92%
Expenses after waivers and/or
reimbursements........................ 0.92% 0.91% 0.86% 0.88% 0.89% 0.94%
Expenses before waivers and/or
reimbursements........................ 0.92% 0.91% 0.86% 0.88% 0.89% 0.96%
Portfolio turnover rate/4/................ 2% 7% 7% 17% 11% 11%
- --------------------------------------------------------------------------------
/1/Calculated using the average shares outstanding for the period.
/2/Per share amount does not reflect the actual net realized and unrealized
gain/loss for the period due to the timing of Fund share sales and the
amount of per share realized and unrealized gains and losses at such time.
/3/Total return excludes the effect of sales charges.
/4/Not annualized for periods less than one year.
/5/Annualized for periods less than one year.
See Notes to Financial Statements.
30
NORTH AMERICAN GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI CLASS A SHARES/1/
SIX MONTHS APRIL 1, 2002 FOR THE
ENDED FOR THE YEARS ENDED OCTOBER 31, THROUGH YEAR ENDED
APRIL 30, --------------------------------------------- OCTOBER 31, MARCH 31,
2007 2006 2005 2004 2003 2002/2/ 2002
- ----------------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING
PERFORMANCE
Net asset value, beginning of
period.............................. $ 7.41 $ 7.34 $ 7.41 $ 7.73 $ 8.03 $ 7.80 $ 8.17
-------- -------- -------- -------- -------- -------- --------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................. 0.13/3/ 0.25/3/ 0.26/3/ 0.24/3/ 0.25 0.18 0.38
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions............... (0.01) 0.18 0.06 0.03 0.07 0.41 (0.03)
-------- -------- -------- -------- -------- -------- --------
Total from investment
operations.......................... 0.12 0.43 0.32 0.27 0.32 0.59 0.35
-------- -------- -------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Net investment income................. (0.18) (0.30) (0.31) (0.16) (0.29) (0.17) (0.41)
Net realized gain on
investments......................... - (0.01) (0.03) (0.08) (0.33) (0.07) (0.23)
Return of capital..................... - (0.05) (0.05) (0.35) - (0.12) (0.08)
-------- -------- -------- -------- -------- -------- --------
Total distributions................... (0.18) (0.36) (0.39) (0.59) (0.62) (0.36) (0.72)
-------- -------- -------- -------- -------- -------- --------
Net asset value, end of period........ $ 7.35 $ 7.41 $ 7.34 $ 7.41 $ 7.73 $ 8.03 $ 7.80
======== ======== ======== ======== ======== ======== ========
TOTAL RETURN/4,5/...................... 1.65% 6.04% 4.39% 3.62% 4.14% 7.75% 4.38%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s)...... $133,710 $146,854 $177,101 $204,266 $267,756 $257,495 $220,629
Ratios to average daily net assets:/6/
Net investment income............... 3.54% 3.47%/7/ 3.55% 3.22% 3.03% 3.84% 4.60%
Expenses............................ 1.08% 1.06%/7/ 1.04% 1.05% 1.09% 1.01% 1.13%
Portfolio turnover rate/5/............ 28% 53% 66% 47% 152% 95% 136%
- --------------------------------------------------------------------------------
/1/On May 16, 2003, ISI Shares were redesignated as ISI Class A Shares.
/2/The Fund changed its fiscal year end from March 31 to October 31.
/3/Calculated using the average shares outstanding for the period.
/4/Total return excludes the effect of sales charges.
/5/Not annualized for periods less than one year.
/6/Annualized for periods less than one year.
/7/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.
31
NORTH AMERICAN GOVERNMENT BOND FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI CLASS C SHARES
SIX MONTHS MAY 16, 2003/1/
ENDED FOR THE YEARS ENDED OCTOBER 31, THROUGH
APRIL 30, ----------------------------- OCTOBER 31,
2007 2006 2005 2004 2003
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period...................... $ 7.40 $ 7.33 $ 7.40 $ 7.72 $ 8.20
------- ------- ------- ------- -------
INCOME (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income..................................... 0.11/2/ 0.21/2/ 0.21/2/ 0.19/2/ 0.17
Net realized and unrealized gain (loss) on investments and
foreign currency transactions........................... (0.01) 0.17 0.06 0.02 (0.38)
------- ------- ------- ------- -------
Total from investment operations.......................... 0.10 0.38 0.27 0.21 (0.21)
------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income..................................... (0.16) (0.25) (0.26) (0.14) (0.21)
Net realized gain on investments.......................... - (0.01) (0.03) (0.08) (0.06)
Return of capital......................................... - (0.05) (0.05) (0.31) -
------- ------- ------- ------- -------
Total distributions....................................... (0.16) (0.31) (0.34) (0.53) (0.27)
------- ------- ------- ------- -------
Net asset value, end of period............................ $ 7.34 $ 7.40 $ 7.33 $ 7.40 $ 7.72
======= ======= ======= ======= =======
TOTAL RETURN/3,4/.......................................... 1.32% 5.35% 3.73% 2.91% (2.62)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s).......................... $15,860 $15,579 $15,944 $18,616 13,565
Ratios to average daily net assets:/5/
Net investment income................................... 2.90% 2.81% 2.89% 2.50% 3.32%
Expenses after waivers and/or reimbursements............ 1.72% 1.72% 1.69% 1.77% 1.85%
Expenses before waivers and/or reimbursements........... 1.72% 1.72% 1.69% 1.77% 2.12%
Portfolio turnover rate/4/................................ 28% 53% 66% 47% 152%
- --------------------------------------------------------------------------------
/1/Commencement of operations.
/2/Calculated using the average shares outstanding for the period.
/3/Total return excludes the effect of sales charges.
/4/Not annualized for periods less than one year.
/5/Annualized for periods less than one year.
See Notes to Financial Statements.
32
ISI STRATEGY FUND
FINANCIAL HIGHLIGHTS (FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD) (UNAUDITED)
ISI SHARES
SIX MONTHS JUNE 1, 2002 FOR THE
ENDED FOR THE YEARS ENDED OCTOBER 31, THROUGH YEAR ENDED
APRIL 30, ---------------------------------------- OCTOBER 31, MAY 31,
2007 2006 2005 2004 2003 2002/1/ 2002
- ---------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of
period.............................. $ 13.54 $ 12.12 $ 11.21 $ 10.50 $ 9.08 $ 10.23 $ 10.89
------- ------- ------- ------- ------- ------- -------
INCOME (LOSS) FROM INVESTMENT OPERATIONS:
Net investment income................. 0.10/2/ 0.15/2/ 0.16/2/ 0.10/2/ 0.08 0.05 0.12
Net realized and unrealized gain
(loss) on investments............... 0.95 1.42 0.91 0.70 1.42 (1.14) (0.66)
------- ------- ------- ------- ------- ------- -------
Total from investment operations...... 1.05 1.57 1.07 0.80 1.50 (1.09) (0.54)
------- ------- ------- ------- ------- ------- -------
LESS DISTRIBUTIONS:
Net investment income................. (0.09) (0.15) (0.16) (0.09) (0.08) (0.06) (0.12)
Net realized gain on investments...... (0.37) - - - - - -
------- ------- ------- ------- ------- ------- -------
Total distributions................... (0.46) (0.15) (0.16) (0.09) (0.08) (0.06) (0.12)
------- ------- ------- ------- ------- ------- -------
Net asset value, end of period........ $ 14.13 $ 13.54 $ 12.12 $ 11.21 $ 10.50 $ 9.08 $ 10.23
======= ======= ======= ======= ======= ======= =======
TOTAL RETURN/3,4/...................... 7.91% 13.01% 9.59% 7.71% 16.47% (10.65)% (4.93)%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of period (000s)...... $77,095 $69,438 $60,205 $44,920 $30,262 $19,924 $24,398
Ratios to average daily net assets:/5/
Net investment income............... 1.54% 1.17% 1.33% 0.92% 0.77% 1.18% 1.14%
Expenses after waivers and/or
reimbursements.................... 1.04% 0.95% 0.94% 1.12% 1.30% 1.30% 1.19%
Expenses before waivers and/or
reimbursements.................... 1.04% 0.95% 0.94% 1.12% 1.79% 1.99% 1.42%
Portfolio turnover rate/4/............ 24% 41% 30% 66% 60% 12% 72%
- --------------------------------------------------------------------------------
/1/The Fund changed its fiscal year end from May 31 to October 31.
/2/Calculated using the average shares outstanding for the period.
/3/Total return excludes the effect of sales charges.
/4/Not annualized for periods less than one year.
/5/Annualized for periods less than one year.
See Notes to Financial Statements.
33
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (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 amended, 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 ISI Shares to
investors. North American offers ISI North American Government Bond Fund
Class A Shares ('ISI Class A Shares') and ISI North American Government Bond
Fund Class C Shares ('ISI Class C Shares'). ISI Shares and North American's ISI
Class A Shares are subject to a maximum front-end sales charge of 3.00%. A
contingent deferred sales charge of 1.00% is imposed on the sale of North
American's 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 or NOCP, such securities are
valued at the mean of the last bid and the last asked prices. Non-exchange
traded securities for which over-the-counter quotations are readily available
are generally valued at the mean between the last bid and 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.
When valuing securities for which market quotations are not readily available
or for which the market quotations that are 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 time as of which the Funds value their
investments if such an 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).
34
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
If a fair value is required, the investment advisor or 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, 2007, there were no fair valued securities.
C. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded on trade date. Realized gains and losses
are determined by comparing the proceeds of a sale or the cost of a purchase
with a specific offsetting transaction. Dividend income is recorded on the
ex-dividend date. Interest income, including amortization of premiums and
accretion of discounts, is accrued daily. Estimated expenses are also accrued
daily. With respect to North American, income, gains (losses) and common
expenses are allocated to each class based on its respective net assets. Class
specific expenses are charged directly to each class.
D. DISTRIBUTIONS
Total Return declares a dividend daily, and Managed Municipal and North
American declare monthly dividends at fixed rates approved by the Funds' Board.
These dividends are paid monthly. To the extent that their net investment
income and short-term capital gains are less than the approved fixed rate, some
of their dividends may be paid from long-term capital gains or as a return of
shareholder capital. Strategy declares and pays dividends quarterly from its
net investment income. Net realized capital gains, if any, are distributed at
least annually. The Funds record dividends and distributions on the ex-dividend
date.
A return of capital may occur for North American at October 31, 2007. The
exact amount, if any, is undeterminable at this time.
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 its taxable
income. In addition, by distributing in each calendar year substantially all of
its net income, capital gains and other amounts, if any, the Funds will not be
subject to Federal excise taxes. Accordingly, no Federal income taxes have been
accrued.
F. FOREIGN CURRENCY TRANSLATION
The Funds maintain their accounting records in US dollars. North American
determines the US dollar value of foreign currency-denominated assets,
liabilities and transactions by using prevailing exchange rates. In valuing
assets and liabilities, North American uses the prevailing exchange rate on
valuation date. 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 bonds and
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 the Fund's books and the US dollar
equivalent of the amounts actually received or paid.
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 US 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 US 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.
The Fund determines the net US dollar value of forward foreign currency
contracts using prevailing exchange rates. As of April 30, 2007, there were no
open forward currency contracts.
35
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
H. REPURCHASE AGREEMENTS
The Funds may make short-term investments in repurchase agreements that are
fully collateralized by US government securities. Under the terms of a
repurchase agreement, a financial institution sells fixed-income securities to
the Funds 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, the Funds have the right to sell the securities and
recover any resulting loss from the financial institution. If the financial
institution enters into bankruptcy, the Funds' claims on the collateral may be
subject to legal proceedings.
I. ESTIMATES
In preparing its financial statements in conformity with US 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 June 2006, the Financial Accounting Standards Board ("FASB") issued
Financial Interpretation No. 48, "Accounting for Uncertainty in Income Taxes"
(the "Interpretation") which is effective for fiscal years beginning after
December 15, 2006, and is to be applied to all open tax years as of the
effective date. This Interpretation prescribes a minimum threshold for
financial statement recognition of the benefit of a tax position taken or
expected to be taken in a tax return, and requires certain expanded
disclosures. Management has recently begun to evaluate the application of the
Interpretation, and has not at this time determined the impact, if any,
resulting from its adoption on the Fund's financial statements.
In September 2006, the FASB issued Statement of Financial Accounting
Standards No. 157 "Fair Value Measurements" (the "Statement") which is
effective for fiscal years beginning after November 15, 2007 and interim
periods within those fiscal years. This Statement defines fair value,
establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
Management has recently begun to evaluate the application of the Statement, and
has not at this time determined the impact, if any, resulting from its adoption
on the Fund's financial statements.
NOTE 3 - FEES AND TRANSACTIONS WITH AFFILIATES AND OTHER SERVICE PROVIDERS
International Strategy & Investment, Inc. ('ISI') is the Funds' 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 an annual fee based on its average
daily net assets, which is calculated daily and paid monthly at the annual rate
of 0.40%.
ISI has contractually agreed to waive its fees and/or reimburse expenses of
North American through February 28, 2008, to the extent necessary, to limit the
expenses of ISI Class C Shares to 1.85% of the class' average daily net assets.
For the six months ended April 30, 2007, there were no fees waived.
Los Angeles Capital Management and Equity Research, Inc. ('LA Capital
Management') is Strategy's
36
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
Sub-Advisor and is responsible for managing the common stocks in the Fund's
portfolio. The Sub-Advisor is paid by ISI, not the Fund.
The Northern Trust Company is the Funds' Custodian.
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. For the six months
ended April 30, 2007, North American Class A Shares did not pay any shareholder
servicing fees.
For the six months ended April 30, 2007, ISI Group earned commissions on
sales of ISI Shares of Total Return, Managed Municipal, and Strategy of $959,
$1,807 and $10,396, respectively, and $5,926 on sales of ISI Class A Shares of
North American. ISI Group retained $430 of the back-end sales charges on the
sale of ISI Class C Shares of North American.
EJV Financial Services, LLC ("EJV") provides certain compliance support
services to the Fund's Chief Compliance Officer. Edward J. Veilleux, Vice
President of the Funds is also a principal of EJV.
Citigroup Fund Services, LLC ('Citigroup') serves as the Funds'
Administrator, Accountant, and Transfer Agent. For its services, Citigroup
receives a combined fee based on the aggregate average net assets of the Funds
(subject to a minimum monthly fee) and monthly fees per open shareholder
account. Average net asset-based fees are calculated daily and all fees are
paid monthly.
NOTE 4 - FEDERAL INCOME TAX AND INVESTMENT TRANSACTIONS
The Funds determine their net investment income and capital gain
distributions in accordance with income tax regulations, which may differ from
US generally accepted accounting principles.
As of October 31, 2006, the components of distributable earnings (accumulated
losses) on a tax basis were as follows:
- ------------------------------------------------------------------------------------------------------
Undistributed Undistributed Unrealized
Tax Exempt Undistributed Long-Term Capital Loss Appreciation
Income Ordinary Income Capital Gains Carryforward (Depreciation) Total
- ------------------------------------------------------------------------------------------------------
Total Return $ - $12,992 $ - $ - $(4,131,348) $(4,118,356)
Managed Municipal 509,008 - 720,913 - 3,270,695 4,500,616
North American - - - - (3,703,499) (3,703,499)
Strategy - 26,521 1,880,649 - 11,354,870 13,262,040
- ------------------------------------------------------------------------------------------------------
The difference between book basis and tax basis unrealized appreciation
(depreciation) for Strategy was primarily due to wash sales.
37
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
The aggregate cost of purchases and proceeds from sales of investments, other
than short-term obligations, for the six months ended April 30, 2007, were as
follows:
-------------------------------------------------------------------------
Non-US Government Obligations US Government Obligations
-------------------------------------------------------------------------
Purchases Sales Purchases Sales
Total Return $ - $ - $30,678,126 $55,261,977
Managed Municipal 1,505,821 2,950,534 - -
North American 9,715,510 8,740,465 28,543,672 45,820,609
Strategy 13,555,642 10,922,726 5,251,472 6,013,289
-------------------------------------------------------------------------
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 US government securities. An investment in Canada or
Mexico may be affected by developments unique to those countries. These
developments may not affect the US economy or the prices of US government
securities in the same manner. In addition, the value of bonds issued by non-US
governments may be affected by adverse international political and economic
developments that may not impact the value of US 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 expect the risk of loss
thereunder to be remote.
NOTE 7 - OTHER INFORMATION
On April 30, 2007, one shareholder held approximately 12% of the outstanding
shares of North American. This shareholder is an omnibus account, which is held
on behalf of several individual shareholders.
NOTE 8 - PROXY VOTING INFORMATION
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. The
Fund's proxy voting record for the 12-month period ended June 30, 2006 is
available, without charge and upon request, by calling (800) 955-7175. This
information is also available from the EDGAR database on the SEC's website at
http://www.sec.gov.
Total Return, Managed Municipal and North American are not required to adopt
proxy voting policies and procedures.
NOTE 9 - AVAILABILITY OF QUARTERLY PORTFOLIO SCHEDULE
The Funds file their complete schedule of portfolio holdings with the SEC for
the first and third quarters of each fiscal year on Form N-Q. Each Funds' Form
N-Q is available on the SEC's website at http://www.sec.gov or may be reviewed
38
ISI FUNDS NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
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.
NOTE 10 - CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Effective December 14, 2005, the Funds replaced Ernst & Young LLP ("E & Y")
with Briggs Bunting & Dougherty, LLP as the Funds' independent registered
public accounting firm by action of the Funds' Board of Directors and upon the
recommendation of the Audit and Compliance Committee of the Board. E & Y's
reports on each Fund's financial statements for the fiscal years ended October
31, 2004 and October 31, 2005 contained no adverse opinion or disclaimer of
opinion nor were they qualified or modified as to the uncertainty, audit scope,
or accounting principles.
During the Fund's fiscal years ended October 31, 2004 and October 31, 2005,
(i) there were no disagreements with E & Y on any matter of accounting
principles or practices, financial statement disclosure or auditing scope or
procedure, which disagreements, if not resolved to the satisfaction of E & Y,
would have caused it to make reference to the subject matter of disagreements
in connection with its report on each Fund's financial statements for such
year, and (ii) there were no "reportable events" of the kind described in Item
304 (a) (1) (v) of Regulation S-K under the Securities Exchange Act of 1934, as
amended.
NOTE 11 - PROXY VOTING RESULTS
At a Special Meeting of Shareholders of the Funds, held on February 12, 2007,
shares were voted as summarized below on the following proposal presented to
shareholders:
To elect the following individuals to serve as Fund Directors.
- ------------------------------------------------------------------------------------
Total Return Managed Municipal North American Strategy
- ------------------------------------------------------------------------------------
W. Murray Jacques For 12,202,030 7,186,163 17,793,897 4,966,188
Against 0 0 0 0
Abstain 125,535 16,707 103,767 15,994
Louis E. Levy For 12,202,030 7,186,163 17,793,897 4,965,122
Against 0 0 0 0
Abstain 127,104 16,707 105,842 17,594
R. Alan Medaugh For 12,247,537 7,187,682 17,802,198 4,961,923
Against 0 0 0 0
Abstain 81,598 16,707 95,465 20,792
Edward A. Kuczmarski For 12,214,584 7,181,607 17,793,897 4,961,923
Against 0 0 0 0
Abstain 112,982 21,263 105,842 20,792
As of June 29, 2007, the Directors of ISI Strategy Fund were R. Alan Medaugh
Edward A. Kuczmarski, Louis E. Levy, W. Murray Jacques.
39
[LOGO] ISI
INTERNATIONAL STRATEGY & INVESTMENT
DIRECTORS AND OFFICERS
LOUIS E. LEVY THOMAS D. STEVENS*
CHAIRMAN VICE PRESIDENT
W. MURRAY JACQUES STEPHEN V. KILLORIN
DIRECTOR VICE PRESIDENT
EDWARD A. KUCZMARSKI TREASURER
DIRECTOR CHIEF COMPLIANCE OFFICER
R. ALAN MEDAUGH CHIEF FINANCIAL OFFICER
PRESIDENT MARGARET M. BEELER
DIRECTOR VICE PRESIDENT
NANCY R. LAZAR SECRETARY
VICE PRESIDENT DANA A. LUKENS
CARRIE L. BUTLER ASSISTANT SECRETARY
VICE PRESIDENT EDWARD S. HYMAN
EDWARD J. VEILLEUX SENIOR ECONOMIC ADVISOR
VICE PRESIDENT
*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
CITIGROUP FUND SERVICES, LLC
TWO PORTLAND SQUARE
PORTLAND, ME 04101
(800) 882-8585
DISTRIBUTOR
ISI GROUP, INC.
40 WEST 57TH STREET, 18TH FLOOR
NEW YORK, NY 10019
(800) 955-7175
ITEM 2.CODE OF ETHICS
Not applicable.
ITEM 3.AUDIT COMMITTEE FINANCIAL EXPERT
Not applicable.
ITEM 4.PRINCIPAL ACCOUNTANT FEES AND SERVICES
Not applicable.
ITEM 5.AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6.SCHEDULE OF INVESTMENTS
Not applicable.
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
Not applicable.
ITEM 11.CONTROLS AND PROCEDURES
(a) The registrant's President and Treasurer have concluded that the
registrant's disclosure controls and procedures (as defined in rule 30a-3(c)
under the Investment Company Act of 1940 (the "Act")) are effective, based on
their evaluation of these disclosure controls and procedures required by Rule
30a-3(b) as of a date within 90 days of the filing date of this report.
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in rule 30a-3(d) under the Act) that occurred during the
registrant's last fiscal quarter that have materially affected, or are
reasonably likely to materially affect, the registrant's internal control over
financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
(a)(3) Not applicable.
(b) Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
(Exhibit filed herewith).
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 /s/ R. Alan Medaugh
----------------------------
R. Alan Medaugh, President
Date June 29, 2007
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 /s/ R. Alan Medaugh
--------------------------------
R. Alan Medaugh, President
Date June 29, 2007
By /s/ Stephen V. Killorin
--------------------------------
Stephen V. Killorin, Treasurer
Date June 29, 2007